*1 CROSS, Appellant, William B.

v. PASLEY, Appellee.

M. R.

No. 16092. Appeals

United States Court Eighth Circuit.

Sept. 22, 1959.

Rehearing Sept. Denied Cir., 267 F.2d 824. also

See

Jurisdiction whether the to determine transactions in violation of the were Sky present Missouri Blue Law is be- diversity citizenship cause of alleged amount involved. As to fed- violation, jurisdiction reposed eral Title 15 U.S.C.A. 77v. judgment spe The basis for the was a finding by cific the trial court that offerings sales and were in violation sup Acts,

both the Missouri and Federal challenges The defendant ra.2 judgment, asserting in effect that findings clearly court are errone ous. We first direct our attention City, Wasserstrom, Kansas M. Solbert Missouri statute. The defendant con (Bellemere Bellemere, Kansas Mo. & parties engaged tends that the in a appellant. City, Mo., brief), on the joint adventure, and that therefore their Thomson, City, Mo. Kansas Albert transactions were not within the contem Fairchild, Vandyke Thomson, & (Davis, plation of the Missouri statute. brief), Mo., City, on the Kansas position makes defendant’s nec- appellee. essary summary pertinent a facts GARDNER, VOGEL Before litigation. giving rise Judges. MATTHES, Circuit one Defendant Keith Chasteen Judge. MATTHES, Circuit partnership formed a known as C & C Pasley, appellee, M. R. In this action Company. Petroleum Letterheads of this below, seeks to recover styled: firm were paid for certain secur him amount alleged to been sold in viola ities Company Petroleum “G and C the Missouri Securities Law tion of Royalties—Production Leases— (commonly as “Blue referred to Building Fairfax Law”), Chapter R.S.Mo., 1949, par City 5, B. Kansas W. Cross ticularly otherwise in [unless Keith Chasteen Baltimore 1-8447” dicated, are Ver Missouri citations partnership pur- Statutes], was formed for Annotated Missouri non’s and The discovering producing (Title pose oil. Federal Securities of 1933 Act Defendant, Chasteen, 77e, 77l). or he and Trial of owned U.S.C.A. §§ jury, oil leases Oklahoma and was commenced a Kansas. case before but upon parties obtain funds finance drill- determination order ing partnership presented upon of wells entered no substantial evidence selling dispute issue, jury venture of as to material accomplish discharged, To oil leases. the cause submitted facilitate objective partnership judgment court. From the made in fa ar- rangements Otey, $14,771.32, Frank vor of with one E. the amount salesman, Otey allegedly paid securities, under which him for the was “to together help money among $1,477.13, attorney them raise raise with fees,1 explore prosecuted various individuals defendant has for oil 2**the appeal drill wells in connection this court. therewith.” provides all transactions 1. of Missouri the suit § 409.240 statute recovery attorney based were consummated reasonable State of fees. Missouri. By supplemental findings entered Au- gust the trial court found that

Otey up time paid salary, same at the was not but worked a substantial sum per (10%) There- on test wells. a commission of ten cent cost of pro- brought buyer pay his after, of the total amount from the including drilling portionate completion interest, costs. sale of the share of *3 Otey operated that defendant costs. testified The record also indicates that he any money partner put up respect pro- under no limitations and his with to did spective drilling purchasers. words, wells. the test the cost “the toward compensa- short, man didn’t have or This “free was deemed to be tall or ride” anything, “operators.” get in order to tion their as in on services these propor- They did, however, their Anybody share who wanted to and leases. completing thought wells. So cost I I could tionate whom sell some generalities. to, operation much for the I be inter- would having in, come I ested in them because Plaintiff one the numerous indi- get my would commission on that.” It viduals contacted defendant or his Otey appears 40 contacted representatives, who in invested the oil and was successful in individuals ob- period approximately leases. Over a taining 30 or 35 investors in as the vari- months, beginning December, 1955, in Apparently, ous leases. $15,141.79 a total of invested in full Chasteen retained a interest each yielded % leases which him a total return in the leases and sales were made of last $370.47. The wells were drilled remaining August, 1956, in and this suit was 1/32 filed % case, charge separate In each terest. October The invested, amounts was made for the actual leasehold in- acquired and the interests in different terest, integral part but as wells, an following are revealed ex- deal, purchaser required put each to hibit :

“Plaintiff’s Exhibit 1.

