Court Opinion

ID: 9720196
Source: CourtListenerOpinion
Date Created: 2023-08-26 08:19:57.314705+00
Date Added: 2024-06-11T18:22:37.348136
License: Public Domain

Opinion
WIENER, J.
Joseph Earnest Feno appeals from the judgment entered on jury verdicts convicting him of selling securities in violation of the Corporate Securities Law of 1968. (Corp. Code, §§ 25110, 25540.)1 For the reasons set forth below, we reverse the judgment.

Factual and Procedural Background

In late 1978 Feno left his employment as a meatcutter and started a used car business. Thinking additional capital would enable him to make more *724money, he advertised in two local newspapers that he had an excellent investment opportunity. Several people responded. Feno’s deal was simple: the investor would give him money so he could purchase used cars at auctions, Feno would then recondition the cars selling them at a profit to be shared with the investor. Each investor had his or her own financial arrangement, but each signed a similar “investor’s contract.” Although some of the investors knew others also were investing, each investor “owned” specific cars and would make money only when those particular cars were sold. Feno’s sales technique included his suggestion the investors could become involved in the business. For example, at his suggestion some of the investors obtained vehicle salespersons’ licenses (Veh. Code, §§ 11800, 11802), permitting them to sell “their” cars. As a practical matter they sold no cars and generally refrained from participating in the business. On occasion some offered advice such as pooling their money or hiring a secretary and buying economy cars, but Feno was neither compelled to nor did he always follow that advice. Under the investor’s contract each investor had the option of receiving his or her entire investment back upon 90 days’ notice.
Feno testified he wanted participation from the investors and some advice and guidance. He acknowledged, however, the investors were relatively uninformed about the used car business, and that his business success did not require professional or managerial skill on their part. Feno conceded any profit expected was solely from his efforts in being able to select and market cars, and the investors had no authority to run the business.
In 1980 Feno’s economic bubble burst. Although he was able to return modest amounts of money to the investors, he declared bankruptcy and, with only one exception, paid back none of the original investments.
A jury found Feno guilty of seven counts of selling securities in violation of section 25110. Six different victims were involved. Feno was placed on probation for five years on the condition he pay $51,000 restitution (Pen. Code, § 1203.1), dismiss an action he filed in his bankruptcy proceeding to enjoin further state court prosecution and serve a period of 90 days on work furlough. This appeal ensued.

