This opinion is subject to revision before final

publication in the Pacific Reporter.

2014 UT 38

IN THE

SUPREME COURT OF THE STATE OF UTAH

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STATE OF UTAH,

Plaintiff and Petitioner,

v.

GRACE C. KELSON,

Defendant and Respondent.

———————

No. 20120843

Filed September 19, 2014

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Third District, Salt Lake

The Honorable Judith S.H. Atherton

No. 041901548

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On Certiorari to the Utah Court of Appeals

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Attorneys:

Sean D. Reyes, Att’y Gen., Karen A. Klucznik, Asst. Att’y Gen.,

Salt Lake City, for petitioner

Alan S. Mouritsen, Nicole G. Farrell, Scott S. Bell,

Salt Lake City, for respondent

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JUSTICE LEE authored the opinion of the Court, in which

CHIEF JUSTICE DURRANT, ASSOCIATE CHIEF JUSTICE NEHRING,

JUSTICE DURHAM, and JUSTICE PARRISH joined.

———————

JUSTICE LEE, opinion of the Court:

¶1 Grace Kelson was convicted of five securities law violations 

and one count of maintaining a pattern of unlawful activity (racketeering) related to an investment scheme. The court of appeals 

overturned Kelson’s securities convictions on the basis of ineffective assistance of trial counsel in stipulating to a jury instruction

that purportedly relieved the State of its burden to prove each element of the charges beyond a reasonable doubt.
STATE v. KELSON

Opinion of the Court

¶2 We reverse. We conclude that the jury instruction in question was an accurate statement of the underlying criminal law and 

not a burden-shifting evidentiary presumption. We accordingly 

reject Kelson’s claims of ineffective assistance of counsel and plain 

error, and thus reinstate her five securities law convictions.

I

¶3 Kelson met Mark and Todd Mosher, owners of a mortgage 

company, in 1999. At that time Kelson was working on two purported property developments—one in Heber City, Utah, and the 

other in Brazil. She approached the Moshers about helping to secure funding for the projects, and they agreed. Between 1999 and 

2001, the Moshers met with 20 to 30 potential lenders but were ultimately unable to secure loans for the projects. Faced with insufficient funding, Kelson and the Moshers sought to obtain a letter 

of credit to fund the Brazilian project. The letter of credit was to

serve as collateral for potential lenders, thereby making it easier to

find parties willing to fund the project. Kelson and the Moshers

needed approximately $125,000 to secure a $15 million letter of 

credit. 

¶4 To that end, they set about persuading friends and colleagues, and the families of their friends and colleagues, to provide funds for the letter of credit. The deal was pitched as a shortterm investment with little to no risk and the potential for very 

high returns. In exchange for funding the letter of credit, the investors received promissory notes signed by Kelson for amounts 

several times larger than the amounts they provided. Kelson and 

the Moshers did not register the promissory notes as securities or

obtain licenses to sell them. 

¶5 The promissory notes stated that they would be paid within thirty days by S.D.C. Financial Services, a limited liability company of which Kelson was the registered agent. S.D.C. was created and registered as a limited liability company on the date the 

promissory notes were executed, and opened its first bank account that same day. Over the course of several days, the money 

secured by the promissory notes was deposited in the S.D.C. bank 

account. Most of it was then transferred to an account in the state 

of Washington. Of the money that remained in the S.D.C. account, 

$5,000 was used for legal fees, and Kelson withdrew another 

$25,000 for her own personal use, which included clothing, gro2
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Opinion of the Court

ceries, personal care, trips to hair salons, furniture, and a down 

payment on a condominium. Kelson did not inform the holders of 

the promissory notes that their money would be used for her personal expenses.

¶6 Ultimately, Kelson failed to obtain the letter of credit and 

S.D.C. defaulted on its obligations under the promissory notes. 

When the S.D.C. bank account was closed a few months later, it 

had a negative balance of approximately $9,000. 

