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Hammer v. Sanders





APPEAL from the Appellate Court for the First District; — heard in that court on appeal from the Circuit Court of Cook County; the Hon. HARRY M. FISHER, Judge, presiding.


Rehearing denied May 22, 1956.

In the circuit court of Cook County, the plaintiffs, H.C. Hammer, Morris Norian and Richard Norian, obtained judgments against the defendants, Charles W. Sanders, John L. Fye and O.R. Thoureen, individually and as co-partners doing business as the Sanders-Fye Drilling Company, for sums paid the latter pursuant to 51 separate oil transactions. The judgments were for $40,328.18, $31,279.86 and $6,988.36, respectively.

The plaintiffs successfully maintained in the trial court that the money was for the purchase of "securities" within the meaning of section 2 of the Illinois Securities Act of 1919 (Ill. Rev. Stat. 1953, chap. 121 1/2, par. 97,) and since the defendants had not complied with this statute relative to registration, etc., the sales could be rescinded and, upon tender, the consideration paid, plus reasonable attorney's fees, could be recovered. Ill. Rev. Stat. 1953, chap. 121 1/2, par. 132.

On appeal, the Appellate Court reversed, holding both that the transactions did not involve the sale of "securities" within the statutory definition and that there was no proper tender. (See 6 Ill. App.2d 346.) We allowed petition for leave to appeal and granted the Secretary of State permission to appear as amicus curiae.

The cause was heard on motions for summary judgment, and for the most part the facts are undisputed.

The defendants, who were in the oil business as partners under the name of Sanders-Fye Drilling Company, owned oil leases in Indiana, Illinois and Kentucky. During the summer of 1952 they concluded 51 separate transactions with the plaintiffs relative to developing these leases, 45 of which were based on so-called letter agreements and six of which were evidenced by invoices only. The letter agreements were identical in form, differing merely as to date, location of property, amount of interest, and sums of money due. For reference, we quote one of these instruments in full:

"Sanders-Fye Drilling Co. Contractors — Oil Producers Lamkin Building Olney, Illinois

Date ____ June 15, 1952 ____ Re ____ Sec. 29, 38-13W ____ Gibson Indiana ____________________________ County State Mr. Hy Hammer Hammer Bros. 33 N. Western Ave. Chicago 12, Ill.

Dear Sir:

This letter will confirm our understanding regarding your acquisition of an interest in leases on property as set forth below.

We will assign to you an undivided ____ 1/128th ____ working interest, under oil and gas leases on a block of ____ 200 ____ acres, located in ____ Gibson ____ County, ____ Indiana ____, for the sum of $ ____ 242.19 ____.

We agree to commence or cause to be commenced, upon the leasehold estate described above, the drilling of a well for oil and/or gas, to diligently prosecute the drilling of same and to test all possible oil formations encountered to a depth of approximately ____ 3000 ____ feet, unless oil or gas in commercial quantities is discovered at a lesser depth, for the sum of $ ____ 242.19 ____, which is your share of the drilling cost of this well. We will plug the well should it be a dry hole.

In the event of a producing well, it is understood and agreed that, in addition to the amount as set out above, you will pay your proportionate part of the casing, drilling in expense, and for all equipment necessary to complete the well, as well as your proportionate part of the monthly operating expense, upon receipt of invoice. It is also understood that for any additional wells that might be drilled, you will pay your proportionate part of all costs, which costs may include the normal drilling profit of Sanders-Fye Drilling Company.

It is agreed that each individual co-owner retains the right to revoke at will the operator's power to sell such co-owner's oil and also denies the operator the power to enter into any contract beyond the minimum needs of the industry under the circumstances and in any event in excess of one year.

It is also agreed that you are purchasing this interest for investment purposes only without any present intention of reselling this interest.

If this is your understanding of our agreement, kindly signify your acceptance by signing in the space provided below and return one copy to this office.

Very truly yours, SANDERS-FYE DRILLING COMPANY, By ____ /s/ John L. Fye _______ Partner Accepted

____ /s/ Hy Hammer ____ ____ July 21, 1952 ____"

In each instance, drilling was either in progress at the time the instrument was signed or commenced shortly thereafter. ...

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