Summary. Payments of Well Name Int. Receipts Thrasher No. 1..........1/32' $4,016.79 Meek No. $370.47 1..............1/32 No. Parker 1............1/32 Thrasher No. 150.00 2..........1/32 Meek No. 475.00 2............1/32

Padgett 1,850.00 ................1/16 3,300.00 Jones No. 2..............1/16 1,850.00 Jones No. 1..............1/16 3,500.00 Estate No. 1............1/16 $15,141.79 Total ..................

$14,771.32” sale of typical The the interest others, of only which differed descriptions was confirmed a letter from in land lease money sums paid. ultimately to be partnership, language con- contained this part: assignment summated written purchased. confirmation interest “This letter confirms our recent agreement regard you the first leases verbal under three letter .gal description follows]. (cid:127)drilled, a wells cause interest quantities, ficient to divided formation ing aat share tered at penetrable Prescribed three venient for the pits 2000 $2,025.00 for ery, ence to the to the derrick floor at all all available information with refer- tives shall be entitled to free access your risk, make your tered the well and the formations encoun- hereinbefore part of with your rights those “We “Yourself and “As full “It is ^[******] this make $225.00, deemed labor, water, materials, all of gas royalty gas mining and we have and agreed nothing lesser feet, interest in share of the shall be drilled to during of None of to a drilling the three test wells payment to us of drill leases agree test well we above l/32nd contract subject celler and payment supplies necessary test unless test independent contractors, substance obligations expected site or by depth. depth assigned compensation depth mentioned herein contained shall and depth. land described create acquire granite, well for oil and geologist location your proportionate drill, or lease on and said drilling you as above mentioned. interests in the oil or that our %th cost in to us your representa- agree Mississippi Chat compensation its and condition of to furnish For the agree to be encoun- lease shall be is encountered approximately overriding oil proportionate hereunder %th gas or other a described you you, of the same. cause on relation depth connection assign to purchase, respective to you times, working the sum machin- agree each of drilling dig sum of paying as [le- us cover- all of given agree to be such suf- con- well gas un- im- are oil as at tween the nated in the tor” the operating agreement and a number of the were not Thus rather transactions securities as question that such interests constituted transactions tion of the do sifications tain certain ant mining tween Also of ties hereto that & C shall thereof purpose Company, plete held joint terms age oil and of said tion of this instrument to tionship whereby any party shall be mining partnership or other rela- party Operator.” omission or strued as Concededly the interests in the leases not fall within the following portions It Is Further statute, ****** “Operator “It ^[******] does : securities, the above described lease material agreement narrow liable account While hereof, control us, is not the transactions, gas, basic issue Act. leases registered set enumerated operation partnership parties but rather creating, law. other shall agreement * * are between or commission, premise defined shall have out in Exhibit ‘A’.” § question shall conduct Neither for either and, subject exempted 409.040 extent and Agreed shall never be con- one of the Operator partnership active be the *4 C hereto.” purpose as and a categories entered joint of them for the acts, therein. it investors, argues delineated to the more required by joint venture, production as of whether full does defendant development by the is clear supervision § contention on exempts create, “Non-Opera- Petroleum ‘Operator’ from “Operator,” and either or adventurers and any or inten- and 409.020(3). issues are for the that from to into be- as be- exempts Defend man- other Non- or clas com- formal par- desig- and opera- and cer 92 teachings tionship of the courts and other only can parties arise where the

