People v. Main

The defendant and appellant was charged by indictment in the county of Los Angeles with having violated the Corporate Securities Act. It was alleged in four counts

[1] The charging part of the first four counts of the indictment to which exception was taken by demurrer and which constitutes the basis of attack here, alleged that “the said P. L. Main did then and there wilfully, unlawfully, knowingly and feloniously, and for a valuable consideration, sell and issue, and aid and abet some person or persons to complainant unknown in selling and issuing to one Carrie Bowman” certain shares of the capital stock of the Southern Oregon Oil and Gas Company, a corporation. It is said that inasmuch as none of the counts alleged that the stock was not the privately owned property of the defendant, each count failed to charge a public offense; that he might lawfully sell his own stock, and that in this respect the alleged sales would fall within an exception to the penal provisions of the act. It is doubtless true that the statute in question does not attempt to prohibit one from selling his privately owned corporate securities without a permit or license, provided his transactions do not bring him within the classification of “dealer,” or “broker.” (In re Lamb, 61 Cal. App. 321 [ 215 Pac. 109 ].) However, the indictment need not negative such exception, for it formed no part of the definition of the offense. (People v. Jevne, 179 Cal. 621 [ 178 Pac. 517 ]; People v. Cencevich, 64 Cal. App. 39 , 44 [ 220 Pac. 448 ].) Another ground of demurrer, that the indictment failed to state by whom the stock was owned, or that it was not owned by the defendant, was directed at the fifth count; and in connection with both grounds it is insisted that there was no evidence tending to show the facts as to which the indictment is said to be silent. The principles

The most serious point raised is that there is an entire lack of proof to support the allegation that the Southern Oregon Oil and Gas Company was a corporation having a capital stock. The indictment alleged in that behalf that “the Southern Oregon Oil and Gas Company was then and there a corporation having a capital stock”; that it had no permit to issue, nor did the defendant have a permit to sell, such stock; that said stock was a “security,” and that “the crime of violation of the corporate securities act, a felony, was committed by the said P. L. Main,” in that he did wilfully, unlawfully, knowingly, and feloniously, for a valuable consideration, sell and issue shares of the capital stock of said corporation.

“The securities which may not be issued or sold without the permission of the corporation commissioner are the ‘shares, or other interests or rights, into which the . . . property of companies ... or rights of . . . members thereof are divided, . . . and all certificates and other instruments issued by them or their authority, evidencing or representing such shares, interests or rights’; also ‘any instrument issued or offered to the public by any company’ evidencing any right to participate in the profits or earnings or the distribution of assets of any business carried on for profit by the company.” (In re Lamb, 61 Cal. App. 321 , 331 [ 215 Pac. 109 ].)

The evidence offered by the People to prove the existence of the corporation was the testimony of witnesses that the defendant represented it to have been incorporated, and exhibited prospectuses, printed subscription contracts, and purported stock certificates, which’ were introduced at the trial, and that he had in his possession a book of printed stock certificates, all of which bore the name of the purported corporation. It is urged by the prosecution that, in view of the evidence referred to above, had this been a civil action the defendant would have been estopped to deny that the Southern Oregon Oil and Gas Company was a corporation, and further proof of that allegation would have been unnecessary.

Comparatively few criminal cases are to be found in the books where the facts create a situation permitting the ap

It is true that the rules of evidence are generally the same in criminal and civil cases. (Pen. Code, sec. 1102.) [2] Undoubtedly wherever the doctrine of estoppel is ap

[4] But while these considerations might uphold the use of an estoppel as against the defendant in a prosecution for embezzlement, obtaining money under false pretenses, or similar. offenses, they furnish no support for the same procedure in the instant case. Here, the person to whom the representations were made is entirely disinterested in the outcome. She did change her position by reason of them, but, so far as the evidence discloses, not to her prejudice. Indeed, evidence to show that she was damaged, if such were the case, would be irrelevant and immaterial. No wrong done to her is the subject of vindication in this action. Whether the defendant is permitted to deny the corporate existence of the Southern Oil and Gas Company, or is es-topped to do so, is a matter of complete unconcern to her. Her interest is as casual as that of a bystander who witnesses a robbery. It follows that the embezzlement and other cases to which we have referred furnish no support for the contention that the state is in a position to assert an estoppel against this defendant.

