Milligan v. Anderson

• Decision Date: 24 September 1975
• Docket Number: No. 74-1558,74-1558
• Parties: James H. MILLIGAN, et al., Plaintiffs-Appellants, v. Robert C. ANDERSON, an Individual, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1202

522 F.2d 1202

James H. MILLIGAN, et al., Plaintiffs-Appellants, v. Robert C. ANDERSON, an Individual, et al., Defendants-Appellees.

No. 74-1558.

United States Court of Appeals Tenth Circuit.

Argued May 19, 1975.

Decided Sept. 24, 1975.

James A. Kirk, Oklahoma City, Okl. (Linn, Helms & Kirk, Oklahoma City, Okl., on the brief), for plaintiffs-appellants.

Joel L. Wohlgemuth, Tulsa, Okl. (Rizley, Prichard, Ford, Norman & Reed, Tulsa, Okl., on the brief), for defendants-appellees William Ross Cabeen and Cabeen Exploration Corp.

Before LEWIS, Chief Judge, and McWILLIAMS and DOYLE, Circuit Judges.

McWILLIAMS, Circuit Judge.

The issue here to be resolved is whether the trial court erred in dismissing a diversity action for want of jurisdiction. James Milligan, Gene McGill and Frank Oller, all citizens of the State of Oklahoma, brought an action in the United States District Court for the Western District of Oklahoma against Robert Anderson, William Ross Cabeen, and the Cabeen Exploration Corporation, a corporation. William Ross Cabeen and Cabeen Exploration Corporation will hereinafter be referred to as Cabeen. The three defendants were alleged to be citizens of California and jurisdiction was based on 28 U.S.C. § 1332.

The gist of the complaint was that Anderson, acting as an agent for Cabeen, had made false and fraudulent representations to the three plaintiffs and that in reliance upon such misrepresentations the plaintiffs entered into certain oral contracts with the defendants in Oklahoma City, Oklahoma. The oral contracts thus entered into concerned the development of oil and gas interests in South America. Based on such oral contracts the plaintiffs, according to the complaint, delivered in Oklahoma City certain sums of money to the defendants, in return for which the plaintiffs were to receive a percentage interest in the oil and gas interests being thus developed.

The complaint went on to allege that written contracts were later furnished the plaintiffs by the defendants, but that the written contracts were totally dissimilar to the oral agreement between the parties. By way of relief the plaintiffs sought judicial rescission of the oral agreement between the parties, as well as a judgment for the monies paid to the defendants.

The one defendant, Robert Anderson, made a "Special Appearance and Plea of No Jurisdiction" and attached thereto his affidavit wherein he stated that, contrary to the allegations in the complaint, he was a citizen of Oklahoma, and not a citizen of California. The plaintiffs were apparently convinced that Anderson was in fact a citizen of Oklahoma. In any event, the plaintiffs then filed a motion to drop Anderson as a party defendant on the grounds that his presence in the proceeding was not required by Fed.R.Civ.P. 19. The trial court, without waiting for a response, granted the motion to drop Anderson from the proceedings. Thereupon Cabeen filed a motion to vacate the order dropping Anderson from the case, alleging that under Rule 19 Anderson was an indispensable party. Cabeen also filed a motion to dismiss on the grounds that if the order dropping Anderson from the case be vacated, then there was a lack of complete diversity between all of the plaintiffs and all of the defendants, in which event there was a lack of subject matter jurisdiction under 28 U.S.C. § 1332. Additionally, Cabeen moved to dismiss on the ground that in dealing with the plaintiffs in Oklahoma, Anderson was not acting as his agent, and that accordingly the trial court lacked in personam jurisdiction over Cabeen.

In ruling on these several motions the trial court had before it the affidavits of Anderson and Cabeen, and the rather lengthy depositions of all three plaintiffs, as well as a deposition of Anderson. Based thereon the trial court concluded that Anderson was an indispensable party and accordingly vacated its earlier order dropping Anderson from the case. The trial court then granted the motion to dismiss filed by Cabeen on the ground that with Anderson back in the case there was not a complete diversity of parties, thereby defeating jurisdiction under 28 U.S.C. § 1332. Additionally, the trial court concluded that it did not have in personam jurisdiction over Cabeen, presumably on the basis that Anderson was not acting as an agent for Cabeen, and sustained the motion to dismiss on this additional ground. The three plaintiffs now appeal the dismissal of their action. We shall first consider the question as to whether under Rule 19 Anderson is to be deemed an indispensable party.

