received thereon, upon the tender of such security, or for damages if he no longer owns the security."
The United States Supreme Court has held that the Securities Act confers jurisdiction of the suit upon the District Courts irrespective of the amount in controversy or the citizenship of the parties. Robert J. Deckert et al. v. Independence Shares Corporation et al. (Deckert v. Pennsylvania Company for Insurances on Lives and Granting Annuities), December 9, 1940, 61 S. Ct. 229, 85 L. Ed. . Therefore, in determining whether the complaint states a cause of action within the purview of the Act, I need only determine whether there is an allegation that the defendant used the mails to sell a security to the plaintiff in a manner declared unlawful by the Act. I am satisfied that the Act confers jurisdiction on this court where fraudulent use of the mails is alleged, whether or not the mails used crossed state lines.
The term "sale" as defined in the Act, Title I, Sec. 2(3), 15 U.S.C.A. § 77b(3), includes "every contract of sale or disposition of, attempt or offer to dispose of, or solicitation of an offer to buy, a security or interest in a security, for value * * *."
In paragraph 9 of his complaint the plaintiff avers that the defendant "in the sale of contract certificates and purchase plans, * * * by use of the mails, * * * have defrauded the plaintiff of money * * *" This general averment, if viewed apart from related and more specific paragraphs, would seem to bring the alleged cause of action within the purview of the Securities Act. However, subsequent more specific averments are to the effect that the representations precedent to the contract were made orally and by personal presentation of written matter by one of the defendant's agents. The first use of the mails averred was in delivery of the contract certificate. The mails were later used for the sending of notices for payments, prospectuses, bulletins and financial statements, which are alleged to have been sent for the purpose of inducing the continuance of payments by the plaintiff. In view of these averments it seems that the mails were not used to procure the contract, but were used to deliver the certificate and carry notices and so forth pertinent to the continuance of payments thereunder.It is not specifically provided that delivery of a security by mail after sale shall create civil liability under the Act when the sale was fraudulently procured. In view of the fact that the Congress specifically provided it should be unlawful and a crime to deliver through the mails in some instances, see Title I, Section 5 of the Act, 15 U.S.C.A. § 77e, I deem failure to so provide for civil liability an indication of the absence of any intention to create civil liability for mere delivery by mail.
However, as explained, the contract was one whereby the plaintiff agreed to pay 120 monthly installments of $10 to the Trustee of a certain trust under a savings plan organized and operated by the defendant. The contract was subject to liquidation at any time upon the giving of notice to the trustee by the plaintiff. The plaintiff contends that his averment that the defendant mailed fraudulent matter to induce him to continue the contract is sufficient to bring the matter within the Act. Undoubtedly the plaintiff did refrain during this period from withdrawing from the savings plan, and the averment affords a basis for proof that such was done because of faith in the representations which were mailed to him by the defendant. I cannot agree that each payment made by the plaintiff was in consummation of a sale, but, if the transaction is viewed practically, it must be admitted that each payment by the plaintiff amounted to a purchase of an "interest in a security for value."
Each payment increased the amount of property to which the plaintiff had acquired equitable title. There was, therefore, an allegation sufficient to bring the complaint within the purview of the Act, since it is alleged that continuance of payments was induced by mailed misrepresentations.
The defendant has also moved that paragraphs 5 and 8 be stricken from the complaint because respectively superfluous and irrelevant.
The mere presence of redundant and immaterial or irrelevant matter is not in itself sufficient grounds for granting a motion to strike the matter from the complaint. Westmoreland Asbestos Co. v. Johns-Manville Corp., D.C., 30 F.Supp. 389. In the event of prejudice to the other party, however, it will be stricken. Meek v. Miller, D.C., 1 F.R.D. 162.
In paragraph 5 of the complaint a section of the Act defining securities is set forth in part. It is true that the court will take notice of all Acts of the Congress and that this paragraph is therefore redundant. However, since it is in no sense prejudicial to the defendant, it need not be stricken. It will prove no burden to answer it.
Paragraph 8 alleges the fact and cause of merger of the Capital Savings Plan, Inc., into the Independence Shares Corporation, as well as the organization and selling practices of the latter. The fact of merger was earlier alleged. The cause of merger is, in this case, immaterial. The present organization and selling practices of the defendant are likewise immaterial. However, in this instance, proof or attempted proof of the allegations could well prove prejudicial to the interest of the defendant. Therefore, paragraph 8 should be stricken.
Motion to dismiss is denied.
Motion to strike is denied as to paragraph 5 and granted as to paragraph 8.
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