Introduction

Before addressing the specific issues Feno raises, we present a brief overview of the pertinent statutory provisions.
Section 25110 declares: “It is unlawful for any person to offer or sell in this state any security in an issuer transaction . . . unless such sale has been qualified under Section 25111, 25112 or 25113 . . .or unless such security *725or transaction is exempted under Chapter 1 (commencing with Section 25100) of this part.”
Section 25540 makes it a crime for any person to wilfully violate any provision of the Corporate Securities Law.  Criminal violations of section 25110 are strict liability offenses. (People v. Clem (1974) 39 Cal.App.3d 539, 541-543 [114 Cal.Rptr. 359].) The offer or sale of a “security”2 is a key element of such an offense which the prosecution must prove beyond a reasonable doubt. (In re Winship (1970) 397 U.S. 358, 364 [25 L.Ed.2d 368, 375, 90 S.Ct. 1068]; People v. Roder (1983) 33 Cal.3d 491, 497 [189 Cal.Rptr. 501, 658 P.2d 1302].) By raising a reasonable doubt on the security issue, a defendant is entitled to an acquittal. (Pen. Code, § 1096.)
Even if he concedes the offer or sale of a security, or fails to raise a reasonable doubt on the issue, a defendant may still gain acquittal under section 25110 by showing (1) the sale of the security was qualified, or (2) the security itself was exempt, or (3) the securities transaction was exempt. The defendant has the burden of proving these affirmative defenses. (§ 25163; People v. Skelton (1980) 109 Cal.App.3d 691, 724 [167 Cal.Rptr. 636], cert, den., 450 U.S. 917 [67 L.Ed.2d 343, 101 S.Ct. 1361]; People v. Park (1978) 87 Cal.App.3d 550, 566-567 [151 Cal.Rptr. 146].) An exemption thus operates to exclude a security or a securities transaction from the securities regulation provisions that would otherwise apply. (See §§ 25100-25105.)
At the time of Feno’s transactions with the investors, former section 25102, subdivision (f) provided an exemption from the provisions of section 25110 for transactions involving nonpublic offerings of certain types of securities: “(f) Any offer or sale, in a transaction not involving any public offering, of any bona fide general partnership, joint venture or limited partnership interest, ...” (Stats. 1979, ch. 665, § 1.7, p. 2042.)3 Although *726somewhat unclear, this exemption implicitly distinguishes between joint venture interests which are securities (see §§ 25010, 25013) and those which are not. The distinguishing characteristic is whether the interest represents a passive investment or an active participation in the venture on the part of the interest holder. (See People v. Skelton, supra, 109 Cal.App.3d at pp. 712-713; People v. Park, supra, 87 Cal.App.3d at pp. 563-564; see also 2 Ballantine & Sterling, Cal. Corporation Laws (1983) § 444.02.) Joint venture interests representing passive investments are securities and therefore are exempt if offered or sold in nonpublic transactions. However, those interests involving active participation in the venture are not securities and thus are outside the scope of the Corporate Securities Law. Such interests can be offered or sold without being qualified or exempted as otherwise required by section 25110.
We admit to some puzzlement over the meaning of the term “bona fide” as included in former section 25102, subdivision (f). If a “bona fide” interest in a joint venture involves active participation in and control of the business (see People v. Park, supra, 87 Cal.App.3d at pp. 562, 564; see also Weinstock v. L. A. Carpet, Inc. (1965) 234 Cal.App.2d 809, 813-814, 817 [44 Cal.Rptr. 852]),4 subdivision (f) becomes internally contradictory because it makes no sense to provide an exemption from securities regulation for an interest which is not a security. On the other hand, if a “bona fide” interest in a joint venture represents a passive investment, then the term “bona fide” seems redundant and unnecessary as stating a given (i.e., a joint venture interest which is a security is exempt from securities regulation if offered or sold in a nonpublic transaction). Neither interpretation is appealing in light of the standard canons of statutory construction, since the former is inharmonious and the latter is surplusage. (See People v. Black (1982) 32 Cal.3d 1, 5 [184 Cal.Rptr. 454, 648 P.2d 104].) Regardless of the statutory lack of neatness, given our obligation to adopt the construction more favorable to the defendant (People v. Davis (1981) 29 Cal.3d 814, 828 [176 Cal.Rptr. 521, 633 P.2d 186]), we apply the latter interpretation.