recognized authorities, question has intend to so associate themselves. See put rest, Am.Jur., been and that transactions 30 Adventures, Joint 8.§ joint pro between adventurers are not gen The factors and elements cites, scribed Blue Laws. He erally required bring joint ad among others, such cases as Hammer v. venture clearly into pointed existence are Sanders, 414, 509, 8 Ill.2d 134 N.E.2d up page in Gales at 527 282 S.W.2d: 878, certiorari denied 352 77 S.Ct. U.S. ‘joint “A adventure’ is founded 100, Degen 79; Campbell 1 L.Ed.2d v. entirely contract, express on either ther, 975; D.C.W.D.Pa., F.Supp. implied. only can It exist Cole, Brown v. 624, 155 Tex. S.W.2d voluntary agreement parties 1011; Lindemulder v. 59 A.L.R.2d to it. been has defined as ‘an as Shoup, 258 Mich. N.W. persons carry sociation of out 75, p. 764.3 The 53 C.J.S. Licenses single enterprise profit, business knowledge, question not, our has been purpose they combine Supreme Court of Mis- ruled on property, their money, effects, skill, although pre- souri, was raised and knowledge.’ 48 C.J.S. Joint Ad Weldon, sented Gales Court v. *5 ventures la. It is in the nature 522. Defendant construes S.W.2d of partnership, generally governed a language of case the Court that the law, the same prin rules of the making quite plain as the Mis- “it that cipal being joint difference that a appro- Supreme will, Court in an souri usually adventure is limited to a priate case, hold that Missouri Blue the single general transaction. As a apply joint Law does not adven- rule, in joint order constitute a very tures.” Because the of a nature of adventure, there a must be com joint adventure, relationship and the munity of accomplish interest in the engaged parties therein, the are in- we ment of a commonpurpose, a mutual clined view that the Missouri stat- right control, right a share designed ute is not cover intended profits the duty and a to share in joint transactions between adventurers may such losses as be sustained. 48 However, attempt partners. we do not C.J.S. Joint Adventures 2a.” Supreme how to forecast the Missouri Here, upon so, importance will rule called do Court if of vital is the letter required operating agree- are we an in- of confirmation and the neither make dependent negate question. expressly ment theory determination joint simple that, adventure, reason partnership. This as in or “nothing Gales, supra, opinion we are that former stated that herein con- evidentiary holding no tained shall any basis for deemed there be to create re- mining party joint plaintiff was that venture, a ad- lation of partnership a or other ” * * * us, and that as between transactions in and the latter “ * * * joint question provided agreement were between that adventurers. shall never be creating, construed as a recognize agree While we that joint mining venture, partnership or concerning drilling operations may ments relationship whereby any party other joint relationship result in at times a shall liable the acts either o[f] adventure, Am.Jur., Oil, Gas and commission, any § omission or other elementary parties party that such a rela- Furthermore, hereto.” joint not understand the We do Hammer adventurers. In the Binde- being Campbell upon action, cases as ruled men, a mulder it was ruled that 10 finding parties engaged contributing were purchase in a $500 to joint case, lease, engaged joint adventure. In the Brown oil in a ven- by dictum observed exempt the court ture and such a venture was apply joint Michigan Act does not adven- Texas from the statute. parties turers, but ruled that there were circum- tenders in court all of said se- facts and view the we do not creating relationship formed curities and states that has received a he stances as single carrying as purpose $370.47 out a income from said securities.” single rendering judgment enterprise transac- the court allowed business or a compels Indeed, credit amount of income received tion. the record by plaintiff. trial, embarked At of the defendant the close conclusion that the upon through plaintiff, enterprise to counsel a rather extensive made this oil; printed “Now, produce please, statement: if the Court discover Pasley part- any Mr. statements of tenders back he letterheads and nership interest may indicate; required was as so a salesman have under the Missouri engaged given statute; may who was carte blanche interest he he have selling authority money by now required tenders them to to raise thing leases, only By sup- under terests in oil our statutes.” plemental