Full opinion text
FRANK A. KAUFMAN, District Judge. The Johns Hopkins University (Hopkins) seeks summary judgment over the vigorous opposition of defendants. The record is voluminous; the cast of characters is numerous; and the narration of the opposing versions of an unusual financial tale could easily outlast several double features. Defendants contend that the case is too complex for summary judgment. The answer to that contention, however, is easily discerned after the material, undisputed facts are culled from the massive record and are permitted to stand alone. In such posture they compel, against the background of applicable law, only one conclusion: This case is ripe for summary judgment for plaintiff. The defendants are James M. Hutton, Jr., et al., copartners, doing business as W. E. Hutton & Co. (Hutton), a stock brokerage firm with its principal place of business in New York City, and with numerous branch offices, including one in Baltimore. Hopkins alleges that Hutton violated duties which it owed to Hopkins under the Securities Act of 1933 (the ’33 Act), the Securities and Exchange Act of 1934 (the ’34 Act) and the common law. Specifically, Hopkins alleges that Hutton made misrepresentations of, and omitted to disclose, material facts, and also engaged in fraudulent and negligent conduct. The controversy arises out of the purchase by Hopkins on March 1, 1961, of an oil and gas production payment for $1,300,000 from Trice Production Company (Trice) in connection with which transaction Hutton received a commission from Trice. Since Hopkins began this suit on November 1, 1963, the parties have indefatigably engaged in discovery, legal and factual argument, and motion hearings. Before oral argument on Hopkins’ motion for summary judgment, Hutton’s chief counsel stated in his main affidavit that Hutton had deposed eleven, and Hopkins twelve, witnesses, involving 7,401 pages of testimony; that Hutton had marked as exhibits approximately 818 documents and Hopkins had so marked about 212 documents, or a total of 1,030 documents; that Hutton had served upon Hopkins two sets of interrogatories and two sets of requests for admissions and that Hopkins had served upon Hutton thirteen sets of interrogatories and seven sets of requests for admissions, embodying a total of more than 2,083 separate inquiries in such interrogatories and requests for admissions. This Court calculates that the pleadings, the motions, the discovery documents, the main and supplementary affidavits of Hutton’s .chief counsel, and other factual and legal memoranda and commentary to the Court exceed 12,000 pages. There have been lengthy hearings and conferences, involving several scores of days before this Court and before a special Master who was at one time appointed with regard to objections to discovery interposed by both sides. After Hopkins filed its original complaint, Hutton answered and prayed a jury trial, Hopkins later was granted leave to file an amended complaint, Hutton answfered, and Hutton later sought to file a third-party complaint against Ragnar D. Naess, et al., co-partners doing business as Naess & Thomas, Hopkins’ investment counsel, for contribution as joint tortfeasors, charging Naess with statutory and common law violations. Chief Judge Thomsen of this Court denied Hutton leave to file the third-party complaint, “primarily because of the complication of issues which would result from the filing of the third party complaint, but also because of the delay and expense to Hopkins, the unreasonable expense to Naess, and the laches of Hutton.” Johns Hopkins University v. Hutton, 40 F.R.D. 338 (D.Md.1966). Hopkins’ amended complaint is set forth in seven counts: (1) Section 12(2) of the ’33 Act; (2) Section 10(b) of the ’34 Act and Rule 10b-3 of the Securities and Exchange Commission (S.E.C.); (3) Section 10(b) of the ’34 Act and Rule 10b-5 of the S.E.C.; (4) Section 15(c) (1) of the ’34 Act; (5) Section 17(a) of the ’33 Act; and (6) and (7) under the common law for (a) false representation and fraudulent conduct and (b) making false representations negligently and with reckless indifference as to their truth. Hopkins’ motion for summary judgment was presented with regard to each of the first five or statutory counts. Near the close of his rebuttal, during oral argument on Hopkins’ motion for summary judgment, Hopkins’ counsel stated that if the Section 12(2) equitable relief sought by Hopkins under count one of the amended complaint should be granted, Hopkins would consider itself fully satisfied (Tr. 458-463). Therefore, since summary judgment will be granted to Hopkins under count one, the issues raised by the other counts are moot. Hopkins’ Amended Complaint was summarized by Judge Thomsen at 40 F.R.D. 338, 340-341, supra, as follows: In 1960, Hutton was employed by Trice to act as its adviser, broker and agent in the sale of production payments carved out of certain oil and gas properties owned by Trice. Hutton offered for sale and sold three such production payments, including the one offered for sale and sold to Hopkins, and Trice paid Hutton commissions amounting to 2% of the sales price obtained. Pursuant to that arrangement, Hutton and Trice offered to sell to Hopkins a production payment out of certain oil and gas properties of Trice located in Texas, Oklahoma and Louisiana, described in a brochure prepared by Hutton and Trice and delivered by them to the Treasurer of Hopkins. The brochure stated that Trice desired to sell production payments in the amount of $2,700,000; that a commitment for approximately $1,400,000 had been received from a bank as a separate first production payment from certain properties; that a second production payment of approximately $1,-300,000 from the same properties and from five additional properties (which would be subordinate to the bank’s production payment except as to the five additional properties) would also provide for certain net profits interests; and that, based on stated estimates of the value and rate of realization of the oil and gas reserves in the properties subject to the second production payment, the purchaser thereof would realize a substantial sum in excess of its cost. Hutton represented to Hopkins, as a further material inducement to purchase the production payment, that the estimates of future net revenues and rate of realization from the oil and gas reserves set forth in the brochure were the estimates of independent engineers who had studied each of the properties. Hutton also recommended to Hopkins and to Naess, Hopkins’ financial adviser, that they select Chester L. Brown, Vice-president of Petroleum Consultants, Inc., to make a study of the reserves and a cheek of said estimates on behalf of Hopkins, at Trice’s expense. In making this recommendation Hutton did not reveal that the employee of Hutton who was dealing with Hopkins had been for many years an intimate friend and associate of Brown, had recently encouraged him to form his consulting engineering company and had indicated to Brown that Hutton would employ him in connection with this production payment. In early 1961, without the knowledge of Hopkins, Hutton employed Brown, at the joint expense of Hutton and Trice, to make a study and estimate of said reserves not for Hopkins but for Hutton and Trice; instructed Brown to make a report which would omit details; concealed from Brown that Hopkins had been led by Hutton to believe that Brown