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Koplin v. Thomas

JULY 21, 1966.

LEONARD W. KOPLIN, PLAINTIFF-APPELLANT,

v.

THOMAS, HAAB & BOTTS, DEFENDANT-APPELLEE.



Appeal from the Circuit Court of Cook County, County Department, Law Division; the Hon. ALBERT E. HALLETT, Judge, presiding. Reversed.

MR. JUSTICE DEMPSEY DELIVERED THE OPINION OF THE COURT.

Rehearing denied September 12, 1966.

This is an appeal by the plaintiff from an order granting the defendant's motion to quash service of process.

Three New York brokers, Saul Lerner Co., Inc., Filer, Schmidt & Co. and Thomas, Haab & Botts, were personally served with summons in New York City, under sections 16 and 17 of the Civil Practice Act. (Ill Rev Stats, c 110, pars 16, 17 (1961).) They were made defendants in a qui tam action for damages brought under Ill Rev Stats, ch 38, § 330 (1959) and ch 38, § 28-8 (1961). The complaint charged that during the years 1959 through 1962 the defendants were dealers in "put and call" options; that these were gambling transactions which violated the laws of Illinois prohibiting gambling in securities (Ill Rev Stats, c 38, § 328 (1959) and c 38, § 28-1(a) (4) (1961)); that the defendants transacted business in Illinois by selling such option contracts to various individuals, firms and corporations in Cook County and elsewhere in Illinois and that these purchasers lost and paid large sums of money to the defendants. It was alleged that the purchasers were entitled to sue the defendants for the amount of their losses but none of them did so, and that the plaintiff, a resident of this State, had the right, therefore, under the statutes to initiate a civil action on behalf of Cook County and himself for triple the amount of the losses.

Each defendant filed a special appearance to quash the service of summons on the ground that it was not amenable to extraterritorial service of process within the meaning of section 17 of the Civil Practice Act. The motions were granted, but the order was subsequently vacated as to Thomas, Haab & Botts, the defendant in the present case. The orders as to the other defendants were affirmed on appeal. (Koplin v. Saul Lerner Co., Inc., 52 Ill. App.2d 97, 201 N.E.2d 763 (1964).) While the Lerner case was pending on appeal Thomas, Haab & Botts moved to strike the complaint; its motion was denied. Two years later (after this court's decision in Koplin v. Lerner) the defendant renewed its motion to quash the service of summons. It is from the granting of this motion that the plaintiff appeals.

Before we reach the principal issues which are: (1) whether the defendant submitted itself to the jurisdiction of the courts of Illinois by transacting business within Illinois and (2) whether section 17, if construed to authorize jurisdiction over the defendant, would violate the due process clause of the Fourteenth Amendment to the Constitution of the United States, we are faced with the plaintiff's contention that the defendant's objection to the assertion of personal jurisdiction was waived by the defendant's motion to strike the complaint. The plaintiff cites a line of cases which hold that an appearance by a defendant for any purpose other than to question the jurisdiction of the court is a general appearance, even if the defendant also challenges the court's jurisdiction, and quotes from Koplin v. Saul Lerner, supra:

"The complaint was couched in such general terms that it was vulnerable to a motion to strike. No such motion was made, however, and none could have been made by the defendants without jeopardizing their special appearances. Ill Rev Stats, ch 110, sec 20(1) (1963). A motion to strike would have admitted that the case was properly in court; the defendants could not ask the court to exercise jurisdiction over the case and at the same time deny that jurisdiction existed. Jones v. Jones, 40 Ill. App.2d 217, 189 N.E.2d 33."

Neither the cited cases nor the quoted language supports the contention; both assume a situation wherein a defendant has coupled a jurisdictional objection with an invitation to the court to exercise its jurisdiction. In the instant case the court ruled adversely to the defendant's motion to quash prior to the defendant's requesting the court to strike the complaint; hence, the defendant comes squarely within the provision of the Civil Practice Act that:

"Error in ruling against the defendant on the objection [that the court lacks personal jurisdiction over the defendant] is waived by the defendant's taking part in further proceedings in the case, unless the objection is on the ground that the defendant is not amenable to process issued by a court of this State." Ill Rev Stats, ch 110, § 20(3) (1961).

