311 U.S. 282 (1940), 17, Deckert v. Independence Shares Corp.

Docket Nº:No. 17
Citation:311 U.S. 282, 61 S.Ct. 229, 85 L.Ed. 189
Party Name:Deckert v. Independence Shares Corp.
Case Date:December 09, 1940
Court:United States Supreme Court

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311 U.S. 282 (1940)

61 S.Ct. 229, 85 L.Ed. 189



Independence Shares Corp.

No. 17

United States Supreme Court

Dec. 9, 1940

Argued October 18, 1940




1. A bill of complaint filed in the District Court by purchasers of securities under a financial plan which involved a trust, alleged in substance that the vendor sold the securities by means which rendered it liable to the purchasers under the Securities Act of 1933; that the vendor was insolvent, was threatened with many lawsuits, and its assets were in danger of dissipation or depletion, and that the trustee was in possession of assets consisting in part of payments made by the purchasers. The bill prayed the appointment of a receiver for the vendor, with power to liquidate assets and to pay claims of the complainants; an injunction restraining the trustee from transferring or disposing of assets of the trust, and general relief.


(1) An appeal to the Circuit Court of Appeals from an interlocutory order granting an injunction was authorized by § 129 of the Judicial Code and was not premature. P. 286.

(2) Upon such appeal, the Circuit Court of Appeals could properly determine the correctness of the District Court's denial of motions

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to dismiss the bill, although normally such denial would be appealable only after a final decree. P. 287.

(3) Motions to dismiss the bill because it failed to state a cause of action, and because the District Court lacked jurisdiction, were properly denied. P. 287.

(4) The District Court had jurisdiction of the suit under § 22(a) of the Securities Act, irrespective of the amount in controversy or the citizenship of the parties. P. 289.

(5) The grant of a temporary injunction by the District Court -- restraining the transfer of funds held by the trustee for the account of the vendor, upon security being given to protect the defendants -- was proper to preserve the status quo pending final determination of the questions raised by the bill. P. 290.

The grant of a temporary injunction is within the discretion of the trial court, and will not be disturbed on appeal unless it be contrary to equity or an abuse of discretion.

(6) The allegations of the bill sufficiently showed that the legal remedy against the vendor, without recourse to the fund in possession of the trustee, would be inadequate. P. 290.

(7) Orders of the District Court allowing the bringing in of two additional plaintiffs, and referring the issue of insolvency to a master, were interlocutory, and not reviewable except upon appeal from a final decree. P. 290.

2. The relief of purchasers who have been sold securities by means which render the seller liable under the Securities Act of 1933 is not restricted to a money judgment. P. 287.

3. The jurisdiction conferred on the District Court by § 22(a) of the Securities Act of suits "to enforce any liability or duty" created by the Act implies the power to make effective the right of recovery afforded by the Act, and the power to make the right of recovery effective implies the power to utilize any of the procedures or actions normally available to a litigant in the exigencies of the particular case. P. 288.

4. A suit to rescind a contract induced by fraud, and to recover the consideration paid, is cognizable in equity, at least where the legal remedy is inadequate. P. 289.

108 F.2d 51 reversed.

Certiorari 309 U.S. 648, to review the reversal of interlocutory orders of the District Court, 27 F.Supp. 763, including the denial of motions to dismiss and the

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grant of a temporary injunction, in a suit based upon the Securities Act of 1933.

MURPHY, J., lead opinion

MR. JUSTICE MURPHY delivered the opinion of the Court.

Two important questions are presented by these petitions. The first is whether the Securities Act of 1933, 48 Stat. 74, authorizes purchasers of securities to maintain a suit in equity to rescind a fraudulent sale and secure restitution of the consideration paid, and to enforce the right to restitution against a third party where the vendor is insolvent and the third party has assets in its possession belonging to the vendor. The second question is whether such purchasers must show that the amount in controversy exceeds $3,000 exclusive of interest and costs as required by Section 24 of the Judicial Code, as amended, 28 U.S.C. § 41.

Petitioners, with one exception residents of Pennsylvania, are owners and holders of Capital Savings Plan Contract Certificates purchased from Capital Savings Plan, Inc., since merged with and now Independence Shares Corporation, a Pennsylvania corporation. These certificates required the holders to make certain installment payments to The Pennsylvania Company for...

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