Warlick v. H. P. Reynolds & Co. , 151 N.C. 606 ( 1910 )

It appeared that on 25 August, 1909, E. H. Warlick et al., plaintiffs, citizens and residents of Burke County, had instituted the action in the Superior Court of said county against H. P. Reynolds Co., and the First National Bank of Huntingdon, Pa., citizens and residents of the State of Pennsylvania, et al., claiming that plaintiffs, by fraudulent statements and practice on the part of defendants H. C. Reynolds Co., had been induced to execute three promissory notes, for $1,200 each, payable respectively 10 September, 1909, 1910 and 1911, and that said H. P. Reynolds Co. had placed said notes with the defendant bank in Pennsylvania, with the view and purpose of negotiating said notes and thereby passing them into the hands of holders in due course, and would do so, etc., unless restrained; and facts were also alleged indicating a right to recover damages for fraud and deceit in said transaction on the part of defendants. Pending the action, plaintiffs also sued out therein a warrant of attachment from the clerk of Burke, and caused same to be levied on certain indebtedness of third parties, citizens and residents in North Carolina, to H. P. Reynolds Co. The affidavits, as stated, indicating a right to recover damages for the fraud alleged against said defendants, the other facts directly relevant to the question presented are embodied in the judgment of his Honor entered on the hearing, and are as follows: (608)

This cause coming on for hearing before Hon. M. H. Justice, at chambers, in Rutherfordton, N.C. on 15 October, 1909, and being heard on motion of plaintiffs to continue restraining order heretofore issued to the hearing, and of the defendants' counsel entering special appearance H. P. Reynolds Co. and the First National Bank of Huntingdon, Pa., to dismiss the action and to vacate and dismiss the restraining order, and to vacate order of attachment, as hereinafter set forth, the court finds the following facts:

That the summons was issued by the clerk of Burke Superior Court to the sheriffs of Burke and Randolph counties on 27 August, 1909; that the notes in controversy were in North Carolina at the date of the issuance of the summons, and were shortly thereafter returned to the defendant bank at Huntingdon, Pa.; that the plaintiffs, on affidavit filed, 1 September, 1909, had order of publication of summons made for H. P. Reynolds Co. and the First National Bank of Huntingdon, Pa., and also sent a copy of the publication of summons and the statement of the cause of action to the sheriff of Huntingdon County, Pa.; that the sheriff of Huntingdon County, Pa., served the summons and statement of the plaintiffs' claim on H. P. Reynolds Co. and First National Bank of Huntingdon, Pa., as shown in the record, and that the attorneys for each of the said defendants made the following entry on the back of said summons:

"Now, this 6 September, A.D. 1909, I accept service of notice of this action in the Superior Court of Burke County, N.C. Chas. T. Bailey, attorney for H. P. Reynolds.

"Now, 6 September, 1909, I accept service of notice of this action in the Superior Court of Burke County, N.C. John D. Dorris, attorney for First National Bank of Huntingdon, Pa."

That on 23 September, 1909, a restraining order was issued in this cause against said defendants, restraining them from disposing of or transferring said notes; that said restraining order was sent to and served on the said defendants by the sheriff of Huntingdon County, Pa., as shown, on 27 September, 1909.

That when the cause came on for hearing on plaintiffs' motion to continue the restraining order to the hearing on 5 October, 1909, at Hendersonville, N.C. the court received the telegram from Avery Avery, attorneys, of Morganton, N.C. as follows:

MORGANTON, N.C. 5 October, 1909.

(609) HON. M. H. JUSTICE, Hendersonville, N.C.

Have just been retained in Warlick et al. v. Reynolds and Bank. Wish to enter special appearance, and make motion, supported by affidavits, to dismiss. Please continue hearing till Friday, the 15th inst. AVERY AVERY.

That on receipt of said telegram, and in consequence thereof, the court continued the hearing, as requested, making the following orders on the back of the said restraining order:

HENDERSONVILLE, N.C. 5 October, 1909.

The within order, and the hearing thereof, is continued, to be heard at Rutherfordton, N.C. 15 October, 1909, in compliance with telegram, hereto attached, from Messrs. Avery Avery.

H. M. JUSTICE, Judge.

The plaintiffs have leave to make any further service of this order and affidavits as they may be advised.

That on 5 October, 1909, the plaintiff had the following notice, together with the restraining order, affidavits, etc., served on Avery Avery, as counsel for defendants H. P. Reynolds Co. and First National Bank of Huntingdon, Pa., by the Sheriff of Burke County:

To H. P. REYNOLDS CO. AND FIRST NATIONAL BANK OF HUNTINGDON, PA., AND AVERY AVERY, Attorneys.

