This action was brought by the Securities and Exchange Commission, a federal agency, to obtain an injunction prohibiting the appellants from continuing operating a plan denounced by the complaint as a “device, scheme or artifice to defraud”, for the purpose of selling the capital stock of the appellant bank. Briefly stated, the plan permitted the purchase of such stock by pooling the monthly payments of the various purchasers, and the purchase on the market of such stock at market price, the payments to be made by a trustee, the Title Guarantee and Trust Company, the stock to be allotted pro rata to the various purchasers, title to be taken in the name of the trustee. The appellant Timetrust, Inc., was organized to promote the purchase of such bank stock. It employed a large number of salesmen to sell the plan to the prospective purchasers, issuing a certificate to the purchaser when the transaction was completed. Such certificate and passbook, or receipt book, showing monthly payments constituted the sole evidence of title in the hands of the purchasers.
The commission does not claim that the plan is inherently wrong or illegal, but that the literature issued by Timetrust, Inc., was so formulated that it lent itself to the actual misrepresentations made verbally by the salesmen.
In considering the relationship of the various parties defendant, it should be noted that this was not a scheme to promote a new and valueless stock by a promotion plan including the incorporation of the new company. In such a case it would be readily seen that all the persons engaging in the fraud would be equally responsible. Here the plan dealt with the stock of a long established bank with assets of over $2,000,000,000, and involved several corporations already incorporated and established. It is not claimed by the Commission that the stock was sold for more than it was intrinsically worth or for more than its market price. The Commission claims that the plan, although legal and honest on its face, was so set up and operated that the purchasers were in- fact misled and defrauded and that this fraud was intended by those who participated in the plan. The defendants have appeared in two separate groups with different attorneys. One group, referred to as the main or principal defendants, consists of the new corporation Timetrust, Inc., and its officers, Meredith Parker, Ralph W. Wood and H. E. Blanchett, who actively controlled the salesmen and the operation of the plan. The other group, referred to in the briefs as aiders and abettors, consisted of the Bank of America Trust and Savings Association, and its president, L. Mario Giannini, and A. P. Giannini, who is Chairman of the Board of Directors of the bank.
Until July IS, 1937, 99.36% of the bank stock was owned by a corporation known as Transamerica. A. P. Giannini was Chairman of the Board of Directors of Transamerica, and his son L. Mario Giannini, was a member of its Board of Directors. Appellant John Grant, now deceased, was the President of Transamerica at the time of the transactions involved herein. This group of defendants and appellants claim that the plan approved by them was perfectly honest and that they cannot justly be charged with wrong because fraud crept into the operation of the plan by reason of the misconduct of salesmen employed by Timetrust, Inc. The officers of Timetrust, Inc., claim that all fraudulent practices of the salesmen were without authority and although no doubt conceding that they were civilly responsible for any misrepresentations of their agents they cannot justly be restrained from operating the plan in a legal and honest manner as it was intended by them to do.
It is evident that those concerned with the plan might well consist of those who honestly approved an honest plan and those who took advantage of the plan to commit fraud in its operation.
With this explanation it will clarify the situation to state the findings of the trial court which are as follows:
“1. The defendants A. P. Giannini, L. Mario Giannini, John M. Grant, Meredith Parker, Ralph W. Wood and H. E. Blanchett collaborated in the organization of the defendant corporation Timetrust, Incorporated, and in the formulation of the plan of its activities and its operations.
“2. The defendant Timetrust, Incorporated, was organized for the purpose of distributing to permanent investors stock of the defendant Bank of America National Trust & Savings Association, owned by the Transamerica Corporation, which was un*216der the management of the defendants A. P. Giannini, L. Mario Giannini and John M. Grant.
“3. The distribution of the stock of the defendant Bank of America National Trust & Savings Association was effected by the' remaining defendants through the medium of selling Timetrust certificates on installment payments; when received by the defendant Timetrust, Incorporated, such payments, after the deduction of certain charges and fees, were used for the purchase of stock of said Bank of America National Trust & Savings Association, at the market price then prevailing, and the account of each certificate purchaser making a payment credited with his proportionate share in the stock so purchased.
“4. Without so disclosing to the purchasers of Timetrust certificates, the defendants, through their activities in the market, stabilized the market price of stock of said Bank of America National Trust & Savings Association purchased by Time-trust, Incorporated, for the accounts of investors in its certificates.
“5. The defendant Bank of America National Trust & Savings Association afforded its facilities to its co-defendants in effecting sales of certificates of Timetrust, Incorporated, and in collecting the payments therefor; it distributed literature of Timetrust, Incorporated, and counselled with its salesmen and prospective purchasers of its certificates.
“6. The United States mails were used by the defendants in promoting and effecting sales of certificates of the defendant Timetrust, Incorporated.
“7. Untrue statements of material facts and omission to state material facts necessary to be stated in order to make statements made in the light of the circumstances under which they were made not misleading, as alleged in sub-paragraphs (a) to (c) inclusive, and (e) to (o) inclusive of Paragraph VIII of plaintiff’s complaint, were made to prospective purchasers by salesmen of the defendant Timetrust, Incorporated, to induce the purchase of said certificates.
