Opinion
Nos. 20255, 21482
Filed April 21, 1998
APPEAL FROM THE CIRCUIT COURT OF GREENE COUNTY, HONORABLE TIMOTHY W. PERIGO, SPECIAL JUDGE.
APPEAL FROM THE CIRCUIT COURT OF GREENE COUNTY, HONORABLE CALVIN R. HOLDEN, JUDGE.
William J. Fleischaker, appellant's attorney.
Jeremiah W. (Jay) Nixon, Attorney General, Douglas M. Ommen, Asst. Attorney General, Breck K. Burgess, Asst. Attorney General, respondent's attorneys.
No. 20255 AFFIRMED; No. 21482 DISMISSED
A jury found Gregory S. Reber (Defendant) guilty of twelve counts of securities fraud, in violation of § 409.101. Each count of the amended information generally alleged that Defendant employed a scheme or artifice to defraud investors regarding fictitious electrical contracting jobs, which Defendant had never obtained, and that Defendant made false statements to investors, thereby inducing them to invest in Defendant's business operation. The trial court entered judgment on the jury verdict and sentenced Defendant to a total of fifteen years' imprisonment. He brings appeal 20255 from that judgment.
Statutory references are to RSMo 1994 unless otherwise indicated.
Thereafter, Defendant filed a motion to vacate the judgment and sentence pursuant to Rule 29.15. The motion court denied relief without an evidentiary hearing. Defendant brings appeal 21482 from that order.
Rule references are to Missouri Rules of Criminal Procedure (1995) because Defendant was sentenced May 15, 1995, and filed his motion for postconviction relief December 20, 1995. The current (1998) version of Rule 29.15(m) provides that in such circumstances, postconviction relief is governed by the version of Rule 29.15 in effect when the motion for postconviction relief was filed, or December 31, 1995, whichever is earlier.
We consolidated the appeals, Rule 29.15( l), but address them separately in this opinion.
APPEAL 20255
Defendant presents one point relied on regarding this appeal. It reads:
The trial court erred in failing to grant [Defendant's] motion for judgment of acquittal at the close of all of the evidence because the court should have found that the State failed to present sufficient evidence from which a reasonable juror might have found the Defendant guilty beyond a reasonable doubt in that the evidence failed to show that [Defendant] sold or offered to sell an investment contract as that term is defined pursuant to the Uniform Securities Act because there was no showing that the agreements between [Defendant] and the people who paid him money called for them to participate in a common enterprise or that their expectation of profits depended upon the significant managerial efforts of others since [Defendant] unconditionally promised to repay their investment plus interest.
In ruling on Defendant's challenge to the sufficiency of the evidence, this Court's review is limited to determining whether the evidence was sufficient to persuade any reasonable juror as to each of the elements of the crime, beyond a reasonable doubt. State v. O'Brien , 857 S.W.2d 212, 215 (Mo. banc 1993). In making that determination, this Court considers all of the evidence in the light most favorable to the prosecution. Id. at 215-16. "Thus, evidence that supports a finding of guilt is taken as true and all logical inferences that support a finding of guilt and that may reasonably be drawn from the evidence are indulged." Id. at 216. "Conversely, the evidence and any inferences to be drawn therefrom that do not support a finding of guilt are ignored." Id.
As to all the investors involved in this case, except those named in Counts III and IV, the evidence shows there was an exchange of money for a written agreement prepared by Defendant. At trial, Defendant readily admitted he made false statements of material facts to his investors in order to obtain money from them. In his brief, Defendant acknowledges that "he made false statements to the victims, to induce them to part with funds." His narrow claim on appeal is that the State failed to adduce sufficient evidence of an "investment contract" between Defendant and investors.
The investors involved in Counts III and IV parted with their money based on Defendant's oral representations and promises substantially similar to those found in Defendant's written agreements with the other investors. Since Defendant does not contend that an oral contract cannot be an investment contract under § 409.401( l), our discussion will not differentiate between Defendant's oral and written agreements.
The State chose to prosecute Defendant under the provisions of § 409.101, which reads:
It is unlawful for any person, in connection with the offer, sale or purchase of any security, directly or indirectly
(1) to employ any device, scheme, or artifice to defraud,
(2) to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or
(3) to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.