Discussion

I
At trial Feno conceded his contracts with the investors were not exempt and their sale was not qualified. Feno also conceded his transactions with *727the investors were not exempt, except as to counts 2 and 4 which he argued were nonpublic and thus within the scope of former section 25102, subdivision (f).5 Thus, except as to counts 2 and 4, the only disputed issue at trial was whether Feno’s transactions with the investors involved the sale of a “security” within the meaning of section 25019. (See fn. 2, ante.)
To prove this essential element the prosecution presented an “investment contract” theory.  Feno countered by characterizing the transactions as either personal services contracts or joint ventures involving active participation and control by the investors. Neither type of arrangement is a security. (People v. Syde (1951) 37 Cal.2d 765, 768-769 [235 P.2d 601]; see Osuna v. Russell (1959) 176 Cal.App.2d 110, 112-113 [1 Cal.Rptr. 289]; Oakley v. Rosen (1946) 76 Cal.App.2d 310, 314-315 [173 P.2d 55]; see also 2 Ballantine & Sterling, Cal. Corporation Laws, supra, § 444.02.) Both Feno and the prosecution submitted jury instructions to the court. A considerable portion of the court’s and counsel’s debate over those instructions concerned the definition of joint venture and the proper relationship between that concept and the security and exemption issues under section 25019 and former section 25102, subdivision (f).
As we shall explain, the trial court correctly instructed the jury that Feno had the burden of proving any exemption he claimed, but erred in describing all joint ventures as being “exempt” from securities law regulation. This error, considered together with the prosecutor’s incorrect argument that Feno had the burden of proving a “joint venture exemption,” and further exacerbated by the court’s erroneous failure to instruct on Feno’s defense burden of proof, lessened the prosecution’s burden of proving the “security” element of the offense beyond a reasonable doubt. We conclude the court’s instructional errors were prejudicial and therefore reverse the judgment.
A
In instructing the jury on Feno’s and the prosecution’s competing theories, the court stated in part: “First of all, it is unlawful for any person to offer or sell in this State any security unless such sales have been qualified or unless such security or transaction is exempted.
“A joint venture is a special combination of two or more persons wherein *728some specific venture, a profit is jointly sought without any actual partnership or corporation designation or as an association of persons to carry out a single enterprise for profit for which they combine their property, money, effects, skill and knowledge, [¶] A bonafide joint venture is exempt from the registration provisions of the corporate security law. You are instructed that a joint venture or partnership exists when there is an agreement between the parties under which they have a community of interest, a common business undertaking and an understanding as to the sharing of profits and losses and a right of joint control. Without the right of joint participation in the management and control of the business, there is no partnership or joint venture.” (Italics added.)
Feno correctly challenges the court’s characterization of joint venture as “exempt.” As we described above, an exemption operates as an affirmative defense, excluding a security or a securities transaction from the securities regulation provisions that would otherwise apply. By characterizing all joint ventures as “exempt” the court necessarily assumed the joint venture interests described by Feno were securities. The court erred in so assuming rather than instructing the jury to decide whether those interests were securities within the meaning of section 25019.
By itself, this mischaracterization appears to be innocuous, a semantic nicety. Based solely on the above instruction, the jury had no reason to consider Feno’s joint venture evidence as presenting an affirmative defense rather than an alternative to the prosecution’s investment contract theory. Feno, however, raised an exemption defense to counts 2 and 4 under former section 25102, subdivision (f). On this issue the court instructed the jury: “As to Counts 2 and 4, only the defendant has asserted as a defense that the sale was made in an exempt transaction from the securities laws. You should consider this defense only if you have first found that a security was sold. If you find that no security was sold, you should not consider this defense.
“As to Counts 2 and 4, in any proceeding under the Corporate Securities Law, the burden of proving the exemption is upon the person claiming it. In this case if the Defendant claims an exemption, then he has a burden of proving that exemption. The effect of this is to shift the burden of going forward with the evidence to the Defendants, [¶] It does not, however, remove from the People the burden of establishing every element of the offense by proof beyond a reasonable doubt.” (Italics added.)
