Carlos Well v. Hammet & Sons

IN THE COURT OF APPEALS OF TENNESSEE,
AT JACKSON
_____________________________________________________
)
CARLOSS WELL SUPPLY CO., INC., ) Shelby County Circuit Court
a/k/a CARLOSS COMPANY, ) No. 92801-4 T.D.
Plaintiff/Appellant,
)
)
)
FILED
VS. ) C.A. No. W1998-00571-COA-R3-CV
) December 15, 1999
HAMMETT & SONS WATER )
WELL & IRRIGATION, INC., ) Cecil Crowson, Jr.
) Appellate Court Clerk
Defendant/Appellee. )
)
________________________________________________________________________________
From the Circuit Court of Shelby County at Memphis.
Honorable James E. Swearengen, Judge
John S. Richbourg,
RICHBOURG & LOWRY, Memphis, Tennessee
Attorney for Plaintiff/Appellant.
Karen R. Cicala, Memphis, Tennessee
Attorney for Defendant/Appellee.
OPINION FILED:
REVERSED AND REMANDED
FARMER, J.
CRAWFORD, P.J., W.S.: (Concurs)
LILLARD, J.: (Concurs)
Plaintiff Carloss Well Supply Co. (“Carloss”) appeals an order of the trial court
granting a motion to dismiss for lack of personal jurisdiction filed by Defendant Hammett & Sons
Water Well & Irrigation, Inc. (“Hammett”). For the reasons set forth below, we reverse the ruling of
the trial court.
Carloss is a Tennessee corporation that manufactures and assembles water pumps at
its place of business in Memphis. Hammett is a Louisiana corporation that furnishes, sells, and
installs water wells. The parties have had an ongoing business relationship since 1976. Gary
Morton, an employee of Carloss, regularly traveled to Louisiana to do business with Hammett.
During one such visit, Hammett ordered some water pumps from Mr. Morton. After taking the
order, Mr. Morton returned to Memphis where the pumps were manufactured and assembled by
Carloss according to Hammett’s specifications. The pumps were then delivered to Hammett at its
place of business in Louisiana. After delivery, Hammett installed the pumps and discovered that
they were not operating properly. Consequently, Hammett returned the pumps to Carloss at its
office in Memphis where they were repaired. Carloss then redelivered the pumps to Hammett at its
place of business in Louisiana.
Carloss subsequently filed a civil warrant with the General Sessions Court of Shelby
County, Tennessee alleging that Hammett had failed to pay for the aforementioned water pumps.
During an appearance before the general sessions court, Hammett made an oral motion to dismiss
for lack of personal jurisdiction, which was granted. Carloss appealed the matter to the Shelby
County Circuit Court. Hammett then filed a motion to dismiss with the circuit court. In support of
this motion, Hammett filed an affidavit executed by David Hammett1 and the deposition of Mr.
Morton. Additionally, in opposition to the motion, Carloss filed an affidavit executed by Robert
McConnell.2 Finding that it lacked personal jurisdiction over Hammett, the circuit court granted
Hammett’s motion to dismiss. This appeal followed.
The sole issue raised on appeal is whether the trial court erred in granting Hammett’s
motion to dismiss for lack of personal jurisdiction. When considering a motion to dismiss, the trial
court must give a liberal construction to the plaintiff’s complaint and assume the truth of the
averments contained therein. See Lewis v. Allen, 698 S.W.2d 58, 59 (Tenn. 1985); Holloway v.
1
Mr. Hammett is the vice-president of Hammett.
2
Mr. McConnell is the president of Carloss.
Putnam County, 534 S.W.2d 292, 296 (Tenn. 1976). The trial court is not required to make
findings of fact but must only determine whether the plaintiff’s complaint alleges facts sufficient to
survive a motion to dismiss. See S & S Screw Mach. Co. v. Cosa Corp., 647 F. Supp. 600, 605
(M.D. Tenn. 1986). Because the issue in the instant case is a question of law, our review of the trial
court’s ruling is de novo with no presumption of correctness. See, e.g., Bell ex rel. Snyder v. Icard,
Merrill, Cullis, Timm, Furen and Ginsburg, P.A., 986 S.W.2d 550, 554 (Tenn. 1999); T.R.A.P.
13(d).
The United States Supreme Court has established standards for determining whether
the exercise of personal jurisdiction over a nonresident defendant is allowable under the Due
Process Clause of the Fourteenth Amendment. In International Shoe Co. v. Washington, 326 U.S.
