to an agreement dated September 4, 1947 entered into by them and certain other persons with defendant, invested certain sums of money with defendant in a joint venture for the drilling of oil and gas wells in certain lands in Michigan. The parties to said agreement knew the nature of the enterprise, knew the men with whom they were dealing and knew each other. The defendant did not advertise his drilling project in any newspaper or circular, nor did he use any other means whereby the information regarding the offering would get into the hands of the general public.
3. The lands consisted of 640 acres, more or less, in Salem Township, Allegan County, Michigan, hereinafter referred to as the Salem block. Under the terms of the said agreement entered into between the plaintiffs and defendant, each plaintiff purchased a one thirty-second working interest in the first well called the Whipple Well. The participation by plaintiffs in the said Whipple Well gave them the right to participate, according to their working interests, in future drilling on the Salem block.
4. After drilling several wells in said Salem block, some of which were commercial producers, defendant on March 19, 1948 wrote each of the plaintiffs that he had taken out a permit to drill another well known as Howard Well No. 1 in said Salem block, more specifically located in Section 13, T4N, R13W and asked them to indicate their acceptance or refusal to participate in the drilling of this Howard Well No. 1.
5. Both plaintiffs, in writing, agreed to participate as interest holders in the cost of drilling the said Howard Well No. 1 and in the early part of April 1948 each plaintiff sent the defendant a check in the sum of $ 127.74 to cover his proportionate share of the estimated drilling cost of the said Howard Well No. 1. The total offering amounted to thirty-two times $ 127.40 or $ 4,076.80. This amount is so small that it obviously could not be construed to be the occasion for a public offering.
6. The said Howard Well No. 1 was drilled in as a dry hole, and the plaintiffs were promptly notified of that fact.
7. Subsequent to the drilling of the Howard Well No. 1, plaintiffs participated in the drilling of other wells on the said Salem block, making a total of nine wells in which plaintiffs participated. Of the said wells, five were commercial producers and four were dry holes. In addition thereto, defendant sold a lease for part of the acreage covered by the original leases for the sum of $ 5,000.00, plus a one-eighth over-riding interest. Each of the plaintiffs, as well as the other participants, received his proportionate share in the $ 5,000.00.
8. On or about March 23, 1949 the plaintiffs executed reassignments of their working interests in the Howard Well No. 1 and sent them to the defendant with a demand for the return of the monies advanced as aforesaid by them as their respective shares of the drilling costs of the said well.
9. Plaintiffs did not tender to defendant reassignments of their interests in the producing wells nor did they tender to defendant the income which had been received by plaintiffs or which was payable to them as a result of the earnings of the producing commercial wells.
10. All the participants in Howard Well No. 1, including the plaintiffs, were persons entitled to participate therein by reason of their joinder in the original agreement of September 4, 1947.
Conclusions of Law
1. The offering made by the defendant to plaintiffs to invest in said Howard Well No. 1 was not in violation of the Securities Act of 1933 because it was not a public offering.
2. The offering was limited entirely to those who had participated with defendant in the drilling of previous wells on the Salem block.
3. Plaintiffs are attempting to retain their interests in producing wells and to demand the return of monies invested in a well which turned out to be dry.
4. Each of the plaintiffs is not entitled to recover the amount paid for his undivided one thirty-second interest in Howard Well No. 1.
5. Judgment should be entered for the defendant together with costs.
An appropriate Order is entered.
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