Unlike these cases, the instant prosecution is one which in no way involves the redress of a wrong done to any individual. The offense committed by the defendant, if any there be, is strictly malum prohibitum, and wrong only because it violates a statute intended to regulate the sale of securities; it is a wrong primarily and exclusively against

[5] We have considered all of the evidence produced by the People having a tendency to prove that the Southern Oregon Oil and Gas Company was a corporation. Reference is now made to certain exhibits introduced by the defendant in connection with the cross-examination of the People’s witnesses. These exhibits purport to be purchase contracts. They are identical, except for the figures referring to the number of shares purchased. Defendant’s exhibit “A” is as follows:

“Purchase Contract

To F. L. Main

of New York City, N. Y.

Dated April 19th 1920 at El Monte, Calif.

I hereby contract for and agree to purchase from you 300 ■-shares of the issued capital stock of the Southern Ore-

gon Oil and Gas Co. at $1 00/100 per share and pay for same as follows;

Cash. Name Carrie Bowman

Accepted Address El Monte Cal.

F. L. Main Banking Reference ....

By .............”

This evidence cannot aid the People. The use of the name “Southern Oregon Oil and Gas Company” is insufficient to prove that it is a corporation. (Briggs v. McCullough, 36 Cal. 542 ; People v. Cherniak, 216 Ill. App. 423 .) Nor do the words contained in these exhibits, “shares of the issued capital stock,” amount to an admission that the company is a corporation. While the term “capital stock” is often used in the sense of the amount derived from the issuance of shares in a corporation, still its signification is by no means limited to that definition. On the contrary, it has been defined to be “money invested in business operations, whether that business is conducted by a single individual, partnership, corporation, or a government.” (9 C. J., p. 1280.) It has been said to be “the amount fixed by partners or their associates as their stake in the concern.” (Hightower v. Thornton, 8 Ga. 486 [ 52 Am. Dec. 412 ]) ; also as the fund or property belonging to a firm or corporation and used to carry on its business. (Sanger v. Upton, 91 U. S. 56 [ 23 L. Ed. 220 ].) Section 2 of the act known as the Corporate Securities Act provides that: “The word ‘company’ includes all domestic and foreign private corporations, associations, joint stock companies, and partnerships, of every kind, and also trustees, ...” and adds thereto certain exceptions. This law clearly recognizes that any of the various entities just enumerated may issue securities and gives the corporation commissioner jurisdiction over the sale thereof in this state—and this concerning foreign as well as domestic organizations. In In re Girard, 186 Cal. 718 [ 200 Pac. 593 ], the defendants were prosecuted for a violation of the Cor

[6] But it may be said that if estoppel is not applicable, at least the fact of the corporate character of the Southern Oregon Oil and Gas Company may be presumed, even though the presumption be a rebuttable one, and that although the defendant might overcome it by proof to the contrary, if he does not do so the fact is sufficiently established. The specific charge laid against him was that he sold and issued shares of the capital stock of a company that was “then and there a corporation.” The defendant introduced no evidence upon the trial, except three exhibits of the nature mentioned herein, and no presumption arose against him from his failure to do so. (People v. Streuber, 121 Cal. 431 [ 53 Pac. 918 ]; People v. Emmons, 13 Cal. App. 487 [ 110 Pac. 151 ].) The burden rested with the People to prove every fact essential to a conviction, beyond a reasonable doubt. (People v. Ribolsi, 89 Cal. 492 , 500 [ 26 Pac. 1082 ]; People v. Gordon, 88 Cal. 422 [ 26 Pac. 502 ].) Hence we

The remaining grounds assigned for reversal involve the giving and the refusal of instructions. One requested instruction which was refused contained matters expressly appearing in a given instruction to which appellant objects,' and the other instructions complained of followed the allegations of the information. We find no error committed in the giving or refusing of instructions, and in view of the opinion above expressed, it is unnecessary to consider other points raised.

