Appeal from the Circuit Court of Marion County; the Hon.
Robert F.A. Stocke, Judge, presiding.
JUSTICE HARRISON DELIVERED THE OPINION OF THE COURT:
Seven plaintiffs brought this action against four defendants after learning that working interests in various oil and gas leases which they had purchased from defendants were unprofitable. Plaintiffs sought rescission of the sales and recovery of the amounts they had paid with interest as well as attorney fees under the Illinois Securities Law of 1953 (Ill. Rev. Stat. 1985, ch. 121 1/2, par. 137.1 et seq.) (the Securities Law). Plaintiffs also sought actual and punitive damages under a separate count of common law fraud. The circuit court of Marion County, after a bench trial, ordered rescission of the sales of the interests because defendants had failed to register the securities with the Secretary of State's office as required by section 5 of the Securities Law (Ill. Rev. Stat. 1985, ch. 121 1/2, par. 137.5), and awarded plaintiffs amounts they paid for the securities plus interest and attorney fees. On the Securities Law counts, judgment was entered in favor of all seven plaintiffs against defendants Frank Richards, Red River Development, Inc., and Herman Wilson, but against all plaintiffs and in favor of defendant Jeannine Richards. On the fraud count, judgment was entered in favor of all defendants and against all plaintiffs.
Defendants have not appealed. However, three of the plaintiffs, Dan Mundell, Charles Mundell, and John Wright, have appealed claiming the court erred in (1) failing to grant them summary judgment, (2) granting judgment in favor of defendant Jeannine Richards in view of her failure to respond to a request for admission, (3) denying two of the plaintiffs recovery of completion costs, and (4) denying plaintiffs punitive damages. We affirm.
Defendant Red River Development, Inc., was the issuer of securities consisting of fractional undivided interests in oil and gas leases on property located in Kentucky. Defendant Frank Richards sold several of these securities to plaintiffs. The securities were not registered with the Secretary of State as required by section 5 of the Securities Law (Ill. Rev. Stat. 1985, ch. 121 1/2, par. 137.5). Defendant Frank Richards testified he did not know the securities were not registered. He further stated he did not remember much about what he had told plaintiffs before selling them their interests. He testified that when he gave potential buyers production figures regarding oil wells, he gave them true and accurate information. He stated that the information he conveyed regarding production levels was based upon information given to him by his brother, defendant Russell Richards, who was involved with Red River and who had experience in the oil industry. Frank Richards testified that his wife Jeannine never had any connection with the sale of the interests in the leases. Jeannine Richards herself testified she never sold or solicited sales of the gas and oil leases.
The seven plaintiffs testified to the same general facts. They stated that Frank Richards had sold them working interests in gas and oil leases. He told them the wells would produce significant amounts of oil and gas. Plaintiffs stated they were not told the wells would be marginal producers, or that Frank Richards would be collecting substantial commissions on the sales. The seven testified that had they known these facts, they would not have purchased the interests. Three of the plaintiffs, Charles Mundell, Dan Mundell, and John Wright, testified that Jeannine Richards also gave them information leading them to believe the wells were productive, and that she influenced their decisions to purchase the interests. The wells included in the interests purchased by plaintiffs were either totally unproductive or only marginally productive.
The court found that because the securities were not registered, plaintiffs should recover the initial purchase prices paid for the interests as well as interest and attorney fees, but not the amounts paid for completing the wells. On the Securities Law counts, judgment was entered for all plaintiffs against defendants Frank Richards, Red River, and Herman Wilson, but against all plaintiffs and in favor of defendant Jeannine Richards. On the fraud count, judgment was entered in favor of all defendants and against all plaintiffs.
• 1 Plaintiffs first argue the court erred in denying their motion for summary judgment. We cannot consider this allegation of error. "After an evidentiary hearing, a prior order denying summary judgment is not reviewable, any error in the denial being merged in the subsequent trial." Clark v. Maddux (1983), 118 Ill. App.3d 546, 549-50, 454 N.E.2d 1179, 1182.