Section 409.401( l) provides that the term security "means any . . . investment contract. . . ." However, we find no statutory definition of an investment contract. Therefore, as Defendant states, the real question in this case is whether his agreements with the investors constitute an investment contract so as to violate § 409.101.
In State v. Kramer , 804 S.W.2d 845 (Mo.App. 1991), the Eastern District of this Court determined that an investment contract is (1) an investment of money, (2) in a common enterprise, (3) with the expectation of profit from the significant managerial efforts of others. Id. at 849. Here, both sides agree that Kramer properly describes an investment contract.
Defendant concedes the State met its burden to show the first element of an investment contract because all the investors advanced money to Defendant believing he would use the funds on his contracted electrical jobs. However, Defendant argues the evidence is insufficient to show element (2), a common enterprise, and element (3), expectation of profit from Defendant's managerial efforts. We disagree.
COMMON ENTERPRISE
Although no Missouri appellate court has addressed this issue, other state and federal jurisdictions have done so. We look to those decisions for guidance.
Faced with deciding whether the parties were engaged in a "common enterprise," the Supreme Court of Oregon in Computer Concepts, Inc. v. Brandt , 801 P.2d 800 (Or. 1990), adopted a test for commonality after reviewing other state and federal decisions.
As in this case, the Oregon security law, ORS 59.015(13)(a) (1983), defines "security" to mean, among other things, an investment contract.
Federal courts have taken two differing views of what constitutes a common enterprise, "horizontal" and "vertical" commonality. Horizontal commonality requires more than one investor and requires a pooling of investments. Hart v. Pulte Homes of Michigan Corporation, 735 F.2d 1001 (6th Cir. 1984); Milnarik v. M-S Commodities, Inc., 457 F.2d 274, 276-77 (7th Cir.), cert den. 409 U.S. 887, 93 S.Ct. 113, 34 L.Ed.2d 144 (1972).
. . . .
Vertical commonality has, in turn, been defined in more than one way. Some courts hold that the investor need prove only dependence on promoter expertise. Taylor v. Bear Stearns Co., 572 F. Supp. 667, 671 (N.D. Ga. 1983); Alvord v. Shearson Hayden Stone, Inc., 485 F. Supp. 848, 853 (D.Conn. 1980). Others require a showing that the investment is interwoven with and dependent on the fortunes of others, so that the investor and the promoter can be said to conduct a common venture. Brodt v. Bache Co., Inc., 595 F.2d 459 (9th Cir. 1978). A variation of the latter vertical commonality test requires that the fortunes of the investor and the promoter be intertwined as to both profit and loss. Kaplan v. Shapiro, 655 F. Supp. 336, 341 (S.D.N.Y. 1987); Mechigan v. Art Capital Corp., 612 F. Supp. 1421, 1427 (S.D.N Y 1985).
Id. at 805 (footnote omitted). The Oregon court then confirmed the view that a one-on-one arrangement could qualify as a security if the transaction otherwise fit the definition of an investment contract and expressly held that either vertical or horizontal commonality suffices for showing a common enterprise. Id.
In Ontario, Inc. v. Mays , 780 P.2d 1126 (Kan.App. 1989), the Kansas appellate court determined that a particular financial relationship constituted an investment contract. Under Kansas law, K.S.A. 17-1252(j), the definition of security, includes an investment contract. In discussing the common enterprise element of an investment contract, the court noted that distinctions exist between horizontal and vertical commonality. Id. at 1128. However, the court suggested that a "finding of either horizontal or vertical commonality satisfies the common enterprise requirement." Id.
Defendant makes no effort to persuade us that the State must present evidence of both vertical and horizontal commonality in order to satisfy the common enterprise requirement in this state. We choose to follow Brandt and Mays and uphold a finding of common enterprise if the State's evidence shows either vertical or horizontal commonality. We take this less restrictive approach because the primary purpose of the Missouri Uniform Securities Act is the protection of buyers of securities. Garbo v. Hilleary Franchise Systems, Inc. , 479 S.W.2d 491, 499 (Mo.App. 1972). Fulfillment of that statutory purpose "embodies a flexible rather than a static principle, one that is capable of adaptation to meet the countless and variable schemes devised by those who seek the use of the money of others on the promise of profits." Id. (citations omitted).