The judgment and order denying the motion for new trial are reversed.

I concur in the judgment, and, in the main, with what is said by Mr. Justice Craig; but upon the question of estoppel I wish to add the following:

To determine whether the doctrine of estoppel can be invoked by the People in support of the issue respecting the corporate existence of the Southern Oregon Oil and Gas Company, it should first be ascertained, if possible, what is the underlying principle which has induced the courts to sanction the application of that doctrine in criminal cases. Unless we can discover the fundamental reason upon which rests the doctrine of estoppel in criminal cases we are without chart to guide or compass to locate the boundary which separates the cases where that doctrine is properly applicable from those where it is not. In none of the decisions brought to my attention was any attempt made to set forth the philosophical basis or rationale of the rule which sanctions the application of the doctrine of estoppel in criminal prosecutions. In many of the decisions the courts, without attempting to probe to the bottom in search for the reason upon which the rule rests, have given unquestioning assent to a dictum of Mr. Bishop, and have let it go at that. See Ex parte Hedley, 31 Cal. 113 , for the language of Bishop.

An analysis of the criminal actions in which estoppel has been held to be applicable discloses that, as between the prosecuting witness and the accused, the former was vested with some sort of private right; that this right was the result of acts of estoppel on the part of the defendant; and that violence had been done to that right by the criminal act which the accused committed against the peace and dignity of the state—his act of criminality being at once both an injury to the wronged individual, furnishing the basis for a civil liability, and an injury to the public, for which a penal liability attached.

Almost all of the criminal actions in which the doctrine of estoppel has been held applicable are cases of embezzlement. In that class of cases it has been held that in prosecutions against an agent or servant for embezzling the money or property of his principal or employer, if the accused has received the money or other thing of value in the assumed exercise of authority as such agent or servant, he is estopped to deny the authority when prosecuted for the embezzlement.

It cannot be that estoppel is invokable by the People as the direct or primary beneficiary thereof. It is a fundamental principle of estoppel that it operates only between parties to the transaction and their privies. A stranger, who is not a party nor a privy, can neither be bound nor aided. (21 C. J., p. 1180; 2 Pomeroy’s Equity Jurisprudence, 4th ed., sec. 813. See Figg v. Handley, 52 Cal. 244 .) In the classes of criminal prosecutions where acts of estoppel may be proved against the defendant, such, for example, as the embezzlement cases cited supra, the state, proceeding in its sovereign capacity to punish for an infraction of its criminal laws, is a total stranger to the transaction out of which the estoppel arose. The acts of estoppel did not directly affect any public right, i. e., any right of the sovereign state as distinguished from the private right of the complaining witness, who, by reason of the acts of estoppel, could lawfully claim, in any civil action which he might bring, that certain legal consequences flowed from the estoppel. Nor could it be said in any of those cases that the state was in privity with the complaining witness whose private right attached by reason of the acts of estoppel. A crime has been defined as “a public wrong in that it affects public rights and is an injury to the whole community, considered as a community, in its social aggregate capacity.” (16 C. J., p. 54.) It is an act committed against the public and not against an individual merely. The guilty party is prosecuted in the interest of the state and not in the interest of the party injured. (7 Cal. Jur., p. 840.) True, the same act may constitute both an injury to an individual, furnishing the basis for a civil action by him, and an injury to the public, for which a penal liability arises. But when the penal liability is enforced in the interest of the People by criminal proceedings, the only right the injury to which is considered is that public right which is due the whole community, considered as a community, in its social aggregate capacity. For this reason it is impossible for the People to

