Bluff Creek Oil Company v. Green, 17056.

• Decision Date: 26 June 1958
• Docket Number: No. 17056.,17056.
• Citation: 257 F.2d 83
• Parties: BLUFF CREEK OIL COMPANY and Wabash Oil Company, Appellants, v. Harold J. GREEN, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

257 F.2d 83 (1958)

BLUFF CREEK OIL COMPANY and Wabash Oil Company, Appellants, v. Harold J. GREEN, Appellee.

No. 17056.

United States Court of Appeals Fifth Circuit.

June 26, 1958.

Leon Shipp, Oklahoma City, Okl., J. W. Hassell, Jr., Dallas, Tex., Robinson, Shipp, Robertson & Barnes, Oklahoma City, Okl., for appellants.

Charles O. Shields, Dallas, Tex., for appellee.

Before TUTTLE, BROWN and WISDOM, Circuit Judges.

JOHN R. BROWN, Circuit Judge.

In testing whether the summary judgment entered in behalf of an Illinois judgment creditor with an ancillary Illinois order of garnishment was correct, the real issue is the validity of the Illinois judgment entered after default by the nonresident defendants who were purportedly served with process in accordance with the Illinois statutory procedure.

The case comes to us via an interpleader filed by an oil purchasing company under 28 U.S.C.A. §§ 1335, 1397, and 1361 seeking to determine to whom Texas oil run payments, deposited by it as a stakeholder in the registry of the Federal Court, should be paid. Only that portion of the final interpleader judgment below as adjudged specified amounts to Green, the Illinois judgment creditor, rather than to Bluff Creek Oil Company and Wabash Oil Company, two of the three Illinois judgment defendant debtors, is before us. The sole attack is on the ground that the Illinois default judgment was void for want of jurisdiction over the person of the non-resident defendants. That in turn involves the validity of the Illinois statute as retroactively applied and the nature and sufficiency of the activities in Illinois of the nonresident defendants to give contact with Illinois.

Underlying this complex litigation which has percolated to us in a simplified form is the old, old story. Green, an Illinois lawyer, importuned in 1951, so he says, by R. H. (Bob) Rucker, an Oklahoma oil man, the president of Wabash, the general factotum and manager of Bluff Creek, father of its vice president, the initial lessee in several of the interests sold to Green, bought a fractional part of the working interest in five Texas leases which were owned by Bob Rucker or Wabash. At the time of the purchase, Rucker represented to Green that the wells were commercially productive at a specified rate, would make substantial profits and return his investment within two years. Green also claims that Rucker represented that while the properties were under an existing operating agreement between the mineral lessees and "his corporation," Bluff Creek, covering operation and development of the properties, there was then, and would thereafter be, no service charge made by Bluff Creek, and operating expenses were fixed at approximately one-fourth of the value of current production. As the frequent sequel, it did not turn out that way, resulting, so Green says, to his damage in the amount of $17,000 which he had paid for these working interests.

This was the burden of Green's suit filed in the Illinois State Court November 14, 1956, against R. H. Rucker, Wabash and Bluff Creek. Acting pursuant to those provisions¹ of the Illinois Civil Practice Act enacted in 1953 and amended 1955, process was issued and was thereafter served personally on R. H. Rucker individually and on behalf of the two corporations, at the offices in Oklahoma City where the business of Rucker and these affiliated corporations was generally conducted.

As the question of the construction and validity of the Illinois statute is common to both defendants, we dispose of it before discussing the factual distinctions between the two. Actually the interpretation of the statute insofar as its retroactivity is concerned is not open to us. As this is just another diversity suit, Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 commits us to what authoritative Illinois decisions have said. Whether for good or bad, Illinois has ruled precisely that as a matter of statutory interpretation this Act has retroactive application. Nelson v. Miller, 11 Ill.2d 378, 143 N.E.2d 673.