Here, the State presented evidence that Defendant induced at least six investors to part with their money on various phony electrical contracting jobs. Several of the phony jobs were alleged to be at Kraft Foods, Inc., while other phony jobs were with different business entities. The end result is a showing by the State of a pooling of investments with Defendant in order to participate in Defendant's nonexistent electrical contracting business. Thus, the State presented evidence of horizontal commonality even under the federal cases cited in Brandt which require more than one investor and a pooling of investments. For this reason, we need not discuss whether the evidence was sufficient for a finding of vertical commonality.
EXPECTATION OF PROFITS FROM DEFENDANT'S MANAGERIAL EFFORTS
As to this third element of an investment contract, Defendant argues the investors were given no expectation of profit from the significant managerial efforts of Defendant or others. Defendant asserts that the investors could not expect profits from his managerial efforts because he promised to repay their money under any circumstances. Defendant's assertion does not square with his written agreements. An example of his investor agreements is the Bill and Molly Etherton investment contract. The Ethertons are Defendant's victims in Count I of the amended information. Their agreement contains the following provisions:
Let it be known that on Dec. 20, 1993 said parties entered into an agreement on a investment on a job at Kraft Foods #SS847630-Rebc and Reber Electric whom is contracting the above job.
Let it be known that this investment is for a period of 8 months and shall carry a profit of not less than 30% on the investment of $5000 and shall also be forwarded to the investors no later than 5 working days after payment to Reber Electric by Kraft Foods.
Also let it be known that the investors are entitled to a pro-rated profits from any other extra work awarded to Reber Electric while this contract is in force and also any unused investments shall also be returned to the investors along with the 30% profit should any work be completed ahead of the 8 month period. Investors shall also be entitled to any bonuses and or rebates from this job.
First, this agreement contains no unconditional promise by Defendant to repay Ethertons $5,000. The agreement only provides for repayment upon "payment to Reber Electric by Kraft Foods." Obviously, this promise is conditioned upon Kraft paying Defendant and conditioned upon Defendant performing the alleged contract with Kraft. Furthermore, this agreement promises Ethertons (1) "pro-rated profits" from extra work awarded to Defendant, (2) a return of "unused investments," (3) profit on work "completed ahead" of schedule, and (4) payment of "bonuses or rebates" from Kraft.
Clearly, this agreement and the other agreements Defendant made are far afield from a mere loan as Defendant contends. These agreements fulfill the third element of an investment contract because the investors were given the expectation of profits only after Defendant's managerial efforts completed his electrical contracting work.
Therefore, we hold that the State's evidence was sufficient for a reasonable juror to conclude that Defendant sold investment contracts to the investors in his phony scheme. Point denied.
APPEAL 21482
Defendant appeals from the motion court's denial of his Rule 29.15 motion without an evidentiary hearing. Subsequently, Defendant filed in this Court a "Motion to Remand" this case to the motion court for entry of an appropriate judgment. The motion was taken with the case.
In his motion, Defendant correctly states that the motion court's findings of fact and conclusions of law fail to constitute a judgment under Rule 74.01. Defendant accurately notes that the motion court's writing is not denominated a judgment anywhere in the twelve-page document.
Defendant also states that the docket entry in this case does not constitute a judgment per Rule 74.01. He is correct. The only relevant docket entry states "Findings of Fact and Conclusions of Law mailed to" the attorneys for each side.
Rule 29.15 proceedings are governed by the rules of civil procedure "insofar as applicable." Rule 29.15(a). See Thomas v. State , 808 S.W.2d 364, 366 (Mo. banc 1991). Therefore, Rule 74.01 applies to this case.
The motion court's findings and conclusions were dated and signed by the judge on December 20, 1996. The "new" Rule 74.01 became effective January 1, 1995.
Rule 74.01(a) provides:
Rule 74.01 JUDGMENT
(a) Included Matters. "Judgment" as used in these rules includes a decree and any order from which an appeal lies. A judgment is rendered when entered. A judgment is entered when a writing signed by the judge and denominated "judgment" is filed. The judgment may be a separate document or included on the docket sheet of the case.
Under this rule, "a judgment must be (1) in writing, (2) signed by the judge, (3) denominated 'judgment,' and (4) filed." Chambers v. Easter Fence Co., Inc. , 943 S.W.2d 863, 865 (Mo.App. 1997). Here, the motion court's findings and conclusions cannot be considered as a judgment because the document is not denominated a judgment.