Even these instructions, correct in themselves, may not have been enough to make the court’s earlier erroneous characterization of joint venture prej*729udicial. These instructions were limited to the transactions involved in counts 2 and 4 and the jury may not have concluded from them that Feno had a burden to prove a joint venture. The prosecutor, however, highlighted the court’s error and added to the jury’s confusion in his closing and rebuttal arguments by dwelling on Feno’s burden to prove a “joint venture exemption”: “Now, if it is a joint venture, a bonafide joint venture and not just something that somebody decided to call a joint venture for purposes of escaping the consequences of violating the Corporate Securities Law, then they are exempt. And I will explain more to you later about what is and what is not a joint venture, [¶] And I just want to point this out at this time and tell you that joint ventures are exempt, and the reason I say that is because even though this is a criminal trial, if the Defendant is claiming that this is a transaction which even though a security is exempt from the permit requirements, the Defendant bears the burden of proving the fact of that exemption to you, and he does it by presenting evidence.
“You take a look at these instructions, and I would submit to you that the one that says joint venture defined is a bonafide joint venture is exempt from the registration provisions of the Corporate Security Law, period. That’s under joint venture defined, [¶] Now, exemptions, whether they are the small offering or as he referred to it as the non-public offerings, or whether they are joint venture exemptions, are matters that the Defendant is charged with the burden of going forward with the proof, [¶] We would submit to you that the Defendant has failed to do so. He has not proved that it’s a joint venture. ” (Italics added.)
Feno objected to the prosecutor’s tactic between his closing and rebuttal arguments. The court, however, declined to admonish the prosecutor or to correct the harm of his argument by instructing the jury the exemption at issue was not for joint ventures per se but for nonpublic offerings of joint venture interests, and that Feno had to prove the availability of the nonpublic transaction exemption only if counts 2 and 4 involved the offer or sale of joint venture interests which were securities within the meaning of section 25019.
Feno’s joint venture theory was critical to his defense. The jury had a choice. Feno’s transactions with the investors either involved investment contracts (i.e., securities) or they involved personal services contracts or joint venture interests which were not securities,  The burden of proving a security was with the prosecution. Any reasonable doubt as to whether the transactions involved the offer or sale of investment contracts required an acquittal.  In the context of this case, the court’s erro*730neous instruction, combined with the prosecutor’s incorrect argument, led the jury to believe Feno’s joint venture evidence was relevant only to his defense and that Feno had to prove a joint venture in connection with establishing his defense based on the nonpublic transaction exemption. To compound matters, the court erroneously failed to instruct on the burden of proof applicable to Feno’s exemption defense.6 This omission left the jury uninstructed in a context where the only instruction given on burden of proof was that of proof beyond a reasonable doubt. In this confused state the jury may well have incorrectly concluded Feno failed to meet a nonexistent burden of proving he was selling something other than a security. As a result, the jury may have decided the security issue without considering whether Feno’s joint venture evidence raised a reasonable doubt regarding the prosecution’s investment contract theory, thereby diluting the prosecution’s burden of proof on the security issue contrary to the due process clause of the Fourteenth Amendment. (In re Winship, supra, 397 U.S. at p. 364 [25 L.Ed.2d at p. 375]; People v. Roder, supra, 33 Cal.3d at p. 497.)  Because the court’s instructional errors were of federal constitutional dimension, reversal is required unless the errors were harmless beyond a reasonable doubt. (Chapman v. California (1967) 386 U.S. 18, 24 [17 L.Ed.2d 705, 710, 87 S.Ct. 824, 24 A.L.R.3d 1065].)7
B
Whether the court’s instructional errors were harmless beyond a reasonable doubt presents a close question. Given the choice between the investment contract and joint venture theories, the evidence points strongly to the former.  “Under widely accepted judicial interpretation and definition, an investment contract for the purposes of securities laws means a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party (S. E. C. v. Howey Co. (1946) 328 U.S. 293, *731298-299 . . .). ‘The most essential consistency in the cases which have considered the meaning of “investment contract” is the emphasis on whether or not the investor has substantial power to affect the success of the enterprise. When his success requires professional or managerial skill on his part, and he has authority corresponding with his responsibility, his investment is not a security within the meaning of the securities act. When he is relatively uninformed and unskilled and then turns over his money to others, essentially depending upon their representations and their honesty and skill in managing it, the transaction is an investment contract. ’ (Italics added.)” (People v. Park, supra, 87 Cal.App.3d at p. 563.)
