Billings v. Investment Trust of Boston

• Decision Date: 16 November 1962
• Docket Number: No. 16936.,16936.
• Citation: 309 F.2d 681
• Parties: John S. BILLINGS and Virginia T. Billings, Appellants, v. INVESTMENT TRUST OF BOSTON, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

309 F.2d 681 (1962)

John S. BILLINGS and Virginia T. Billings, Appellants, v. INVESTMENT TRUST OF BOSTON, Appellee.

No. 16936.

United States Court of Appeals Eighth Circuit.

November 16, 1962.

Robert V. Light, Little Rock, Ark., Thomas G. Meeker, Philadelphia, Pa., on the brief, for appellants.

Robert Shults, of Lester & Shults, and Wright, Lindsey, Jennings, Little Rock, Ark., for appellee.

Before SANBORN and BLACKMUN, Circuit Judges, and REGISTER, District Judge.

REGISTER, District Judge.

This is a diversity case. Jurisdictional prerequisites being present, it was removed by appellee from the Pulaski County Chancery Court of the State of Arkansas to the United States District Court. Pursuant to motion of appellee, the purported service of summons was quashed and the complaint was dismissed. This appeal follows.

The essential facts are brief. Appellants (plaintiffs) purchased shares in the defendant company (a Massachusetts corporation) in Atlanta, Georgia, in 1955, 1956 and 1957 through a local broker who retained custody of the certificates for the shares. The complaint in effect alleged that pursuant to stock transfer authorizations purportedly executed by plaintiffs, but which were in fact forgeries made without the knowledge, assent or authority of plaintiffs, the defendant caused said shares to be cancelled, and altered the corporate stock books accordingly. It was stipulated that such fraud practices, if so perpetrated, were perpetrated in 1958 in some state or states other than Arkansas and had no connection with Arkansas. Appellants moved to Arkansas during 1961 and were, at the time of the commencement of this action and of the trial, residents and citizens of Arkansas. In 1954 appellee filed a "Surety Bond" and a "Consent to Service" with the Arkansas State Bank Department for purpose of compliance with the Arkansas Securities Laws. The complaint does not allege any violation of such laws.

The sole question presented to and decided by the trial court was whether service could be obtained on the defendant pursuant to the Consent to Service.

The Consent to Service is as follows:

"Pursuant to resolution duly adopted at a (regular) meeting of its Trustees held on 1st day of February, 1954, at its office in Boston, Massachusetts, the Investment Trust of Boston, a Trust, hereby agrees that suits and actions may be commenced against it, for any cause arising out of sale, or offer of sale, by it, in the proper courts of any county in the State of Arkansas, in which a cause of action may arise or in which the plaintiff may reside, by the service of any process or pleading which is authorized by the laws of the State of Arkansas, on the State Bank Commissioner of Arkansas, said service of process in such cases to be as valid and binding as if due service of process had been made personally on the proper officers of this Trust.

"Nothing herein contained shall subject said trust to the jurisdiction of the State of Arkansas, otherwise than herein expressly agreed, and nothing herein shall deprive said trust of the right which it may have to remove any suit to the Federal Court.

"Witness the Trust signature and seal of said trust by its duly authorized officers, this 14th day of April, 1954.

"Investment Trust of Boston By /s/ Robert L. Moore President"

Following hearing on the aforementioned motion, and subsequent dismissal of the action, Judge Gordon E. Young, in a memorandum letter opinion, set out his reasoning for the action taken. The body of said letter opinion is as follows:

"In 1947 the Arkansas Legislature enacted a comprehensive act for the regulation of the sale of securities in the State of Arkansas called `The Arkansas Securities Act\', Ark.Stats. 67-1201, 67-1234. Its purpose obviously was to protect the public from the unlawful sale of securities in the State of Arkansas.

