Roskelley & Co. v. Lerco, Inc.

WILKINS, Justice:

Plaintiff brought action against defendant, a Kentucky corporation, alleging breach of an oral contract to pay a commission or “finder’s fee,” to plaintiff for its services in connection with the sale of goods by defendant for use in this State by a Utah corporation.

Defendant appeared specially and moved to quash service and dismiss the complaint for lack of jurisdiction over it.¹ From the order of the District Court, Salt Lake County, denying defendant’s motion, and ordering it to answer the complaint within ten days, defendant appeals. All statutory references are to Utah Code Annotated, 1953, as amended.

For the purposes of its motions, defendant filed an affidavit reciting the following facts: (1) The parties had no contract for the payment of commissions. (2) Prior to July, 1975, M. L. Roskelley, plaintiff’s representative, telephoned defendant in Kentucky inquiring about the possibility of acting as broker for defendant in Utah, but declined defendant’s terms for such a contract. (3) Defendant sold equipment to U. S. Steel Credit Corporation, which in turn leased the equipment to Utah American Steel Co. (4) In June, 1975, plaintiff accompanied officers of Utah American Steel Co. to defendant’s plant in Kentucky for the purpose of discussing the specifications of the equipment, but at that time there was no discussion concerning payment of any commission to plaintiff. (5) Defendant sent its employees to Utah following July 16, 1975, to supervise the installation and adjustment of the equipment at the plant of Utah American Steel Co., and for no other purposes. These facts were not controverted by plaintiff by counter-affidavit or otherwise.

Defendant contends on appeal that the State of Utah does not have in person-am jurisdiction over defendant under Section 78-27-24² or otherwise. We agree that this record does not show that defendant was doing business in this State to such an extent that our Courts would have general jurisdiction,³ and that if the suit can be maintained here, plaintiff must show that his cause arose out of one or more of defendant’s contacts with this State as set forth in Section 78-27-24.

Plaintiff argues that the “minimal contacts” test of International Shoe⁴ is satisfied, as defendant transacted business in this State, contracted to supply goods in this State, and defendant’s employees were physically present in this State.

But we are not here concerned with defendant’s contract for the sale of goods to U.S. Steel Credit Corporation, nor with the installation of the equipment at the Utah American Steel plant, and plaintiff’s claim does not arise out of those activities. Plaintiff’s alleged contract with defendant is collateral to its activities relating to the sale of equipment to U.S. Steel Corporation, and such a contract between plaintiff and defendant, would portray plaintiff’s, and not defendant’s, services and activities within this State.

We note that the dissent would resolve the question of jurisdiction on the basis of the allegation in plaintiff’s complaint that an oral contract was entered into, regardless of defendant’s sworn statement of specific facts denying such a contract. The dissent views defendant’s statement that it made no commitment to plaintiff regarding a commission as vague and susceptible of many meanings. We view defendant’s affidavit as completely contradicting plaintiff’s allegation that a contract exists.

Nevertheless, it is the jurisdictional facts, and not whether plaintiff has stated a claim upon which relief may be granted, which concern us here. The statement concerning jurisdiction in plaintiff’s complaint is its allegation that defendant “does business within the State of Utah, and has significant contacts with the State of Utah.” Significantly, when jurisdiction is drawn into controversy, defendant’s affidavit alleges that defendant is not qualified to do business generally in Utah; that the contacts defendant had with plaintiff were initiated by plaintiff; that defendant met plaintiff in Kentucky, not in Utah; that defendant’s contract for the sale of equipment was with U.S. Steel Credit Corporation, and not with Utah American Steel; that defendant entered the State of Utah only for the purpose of supervising the installation of that equipment; that plaintiff did not at any time perform any services with regard to such installation — in short, that defendant had no purposeful contacts with the State of Utah which would support a finding of jurisdiction for the purpose of litigating this contract for commissions. These facts remain unanswered by plaintiff, and we believe fatally so.

The dissent contends that plaintiff, by the allegations in its complaint, has established prima facie jurisdiction and the burden has shifted to defendant to prove lack of jurisdiction. But when jurisdiction is challenged, plaintiff cannot solely rely on allegations of jurisdiction in its complaint in the face of an affidavit by defendant which specifically contradicts those general allegations.