The facts generally support the impression the investors were unsophisticated in the used car business and were led to expect profits solely or substantially from Feno’s efforts. Even he agreed to that at one point in his testimony. However, other facts suggest the investors held and exercised rights of participation in the management and control of Feno’s business. For example, the investors had the right to hold the pink slips for their cars and at least one investor did so for some time. Most of the investors intermittently checked on their cars and/or accounts and offered business advice to Feno, some of which he followed. Additionally, some investors obtained car sales licenses. These facts, taken together, may have been sufficient to raise a reasonable doubt regarding whether the parties intended to enter into investment contracts or joint ventures. (See and compare People v. Park, supra, 87 Cal.App.3d at p. 564; also compare People v. Coster (1984) 151 Cal.App.3d 1188, 1194-1195 [199 Cal.Rptr. 253].) We are not satisfied beyond a reasonable doubt that the jury would have decided the security issue against Feno had it considered Feno’s joint venture evidence as an alternative to the prosecution’s investment contract theory. We therefore conclude the court’s instructional errors were prejudicial.
II
For the guidance of the court at retrial, we address the following issues.
A
As noted above, Feno relied at trial on the nonpublic transaction exemption provided by former section 25102, subdivision (f) as an affirmative defense to counts 2 and 4. Feno conceded the exemption was unavailable for the other counts because they involved transactions initiated in response to his newspaper advertisements. (See People v. Clark (1963) 215 Cal.App.2d 734, 744 [30 Cal.Rptr. 487], cert, den., 375 U.S. 943 [11 L.Ed.2d 274, 84 S.Ct. 350], rehg. den., 375 U.S. 998 [11 L.Ed.2d 480, 84 S.Ct. 630].)
*732Count 2 arose from a transaction with Maria Deliberti, a secretary. Deliberti responded to Feno’s newspaper advertisements in February 1979, initially investing $5,000 (count 1). Four months later she invested an additional $5,000 (count 2). Count 4 was based on Feno’s transaction with William Trepanier, an engineer. Trepanier was a friend of Peter Hamm, another investor recruited by Feno’s advertising (count 3). Hamm told Trepanier about the opportunity, which prompted Trepanier to meet with Feno in June 1979 and invest $4,758 (count 4).
Assuming arguendo they involved the sale of “securities” within the meaning of section 25019, Feno argued the transactions involved in counts 2 and 4 were exempt because they were not initiated by advertising. The jury was instructed: “A profit-sharing agreement is exempt from the registration requirements if it is nonpublic.[8] In defining a non-public, private offering and sale, you may consider that an offer or sale of any security[9] does not involve any public offering if offers are not made to more than 25 persons and sales are not consummated to more than 10 of such persons, and if all of the offerees either have a preexisting personal or business relationship with the offeror, or its partners, officers, directors or controlling persons, or by reason of their business or financial experience could be reasonably assumed to have the capacity to protect their own interest in connection with the transaction.” (See Cal. Admin. Code, tit. 10, former § 260.102.2, italics added.)
As the emphasized language makes clear, Feno’s exemption argument must fail. Feno advertised his investment opportunity for over a year in two local newspapers with a combined circulation of about 300,000. Under those circumstances, without question, offers were made to more than 25 persons. (See § 25017, subd. (b).) Although each of the transactions in counts 2 and 4 were themselves one step removed from Feno’s advertisements, they both occurred in the context of an ongoing offering of the same investment opportunity addressed indiscriminately to a sizable and heterogeneous group (i.e., the readership of the newspapers). Under the above instruction, Feno’s offering was public as a matter of law. (Cf. Tomei v. Fairline Feeding Corp. (1977) 67 Cal.App.3d 394, 401-402 [137 Cal.Rptr. 656] [nonpublic transaction exemption unavailable because, during two-year *733period preceding issuer’s agreement with investor, issuer entered into same form of agreement with about 100 other people].)
