Opinion
No. 23557
Decided January 10, 1956.
Criminal law — Violation of Ohio Securities Act — Sufficiency of indictment — Prosecution against defendants tried jointly — One issue for jury — Inconsistent verdict — Guilty as to one and not guilty as to other — Proof of motive — Section 2945.59. Revised Code — Reference to "similar act" statute as "similar offense" statute, prejudicial — Land contract — Purchase of interest in realty, not security, when.
1. An indictment charging the accused with selling an unlicensed security and with selling securities without being licensed to do so is sufficient to charge a violation of the Ohio Securities Act.
2. In a criminal action against two or more defendants who are tried together, and, where there is but one issue to be decided by the jury, and where one defendant is charged as an aider and abettor, a verdict of guilty as to such defendant and not guilty as to a codefendant is inconsistent and must be set aside.
3. In a criminal action, a reference by the court and prosecuting attorney to Section 2945.59, Revised Code ("similar-act" statute), as a "similar-offense" statute in effect tells the jury that evidence introduced under such statute demonstrates that the accused was guilty of similar offenses and is prejudicial to the accused.
4. Where, under a land contract, the purchaser acquires an undivided interest in an apartment building with the right to occupy an apartment as a home, and the contract requires the vendor to deliver a warranty deed upon full performance of the contract, such contract constitutes the purchase of an interest in land and not the purchase of a security within the meaning of the Ohio Securities Act, even though it is mentioned that, when a certain amount of the purchase price is paid, certain shares of stock will be issued.
APPEAL: Court of Appeals for Cuyahoga County.
Mr. Frank T. Cullitan, prosecuting attorney, and Mr. Frederick W. Frey, for appellee.
Messrs. Greene Greene and Mr. Lockwood Thompson, for appellant.
This appeal comes to this court on questions of law from a judgment and sentence of the defendant Samuel Hirsch on the verdict of guilty returned by the jury. The appellant's wife, a codefendant in the same trial, was found not guilty by the verdict of the jury and discharged.
The appellant, Samuel Hirsch, and his wife, Bess, were indicted for alleged violations of the Blue Sky Law. Bess Hirsch was the owner of an eight-suite apartment house located at 1031 Linn Drive, Cleveland, Ohio. Samuel Hirsch is a licensed real estate broker. Through the procurement by Hirsch, two separate land contracts were entered into between Mrs. Hirsch and two purchasers, entitling each such purchaser to a fixed-percentage undivided interest in the apartment property, the purchase of such interest giving the purchaser the right to occupy a designated suite in the building for residence purposes, including the use of a garage space. The other suites in the building were disposed of in like manner, but due to the limitation provisions of the Blue Sky Law, the sales of such suites were not subject to the criminal provisions of the Securities Act, and at the trial of this case the sales of these suites were injected into the trial, the state claiming that such evidence was admissible as similar offenses (similar acts) under the provisions of Section 2945.59, Revised Code.
The facts by which the state seeks to sustain the conviction of the appellant on the four counts of the indictment are not in great dispute.
Bess Hirsch, as owner, sold to Wilma Long and Bunyon Long, mother and son, through the efforts of the appellant, a four thirty-eighths interest in the apartment house (which contained eight suites) located on Linn Drive, as described by metes and bounds in the land contract, for $6,300, payable $1,200 down and the balance at the rate of $51 per month, which included six per cent interest on the balance, beginning October 1, 1953, plus $16.50 as the purchaser's portion of taxes, insurance and building maintenance. The contract was dated September 5, 1953, and provided that the purchaser of such interest had the right to occupy suite No. 5, with the further provision:
"It is understood and agreed that four shares of stock will be delivered to the party of the second part when the principal sum will be reduced to two thousand five hundred dollars ($2,500). At the time of the delivery of said stock, the party of the second part will execute a note or notes in the sum of twenty-five hundred dollars ($2,500) payable in monthly installments of fifty-one dollars ($51) each plus sixteen dollars and fifty cents ($16.50) per month for taxes and assessments, maintenance and any other expenses which will be incurred in connection with the maintenance of said building."
