Doyn Aircraft, Inc. v. Wylie

• Decision Date: 04 June 1971
• Docket Number: No. 228-70.,228-70.
• Citation: 443 F.2d 579
• Parties: DOYN AIRCRAFT, INC., a corporation, Plaintiff-Appellee, v. James C. WYLIE and Atlas Aviation Sales, Inc., a corporation, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

443 F.2d 579 (1971)

DOYN AIRCRAFT, INC., a corporation, Plaintiff-Appellee, v. James C. WYLIE and Atlas Aviation Sales, Inc., a corporation, Defendant-Appellant.

No. 228-70.

United States Court of Appeals Tenth Circuit.

June 4, 1971.

Donald L. Martin, Houston, Tex., for defendant-appellant.

Gerald L. Michaud, Wichita, Kan. (Bradley Post, Wichita, Kan., on the brief), for plaintiff-appellee.

Before BREITENSTEIN and HILL, Circuit Judges, and LANGLEY, District Judge.

HILL, Circuit Judge.

Doyn Aircraft brought suit against Wylie to recover for breach of contract, fraud, and for conversion of seventeen Supplemental Type Certificates (STC's).¹ After trial to the court without a jury, judgment was entered in Doyn Aircraft's favor awarding $32,000 for breach of contract, $3,000 for expenses in securing new STC's, and $15,000 as reasonable attorney's fees. The sum of $6,043.77 due and owing from Doyn Aircraft to Wylie was offset against the judgment, making the net recovery $43,596.23. Wylie appeals.

Doyn Aircraft is a Kansas corporation with its principal place of business in Wichita; Wylie is a Texas citizen. In August, 1965, Wylie visited Means, the president of Doyn Aircraft, in Wichita to investigate the possibility of becoming a distributor for airplane conversion kits manufactured by Doyn Aircraft under the authority of the seventeen STC's. It was known from the outset that Doyn Aircraft was in financial difficulties, and that financing would be needed to pursue the proposed venture. Negotiations continued between the parties until October 16, 1965, when Means traveled to Houston and executed a distributorship contract.

Wylie signed the agreement as trustee for a corporation that would be Doyn Aircraft's exclusive distributor. The distributor was to purchase a minimum of eight conversion units per month, commencing January 1, 1966. Upon thirty days' notice either party could terminate the contract for designated reasons, and if a dispute arose over the meaning of the contract terms, Texas law would govern.

To provide financing for the venture, Means simultaneously executed a promissory note in the principal sum of $28,000 to the order of Wylie. Appellant then gave Means a $22,460 check which represented the cash proceeds of the note. After Means left for Kansas, Wylie became unsure of the agreement and stopped payment on the check. After more fully investigating the financial and legal status of Doyn Aircraft, Wylie met with the other parties in Wichita on November 4 and 5, 1965, in an attempt to iron out the difficulties and reconstruct the details of the venture.

The precise details as to what occurred with regard to the distributorship contract are clouded by faulty and conflicting memories. Wylie and his lawyer have no recollection that a new contract was negotiated nor that the "Houston contract" was altered. The Doyn Aircraft witnesses recall that the "Houston contract" was retyped with changes made, resulting in a new contract. There seems to be no dispute that Wylie agreed to send Means a $25,000 check, less the $6,043.77 debt, once he returned to Houston; that the STC's were transferred to Wylie as security for the loan; that an option to repurchase was executed; and that Wylie agreed that after he returned to Houston, he would execute an exclusive use agreement to allow Doyn Aircraft to continue manufacturing the conversion units. Immediately following the meetings, Wylie caused the STC's to be registered in his name.

Once Wylie returned to Houston with the STC's in his name, he refused to send Means the check, he refused to execute the exclusive use agreement, he refused to return the STC's which he held only as security for the loan he refused to negotiate and kept them instead as security for the $6,043.77 debt; he refused to place any orders with Doyn Aircraft, and he formed Atlas Aviation Sales, Inc., the anticipated corporation, and allowed that entity to manufacture the conversion kits under the authority of the seventeen STC's. Means attempted to halt Wylie's unauthorized use of the STC's but was unsuccessful. Eventually Means was successful in getting other STC's from the FAA to permit Doyn Aircraft to continue manufacturing the conversion kits.

This action was originally instituted in the Kansas state courts but was removed to federal court by Wylie. From the outset, and on appeal, appellant has maintained that the federal court in Kansas is without subject matter and in personam jurisdiction. In the petition for removal, without waiving the right to contest the issue of personal jurisdiction, Wylie stated that he had been personally served in Houston, Texas; that the matter in dispute exceeds $10,000; that Doyn Aircraft is a Kansas corporation with its principal place of business in that state; and that Wylie is a Texas citizen.

Federal subject matter jurisdiction is conferred here by 28 U.S.C. § 1332. The removal statute, 28 U.S.C. § 1441, generally allows a defendant to remove "any civil action brought in a State court of which the district courts of the United States have original jurisdiction." Original jurisdiction is here based on diversity of citizenship, which Wylie has, by his petition for removal, tacitly admitted. "The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $10,000, exclusive of interest and costs, and is between * * * citizens of different States * * *." 28 U.S.C. § 1332(a).²

The brunt of appellant's attack on the power of the Kansas federal court to try the case focuses on whether it was vested with in personam jurisdiction. The resolution of that question, it is agreed, depends upon the application of the Kansas long-arm statute. See Walker v. Field Enterprises, Inc., 332 F.2d 632 (10th Cir. 1964). K.S.A. 60-308(b) generally provides that a nonresident submits to the jurisdiction of the Kansas courts as to a cause of action which arises from his transacting business within the state.

The statute is based on the minimum contacts test laid down in International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), "and whether due process is satisfied depends upon the quality and nature of the activities of the defendant, which must be determined on a case by case basis." Woodring v. Hall, 200 Kan. 597, 438 P. 2d 135, 141 (1968). Before jurisdiction may be entertained over a nonresident on the basis of transacting business within the state, three basic factors must coincide: "(1) the nonresident must purposefully do some act or consummate some transaction in the forum state; (2) the claim for relief must arise from, or be connected with, such act or transaction; and (3) the assumption of jurisdiction by the forum state must not offend traditional notions of fair play and substantial justice * * *." White v. Goldthwait, 204 Kan. 83, 460 P.2d 578, 582 (1969).

Wylie argues that since the distributorship agreement was executed in Texas and was to be governed by the laws of that state, he has not transacted business in Kansas so as to satisfy the minimum contacts standard. Thus the Kansas courts have no basis for asserting personal jurisdiction over him regarding any breach of the distributorship contract. The connection, of course, hinges on the assertion that Wylie did not transact business during the November 4 and 5 visit to Wichita. The trial court overruled this contention on a motion to dismiss for want of jurisdiction, and we are impelled to the same conclusion.

Wylie purposefully transacted business within the state. In Woodring v. Hall, 438 P.2d at 144, the Kansas Supreme Court said: "In a broad sense, `business' is transacted within the state when an individual is within or enters this state in person or by agent and, through dealing with another within the state, effectuates or attempts to effectuate a purpose to improve his economic conditions and satisfy his desires."

Appellant first traveled to Kansas in August, 1965, in an attempt to begin negotiations for an...