• 2 Plaintiffs next contend the court erred in entering judgment in favor of defendant Jeannine Richards on the Securities Law counts because she had admitted the facts necessary to hold her liable under the Act. Plaintiffs had filed a request to admit facts under Supreme Court Rule 216 (103 Ill.2d R. 216), which in subparagraph (c), in pertinent part, states:
"Each of the matters of fact and the genuineness of each document of which admission is requested is admitted unless, within 28 days after service thereof, the party to whom the request is directed serves upon the party requesting the admission either (1) a sworn statement denying specifically the matters of which admission is requested or setting forth in detail the reasons why he cannot truthfully admit or deny those matters or (2) written objections on the ground that some or all of the requested admissions are privileged or irrelevant in whole or in part." (103 Ill.2d R. 216(c).)
The request asked Jeannine Richards to admit she was a salesperson for Red River, and that she solicited sales and sold unregistered securities to plaintiffs. Jeannine Richards did not file a response within the 28-day time period found in Rule 216(c), but filed a response almost three months after the request. The court struck this response as being untimely. At trial, the court admitted evidence from both sides regarding whether Jeannine Richards was involved in soliciting sales or making sales of the securities for Red River. However, near the end of the trial, the court stated: "Any answer * * * contrary to admissions and statement of facts will not be accepted by the Court as fact."
• 3 Plaintiffs argue that under Rule 216, once there was no timely response to the request for admissions, the facts in the request were admitted conclusively and Jeannine Richards could not present evidence on those matters. However, plaintiffs presented evidence of Jeannine Richards' involvement with the solicitation and sale of the securities during their case in chief. A party waives his right to rely on the admission if he introduces evidence on the issues which would be controlled by the admission. (People ex rel. Reynolds v. Aldridge (1982), 107 Ill. App.3d 679, 685, 437 N.E.2d 1268, 1272.) Since plaintiffs introduced evidence on the issue of Jeannine Richards' involvement with the solicitation and sale of securities, they waived their right to rely on the admission. The court here heard sufficient evidence to find Jeannine Richards was not involved. We cannot say its judgment in favor of Jeannine Richards on the Securities Law count was against the manifest weight of the evidence. See Buehl v. Dayson (1984), 127 Ill. App.3d 958, 965, 469 N.E.2d 403, 409.
• 4 Two of the plaintiffs next contend the court erred in denying them recovery of completion costs, which were the costs of completing wells once they were found to be productive. John Wright and Dan Mundell claim they should have been able to recover amounts they paid as completion costs as part of the purchase prices paid for the working interests.
Section 13A of the Securities Law allows recovery of "the full amount paid, together with interest from the date of payment for the securities sold." (Ill. Rev. Stat. 1985, ch. 121 1/2, par. 137.13A.) The question here is whether the completion costs were part of "the full amount paid" for the securities. Defendants cite Hammer v. Senders (1956), 8 Ill.2d 414, 134 N.E.2d 509, cert. denied (1956), 352 U.S. 878, 1 L.Ed.2d 79, 77 S.Ct. 100, and Burke v. Zipco Oil Co. (1974), 19 Ill. App.3d 909, 312 N.E.2d 399, for the proposition that payments for development costs of oil wells do not constitute securities. However, Hammer and Burke have been read very narrowly and have been limited to their unique facts. (See Witter v. Buchanan (1985), 132 Ill. App.3d 273, 281-82, 476 N.E.2d 1123, 1130-31.) In Hammer, the contract called for separate payments for the working interest and drilling costs, and plaintiff admitted he made one payment and that was for drilling costs. In Burke, the limited issue was what constitutes the price of a security for purposes of filing a report under the limited offering provisions found in section 4H of the Securities Law (Ill. Rev. Stat. 1973, ch. 121 1/2, par. 137.4H). In reading these two cases narrowly, the court in Witter criticized the approach to distinguishing working interests from payments for drilling costs as being what it called artificial. (Witter v. Buchanan (1985), 132 Ill. App.3d 273, 284, 476 N.E.2d 1123, 1131.) Addressing its own case, the court in Witter looked to the agreement of the parties and the plaintiffs' testimony that they intended to purchase working interests when they made payments for drilling and completion costs to determine the plaintiffs had purchased securities because they indeed had purchased working interests. 132 Ill. App.3d 273, 284, 476 N.E.2d 1123, 1131.
Likewise, we look to the intent of the parties, as evidenced primarily by their contracts, to determine if completion costs were part of the amount paid for the securities. The form of the ...