was an independent engineer acting for Hopkins; concealed from Brown the existence of the reports and estimates that had been made by independent engineers for Trice concerning which Hutton had made representations to Hopkins; and failed to request Brown to make any check of such reports or estimates. While Brown was making his study and estimates for Hutton and Trice, Hutton represented to Hopkins that Brown was making the study and estimate as Hopkins’ ‘independent reservoir engineer’, and, acting as such, was checking the earlier reports and estimates of said reserves made by the independent engineers. Hutton represented to Hopkins that Brown’s study and estimates showed that the figures previously presented by Hutton were conservative and that Hopkins could expect repayment of its investment with interest in a shorter time and could expect a greater return from its net profits interest than had been estimated by the original independent engineers. Hutton forwarded to Hopkins Brown’s report which confirmed those representations. Relying to a material degree on each of said material representations made by Hutton, Hopkins purchased for $1,300,000 the production payment and net profits interests on March 1, 1961. On October 15, 1962, Trice filed in the United States District Court for the Eastern District of Texas, Tyler Division, a Petition for Reorganization under Chapter X of the Bankruptcy Act. In early 1963, Hopkins received a report disclosing that the reserves of oil and gas in the properties included in the $1,300,000 production payment purchased by Hopkins were substantially less than as represented by Hutton. Also in 1963, within one year prior to the filing of the original complaint herein, Hopkins learned for the first time that the alleged representations made by Hutton were false, and learned for the first time of the alleged skulduggery in connection with Brown’s report. In their answer to the amended complaint, defendants, among other things: 1. Admitted that all of the individual defendants, excluding defendants Joseph A. W. Iglehart and Benjamin D. Williams who were limited partners, were conducting business under the name of W. E. Hutton & Co. (Hutton); 2. Admitted that the defendants maintained an office in the District of Maryland; 3. Conceded that this Court has jurisdiction ; 4. Admitted that in 1960 Trice was a Delaware corporation having its principal place of business in Texas; 5. Admitted that in 1960 Hutton performed certain services in connection with the sale by Trice of certain production payments carved out of certain oil and gas properties of Trice; and that Hutton was paid commissions by Trice amounting to 2% of the face amount of each of three production payments sold by Trice, including the one sold by Trice to the plaintiff on or about March 1,1961; 6. Admitted that Cliff Trice, President of Trice, and Gilbert LaPiere, an agent and employee of Hutton, met in Baltimore on September 21, 1960, with Henry Baker, Treasurer and Financial Vice President of Hopkins, at which time a $1,300,000 production payment carved out of certain oil and gas properties of Trice located in Texas, Oklahoma and Louisiana was discussed; 7. Admitted that Hutton had in their possession on December 8, 1965, a writing entitled “General Comments Pertaining to Purchase of Oil and Gas Production Payment” dated September 16, 1960; that Trice prepared that brochure; that that brochure, or a- copy thereof, was delivered to Baker by Cliff Trice on or about September 21, 1960, during a conference at Hopkins in Baltimore arranged by Naess; and that Naess had received a copy of that brochure; 8. Specifically denied that that brochure was prepared by Hutton either in whole or in part; 9. Admitted that LaPiere wrote a letter to Baker, dated February 3, 1961, in which a reference is made to “my brochure of September 16, 1960”; defendants contend that the word “my” was incorrectly or inadvertently used, although not intentionally so; 10. Alleged that Petroleum Consultants, Inc. and particularly Brown were selected by Hopkins to make an independent expert study of certain properties of Trice, an estimate of the reserves therein and future profits therefrom; and that LaPiere, at the request of Hopkins, wrote a letter to Petroleum Consultants, Inc., dated January 5, 1961; 11. Admitted that LaPiere knew Brown prior to January 5,1961; 12. Admitted that LaPiere, or someone on his behalf, wrote letters to Mark Harriman of Naess and Thomas and to Baker dated' respectively January 16, 1961, and February 3,1961; 13. Admitted that Hopkins accepted an offer made by Trice that Hopkins purchase for $1,300,000 a production payment and net profits interest carved out of certain oil and gas properties of Trice located in Texas, Oklahoma and Louisiana; and that that purchase was consummated in Texas on or about March 1, 1961; 14. Alleged that Naess and Thomas were investment counsel for Hopkins for over twenty years and in pursuance thereof, Walton Canedy, the Baltimore partner of Naess and Thomas, attended every meeting of the Hopkins Finance Committee between January 1, 1960 and the date Hopkins commenced this action; 15. Alleged that Naess was a friend and acquaintance of Cliff Trice since at least 1957; that in 1958 Naess made personal investments in Trice’s oil drilling ventures; and that Naess recommended to his clients that they invest in participations in such ventures of Trice; 16. Alleged that on August 30, 1960, Trice wrote a letter to Naess and enclosed a Trice brochure dated August 8, 1960; 17. Alleged that on September 14, 1960, Cliff Trice personally called on Naess in New York and proposed the purchase of an oil production payment by Hopkins; 18. Alleged that Trice sent Naess a Trice brochure dated September 16, 1960, the substance of which Naess communicated to his partner Canedy, asking the latter to pass it on to Baker; and that Baker indicated to Canedy he was interested ; 19. Alleged that Naess arranged the meeting with Baker on September 21, 1960 at Hopkins (referred to in 7 above), attended by Cliff Trice, Canedy, and LaPiere, at which meeting Cliff Trice delivered to Baker a copy of Trice’s September 16, 1960 brochure; 20. Alleged that during the Fall of 1960, Gordon Meeks, a friend of Naess, told Naess he was forming a new petroleum consulting firm with Brown, known as Petroleum Consultants, Inc. and that thereafter Naess selected Brown as Hopkins’ own independent oil consultant to check the oil and gas reserves in the Trice production payment offered by Trice to Hopkins; 21. Alleged that in October, 1960, Bankers Trust Company of New York City (Bankers Trust or Bankers) purchased a 11,375,000 payment from Trice through Bankers’ nominee, Oilco, Inc., under which Bankers occupied a primary position with respect to approximately 18 of the 23 wells in the production payment under consideration by Hopkins, pursuant to which the latter would occupy a primary position as to 5 wells and a secondary position to Bankers as to the aforesaid 18 wells; 22. Alleged that Naess and Thomas and Hopkins gave consideration to Hopkins’ investment policy in July or August, 1960, and steps to restate that policy were taken by Hopkins Finance Committee in October, 1960; that on November 25, 1960, that Committee adopted a restatement of its investment policy pursuant to which Hopkins was authorized to invest up to 10% of its endowment funds in certain types of investments including