required prospective purchaser findings, trial found necessary technically that he the funds to se- tender was insuffi- Mutuality cient con- cure the interests. under the Missouri statute but absent; supports “However,“the question trol is stated: the evidence was not finding during had court’s that “defendant raised the defendant either well, sole control over the trial Trial, or in his Motion for New although holders [and] of interests first time it was called to the right therein to enter attention of had the court was in Defend- premises progress Supplemental Suggestions ant’s to view sup- nothing port drilling, they had its of his do with Motion for New Trial. It is * * supervision *.” the conclusion of the court that tender *6 of may the securities waived and that of the facts be- Further elaboration the statutory defendant waived the re- unnecessary. The conclusion us is fore quirement physical for tender.” Does the inescapable the transactions un- that is require physical Securities Act scrutiny securi- constituted sales of der tender of the securities to the seller in proscribed Missouri Blue the ties Law, person open or in court? findings The answer of trial the court and the supplied has not been the Missouri correct. Inasmuch as that effect are to plaintiff courts. In 53 77, p. 782, C.J.S. Licenses proceed under the is entitled dealing with remedies for violations of statute, deem unneces- we it Missouri sary Sky Laws, Blue pronouncement this is application of the Fed- consider made: Act. Securities eral and dis- plaintiff have for consideration purchaser We do “In order to entitle the position that the contention parted, recover with which that he has adequate tender of the as- restore, failed make he must or tender or offer to- signed 409.- interests. Section leasehold restore, received, that which he has un- provides Missouri Act that 240 less or restoration a tender is excused.”' ** * making “person such sale Louis Loss in his treatise on Securities * * * pur- liable to such shall be Regulation, p. states at 969: ap- “The any law in in an action court proach chaser at question of the courts to the jurisdiction upon competent tender good what constitutes tender varies con- open person in or in court siderably.” seller This is borne out Anno- or of the sold contract of the securities 42, pages tation in 87 A.L.R. at 115-116. paid by full amount such made appears From research it our that the together purchaser, with all taxable question has been resolved a consid- attorney’s. reasonable fees in costs and attending eration of the facts in each- any under this sec- tender action or case. prac- While we believe the better * * tion; physical tice to be that tender of the se- curities should be made was in The tender made this the seller in complaint “(t)he person open court, persuaded stated: or in manner. we are defendant oil, to hold conduct gas, that undivided interest or other in * * * throughout proceeding rights; certificate, renders im- mineral any goes potent contract, any complaint receipt which or whatso- instrument representing fo- constituting was ever form the tender. The trial or evi- question of, of wheth- dence by, cused the vital or secured title or any gas oil, mining er the stat- in lease, the transactions within terest came * * [Emphasis ute. com- supplied]. The tender as made is plaint challenged, was not not definition is that to be observed questioned stage nearly at trial. identical to that found in When at the Act, renewed the tender 77b Federal Title Securities close being voiced no (1), the case defendant the Mis- difference objection sufficiency comprehensive. as to thereof. souri is definition more Upon conclusion of introduction of question is The answer to the instant evidence, expressed judge Howey Co., the trial found in E. C. v. W. J. S. opinion pre- as to what issues U.S. 90 L.Ed. S.Ct. sented, ques- which prospective did include In case customer tion of tender. If counsel defendant was offered both a land sales contract contrary entertained a view he failed to contract under a service judg- make it Howey Company known. his motion to service citrus groves. Holding offering ment for a new alternative that an challenge validity grove coupled defendant development failed units of the judgment of the cultivating, because an insufficient with a contract for market- inescapa- ing remitting tender. All of proceeds this leads to the regarded offering ble conclusion that investors, was an of an “invest- meaning the tender as sufficient