310 (1945), the Court stated that such an exercise of jurisdiction is appropriate when the defendant
has “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 (quoting Milliken v. Meyer, 311
U.S. 457, 463 (1940)). Although the Court did not define the phrase “minimum contacts,” it did
indicate that, in some cases, a single contact with the forum state could support a finding of
jurisdiction. See id. at 318. It also suggested, however, that “irregular” or “casual” contacts with
the forum state are insufficient to serve as the basis of jurisdiction. See id. at 320. The Court stated
that the focus of the “minimum contacts” inquiry should be the “quality and nature of the activity in
relation to the fair and orderly administration of the laws which it was the purpose of the due
process clause to insure.” Id. at 319. In determining that a Delaware shoe manufacturer was
amenable to suit in the state of Washington, the Court offered the following rationale:
[T]o the extent that a corporation exercises the privilege of conducting
activities within a state, it enjoys the benefits and protection of the
laws of that state. The exercise of that privilege may give rise to
obligations; and, so far as those obligations arise out of or are
connected with the activities within the state, a procedure which
required the corporation to respond to a suit brought to enforce them
can, in most instances, hardly be said to be undue.
Id.
The proper application of the “minimum contacts” test has been further explained in
a number of Supreme Court cases following International Shoe. In McGee v. International Life
Insurance Co., 355 U.S. 220 (1957), the Court upheld the exercise of jurisdiction by a California
court over a Texas corporation whose only contact with the state of California was that it sold a
single insurance policy to a California resident. See id. at 223. In concluding that the “minimum
contacts” standard had been satisfied, the Court stated: “It is sufficient for purposes of due process
that the suit was based on a contract which had substantial connection with [the forum state].” Id.In Hanson v. Denckla, 357 U.S. 235 (1958), the Court focused on the “quality and nature” of the
contacts, holding that the trial court lacked personal jurisdiction because the nonresident defendant
did not “purposefully avails itself of the privilege of conducting activities within the forum State,
thus invoking the benefits and protections of its laws.” Id. at 253.
In addition to asking whether the nonresident defendant has “minimum contacts”
with the forum state, a court must also consider those contacts in light of other factors and
determine if the assertion of personal jurisdiction comports with “traditional notions of fair play and
substantial justice.” International Shoe, 326 U.S. at 316. Such factors include 1) the burden on the
defendant, 2) the forum state’s interest in adjudicating the dispute, 3) the plaintiff’s interest in
obtaining convenient and effective relief, 4) the judicial system’s interest in obtaining the most
efficient resolution of controversies, and 5) the shared interest of the several states in furthering
fundamental substantive social policies. See World-Wide Volkswagen Corp. v. Woodson, 444 U.S.
286, 292 (1980). In Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102 (1987), the Court
considered these five factors and held that, even if the “minimum contacts” inquiry was satisfied,
the assertion of personal jurisdiction by the California court over the Japanese defendant would be
unreasonable. See id. at 114.
The exercise of personal jurisdiction by a Tennessee court over a nonresident
defendant such as Hammett is governed by section 20-2-214 of the Tennessee Code Annotated,
which provides in pertinent part as follows:
Persons who are nonresidents of Tennessee and residents of
Tennessee who are outside the state and cannot be personally served
with process within the state are subject to the jurisdiction of the
courts of this state as to any action or claim for relief arising from:
(1) The transaction of any business within the state;
(2) Any tortious act or omission within this state;
(3) The ownership or possession of any interest in property
located within this state;
(4) Entering into any contract of insurance, indemnity, or
guaranty covering any person, property, or risk located within this
state at the time of contracting;
(5) Entering into a contract for services to be rendered or for
materials to be furnished in this state;
(6) Any basis not inconsistent with the constitution of this
state or of the United States;
(7) Any action of divorce, annulment or separate maintenance
where the parties lived in the marital relationship within this state,
notwithstanding one party’s subsequent departure from this state, as to
all obligations arising for alimony, custody, child support, or marital
dissolution agreement, if the other party to the marital relationship
continues to reside in this state.
Tenn. Code Ann. § 20-2-214(a) (1994). This statute was intended to reach to the full extent
allowable under the Due Process Clause of the Fourteenth Amendment and thus should be given a
liberal construction. See J.I. Case Corp. v. Williams, 832 S.W.2d 530, 531 (Tenn. 1992); Masada
Inv. Corp. v. Allen, 697 S.W.2d 332, 334 (Tenn. 1985); Southland Express, Inc. v. Scrap Metal
Buyers of Tampa, Inc., 895 S.W.2d 335, 338 (Tenn. Ct. App. 1994).
