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WAUKESHA BUILDING CORPORATION v. JAMESON

October 11, 1965

WAUKESHA BUILDING CORPORATION, PLAINTIFF,
v.
P.W. JAMESON ET AL., DEFENDANTS. P.W. JAMESON, THIRD-PARTY PLAINTIFF, V. H.K. MORGAN ET AL., THIRD-PARTY DEFENDANTS. H.K. MORGAN ET AL., THIRD-PARTY PLAINTIFFS, V. ERIE MANUFACTURING COMPANY, THIRD-PARTY DEFENDANT.



The opinion of the court was delivered by: John E. Miller, Chief Judge.

There is before the court the motion of Erie Manufacturing Company, a third-party defendant, to quash the service and dismiss the third-party complaint against it. Initially Waukesha Building Corporation, an Arkansas corporation which owns and operates the Aristocrat Motor Inn of Hot Springs, Arkansas, commenced action against the general contractor, P.W. Jameson Company, a Tennessee company, for alleged defective construction of the Aristocrat Motor Inn. The general contractor, Jameson, with leave of the court, commenced third-party actions against numerous subcontractors, including George W. O'Brien, H.K. Morgan, Barney W. Thompson, Ted H. Turner, Jr., d/b/a Morgan-O'Brien Plumbing and Heating Company, hereafter referred to as O'Brien. O'Brien, with leave of the court, filed a third-party complaint against Erie Manufacturing Company which supplied certain valves used in the Aristocrat airconditioning and heating systems. Erie Manufacturing Company is a Wisconsin corporation with its principal place of business in Milwaukee.

On September 17, 1965, a hearing was held on the motion of Erie to quash the service and dismiss the third-party complaint against it. At the conclusion of the evidence adduced by the movant, Erie, and the third-party plaintiff, O'Brien, the motion was submitted and taken under advisement. The court has received and considered briefs by movant and third-party plaintiff O'Brien in support of their respective contentions.

The sole question presented by the motion is whether or not the movant, third-party defendant Erie, has subjected itself to the jurisdiction of the court.

The operative facts with respect to Erie's presence or lack of it in this state are not disputed. Erie is not qualified to do business in Arkansas and has never maintained an office, warehouse or inventory within Arkansas. It does not have soliciting personnel regularly covering Arkansas although it has a sales representative in Dallas, Texas, who makes periodic trips and calls upon persons using products such as Erie's in Arkansas. The products of Erie are normally sold through manufacturers' representatives, and at the direction of its representative shipped directly to the purchaser at the job site, f.o.b. Milwaukee. The manufacturer's representative in the instant proceeding, G.H. Avery Company of Memphis, solicited the purchase order of the valves used in the airconditioning system supplied by Erie from a Memphis contractor, one Yager & Nenon, Inc. The order through Yager & Nenon, Inc., was made by O'Brien, and the order was shipped by common carrier to the job site of the Aristocrat at Hot Springs, Arkansas. O'Brien, as heretofore stated, was a subcontractor to install the plumbing and heating systems, and was made a third-party defendant by the original defendant, general contractor Jameson. O'Brien installed the first set of valves, manufactured by Erie, in the Aristocrat heating and airconditioning system sometime prior to August 1963. Complaint was made by the owner of the Aristocrat that metal tubing "had blown out of" the valves when subjected to pressure. Sometime in January 1964 an engineer of Erie visited the job site, and after his inspection and examination agreed to supply O'Brien with another complete set of valves to replace the original set received by O'Brien as above stated. It is not necessary for the court to determine the reason for the malfunction of the system. The original valves were returned and the second set supplied by Erie was installed by O'Brien. The difficulty initially observed in the system persisted after the installation of the second set of valves, and Erie supplied an additional or third set of valves and employed a local contractor to install them in January or February 1965. It was subsequently determined that the screws used to mount the motors on the valves were of an incorrect size and additional screws were supplied to the contractor chosen by Erie, and this adjustment was made in April 1965.

The third-party defendant Erie in its brief contends that it is not doing business within the State of Arkansas and has not, by virtue of the conduct outlined above subjected itself to the jurisdiction of this court under the so-called long-arm statute of 1963. In its brief the defendant takes the position that any cause of action asserted against it is related solely to the supplying of the initial valves, and the court's jurisdiction must be determined by a consideration of that transaction only. The defendant Erie thus seeks to isolate the initial supply of valves from all the events that occurred thereafter. O'Brien, however, contends that Erie has subjected itself to the jurisdiction of this court by virtue of (1) Erie's shipping its products directly to the job site at Hot Springs; (2) sending representatives to Hot Springs to confer with and determine the cause of the malfunction in the airconditioning and heating system; (3) billing and shipping replacement valves directly to the job site at Hot Springs; (4) sending its representatives to Hot Springs to determine and examine the malfunction after the second set of valves were installed which resulted in the installation by Erie through a contractor it employed to install the third set of valves; and (5) sending salaried agents to call on and solicit the trade in Arkansas.

