Can-Am Petroleum Company v. Beck, 7383.

• Decision Date: 04 May 1964
• Docket Number: No. 7383.,7383.
• Citation: 331 F.2d 371
• Parties: CAN-AM PETROLEUM COMPANY, a Colorado corporation, Harold D. Beckwith, and Charles Laird, Appellants, v. Ramona BECK, Rita Stark, Mr. James Meyers, Mrs. James Meyers, and William Halpern, Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

331 F.2d 371 (1964)

CAN-AM PETROLEUM COMPANY, a Colorado corporation, Harold D. Beckwith, and Charles Laird, Appellants, v. Ramona BECK, Rita Stark, Mr. James Meyers, Mrs. James Meyers, and William Halpern, Appellees.

No. 7383.

United States Court of Appeals Tenth Circuit.

May 4, 1964.

Robert Martin, Wichita, Kan. (George B. Collins, Oliver H. Hughes, K. W. Pringle, Jr., W. F. Schell, Thomas M. Burns, Laverne Morin, Robert M. Collins and William L. Oliver, Jr., Wichita, Kan., were with him on the brief), for appellants.

James W. Sargent and Bruce W. Zuercher, Wichita, Kan. (Emmet A. Blaes, Roetzel Jochems, Robert G. Braden, J. Francis Hesse, Stanley E. Wisdom, Cecil E. Merkel, Harry L. Hobson, L. D. Klenda, Charles M. Cline and Richard A. Loyd, Wichita, Kan., were with them on the brief), for appellees.

Before MURRAH, Chief Judge, and PICKETT and LEWIS, Circuit Judges.

LEWIS, Circuit Judge.

Appellees as plaintiffs below initiated this action under the Federal Securities Act of 1933, 15 U.S.C. § 77a et seq., to recoup monies paid to the corporate defendant for undivided interests in oil and gas leases. The individual defendants are managing officers of Can-Am Petroleum Company. The trial court, concluding that the evidence supported plaintiffs' claim that the securities were sold in violation of sections 77e and 77l of the Act,¹ entered judgment for plaintiffs according to their several interests and added a joint award for costs and attorneys' fees under section 77k. Defendants now submit to the principal judgment as it affects all plaintiffs except Ramona Beck but attack the award of costs and attorneys' fees in its entirety. In regard to Ramona Beck the evidence clearly shows, so say appellants, that Mrs. Beck was in pari delicto with the corporation and its officers and thus, under equitable principles, cannot avail herself of the shelter of the Securities Act; and further, that she was an underwriter as that term is defined in subsection 77b(11) of the Act and thus not entitled to the remedial provisions of the Act. We affirm the principal judgment but remand the case to the trial court for further consideration in regard to costs and attorneys' fees.

In 1959, the defendant corporation Can-Am was an independent oil and gas exploration and production company with offices in Denver, Colorado, and Wichita, Kansas. Included in the company's holdings was an oil and gas lease on 45 acres of land in Hart County, Kentucky, which the company was anxious to drill and develop. To obtain the necessary capital, set at $50,000.00, Can-Am sent Marvin Beckwith (an original defendant) to Phoenix, Arizona, to promote the sale of undivided interests in the leasehold for such development needs and clear a carried interest for Can-Am. At Phoenix, Beckwith made a "cold" contact with Mrs. Beck, a business woman of some means but no experience in or knowledge of the oil and gas business. Mrs. Beck evinced an immediate interest in the venture that, between March and September, resulted in many and varied activities upon her part which could be described as both legally reckless and naive.

By September, Mrs. Beck had purchased and paid for an 11/32 undivided interest in the leasehold, for herself, and at a cost of $27,187.00; she had enthusiastically and successfully urged others to purchase interests and had worked closely with Beckwith in his promotional efforts; she had received from Can-Am, by agreement, an additional 1/16 undivided interest for her efforts to further the promotion; and she had tried, unsuccessfully, to dispose of the interests of both Can-Am and herself at a quick and substantial markup. In regard to her activities which extend beyond her personal investment we find substantial support in the record for both the extent and limitation contained in the trial court's finding that:

"4. The plaintiff, Ramona Beck, was associated with the defendants in the sale of these securities to other persons and actively participated in efforts to sell the securities of the defendants to other persons in an effort to forward their interest as well as hers. For this she was paid a 1/16 working interest by the defendants."

Although the law is sometimes impatient with claims by parties to illegal contract when made against each other it will always examine with care the total circumstances of the parties' association and particularly so when the public interest is involved in the enforcement of a statutory remedy. Here the claim is based upon the provisions of the Securities Act, the remedial aspects of which cannot be waived either directly or indirectly. 15 U.S.C. § 77n; Wilko v. Swan, 346 U.S. 427, 74 S.Ct. 182, 98 L.Ed. 168. The purpose of the Act is to protect the naive or uninformed investor and to deny recourse to the reckless or fraudulent seller of securities. And thus, when the relationship of the parties is mixed, the judicial inquiry will concern itself with essentials in interpreting and enforcing the provisions of the Act. One who sells securities in violation of the Act will find no comfort in his own incidental investment when he seeks recovery against his equally...