and his claim to ment contract” within the contrary Act, merit. without at Securities the Court stated page U.S., page 298 of 328 1103 of at complains of the Defendant also words, 66 S.Ct: “In other an investment asserting judgment, amount purposes contract Securities to re entitled no event contract, Act means a transaction $715, to be the than said cover more whereby person scheme invests his plaintiff’s paid amount *7 money enterprise in a common and is would differenti leases.4 Defendant expect profits solely led to from the ef- figure that and the addition between ate promoter party, forts of the or a third drilling by plaintiff paid for al sums being immaterial whether the shares contending drilling costs, that ex enterprise part are evidence formal penses of the “invest were not a certificates or nominal interests in ment.” physical employed assets in en- statute, 409.020(3), de- The terprise.” “security” or “securities” fines the term * * * stock; “any note; evidence, particu- from to mean is clear * * * contract; larly letters, vestment fractional the. confirmation supra, p. Padgett initially pur- The Plaintiff’s Exhibit lease was See 4. 1, 4. 1, lease, at $85 in Thrasher No. Meek No. chased a cost of for Interests initially purchas- wells, plus $765 Parker No. were for test or for 1 and a total being $2,250 $1,000 of this amount An additional $225 $850. ed for sum of — lease, $2,025 completion. assigned as cost of the and advanced for was $1,- 2, 1, An No. of test wells. additional The Jones Jones No. as cost and Es- purposes purchased No. 1 was advanced later for interests were tate for tests, completion, outlay making $1,800, $1,250, further and initial an and expenses. $2,250, respectively. miscellaneous We cannot ascer- Apparently “Thrasher 2” record No. tain from the in what manner 2” covered No. were under these were allocated “Meek sums between lease original drilling. $150 lease and the amounts of and test The cost balance in- $475, respectively, comple- were invoiced in vested these 3 leases covered “completion “development” costs, expenses. and other costs.” tion required conveyed plainiff terests in was total amount that leases instruments, pay, written was the consideration at least one of duly plaintiff by ap- was amount al recorded, The “investment contract.” should propriate relinquish test instrument, the cost re- located assign integral part such of the entire in elimi- wells was transaction, order to being paid possibility nate the same was at cast cloud —it rendering purpose title time and real estate. primary In securities. more valuable Accordingly, judgment obligated pay addition, by adding court is modified thereto drilling expenses. Whit future following: thirty “Plaintiff shall within Wall, 868, Cir., at 226 F.2d taker v. page days from the date the mandate herein ruling plain 872, court, this in is filed in Court, District execute payments tiff was entitled to recover good deliver to and sufficient defendant a wells, equipment and second made for whereby fully instrument he shall perversion stated: “It would be relinquish any right, forever release and in the statute allow remittances made acquired by title or interest him the conjunction with a void and unlawful subject oil leases which are security restitution, exempt from action.” permit unjust un- would enrichment guise statutory der definition.” We have also considered defendant’s contentions estoppel barred laches, and that refusing permit him on the erred counterclaim,

eve of trial to file a find them without merit. William D. PETTIT and Thomas J. Craw- ford, Trustees-Appellants, judgment is The v.

Affirmed. PRODUCTS, DOESKIN INC. and Keta Company, Appellees. &Gas Oil Rehearing. Petition On No. Docket 25437. PER CURIAM. Appeals United States Court of Defendant-appellant petition has filed a Second Circuit. rehearing in which he asks for a Argued Feb. 1959. modification of our the alternative a 24, 1959. Aug. Decided opinion. Rehearing Denied Oct. rehearing petition denied. *8 See 270 F.2d 699. However, we further consideration judg- the view now entertain should ment entered supplemented require modified reassign formally or relin- conveyed quish him in holding to our We adhere the oil leases. presented that under the circumstances es- record the cannot liability cape because plain- Neither can of the tender. form by him, made tiff, the tender in view favor, judgment in success- fully he retains owns assert

right, or interest the securities title Nevertheless, question. since the