Court Opinion

ID: 9789800
Source: CourtListenerOpinion
Date Created: 2023-08-31 01:41:35.320453+00
Date Added: 2024-06-11T15:34:09.315961
License: Public Domain

HERNDON, J., Concurring and Dissenting.
I concur in the conclusion of the majority that the judgment and order as to Counts V to X, inclusive, should be affirmed. I dissent, however, from those portions of the majority opinion which hold that the judgment and order should be reversed as to Counts I to IV, inclusive.
Discussions between court and counsel in the court below as contained in the record before us discloses that the learned trial judge had clearly in mind the well settled rules of law by which it is to be determined whether the instruments involved are “securities” within the purview of the applicable statute or whether they represented interests in a bona fide joint venture, which are expressly exempted from its application. The evidence supporting the trial court’s judgment on all counts impresses me as being not only substantial but clear and convincing.
I find myself in complete accord with the apparently unanimous view of counsel for appellants, the district attorney, the attorney general, and the trial judge that all ten transactions are substantially the same in character. As appellants correctly state in their opening brief, “ [T]he testimony given by all of the witnesses was very similar in context.” And the district attorney responded as follows to the inquiry of the court below whether the testimony on the other counts would be different from that given by the first witness with reference to Count II: “I think they are all similar; there’s a little variation, but they are all very similar—I will say that.”
As I view the record, all of the transactions described in the testimony of the seven elderly witnesses are essentially the same, both in form and in substance. It is unmistakably clear from the record that the conduct of the appellants with reference to each and every one of said transactions *103constituted a part of a common plan, scheme, and design so that the evidence as to each is competent to prove the unlawful intent of the others and to prove the illegality of the scheme as a whole. (18 Cal.Jur.2d § 138, p. 588, and cases cited.) The lack of any material difference in the transactions and their identification with the common scheme is further emphasized by the fact that some of the sales involved in the first four counts related to interests in the very same mining claims which are involved in the last six counts.
As will be shown by a summary of the evidence relating to Count I, shortly to be set forth, the scheme is a classic example of a common form of swindle technique. Quite typically, six of the seven victims who testified at the trial were elderly women. The essence of the scheme was to cast the transaction in such form that the victims would appear to be bona fide joint venturers with appellant Rankin in locating and perfecting mining claims upon portions of the public domain whereon Rankin, as he represented, had previously discovered rock rich in uranium content. In all instances, the “investors” were cast in the role of original locators and appellants have sought to characterize the payments of $250 for each fractional one-eighth interest as contributions to the costs and expenses of locating, perfecting and developing the claims. All of the victims received documentary evidence of their interests in the form of copies of location notices showing them as locators and setting forth their respective fractional interests. In form these “muniments of title” were essentially the same in every instance.
The record reveals that nearly all of these purported “joint venturers,” other than Rankin, were complete strangers to each other. Except for Mrs. Jennie Smith (Counts VII and VIII) and a Miss Marion Carter (Counts IX and X), who were friends, the complaining witnesses met for the first time when they appeared in court to testify at the preliminary hearing.1
The victim of the transaction involved in Count I was Miss Myrtle McLean, a retired clerk-typist. She had known defendant Garvin for several years. On or about August 9, 1954, Garvin brought defendant Rankin to her home and introduced him to her. The following excerpts from Miss McLean’s testimony will more adequately describe the pres*104entation: “Q. Well, when they came in, who spoke first? A. Mr. Garvin did. Q. What did he say? A. Well, he introduced me to Mr. Rankin. Q. What did he say about Mr. Rankin ? A. Well, he had some claims of uranium and wanted to talk to me. Q. Did he tell you who Mr. Rankin was, or anything about him? A. Well, he told me that he had known him for a long time. Q. Yes? A. And they showed me some credentials. Q. What kind of credentials