Sheriff, Washoe County v. Fullerton

924 P.2d 702, 112 Nev. 1084, 1996 Nev. LEXIS 139
CourtNevada Supreme Court
DecidedAugust 28, 1996
Docket24489
StatusPublished
Cited by8 cases

This text of 924 P.2d 702 (Sheriff, Washoe County v. Fullerton) is published on Counsel Stack Legal Research, covering Nevada Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Sheriff, Washoe County v. Fullerton, 924 P.2d 702, 112 Nev. 1084, 1996 Nev. LEXIS 139 (Neb. 1996).

Opinions

[1085]*1085OPINION

By the Court,

Rose, J.:

This case revolves around a patented invention known as a “zip nut” and the efforts to exploit its obvious potential. More particularly, the issues on appeal relate to the efforts of respondent Robert Lee Fullerton (“Fullerton”), the inventor of the device to whom the patent was issued, and respondent Corinne F. Bennett (“Bennett”), to solicit investors for the production and marketing of the zip nut. The respondents’ efforts in this regard led to the formation of various corporations. The State of Nevada filed a civil complaint for securities fraud and the appointment of a receiver against respondents involving: (1) the selling of stock in one of these corporations, First Phoenix, Inc., without telling investors of the existence of other Fullerton-formed corporations claiming an interest in the patent; and (2) the failure to disclose that a federal injunction had been issued against respondents’ activities regarding the patent. The district judge presiding over the civil receivership case determined that Fullerton was not guilty of fraud, but was simply a poor businessman, and entered consent orders restructuring the various corporate entities into one entity in which Fullerton and the investors were given various interests. Thereafter, but while the civil matter was still pending, criminal indictment proceedings were initiated against the respondents, alleging the same violations of Nevada’s Uniform Securities Act that had been alleged in the civil case.

The order appealed from in the instant case granted the respondents’ petitions for habeas corpus and motion to dismiss the criminal charges against them. The district court’s rulings were based upon findings that: (1) the initiation of criminal proceedings following the filing of the still pending civil action had violated the respondents’ rights against double jeopardy; (2) the State’s use of the civil receiver in pursuing the criminal action deprived respondents of their rights to due process, as it gave the [1086]*1086prosecutor access to evidence which would otherwise have been available only through a criminal investigation conducted under constitutional safeguards; and (3) the prosecutor engaged in misconduct and acted under a conflict of interest by working with the attorney who had represented respondents in the civil action, and whose financial interests were now adverse to his former clients, in preparing the criminal indictment.

For reasons discussed hereafter, we conclude that the respondents were not subjected to double jeopardy and that the district court incorrectly determined that respondents’ due process rights were violated. We therefore reverse the orders entered below and remand to the district court for trial.

FACTS

A detailed exposition of factual background and the procedural history of the civil and criminal proceedings is essential to an understanding of the ratio decidendi of our disposition of this appeal.

In 1979 Fullerton applied for the protection of a patent on his invention denominated the “zip nut.” The zip nut was designed for a quick and easy attachment to a bolt. In late 1982, prior to receiving the patent, Fullerton assigned his “entire right, title and interest” therein to Fullerton Zip Nut, Inc., a Utah corporation, and recorded this assignment with the U.S. Patent and Trademark Office in January of 1983. The patent on the zip nut was issued to Fullerton in March of 1983. Later, in February of 1985, Fullerton Zip Nut, Inc. was merged into Fullerton Inc., a Nevada corporation, with the intent of providing Fullerton Inc. with the patent rights to the zip nut held by Fullerton Zip Nut, Inc. Thereafter, for reasons which are not apparent on the record, Fullerton and Fullerton Inc. were sued by former shareholders of Fullerton Zip Nut, Inc. in Utah’s federal district court. The latter court issued a preliminary injunction on April 8, 1988, enjoining Fullerton and Fullerton Inc. from dissolving Fullerton Inc. or from transferring any of the assets of Fullerton Inc., including patent rights.

In October 1988, Fullerton and Bennett formed First Phoenix, Inc., a Nevada corporation, with Bennett as president and Fullerton as secretary/treasurer. Respondents assert that First Phoenix had, as its only asset, a fifty percent interest in all profits Fullerton received from the zip nut product. As a further complication, in December of 1988, Fullerton assigned all rights in the zip nut patent to Crescent Products Corporation (a Virginia corporation, the stock of which was apparently owned by Fullerton) and recorded this assignment with the U.S. Patent and Trademark Office on January 9, 1989. Fullerton also dissolved [1087]*1087Fullerton Inc. in December of 1988. All of these actions appeared to be in violation of the federal injunction issued in Utah.

The State of Nevada alleges that between May 1989 and September 1990, Fullerton and Bennett sold stock in First Phoenix, Inc., although First Phoenix was not registered to sell securities in Nevada and Fullerton and Bennett were not licensed as sales representatives in Nevada. One of the investors who purchased stock, Greg McVickers, is alleged to have been hired by Bennett and Fullerton to solicit more investors despite the fact that McVickers was also unlicensed to sell securities.

The State alleges that the foregoing activities constituted fraudulent conduct on the part of Bennett and Fullerton, since McVickers and the other investors believed they were investing in the zip nut product (the company was referred to generically as the zip nut corporation, which in fact did not exist). In fact, however, First Phoenix, Inc. had no rights to the product because the rights had been assigned to other corporations. Moreover, the investors were not told of the federal lawsuit and injunction in Utah, and the securities were unregistered and the salesmen unlicensed. In addition, the investors were unaware that Bennett and Fullerton were allegedly living off the investors’ funds and otherwise using the funds for personal and private benefit.

On May 16, 1991, Bennett and Fullerton incorporated Zip Nut, Inc., a Nevada corporation. Respondents refer to this as the “development stage corporation” of the zip nut device and, according to their brief and the testimony of their one-time attorney John Schell, this corporation was designed to be the shell corporation into which the interests of Fullerton, First Phoenix, and Crescent Products would be consolidated.

Procedural history of the civil action

On September 4, 1991, the State of Nevada, ex rel. the Secretary of State and Securities Division, filed a civil complaint against Fullerton (both individually and d/b/a Fullerton Design), Crescent Products Corporation d/b/a Fullerton Design, Zip Nut, Inc., and various Does, and later, Bennett.1 The complaint alleged claims for relief based upon: (1) the offer and sale of unregistered securities, in violation of NRS 90.460; (2) unlaw[1088]*1088fully transacting business as a broker-dealer and unlawfully transacting business as a sales representative, in violation of NRS 90.310

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Sheriff, Washoe County v. Fullerton
924 P.2d 702 (Nevada Supreme Court, 1996)

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Bluebook (online)
924 P.2d 702, 112 Nev. 1084, 1996 Nev. LEXIS 139, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sheriff-washoe-county-v-fullerton-nev-1996.