M.B. BREIGHNER, J.
Defendant was charged with seven violations of the Michigan Uniform Securities Act, MCL 451.501 et seq.; MSA 19.776(101) et seq. The information also charged one count of obtaining money under false pretenses, MCL 750.218; MSA 28.415. After a bench trial, defendant was convicted of the false pretenses charge and two of the securities charges. The court sentenced him to 23 days incarceration and fined him $4,750. Defendant appeals as of right. We affirm in part and reverse in part.
The three guilty verdicts involved a bond transaction between defendant and Winifred G. LaFever. The bond transaction was one in a series of business transactions between defendant and Mrs. LaFever during a period from May to September, 1974.
Prior to 1974, defendant had been a registered stockbroker in this state. From 1963 to 1969, he acted as a stockbroker for Mrs. LaFever and her husband. After the death of her husband in 1969, Mrs. LaFever continued to contact defendant regarding her investments. She relied on his advice in buying and selling shares of stock.
In 1973, defendant moved to Arizona and incorporated an investment firm dealing in precious
In late 1973 or early 1974, defendant began to solicit Mrs. LaFever to purchase gold and silver. The first conversation with her was mostly social. In subsequent conversations, defendant suggested the purchase of gold and silver coins to hedge against loss of security value. To finance the purchase of coins he discussed sale of shares of stock held by Mrs. LaFever.
Mrs. LaFever decided to liquidate some of her investments and purchase coins from defendant. Following defendant's instructions, stock certificates, secured from her New York stockbroker, were forwarded to defendant with authority to sell. Proceeds of sale went into Mrs. LaFever's account with defendant and were used to purchase foreign coins at a high markup.
As more coins were purchased from stock sales, Mrs. LaFever told defendant she needed to earn some income from her assets. Defendant offered to explore the acquisition of an appropriate municipal bond. Subsequently, defendant recommended purchase of a $5,000 Puerto Rican Telephone Authority bond. Mrs. LaFever agreed to the purchase.
Defendant purchased five Puerto Rican municipal bonds in his firm's name. The combined face value of the bonds was $5,000. Their cost to defendant was $5,192. Defendant billed Mrs. LaFever $5,750.
Upon receiving the price statement Mrs. LaFever called defendant and asked why it cost her $5,750 for a $5,000 bond. "He assured", she testified, "that there was a lot of paperwork and it was hard to get". She also stated defendant did not tell her what part of the total price was his "fee", but he "probably" characterized the "size of the fee"
Defendant's percentage markup on bonds sold Mrs. LaFever was 10.7. The state's expert testified a normal markup on such bonds was less than five percent,
Defendant testified he bought the bonds "short" and the markup reflected his risk. The state's expert testified the price of the subject bonds fluctuated in a narrow range during the month in question. In his argument to the court, the prosecutor pointed out defendant charged the same price for bonds held for 12 or 13 days as for bonds held two days.
Regarding the difficulty in obtaining the bonds, evidence showed they were obtainable from a broker with whom Mrs. LaFever had an account.
One count of the information against defendant charged wilfull failure to disclose material facts and engaging in a course of business which operated as a fraud "in connection with the offer to sell and sale by him of a security". Another count charged him with wilfull fraud as an investment advisor. A third count charged that defendant,
Defendant was found guilty on these three counts. He was acquitted on five others charging fraud and deceit in connection with the coin sales and violations of certain registration requirements.
The trial court's findings are conclusory. With regard to the securities counts, the court stated it found each ultimate fact necessary to sustain a conviction. It did not reveal the basis for each finding.
Defendant's appeal raises an issue as to the sufficiency of the trial court's findings of fact. It also presents questions concerning the validity of the trial court's findings of fact and conclusions of law with respect to each of the defendant's three convictions.
SUFFICIENCY OF THE FINDINGS OF FACT
Rule 517.1 of the Michigan Court Rules imposes two distinct duties upon a trial court sitting without a jury. The court must make a sufficient statement of its findings of fact and must not make findings of fact that are clearly erroneous. Failure to satisfy the first obligation necessitates remand for further findings. Any finding of fact that is clearly erroneous may be set aside on appeal. As stated above, the present appeal challenges both the sufficiency of the lower court's fact
Defendant claims his case must be remanded because the trial court's conclusory statement of facts fails to disclose key factual determinations which caused the court to convict. We agree the court's findings on their face are conclusory. There is, however, no need to remand for a more detailed statement.