For the foregoing reasons I think it clear that the sole basis for the application of the doctrine of estoppel in criminal cases is the existence in some individual of a private right, depending for its existence upon the acts of estoppel, which right was invaded by the accused when he committed the criminal act against the state. In the ordinary criminal prosecution for embezzlement, where the complaining witness actually owns the money or property embezzled, or actually has some qualified ownership thereof with the right of possession and control, the prosecution, to make out a ease against the accused, must, of course, prove such ownership in the prosecuting witness. In a case where the private individual injured by the act of embezzlement does not actually own the money or other thing of value, or has not an actual qualified interest therein, but has, nevertheless, the right to claim ownership as between himself and the accused, based upon the latter’s acts of estoppel, he has a certain kind of private right—a right which, in a civil action by him against his unfaithful agent, would constitute the basis for appropriate relief against the wrongdoer. This private right, notwithstanding it rests entirely upon estoppel, may be proved by the prosecution in a criminal action against the wrongdoer for the same reason and for the same purpose that the prosecution may prove ownership in the complaining witness where the latter is in fact the rightful owner. But whether the People prove an actual ownership, as is ordinarily the case, or prove that the accused is estopped to deny ownership, in either event the prosecution does no more than prove the existence of a private right in the complaining witness— a private right which the accused has injured by an act which constitutes at once an injury to the public and an injury to the individual who has been harmed in his private property right. And so where the accused, by his assumption of authority, has estopped himself to deny that he received the money or property in the course of his employment, evidence of the acts of estoppel is admissible, not upon the theory that the estoppel inures to the People as the direct

It seems clear to me that the admissibility of acts of estoppel in criminal cases can be justified only upon some such theory as that which I have attempted to outline. In a vigorous dissenting opinion in State v. Dawe, 31 Idaho, 796 [ 177 Pac. 393 ], it is said by Mr. Justice Morgan that “the application of the doctrine of estoppel in criminal cases is of doubtful origin and worse than doubtful soundness.” Unless I thought that the application of the doctrine could be justified upon some such theory as that which I have sought to expound, I should feel constrained to agree with the learned author of that dissent. The application of the doctrine of estoppel in criminal cases certainly would be of “worse than doubtful soundness” if it were made to rest upon the notion that the estoppel is invokable by the People as its direct and immediate beneficiary. If that were the theory upon which it rested it would do violence to the fundamental rule that estoppel operates only between parties and their privies.

If the foregoing be a correct exposition of the underlying theory upon which rests the doctrine of estoppel in criminal eases, then that doctrine is not applicable in the instant ease. Here the criminal act with which appellant is charged did no injury to the complaining witness or to any of her private rights. The injury was solely to society in the aggregate. It is this which differentiates the present case from those

I concur in the judgment and in the opinion of Mr. Justice Craig, with this exception: I do not concur in what he says upon the subject of estoppel. I think it inexpedient to join in a quest for the reasons upon which the supreme court, in company with other tribunals, has applied the doctrine of estoppel in criminal cases, for I do not think such a search is necessary to a decision of the present action. Upon the question of estoppel I think no more than this need be said: The doctrine has been applied in no criminal case except where the defendant was sought to be punished for a wrongful invasion of the private property right of an individual, which invasion might have been the subject of a civil action by the individual, and in which he might have invoked the estoppel allowed to be asserted in the criminal case. The prosecution here seeks to punish appellant for acts and omissions which did not themselves invade the property right of any individual. There is no estoppel involved in the specific charges here made which any individual could invoke. It seems to me that these are sufficient reasons for the assertion that the criminal cases in which the doctrine has been applied are not authority for its application in the present instance. Laying aside the compulsion of precedents, I can perceive no ground for its application here and respondent has shown us none.

A petition by respondent to have the cause heard in the supreme court, after judgment in the district court of appeal, was denied by the supreme court on February 4, 1926.

Curtis, J., deeming himself disqualified, did not participate.