¶7 The State charged Kelson with three counts of securities 

fraud; one count of offering or selling unregistered securities; one 

count of sales by an unlicensed broker-dealer, agent, or investment advisor; and one count of engaging in a pattern of unlawful 

activity. At trial, Kelson did not dispute that she had issued the 

promissory notes. Her primary defense was that the promissory 

notes did not constitute “securities” under Utah law. 

¶8 The parties stipulated to jury instructions, one of which 

outlined the process for the jury to determine whether the promissory notes were securities. Instruction 25 stated:

You are instructed that a “note” is presumed to be 

a security. However, certain notes have been classified as non-securities; these notes are: 

1. the note delivered in consumer financing, 

2. the note secured by a mortgage on a home, 

3. the short-term note secured by a lien on a 

small business or some of its assets, 

4. the note evidencing a “character” loan to a 

bank customer, 

5. short term notes secured by an assignment of 

accounts receivable, or 

6. a note which simply formalizes an openaccount debt incurred in the ordinary course 

of business particularly if, as in the case of a 

customer of a broker, it is collateralized. 

The instruction then explained that a class of notes that “resembles one of these exceptions can be added to the list of nonsecurity notes if [it] meet[s] a four factor test.” 

¶9 Instruction 25 then delineated a four-part test. Under that 

test the jury was directed first to “examine the transaction” to de3
STATE v. KELSON

Opinion of the Court

termine whether “the seller’s purpose [was] to raise money for the 

general use of a business enterprise or to finance substantial investments,” in which case the note would likely be deemed a security. Alternatively, the jury was to consider whether the note 

“facilitate[d] the purchase of a minor asset or consumer 

good[,] . . . correct[ed] cash-flow difficulties[,] . . . [or] advanced 

some other commercial or consumer purpose,” in which case the 

note was “less sensibly described as a security.” Next the jury was 

to determine whether the note was an instrument “in which there 

is common trading for speculation and investment,” and “examine the reasonable expectations of the investing public.” And finally, the jury was to examine whether another factor such as “the 

existence of another regulatory scheme” reduced the risk of the 

instrument and “thereby render[ed] application of the Securities 

Act unnecessary.” 

¶10 Kelson was convicted on all six counts and appealed. The 

court of appeals reversed Kelson’s five securities law convictions, 

holding that her counsel rendered ineffective assistance by stipulating to instruction 25 because that instruction (specifically, its 

language establishing a presumption that a note is a security) impermissibly shifted the burden to Kelson and relieved the State of 

its burden to prove each element of an offense beyond a reasonable doubt.1 See State v. Kelson, 2012 UT App 217, ¶ 49, 284 P.3d 

695. The State filed a petition for certiorari, which we granted. 

¶11 On certiorari, we review the decision of the court of appeals, not the underlying decision of the trial court. The appellate 

court’s decision merits no deference in our analysis, although the

correctness of the court of appeals’ decision may turn in part on 

whether it accurately reviewed the trial court’s decision under an

appropriate standard of review. See State v. Verde, 2012 UT 60, 

¶ 13, 296 P.3d 673.

II

¶12 The threshold question presented concerns the viability of 

the jury instruction’s statement that “a ‘note’ is presumed to be a 

security.” Kelson contends, and the court of appeals held, that this 

1 The court of appeals also vacated Kelson’s conviction for pattern of unlawful activity, see State v. Kelson, 2012 UT 217, ¶ 48, 284 

P.3d 695, but the State does not challenge that part of the decision.

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Opinion of the Court

presumption effectively relieved the prosecution of its burden of 

proof on an element of the securities crimes with which she was 

charged, running afoul of the principles set forth in Francis v. 

Franklin, 471 U.S. 307, 313 (1985), and In re Winship, 397 U.S. 358, 

363 (1970). State v. Kelson, 2012 UT App 217, 284 P.3d 695. And in 

light of this alleged defect in the instruction, the court of appeals 

agreed with Kelson’s assertion that her counsel was ineffective in 

failing to object to it.