The purpose of requiring a trial court to "find the facts specially" is to facilitate appellate review. People v Jackson, 390 Mich. 621; 212 N.W.2d 918 (1973). "Findings of fact in a nonjury case serve a function paralleling the judge's charge in a jury case, that of revealing the law applied by the fact finder." Id., 627. A case will not be remanded for further findings of fact unless a remand would serve the purposes of the court rule. People v Jackson, 81 Mich.App. 18; 264 N.W.2d 101 (1978).
It follows that findings of fact cannot be judged sufficient or insufficient on their face. But see, 2 Honigman & Hawkins, Michigan Court Rules Annotated, pp 593-595. They must be judged in the context of specific legal and factual issues raised by the parties and the evidence. See People v Jackson, supra at 627, fn 3. Compare, e.g., People v Green, 32 Mich.App. 482; 189 N.W.2d 122 (1971), and People v George Scott, 21 Mich.App. 217; 175 N.W.2d 312 (1970), with People v Bedford, 78 Mich.App. 696; 260 N.W.2d 864 (1977), and People v Stanford, 68 Mich.App. 168; 242 N.W.2d 56 (1976). In that context this Court has even upheld a general verdict of guilty by a court sitting without a jury. People v Jackson, supra.
There is no purpose in remanding this case for further findings of fact. Some of the arguments
DEFENDANT'S CONVICTION FOR SECURITIES FRAUD IN CONNECTION WITH THE OFFER AND SALE OF A SECURITY
The Michigan Uniform Securities Act is based upon the Uniform Securities Act. Section 101 of the statute provides in pertinent part:
"It is unlawful for any person, in connection with the offer, sale or purchase of any security, directly or indirectly:
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"(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.
"(3) To engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person." MCL 451.501; MSA 19.776(101).
Section 409 of the act makes criminal any wilfull violation of § 101. See MCL 451.809; MSA 19.776(409).
Defendant claims his conviction under § 101 must be reversed for two reasons. First, he argues there was no duty to disclose the markup on Puerto Rican bonds sold Mrs. LaFever. He further contends that the trial court's conclusory findings do not disclose a finding of specific intent to defraud, which is necessary to a finding of "wilfullness".
Section 101 of the securities act imposes a duty of full disclosure and fair dealing in the context of security transactions. Cf., Mathews & Sullivan, Criminal Liability for Violations of the Federal Securities Laws: The National Commission's Proposed Federal Criminal Code, S. 1 and S. 1400, 11 American Criminal L Rev 883, 894-895 (1973), quoting, H R Rep, No 85, 73d Cong, First Sess, p 2 (1933) (purpose of analogous Federal securities regulations). The act should be construed liberally to effectuate this purpose. People v Dempster, 396 Mich. 700; 242 N.W.2d 381 (1976).
The duties imposed by § 101 are analogous to duties imposed by Rule 10b-5 of the Federal securities regulations. 17 CFR, § 240.10b-5. Some Federal courts have held that the "scope" of the duty imposed by rule 10b-5 depends on the relationship between the victim and the defendant, their relative access to information, the benefit the defendant derives from the transaction, and the activity of the defendant in encouraging the transaction. See e.g., First Virginia Bankshares v Benson, 559 F.2d 1307, 1314 (CA 5, 1977), White v Abrams, 495 F.2d 724, 731 (CA 9, 1974). Under this so-called duty analysis approach, the appropriate duty imposed varies as a matter of law from case to case. White v Abrams, supra at 734.
As we read § 101 of the Michigan act, the duties imposed arise "in connection with the offer, sale or purchase of any security" and remain constant. Subsection 101(2) imposes a duty to disclose all material facts necessary to make other statements not misleading under the circumstances. Subsection
The legal or "duty" question involved in any prosecution under § 101 is whether the defendant should have to refrain from the particular omission found to be material and misleading under subsection 101(2) or to refrain from the course of conduct found to operate as a fraud under 101(3). That question has been resolved by our Legislature.
It is unquestionable that the complained-of conduct of the present defendant arose "in connection with the offer, sale or purchase of any security".