the type offered by Trice to Hopkins; and that on January 27, 1961, that Committee met and formally considered Trice’s proposal but did not at that meeting conclude consideration of that proposal; 23. Alleged that on February 1, 1961, Hopkins’ legal counsel made a written analysis of the Trice production payment, which analysis indicated, inter alia,, the speculative nature and risks involved in the Trice production payment; that on February 1, 1961, such counsel advised Baker to obtain certain reports of independent engineers, namely, those of DeGolyer & MaeNaughton (D & M), Schafer and Brown, and that on February 1, 1961 such counsel told Baker they “must see” those three reports before the purchase was consummated; 24. Alleged that on February 7, 1961, at a meeting in Baltimore at the office of Hopkins’ legal counsel, attended by Mitchell and Worth McCauley of Trice, Baker, and Dandridge and Cooper, members of the law firm representing Hopkins, but not LaPiere or any other Hutton representative, a February 3, 1961, Trice brochure was delivered to Baker; 25. Alleged that no representative of Hopkins, Naess & Thomas nor Hopkins’ legal counsel, ever at any time prior to March 1, 1961, obtained the engineering reports of D & M, Schafer or Mercantile National Bank of Dallas; 26. Alleged that Brown, “Hopkins own consultant selected by Naess,” made an independent evaluation of the properties involved in the Trice production payment and set forth his opinion in a report delivered to Hopkins, Naess and Thomas, and to Hopkins’ legal counsel; 27. Alleged that Naess studied the Brown report, advised Hopkins that he had contacted Baker and the Mercantile National Bank and on February 14, 1961, wrote a letter to Hopkins recommending the purchase, which letter was read at the Hopkins Finance Committee meeting on February 24, 1961, and made part of the minutes of that meeting. At that meeting the Committee approved the purchase of the Trice production payment and the purchase was thereafter consummated on or about March 1, 1961, at which closing Hopkins was represented by its Texas legal counsel, and at which neither LaPiere nor anyone from Hutton was present; 28. Alleged that Hopkins did not rely upon Hutton or any other defendant but upon Naess, Canedy, others in the firm of Naess & Thomas, Brown, Petroleum Consultants, Inc., Trice, Mitchell, Mc-Cauley, others in the Trice Company, Hopkins’ general legal counsel in Baltimore, and its special legal counsel in Dallas; 29. Admitted that Trice, on or about October 15, 1962, filed in the United -States District Court for the Eastern District of Texas, Tyler Division, a petition for reorganization under Chapter X of the Bankruptcy Act; 30. Denied each and every other allegation in plaintiff’s complaint; 31. Stated that the amended complaint failed to state a claim upon which relief could be granted; 32. Alleged that “[i]f any representations were made to Hopkins on behalf of these defendants which included any untrue statement of a material fact or omitted to make the statements in the light of the circumstances under which they were made not misleading, defendants did not know, and in the exercise of reasonable care, could not have known of such untruth or omissions.”; 33. Alleged that such material changes and modifications in the Trice production payment purchased by Hopkins on March 1, 1961, had been made since March 1, 1961, that Hopkins had failed to tender back, and was unable to tender back, as required by Section 12(2) of the ’33 Act; 34. Pled the one year statute of limitations (See Section 13 of the ’33 Act, quoted verbatim, supra); 35. Set out defenses numbered Fifth, Sixth, Seventh, Eighth, Ninth, Tenth, Eleventh and Twelfth which have no application to the first or Section 12(2) count. On December 22, 1966, Hutton sought leave to amend its answer to the amended complaint and thereby to file a Thirteenth Defense. Over Hopkins’ opposition, this Court permitted that additional defense, pertaining to all counts of the complaint, including the first or 12(2) count to be filed. That defense alleges contributory negligence and assumption of risk by Hopkins and states that Hopkins’ Finance Committee, its agents and representatives, failed to conform to the standards required of fiduciaries and trustees of an educational institution in approving the purchase of the Trice production payment. Whether “summary judgment is appropriate in any case is one to be decided upon the particular facts of that case.” First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968). The duty of the trial court, in considering such a motion, is not to decide any factual issue but rather to determine whether any factual issue exists which requires determination by the factfinder. National Screen Service Corp. v. Poster Exchange, Inc., 305 F.2d 647, 651 (5th Cir. 1962); Byrnes v. Mutual Life Insurance of New York, 217 F.2d 497, 500 (9th Cir. 1954). In this case Hopkins urges this Court to make many findings of fact which this court specifically declines to do in this summary judgment context. But that does not relieve this Court of the obligation to examine the record before it under Rule 56 and to determine if there is lacking any genuine dispute with regard to material facts which in and of themselves provide an undisputed basis upon which plaintiff is entitled to summary judgment relief under Section 12(2) of the ’33 Act. Such an examination requires a careful classification of those material facts which qualify as undisputed under Rule 56 standards. FINDINGS OF UNDISPUTED MATERIAL FACTS Based upon an exhaustive review of the entire record in this case this Court finds that the following facts are material and that there is no genuine dispute with regard to any of them. 1. LaPiere was employed by Hutton, as Manager of its Oil and Gas Department, on March 1, 1957, and resigned from this position in July 1961. 2. The New York Stock Exchange notified Hutton, on or about September 20, 1957, that the Exchange had approved LaPiere’s application to act as a duly qualified Registered Representative. 3. In his capacity for Hutton, as Manager of the Oil and Gas Department and as a Registered Representative, LaPiere, among other duties, was authorized to solicit underwritings and other financing from a number of oil companies, to administer from day-to-day the interests of participants in “various” oil drilling programs, to contact the public with regard to purchases or sales of stocks and bonds and investment banking relationships, and to screen and add what information he might have to programs presented by the various oil operators who approached Hutton. 4. Trice Production Co., in early August 1960, mailed copies of the first Schafer report, dated March 27, 1960, the second Schafer report, dated June 8, 1960, and the D & M (April 1, 1960) report, dated June 11, 1960, to LaPiere. 5. The $1,300,000 production payment purchased by Johns Hopkins University, on March 1, 1961, covered a combination of 23 oil and gas wells. 