First City Bank, N.A. v. Air Capitol Aircraft Sales, Inc.

Decision Date19 June 1987
Docket NumberNo. 85-2410,85-2410
Citation820 F.2d 1127
Parties, 3 UCC Rep.Serv.2d 1845 FIRST CITY BANK, N.A., a National Banking Association, Plaintiff-Appellee, v. AIR CAPITOL AIRCRAFT SALES, INC., a Kansas corporation, and Gary R. Morgan, an individual, Defendants-Appellants.
CourtU.S. Court of Appeals — Tenth Circuit

John P. Roberts, Edwards, Roberts & Propester, Oklahoma City, Okl. (David L. Crutchfield, with him on the brief), for plaintiff-appellee.

Dianne L. Smith, Tulsa, Okl., and Frank C. McMaster, Wichita, Kan. (Benjamin P. Abney, Tulsa, Okl., on the briefs), for defendants-appellants.

Before ANDERSON, TACHA and TIMBERS *, Circuit Judges.

TIMBERS, Circuit Judge.

Appellants Air Capitol Aircraft Sales, Inc., ("Air Sales") and Gary R. Morgan ("Morgan"), collectively "appellants", appeal from a judgment entered June 17, 1985 in the Western District of Oklahoma, Lee R. West, District Judge, which, after a jury trial, awarded appellee First City Bank, N.A., ("the bank") $800,000 on its claim in a diversity action for breach of a guaranty agreement. The appeal also brings up for review the dispositions by the district court of certain pre-trial and post-trial motions.

On appeal, appellants claim, first, that the district court erred in denying their motion to dismiss for lack of personal jurisdiction; second, that the court abused its discretion in denying them leave to amend their answer in certain respects; and, third, that the court erred in not instructing the jury on impairment of collateral. Appellants also assert a multitude of other claims on appeal, all of which are patently frivolous, and none of which merits discussion.

We hold, first, that the court properly denied appellant's motion to dismiss for lack of personal jurisdiction; second, that the court did not abuse its discretion in denying appellants leave to amend their answer; and, third, that the court correctly refused to instruct the jury on impairment of collateral.

We affirm.

I.

We summarize only those facts believed necessary to an understanding of the issues raised on appeal.

The bank is a national banking association with its principal place of business in Oklahoma City, Oklahoma. Morgan is a citizen of Kansas. Air Sales is a Kansas corporation and has its principal place of business in Kansas.

Sometime prior to February 1983, Air Sales purchased a Lockheed Jet Star Aircraft ("the plane") through financing by the Farmers State Bank in St. Joseph, Missouri. 1 1] In February 1983, appellants began negotiations to sell the plane to Air Capitol Aircraft Leasing, Inc., ("Air Leasing") so that Air Leasing could lease the plane to InAir Airlines ("InAir"), a Panamanian corporation. Air Leasing is an Oklahoma corporation with its principal place of business in Oklahoma City. The negotiations were conducted with Ricardo Bilonick and Robert Castano, who are principals of InAir.

InAir and Air Leasing needed financing for the transaction. Morgan telephoned a representative of the bank--B.F. "Smokey" Davidson--in order to arrange the financing. As part of the financing ultimately obtained, Morgan--individually and as representative of Air Sales--executed the continuing and unconditional guaranty agreement at issue in the instant case. That agreement was dated March 1, 1983 and was executed in Florida. It guaranteed the unlimited indebtedness of Air Leasing.

On March 9, 1983, Air Leasing borrowed $1,250,000 from the bank. Of that amount, $1,038,000.48 was wired to the Farmers State Bank to satisfy the loan it had made to Air Sales for the original purchase of the plane. The balance was deposited in Air Leasing's account at the bank. Air Leasing signed a promissory note to the bank for $1,250,000, which appellants guaranteed by virtue of the guaranty agreement.

Air Leasing stopped making payments on the promissory note when the United States Customs Service impounded the plane for carrying cocaine. After unsuccessful efforts to obtain payment, the bank commenced the instant action on March 28, 1984. The bank took possession of the plane on the same day. On April 2, 1984, a registered process server served Morgan by delivering a summons and a copy of the complaint to his stepson, Mitch Lousch, at Morgan's home in Wichita, Kansas. Aircraft Sales was served on April 4 at its corporate offices.

On April 18, 1984, appellants moved for an extension of time until May 1 in which to answer or otherwise plead. The motion was granted by an order entered April 19, 1984. Appellants filed no answer or other pleading by May 1. On May 8, the bank filed an application for entry of a default judgment. The clerk of the district court entered such a judgment against appellants.