The essential omission alleged was defendant's failure to disclose the market price of the bonds and his markup. The trial court did not clearly err in finding the alleged omission to be "material". A material fact is one that a reasonable investor might have considered important to his investment decision. Mills v Electric Auto-Lite Co, 396 U.S. 375, 384; 90 S.Ct. 616; 24 L Ed 2d 593 (1970). Mrs. LaFever, as a reasonable bond purchaser, might have considered it important that her seller was charging far in excess of what others were charging for the same bond.
Further, the court did not clearly err in finding the alleged omission to be misleading under the circumstances. There is some evidence defendant
Finally, on this record the trial court did not clearly err in finding defendant's conduct operated as a fraud. Cf., id.
In support of his contention that he owed no duty in this case, defendant cites Hafner v Forest Laboratories, Inc, 345 F.2d 167 (CA 2, 1975), and Arber v Essex Wire Corp, 490 F.2d 414 (CA 6, 1974). The Court in Hafner held a corporation breached no duty under Rule 10b-5 by failing to give the current market price of its securities upon request by a buyer. The Court reasoned the information was equally available to both parties in daily national quotation sheets and no fiduciary relationship existed between the parties. Arber held a buyer (insider) has no duty to direct its seller's (outsider) attention to routine data commonly found in a company's books, at least when the information is readily available and the outsider knows it is available and makes no inquiry.
Both cases are distinguishable from this case. These cases present a situation where the omission
"Wilfullness" is a word of many meanings, depending upon the context in which it is used. Zimberg v United States, 142 F.2d 132, 137-138 (CA 1, 1944).
To wilfully violate subsection 101(2) this defendant must have intended the omission which was found to be material and misleading. To wilfully offend subsection 101(3) he must have intended to engage in the course of conduct found to operate as a fraud. In addition, this defendant must have known or recklessly failed to discover facts that rendered his conduct violative of those subsections. It is insufficient that he could have discovered the facts by due care. On the other hand, he need not have acted with the conscious purpose to mislead or defraud. It is also unnecessary that he know his conduct violated the law.
The trial court's finding of wilfullness in this
DEFENDANT'S CONVICTION FOR SECURITIES FRAUD AS AN INVESTMENT ADVISOR
Relevant to this case, subsection 102(a) of the Michigan Uniform Securities Act provides:
"(a) It is unlawful for any person who receives any consideration from another person primarily for advising the other person as to the value of securities or their purchase or sale, whether through the issuance of analyses or reports or otherwise:
"(1) To employ any device, scheme or artifice to defraud the other person.
"(2) To engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon the other person." MCL 451.502(a); MSA 19.776(102)(a).
Defendant's conviction under this antifraud provision cannot stand. The trial court clearly erred in finding defendant received consideration primarily for advising Mrs. LaFever as to the value of securities or their purchase or sale.
Subsection 102(a) was intended to reach persons who are specially compensated for rendition of investment advice. "The essential distinction to be borne in mind in [applying this provision to] borderline cases * * * is the distinction between compensation for advice itself and compensation for services of another character to which advice is merely incidental." Uniform Securities Act,
It is undisputed that defendant advised Mrs. LaFever to liquidate a portion of her stock portfolio and purchase a Puerto Rican municipal bond. As a result, she bought five Puerto Rican municipal bonds from defendant for $5,750. It does not follow, because defendant received consideration "as a result of" investment advice, that he received consideration "primarily for" the advice.
There is no direct evidence defendant received consideration primarily for investment counsel. He never billed Mrs. LaFever for advice, and she did not earmark any part of the $5,750 purchase price as payment for advice. There was no testimony that any part of the payment was for advice. Defendant's expert said none of defendant's conduct brought him within the category of an investment advisor.
Although it might be inferred that some part of the excessive markup was primarily for investment advice, we are not obliged under the "clearly erroneous" standard to uphold any finding of fact supported by some evidence.
DEFENDANT'S CONVICTION FOR OBTAINING MONEY UNDER FALSE PRETENSES
In attacking his conviction for obtaining money under false pretenses, defendant claims trial court error in holding his conduct constituted a false pretense. Defendant contends the essence of the claim against him is the charging of an excessive markup, and this is not a "false pretense". We disagree.
