People v. Steele

California Court of Appeal Nov 21, 1934 No. Crim. 301Published

Before: Barnard

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Holding. The court held that the written agreement in question did not constitute a 'security' under the Corporate Securities Act because the investor's potential profit depended on his own labor and operations rather than the efforts of others.

Issues

Whether the written agreement between the parties constitutes a 'security' within the meaning of the Corporate Securities Act.

Disposition. reversed

Quotations verified verbatim against the opinion

“the term has no proper application to an enterprise which is to be conducted by the investor himself.”

“any anticipated profits could come only through the proceeds of operations to be conducted by the complaining witness himself.”

“we think it is not a “security” within the meaning of the Corporate Securities Act.”

BARNARD, P. J.

The appellant was charged with grand theft and with a violation of the Corporate Securities Act, in that on or about July 15, 1933, he “did feloniously sell an instrument in writing evidencing an interest in a profit-sharing enterprise constituting a security under subdivision 7, section 2, of the Corporate Securities Act of the ¡State of California, without the said defendant or anyone having applied for or obtained, from the Corporation Commissioner of the State 'of California, authority or permit so to do”. On the first trial he was acquitted on the charge of grand theft and the jury disagreed on the other charge. A second ■ trial on the charge of violating the Corporate Securities Act resulted in a conviction and this appeal is from the judgment which followed.

It appears that the appellant was the owner or holder of certain placer mining claims located in Inyo County, and also the owner of certain mining equipment. From some time in April, 1933, until July 15, 1933, the complaining witness, Simon Z. Dunn, was associated with the appellant in attempting to work these mining claims under some contractual relationship which is not here material. On the last-named date, these parties entered into a written agreement which is referred to in the information and which constitutes the purported security upon which this charge against the appellant is based. It is conceded that the appellant received from Dunn the sum of $250 at the time this agreement was executed and also that he had not obtained from the corporation commissioner any permit which in any way related to this transaction.

The determining question here is whether the written instrument in question constitutes a security within the meaning of the Corporate Securities Act. The agreement reads as follows:

“CONTRACT AND AGREEMENT FOR LEASE OF PERSONAL PROPERTY.

“This Agreement by and between R. W. ¡Steele, Lessor, .Party of the First Part and the undersigned Simon Z. Dunn, Party of the Second Part, Witnesseth:

“That, whereas, the first party is the owner and/or holder of the right to possession of and in certain placer

[372]

mining claims and locations situate in and near that territory in Inyo County, California, known as Mazourka Canyon and its tributaries and is the owner and/or lessee of certain placer gold mining equipment, and

People v. Steele

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BARNARD, P. J.

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