“8. After a prospective purchaser had made his first payment with his application to purchase a Timetrust certificate, he was furnished with a written certificate issued by Timetrust, Incorporated, which together with the ‘Agreement of Trust’ expressly made a part thereof, fully and correctly described the investment plan of the defendant Timetrust, Incorporated.
“The defendants have sought to absolve themselves of any vice in the method of selling Timetrust certificates by disavowing and disclaiming any responsibility for the untrue statements alleged to have been made to prospective purchasers, contending that the entire transaction is contained in the written certificate and agreement of trust. The Court holds that the purpose of the Securities Act of 1933, IS U.S.C.A. § 77a et seq., may not be so defeated. From the facts found by the Court, it holds that the conduct of the defendants is contrary to the Securities Act of 1933.
“It is therefore ordered, that the defendants be and they are hereby enjoined as prayed in the complaint.” 1
These representations shown in footnote are that the Timetrust certificates are (a) similar to savings bank account but pay a *217higher rate of interest; (b) that money paid -in would he available at all times, subject to a small fee; (c) that the plan was one for the accumulation of a definite sum; (d) * * *; (e) that the system provided for dollar averaging, a new and unique plan; (f) that the system of dollar averaging made certain a profit of from $50 *218to $300; (g;) that it was not stated that dollar averaging only operates when a fixed sum is paid regularly; (h) that Timetrust is free from human errors; (i) that compound interest or dividends would be paid in addition to the principal; (j) that Time-trust provides for dividend accumulation or compounding; (k) that the purchaser *219would receive from 7 to 15% per annum income and appreciation which compounded would give for a $50 monthly payment for ten years ($6,000) a value of from $8,685 tó $13,778; (1) that the insurance feature of the plan assured the beneficiary for the full amount of his certificate payable in cash; (m) that monthly payments would be invested in bank stock without substantial reduction whereas a large per cent was deducted from the first 18 months’ payments; (n) that the purpose of the choice of the bank stock was because it was a fine investment, whereas it was selected to effect a distribution of the bank’s stock; (o) that the purpose was to help provident minded people to secure the better things of life, whereas its purpose was to effect a wide distribution of the bank stock.
None of these representations were made in the printed prospectus nor in the written application signed by the purchaser, nor in the certificate or trust agreement mailed to him immediately after his application and first payment were made. These documents contained explicit statements as to the method through which the bank stock was to be purchased and held and the amount of the creation fee and the method and cost of revocation.
The appellee being dissatisfied with the findings which, as we have seen, did not find that there was a scheme, artifice or device to defraud, moved the court to make a specific finding to that effect and also moved for an amended conclusion of law to that effect. The court denied the application for the finding of fact but granted the application for the amended *220conclusion of law. This gives rise to a curious situation. The appellee contends that the conclusion of law is in fact a finding of an ultimate fact; that is, a finding that there was in fact a device, scheme or artifice to defraud. This contention is amply supported by the authorities. Bogan v. Hynes et al., 9 Cir., 65 F.2d 524. The difficulty here arises from the fact that the court declined to find as a fact that there was a fraudulent scheme covering the operations of all the defendants but incorporated that idea into a conclusion of law. The court may have been of opinion that the actual fraud of the salesmen was imputed as a matter of law not only to their immediate employers but also to those who devised the general plan of selling stock and hence that as the plan as actually operated was fraudulent it must as a matter of law be held to be a fraudulent plan. It should be observed that the findings for or against fraud were of the utmost importance to the defendants. The decree merely enjoins the parties from making fraudulent representations in the sale of bank stock and other securities. As such representations are denounced by the criminal law, no one could or would protest against such an injunction which merely prohibits them from committing crime. The sting of the decree lies in the implication that the defendants are dishonest. It is asserted that the mere institution of these proceedings caused a depreciation in the value of the bank stock of over one hundred million dollars and has practically stopped the sale of stock by Timetrust, Inc. It should be observed that the actual perpetrators of the fraud, the forty or fifty salesmen, are not parties here, and that the question is as to whether or not the defendants launched a fraudulent scheme. We are of the opinion that the case should be remanded to the trial court for a specific finding of fact as to whether or not the defendants, or any of them, devised a fraudulent scheme such as is denounced by the statute. We are not suggesting by the above recital that the district judge reached his conclusion of law that the fraud had been committed without an appreciation of all that we have here stated.
In view of our conclusion we have refrained from commenting upon the voluminous record of over 5,000 pages and a discussion of the points raised in the briefs, further than to hold that there is conflicting evidence on the issue of fact, upon which the required finding is to be made, from which the court may draw inferences for or against a finding of the fraud which the district judge has stated as a conclusion of law. The responsibility for a decision on the facts lies with the trial court and we do not wish to in any wise interfere with such decision.
The case is remanded to the United States District Court for the Northern District of California, to Judge Sames of the United States District Court of Arizona, presiding therein. The findings made will be returned to this court as a part of the record on appeal.
The defendant, John M. Grant, having died during the pendency of this appeal the case is dismissed as to him.