were they? A. Well, I didn’t read the whole letter; it was in regard to an executive position with some company—oil company. Q. What oil company was it? A. I think it was Standard. Q. Standard Oil Company in Nevada ? A. I think so. Q. What position did he hold with the Standard Oil Company in Nevada? A. Well, I understood it was the vice president, or some such—some such office; I don’t remember now. Q. Go ahead and tell the court now as near as you can everything they told you about these uranium claims. A. Well, I can’t remember everything that was said. . . . He explained the whole thing to me, you know—that it was—the potential, and so forth. . . . And it all sounded very good to me; so I purchased an interest. Q. And what interest did you get? A. An 8th interest. Q. In what? A. In three claims. Q. In three claims; and what did you pay for that interest? A. $250.00. Q. How did you pay it? A. 1 paid it in cash.”
The following are excerpts from Miss McLean’s testimony given on cross-examination: “ Q. Mrs. McLean, when you first , discussed the matter with Mr. Rankin, did he tell you that he was getting a group together, or ask you if you would like to join some other parties in filing on some uranium claims? A. Well, I assumed that there were other parties asked to join in the group. Q. And did he tell you that you would be a locator of the claim, or one of the parties who would be locating some claim? A. I didn’t get that. Q. I say, did he tell you that you would be one of the original locators of the claims? A. Well, that’s what I understood. Q. And he didn’t tell you that he was selling you an interest in any claims—any mining claims? A. No. Q. All right; now, at the time he got the second $250.00, did he not tell you that that was needed for the location and assessment work? A. That’s right. Q. And it was not for the location work—in other words, one of the $250.00 was for the first location of the first claim, and then there was a second one for another $250.00? Mb. Abtebbebby: I didn’t so understand her testimony. Mb. Seat: I am trying to refresh her; it’s a little *105confusing to me. The Witness : I paid $250.00 for the claims at first, and then $250.00 for assessment work; and that’s all I paid.”
It will be observed that Miss McLean’s testimony is somewhat self-contradictory as to whether at the time she paid her first $250 she understood the claims to be “then existing” or thereafter “to be located.” Since to my mind it is wholly immaterial whether defendants’ representations and her understanding relative to this detail was one way or the other, I shall assume the correctness of defendants’ version of her testimony in this respect. The same confusion appears in the testimony of several of the aged witnesses.2 For example, Miss Marion Carter (Counts IX and X) testified as follows in response to questions of the district attorney concerning one of the several3 checks for $250 which she had issued to appellant Rankin: “Q. And on the back it bears the endorsement of Mr. Rankin. Tell the Court what that was for. A. That was for an eighth claim, or the expenses on an eighth claim of uranium. Q. Well, now, which was it? Do you know, or are you able to state which it was? A. Well, it was all the same to me; it was %th claim, and I knew that it was for monuments—some of the money had to go for monuments and different work on the claims, or drilling, maybe; it was for %th claim of the uranium; whatever it was—the area or district.”
Miss McLean did not recall signing any document at any time, nor did she receive any document at the time she paid over her money to the defendants. Shortly thereafter, however, she received through the mail from Rankin a document on a printed form entitled “Notice of Location” dated August 4, 1954, locating a claim to be designated (quite euphemistically) as “Lucky Strike No. 2.” The location notice carried as “Names of Locators” the names of Rankin, Myrtle R. McLean and two other women. After the names of the “locators” other than Rankin were designations indicating their interest as “% interest,” or “% interest.”
Thereafter, Miss McLean received from Rankin through the mail the documents identified at the trial as People’s *106Exhibits Numbers 6 and 7. Exhibit Number 6 was dated December 12, 1954, and headed “Certificate of Location.” It certified that Lucky Strike Number 3 was located by Rankin and others, and bore the names of Rankin, McLean and three others with fractional designations after each name of %, Ys, or 1/16. Exhibit Number 7 was dated August 9, 1954, and was headed “Location Notice—Lode Claim.” It purported to give notice of the location and claim of “Lucky Strike No. 2” and at the foot it designated the locators as follows: “Ben I Rankin Tonopah Nevada Fishlake Valley RT Myrtle R. Me.Clean. 5748. 7th Ave. L.A. 43 Ca as locator of Ys, interest of the above claim Luekystrike No. 2. Rec Payment for intrest to date.