6. The twenty-three wells under this $1,300,000 production payment purchased by Hopkins, and the estimates of their future net revenue contained in the first and second Schafer and the D & M reports are as follows: 1st Schafer 2nd Schafer Well D & M Estimate Estimate Estimate R. D. McDonald #1 $1,699,536 None None Milne #1 361,223 None None Dugger #1 119,742 $ 72,858 None Younger #1 50,473 30,938 None Dollar #1 11,829 None None Barham-Knox #1 8,918 None None Noland #2 27,761) None None Noland #3 46,256) None None Noland #4 38,351) 71,402)6 94,234) None Windle 259,861 56 None None Weatherford 102,028 None None Dennis 91,045 None None Nunez “A” #1 670,667 350,841) 618,696) None J. R. Clayton #2 4,193 37,230 None Woodworth #1 95,871 406,912) 43,009) $411,696 Harvey Jones #1 93,351 None 292,626 Swinney #5 23,954 57,646 58,451 Tipps #1 316,802 None None Hester #1 None None None Dumas #1 Skiles #1 None None None None None None Vera Roney #2 None None None Hughes #1 None None None 7. Trice Production Co. mailed Trice Production Schedules II and III, dated August 7, 1960, to LaPiere. Schedule II showed, among other things, the following estimates of future net revenues: Nunez A-l $670,667 Jones 292,626 Woodworth 411,696 Dumas 265,541 Hester 478,704 Swinney 58,451 Hughes 79,513 Dollar 11,829 Dugger 72,858 Tipps 327,794 Weatherford 116,604 Windle 121,128 Skiles 53,958 Barham Knox 8,918 J. R. Clayton 4,193 Roney #2, $ 16,518 Noland #2, ¡#3, #4 124,897 Younger 50,473 Milne 361,223 R. D. MacDonald 1,699,536 Dennis 128,618 The total estimated future net revenue shown for the above 23 wells — those 23 wells which comprised the $1,300,000 production payment purchased by Hopkins — is $5,355,744. Schedule III is virtually the same as Schedule II, but it includes estimates for six additional properties — six “minor interest” properties which LaPiere asked Trice Production Co. to strike from the schedule — and a total estimate for future net revenues of $5,367,523. 8. Trice Production Co. mailed to LaPiere a “Schedule I” dated August 7, 1960. That schedule showed, among other things, the following for each of the 23 wells in the $1,300,000 production payment purchased by Hopkins: Well Available Analyses Sources of Extension and Reserves Nunez A-l D&M D&M Jones D&M, Schafer Schafer Woodworth D&M, Schafer Schafer Dumas None TPC Hester None TPC Swinney D&M, Schafer Schafer Hughes None TPC Dollar D&M D&M Dugger D&M, Schafer Schafer Tipps D&M D&M Weatherford D&M D&M Windle D&M D&M Skiles None TPC Barham Knox D&M D&M J. R. Clayton D&M D&M Roney i#2 None TPC Noland #2, #3, i#4 D&M D&M Younger D&M D&M Milne D&M D&M R. D. MacDonald D&M D&M Dennis D&M D&M 9. Trice Production Co. mailed to LaPiere the brochure dated August 8, 1960, entitled “Proposal for Purchase of Oil & Gas Production Payment.” Among other things, this brochure included estimates of future net revenue for the same 29 wells covered by Schedule III, supra, (including the 23 covered by the $1,300,000 production payment purchased by Hopkins), and this brochure shows a total future net revenue figure for the wells of $5,083,773. 10. On or about August 5, 1960, LaPiere asked Bankers Trust, through Keteham, to finance a $2,500,000 Trice production payment, which Bankers turned down. 11. LaPiere then, on or about August 8, 1960, called Keteham again and offered Bankers Trust a counter-proposal in which William Hutton agreed to reduce the amount of broker’s loan which Hutton had from Bankers if Bankers agreed to take part in the Trice financing. Bankers decided to go ahead with this proposal. 12. In August, 1960, Keteham of Bankers received from LaPiere a copy of the D&M report, the second Schafer report and the Trice Production Co. “Schedule II”. Keteham prepared a resume of the D&M report, and a schedule recapitulating net revenue figures from the D&M and first and second Schafer reports. 13. Bednar, a technical consultant to Bankers Trust, reviewed the D&M and Schafer reports and expressed to Ketch-am his preference for the D & M estimates, rather than those of Schafer which seemed to Bednar to take the high road. 14. Ford, of Trice, wrote Ketcham, in a letter dated August 27, 1960, among other things, that certain variations existed between Trice figures and the D & M report estimates for the Weatherford #1, Lee Tipps #1, Bert Dennis ,#1 and Emma Windle #1 wells. Ford explained that the D & M estimates, which were made before the Trice figures were assembled, were lower than the Trice figures because the D & M figures reflected a deduction of certain estimated capital expenditures; that the latter were not deducted for the Trice figures because subsequent to the date of the D & M report these four wells had been completed and those expenditures made. 15. Barnett of Trice wrote LaPiere a letter, dated August 25, 1960, which, among other things, described a possible sales pitch for putting together a syndicate to take a portion of the production payment deal, and informed LaPiere that he would receive a memo by Wood, of Peat, Marwick & Mitchell, with regard to the tax aspects of such a deal. 16. On August 30, 1960, LaPiere contacted Rowen, a partner in the law firm of Sherman, Sterling and Wright, of New York City, and asked Rowen to comment on the proposed $1,300,000 Trice production payment, especially with regard to tax matters. Rowen performed approximately 14 hours of work with regard to the Trice Production Co. matter. 17. Rowen received a letter, dated September 10, 1960, from McCauley of Trice, which letter explained that enclosed with it was a copy of a McCauley-to-LaPiere letter of the same date and a draft of a proposed production payment, which McCauley desired LaPiere and Rowen to discuss. Rowen talked with McCauley about this material in a phone call on September 15, 1960. 18. Rowen received from McCauley more production payment documents with a letter, dated October 4, 1960, which letter stated McCauley’s understanding that LaPiere had obtained a committal on approximately all of the $1,300,000 production payment, and that within the next few days the first production payment (to Bankers) would be concluded. 19. McCauley also communicated, by letter dated September 12, 1960, with counsel for Bankers Trust Company (Cahill, Gordon, Reindel & Ohl, of New York City) concerning documents covering the Bankers Trust part of the Trice . production payment transaction. Among other things, McCauley expressed his view that the instruments were the usual provisions in transactions such as those proposed with Bankers Trust and the Gilbert LaPiere group. 20. Ketcham wrote a memo for the Bankers credit file dated September 16, 1960, which related that Constable of Bankers Trust had spent time with D & M and with Trice reviewing the D & M engineering work, and which stated that Bankers was waiting for a revised report on the Windle well and that Bankers had told LaPiere that Bankers would make the loan and would draw papers for an amount in excess of $1,300,000 and would advance additional funds as soon as satisfactory engineering determined a loan value for the Windle well. 21. Because of Bankers’ dissatisfaction with the D & M report on the Windle well, Bankers asked Bednar to make a report on that well, and the Bednar report on Windle, dated September 27, 1960, stated among other things, a net revenue figure of $193,264. 22. Ketcham wrote to LaPiere, a letter dated September 28,1960, in which he stated that Bankers desired to limit the amount of the production payment to $1,300,000 plus the loan value of the Windle lease, and that he expected Bednar’s answer on the Windle in the very near future. 