Although not given to the jury, a second set of guidelines was available for determining whether Feno’s transactions with the investors involved a “public offering” within the meaning of former section 25102, subdivision (f). These guidelines were based in large part on bulletin No. 67-5 (May 25, 1967) and release No. 5-C (Jan. 31, 1969) issued by the Commissioner of Corporations.10 As restated in People v. Skelton, supra, 109 Cal.App.3d at page 724:  “The determinative factors indicating a ‘public offering’ include: (1) the number of offerees; (2) the relationship of the offerees to each other; (3) the relationship between the issuers and the offerees; (4) the size of the offerings; (5) the manner of the offerings; and (6) the character of the security offered. (People v. Humphreys (1970) 4 Cal.App.3d 693, 697 [84 Cal.Rptr. 496].) In addition, the ease with which the security may be transferred from original purchasers and the fact the particular persons affected needed the protection of the corporate securities law are important considerations. (Id., at pp. 700-701.)”
Application of the Skelton factors to the evidence produced at trial leads to the same conclusion reached above: Feno’s offering was public as a matter of law. The number of offerees here (the readership of the newspapers for over a year) was practically unlimited. We can safely assume there was no close relationship among those offerees based either on blood, friendship or business association. The record discloses none of the offerees who became investors had previously known Feno, and we can safely assume the offeree group as a whole consisted of relative strangers to Feno. As with the number of offerees, the size of Feno’s offering was practically unlimited. Feno accepted all investments that came his way, ranging in amount from $4,758 to $20,000. No doubt Feno was prepared to accept as much money as his offerees were prepared to invest.11 Each of these factors tends to indicate Feno’s offering was public. (See People v. Humphreys (1970) 4 Cal.App.3d 693, 698-699 [84 Cal.Rptr. 496]; release No. 5-C, at 2 Marsh & Volk, op. cit. supra, pp. A-4-16 to A-4-20.) In addition, two *734factors of particular significance here are the manner of Feno’s offering and the unsophisticated character of his investors. Feno’s use of newspaper advertisements “almost conclusively” established his offering was public (People v. Humphreys, supra, 4 Cal.App.3d at p. 699), and his investors’ general lack of business or financial experience with previous investments demonstrated their need for the protections afforded by the Corporate Securities Law. (See id., at pp. 700-701; see also Southern Cal. First Nat. Bank v. Quincy Cass Associates (1970) 3 Cal.3d 667, 675-676 [91 Cal.Rptr. 605, 478 P.2d 37]; Craft v. Brooks (1962) 204 Cal.App.2d 187, 188-189 [22 Cal.Rptr. 68].)
Because Feno’s offering was public as a matter of law, the court at retrial should not instruct the jury on the nonpublic transaction exemption provided by former section 25102, subdivision (f).
B
The following comments are germane only if Feno is again convicted.
In this appeal Feno has challenged the validity of the court’s order conditioning his probation on dismissal of his bankruptcy action and the payment of $51,000 as restitution.
Penal Code section 1203.1 grants trial courts broad discretion to prescribe conditions of probation so long as they serve a purpose specified in the statute. (People v. Richards (1976) 17 Cal.3d 614, 619 [131 Cal.Rptr. 537, 552 P.2d 97].)  Penal Code section 1203.l’s major goal is rehabilitation of the criminal. (Richards, supra, at p. 620.) Restitution may serve this purpose (see id., at pp. 619-620) and, when properly imposed, may not be discharged in bankruptcy. (People v. Calhoun (1983) 145 Cal.App.3d 568, 571-572 [193 Cal.Rptr. 394].)  Here, apart from its doubtful validity under the supremacy clause (U.S. Const., art. VI, § 2), the court’s probation condition requiring Feno to dismiss his bankruptcy action appears unrelated to any of the purposes specified in Penal Code section 1203.1. Moreover, if the condition was meant to ensure Feno’s payment of restitution, the condition was unnecessary because of the nondischargeable nature of a proper restitution order. The court may not require dismissal of Feno’s bankruptcy action as a probation condition.
As to the amount of restitution, $51,000, the record is unclear whether that sum was actually lost by the investors as a direct result of Feno’s conduct. Loss of money is not an element of the crimes of which Feno was convicted. (See People v. Clark, supra, 215 Cal.App.2d at pp. 736-737, 751 [unlawful sales of securities without permits under former § 26104, *735subd. (a)].)  Although restitution may serve a rehabilitative purpose and may be ordered in cases involving unlawful sales of securities without permits (People v. Sidwell (1945) 27 Cal.2d 121, 129-130 [162 P.2d 913]; People v. Mason (1960) 184 Cal.App.2d 182, 187-188 [7 Cal.Rptr. 525]), the amount ordered must be supported by a factual record consistent with a defendant’s due process rights. (People v. Richards, supra, 17 Cal.3d at pp. 620-621.) Accordingly, we presume that if Feno is again ordered to make restitution the total sum and the manner of payment will be consistent with the principles expressed by our Supreme Court in People v. Richards, supra, 17 Cal.3d 614.

