Kappus v. Western Hills Oil, Inc.

24 F.R.D. 123, 2 Fed. R. Serv. 2d 31, 1959 U.S. Dist. LEXIS 4171
CourtDistrict Court, E.D. Wisconsin
DecidedJune 25, 1959
DocketCiv. A. No. 58-C-193
StatusPublished
Cited by21 cases

This text of 24 F.R.D. 123 (Kappus v. Western Hills Oil, Inc.) is published on Counsel Stack Legal Research, covering District Court, E.D. Wisconsin primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Kappus v. Western Hills Oil, Inc., 24 F.R.D. 123, 2 Fed. R. Serv. 2d 31, 1959 U.S. Dist. LEXIS 4171 (E.D. Wis. 1959).

Opinion

GRUBB, District Judge.

Plaintiff filed his first complaint in this action on July 3, 19-58, alleging breach of contract. The summons and complaint were served on the corporate defendant, Western Hills Oil, Inc., hereinafter referred to as “Western,” by a U. S. Marshal’s personal service on the corporation’s Executive Vice President in Tulsa, Oklahoma. Service on individual defendant James G. Bennett was obtained by a U. S. Marshal’s personal service in Festus, Missouri. Defendants filed a motion to dismiss for lack of jurisdiction over their persons and brief in support. In plaintiff’s answering brief counsel attempted to add a claim for violation of the Wisconsin Securities Law, W.S.A. § 189.01 et seq., and asserted such as a basis for jurisdiction over the defendants.

On September 16, 1958, plaintiff filed a first amended complaint reasserting his claim for breach of contract and alleging an additional claim for violations of the Wisconsin Securities Law. The amended complaint was served in the same manner as the original complaint. Western and Bennett again moved to dismiss the action for lack of jurisdiction. Although the parties were prepared to stand on their original briefs, the court called for additional briefs to cover certain unsupported propositions.

In his supplemental brief, plaintiff asserted for the first time the Federal Securities Acts, 15 U.S.C.A. § 77a et seq., as a basis for this court’s jurisdiction.

After hearing argument on the motion to dismiss, the court granted the plaintiff leave to file a second amended complaint without imposing terms. Plaintiff then filed a second amended complaint alleging in one count, running eighteen pages, claims for breach of contract, violations of the Wisconsin Securities Law, violations of the Federal Securities Acts and regulations, hereinafter referred to as Federal Securities Acts claims or violations, “misrepresentations, untrue statements, schemes, plans, illegal acts and fraud.” Plaintiff joined in this one count, in addition to the original two defendants, eight more individual defendants. All defendants were personally served outside the State of Wisconsin. Subsequently, the parties stipulated to the dismissal as to all defendants except Western, James G. Bennett, John Gilmartin, Claude H. Treat, Jr., and G. F. Dohrn. Defendants again moved to dismiss the action for lack of jurisdiction over the persons and the subject matter and filed a brief in support.

Facts

Plaintiff’s second amended complaint and affidavit in support assert that on January 21,1957, Western solicited plaintiff in Kenosha, Wisconsin, and then and there entered into a written agreement evidenced by a receipt of payment by Kappus of $20,000 for a one-half working interest in a certain oil and gas lease. On December 20, 1957, in Kenosha, Western and Kappus substituted a new agreement. This new agreement released Western from certain obligations and added, among others, Western’s promise that it would not mortgage the equipment or material used in developing the Simpson lease without first obtaining Kappus’ authorization; that ninety days from the ensealing of the agreement Western would have completed the sixth oil well contracted pursuant to the January 21, 1957, agreement; and that if Western failed to comply within the time designated, the agreement would be void, and the investment of Kappus would be returned to him in full together with 6 per cent penalty payment as stipulated damages.

[126]*126Western further represented that no mortgages or liens were then in existence against any of the salvage equipment or materials used in the development of the Simpson lease.

James G. Bennett and John Gilmartin were made defendants based upon the allegation that the December 20, 1957, agreement was made at the request of Bennett who signed as Vice President for Western and with the knowledge and consent of Gilmartin, then President of Western.

G. F. Dohrn was made a defendant on the allegation that he was a director of Western on December 20, 1957, and Claude H. Treat, Jr., was made a defendant based upon the assertion that he was the Executive Vice President of Western on December 20, 1957.

Plaintiff alleges that defendants breached their contract in not completing a well within ninety days and in having mortgaged the equipment or materials used in developing the Simpson lease without plaintiff’s authorization. Plaintiff alleges further that despite Western’s representations to the contrary, “mortgages or liens” against the “equipment or materials” used in the development of the Simpson lease existed at the time the agreement was made. These and other acts are complained of as breaching the contract and as being in violation of the Wisconsin Securities Law and the Federal Securities Acts.

Jurisdiction Over Western Hills Oil, Inc.

The State of Wisconsin authorizes the exercise of personal jurisdiction over a foreign corporation in actions against the corporation which arise out of the doing of business in Wisconsin. Wis. Stats. § 262.09(4) (1957).

This court held in American Type Founders, Inc. v. Mueller Color Plate Co., D.C.E.D.Wis.1959, 171 F.Supp. 249, that the solicitation and execution of a contract in Wisconsin for the sale and installation of equipment and certain other minor activities constituted “doing business” in Wisconsin. Under the same principles, the solicitation and sale of a security in Wisconsin to a Wisconsin resident constitutes “doing business.” It is sufficient for purposes of the Fourteenth Amendment that the action against Western is based on a contract which had substantial connection with this State. See also McGee v. International Life Ins. Co., 1957, 355 U.S. 220, 78 S.Ct. 199, 2 L. Ed.2d 223; Huck v. Chicago, St. P., M. & O. R. Co., 1958, 4 Wis.2d 132, 90 N. W.2d 154; and Dettman v. Nelson Tester Co., 1959, 7 Wis.2d 6, 95 N.W.2d 804.

Thus, the State had the power and authorized the exercise of its power over a corporation in circumstances as here before the court, and personal service made outside of the State of Wisconsin on the Secretary of the defendant corporation was sufficient to adequately give notice to the defendant corporation and conform with the requirements of due process. Behling v. Wisconsin Hydro Electric Co., 1957, 275 Wis. 569, 83 N.W. 2d 162.

The question is raised as to whether personal service without the State is consistent with the Federal Rules of Civil Procedure, 28 U.S.C.A.

Rule 4(d) (7) states that it is “ * * * sufficient if the summons and complaint are served * * * in the manner prescribed by the law of the state in which the service is made for the service of summons or other like process upon any such defendant in an action brought in the courts of general jurisdiction of that state.”

Section 262.09(4) of the Wisconsin Statutes provides:

“If the defendant is a foreign corporation * * * and * * * (b) the cause of action against it arose out of the doing of business in Wisconsin, service hiay be made * * * by delivering within or without the state a cópy of the sum[127]

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Bluebook (online)
24 F.R.D. 123, 2 Fed. R. Serv. 2d 31, 1959 U.S. Dist. LEXIS 4171, Counsel Stack Legal Research, https://law.counselstack.com/opinion/kappus-v-western-hills-oil-inc-wied-1959.