23. Constable wrote a memorandum to the Bankers credit file, dated October 14, 1960, in which he stated, among other things, that Bankers loaned on that date $1,375,000 to Oilco Inc., Bankers’ dummy corporation, for the purpose of purchasing the production payment, and that this financing was done at the request of LaPiere of W. E. Hutton for their customer, Cliff Trice of Trice Production Co. 24. LaPiere, by letter dated October 17,1960, wrote to Ketcham and expressed his appreciation for the completion of the Bankers’ oil payment deal, and enclosed a $75,000 check of W. E. Hutton Co. to open a new account with Bankers for W. E. Hutton’s Oil and- Gas. Department. 25. Ketcham, in a credit file memo, dated October 18, 1960, stated, among other things, that the Hutton account was opened as a partial reward to Bankers for having purchased the $1,375,000 production payment. 26. Hutton received from Trice a $27,500 gross commission for placing this production payment; LaPiere received 40% of this commission payment, or $11,000. 27. By letter to Ragnar Naess dated August 30, 1960, Cliff Trice presented Trice Production Co. plans to sell carved-out production payments in order to secure financing. In this letter, Trice stated, among other things, that LaPiere indicated Hutton’s interest in securing monies for a production payment series amounting to $2,700,000 and that Trice agreed to pay Hutton a 2% finder’s fee in connection with this sale; explained the mechanics of the production payment ; and stated that the payments had been evaluated by the competent and conservative engineering firms of D & M and Schafer; explained Hutton’s attempts to sell the $2,700,000 payment in two payments, one to a bank and another to a proposed syndicate; suggested the attractiveness of production payments as an institutional investment; asked Naess to recommend production payments to some of his clients; and enclosed a brochure, dated August 8, 1960, prepared in connection with the $2,700,000 production payment, which showed an estimated total future net revenue figure of $5,083,773. 28. On September 14, 1960, Cliff Trice and Gilbert LaPiere met with Ragnar Naess in the latter’s office at which time Trice presented a production payment proposal concerning which he wanted to interest Naess’ client, Johns Hopkins University; and during which meeting Naess spoke, by way of long distance, interstate telephone with his Baltimore partner, Canedy, and with Baker, the Treasurer of Hopkins, concerning the proposal, outlined the proposal to Baker and arranged for a meeting between Baker and Trice and LaPiere in Baltimore. 29. Thomas of Trice, by letter dated September 13, 1960, wrote to LaPiere a letter which included electric logs for four wells covered by the secondary production payment and enclosed a brief summary in connection with the $2,700,-000 production payment and asked LaPiere to get in touch with Trice Production Co. if he needed anything else that would assist him. The enclosed summary explained that the $5,083,773 estimated net revenue figure set forth in the brochure was a minimum figure compiled by independent engineering firms, and that additional data which had become available indicated that future revenue would amount to approximately $7,200,-000. 30. Trice Production Co. sent to LaPiere’s secretary a letter dated September 21, 1960, transmitting twelve copies of a brochure dated September 16, 1960, entitled “Proposal for Purchase of Oil and Gas Production Payment,” and by letter, dated September 23, 1960, twelve additional copies of this September 16 brochure were sent to LaPiere, and another twenty copies were sent to LaPiere on October 4, 1960. 31. Naess also received a copy of this September 16, 1960 brochure. 32. This September 16, 1960, brochure included comments on the proposed $2,700,000 production payments and an outline of the economic results, and stated a total future net revenue figure of $6,560,000 with eight years said to be the time required to retire principal and interest on the $2,700,000 production payment, and estimated a return of $2,905,174 to holders of the $1,300,000 production payment. 33. Trice, LaPiere and Canedy attended a meeting in Baker’s office on September 21, 1960, at which time Baker received a copy of the September 16, 1960 brochure containing the $6,560,000 net revenue figure and at which time he received the calling cards of Trice and LaPiere. 34. LaPiere received a letter, dated September 23, 1960, from Ford of Trice which stated that it included a schedule showing the “8/8 reserves” (estimated total production in barrels or gas units) for each of the 23 wells covered by the $2,700,000 production payment and suggested that this schedule be included in LaPiere’s and Cliff Trice’s copy of the brochure to talk from, but that it was felt that those reserve figures should not be made an inclusion in all of the brochures. 35. Canedy wrote to Naess and other Naess & Thomas officials a memo, dated September 22, 1960, in which, among other things, he mentioned the September 21 meeting in Baker’s office, and in which he included a suggestion to Naess that Naess and Thomas find an expert to advise Hopkins on the deal and that Baker had agreed to compensate Naess & Thomas for the added expense of such a consultant. 36. After receiving this memo, Naess expressed his satisfaction with Canedy’s suggestion to him, but stated that Hopkins, and not Naess & Thomas, should employ the consultant. 37. In the first half of October, 1960, Naess had discussions with Baker in which he stated the advantages of the production payment and recommended that Hopkins employ Petroleum Consultants, Inc. to check the reserve estimates of D & M and Schafer on the wells included in the production payment which Hopkins was considering. 38. At the meeting of the Johns Hopkins University Finance Committee, on October 14, 1960, Baker outlined the production payment proposal, which the Committee decided not to pursue at that time, but which it indicated might be considered at a future date. 39. In October, 1960, Arthur Wiesenberger, a New York investment banker, wrote letters and enclosed therewith copies of the September 16, 1960, brochure, to at least five of his investment clients. The letters explained a possible Trice production payment program total-ling $1,300,000 and stated that the production payment business had been brought to Wiesenberger by Gilbert LaPiere of W. E. Hutton & Co. ■ None of Wiesenberger’s clients purchased Trice production payments. 40. On October 4, 1960, Cliff Trice wrote to LaPiere at W. E. Hutton & Co., and stated to LaPiere that he had prepared (and enclosed) a list of possible participants for a production payment syndicate; that he was confident that with LaPiere’s continued efforts they would be successful in selling production payments totalling $1,300,000; and that he deeply appreciated everything LaPiere had done for him and for Trice Production Co. The eleven names on the enclosed list of possible syndicate members were about evenly distributed between institutions and individuals. 41. During October, November and December, 1960, LaPiere and Trice negotiated with Bankers Trust for the sale of a $720,000 production payment to Oilco, which sale was ultimately made on January 6, 1961, and for which sale Hutton received a 2% commission, or $14,400, from which latter amount LaPiere received $3,600 (25% of the $14,400). 