¶13 The State’s response is twofold. It first defends the instruction as accurately reflecting a presumption prescribed by statute, 

Utah Code section 61-1-13(24)(a)(i)(A) (2000)—a provision that in 

the State’s view obviates the principles in Francis and Winship and 

therefore excuses counsel’s failure to object to the instruction in 

question. And second, the State defends counsel’s failure to object 

on an alternative basis—that the instruction was actually more favorable to the defense than that prescribed by statute, in that the 

instruction incorporated limiting principles from Reves v. Ernst & 

Young, 494 U.S. 56 (1990), that are not set forth in the statute.

¶14 We uphold the instruction as an accurate statement of law 

that does not implicate the burden-shifting concerns reflected in 

Francis and Winship. On that basis we reverse the court of appeals’ 

determination of defense counsel’s ineffectiveness in failing to object to instruction 25, and decline to address the State’s alternative 

ground for defending counsel’s performance. Finally, we reject 

Kelson’s plain error argument, as there was no plain error in the 

adoption of this stipulated instruction.

A

¶15 Winship established the now-familiar principle that due 

process requires proof beyond a reasonable doubt “of every fact 

necessary to constitute the crime with which [one] is charged.” 

397 U.S. at 364. Francis extended that “axiomatic and elementary . . . principle” to foreclose the operation of burden-shifting 

evidentiary presumptions that have the effect of relieving the 

prosecution of its burden of proof on an essential element of a 

crime. 471 U.S. at 315–18. 

¶16 The presumption at issue in Francis arose in the context of a 

crime of “malice murder” (murder committed with “malice aforethought”). See Francis, 471 U.S. at 310 n.1. Although the underlying substantive criminal law required not just proof of the actus 

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Opinion of the Court

reus of homicide but the mens rea of intent, the jury instruction in 

question had the effect of relieving the State of its burden of proving the latter. It did so by operation of a presumption that a person is “presumed to intend the natural and probable consequences of his acts.” See id. at 315.2

¶17 The Francis court found that presumption to run afoul of 

due process. It held that due process “prohibits the State from using evidentiary presumptions in a jury charge that have the effect of 

relieving the State of its burden of persuasion beyond a reasonable doubt of every essential element of a crime.” Francis, 471 U.S. 

at 313 (emphasis added). And it found that principle to be implicated by the above-noted instruction, as it effectively eliminated 

the requirement of proof of intent beyond a reasonable doubt—by 

the presumption establishing the mens rea element upon proof of 

the actus reus. See id. at 316 (explaining that the instruction runs 

afoul of due process principles because it “directs the jury to presume an essential element of the offense—intent to kill—upon 

proof of other elements of the offense—the act of slaying another”).

¶18 The fatal flaw in the instruction in Francis was its distortion 

of the substantive law of intentional homicide. That underlying 

law set forth two independent elements—of actus reus and mens 

rea—and left no room for a presumption collapsing the two. Thus, 

2 The full jury instruction at issue in Francis read: “A crime is a 

violation of a statute of this State in which there shall be a union 

of joint operation of act or omission to act, and intention or criminal negligence. A person shall not be found guilty of any crime 

committed by misfortune or accident where it satisfactorily appears there was no criminal scheme or undertaking or intention or 

criminal negligence. The acts of a person of sound mind and discretion are presumed to be the product of the person's will, but 

the presumption may be rebutted. A person of sound mind and 

discretion is presumed to intend the natural and probable consequences of his acts but the presumption may be rebutted. A person will not be presumed to act with criminal intention but the 

trier of facts, that is, the Jury, may find criminal intention upon a 

consideration of the words, conduct, demeanor, motive and all 

other circumstances connected with the act for which the accused 

is prosecuted.” 471 U.S. at 311–12. 

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Opinion of the Court

the defect in the Francis instruction was its creation of an evidentiary presumption out of whole cloth—a presumption that had no 

basis in the substantive criminal law and that therefore shifted the 

burden of proof on an element assigned by the criminal law to the 

prosecution.

¶19 The presumption at issue here did no such thing. It in no 

way altered or undermined any element of the substantive law.