The other land contract (procured by the efforts of the appellant), the execution of which by Bess Hirsch is the subject of this indictment, was with Walter and Hazel Venable, husband and wife. This contract was the same in every respect as that entered into with the Longs, except that the total consideration was $7,000, the down payment was $1,500, the interest in the apartment property to be transferred to the purchaser (by warranty deed) was five thirty-eighths, the monthly payments were $55, plus $16.50 for taxes and maintenance, the number of shares of stock to be received upon reduction of purchase price to $2,800 was five, and the suite which the Venables were privileged to occupy was No. 1.
At the time of the indictment neither the Venables nor the Longs had become entitled to the delivery of stock under the terms of the contract. There was no provision in the land contracts defining or in any fashion describing the corporation, the stock of which was to be delivered under their terms. That is to say, there was not a word in either contract as to the capital structure of such corporation, its purposes or any other essential fact about it necessary to make use of provisions of the contract requiring delivery of shares of stock.
The first count of the indictment charges that Bess Hirsch and Samuel Hirsch on or about September 5, 1953, in the county aforesaid "did knowingly, unlawfully and intentionally sell, cause to be sold, offer for sale and cause to be offered for sale to Wilma S. Long and Bunyon Long a security, to wit, a written instrument and agreement of a promissory nature bearing the title of a `land contract,' which said instrument provides, in substance and in material part, that the said Bess Hirsch promises and agrees to deliver to said Wilma S. Long and Bunyon Long four shares of stock when the principal sum due and payable from said Wilma S. and Bunyon Long to the said Bess Hirsch according to the terms of said written instrument bearing the title of `land contract' will be reduced to the sum of two thousand five hundred dollars, which said security, to wit, said so-called land contract, was not then and there registered by description, nor qualified, nor exempted, nor the subject matter of a transaction then and there registered by description, nor the subject matter of an exempted transaction in accordance with the provisions of the Ohio Securities Act, to wit, Sections 1707.01 to 1707.99, inclusive, of the Revised Code of Ohio, and Sections 8624-1 to 8624-45, inclusive, of the General Code of Ohio."
The second count describes the same transaction as described in the first count, the charge being that the defendants made a sale of securities coming within the Securities Act, without being jointly or severally licensed to sell securities under the Blue Sky Law of Ohio (Sections 1707.01 to 1707.99, Revised Code).
The third and fourth counts describe a like transaction entered into on February 9, 1953, between the defendants and Walter Venable and Hazel Venable, husband and wife, and charges like offenses in that a sale of securities, not licensed or exempt under the Ohio Securities Act, was made by the defendants and that the defendants were not licensed to sell securities under the act.
The evidence shows, and these facts are not controverted by any evidence introduced by the state, that the Longs (mother and son) and the Venables (husband and wife) were not in the security market at the time these transactions were consummated. What they wanted and did purchase was an undivided interest in an apartment building with the absolute right to occupy one of the suites as a home. These two contracts required the sellers to give the purchasers warranty deeds when the contracts were fully performed. The only mention of stock in the contracts here, the basis of this indictment, was as above quoted, except that at the end of the Venable contract were the words, "shares of stock according to contract." There is some evidence of verbal discussions with some of the purchasers of the suites, other than those which are the subject of this indictment, with regard to organizing a corporation whereby the suite owners would have their interests in the building represented by shares of stock in a corporation to which the title of the apartment building would be deeded. This idea has some support from the evidence which is to the effect that the building had eight suites with a total of 38 rooms, and the number of shares mentioned in the eight contracts introduced in evidence equalled the total number of rooms in the suites purchased, that is, 38. The evidence of the state shows that those who dealt with the defendants were buying a percentage interest in an apartment building with the right to occupy a particular suite therein as a home, and, if stock of a corporation was in fact to be involved in the transaction, it was for the sole purpose of working out the co-operative features of the joint ownership of the real estate. It must be observed, as above noted, that the evidence about any existing or proposed corporation whose stock was disposed of or to be disposed of to the purchasers of percentage interests of the apartment building was of such an indefinite nature as to render the agreements unenforceable either at law or in equity, and, if some form of corporate organization was necessary to make the co-operative features of joint ownership of the property more workable, it could only come about by new agreements among the several owners.
