Wall v. Wagner, Civ. No. 82-53.

• Citation: 125 F. Supp. 854
• Decision Date: 06 December 1954
• Docket Number: Civ. No. 82-53.
• Parties: William G. WALL and Doris I. Wall, Plaintiffs, v. A. J. WAGNER, real name unknown, Pay Rock Oil, Inc., a Corporation of Eureka, Kansas, and C. C. Whittaker, real name unknown, Defendants.
• Court: U.S. District Court — District of Nebraska

125 F. Supp. 854

William G. WALL and Doris I. Wall, Plaintiffs, v. A. J. WAGNER, real name unknown, Pay Rock Oil, Inc., a Corporation of Eureka, Kansas, and C. C. Whittaker, real name unknown, Defendants.

Civ. No. 82-53.

United States District Court D. Nebraska, Omaha Division.

December 6, 1954.

COPYRIGHT MATERIAL OMITTED

Deutsch & Jewell, Frederick M. Deutsch, Norfolk, Neb., for plaintiffs.

Fred N. Hellner, Omaha, Neb., for defendant A. J. Wagner.

Van Pelt, Marti & O'Gara, Warren K. Dalton, Lincoln, Neb., for defendants C. C. Whittaker and Pay Rock Oil, Inc.

DONOHOE, Chief Judge.

This action was instituted by plaintiffs, William G. Wall and Doris I. Wall, to recover $9,557.96, plus interest, from defendants, A. J. Wagner, C. C. Whittaker and Pay Rock Oil, Inc. Since the basis of plaintiffs' claim is that certain undivided interests in oil and gas leases were sold to them by defendants without complying with the Securities Act of 1933, 15 U.S.C.A. § 77a et seq., this court has jurisdiction. 15 U.S.C.A. § 77v. Venue is properly laid in this District because a "sale" as that term is used in the Securities Act took place in Nebraska. 15 U.S.C.A. § 77v.

After careful consideration of the properly admissible evidence presented at the trial, the court makes the following special

Findings of Fact:

The defendant, Pay Rock Oil Company, of which C. C. Whittaker was, during the period material to this case, president and a substantial stockholder, employed the other defendant, A. J. Wagner, as its representative, to sell interests in oil leases on a commission basis.

In the early part of July, 1952, defendant A. J. Wagner contacted plaintiffs at Norfolk, Nebraska, and induced them to go with him to the State of Kansas for the purpose of inspecting certain oil fields which were the subject of oil lease interests that Wagner was selling.

On July 15, 1952, plaintiffs drove from Norfolk, Nebraska, to Lincoln, Nebraska, where they met Wagner and traveled with him in his automobile to Madison, Kansas. Here they were introduced by Wagner to the defendant C. C. Whittaker. On this same day Wagner and Whittaker took plaintiffs to different tracts of land, showing them oil wells with pumping station equipment in operation, and stating the amount of production of such wells, their owners and similar facts. That evening the parties returned to Eureka, Kansas, where plaintiffs were provided by defendants with a room at the Lyndon Hotel, and were guests of the defendants for dinner that evening and breakfast the next morning.

Sometime before noon the next day the parties went to the office of defendant, Pay Rock Oil, Inc., in Eureka, Kansas, and after some discussion relating to property described as Freeburg "A" plaintiffs signed an agreement authorizing Wagner to procure on their behalf a working interest in Freeburg "A". The agreement provided that plaintiffs would pay $3,000 plus an additional $1,500 for drilling expenses if oil were found on the leasehold. The plaintiffs also acquired an option to purchase a similar interest in Freeburg "B", another oil lease. In connection with this transaction, plaintiffs made out and delivered a check in the sum of $3,000 to Whittaker, as payee. Whittaker endorsed the check to Pay Rock Oil, Inc., the ultimate recipient of the proceeds. Wagner signed the before-mentioned agreement as "Representative".

Plaintiffs returned to their home in Norfolk, Nebraska, without a copy of the agreement. On July 30, 1952, plaintiffs wrote to the Secretary of Pay Rock Oil Company at Eureka, Kansas, for their copy of the agreement and it was forwarded to them promptly. Shortly thereafter a document entitled "Development Contract of Oil and Gas Lease" was sent by mail from Pay Rock Oil, Inc., at Eureka, Kansas, to plaintiffs at Norfolk, Nebraska. This instrument which covered the Freeburg "A" property, among other things provided:

"In event production be secured in the above well, Operator shall turnkey the completion of the above well to and including necessary tankage for the sum of $1500.00 for 1/16th dollars, the same to be paid pro rata in advance by the owners as their interests appear.

"The second and succeeding wells drilled on the above property shall be turnkeyed by the Operator for a lump sum of $900 for 1/16th dollars to test the known producing horizon of this area".

This contract, which also included a grant of an interest in the oil rights in the Freeburg "A" property, was executed and acknowledged by A. J. Wagner in Greenwood County, Kansas.

On August 12, 1952, the following letter was sent to plaintiffs:

"To All Owners of the Freeburg `A' Lease:

"Dear Friends:

"The bit reached the oil late yesterday afternoon in the Freeburg `A' No. 1, and last night we ran and cemented the pipe. We will now push on with the completion of the well in regular manner.

"Please send your pro rata part of equipment costs on a turnkey basis. They are now due as per the enclosed statement.

"Very sincerely yours "Pay Rock Oil, Inc. "C. C. Whittaker, Pres."

Enclosed with this letter was a statement for $1,500 for "equipment and completion costs". On August 27, 1952, plaintiffs remitted a check in that amount. A similar statement for $900 was mailed to plaintiffs on September 5, 1952, and they remitted payment October 8, 1952.

About September 1, 1952, defendant Wagner urged plaintiffs at Norfolk, Nebraska, to exercise their option on the land described as Freeburg "B"; and plaintiffs sent two checks, each in the sum of $1,500, one dated September 5, and the other September 15, 1952, to Pay Rock Oil, Inc. On September 23, 1952, Pay Rock Oil, Inc., sent to plaintiffs a document entitled "Development Contract of Oil and Gas Lease" covering the property described as Freeburg "B". This document was also executed and acknowledged by A. J. Wagner at Greenwood County, Kansas. This agreement provided for the payment of drilling expenses in the sum of $1,500 and $900 under the same terms and conditions as contained in the agreement relating to Freeburg "A".

About September 22, 1952, Pay Rock Oil, Inc., sent to plaintiffs a statement for $1,500 for "Completion and Equipment — Freeburg `B' No. 1". Plaintiffs remitted payment for this statement on September 25, 1952.

From December, 1952, through April, 1953, plaintiffs received $342.04 in distributions from Pay Rock Oil, Inc., in connection with the Freeburg "A" and Freeburg "B" contracts.

Pay Rock Oil, Inc., was the actual owner of the oil rights in the property described as Freeburg "A"...