"One section of the Act, 67-1209, provides that any seller of securities covered by the Act, before receiving approval of its application to sell within the State, should file with the application `the irrevocable written consent of the issuer applying for such registration that in suits, proceedings and actions growing out of the violations of any provisions of (certain sections of the Act) the service on the Commissioner of any notice, process or pleading therein authorized by the laws of this State shall be as valid and binding as if due service had been made on the issuer.\'

"The consent to service filed with the Arkansas State Bank Commissioner as a prerequisite to the sale of shares of the plaintiff (sic) in Arkansas was filed pursuant to this section.

"It is undisputed that the shares involved in this lawsuit were purchased by the plaintiffs from a dealer in Georgia in 1955, 1956 and 1957, when the plaintiffs resided in Georgia. The alleged forgeries by third parties all occurred in Georgia during the year 1958 while plaintiffs were still residing in Georgia. After these transactions the plaintiffs moved to Arkansas.

"It is clear that no violation of the Arkansas Security Laws is in any way involved under the allegations of the complaint.

"I have no doubt in my mind that the purpose of this statute was to protect the public from sales arising in or related to the State of Arkansas, and the limited consent to service filed in accordance with the Act was restricted to those purposes. Certainly it should not be extended so as to permit suits in Arkansas arising out of transactions occurring anywhere in the United States with no relation to the State of Arkansas.

"In 1959 the Arkansas Legislature passed a new and more comprehensive `Securities Act\' covering the same regulatory field.

"In this new Act, the section on `Consent to Service of Process on Commissioner\', 67-1260(a) applies to persons who sell or offer to sell when:

"(1) An offer to sell is made in this state, or

"(2) An offer to buy is made and accepted in this State.

"I think it should also be noted that the repealing clause of the 1959 Act, Section 29 of Acts 1959, No. 254, provides that no civil suit may be maintained to enforce any liability under prior law unless brought within any period of limitation which applied when the cause of action accrued, and in any event within two years after the effective date of this Act.

"The effective date of the 1959 Act was July 1, 1959. This action was instituted in the Chancery Court of Pulaski County, Arkansas, on August 2, 1961, more than two years later.

"In accordance with these views, I have sustained the motion of the defendant to quash the service of summons issued out of the Chancery Court of Pulaski County, Arkansas, and have dismissed the complaint.

"This memorandum letter opinion shall be filed as part of the record in this case."

Appellants concede that the language of the statute is not broad enough to reach the subject matter of this suit. However, they contend that the Consent to Service here involved was the voluntary act of the appellee, that its scope should be measured by a reasonable interpretation of its plain language and without reference to extrinsic sources wherein additional limitations might be found, that the Consent itself is the proper measure as to its amenability to suit in Arkansas, and that the plain language of such Consent embraces or extends to the subject matter of this action.

The issue involved (i. e. the scope of such Consent) is a matter of Arkansas law. Charles Keeshin, Inc. v. Gordon Johnson Co., D.C., 109 F.Supp. 939, 942; Restatement, Conflict of Laws, Sec. 589. As such issue has not been decided by the Supreme Court of Arkansas, it was the trial court's function to determine what that Court would probably rule in a similar case. King v. Order of United Commercial Travelers of America, 333 U. S. 153, 161, 68 S.Ct. 488, 92 L.Ed. 608.

That "A foreign corporation, not within the purview of any state statute, may voluntarily submit to the jurisdiction of the courts of the state" (Flour City Ornamental I. Co. v. General Bronze Corp., D.C.Minn., 21 F.Supp. 112, 116) is so well established as to be beyond effective challenge. Neirbo Company et al. v. Bethlehem Shipbuilding Corporation, Ltd., 308 U.S. 165, 175, 60 S.Ct. 153, 84 L.Ed. 167; Davis v. Smith, 3 Cir., 253 F.2d 286, 289.

By the specific terms of the Consent to Service, appellee agreed that "suits and actions may be commenced against it, for any cause arising out of sale, or offer of sale, by it. * * *" Appellants argue that "arising out of" should be interpreted to mean "having any...