Locator Address
Witness: s/Ben I. Rankin”
In my view, the trial court was amply justified in finding and holding that defendants sold to Myrtle McLean a security in the form of an interest in a mining title. The documents which she received through the mail quite obviously were designed to serve the office of “certificates” in the sense that they were intended to evidence and represent the investor’s ownership of the indicated interest in the mining claims described and her right to participate in the earnings and profits thereof.
The effect of the majority opinion with respect to Counts I to IV is to sustain appellants’ argument that the transactions amounted to a bona fide joint venture in that appellants merely invited the complaining witnesses to join with them in locating mining claims on the public domain, and collected $250 for each one-eighth interest in consideration of appellants’ services in perfecting the claims by monumenting, recording and filing the notices of location, etc.
There is a short answer to this argument. Even this description of the transactions in the light most favorable to appellants portrays illegal sales of interests in a mining venture. Obviously the documents which appellants delivered to the “investors” were intended to evidence the respective interests which they were acquiring. Hence, they are securities within the definition of subdivision (a) of section 25008 of the Corporations Code, which includes “ (a) . . . any certificate of interest or participation; any certificate of interest in a profit-sharing agreement; any certificate of interest in an *107oil, gas, or mining title or lease; any . . . investment contract, or beneficial interest in title to property, profits, or earnings.”
Appellants have sought the shelter of subdivision (n) of section 25100 of the Corporations Code which exempts from the application of the Corporate Securities Law “ [a]ny bona fide joint adventure interest, except such interests when offered to the public.” But the evidence in this case is more than sufficient to support findings (1) that there was no bona fide joint venture; and (2) that the interests sold were “offered to the public.” It is apparent from the record that appellants offered and sold these interests indiscriminately to a large number of people who were total strangers to each other. As I shall point out shortly, the transactions bear none of the hallmarks of a true joint venture.
As stated in People v. McCabe, 60 Cal.App.2d 492, 498 [141 P.2d 54]: “If such a writing so issued by an individual creates a present right to a present or a future participation in the profits of an enterprise undertaken for profit it is a security under the act. The fact that the interest in the profits conveyed was not to be realized until the sale of the process does not make it any the less a security. (People v. Oliver, 102 Cal.App. 29, 36 [282 P. 813]; People v. Claggett, 130 Cal.App. 141, 143 [19 P.2d 805]; People v. Shafer, 130 Cal.App. 74 [19 P.2d 861].)”
To my mind, it makes not the slightest difference either in reason or in law whether the present right to future participation in the profits of the mining venture appertained to claims which had been “located” in the legal sense, that is, by the erection of monuments, etc., or to claims which Rankin intended to locate upon land known to him and upon which he claimed to have discovered mineral. Discovery of mineral is the first step in a series of steps that must be taken to perfect a mining title. (Adams v. Crawford, 116 Cal. 495 [48 P. 488]; 33 Cal.Jur.2d § 55, p. 100.)
Thus, it makes no practical or legal difference whether the sale of the interest was made before or after the claim was located in the legal sense. As stated in People v. Oliver, 102 Cal.App. 29, at page 36 [282 P. 813]: “If the instrument of sale creates a present right to a present or a future participation in either the income, profits or assets of a business carried on for profit, it is a ‘security’ as defined in the Corporate Securities Act. Because the interest created will not return a profit until the performance of a future act, such as the sale of an interest in a patent, or the grant to a *108licensee of the right to use it, does not bring it without the provisions of this act. (Agnew v. Daugherty, 189 Cal. 446 [209 P. 34].) To hold otherwise would make the real test of the legality or illegality of the sale the ultimate success or failure of the venture. The law was passed to protect the investors against unprincipled promoters, as well as to keep valueless securities off the market. It is the act of selling that is primarily placed under the examination of the commissioner of corporations, and his action in granting or withholding his permit to sell cannot be made contingent upon the future success or failure of the business venture. To hold otherwise would put a premium on fraud and permit a promoter to sell a mythical security without any intention of ever attempting to engage in the business in which he purported to sell an interest.” To the same effect are People v. Shafer, 130 Cal.App. 74, 76 [19 P.2d 861] and People v. Jaques, 137 Cal.App.2d 823, 832 [291 P.2d 124].