To the contrary, the presumption accurately reflected that law, 

which defines a “security” to include “any note.” UTAH CODE

§ 61-1-13(24)(a)(i)(A) (2000).3 The presumption in instruction 25 

thus steered clear of the due process concern in Francis, as it in no 

way shifted the burden of proof on an element assigned by the 

criminal law to the prosecution.

¶20 The legislature has the discretion to define the elements of 

a crime as it sees fit. In so doing, it is not at all foreclosed from 

employing the terminology or concept of a presumption. The moral 

of Francis is not that presumptions are generally suspect as elements of criminal jury instructions; it is that they must not be used 

in a manner that shifts the burden of proof on an element assigned by the criminal law to the prosecution.4

3 The statute underwent subsequent amendments, which were 

primarily stylistic. Kelson was charged under the 2000 version, so 

we cite it here. 

4 See People v. McCall, 82 P.3d 351 (Cal. 2004) (upholding jury instruction under statute criminalizing possession of certain chemicals with intent to manufacture methamphetamine—which stated 

that “possession of immediate precursors sufficient for the manufacture of [] hydriodic acid [] shall be deemed to be possession of 

the derivative substance”—because that presumption in instruction was “nothing more than a definitional section that specified 

[criminal] conduct,” and “lawmakers [have] broad power to select 

the elements of crimes, and to define one thing in terms of another”); People v. Pinkston, 112 Cal. App. 4th 387, 391–92 (2003) (upholding jury instruction under statute defining evasion of peace 

officer as a felony where “pursued vehicle is driven in a willful or 

wanton disregard for the safety of persons or property,” including 

“driving while fleeing or attempting to elude a pursuing peace 

officer during which time either three or more violations that are 

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Opinion of the Court

¶21 Even in the law of murder, there is no general due process 

ban on the invocation of a presumption. The law of felony murder 

incorporates a presumption, and in so doing raises no due process 

concern. Thus, although the state generally must prove intent to

sustain a conviction for murder, our law presumes intent where a 

homicide is committed in the course of a felony. See UTAH CODE

§ 76-5-203(2)(d). The adoption of that presumption falls well within the legislature’s judgment in defining the elements of a crime. 

And for that reason a jury instruction reflecting it would be perfectly acceptable as a matter of due process.

¶22 The same conclusion holds for the securities crimes at issue 

here. The governing statute is in the form of a presumption—in 

defining “security” in terms of general rules and exceptions. See 

UTAH CODE § 61-1-13(24)(a)&(b) (2000). And the instruction at issue accurately reflected the statute in establishing a presumption 

that a note is a security.

¶23 That conclusion foils Kelson’s claim for ineffective assistance of counsel. Kelson’s counsel could reasonably have stipulated to instruction 25 as an accurate statement of law that in no way 

shifted the burden of proof through an evidentiary presumption.

We reverse on that basis. See Nicholls v. State, 2009 UT 12, ¶ 37, 203 

P.3d 976 (defendant has burden to show counsel’s performance 

“fell below an objective standard of reasonableness” (citing Strickland v. Washington, 466 U.S. 688 (1984))).

B

¶24 In so doing, we decline to address the State’s alternative 

basis for defending counsel’s effectiveness—its assertion that

counsel’s performance could be defended on the ground that instruction 25 was arguably more favorable to the defense than the 

standard prescribed by statute, such that an objection to the instruction might have produced a clarification that would have 

hurt Kelson’s cause. This alternative argument compared the statutory text with the terms of the instruction. Whereas the statute 

seems to categorically equate a “security” with a “note,” the State 

assigned a traffic violation point count under [statute] occur, or 

damage to property occurs”; concluding that definition established a rule of law “rather than a presumption apportioning the 

burden of persuasion” on an element of the crime). 

