Phoenix America Corp. v. Brissey , 46 N.C. App. 527 ( 1980 )

265 S.E.2d 476 (1980)

PHOENIX AMERICA CORPORATION
v.
William BRISSEY and wife, Grace M. Brissey, d/b/a the Fireplace and Things and Grabil, Inc.

No. 7928DC817.

Court of Appeals of North Carolina.

May 6, 1980.

Gray, Kimel & Connolly by David G. Gray, Asheville, for plaintiff-appellee.

Van Winkle, Buck, Wall, Starnes & Davis by Albert L. Sneed, Jr., Asheville, for defendant-appellants.

HEDRICK, Judge.

Although the denial of a motion to dismiss ordinarily is not immediately appealable, defendants in this case properly proceed pursuant to the provisions of G.S. § 1-277(b), which prescribes a right of immediate appeal where there has been "an adverse ruling as to the jurisdiction of the court over the person or property of the defendant . . . ." Since defendants are safely before us, we confront the crucial issue presented by their appeal, i. e., were statutory and constitutional requirements satisfied so as to permit the courts of North Carolina to exercise jurisdiction in personam over these South Carolina defendants?

To resolve that issue, we must consider first whether a basis for asserting jurisdiction exists under the statute, G.S. § 1-75.4, commonly referred to as the "long-arm" statute, the provisions of which are recognized as a "``legislative attempt to assert in personam jurisdiction over nonresident defendants to the full extent permitted by the Due Process Clause of the United States Constitution.'" Sparrow v. Goodman, 376 F. Supp. 1268, 1270 (W.D.N.C. 1974). To that end, the statute is accorded a liberal construction in favor of finding personal jurisdiction, subject only to due process limitations. Dillon v. Numismatic Funding Corp., 291 N.C. 674, 231 S.E.2d 629 (1977); see also Munchak Corp. v. Riko Enterprises, Inc., 368 F. Supp. 1366 (M.D.N.C. 1973).

Here, the statute clearly affords grounds for the exercise of jurisdiction by our courts. Subsection (5)(d) of § 1-75.4 provides for jurisdiction in any action which "[r]elates to goods, documents of title, or other things of value shipped from this State by the plaintiff to the defendant on his order or direction." It is not disputed that the goods in question were shipped from North Carolina. Thus, the initial inquiry in the determination whether jurisdictional grounds are present must be answered affirmatively.

Even so, we must further answer the question whether the exercise of jurisdiction offends or comports with due process. United Buying Group, Inc. v. Coleman, 296 N.C. 510, 251 S.E.2d 610 (1979); Dillon v. Numismatic Funding Corp., supra; Gro-Mar Public Relations, Inc. v. Billy Jack Enterprises, Inc., 36 N.C.App. 673, 245 S.E.2d 782 (1978). This is the crucial inquiry and the ultimate determinative factor in assessing whether jurisdiction may be asserted under the "long-arm" statute. Chadbourn, Inc. v. Katz, 285 N.C. 700, 208 S.E.2d 676 (1974); Modern Globe, Inc. v. Spellman, 45 N.C.App. 618, 263 S.E.2d 859 (1980). The "litmus standard" for judging when a state may exercise in personam jurisdiction over a nonresident defendant is well-known and was established 35 years ago by the landmark case of International Shoe Co. v. Washington, 326 U.S. 310, 66 S. Ct. 154, 90 L. Ed. 95 (1945): Due process requires that a nonresident defendant have certain minimum contacts with the forum state such that the maintenance of the suit does not offend "traditional notions of fair play and substantial justice." Id. at 316, 66 S. Ct. 158, 90 L. Ed. 102. See also O'Neal v. Hicks Brokerage Co., 537 F.2d 1266 (4th Cir. 1976). Helpful criteria for analyzing whether minimum contacts are present include:

[T]hree primary factors, namely, the quantity of the contacts, the nature and quality of the contacts, and the source and connection of the cause of action with those contacts, . . . and . . . two others, interest of the forum state and convenience . . . .

Aftanase v. Economy Baler Co., 343 F.2d 187, 197 (8th Cir. 1965) [per Justice (then Judge) Blackmun]. See also Fieldcrest Mills, Inc. v. Mohasco Corp., 442 F. Supp. 424 (M.D.N.C.1977); McCoy Lumber Industries, Inc. v. Niedermeyer-Martin Co., 356 F. Supp. 1221 (M.D.N.C.1973). Moreover, the analysis requires that the interests of and fairness to both the plaintiff and the defendant be carefully weighed and considered. Dillon v. Numismatic Funding Corp., supra. The determination cannot be effected by using a "mechanical formula or rule of thumb, but by ascertaining what is fair and reasonable and just in the circumstances." Farmer v. Ferris, 260 N.C. 619, 625, 133 S.E.2d 492, 497 (1963); see also Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437, 72 S. Ct. 413, 96 L. Ed. 485 (1952).