Of course, that Illinois holding, decisive as it is on construction, still leaves for us the genuine Federal question whether either its retroactivity or applicability to nonresidents served outside the state violated the National Constitution. On neither point, in our judgment, is the Act imperiled. Indeed, both seem to be authoritatively answered by McGee v. International Life Insurance Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed. 223. On retroactivity and the analogous problem of impairment of contracts, the Court emphasized about the California statute there involved what the Illinois Court stressed concerning this one in Nelson that the service of process statute did not add to or create new liabilities which were then sought to be retrospectively asserted. What the process law does is merely provide for the effectual assertion of that right, a means of doing so through local courts. As a remedial, procedural statute, it could constitutionally apply to supply effective machinery for the assertion of existing substantive rights which, of course, on Green's Illinois State Court complaint came into being as a result of the transactions in 1951. Funkhouser v. J. B. Preston Co., 290 U.S. 163, 54 S.Ct. 134, 78 L.Ed. 243; National Surety Co. v. Architectural Decorating Co., 226 U.S. 276, 33 S.Ct. 17, 57 L.Ed. 221. Moreover Illinois, concerned as it is with a construction which claims the full reach open under the Federal Constitution, is aware of the vital distinction and has itself stricken down retroactive laws which create new substantive rights or impose new liabilities. Theodosis v. Keeshin Motor Express Company, Inc., 341 Ill.App. 8, 92 N.E.2d 794.

Similarly, the Court in McGee held that if the transaction was one which had a substantial connection with a state and effective means was provided in the statute for actual notice and ample opportunity to appear and defend,² it was not a violation of due process to afford local citizens a local forum for redress of local wrongs or rights. This was, the Court asserted, the lesson taught, for "Looking back over this long history of litigation a trend is clearly discernible toward expanding the permissible scope of state jurisdiction over foreign corporations and other nonresidents." McGee v. International Life Insurance Co., supra, 355 U.S. at page 222, 78 S.Ct. at page 201, 2 L.Ed.2d at page 226.

Of course this latter point requires that there be some connection with the State of Illinois to invest it with the power to make service of its process effective against outsiders. Sunday v. Donovan, 16 Ill.App.2d 116, 147 N.E.2d 401; Haas v. Fancher Furniture Co., D.C.Ill., 156 F.Supp. 564; Orton v. Woods Oil & Gas Co., 7 Cir., 249 F.2d 198; Nelson v. Miller, supra. We find no difficulty on that score so far as the nature of these transactions is concerned and the participation in them by Wabash. Our reservation on Bluff Creek arises entirety because that was a factual dispute not resolvable by summary judgment.

By request for Admissions and a pretrial deposition of Rucker, it was uncontradicted that all of the negotiations with Green in 1951 had taken place in Chicago over a period of a considerable number of days. The agreement was there made, Rucker returned to Oklahoma where the papers were prepared after which they were returned to Chicago for final execution and delivery there. What was sold and conveyed by these transactions was a fractional part of the working interest which Rucker individually or Wabash owned in the properties. Obviously Rucker was authoritatively dealing for himself, and it is equally plain that he was, and was acting as, the president of Wabash and on its behalf in the Chicago transactions. He could bind it by the contracts there negotiated and made and could, at the same time, commit torts in Illinois by making the representations which the default decree, if valid, established. The moving papers reflected that there was no genuine, real, actual issue of fact on this, and summary judgment was therefore right as a means of disposing of it without a costly, prolonged trial. Cf. Millet v. Godchaux Sugars, Inc., 5 Cir., 241 F.2d 264; Carss v. Outboard Marine Corp., 5 Cir., 252 F.2d 690, 1958 A.M.C. 638.

But this was not the case with respect to Bluff Creek. Court and counsel seem to have become so preoccupied with the question of agency of Rucker to act for and on behalf of, or receive service³ for, Bluff Creek, that the crucial point escaped all.

The serious question was not whether Rucker was agent for Bluff Creek. Indeed, this was no question at all for the Requests for Admission, showing factually that he was, had been, and still was the general manager of Bluff Creek in the active management and handling of its affairs, and not a single act of his in all of his manifold dealings had ever been questioned or repudiated by the corporation, made his belated formal denial of authority a pure afterthought and a pretended dispute which was ineffectual. Bruce Construction Corp. v. United States, 5 Cir., 242 F.2d 873.

What was the issue was whether, in fact, Rucker with his collapsible,...