In our view of the matter Anderson is not an indispensable party. Under the circumstances disclosed in the record before us he may well be a proper party, and perhaps a necessary or desirable party, but not an indispensable party. Indispensable parties are those without whom the action cannot proceed, and must be joined even if by such joinder the court loses jurisdiction over the controversy. 2 Barron & Holtzoff, Federal Practice & Procedure 85, 86 (Revised ed. 1961). This court in Skelly Oil Co. v. Wickham,202 F.2d 442 (10th Cir. 1953), defined "indispensable party" in the following language:

An indispensable party is one who has such an interest in the subject matter of the controversy that a final decree cannot be rendered as between other claimants, of interest in the subject matter, who are parties to the action, without radically and injuriously affecting his interest and without leaving the controversy in such a situation that its final determination may be inconsistent with equity and good conscience.

While the quoted language applies to "indispensability" as it was defined prior to the 1966 amendment to Rule 19, it nevertheless comports with recent definitions of the term. The 1966 amendment to Rule 19 was not intended as a change in principles, and instead the amendment simply sought to eliminate a degree of confusion which had previously surrounded the rule. Provident Bank v. Patterson, 390 U.S. 102, 88 S.Ct. 733, 19 L.Ed.2d 936 (1968). See also C. Wright, Law of Federal Courts 299-301 (2d ed. 1970).

Proceeding to a consideration of whether an agent is generally an indispensable party in an action against his principal, we note that in Fry v. Penn. Mut. Life Ins. Co., 159 P.2d 550 (Okl.1945) the Oklahoma Supreme Court held that an agent acting for a disclosed principal is not even a necessary or proper party in an action brought to require specific performance. In Townsend v. Walter Kidde & Co., 7 F.R.D. 166 (D.C.Mass.1945), the plaintiff sued the defendant as an allegedly undisclosed principal, in which circumstance the court held that the agent of such undisclosed principal was not an indispensable party. See also Cass v. Sonnenblick-Goldman Corp., 287 F.Supp. 815 (E.D.Pa.1968), where it was held that even though a principal and his agent are both involved in allegedly wrongful acts, they both are not necessarily indispensable parties to an action arising out of those acts. Accordingly the court in Cass dismissed the agent, who along with his principal was a named defendant, on the ground that the agent was not an indispensable party.

Under the authorities above cited we conclude that Anderson is not an indispensable party. The plaintiffs seek to rescind oral contracts which they entered into with Cabeen, who was allegedly acting through his agent, Anderson. So, under plaintiffs' theory of the case, the contract they seek to rescind is with Cabeen, and not Anderson. Hence, Anderson had no personal interest, as such, in the contract which he negotiated for Cabeen. Additionally, the plaintiffs seek return of the monies which they gave Anderson, who in turn delivered the checks in question to Cabeen. Incidentally, the checks in question were all made out to Cabeen, and he cashed the checks and received the proceeds therefrom. Under these circumstances the trial court can accord complete relief as between the plaintiffs and Cabeen, and the other factors mentioned in Fed.R.Civ.P. 19 do not in our view dictate a finding that Anderson is an indispensable party. The fact that Cabeen paid Anderson a finder's fee out of certain monies he received from the one plaintiff, Milligan, does not alter the situation. That is a matter strictly between Cabeen and Anderson. In such circumstances the trial court erred in vacating its earlier order dropping Anderson from the case, and its dismissal of the action against Cabeen cannot be upheld on the ground that there is not a complete diversity of parties. There is a complete diversity of the indispensable parties.

The trial court also based its dismissal of the action as concerns Cabeen on the additional ground that he was not subject to service of process under the Oklahoma long arm statute. This holding was presumably based in turn on the premise that in his various dealings with the plaintiffs in the State of Oklahoma Anderson was not acting as an agent for Cabeen, although the trial court admittedly made no specific mention of this particular matter. In any event, our study of the record convinces us that the plaintiffs did establish, at least prima facie, that in his dealings with the several plaintiffs Anderson was...