You are hereby notified to produce, on the hearing of the motion to continue the restraining order in this cause, before Judge M. H. Justice, at Rutherfordton, N.C. on 15 October, 1909, and allow the plaintiffs' inspection of the three notes in controversy in this action, and which are attacked for fraud, and dated about 10 September, 1908, and described in the affidavit, a copy of which and of the said restraining order hereto attached and served on you with this notice. This 6 October, 1909. J. T. PERKINS, JOHN M. MULL, Attorneys for Plaintiffs.

That on the hearing on 15 October, at Rutherfordton, counsel for both parties appeared specially, and Avery Avery asked to enter a special appearance of said defendants and moved to dismiss the action, to vacate and dissolve and dismiss the restraining order, and vacate the order of attachment set forth in the record, and offered the affidavits filed of John Dorris and Thomas B. Bailey. (610)

It is further found as a fact that there was no actual service of summons or acceptance of service by defendants, except as appears by affidavits of Dorris and Bailey and return of service by the sheriff of Huntingdon County, Pa.

Upon said records, findings of fact and the affidavits filed, and the evidence of record, it is, on motion of J. M. Mull and John T. Perkins, attorneys for plaintiffs, ordered and adjudged that the restraining order heretofore issued be continued to the final hearing, and that said defendants H. P. Reynolds Co. and the First National Bank of Huntingdon, Pa., their agents, servants and employees, be enjoined and restrained from assigning, transferring or disposing, in any manner whatsoever, the three notes, of $1,200 each, signed by the plaintiffs E. S. Warlick, W. H. York, O. L. Thornburg, J. A. Beach, J. H. Dale and others, made payable to the defendant H. P. Reynolds Co., and dated on or about 10 September, 1909.

Upon the statement of counsel, Avery Avery the said notes are not in their individual possession, but in the possession of their said clients, as they are informed; the production and impounding with the clerk of said notes is left open, without prejudice to plaintiffs, to move for further production and impounding with the clerk of Burke Superior Court, upon the filing of a complaint. The court refused to vacate the order of attachment, with the seizin thereunder, on the ground that defendants had given no notice of motion for same.

M. H. JUSTICE, Judge, etc.

At chambers in Rutherfordton, N.C. 15 October, 1909.

To these findings and order the defendants excepted and appealed. After stating the facts: Jurisdiction in case of actions in personam can only be acquired by personal service of process within the territorial jurisdiction of the court, or by acceptance of service, or by a general appearance, actual or constructive, this last usually arising by reason of some motion in the cause, which can only be made in behalf of one who submits his case generally to the court's jurisdiction. Vick v. Flournoy,147 N.C. 209; Scott v. Ins. Co., 137 N.C. 515; Bernhardt v. Brown,118 N.C. 701; Pennoyer v. Neff, 95 U.S. 715.

In the present case there has been no service in any of the (611) modes suggested — none by personal service nor by acceptance personally — and our decisions are that an attorney at law, under his general authority as such, cannot make a valid acceptance of service of original process. Anderson v. Hall, 87 N.C. 381. And on the testimony it is found as a fact that the attorneys here had no special authority for the purpose indicated, nor has there been any general appearance, actual or constructive. True, there are decisions to the effect that when a motion for a continuance has been made and allowed, this will be considered a general appearance of the moving party, but such a ruling will no doubt be found to obtain in cases where the motion was made generally for the continuance of the cause, and not as here, where the appearance was expressly restricted to the special purpose of moving to dismiss for want of jurisdiction, and there was only a request for a temporary continuance of the motion. In so far as the action seeks to set aside the notes for fraud, and to enjoin their transfer, this is strictly an action inpersonam. An injunction can only operate in personam; and unless jurisdiction of the party can be acquired, the attempted procedure is a nullity, and, on motion properly made, it should be dismissed. Hinton v.Ins. Co., 126 N.C. 18; Telegraph Co. v. Telegraph Co., 49 Ill. 90;Hazelhurst v. R. R., 43 Ga. 13; High on Injunctions (4 Ed.), sec. 33.

In Hinton v. Ins. Co., it was held: "The States of the Union being coequals in authority and power, no State, through its courts, can extend its coercive power, nor provide for personal service of process, nor affect by judicial determination property outside of its own territory. Any such attempt to extend its jurisdiction beyond its own limits over persons or property in another State is without authority and void."

In Hazelhurst v. R. R., 43 Ga., supra, it was held: "That a court of equity of this State will not enjoin nonresidents of the State who are not and cannot be served with process, and who are outside of its boundaries, from doing acts of a personal character beyond the State lines and beyond the jurisdiction of its process for contempt of its order."

