Court Opinion

ID: 9720197
Source: CourtListenerOpinion
Date Created: 2023-08-26 08:19:57.321717+00
Date Added: 2024-06-11T18:22:37.530193
License: Public Domain

STANIFORTH, J.
I respectfully dissent.
We are mandated by the California Constitution, article VI, section 13, not to set aside a judgment “on the ground of misdirection of the jury . . . or for any error as to any matter of procedure, unless, after an examination of the entire cause, including the evidence [we are] of the opinion that the error complained of has resulted in a miscarriage of justice.” Reversing the jury verdict here violates this most fundamental of appellate court rules.
The key issue of fact in this case was whether Feno sold securities in violation of the Corporate Securities Law (Corp. Code, §§ 25110, 25540). The evidence is overwhelming—for the most part uncontested—proving beyond any reasonable doubt that Feno is guilty of the crimes as charged.
These facts are: Several unskilled investors, through advertisements and other invitations, were induced to place substantial sums of money in Feno’s hands. Feno was to select and purchase vehicles, recondition them and ultimately sell them. These investors depended upon Feno’s representations and honesty to manage the business. These investors had no responsibility beyond turning over their money to Feno. No investor had any power or authority to affect the success or failure of the business. When viewed in the light most favorable to the People these facts point unerringly to the conclusion the investment contract was a “security” and to the guilt of Feno.
The court correctly instructed the jury as to the definition of a security in accordance with Corporations Code section 25019; the court correctly in*736structed the jury as to the burden of proof placed by law on the People to prove Feno guilty beyond reasonable doubt of selling a security as so defined. There was no ambiguity or misdirection in this imposition on the People of the proper burden of proof.
I
Feno contends the trial court committed error by refusing his instruction which would have told the jury “It is the burden of the People to prove beyond a reasonable doubt that the relationship between the defendant and every alleged victim was not a personal service contract nor an agency nor a joint venture. If you find the People have not met this burden you shall return a verdict of not guilty for each and every count for which you make a finding.”
Feno’s proposed instruction is erroneous as a matter of law. The court, after defining a “joint venture” (and “mischaracteriz[ing]” (majority opn., ante, p. 728) its legal status as discussed infra), instructed as to count 2 and 4 as follows: “The burden of proving an exemption is upon the person claiming it. . . . The effect of this is to shift the burden of going forward with the evidence to Defendants. It does not however remove from the People the burden of establishing every element of the offense beyond a reasonable doubt. ”
The majority concede these instructions are “correct in themselves” (majority opn., ante, pp. 728-729), but insist they create prejudice requiring reversal. These instructions as given are too favorable to the defendant as a matter of law.
Section 25163 of the Corporate Securities Law of 1968 provides: “In any proceeding under this law, the burden of proving an exemption or an exception from a definition is upon the person claiming it. ” Evidence Code section 500 declares “Except as otherwise provided by law, a party has the burden of proof as to each fact the existence or nonexistence of which is essential to the claim for relief or defense that he is asserting.” As section 500 suggests, this general rule allocating the burden of proof may be altered as “provided by law.” Where any statute (except Pen. Code, § 522) assigns a burden of proof in a criminal matter, “such statute is subject to Penal Code Section 1096”—the ever present presumption of innocence provision. (Evid. Code, § 501.) Thus, in the Corporate Securities Law violation context, the overall burden is and remains on the People to prove a defendant’s guilt beyond a reasonable doubt as to all elements of the offense.
*737II
Has the burden of proof been “otherwise allocated” by section 25163 in criminal proceedings charging violation of the Corporate Securities Laws where, as here, Feno claims a statutory exemption from liability? In determining whether the traditional allocation of the burden of proof could be constitutionally altered, the courts have considered a number of factors. The first question to be resolved is the role of the facts at issue in the definition of the crime. Does the shifting of the burden of proof instruction concern an essential element of the offense? If it does not, it may survive constitutional inspection.
The constitutionality of the burden-shifting rule or device will turn on whether it “undermine[s] the fact finder’s responsibility at trial, based on the evidence adduced by the State, to find the ultimate facts beyond a reasonable doubt.” (Ulster County Court v. Allen (1979) 442 U.S. 140, 156 [60 L.Ed.2d 777, 791, 99 S.Ct. 23]; citations omitted.)