The appellant has presented 37 assignments of error, many of them covering the same or closely related questions. The appellant has grouped these claims of error under 12 headings in his brief and has confined his consideration of them under such groupings. He states also that all the claims of error fall into two categories.
First, was the appellant entitled to be discharged because the state failed to establish his guilt of a violation of the Blue Sky Law, or was he entitled to be discharged because Bess Hirsch, the principal, having been found not guilty by the jury, the appellant, tried as an aider and abettor before the same jury, should have likewise been discharged?
Second, the appellant, if not legally entitled to be discharged, is at least entitled to a new trial free of the "errors, passion and prejudice, abounding in the proceedings."
These categories are concerned first with the sufficiency of the indictment and error in overruling appellant's motion for discharge at the end of the state's case and also at the conclusion of the taking of evidence, and in the second category the errors may be grouped under the following heads:
First, error in the admitting of evidence offered by the state, including so-called similar-offense (act) evidence, in rejecting competent evidence offered by the appellant, in limiting the scope of cross-examination.
Second, errors in the charge of the court and related subjects.
Third, misconduct of the court and prosecutor in the trial of the case to the prejudice of the appellant.
Fourth, overruling motion for new trial.
The first two claims of error must be overruled. They charge that the allegations of the indictment are not sufficient to charge a violation of the provisions of the Securities Act. The allegations of the first and third counts, charging the sale of an unlicensed security, are clearly sufficient under the statute, as is equally true as to counts two and four charging the defendants with selling securities, not being licensed so to do as required by law. If greater clarity in the allegations of the indictment was needed, the appellant should have requested a bill of particulars.
Under the evidence, Bess Hirsch was the owner of the property who executed the land contracts claimed by the state to be securities, and the appellant conducted all the negotiations, acting as the selling agent in such transactions. There is no claim in this case that Mrs. Hirsch acted under the domination of her husband, at least so far as the state's case is concerned. Such claim must of necessity be presented as a defense, which was not done in this case, nor is there a claim by the state that she held title to the apartment in trust for her husband. Therefore, the appellant had nothing to sell, the property being his wife's, and his wife, according to the evidence, put all negotiations for the sale of the property into the hands of her husband. There is absolutely no evidence to support the assertion in the state's brief that the property was that of Samuel Hirsch. The jury found the defendant Bess Hirsch not guilty and the defendant Samuel Hirsch guilty under all four counts of the indictment. If the appellant, who was charged with aiding and abetting the sale of the claimed unregistered or unlicensed securities, was found guilty and the seller (the admitted owner of the property sold) was found not guilty in the same trial by the same jury, such a verdict would be inconsistent. It is difficult to see how an aider and abettor could be guilty if the principal was not, where there is but one issue of fact to be determined, that is that the act of selling was unlawful. This must be equally true where the agent is charged, as aider and abettor of a codefendant as principal, with the alleged unlawful acts of selling securities without a license. Under such circumstances, where ownership of the property is admitted by the seller, and the terms of the sale and the sale are also admitted, so that the only issue is whether the sale of the property comes within and is prohibited by the provision of the Securities Act, a verdict of not guilty as to the owner and seller could be only on the ground that the sale of the property was not in violation of the Securities Act. We must conclude, therefore, that in any event when the jury found defendant Bess Hirsch not guilty in the same trial and on the same evidence in and upon which it found the defendant Samuel Hirsch guilty on all four counts, such a verdict was inconsistent, and the defendant Samuel Hirsch should have been granted a new trial.
We are quite aware that in separate trials of codefendants charged with participation in the same crime, verdicts need not be consistent. It is likewise true that, where issues of identity or participation in a criminal act are presented in the same trial of two or more defendants, a verdict of guilty as to one defendant and not guilty as to a codefendant will not support a claim of an inconsistent verdict. But where there is but one issue to be decided by the jury, that is, whether a security sold (the sale of which is admitted by the appellant) was one coming within the provisions of the Blue Sky Law, a verdict of one defendant not guilty and a codefendant guilty when tried together on the same evidence, where the defendant found not guilty was the owner of the property and the one held guilty was charged as an aider and abettor, is inconsistent and must be set aside.