Certainly it was not contemplated that this mining venture would be completed or terminated when the claims had been located and perfected. Quite obviously the location of the claims was only the beginning of the venture. The investors were led to envisage earnings and profits.4 The record is replete with evidence that plans for development, for the construction of a mill and for the shipping of ores were discussed with various of the investors at various times.5
Thus, we are led logically to a consideration of the test laid down in the following language from Austin v. Hallmark Oil Co., 21 Cal.2d 718, 727 [134 P.2d 777]: “If the transaction is one in which the assignee is merely an investor who for a consideration is given the right to share in the profits or proceeds of an enterprise to be conducted by others, the instrument representing such interest is a security. Where, however, as in the present case, the assignee is to share in the conduct of the enterprise, the instrument representing an assignment of a fractional interest in the production of oil is not a security within the act. ’ ’
*109The foregoing test is entirely consistent with the declaration in Moore v. Stella, 52 Cal.App.2d 766, 778 [127 P.2d 300], that it is the policy of California law as indicated by the various definitions of “security” to subject to regulation “all schemes for investment, regardless of the forms of procedure employed, which are designed to lead investors into enterprises where the earnings and profits of business or speculative ventures must come through the management, control, and operations of others. ...”
Manifestly, it was contemplated that the “management, control and operations” of the mining claims involved in this case would be left in the hands of the defendants. Any suggestion that the parties contemplated active participation in these operations by the six elderly ladies or by the practicing physician would be little short of ridiculous. The test laid down in Austin v. Hallmark Oil Co., supra, 21 Cal.2d 718, 727, is designed to differentiate between an investment in an enterprise to be conducted by others and a participation in a joint venture. The question whether a joint venture was created was primarily one for the trial court to determine from the evidence and the inferences reasonably to be drawn therefrom. (Goldberg v. Paramount Oil Co., 143 Cal.App.2d 215, 220 [300 P.2d 329].)
There seems to be no disagreement concerning the oft-stated principle that the courts will look through the form to discern the true substance of a transaction. It seems to me that no X-ray vision is needed to see through the transparent subterfuge of form with which the defendants in t.big ease attempted to camouflage the transactions here involved. In the last analysis, none of them amounted to anything more or less than sales of interests in uranium mining ventures from which the purchasers were led to expect early returns in the form of “royalties” or “dividends.”
I would affirm the judgment on all counts.
The petition of appellant Joseph B. Garvin for a hearing by the Supreme Court was denied July 2, 1958.

 The evidence discloses that there were numerous other participants in addition to the seven whose “purchases” or “contributions” were the subjects of the ten counts of the information.

 As the majority opinion points out, substantially the same conflict appears in the testimony of Mrs. Jennie M. Smith, whose purchases were the basis of Counts VII and VTII.

 Miss Carter, who had been a nurse for about forty years, invested at least $1,500. The ten sales charged in the information were only representative examples of a much larger number.

 Mrs. Jennie M. Smith, who also had worked as a nurse for 40 years, “invested” $1,400. Rankin told her that she could expect to begin receiving her “dividends” by March of the following year. Garvin promised Miss Garter that she “would be getting royalties before Christmas,” but Rankin thought these “royalties” might not be forthcoming before the following March.

 After he had made his investment, the witness Buckingham received letters from Rankin telling of plans regarding the building of a mill, .the shipping of ore, etc.