Because the motion to strike came after the motion to quash service was denied, the defendant preserved its jurisdictional objection and it had the right to renew this objection. SHA, c 110, § 20, Joint Committee Comments. And the motion judge had the right to review the order vacating the first order to quash if in his judgment the vacating order was erroneous. Richichi v. City of Chicago, 49 Ill. App.2d 320, 199 N.E.2d 652 (1964).

The defendant's actions alleged to constitute the transaction of business within Illinois are set forth in the complaint, the affidavits of the plaintiff in opposition to the motion to quash, and the accompanying exhibits. The plaintiff alleged that the defendant placed advertisements in two newspapers sold in Chicago, offering put and call options for sale; that the defendant sent agents into Illinois to conduct seminars and to educate the public about option contracts and thereby promoted sales; that many persons, firms and corporations in Chicago and in Illinois accepted the defendant's offers and bought the options by telephoning or mailing acceptances either directly to the defendant or through brokers. The plaintiff submitted as an exhibit the defendant's 1960 application for registration as a dealer in securities. The application, which was filed with the Illinois Secretary of State, included the defendant's consent to be bound by service of process on the Secretary in suits arising out of sales of securities in violation of the Securities Law of 1953 (Ill Rev Stats, c 121 1/2, § 137.1-137.15). The plaintiff also submitted letters from the defendant to the Secretary of State which certified that the defendant had made sales of option contracts to persons and firms in Illinois. The letters detailed the dates of the transactions, the names and addresses of the purchasers, and the terms of the option contracts.

In its special appearance and motion to quash, the defendant denied that it had transacted business in Illinois within the meaning of section 17(1) (a) or that it could be subjected to the jurisdiction of Illinois courts without a violation of due process. It alleged that it was a partnership composed of two individuals, neither of whom was a citizen or resident of Illinois; that the defendant's only place of business was in New York and that all of its business was transacted there; that none of its partners or employees had accepted an offer or made a sale in Illinois; that Illinois residents either directly or through brokers might have communicated with the defendant in New York, but that sales were made in New York and the option contracts were delivered there to the purchasers' brokers. The defendant admitted placing advertisements in Illinois newspapers but denied that they were offers to sell, admitted sending agents to Chicago to conduct seminars but denied that sales of put and call options were made at the seminars.

[3-5] The first question is one of statutory construction: does section 17(1) (a) provide for jurisdiction on the facts of this case? Jurisdiction under section 17 has not been restricted to those cases alone where its language literally describes the activities of the defendant. See Currie, The Growth of the Long Arm: Eight Years of Extended Jurisdiction in Illinois, 1963 Ill L Forum 533. As the Supreme Court observed in Nelson v. Miller, 11 Ill.2d 378, 143 N.E.2d 673 (1957), section 17 reflects the legislative intention to exert judicial jurisdiction over nonresident defendants to the extent permitted by the due process clause. Hence, the courts in construing section 17 have upheld jurisdiction if the defendant has voluntarily established certain minimum contacts with the State, if the State has an interest in providing the plaintiff a forum for litigation, and if the assertion of jurisdiction is not fundamentally unfair.

The complaint in the Koplin v. Lerner case alleged that the two defendants, Saul Lerner Co., Inc., and Filer, Schmidt & Co., had advertised options in newspapers circulated in Chicago and that representatives of the two defendants had been in Illinois promoting their business. An affidavit filed by the plaintiff stated that a subsidiary of the Lerner company had registered in Illinois as a dealer in securities and that Filer, Schmidt had likewise registered as a dealer in securities and had filed a consent to the service of process. Each defendant denied that it had transacted any business in Illinois within the meaning of section 17(1) (a). The Lerner company stated in an affidavit that it had no knowledge of any direct sale to any Illinois resident and that all its sales were made in New York. Filer, Schmidt stated that it conducted its business in New York and that its contracts were executed, paid for, delivered and performed in New York. In an affidavit it stated that occasional inquiries were received from Illinois brokers and that 12 residents in Illinois had maintained accounts at some time during the period covered by the complaint, but that all contracts were made in New York. In response ...


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