In several recent cases the United States Supreme Court has addressed the constitutionality of laws which have shifted the burden of proof on certain issues to a criminal defendant. (See Sandstrom v. Montana (1979) 442 U.S. 510 [61 L.Ed.2d 39, 99 S.Ct. 2450]; Ulster County Court, supra, 442 U.S. 140 and Patterson v. New York (1977) 432 U.S. 197 [53 L.Ed.2d 281, 97 S.Ct. 2319].) In each of these cases, a critical component of the reviewing court’s task was to ascertain whether the facts the defendant claims he was required to prove negated an essential element of the state law offense. (See Mullaney v. Wilbur (1975) 421 U.S. 684 [44 L.Ed.2d 508, 95 S.Ct. 1881], Patterson v. New York, supra, 432 U.S. at p. 205 [53 L.Ed.2d at p. 288].)
The most recent United States Supreme Court case dealing with the shifting of the burden of proof on a specified issue in a criminal case is Patterson v. New York, supra. The Patterson court examined a New York law requiring a defendant in a second degree murder prosecution to prove by preponderance of the evidence the affirmative defense of an extreme emotional disturbance in order to reduce the crime to manslaughter.
The United States Supreme Court held such a shifting of the burden did not violate the due process clause of the Fourteenth Amendment, reasoning: “We thus decline to adopt as a constitutional imperative, operating countrywide, that a State must disprove beyond a reasonable doubt every fact constituting any and all affirmative defenses related to the culpability of an accused. Traditionally, due process has required that only the most basic procedural safeguards be observed; more subtle balancing of society’s interest against those of the accused have been left to the legislative branch. *738We therefore will not disturb the balance struck in previous cases .... Proof of the nonexistence of all affirmative defenses has never been constitutionally required; and we perceive no reason to fashion such a rule in this case . . . .” (Id., at p. 210 [53 L.Ed.2d at p. 292], italics added.)1 The Patterson court pointed out at page 209, footnote 11 [53 L.Ed.2d at p. 291]: “The drafters of the Model Penal Code would, as a matter of policy, place the burden of proving the nonexistence of most affirmative defenses, . . . on the prosecution once the defendant has come forward with some evidence that the defense is present. The drafters recognize the need for flexibility, however, and would, in ‘some exceptional situations,’ place the burden of persuasion on the accused . . . [¶] [O]ther writers have recognized the need for flexibility in allocating the burden of proof in order to enhance the potential for liberal legislative reforms. See, e.g., Low & Jeffries, [DICTA: Constitutionalizing the Criminal Law?, 29 Va. Law Weekly, No. 18, p. 1. (1977)].”
*739III
The reasoning of the United States Supreme Court has been followed in state courts (and lower federal courts) where corporate securities violations have been charged and a statutory defense of exempt securities been raised. In State v. Goetz (N.D. 1981) 312 N.W.2d 1, certiorari denied, 455 U.S. 924 [71 L.Ed.2d 467, 102 S.Ct. 1286], the defendant contended the state should be required to prove the nonexistence of an exemption from the corporate securities laws. The jury had been instructed defendant had the burden to prove the existence of an exemption by a preponderance of the evidence. This instruction was based upon North Dakota Civil Code section 10.04-19(1), which provides: “ ‘In any action civil or criminal, where a defense is based upon the exemption provided for in this chapter, the burden of proving the existence of such exemption shall be on the party raising such defense.’” (312 N.W.2d at p. 9.) Goetz argued the statute unconstitutionally shifted the burden of proof, despite the fact the trial court also instructed the jury the state was required to prove the elements of its case beyond a reasonable doubt. The North Dakota Supreme Court, relying on a Michigan Supreme Court decision, People v. Dempster (1976) 396 Mich. 700 [242 N.W.2d 381], held the provision was constitutional.
Dempster in turn relied upon United States v. Tehan (6th Cir. 1966) 365 F.2d 191, which upheld as constitutional a provision similar to the North Dakota provision challenged in Goetz.
In Nelson v. State (Okla. Crim. 1960) 355 P.2d 413, it was said whether stock offered or sold falls within the exempt class of securities is a matter peculiarly within the personal knowledge of the seller. Such being the case the state is not required to prove a negative which it is the duty of the seller to ascertain before he sells or offers the security for sale. Under these conditions, the matter of proving a security is exempt is an affirmative defense and the burden is upon the defendant to bring himself within the terms of the exemption claimed under the statute.
To the same effect see Lamb v. Jernigan (11th Cir. 1982) 683 F.2d 1332, 1335; State v. Goodman (1974) 110 Ariz. 524 [521 P.2d 611, 613]; State v. Goetz, supra, 312 N.W.2d 1, 9; United States v. Tehan, supra, 365 F.2d 191, 195; People v. Wilson (1941) 375 Ill. 506 [31 N.E.2d 959, 962]; Commonwealth v. David (1974) 365 Mass. 47 [309 N.E.2d 484, 488-489]; People v. Smith (1942) 315 Ill.App. 100 [42 N.E.2d 119]; Commonwealth v. Harrison (1939) 137 Pa.Super. 279 [8 A.2d 733]; State v. Frost (1979) 57 Ohio St.2d 121 [11 Ohio Ops.3d 394, 387 N.E.2d 235, 238-239].