And in High on Injunctions, sec. 33, the doctrine is stated as follows: "The jurisdiction of equity by way of injunction being, as we have already seen, strictly in personam, it will not be exercised against persons and property beyond the borders of the State in which the proceedings are instituted. Neither law nor comity between distinct State governments recognizes the authority of one State to exercise jurisdiction over citizens and property beyond its borders. Nor will equity attempt (612) by injunction to restrain a nonresident defendant, who has not been served with process, and who is not subject to the jurisdiction of the court, from performing some act beyond the State even though there has been constructive service by publication as to such defendant."

It is no satisfactory answer to this position that if the process is void, defendant need not regard it. One whose rights are involved and affected by an order of this character is not required to test its validity by disobedience, and thereby risk the process of contempt, but he may appear specially and have the court determine and inform him as to the validity of the proceedings; and if it be shown on the hearing that no personal service of process has been or can be had within the jurisdiction, the injunction should be dismissed (Adams v. Lamar, 8 Ga. 83-87) and if the ruling be against him, an appeal presently lies.

This is the very course suggested and commended in Clark v. Mfg. Co.,110 N.C. 111, that the party affected should appear special, and if the ruling be against him he can preserve his rights by noting an exception and entering a general appearance. True, it is held with us that where a motion to dismiss for want of jurisdiction is overruled, the party can only note his exception and proceed with the cause, and that no appeal then lies; but this is on the ground that overruling such a motion to dismiss is not ordinarily an appealable order, in that no substantial right of the litigant is thereby affected; but when the process is that of an injunction, an order continuing same, if valid, then and there affects a substantial right, and so an appeal, as stated, presently lies.

It was suggested that this being an action to set aside the notes of resident debtors, it could be treated as a proceeding quasi in rem, as in cases of attachment, but this position is not sustained by authority. As a general rule, and for general purposes, the situs of negotiable notes is at the home of the creditor. It is otherwise, as indicated, in the case of attachment, wherein the situs of notes, for purposes of the process, is held to be at the home of the debtor. Cooperv. Security Co., 122 N.C. 463. This exception to the general rule is made chiefly on the ground that the court process in such case operates on the indebtedness and affects the conduct of the debtor concerning it, to wit, in reference to its payment and satisfaction; and, this being recognized doctrine, creditors by note take and hold them subject to its application in cases where attachment lies. The same principle has been upheld in case of creditors' bills operating in the nature of equitable fi. fas. (Beach on Injunctions, sec. 82 citing (613)Bragg v. Gaynor, 85 Wis. 68); and also in actions affecting the title and interest of nonresidents in realty situate within the jurisdiction, as in Vick v. Flournoy, supra; Arndt v. Suggs, 134 U.S. 116.

But in our case the relief sought can only be made effective by operating on the creditor and his interest in the notes and his conduct concerning them; and the situs of the notes, for the purpose of this action, therefore, comes under the general rule and must be considered as at the home of the creditor. Hinton v. Ins. Co., supra; Adams v. Lamar, supra.

In this last case, Nisbet, J., quoting with approval from Dearing v.Bank, 5 Ga. 503, states the correct principle, as follows: "That the courts of this State have no extra territorial jurisdiction and cannot make the citizen of foreign States amenable to their process or conclude them by a judgment in personam without their consent; and a judgment in personam against a citizen of a foreign State, in a cause wherein he did not appear, although notice was served on him by publication, is a nullity."

We are of opinion, therefore, and so hold that defendants' motion in the present case was jurisdictional in its nature; that they had the right to appear specially, and, having properly noted their exceptions, they could test the validity of the injunction order by a present appeal, and that there was error in refusing to dissolve the injunction in accordance with their motion. On the record, however, we do not think the action could be dismissed, and this by reason of the claim for damages for faud [fraud] and deceit on the part of defendants in obtaining the notes in question, and the attachment issued in the cause and levied on indebtedness to defendants of certain citizens of Caldwell County, etc. We have held, in Worth v.Trust Co., ante, 191, that under our statutes an attachment lies in a case of this character, citing, among other authorities, and as more especially pertinent to this case, Paper Co. v. Searing, 54 N.Y. Supreme Court, 237. And this process, as stated, having been levied on indebtedness to defendants from persons within the jurisdiction of the court, the cause will proceed for the purpose of condemning and applying the property levied on to such indebtedness as plaintiff may be enabled to establish on the trial. Pennoyer v. Neff, supra.

The injunction will be dismissed and the cause otherwise conducted in accordance with this opinion.

Error.

Cited: Finch v. Slater, 152 N.C. 156; School v. Peirce, 163 N.C. 430;Armstrong v. Kinsell, 164 N.C. 128; Johnson v. Whilden, 166 N.C. 109.