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Opinion of the Court

noted that the instruction framed the matter in terms of a presumption subject to rebuttal—under exceptions and factors apparently incorporating the federal definition of security set forth 

in Reves v. Ernst & Young, 494 U.S. 56, 61–65 (1990).5

5 Reves interpreted the federal definition of “security” in the 1934 

Securities Act, 15 U.S.C. § 78c(a)(10). Although the statutory definition broadly defined “security” as “any note, stock, treasury 

stock, bond, debenture, certificate of interest or participation in 

any profit-sharing agreement,” the Reves court concluded that the 

1934 Act did not establish a “broad federal remedy for all fraud,’” 

but was aimed instead at fraud in connection with “investments.”

Reves, 494 U.S. at 61 (internal quotation marks omitted). Thus, the 

Reves court held that the 1934 Act did not literally extend to all 

transactions encompassing literally all “notes,” but rather left it to 

the SEC and to the courts “to decide which of the myriad financial 

transactions in our society come within the coverage of these statutes.” Id. (internal quotation marks omitted). 

Extending a body of caselaw followed in some of the lower 

courts to have addressed this issue, the Reves court adopted a presumption that “every note is a security,” while allowing for rebuttal of the presumption by a showing that the note falls into one of 

seven categories more closely resembling consumer or commercial loans than investments. Reves, 494 U.S. at 64–65 (recognizing 

exceptions for (1) a “note delivered in consumer financing;” (2) “a 

note secured by a mortgage on a home;” (3) a “short-term note secured by lien on a small business or some of its assets;” (4) a “note 

evidencing a ‘character’ loan to a bank customer;” (5) a short-term 

note “secured by an assignment of accounts receivable;” (6) “a 

note which simply formalizes an open-account debt incurred in 

the ordinary course of business;” and (7) a note “evidencing loans 

by commercial banks for current operations”). In addition, the 

Reves court identified four factors of relevance to determining 

whether a note bears a “strong resemblance” to one of these categories. Id. at 66–67 (indicating that the relevant factors are (1) “the 

motivations that would prompt a reasonable seller and buyer to 

enter into [the transaction];” (2) “the plan of distribution of the instrument;” (3) “the reasonable expectations of the investing public;” (4) “whether some factor such as the existence of another 

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Opinion of the Court

¶25 The distinction between the statutory text and the terms of 

the instruction may be more apparent than real. The Reves standard could be understood to represent a settled, term-of-art understanding of the definition of a security. And if so it might be possible to read the Utah statute as incorporating that established 

understanding. See Maxfield v. Gary Herbert, 2012 UT 44, ¶ 31, 284 

P.3d 647 (noting that when a word or phrase is transplanted from 

another legal source, it may be interpreted to bring its “old soil 

with it”); State v. Burkenshaw, 2010 UT App 245, ¶ 11 n.3, 239 P.3d 

1052 (reviewing trial court’s application of the Reves test in a criminal case, “without deciding whether Utah should adopt that 

test” to determine whether a note is a security). But we need not 

and do not resolve this question here. We rest our decision instead 

on the conclusion that instruction 25 was not an evidentiary presumption unlawfully shifting the burden of proof to the defense

but an accurate statement of Utah law.6

C

¶26 The above analysis of instruction 25 defeats Kelson’s plain 

error claim as well. Because the instruction is not a burdenshifting evidentiary presumption but a correct statement of Utah 

law, there can be no error—much less plain error—in the district 

court’s acceptance of the parties’ stipulated instruction. See State v. 

Dunn, 850 P.2d 1201, 1208 (Utah 1993) (plain error “is not established” unless error is “obvious”). We accordingly reject Kelson’s 

assertion of plain error and therefore reinstate the securities convictions entered against her in the district court.

——————

regulatory scheme significantly reduces the risk of the instrument, 

thereby rendering application of the Securities Act unnecessary”).

6 Our holding also obviates Kelson’s take on the Reves factors set 

forth in the instruction—that those factors reinforced the burdenshifting impact of the instruction’s presumption. She says they did 

so by telling the jury “that it should infer notes are securities unless the defendant persuaded the jury that such an inference was 

unwarranted.” That may be, but again that is not by operation of a 

burden-shifting evidentiary presumption, but only as an accurate

statement of the substantive law. 

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