Disposition

Judgment reversed.
Cologne, Acting P. J., concurred.

All statutory references are to the Corporations Code unless otherwise specified.

Section 25019 provides in part: “ ‘Security’ means any note; stock; treasury stock; membership in an incorporated or unincorporated association; bond; debenture; evidence of indebtedness; certificate of interest or participation in any profit-sharing agreement; collateral trust certificate; preorganization certificate or subscription; transferable share; investment contract; voting trust certificate; certificate of deposit for a security; certificate of interest or participation in an oil, gas or mining title or lease or in payments out of production under such a title or lease; any beneficial interest or other security issued in connection with a funded employees’ pension, profit sharing, stock bonus, or similar benefit plan; or, in general, any interest or instrument commonly known as a ‘security’; or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. All of the foregoing are securities whether or not evidenced by a written document. ...”

Effective November 1, 1981, section 25102, subdivision (f) provides a limited offering exemption for the offer or sale of any security in transactions meeting specified statutory criteria. (Stats. 1981, ch. 1120, § 1, pp. 4388-4389; 1 Marsh & Volk, Practice Under the Cal. Securities Laws (rev. ed. 1983) § 4.02A[1][a] (cited hereafter as Marsh & Volk).)

To the extent “bona fide” reflects the partnership concept of delectus personae, that would be consistent with participation in and control of the venture. (See Rivlin v. Levine (1961) 195 Cal.App.2d 13, 21-24 [15 Cal.Rptr. 587]; Comment, Limited Partnerships and the Cal. Securities Law: Restricting the Public Sale of Limited Partnership Interests (1980) 13 U.C. Davis L.Rev. 618, 643, fn. 142.)

Whether the nonpublic transaction exemption may be available for counts 2 and 4 is discussed below in part II A.

We conclude below Feno’s offering was public as a matter of law and thus the court at retrial should not instruct the jury on the nonpublic transaction exemption provided by former section 25102, subdivision (f). (See part II A, post.) Consequently, we need not decide whether the burden of proof applicable to that defense requires a defendant to raise a reasonable doubt on that issue or to establish the exemption by a preponderance of the evidence. (See generally People v. Tewksbury (1976) 15 Cal.3d 953, 963-968 [127 Cal.Rptr. 135, 544 P.2d 1335]; 2 Jefferson, Cal. Evidence Benchbook (2d ed. 1982) § 45.1, pp. 1640, 1643-1645.) Although not discussed by the majority, the dissent devotes parts II, III and IV of its opinion to this issue. Since nothing is said to the contrary, presumably even the dissent agrees this issue should be moot because the challenged transactions, counts 2 and 4, are public as a matter of law.

Feno argues lessening the burden of proof requires reversal per se, citing People v. Burres (1980) 101 Cal.App.3d 341, 353-354 [161 Cal.Rptr. 593]. (But see People v. Benson (1982) 130 Cal.App.3d 1000, 1011 [180 Cal.Rptr. 921].) Because we reverse under the Chapman standard, we do not address this issue.

By characterizing profit-sharing agreements as exempt if nonpublic the court broadened the language of former section 25102, subdivision (f), which referred only to offers or sales of general or limited partnership interests, joint venture interests and beneficial trust interests. Neither party on appeal addresses the effect, if any, of this deviation. We also decline to discuss it because we conclude this instruction will be unavailable to Feno at retrial. (See post.)

The court’s reference to offers or sales of “any security” also was improperly expansive. (See fn. 8, ante.)

Bulletin No. 67-5 and release No. 5-C contain identical guidelines. (1 Marsh & Volk, supra, § 3.02[2][d].) For the text of release No. 5-C, see 2 Marsh & Volk, op. cit. supra, at pages A-4-15 to A-4-21.

One investor, for example, described Feno’s ready acceptance of an increased investment:
“Q. [People] Now, did Mr. Feno tell you how much would be required for an investment in his business?
“A. Well, at first he asked for $10,000, but we had 20,000 available and I asked him why not put the whole thing in. If 10 would do good, maybe 20 would still do more good.
“Q. What was his reaction when you told him?
“A. He said that would be just fine.”