As the court views the issue as made out by the motion and the evidence adduced by the parties, the questions are (a) whether or not Erie is doing business in Arkansas under Ark.Stat.Ann Sec. 27-340 (1962 Repl.); and (b) whether Erie has subjected itself to the court's jurisdiction under the Uniform Interstate and International Procedure Act, Ark.Stat.Ann. Sec. 27-2502 (1962 Repl.).

The third-party defendant Erie in its brief contends as a fundamental proposition that the burden is upon O'Brien to establish the jurisdictional facts. With this principle the court is in complete agreement, and no purpose would be served by discussing and analyzing the various citations contained in the defendant's brief in support of this proposition. The defendant in its brief further contends that the first shipment of valves should be isolated from the subsequent events and that Erie has not subjected itself to the jurisdiction of the court by virtue of that shipment either under the general "doing business statute" or under the provisions of the Uniform Interstate and International Procedure Act.

The traditional manner in which foreign corporations subject themselves to the judicial jurisdiction of the state is by virtue of their doing business in that state. All states have enacted legislation granting judicial jurisdiction over foreign corporations which, although doing business within their states, do not qualify and formally submit to the jurisdiction of their courts. The concept of doing business is predicated upon the principle that an individual, partnership or corporation may not go within the geographical boundaries of a state and there transact its business and then withdraw from the state and defeat the citizens of the state bringing the withdrawing party into the state courts. The Arkansas "doing business" statute in Ark.Stat. Ann. Sec. 27-340 (1962 Repl.) provides:

    "Any non-resident person, firm, partnership,
  general or limited, or any corporation not qualified
  under the Constitution, and Laws of this State as to
  doing business herein, who shall do any business or
  perform any character of work or service in this
  State shall, by the doing of such business or the
  performing of such work, or services, be deemed to
  have appointed the Secretary of State, or his
  successor or successors in office, to be the true and
  lawful attorney or agent of such non-resident, upon
  whom process may be served in any action accrued or
  accruing from the doing of such business, or the
  performing of such work, or service, or as an
  incident thereto by any such non-resident, or his,
  its or their agent, servant or employee. Service of
  such process shall be made by serving a copy of the
  process on the said Secretary of State, and such
  service shall be sufficient service upon the said
  non-resident of the State of Arkansas, provided that
  notice of such service and a copy of the process are
  forthwith sent by registered mail by the plaintiff,
  or his attorney, to the defendant at his last known
  address, and the defendant's written return receipt
  or the affidavit of the plaintiff, or his attorney,
  of compliance herewith are appended to the writ or
  process and entered in the office of the Clerk of the
  court wherein said cause is brought."

The so-called "doing business" statutes are bottomed upon the defendant's presence with respect to the cause of action sued upon or certain other minimum contacts. As stated in International Shoe Co. v. State of Washington, (1945) 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95, as a constitutional minimum it must be shown that the defendant has had at least minimum contacts to render it amenable to the jurisdiction of the courts of a state. The underlying principles are, of course, fair play, reasonable notice and opportunity to defend. What constitutes minimum contacts within a state to render a corporation amenable to the jurisdiction of the courts of that state is far less than the traditional concept of doing business.

In McGee v. International Life Ins. Co., (1947) 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223, the defendant Texas corporation, through a reinsurance agreement, mailed a reinsurance certificate to a citizen in California. The insured paid the premiums by mail from California to the corporation's office in Texas. The policy had originally been purchased from an Arizona corporation. Neither corporation had ever had any office, any agent or done any other business in California. The plaintiff beneficiary of the insured California citizen sued defendant Texas corporation in the California state court. Process was served by registered mail at the Texas corporation's principal place of business. The defendant corporation declined to appear and the judgment was entered against it. The plaintiff thereafter brought suit in the Texas court on the California judgment, and the Texas court refused to give full faith and credit. The Supreme Court reversed on the ground that the defendant corporation had sufficient contacts with California to render it amenable to the jurisdiction of the California courts relying upon the International Shoe case. The court at page 223 of 355 U.S., at page 201 of 78 S.Ct. stated:

  "It is sufficient for purposes of due process that
  the suit was based upon a contract which had
  substantial connection with that State. (Citations
  omitted.) The contract was delivered in California,
  the premiums were mailed from there and the insured
  was a resident of that State when he died."

As a constitutional matter the state has a right to prescribe the conditions by which persons, partnerships or corporations may come within its borders in the pursuit of their business interest. The constitutional limitation is grounded upon the principle of some contact by the defendant with the state which seeks to render it amenable to its courts. The Uniform Interstate and International Procedure Act as approved by the Uniform State Law Commissioners, has been adopted in Arkansas, Act 101 of 1963, Ark.Stat.Ann. Secs. 27-2501-2507 (1963 Supp.). This statute in Sec. 27-2502 provides:

    "A. Definition of `person.' As used in this
  section, `person' includes an individual or his
  executor, administrator or other personal
  representative, or a corporation, partnership,
  association, or any other legal or commercial entity,
  whether or not a citizen or domiciliary of ...

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