The courts of this state have applied section 20-2-214 and the “minimum contacts”
test of International Shoe and its progeny on several prior occasions. First, in Nicholstone Book
Bindery, Inc. v. Chelsea House Publishers, 621 S.W.2d 560 (Tenn. 1981), Nicholstone, a
Tennessee corporation, agreed to perform printing and binding services at its office in Tennessee
and then ship the finished product to Chelsea, a New York publisher. See id. at 561. In an action
brought by Nicholstone against Chelsea for nonpayment under the contract, the issue became
whether the Tennessee court could assert personal jurisdiction over Chelsea. See id. The
Nicholstone court adopted the three part analysis of Southern Machine Co. v. Mohasco Industries,
Inc., 401 F.2d 374 (6th Cir. 1968), stating as follows:
First, the defendant must purposefully avail himself of the privilege of
acting in the forum state or causing a consequence in the forum state.
Second, the cause of action must arise from the defendant’s activities
there. Finally, the acts of the defendant or consequences caused by
the defendant must have a substantial enough connection with the
forum state to make the exercise of jurisdiction over the defendant
reasonable.
Nicholstone, 621 S.W.2d at 562 (quoting Mohasco, 401 F.2d at 381). Applying these factors, the
court found that Chelsea’s contacts with the state of Tennessee were sufficient to subject Chelsea to
the jurisdiction of the Tennessee courts. See id. at 566.
Additionally, in Masada Investment Corp. v. Allen, 697 S.W.2d 332 (Tenn. 1985),
the Tennessee Supreme Court considered whether Allen, a Texas attorney, had sufficient contacts
with the state of Tennessee to confer jurisdiction on the Tennessee courts. Id. at 333. Allen’s
contacts with Tennessee consisted of the following: 1) He prepared a sales contract and a warranty
deed in connection with a pending purchase of real property located in Tennessee; 2) He sent the
aforementioned sales contract and warranty deed to Tennessee for execution; and 3) He participated
in the closing on the property, which took place at his office in Texas. See id. In determining
whether Allen had “minimum contacts” with the state of Tennessee, the court adopted the five
factor analysis of Shelby Mutual Insurance Co. v. Moore, 645 S.W.2d 242 (Tenn. Ct. App. 1981).
See Masada, 697 S.W.2d at 334. The court thus considered 1) the quantity of the contacts, 2) the
nature and quality of the contacts, 3) the source and connection of the cause of action with the
contacts, 4) the interest of the forum state, and 5) convenience.3 See id. Applying these factors, the
court found that Allen’s contacts with the state of Tennessee were sufficient to satisfy the
requirements of section 20-2-214(a)(6) and reversed the trial court’s dismissal of the claims asserted
against Allen. See id. at 335.
Finally, in J.I. Case Corp. v. Williams, 832 S.W.2d 530 (Tenn. 1992), Williams, an
Arkansas farmer, met a sales representative of J.I. Case while attending the Mid-South Fair in
Memphis. See id. at 531. During a subsequent visit by the sales representative to Williams’ farm,
the parties reached an agreement regarding the purchase and lease of some farm equipment. See id.Instruments reciting this agreement were then prepared and signed by J.I. Case in Memphis and sent
to Arkansas where they were signed by Williams. See id. J.I. Case subsequently filed an action
against Williams in a Tennessee court seeking reformation of the agreement. See id. The
Tennessee Supreme Court upheld the trial court’s assertion of personal jurisdiction over Williams,
stating as follows:
The contacts with Tennessee in the case before the Court were
much more substantial than those in Masada. . . . The initial contact
between the parties occurred at Case’s equipment exhibit at the fair in
Tennessee; the instruments controlling the transaction between the
parties were prepared and executed by Case in Tennessee; financing
for the balance due under the agreement was furnished by a company
located in Tennessee; the agreement executed by the parties
contemplated that payments due under the agreement would be made
in Tennessee; and parts and labor for the repair and maintenance of
the equipment under the warranty agreement were to be furnished in
or from Tennessee. . . . These significant contacts by Williams with
Tennessee relating directly to the underlying cause of action form an
adequate basis for the assertion of jurisdiction. These contacts
resulted in a continuing relationship between Williams and the State
and are such that the maintenance of the suit does not offend
traditional notions of fair play and substantial justice and therefore
3
Before adopting these five factors, the court first noted the three factor analysis set forth
in Mohasco. See Masada, 697 S.W.2d at 334. It then agreed with the conclusion of the court in
Moore that the reach of section 20-2-214 had been extended with the addition of subsection
(a)(6) and that, consequently, the Mohasco test was now too restrictive. See id.does not violate the Due Process Clause of the United States
Constitution.