The Supreme Court of Missouri has recently confirmed that a trial court must "denominate" its final ruling as a "judgment." City of St. Louis v. Hughes , 950 S.W.2d 850 (Mo. banc 1997). In discussing Rule 74.01(a), the court stated:
The requirement that a trial court must "denominate" its final ruling as a "judgment" is not a mere formality. It establishes a "bright line" test as to when a writing is a judgment. The rule is an attempt to assist the litigants and the appellate courts by clearly distinguishing between when orders and rulings of the trial court are intended to be final and appealable and when the trial court seeks to retain jurisdiction over the issue.
Id. at 853. The Court also said that "[w]hether the designation 'judgment' appears as a heading at the top of the writing, within the body of the writing in some other manner, or in the entry on the docket sheet, it must be clear from the writing that the document or entry is being 'called' a 'judgment' by the trial court." Id.
The lack of a final judgment in this case prevents this Court from obtaining jurisdiction. Williams v. Westrip , 917 S.W.2d 590, 591 (Mo.App. 1996). Our only alternative is to dismiss the appeal. To that extent, we sustain Defendant's motion and deny the other relief requested.
The appeal is dismissed without prejudice.
PARRISH, P.J., concurs; SHRUM, J., dissents in No. 21482 and files dissenting opinion.
DISSENT
I respectfully dissent in No. 21482, the post-conviction appeal.
The majority dismisses Defendant's appeal because the order denying Defendant's 29.15 motion was not denominated a judgment as required by Rule 74.01(a) and as the rule has been interpreted by our supreme court. See City of St. Louis v. Hughes , 950 S.W.2d 850 (Mo. banc 1997). I disagree. I believe that Rule 74.01(a) directly conflicts with Rule 29.15. Any rule of civil procedure that conflicts with Rule 29.15 or Rule 24.035 does not govern. See Thomas v. State , 808 S.W.2d 364, 366 (Mo. banc 1991).
Rule 29.15(k) states that "[a]n order sustaining or overruling a motion filed under the provisions of . . . Rule 29.15 shall be deemed a final judgment for purposes of appeal by the movant or the state." (emphasis supplied). As the majority notes, "[t]he procedure to be followed for motions filed pursuant to . . . Rule 29.15 is governed by the rules of civil procedure insofar as applicable." Rule 29.15(a).
The effect of the language "insofar as applicable" as used in post-conviction rules is discussed in Thomas , 808 S.W.2d at 366. To decide whether a rule of civil procedure is applicable in the context of post-conviction review, the court must inquire as to whether the rule "enhances, conflicts with, or is of neutral consequence to the purposes of" Rules 29.15 or 24.035. Id. If the rule enhances or is of neutral consequence to the purposes of Rules 29.15 or 24.035, then that rule is applicable. Id. If the rule conflicts with the purposes of Rules 29.15 or 24.035, then that rule is not applicable. Id.
One purpose of Rules 29.15 and 24.035 is to prevent or avoid "'delay in the processing of prisoners' claims and prevent the litigation of stale claims.'" Thomas , 808 S.W.2d at 366 (quoting Day v. State , 770 S.W.2d 692, 695 (Mo. banc 1989)). Application of the denomination requirement of Rule 74.01(a) in this case runs counter to the purposes of Rule 29.15. This is especially true since Rule 29.15(k) refers to the adjudication of a post-conviction motion as an "order." No doubt the trial court relied on Rule 29.15(k) to denominate its adjudication an "order." This court only causes delay in the processing of the claim by applying the denomination requirement of Rule 74.01(a) to post-conviction appeals.
Recently in Evans v. State , ___ S.W.2d ___ No. 21736 (Mo.App. filed March 6, 1998) this court dismissed an appeal from the denial of a Rule 24.035 motion. I concurred in Evans . However, as the opinion notes, it did not appear that the motion court "discharge[d] the movant or resentence[d] the movant or order[ed] a new trial or correct[ed] the judgment and sentence as appropriate." Evans , ___ S.W.2d at ___, No. 21736, slip op. at 2. Thus, there was another basis for dismissing the Evans appeal; consequently, the result in Evans was not erroneous.
In this case, however, application of the denomination requirement of Rule 74.01(a) is inconsistent with the purposes of Rule 29.15. Therefore, I dissent in No. 21482.