Appellants filed a motion to set aside the default judgment on May 15, 1984. In an order entered June 5, 1984, the district court found under Fed.R.Civ.P. 55(c) that the default judgment had been entered improperly and granted appellants 15 days in which to seek relief pursuant to Fed.R.Civ.P. 60(b). Appellants filed a Rule 60(b) motion on June 15, 1984.

On July 10, 1984, appellants each filed a "Proposed Answer" together with a brief in support of their Rule 60(b) motion. By an order entered July 19, 1984, the court granted the Rule 60(b) motion. The court stated that "[t]he two Proposed Answers submitted in this action by the Defendants will be considered as Defendants' Answers and the issues will be considered by the Court as joined."

The bank completed discovery by August 24, 1984. Appellants conducted no discovery. On November 13, 1984, appellants each filed motions to amend their answers by adding affirmative defenses, a counterclaim against the bank, and certain third party defendants. On November 30, appellants filed a motion to dismiss the complaint for lack of personal jurisdiction.

By order entered February 7, 1985, the district court denied appellants' motion to dismiss, finding that both appellants had sufficient minimum contacts with Oklahoma.

On March 4, 1985, the court denied appellants' motions to amend their answers. The court stated that it had "reviewed the chronology of events in this lawsuit and has examined the defendants' latest submissions. In so doing the Court finds that the defendants' requests are untimely and that this matter will proceed to trial on the issues as presented by the pleadings on file." Trial was set for June 10.

On April 30, 1985, appellants requested a 30 day extension of time within which to complete discovery and file motions. The court granted appellants 15 days by an order entered May 6, 1985. On May 31, well beyond the 15 day extension granted by the court, appellants filed an application to take "trial" depositions of two individuals--one in Florida, the other in Panama--on June 5 and 6. By an order entered June 3, the court denied the application. It observed that the application had been made after the discovery deadline and just shortly before the scheduled trial date. The court stated that appellants had neither cited any authority nor advanced any reason for granting the application so late in the proceeding.

Trial took place during the period June 10-14, 1985. The jury found for appellee in the amount of $800,000. Judgment was entered on the jury verdict on June 17, 1985. After numerous post-trial motions and rulings, appellants took the instant appeal on September 10, 1985.

For the reasons set forth below, we affirm the judgment of the district court.

II.
A.

Appellants assert two claims regarding personal jurisdiction. First, they claim that they had insufficient contacts with the State of Oklahoma to confer the court with jurisdiction over them. Second, Morgan claims that service on him was defective.

1. Minimum Contacts

"Whether a federal court has personal jurisdiction over a nonresident defendant in a diversity action is determined by the law of the forum state." Yarbrough v. Elmer Bunker & Associates, 669 F.2d 614, 616 (10th Cir.1982). When the bank commenced the instant action, Oklahoma's long arm statutes, Okla.Stat.Ann. tit. 12, Sec. 187 (West Supp.1987) and Sec. 1701.01 (West 1980), provided that a plaintiff's cause of action against a nonresident defendant must arise out of the same acts which provide the basis for the court's exercise of in personam jurisdiction. Luckett v. Bethlehem Steel Corp., 618 F.2d 1373, 1386-87 (10th Cir.1980). When appellants filed their motion to dismiss for lack of personal jurisdiction, however, a new long arm statute was in effect. That statute provides in relevant part:

"A court of this state may exercise jurisdiction on any basis consistent with the constitution of this state and the Constitution of the United States."

Okla. Stat. tit. 12, Sec. 2004 F (1984).

In addressing appellants' claim of insufficient contacts, the district court applied Sec. 2004 F. The bank argues that the court's application of that statute was proper. We agree. Under Oklahoma law, a statute that merely alters a remedy or procedure for enforcing a legal right applies retroactively and is applicable fully to actions pending at the time of the statute's enactment. E.g., Gray v. Gray, 459 P.2d 181, 186 (Okla.1969); Oklahoma Water Resources Board v. Central Oklahoma Master Conservancy District, 464 P.2d 748, 756 (Okla.1968). Oklahoma courts deem jurisdictional statutes to be procedural and therefore are applied retroactively. See Shelby-Downard Asphalt Co. v. Enyart, 67 Okla. 237, 170 P. 708 (Okla.1918); Magers v. Magers, 645 P.2d 1039, 1040-41 (Okla.Ct.App.1978); see also Hallowell v. Commons, 239 U.S. 506 (1916) (statute vesting Secretary of Interior with jurisdiction over controversies surrounding Indian heirship held to be applicable retroactively). Since Sec. 2004 F is a jurisdictional statute, Oklahoma courts would apply it retroactively. The statute became effective November 1, 1984. 4 Okla.Sess.Laws, Ch. 164, Sec. 34 (1984). Appellants filed their motion to dismiss o...

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