42. On November 25, 1960, the Johns Hopkins University Finance Committee issued a statement of its investment policy which, among other things, set forth a new position, namely, that in the fixed income portion of Hopkins’ endowment portfolio (which portion comprised approximately 50% of that portfolio), there could be “up to 10% of portfolio in other investments” providing higher current return than from investments such as high-grade bonds or mortgages, and/or the probability of capital gain. The statement explained that such investments could include convertible bonds, leasebacks, oil payments, and certain other properties. 43. In November, 1960, I. W. Iglehart, a Registered Representative of Hutton, had phone discussions with his father-in-law, Charles F. Garland, the President of Hopkins’ Board of Trustees, with regard to the disposition of Hopkins’ Finance Committee toward the production payment proposal. 44. On December 7, 1960, Naess, during a meeting between Trice and himself, contacted Baker to ascertain if Johns Hopkins had any then present interest in the $1,300,000 production payment and also whether LaPiere should appear before the Finance Committee on January 27, 1961. During this December 7, 1960, meeting Naess also learned that Trice would pay the cost of the University’s independent oil consultant. 45. At its December 23, 1960, meeting the Johns Hopkins University Finance Committee again discussed the production payment proposal and at that time learned that Trice Production Co. was willing to pay the cost of the University’s independent oil consultant. The Committee decided to discuss the production payment at its January 27, 1961 meeting at which Naess and a representative of W. E. Hutton & Co. were to be present. 46. By letter to Harriman of Naess & Thomas, dated January 4, 1961, LaPiere explained the nature of an oil payment of the type proposed to Hopkins; explained that the seller creates a payment from the properties in an amount equivalent to the financing the properties can support, in this case, $2,700,000; and stated that the amount that the properties can support is determined by independent engineers who had estimated the reserves and income on the properties. 47. By letter to Petroleum Consultants, Inc. dated January 5, 1961, LaPiere stated that W. E. Hutton & Co. and Trice Production Co. would like Petroleum Consultants, Inc. to make a study and to estimate future net oil and gas reserves and cash projections in connection with certain properties of Trice Production Co., and requested that work be started, if possible, on January 9, and that statements be sent to LaPiere at Hutton’s address. 48. Harriman, by letter dated January 10, 1961, requested that LaPiere answer certain questions raised by Baker on the production payment deal, and stated that he believed a memorandum to Harriman containing these answers would- make easier LaPiere’s visit to the Finance Committee meeting on January 27. 49. LaPiere then called Worth Mc-Cauley, General Counsel of Trice and conveyed these questions to McCauley and requested that McCauley write the answers to these questions in a letter to LaPiere. 50. By letter, dated January 12, 1961, Worth McCauley replied to LaPiere’s request in question-answer form. 51. By letter, dated January 16, 1961, LaPiere replied to Harriman’s January 10 request in question-answer form. 52. The question-answer portion of the LaPiere-to-Harriman letter of January 16 was identical to the McCauley-to-LaPiere January 12 correspondence, but for the additions noted below. Among other things, LaPiere stated that the buyer was purchasing a production payment of so many dollars payable out of oil to be produced and the then existing reservoir engineer studies of what said properties would produce (this statement was also contained in the McCauley letter) ; explained that the buyer would get returns in terms of net revenues from production as arrived at by the buyer’s independent reservoir engineers; and stated that the first estimates had been made by D & M and were then being checked by Chester Brown of Petroleum Consultants, Inc (see n. 14, question and answer 1; the McCauley letter to LaPiere included no mention of the earlier D & M estimates); that the only experts who had been engaged were D & M, who had made the original estimate, and Brown, who was presently checking such estimates (see n. 14, question and answer 3; the McCauley answer did not mention D & M); that Sherman, Sterling & Wright, counsel to W. E. Hutton & Co., had checked all titles and agreements to their satisfaction (see n. 14, question and answer 5; the McCauley answer did not include this reference to Sherman, Sterling & Wright). 53. The January 16 LaPiere-to-Harriman letter was forwarded by Harriman to Baker. 54. By letter dated January 24, 1961, Baker transmitted to members of the Finance Committee the LaPiere-to-Harriman January 16 letter, and the September 16 brochure, but the brochure was conveyed without the original cover page bearing the date September 16, 1960. 55. LaPiere attended that portion of the January 27, 1961, Johns Hopkins University Finance Committee meeting which related to the production payment. 56. At the January 27, 1961, Finance Committee meeting, Baker stated that based on D & M estimates of production Hopkins would receive during the first four years interest at 6% on funds invested and amortization of the principal in the total amount of about 3%; that during the next four years Hopkins would receive interest at 6% on the declining investment and return of the remainder of the principal of its original investment; that, in the next approximately ten years Hopkins would receive profits from 50% of the production from the wells until a total of $641,000 had been received; and that after the above approximately eighteen years Hopkins would receive 25% of the net profits from these properties during their remaining lifetimes; and that the total receipts, in addition to principal and interest at 6% thereon, were estimated to be $1,138,000. At this same meeting, LaPiere stated that the original D & M estimates with regard to the properties in question were now being checked by Brown of Petroleum Consultants who had been selected by Naess and whose fee would be paid by Trice Production Co. LaPiere further reported, among other things, that Brown’s study indicated that the University might produce a total return of $3,005,000 instead of the original D & M estimate of $2,905,000, and that the difference in connection with those figures was due to Brown’s estimate of $1,243,000 for the Residual Net Profits Interest — an increase of $100,000 over prior estimates for that interest; that Mr. Brown estimated interest and principal repayment in 6.6, rather than 8.8 years: that the proposed production payment properties included 17 oil wells and 6 gas wells, and that Hopkins would have a first lien on five of those 23 wells; that all estimates were based on then current prices for oil and gas; that at least 6% current interest was guaranteed to Hopkins, and that if production would not be sufficient to keep this current, other provisions would be made; and that other universities had substantial investments in oil payments, although not of this particular kind. 57. At its meeting of January 27, 1961, the Finance Committee of Johns Hopkins University approved the investment of ■ $1,300,000 in the Trice production payment and approved an appropriation of $3,000 for expenses related thereto. 58. At the end of January, 1961, Baker called Cooper of Venable, Baetjer & Howard, counsel to Hopkins, and requested him to look over certain papers regarding the production payment and to offer his comments to Baker. 