We do not consider the procedure proposed by the dissent to be fair or reasonable, in view of the fact that one of the primary ingredients of the due process inquiry into personal jurisdiction over a nonresident is whether it is more fair and just to require defendant to undertake the added costs and inconvenience of litigating in our courts than it is to require plaintiff to undertake those costs and that inconvenience by pursuing defendant in the state in which defendant resides. Here, the District Court has no power to hear this case on the merits if the facts are as alleged in defendant’s affidavit because the Court has no jurisdiction.

The Colorado case, Texair Flyers, Inc. v. District Court, First Judicial District, 180 Colo. 432, 506 P.2d 367 (1970), cited in the dissent, has not been followed in any other jurisdiction. And none of the federal cases cited by the Colorado Court in that case, go so far as to say that only the allegations of the complaint should be considered, so that a defendant is entirely precluded from challenging those allegations at the threshold. Though the federal cases generally hold that plaintiff should not be required to prove all of the merits of his case in a hearing designed for the purpose of determining jurisdiction, a proposition with which we agree, those courts based their determinations on all the pleadings, including affidavits of the parties, and in some of the cases, depositions, answers to interrogatories, and requests for admissions.

Thus, in Surpitski v. Hughes Keenan Corp., 362 F.2d 254 (1st Cir. 1966), the District Court had allowed plaintiff 48 hours to file a motion or counteraffidavit in response to defendant’s affidavit and dismissed the complaint when plaintiff’s response was to move for further discovery. The Circuit Court reversed and remanded the case to allow plaintiff further discovery for the purpose of determining jurisdiction. And the Court in Alosio v. Iranian Shipping Lines, 307 F.Supp. 1117 (W.D.Pa.1970) stated:

At this stage, however, where it is enough for plaintiffs to show “threshold jurisdiction” sufficient to demonstrate the fairness of allowing them to continue the suit here, United States v. Montreal Co., supra, 358 F.2d [239] at 242-243, the affidavits amply accomplish the demonstration in their favor. This conclusion could not be reached, of course if the problem were one of “weighing” affidavits on the two sides containing square contradictions of each other. It can be and is reached because the sworn allegations in plaintiffs’ affidavits of concrete, specific and plainly material facts are in significant respects simply ignored by the ostensibly responsive affidavits. In motion papers that reflect intensive, detailed, expert lawyering on both sides, striking omissions of this sort cannot be overlooked or denied their patent importance. [emphasis added]

We think that a mechanism for determining jurisdiction prior to a trial on the merits, analogous to the mechanism available for summary judgment, Rule 56(e), comports with fairness and due process, and hence that allegations in a complaint should not be able to withstand the force of specific allegations of fact in affidavit form which latter allegations are not challenged. In this case, allegations of specific and material facts in defendant’s affidavit are unanswered by plaintiff.

We further believe that the broad construction the dissent would give the term “arose from” is unwarranted, and is unsupported by the cases cited therein. This Court recently held, in the case of Abbott G. M. Diesel, Inc. v. Piper Aircraft Corp., supra, note 3, that there are significant distinctions between the “doing business” concept and the “minimal contacts” test of International Shoe. The older “doing business” concept requires a plaintiff to show that defendant has conducted substantial and continuous business activity within the forum state. Once that is shown, defendant is subject to litigation related or unrelated to that business, as he is a “pseudo-resident.” But if the action is brought pursuant to the long-arm statute because defendant is not doing substantial business in the forum state, plaintiff must show that his claim arises out of some contact defendant has with the forum state, some action undertaken by defendant by which it can be shown that defendant has “purposefully availed himself of the privilege of conducting activities within the forum state.”⁵ And it does not here assist the plaintiff to show the contacts defendant has with the forum, if the specific litigation at bar does not arise out of any of those contacts. The dissent’s analysis does not consider the distinction between general and specific jurisdiction.

Shaffer v. Heitner, 433 U.S. 186, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977), concerned quasi in rem jurisdiction based on property located in the forum, and Kulko v. Superior Court of California, 436 U.S. 84, 98 S.Ct. 1690, 56 L.Ed.2d 132 (1978), concerned marital relations issues. Neither case is illumi-native in discussing the distinctions between “doing business” and litigation “arising out of” defendant’s “transaction of any business in the forum state.”⁶

In Koplin v. Thomas, Haab and Botts, 73 Ill.App.2d 242, 219 N.E.2d 646 (1966), the Court found that defendant had more than minimal contacts; that it was doing business in the forum State, and had even registered with the Secretary of State to do business in the State. Hence the Illinois long-arm statute was not applicable.