Applying these standards to the facts of the case before us, the quantity of the contacts which the Brisseys had with North Carolina is insubstantial. Their uncontradicted affidavit settled that they had dealings with the plaintiff on only one other occasion prior to the transaction giving rise to this lawsuit. Moreover, their undisputed claim is that they have not been within the State of North Carolina for at least two years, nor within Buncombe County for at least five years.

In our opinion, the nature and quality of the defendants' contacts with this State, on the record before us, is likewise de minimus. The purchase at issue involves only one sale, for a total amount of $2,700.00. [Cf. Fieldcrest Mills, Inc. v. Mohasco Corp., supra, which involved a contract amount in excess of $400,000.00.] Moreover, we think the sole thread linking the Brisseys to North Carolina is the processing of their order for stoves through the home office of the plaintiff in Asheville. The order, according to uncontradicted evidence, was solicited by plaintiff and accepted by defendants in South Carolina. The goods, while shipped from North Carolina, were accepted in South Carolina. Payment for the goods was made to the driver of plaintiff's delivery truck in South Carolina. Plaintiff appears to rely on the fact that payment on the check was stopped through a bank in North Carolina, but we find that circumstance merely fortuitous and, in any event, insufficient to establish the requisite substantial connection between the transaction and this State. Cf. World-Wide Volkswagen Corp. v. Woodson, ___ U.S. ___, 100 S. Ct. 559, 62 L. Ed. 2d 490 (1980).

We are aware that a single contract can furnish the basis for the exercise of jurisdiction over a nonresident. McGee v. International Life Insurance Co., 355 U.S. 220, 78 S. Ct. 199, 2 L. Ed. 2d 223 (1957); Chadbourn, Inc. v. Katz, supra. If the contract is to be actually performed in North Carolina and has a substantial connection with this State, jurisdiction will lie. Staley v. Homeland, Inc., 368 F. Supp. 1344 (E.D.N. C.1974). However, the mere act of entering into a contract with a forum resident, as here, will not provide the necessary minimum contacts with the forum state, especially when all the elements of the defendants' performance, as here, are to take place outside the forum. See, e. g., Iowa Electric Light and Power Co. v. Atlas Corp., 603 F.2d 1301 (8th Cir. 1979), cert. denied,___ U.S. ___, 100 S. Ct. 1090, 63 L. Ed. 2d 327 (1980). Furthermore, in cases of contract disputes, "the touchstone in ascertaining the strength of the connection between the cause of action and the defendant's contacts is whether the cause arises out of attempts by the defendant to benefit from the laws of the forum state by entering the market in the forum state." Fieldcrest Mills, Inc. v. Mohasco Corp., supra at 428; see also Hanson v. Denckla, 357 U.S. 235, 78 S. Ct. 1228, 2 L. Ed. 2d 1283 (1958); Chemical Realty Corp. v. Home Federal Savings & Loan Assoc. of Hollywood, 40 N.C.App. 675, 253 S.E.2d 621 (1979), appeal dismissed,___ U.S. ___, 100 S. Ct. 1000, 62 L. Ed. 2d 744 (1980). Neither from the allegations of plaintiff's complaint nor from the averments of the Brisseys' affidavit could we conclude that either the individual or the corporate defendants in this case have undertaken any action by which they could avail themselves of the benefits and protections of our laws. They have declared, and the uncontested evidence confirms, that at no time have they carried on any business activity, including solicitation and mail order or catalog sales, in the State of North Carolina. Clearly, the only relevant activity occurring in North Carolina with respect to this transaction was actually carried on by the plaintiff, not the defendants, and that activity in our opinion was primarily ministerial in nature. Substantial performance of the contract, from its inception to its conclusion, occurred in South Carolina. Any connection between defendants and this State existing by virtue of this contract is far too tenuous to satisfy "traditional notions of fair play and substantial justice." International Shoe Co. v. Washington, supra.

Consideration of the factors of convenience and interest of the forum state, when weighed in light of our interpretation of due process requirements, does not persuade us to change our decision to decline jurisdiction. While North Carolina certainly has an interest in providing a forum for its residents, such interest cannot be asserted to override the mandates of due process. As far as convenience to the parties is concerned, we think it just as convenient for plaintiff to pursue its cause against these defendants in South Carolina, especially in view of the fact that its agent who initiated and negotiated the sale is a South Carolina resident.

Defendants have argued other assignments of error which, because of our disposition of this issue, we find unnecessary to discuss.

We hold that the assertion of in personam jurisdiction over these defendants violates due process. We accordingly reverse and remand to the District Court for the entry of an Order dismissing the complaint.

Reversed and remanded.

WEBB and WELLS, JJ., concur.