Id. at 533.
We now consider whether, under the unique facts of the instant case, the trial court
could have asserted jurisdiction over Hammett pursuant to section 20-2-214. Hammett’s contacts
with the state of Tennessee relative to the claim asserted by Carloss are as follows: (1) Hammett
ordered water pumps from Carloss, a Tennessee corporation, to be manufactured and assembled in
Tennessee; (2) Hammett returned the water pumps to Carloss at its office in Tennessee to be
repaired; and (3) Hammett made payments to Carloss at its office in Tennessee. Under subsection
(a)(6) of section 20-2-214, a Tennessee court may assert personal jurisdiction over a nonresident
defendant with respect to any action or claim for relief arising from “[a]ny basis not inconsistent
with the constitution of this state or of the United States.” Tenn. Code Ann. § 20-2-214(a)(6)
(1994). This provision requires us to consider whether there are “minimum contacts” between
Hammett and the state of Tennessee such that the maintenance of an action against Hammett in a
Tennessee court does not offend “traditional notions of fair play and substantial justice.”
International Shoe, 326 U.S. at 316. As stated above, this inquiry involves the consideration of
five factors, including (1) the quantity of the contacts, (2) the nature and quality of the contacts, (3)
the source and connection of the cause of action with the contacts, (4) the interest of the forum state,
and (5) convenience. See Masada, 697 S.W.2d at 334.
With respect to the first of the factors listed above, we note that Hammett’s contacts
with the state of Tennessee are few in number. It appears, however, that the number of Hammett’s
contacts are at least comparable to if not greater than those of the defendants in Nicholstone,
Masada, and J.I. Case, all of which involved only a single contract or transaction. We also find
that the nature and quality of Hammett’s contacts with the state of Tennessee are substantial in that
the parties have maintained an ongoing business relationship since 1976. As noted above, the
parties in Nicholstone, Masada, and J.I. Case did not have an ongoing business relationship but
instead were involved in a single contract or transaction. Furthermore, the claim asserted by Carloss
arises out of a contract under which Hammett agreed to purchase some water pumps manufactured
and assembled by Carloss in Tennessee. Additionally, given that Carloss is a Tennessee corporation
doing business in this state, we think that the state of Tennessee has an interest in providing a forum
for the adjudication of Carloss’ claim. Finally, we recognize that Hammett would be
inconvenienced if required to defend a lawsuit in Tennessee. Likewise, Carloss would be
inconvenienced if forced to assert its claim in a Louisiana court. With respect to this factor, we
think it is relevant that Hammett has never traveled to Tennessee to conduct its business4 and that
many of the potential witnesses in the instant case are located in Louisiana. Considering each of the
five factors discussed above in light of the rulings of our supreme court in Nicholstone, Masada,
and J.I. Case, we conclude that there are “minimum contacts” between Hammett and the state of
Tennessee such that the exercise of personal jurisdiction by the courts of this state does not offend
“traditional notions of fair play and substantial justice.” International Shoe, 326 U.S. at 316.
Consequently, we hold that the trial court could have asserted jurisdiction over Hammett pursuant to
subsection (a)(6) of section 20-2-214.
Based on the foregoing, we find that the exercise of personal jurisdiction over
Hammett by the courts of this state is appropriate under section 20-2-214(a)(6).5 We therefore
conclude that the trial court erred in granting Hammett’s motion to dismiss Carloss’ claim. In light
of this conclusion, the ruling of the trial court is reversed and the cause is remanded for further
proceedings consistent with this opinion. Costs on appeal are taxed to Hammett, for which
execution may issue if necessary.
____________________________________
FARMER, J.
______________________________
CRAWFORD, P.J., W.S.
______________________________
LILLARD, J.
4
As noted in Masada, “the absence of physical contacts will not defeat in personam
jurisdiction where a commercial actor purposefully directs his activities toward citizens of the
forum State and litigation results from injuries arising out of or relating to those activities.”
Masada, 697 S.W.2d at 334 (citing Burger King Corp. v. Rudzewicz, 471 U.S.462, 472 (1985)).
5
In light of this finding, we find it unnecessary to discuss whether, under the facts of the
case at bar, jurisdiction might also exist under other subsections of section 20-2-214.