The case of Volkswagen Insurance Co. v. Whittington, 58 Ill.App.3d 621, 16 Ill.Dec. 179, 374 N.E.2d 954, (1978) is, we believe, directly contrary to the point for which the dissent cites it, for there the Court reversed the lower Court’s denial of third-party defendants’ motion to dismiss the complaint against them, as the litigation, which concerned an automobile collision, did not arise out of the business those defendants had previously conducted in the forum State.

It is extremely important to consider the impact of Hanson v. Denckla, supra, note 5, in actions brought pursuant to the long-arm statute, for there the United States Supreme Court held that State Courts do not have the power to take jurisdiction over non-resident defendants unless the litigation is related to acts of the defendant by which it “purposefully avails itself of the privilege of conducting activities within the forum State . . . ” A close scrutiny of Cook Associates, Inc. v. Colonial Broach & Machine Co., 14 Ill.App.3d 965, 304 N.E.2d 27 (1973), International Shoe v. Washington, supra, Cohan v. Municipal Leasing Systems, Inc., 379 F.Supp. 1022 (D.C.Ill.1974), Waukesha Bldg. Corp. v. Johnson, et al., 246 F.Supp. 183 (D.C.Ark.1965), Columbia Metal Culvert Co., Inc. v. Kaiser Industries, Corp., 526 F.2d 724 (3rd Cir. 1975), and In-Flight Devices Corp. v. Van Dusen Air, Inc., 466 F.2d 220 (6th Cir. 1972), all cited in the dissent, reveals that the Hanson v. Denckla test was discussed and met, for in those cases each defendant had purposefully conducted activities in the forum State and the specific litigation arose directly out of those activities.

In Cornelison v. Chaney, 16 Cal.3d 143, 127 Cal.Rptr. 352, 545 P.2d 264 (1976), the California Court came to a conclusion opposite that of the Illinois Court in Volkswagen Insurance Co. v. Whittington, supra, on similar facts. In Cornelison, defendant, a truck driver, was a resident of Nebraska. Plaintiff, a California resident, brought a wrongful death action for the death of her husband which occurred in a collision between an automobile driven by her husband and defendant’s truck, in the State of Nevada. The trucker had entered the State of California twice a month for seven years for the purpose of delivering goods and picking up other goods for delivery elsewhere, and was at the time of the collision, en route to California. Justice Mosk, speaking for a majority of four of the seven Justices found jurisdiction on the very tenuous ground that “The accident arose out of the driving of the truck, the very activity which was the essential basis of defendant’s contacts with this state.” [127 Cal.Rptr. at 356, 545 P.2d at 268] Justice Clark, in his dissent, with which the other two Justices concurred, pointed out that defendant’s activities in the State of California would be relevant in determining limited jurisdiction in a cause of action alleging defendant’s fraud in dealing with the local manufacturers, whom he served, but simply is not relevant to an action alleging negligent driving in Nevada. [127 Cal.Rptr. 352, 545 P.2d at 270, footnote 1] We would agree with the dissent in that case.

Here, defendant’s purposeful activities within this State consisted of its sale of equipment ultimately destined for installation in this State, and its entry into this State for the purpose of overseeing the installation of that equipment. These contacts would be sufficient for the establishment of limited jurisdiction if this litigation concerned an action for breach of warranty or negligence in installing the equipment, brought by Utah American Steel or U.S. Steel Credit Corporation, but this plaintiff cannot avail himself of such contacts for the purpose of his claim on an entirely different contract. To do so he must show that this State has general jurisdiction; to wit, the defendant has conducted substantial and continuous business in this State. Plaintiff has shown no purposeful activity on the part of defendant within this State by which it could be said that defendant knew or should have known that it was subjecting itself to the jurisdiction of our Courts, for the purposes of this alleged contract for commissions. Even assuming a contract for commissions was entered into, negotiations of the terms of that contract could have been undertaken only by way of the long distance telephone call between plaintiff and defendant’s president, which was initiated by plaintiff, and a meeting in the State of Kentucky, not Utah, at which time defendant swears such a contract was not discussed. If we accept defendant’s statement in its affidavit as true, as we must, since it is uncontroverted by plaintiff, defendant negotiated a sale of the equipment in question to U.S. Steel Credit Corporation, and did not know at that time that the equipment would be installed in Utah. Where are the purposeful acts on the part of defendant by which it could be said that it subjected itself to the jurisdiction of Utah for the purpose of litigating this alleged contract?

