Hall v. Security Planning Services, Inc.

D. Arizona

Hall v. Security Planning Services, Inc.

419 F. Supp. 405, 1976 U.S. Dist. LEXIS 14065

CourtDistrict Court, D. Arizona

DecidedJuly 16, 1976

DocketCiv. 72-393 Phx. WPC

StatusPublished

Cited by5 cases

This text of 419 F. Supp. 405 (Hall v. Security Planning Services, Inc.) is published on Counsel Stack Legal Research, covering District Court, D. Arizona primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook

Hall v. Security Planning Services, Inc., 419 F. Supp. 405, 1976 U.S. Dist. LEXIS 14065 (D. Ariz. 1976).

Pincite

Opinion

*407 JUDGMENT

COPPLE, District Judge.

The file in this matter is vast and the instant motion for partial summary judgment as to defendants Richard P. Curran and Inland Capital only is over 900 pages in length. The course of conduct entered into by defendants Richard P. Curran and Inland Capital Corporation is clearly outlined in the record and there are no material disputes of fact as to these defendants. That course of conduct was in direct violation of the securities law of the United States, the securities law of the State of Arizona and of the common law of the State of Arizona.

The undisputed facts in this record reveal the following pattern of fraud and deceit. These defendants developed in the state of Arizona a land development known as Cochise College Park. They conducted a nationwide sales campaign to induce individuals from throughout the world to purchase lots in this development. As a direct adjunct to these sales the defendants discounted and marketed themselves and through others the paper that represented the alleged mortgages and contracts of sale signed by the various lot purchasers. They also discounted and marketed notes and mortgages from other land promoters that operated in this state.

This Court is vested with sole jurisdiction as to the claims under Rule 10b-5 (17 C.F.R. § 240.10b-5), 15 U.S.C. §§ 78j(b) and 78aa. See, Clark v. Watchie, 513 F.2d 994 (9th Cir. 1975).

Not only did these defendants fail to register these securities with the Securities and Exchange Commission and the State of Arizona, they also knowingly misrepresented the very nature of the notes and mortgages that they marketed to the plaintiff class. In furtherance of their scheme to defraud, these defendants sold notes on lots that had never in fact been purchased by any real person. They concealed that fraud by making the initial contract payments from the funds provided through the sale of the notes and mortgages at their face value. They conducted the same subterfuge in reference to contracts that were rescinded by the buyers of the lots. In addition to nonexistent and rescinding notemakers the defendants themselves became purported lot buyers and makers of the notes in question. All of the above was financed by the defendants, in fact repaying to the note or mortgage holders a small percentage of the capital amount that they invested in those instruments.

In addition to that which is outlined above, the defendants knowingly and materially misrepresented these securities as being secured by realty mortgages. That was not the fact. At the time of the sale of the notes no real property mortgages involved in this action had in fact been recorded on the lots underlying the notes. Hall v. Security Planning, 371 F.Supp. 7 (D.Ariz. 1974).

Defendants furthered their fraud by marketing over $20,000,000 in unregistered securities (notes) through secondary agents. These defendants also sold such unregistered securities from other developments in the amount of $3,000,000.

All of these actions were in direct contravention of the securities law of the United States. In particular the defendants have violated and are liable under 15 U.S.C. §§ 77o, 78t and Rule 10b-5 (17 C.F.R. 240.10b-5). These defendants have violated and are liable under A.R.S. §§ 44-1991, 2001, 2003. The actions of these defendants also constituted common law fraud under the laws of this state. See, Safeway Portland Emp. Fed. Cr. Un. v. Wagner & Co., Inc., 501 F.2d 1120 (9th Cir. 1974).

While summary judgment is not the usual order of things in a securities action of this nature, it is warranted in this case. The usual problem is one of scienter, Ernst & Ernst v. Hochfelder, 425 U.S. 185, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976). The instant record provides ample uncontested proof as to that and all other elements of *408 such an action as it relates to these defendants. The Court also notes that these defendants have not responded to this motion and have failed to provide the Court with any circumstances that would change the picture this record paints.

These defendants’ course of conduct was so filled with knowing and wilful fraud that punitive damages are also called for in the instant factual situation. Price v. Hartford Accident and Indemnity Co., 108 Ariz. 485, 502 P.2d 522 (1972); cf., Goodman v. Poland, 395 F.Supp. 660 (D.Md.1975).

As noted earlier the Court has also found these defendants liable under A.R.S. § 44-1991. Pursuant to A.R.S. §§ 44-1201, 2001, interest will be charged against these defendants in the amount of 6% a year and attorney’s fees are awarded at a rate of 10% as a surcharge of actual damages awarded in the instant action to the plaintiff class.

Relief

The parties listed in paragraphs 1 and 2 of this judgment have already demonstrated the amounts in which they were damaged. The remainder of the plaintiff class is awarded partial summary judgment on the question of liability. They must file with this Court proof of damages before they can be awarded same pursuant to this order.

JUDGMENT

IT IS ORDERED, ADJUDGED AND DECREED:

1. That the following-named members of plaintiff class have judgment jointly and severally against defendants Richard P. Curran and Inland Capital Corporation and recover of said defendants the amounts shown on the securities identified by contract number following each plaintiff’s name, plus interest at the rate of 6% per annum from June 5, 1972 until paid.

NAME CONTRACT NO. BALANCE DUE

ARNOLD, Rev. Adam & Ruth 6963 $2,884.90

7603 7.035.92

BALODIMOS, Pelagia M. 7498 3,973.50

BELL, W. 8055 5.751.00

BOOTH, H. & D. 9125 4.418.92

BRYAN, P. 8788 4,710.90

CARLSON, H. 5329 4.654.74

5455 2.948.69

5470 3.599.24

CHEAREY (CHERREY),M. & L. 8659 7.796.25

COLLINS, Herman & R. 6613 5,171.04

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