In determining what constitutes a false pretense, this Court has drawn a distinction between false statements of opinion and false statements of fact. Compare People v Marks, 12 Mich.App. 690; 163 N.W.2d 506 (1968), with People v Wilde, 42 Mich.App. 514; 202 N.W.2d 542 (1972). In People v Wilde, we stated a false opinion is not a false pretense within the meaning of the statute because persons can be expected to protect themselves from false opinions. They know such statements are subject to distortion and deceit. The Legislature only intended to provide criminal sanctions for misrepresentations of fact. Overcharges, even gross and indefensible overcharges, fall into
Notwithstanding the general distinction between opinion and fact in this area of criminal law, a dishonest statement of opinion may be a false pretense if the relationship between defendant and the victim is such that the victim cannot be expected to protect himself. Thus, "a dishonest expression of opinion may be a misrepresentation of fact suitable for false pretenses, especially where the opinion relates to a matter peculiarly within the knowledge of the one who expresses the opinion". LaFave & Scott, Criminal Law, § 90, pp 658-659. Regarding opinions of value specifically, Judge Learned Hand has spoken:
"True, the law still recognizes that in bargaining parties will puff their wares in terms which neither side means seriously, and which either so takes at his peril (Vulcan Co. v. Simmons, 248 F. 853 [C.C.A. 2]); but it is no longer law that declarations of value can never be a fraud. Like other words, they get their color from their setting, and mean one thing when exchanged between traders, and another when uttered by a broker to his customer. Values are facts as much as anything else; they forecast the present opinions of possible buyers and sellers, and concern existing, though inaccessible, facts. Such latitude as the law accords utterances about them, depends upon the hearer's knowledge that the utterer expects him to use his own wits * * *." United States v Rowe, 56 F.2d 747, 749 (CA 2, 1932).
Even though defendant and Mrs. LaFever dealt in form as dealer and principal, their relationship was such that she could not be expected to protect herself from defendant's misrepresentations and omissions regarding the excessive and arbitrary nature of his markup.
Affirmed in part, reversed in part. Remanded for resentencing.
"As to count 3 [the charge under § 101], the Court finds that the People have proven beyond a reasonable doubt that C. Eugene Cook named in said count is one and the same as the defendant in this case; that from on or about the last week of July, 1974, to the first week of August, 1974, in the City of South Haven, County of Van Buren, and State of Michigan, that the defendant did directly and indirectly in connection with the offer to sell and the sale by him of securities, a Puerto Rican Telephone Authority bond, A-8075, to one Winifred G. LaFever; that he did wilfully, knowingly engage in a practice and course of business which would and did operate as a fraud and a deceit upon said Winifred G. LaFever. Further, that the defendant did knowingly and wilfully omit to state certain material facts necessary in order to make the statement made in the light of the circumstances under which they were made not misleading; that the defendant did as a result of said unlawful conduct unlawfully obtain money upon the property from said Winifred G. LaFever in connection with said sale of said bond; that this is contrary to the provisions of M.S.A. 19.776(101) as charged by the People in this court. It is the verdict of the Court that the defendant C. Eugene Cook is guilty beyond a reasonable doubt of the crime as charged in count 3, and this verdict is ordered to be entered upon the record of this Court."
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"As to count 7, the Court finds that the People have proven beyond a reasonable doubt that the C. Eugene Cook named in this count is one and the same as the defendant in this case; that from on or about the last week of July, 1974, to the first week of August, 1974, in the City of South Haven, County of Van Buren, State of Michigan, that the said defendant received consideration from one Winifred G. LaFever primarily for advising her as to the purchase of a security, a Puerto Rican Telephone Authority bond, number A-8075, later selling the same to her, he acting as an investment advisor; and the said defendant did unlawfully, knowingly, and wilfully and intentionally engage in transaction practices and a course of business which would and did operate as a fraud and a deceit upon said Winifred G. LaFever, causing her to unlawfully pay monies in connection with said bond transaction as charged by the People in this Court; and that in connection with this count, the conduct of the defendant is contrary to the provisions of M.S.A. 19.776(102) as charged. It is the verdict of the Court that the defendant C. Eugene Cook is guilty beyond a reasonable doubt of the crime as charged in count 7, and this verdict is ordered to be entered upon the record of this Court."