59. Cooper wrote a memo to the Venable, Baetjer & Howard file on the production payment, dated January 27, 1961, in which he commented on different aspects of the production payment deal and noted certain risks involved therein, but he did not give this memo to Baker. 60. Cooper, after he prepared the memo, called Baker and stated, among other things, that Hopkins should obtain the reports of D & M, Schafer, and Brown, and that it would be helpful if Hopkins would obtain the documents which Bankers Trust had used in connection with its production payment purchase from Trice. 61. After another request from Cooper to get the experts’ reports, Baker, on February 6, 1961, telephoned LaPiere and requested that he send Baker the reports. 62. On or about February 2, 1961, LaPiere wrote to Cliff Trice that Johns Hopkins University had agreed to purchase the $1,300,000 production payment at the Finance Committee meeting on January 27, 1961; that Baker or his attorney would shortly contact Trice; and that Baker had instructed him that any questions which Trice might have should be directed to LaPiere at W. E. Hutton & Co. 63. Baker received from LaPiere a letter, dated February 3, 1961, in which LaPiere stated, among other things, a summary of the Petroleum Consultants, Inc. report which included a total future net revenue figure of $7,394,000 and a return to the holder of the $1,300,000 production payment of $3,005,000, and in which LaPiere compared those figures with those in the September 16, 1960, brochure and stated that he was gratified to know that the figures presented in what he referred to in this letter as his brochure of September 16, 1960, were conservative. 64. At a meeting in Baltimore on February 7, 1961, attended by Baker, Dandridge of Venable, Baetjer & Howard and for a time by Cooper, and also by Worth McCauley and Mitchell of Trice, Mitchell gave to Baker a brochure dated February 3, 1961, entitled “Data Pertinent to Johns Hopkins Production Payment.” 65. The February 3, 1961, brochure given by Mitchell to Baker stated, among other things, that some of the twenty-three wells included in the Johns Hopkins production payment had been evaluated by one consulting firm and some by another; that eight wells were evaluated by the engineering staff of Mercantile National Bank and explained the method by which the figures for the eight wells evaluated by Mercantile were calculated; stated that LaPiere had reviewed the technical data for each and every well and concluded that the reserves supporting this proposed production payment were conservative; and, that it was understood that Brown, as a result of his study, felt the reserves utilized in supporting the production payment were conservative. This brochure also showed the following list of net revenue figures and. consultants for each well: Net Rev. to Reserves based on Trice Prod. Co. Following Consultants Reserves Nunez A i#l $ 672,465 D&M Harry Jones #1 334,497 Schafer Woodworth #1 516,111 Schafer Swinney #1 104,674 Mercantile Dollar #1 15,085 D&M Dugger #1 196,676 D&M Tipps #1 304,377 Mercantile Weatherford !#1 91,469 D&M Windle #1 394,319 Mercantile Barham-Knox #1 40,219 D&M J. R. Clayton ;#2 36,062 Schafer Noland #2, #3, ¡#4 179,760 Schafer Younger i#l 32,833 Schafer Milne #1 220,981 D&M R. D. McDonald #1 2,041,979 D&M Bert Dennis ¡'#1 123,757 D&M Vera Roney #2 19,140 Mercantile Dumas #1 385,500 Mercantile Hughes #1 79,435 Mercantile Skiles #1 47,525 Mercantile Hester #1 723,136 Mercantile $6,560,000 66. At the February 10, 1961, meeting of the Johns Hopkins University Finance Committee, it was reported, among other things, that Hopkins, through Venable, Baetjer & Howard, had retained the law firm of Carrington, Johnson & Stephens of Dallas, Texas for certain work with regard to the production payment purchase; that reserves for each of the wells had been analyzed first by either D&M, Schafer, or the Mercantile engineering staff, second by LaPiere of Hutton, and third by Brown of Petroleum Consultants (selected by the University’s investment counsel to make a report); and that it was planned to have Naess make further investigations with Bankers Trust and to study the Brown report, and then make recommendations to the University. 67. By letter to Baker dated February 14, 1961, Naess stated that Mercantile National Bank in Dallas held Cliff Trice in high regard; that he had found the assumptions in the Brown report to be reasonable; that he had spoken with Ketcham and had learned that Trice came highly recommended; that Constable of Bankers had spent some time going over the D&M reports, but had not personally made independent estimates; that the number of leases underlying the Bankers loan was less in number than those underlying the Hopkins loan; that Naess had known Trice for quite a few years and held him in high regard; and, that considering everything, Hopkins should purchase the production payment. 68. LaPiere received a letter from Baker dated February 14, 1961, with enclosures. In that letter Baker stated that he was enclosing excerpts from the Hopkins Finance Committee meetings of October 14, 1960, December 23, 1960, January 27,1961, and February 10, 1961, having to do with Hopkins’ proposed production payment purchase through LaPiere. Also, in that letter, Baker asked LaPiere to let him know if there was anything in those excerpts which indicated a different understanding on Hopkins’ part than LaPiere and Trice Production Co. had in mind. 69. By letter dated February 24, 1961, LaPiere conveyed to Baker a balance sheet as of November 30, 1960, and explained the Trice financial picture, and also stated that Hopkins would look to the oil and gas reserves for its guarantee, for no matter who operated the properties, Hopkins’ call would be on the reserves. 70. At the February 24, 1961, meeting of the Johns Hopkins University Finance Committee, the Naess letter of February 14, 1961, recommending the purchase by Hopkins was read, mechanical details relating to expenses of the purchase were discussed, and the Treasurer (Baker) was authorized to make the investment which it was understood would be settled for by about March 1, 1961. 71. On March 1, 1961, the closing for the purchase by Johns Hopkins University of the $1,300,000 Trice production payment was held at the offices of Hopkins’ Texas counsel. The production payment agreement between Hopkins and Trice is included in the record in this case. 72. Hopkins’- Texas counsel, at about the time of settlement, received a letter from Trice Production Co. dated February 23, 1961, which stated, among other things, that Trice guaranteed 6% interest per annum on the unpaid monthly balance of $1,300,000 until the Oilco production payment would be liquidated and terminated; that Hopkins would be reimbursed for certain state income taxes and for the Dollar well, should it not go into production; and that that Trice undertaking was in consideration of Hopkins’ purchase of the production payment and net profit overriding royalty interests. 73. By letter to William Hutton of W. E. Hutton & Co. dated March 6, 1961, Cliff Trice stated his belief that Hutton had received Trice Production Co.’s $26,-000 check for commissions on the $1,300,-000 oil payment sale to Johns Hopkins University and expressed his appreciation to Hutton, W. E. Hutton & Co. and to LaPiere for helping Trice with its problems in converting short-term debt to long-term. 74. W. E. Hutton & Co. received a $26,000 check from Trice Production Co., dated March 7, 1961, and this check contained a description which stated that it was for a commission in connection with placement of Trice’s $1,300,000 production payment with Johns Hopkins University by LaPiere. 