This identical question was presented in the case of State v. Nowak, 16 C. C. (N.S.), 596, 27 C. D., 629, where the defendant was convicted as an aider and abettor of a special constable on a charge of extortion, and the special constable found not guilty in the same trial. The court held that an aider and abettor cannot be convicted in the same proceeding and by the same jury which acquits his principal.
The other claims of error are numerous and cover almost every aspect of the trial. Those dealing with the similar-act section of the Code of Criminal Procedure (Section 2945.59, Revised Code) must for the most part be sustained. The provisions of this section are as follows:
"In any criminal case in which the defendant's motive or intent, the absence of mistake or accident on his part, or the defendant's scheme, plan, or system in doing an act is material, any acts of the defendant which tend to show his motive or intent, the absence of mistake or accident on his part, or the defendant's scheme, plan, or system in doing the act in question may be proved, whether they are contemporaneous with or prior or subsequent thereto, notwithstanding that such proof may show or tend to show the commission of another crime by the defendant."
The court and the prosecutor referred to this statute as a similar-offense statute. To do so was prejudicial to the appellant's rights. Those statements, in effect, told the jury that such evidence was to demonstrate that the appellant was guilty of similar offenses. The only purpose of this section is to make available to the state evidence of similar acts where the issue of the defendant's motive or intent, the absence of mistake or accident on his part or the defendant's scheme, plan or system in doing an act is material. No issue of that character is here presented. The appellant admits negotiating the land contracts. He admits that he dictated the terms of such land contracts. The only issue is whether or not the contracts as drawn and performed constituted a violation of the Blue Sky Law as in force at the time the contracts were made, that is, were the securities required to be registered or licensed under the Blue Sky Law or did such a contract constitute a sale of an interest in land? The evidence of claimed similar acts was, therefore, clearly inadmissible, and the admission of such evidence constituted prejudicial error.
The claims of error in the rejection and admission of evidence are numerous, but because of the principal question to be decided as to whether or not, taking the record in its entirety, the state made out a case as charged in the four counts of the indictment, we do not find it necessary to say more than that for the most part such claims are well taken. This is likewise true of the errors claimed as to the charge to the jury, excluding however the claim that the court attempted to explain the provisions of the general charge after it had been reduced to writing under the provisions of Section 2945.10, Revised Code.
We come now to the sufficiency of the state's case. In the first place, the overwhelming evidence as to the purpose of the Longs and the Venables in entering into the contracts designated as state's exhibits 1 and 7, respectively, was to purchase a place to live. They were not seeking investments in the security market, nor was it the purpose of the defendants to sell securities for investment purposes. The Longs and Venables bought the right to occupy separate suites in an apartment building, together with the right to have transferred to them by warranty deed an undivided percentage interest in the property. The land contracts here considered constituted purchases of interests in land. Such transactions are excluded from the provisions of the Securities Act. The term, "security," in that act is clearly and carefully defined in subdivision (B) of Section 1707.01, Revised Code, wherein it is stated that "such sections [ 1707.01 to 1707.45, inclusive, Revised Code] shall not apply to bond investment companies or to the sale of real estate."
The reference to stock in these contracts, if it could be said to have any binding effect at all, which we hold it could not, was for the purpose of managing the co-operative feature of the joint ownership of the property.
There are other provisions of the act which support the substance of the quoted part of the foregoing section, that the act was not intended to include real estate transactions within the state of Ohio.
For the foregoing reason, we must conclude that the state failed completely (that is that there is no evidence) to show a violation of the Blue Sky Law as charged in the indictment.
This identical question was presented to this court in two cases styled State v. Silberberg, where the facts were far more favorable to the state in that the land contracts spelled out the necessity of forming a corporation at the vendors' expense to take title to the property, the corporate stock of which was to be issued to the purchasers of suites to the extent of the percentage interests purchased. This court, in that case, held that the land contracts there involved constituted sales of interests in real estate and not the sales of securities as defined in the Blue Sky Law. The opinion was written by Judge Middleton of the Third Appellate District, and the judgment was concurred in by Judges Doyle and Hunsicker of the Ninth Appellate District.
See 166 Ohio St. 101.
The judgment of guilty and the sentence of the appellant herein are, therefore, reversed, and the appellant is discharged.
Judgment reversed.
KOVACHY, P. J., and HURD, J., concur.