People v. Gardner

Opinion

In a multi-count indictment, defendants were charged in nine counts with “bucketing” in violation of section 29100 of the Corporations Code, and eight counts of grand theft, in violation of subdivision 1 of section 487 of the Penal Code. On defendants’ motions under section 995 of the Penal Code, the trial court denied the motions as to the grand theft counts, but granted it as to the bucketing counts. The People have appealed;^[1] we reverse.

I

Of the 17 counts in the indictment, 14 counts (counts II and III, IV and V, VI and VII, VIII and IX, X and XI, XII and XIII, XIV and XV) are bracketed counts, the even numbered counts charging grand theft against 7 victims, and the odd numbered counts charging bucketing on the same dates (or periods) as are alleged in the accompanying theft counts. Count XVI charges grand theft against an eighth victim, but count XVII alleges bucketing only in general terms for the same period as is alleged in count XV in connection with the theft alleged in count XIV. Count I is an overall count, charging bucketing during the entire period of time alleged in the other bucketing counts.

The People contend that the trial court granted the motion to dismiss count XVII on the theory that it merely duplicated count XV. While it is true that the two counts allege the same dates, examination of the grand jury transcripts shows that there were two transactions on those dates, each involving a different buyer; under those circumstances, the People are entitled to show, if they can, that there were two independent offenses committed. Count XVII should not have been dismissed on the ground given by the trial court.

Count I is obviously one that duplicates, by the period alleged, all of the eight separate bucketing counts. While nothing in the grand jury

Although defendant Gardner contended in the trial court (although not in his briefs on appeal) that prosecution for bucketing had been preempted by federal law, that contention is without merit. The transactions herein involved all preceded February 23, 1973; the federal law applying to such transactions did not become effective until April 21, 1975. There was no preemption.

Ill

We turn to the basic issue involved in this appeal: Did the evidence before the grand jury show, within the limits required in passing on a motion under section 995, that defendants had engaged in bucketing as defined in subdivision (c) of section 29008 of the Corporations Code as in effect during the period of time herein involved? We conclude that it did.

Subdivision (b) of section 29008 defines bucketing as follows: “(b) Making or offering to make any contract respecting the purchase or sale of any securities or commodities, wherein both parties intend, or the keeper intends, that the contract shall be, or may be, deemed terminated, closed, or settled when the public market quotations of prices for the securities or commodities named in the contract reach a certain figure without a bona fide purchase or sale of the securities or commodities.”

According to the evidence before the grand jury, defendants (operating as King Commodity Company) sold to the alleged victims what are known as “double options” to purchase future contracts for the purchase and sale of sugar and silver.^[2] The system operates as follows: A

Since the statute involved applies, by its terms, only to contracts “respecting the purchase or sale of any securities or commodities,” defendants contend that the options sold by them, calling for the possible ultimate delivery of future delivery contracts and not for the delivery of the commodities themselves, are not within the statutory prohibition. That contention is specious. The statutory language is not limited to contracts for the purchase or sale, but, in wider terms, applies to any contract “respecting” such an ultimate transaction. Options to acquire contracts of purchase or sale are contracts “respecting” purchase or sale.

The real issue is whether the evidence before the grand jury shows either that both parties to the option transactions, or at least the sellers (“keepers”) of such options, did not actually and bona fidely intend the delivery of the future delivery contracts called for in the options.

We come, then, to the ultimate issue: Does the evidence before the grand jury contain evidence from which a trier of fact reasonably could conclude that, whatever the intent of the buyers of the double options may have been, defendants never intended to honor the options if exercised. In approaching that issue, we are mindful of the fact that the seller of such an option need not have, at the time of sale, the ability to comply with the option if immediately exercised.^[4] It is sufficient if he intends to acquire the promised contracts when as and if the optionee exercises the option at the future time contemplated by both parties.

Defendants point to carefully drafted language in the option contract, to the effect that all options (unless hedges)^[5] contemplate the actual delivery and receipt of the “property” involved. But that self-serving language, although bearing on the issue of intent, is not controlling. There is before the grand jury evidence from which a trier of fact might conclude that, in spite of the formal protestation of the written instruments, defendants never intended to honor any of the options:

(a) At no time did defendants ever own, or have arrangements to acquire, any future delivery contracts;

(b) Since defendants could not hedge against their obligations as optionors, they could honor the options only if they had, during the option period, assets sufficient to enable them to buy the promised contracts when the optionees demanded delivery. But defendants never had assets even vaguely approaching the requirement. In fact, and underlying the theft counts in the indictment, the evidence shows that defendants did not, as they promised they would, even keep available the fund created in their hands by the receipt of the premiums for the options. That is a course of dealing from which a trier of fact could well conclude that defendants never intended to honor the options they had' given.^[6]

Since there was evidence sufficient to support the indictment, the trial court erred in dismissing the “bucketing” counts. The order is reversed.

Files, P. J., and Dunn, J., concurred.

A petition "for a rehearing was denied September 6, 1977.