75. Hutton’s Customer’s Ledger, “Prepaid Expense Trice Oil Payment Syndicate #1” itemizes as follows expenses totalling $5,479.80 which Hutton subtracted from the gross commission of $26,000 in order to arrive at a net corn-mission of $20,520.20: Expenses incurred through Dec. 21, 1960 $1,933.31 1/24/61 Tel. Calls 126.72 1/26/61 Amer. Airlines 399.19 2/ 3/61 Hilton Credit 59.60 2/ 8/61 Tel. calls, Oil Dept. 229.79 2/14/61 G. LaPiere travel 16.70 2/21/61 ^ Pet. Cons. Inc. [$3429.00 3/ 8/61 I Minus Ck. Trice Prod. $1,714.50] 1,714.50 3/ 9/61 f Fee paid to I. D. (sic) Iglehart oil commission 1,000.00 $5,479.81 76. LaPiere was paid by Hutton 25% of the net from the $26,000 commission which Hutton received from Trice, so that after deductions for expenses, LaPiere received $5,130.05 in connection with the sale of the $1,300,000 production payment to Johns Hopkins University. 77. By letter to Pelley of Bankers Trust, with a copy to Ketcham, dated February 27, 1961, William Hutton stated that Hutton had been engaged through LaPiere in a refinancing program for Trice over the preceding four months; that in addition to the two prior production payments purchased by Bankers Trust, LaPiere had discussed a third deal involving approximately one million dollars, with Bankers; that Hutton was disappointed that Bankers did not wish to refinance the whole Trice picture; that Hutton continued to have confidence in Trice and would go forward in refinancing Trice; that it would be helpful to Hutton if Bankers would further consider the proposed one million dollar payment; and that Hutton would thus be allowed more time to direct its attention to-other institutions to assist it in the overall financing. 78. Bankers refused to participate in further Trice financing because of irregularities found by Constable of Bankers on a visit to Trice on or about March 2 or 3, 1961, and Ketcham and others from Bankers communicated this decision to William Hutton at a meeting on March 9, 1961, at which meeting they also expressed warnings to Hutton to treat the Trice Production Company situation and LaPiere with great care. 79. During the years 1956-1962, partners and relatives of partners of W. E. Hutton & Co. invested over $1,000,000 in Trice Production Co., oil drilling programs, and clients and customers of W. E. Hutton &' Co. invested over $2,000,000 in such programs. 80. After receiving a letter, dated March 28, 1961, from LaPiere requesting that he prepare a report for Trice and W. E. Hutton & Co. on certain wells with regard to a proposed new production payment, Brown prepared the report and billed Trice $6,865 for this work, half of which amount was paid by Hutton and half by Trice Production Co. 81. On April 11, 1961, Keusch and LaPiere of Hutton attended a meeting at which Trice presented to Bristol, financial advisor to Princeton University, a proposed production payment for sale to Princeton University, and at which meeting Bristol received a pamphlet, dated March 13, 1961, which described, among other things, Hutton’s prior assistance to Trice in the sale of three production payments and Hutton’s view of the advantages of a production payment investment. Princeton did not purchase this proposed production payment because of, among other reasons, an existing defect in Trice working capital. 82. Trice proposed a similar production payment to Guardian Life Insurance Co. and by letter to Trice dated May 31, 1961, LaPiere explained the delays in completing the proposed Princeton and Guardian purchases of payments and also a proposed University of Pennsylvania production payment purchase, as being caused by the necessity of taking time to indoctrinate financial officials of those institutions in the ways of oil payments. 83. In a letter to Trice dated June 15, 1961, LaPiere further explained Guardian’s delay in making a purchase by stating that it was necessary to educate Guardian on the principles of an oil payment which, as had been the case with Johns Hopkins University, would be a long tedious matter. Guardian ultimately did not purchase a Trice production payment. 84. LaPiere left the employ of W. E. Hutton & Co. in July, 1961. 85. After he left Hutton’s employ, LaPiere, by letter to Trice dated July 19, 1961, described Hopkins’ satisfaction at their payment purchase which “we” had presented. 86. By letter to McCauley dated April 12, 1961, Baker stated, among other things, that he understood Trice remittances to Hopkins were first to be credited to the interest due account, that the balance was to be applied to the principal account, and that Hopkins would at least receive the 6% interest payments. 87. By letter to Baker, dated April 19, 1961, McCauley confirmed Baker’s understanding stated in the Baker-toMcCauley letter of April 12, 1961. 88. In reply to a letter dated August 3, 1961, from Patterson of Hopkins, Thomas of Trice by letter dated August 14, 1961, presented a schedule which showed that interest owed by Trice to Hopkins was in arrears by over $4,000 through April 25, 1961; and that by June 26, 1961, when interest was no longer in arrears, $569.19 of the payments made to Hopkins had been applied to reduction of principal. 89. By letter to Patterson dated September 18, 1961, Thomas stated that insufficiencies in interest designated on a Trice schedule for April, May, June and August were due to the fact that several of the leases dedicated to the production payment had been underproduced due to a maritime strike, but that this underproduction would be made up in the future. 90. While Hopkins received slightly more than the $6,497.15 interest due to it for the period June 27, 1961, to July 26, 1961, it received almost $200 less than the $6,496.97 interest due it for the period July 27, 1961, to August 25, 1961. 91. With the exception of the period from November 27, 1961, to December 26, 1961 (when it did not receive more than $250 of the interest due it), Hopkins received between approximately $60 and $1500 more than the interest due it for each monthly period from August 26, 1961 to January 26, 1962. 92. As of December 31, 1961, Hopkins had not yet received any revenue from “Pone Gas Unit #1,” and from the Dollar well (which had been plugged and abandoned since April 1961), two of the wells covered by its $1,300,000 production payment. Of the wells covered by this payment, nine were either underproducing or not producing as of this time. 93. On January 15, 1962, Trice Production Co. began to negotiate directly with Hopkins for the sale of a second production payment in the amount of $1,000,000. 94. During these negotiations Hopkins and Naess became aware of certain insufficiencies, some substantial, in Trice payments on the Bankers Trust production payment, and that more wells in that payment had underproduced than overproduced as compared with the engineering estimates furnished to Bankers prior to purchase. Trice’s financial situation including the possibility of a Trice bankruptcy was also discussed. 95. Hopkins also became aware, during these negotiations, that the time of payment for both the Bankers and Hopkins production payments would be delayed six months beyond the time estimated