*740IV
California case law is in accord. In People v. Dean (1933) 131 Cal.App. 228 [21 P.2d 126], the defendant was charged with violating section 18 of the Corporate Securities Act in selling an unauthorized security. Dean claimed the burden was on the state to negative the issuance of such permit. The appellate court held the general rule of evidence respecting the proof of negative affirmance was declared in Commonwealth v. Boyer (1863) (89 Mass.) 7 Allen 306, where at page 307 it was said: “ ‘When the defendant is in the first instance shown to have done an act which was unlawful unless he was distinctly authorized to do it, the proof of authority is thrown upon him.’ ” (Dean, supra, at p. 231.) Thus the appellate court in Dean held the burden of proving the issuance of the security under a permit was properly placed on the defendant in the criminal proceeding. (Id., at p. 233.)
Dean relied upon the much cited case of People v. Boo Doo Hong (1898) 122 Cal. 606 [55 P. 402], where the defendant was charged with unlawfully practicing medicine without a license. The evidence showed Boo Doo Hong had been practicing medicine in Red Bluff but evidence was not introduced by either side showing or tending to show Boo Doo Hong had or had not a certificate to so practice as required by law. The court instructed the jury the burden was on Boo Doo Hong to establish that he had the certificate. If he failed to prove such fact it must be taken as true that he did not have one. Such instruction was challenged on the ground that in a criminal case the defendant is presumed to be innocent until proven guilty beyond a reasonable doubt and such presumption continues throughout the trial. The Supreme Court responded: “The general rule is undoubtedly as above stated, but there is a well recognized exception to the rule, where there is a negative averment of a fact which is peculiarly within the knowledge of the defendant.” (Id., at p. 608.) The Boo Doo Hong court upheld the imposition of the burden of proof upon the defendant on this specific issue.
If more than case authority is needed for such a rule, see Fletcher, Two Kinds of Legal Rules—A Comparative Study of Burden-of-Persuasion Practices in Criminal Cases (1968) 77 Yale L.J. 880, 909; and 69 Am.Jur.2d, Securities Regulation—State, section 108, page 1138.
The defendant was not asked to negative an element of the offense. He had the burden to persuade the jury as to a statutory exemption. The law most explicitly assigns the “burden of proving an exemption or exception” to Feno, “the person claiming it.” (Corp. Code, § 25163.) Feno requested instruction which was not authorized by law. This is no basis for reversal.
*741V
Feno maintains the trial court committed error by telling the jury a bona fide joint venture is “exempt” from registration provisions of the corporate securities law. The majority opinion concedes that “By itself, this mischaracterization appears to be innocuous, a semantic nicety.” (Majority opn., ante, p. 728.) A more correct statement of the law under 25012 of the Corporations Code would be that law exempts any “non-public offering of any bona fide general partnership joint venture or limited partnership interest.” This misinstruction must be viewed in light of the court’s correct definition of a joint venture and as an error that loses any reversible impact where the People v. Watson (1956) 46 Cal.2d 818, 838 [299 P.2d 243] rule is applied.
VI
In my view, the error in the trial court’s instruction was that it does not specify the degree or nature or quantum of burden on the defendant the law requires where a defense of statutory exemption is raised by a defendant. In so doing the instructions as actually given (and not given) were more favorable to the defendant than those to which he was otherwise entitled.
The question of a favorable misinstruction (or noninstruction) on this precise issue (exempt security) has not yet been addressed by a California court. However, the Supreme Court of Arizona in State v. Baumann (1980) 125 Ariz. 404 [610 P.2d 38, 46], was confronted with Arizona Revised Statute section 44-2033, which placed the burden of proving securities were exempt from registration upon the party raising the defense.
In page 46, footnote 8, to its opinion, the Arizona Supreme Court stated: “[T]he jury was not instructed by the trial judge that appellant must carry his burden with respect to proving the exemptions. Instead the jury was instructed that the burden of proof rested wholly with the State. Any error in the omission of such instruction inured solely to appellant’s benefit.” (Ibid., italics added.)