Lastly, the dissent assumes facts not supported by the record when it relates “ . . . the witnesses to this alleged contract for commission are in large part going to be found within this state.”

In our view of the facts as discussed above, most of the witnesses will be found in Kentucky. Nevertheless, there is in the record, no statement or other indication by either party as to where the witnesses are located.

In considering limited jurisdiction under the long-arm statute, we tend to lose sight of the fact that the original rule, prior to International Shoe, was that a plaintiff, who has the choice of whether or not to bring the action, should not also be extended carte blanche in choosing the forum, for he thereby subjects the defendant to costly litigation which might not be warranted by the amount in controversy, thus possibly forcing the defendant to default because he cannot afford to defend. The great significance of International Shoe lies in its recognition of the fact that plaintiffs, also, are often left without remedy, in this age of increased interstate travel and commerce, when they are damaged by a non-resident and cannot afford to pursue an action in a foreign jurisdiction. Thus the economic realities of litigation must always be taken into consideration in deciding whether a particular forum is convenient to the parties. In Cornelison, supra, for example, the majority of the Court held that a California forum was equally convenient to a Nebraska defendant as a Nevada forum would be, while the dissenting opinion pointed out that it was more costly to bring Nevada witnesses to California.

In this respect, it is interesting to note that the California Court of Appeal, Fifth District, in the case of Belmont Industries, Inc. v. Superior Court of Stanislaus County, 31 Cal.App.3d 281, 107 Cal.Rptr. 237 (1973), balanced the costs and conveniences of the parties and weighted that balance in favor of the defendant. In that case, Viking Drafting, Inc., the real party in interest, brought an action to recover for its services in drafting plans pursuant to a contract with a Pennsylvania defendant for construction work in the State of Maryland. The Court found that the only contact defendant had with the State of California was that the plaintiff’s services were performed in that State. That was an insufficient contact, the Court said, as the defendant had not purposefully sought the protection of the laws of California. But the Court further found Viking to be a sophisticated business entity which had dealt at arm’s length with defendant on many occasions and had made “repeated trips to Pennsylvania for the purpose of negotiating and conferring with petitioner [defendant] on drafting work.” [107 Cal.Rptr. at 242.] This being the case, the Court held that a Pennsylvania forum was as easily available to Viking as a California forum, and there would be no hardship to the plaintiff, Viking, if the California forum were not available to it.

Similarly, here, plaintiff has found the time and money to meet with defendant in the State of Kentucky, and it does not appear that it would be a hardship to plaintiff if he is also required to seek his remedy in that State.

We are not persuaded that it would comport with the requirements of due process owed defendant under the Fourteenth Amendment of the United States Constitution to require defendant to defend this action in our Courts. And we do not find that defendant has submitted itself to this jurisdiction for the purposes of this action, by any activities outlined in Section 78-27-24.

Reversed, and remanded to the District Court of Salt Lake County for entry of its order dismissing plaintiff’s complaint. Costs to defendant.

CROCKETT, C. J., and MAUGHAN, and HALL, JJ., concur.

1 . Defendant also moved to set aside the default judgment which had been entered against it, and said motion was granted.

2 .Section 78-27-24 provides in pertinent part:

Any person, notwithstanding section 16-10-102, whether or not a citizen or resident of this state, who in person or through an agent does any of the following enumerated acts, submits himself, and if an individual, his personal representative, to the jurisdiction of the courts of this state as to any claim arising from:

(1) The transaction of any business within this state;

(2) Contracting to supply services or goods in this state; .

3 . See Abbott G. M. Diesel, Inc. v. Piper Aircraft Corp., Utah, 578 P.2d 850 at p. 853, footnote 6, (1978).

4 . International Shoe v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945).

5 . Hanson v. Denckla, 357 U.S. 235, at 253, 78 S.Ct. 1228, at 1240, 2 L.Ed.2d 1283 (1958).

6 . Our statute provides for a marital relations “contact” in § 78-27-24(6), and a real property contact in subsection (4). We are concerned, here, with interpreting subsections (1) and (2) of that statute.