In such circumstance the Supreme Court of Arizona affirmed the conviction and sentence despite the failure to instruct. An earlier case from Arizona, State v. Goodman (1974) 21 Ariz.App. 252 [517 P.2d 1299], arrived at the same result. The Arizona appellate court there stated: “A.R.S. § 44-2033 states that the burden of proving the existence of any exemption provided for in the statutes shall be upon the party raising the defense. This statute does not eliminate the ultimate burden of proof placed on the State of proving beyond a reasonable doubt the guilt of a defendant. However, *742upon proof by the State of violation of the securities law, the burden of going forward with the evidence does shift to the defendant to prove by a preponderance of the evidence the existence of the claimed exemption. See United States v. Tehan, 365 F.2d 191 (6th Cir. 1966).” (Id., at p. 1301, fn. omitted.)
At page 1301, footnote 2, the Goodman court stated: “[T]he jury was not instructed by the trial judge that the appellant was faced with a burden of proof with respect to proving the exemption. Instead, and to appellant’s favor, the jury was instructed that the burden of proof rested totally with the State. No objection was made to the instructions given, nor is any argument made on appeal as to its omission.” (Italics added.)
The Goodman court found the People had not met their burden of proof and therefore reversed the judgment. In State v. Goodman, supra, 110 Ariz. 524 [521 P.2d 611], the Arizona Supreme Court vacated the appellate court decision but affirmed Goodman’s conviction saying: “The defendant did not meet his burden of proof to bring himself within the exemption of A.R.S. §§ 44-18438. See United States v. Tehan, 365 F.2d 191 (6th Cir. 1966).” (Id., at p. 613.)
VII
The majority opinion here would reverse the judgment and require a costly and lengthy retrial by reason of a failure to instruct or of a misinstruction which, in total effect, was more than favorable to the defendant. The instructions given and argument made did not erroneously shift the burden of proof to the defendant. The ultimate burden was left totally upon the People to prove beyond a reasonable doubt every element of the offense, where, of course, the burden properly belonged.
Error of “innocuous semantic nicety” proportions or overly favorable misinstructions or noninstructions do not equate with a “miscarriage of justice.” (Cal. Const., art. VI, § 13.) I would affirm the judgment.
A petition for a rehearing was denied May 4, 1984. Staniforth, J., was of the opinion that the petition should be granted. Respondent’s petition for a hearing by the Supreme Court was denied June 21, 1984. Bird, C. J., was of the opinion that the petition should be granted.

A most perceptive analysis of the impact of burden shifting was set forth by Chief Judge Breitel of the Court of Appeals of New York, concurring in People v. Patterson (1976) 39 N.Y.2d 288 [383 N.Y.2d Supp. 573, 347 N.E.2d 898], who said: “. . . although one should guard against such abuses, it may be misguided, out of excess caution, to forestall or discourage the use of affirmative defenses, where a defendant may have the burden of proof but no greater than by a preponderance of the evidence. In the absence of affirmative defenses the impulse to legislators, especially in periods of concern about the rise of crime, would be to define particular crimes in unqualifiedly general terms, and leave only to sentence the adjustment between offenses of lesser and greater degree. In times when there is also a retrogressive impulse in legislation to restrain courts by mandatory sentences, the evil would be compounded.
“The affirmative defense, intelligently used, permits the gradation of offenses at the earlier stages of prosecution and certainly at the trial, and thus offers the opportunity to a defendant to allege or prove, if he can, the distinction between the offense charged and the mitigating circumstances which should ameliorate the degree or kind, of offense. . . . The placing of the burden of proof on the defense, with a lower threshold, however, is fair because of defendant’s knowledge or access to the evidence other than his own on the issue. To require the prosecution to negative the ‘element’ of mitigating circumstances is generally unfair, especially since the conclusion that the negative of the circumstances is necessarily a product of definitional and therefore circular reasoning, and is easily avoided by the likely legislative practice mentioned earlier.

it,

“In a more mature and developed criminology sophisticated distinctions should be used freely, guarding only for abuse. The goals are more appropriate definition of and sanctions for crime, and a retreat from primitive notions about crime based on a result alone or based largely on result. ‘A homicide is a homicide is a homicide’ is not a truth of modern criminology, such a simplistic approach, which could be encouraged by making affirmative defenses unattractive to legislators, is not one to be followed, [f] . . . In short, only those with a lack of historical perspective would treat the affirmative defense as a hardening of attitudes in law enforcement rather than as a civilized and sophisticated amelioration.
“In sum, the appropriate use of affirmative defenses enlarges the ameliorative aspects of a statutory scheme for the punishment of crime, rather than the other way around—a shift from primitive mechanical classifications based on the bare antisocial act and its consequences, rather than on the nature of the offender and the conditions which produce some degree of excuse for his conduct, the mark of an advanced criminology.” (At pp. 909-910, italics added.)