Hamilton National Bank of Chattanooga v. Russell

• Decision Date: 08 August 1966
• Docket Number: Civ. A. No. 4646.
• Citation: 261 F. Supp. 145
• Parties: The HAMILTON NATIONAL BANK OF CHATTANOOGA v. Robert A. RUSSELL, Dale Smith Warner, Thomas Anglin Hamilton, May Powell Smith, William I. Smith, Individually and as Executor under the Will of Edward J. Smith, Deceased, and Eunice Branch Hamilton and Harry Matthews, Co-Executor under the Will of Edward J. Smith, Deceased.
• Court: U.S. District Court — Eastern District of Tennessee

261 F. Supp. 145

The HAMILTON NATIONAL BANK OF CHATTANOOGA v. Robert A. RUSSELL, Dale Smith Warner, Thomas Anglin Hamilton, May Powell Smith, William I. Smith, Individually and as Executor under the Will of Edward J. Smith, Deceased, and Eunice Branch Hamilton and Harry Matthews, Co-Executor under the Will of Edward J. Smith, Deceased.

Civ. A. No. 4646.

United States District Court E. D. Tennessee, S. D.

August 8, 1966.

Moon, Harris & Dineen, Chattanooga, Tenn., for plaintiff.

Miller, Martin, Hitching, Tipton & Lenihan, Chattanooga, Tenn., for Robert A. Russell and Thomas A. Hamilton.

Noone, Moseley & Bell, Chattanooga, Tenn., for Dale Smith Warner, May Powell Smith and William I. Smith.

Witt, Gaither, Abernathy & Wilson, Chattanooga, Tenn., for Eunice Branch Hamilton.

Knox, Jones, Woolf & Merrill, Anniston, Ala., Bradley, Arant, Rose & White, Birmingham, Ala., for Robert A. Russell, Thomas A. Hamilton, and Eunice B. Hamilton.

OPINION

FRANK W. WILSON, District Judge.

This is an action upon a note wherein plaintiff seeks to bring defendants before the Court upon substituted service under the provisions of the Tennessee "Long Arm Statute", Sections 20-235 et seq., Tennessee Code Annotated. The case is before the Court upon motions of the defendants to quash or set aside service of process and to dismiss for lack of in personam jurisdiction.

The question is whether in personam jurisdiction over each of the defendants may be exercised by this Court consistent with the requirements of the Due Process Clause of the Fourteenth Amendment, United States Constitution. Although there are no constitutional prohibitions upon service of process of a United States District Court anywhere in the United States, such service is limited by statute, with certain exceptions, to the state in which the District Court sits. One of the exceptions is embodied in Rule 4(d) (7), Federal Rules of Civil Procedure, wherein service of summons is authorized "in the manner prescribed by the law of the state in which the district court is held". Such state law must, of course, meet the requirements of due process under the Fourteenth Amendment. The legislation in question was enacted in early 1965 and has received no construction, as far as is known to the Court, by the appellate courts of the State of Tennessee. The Tennessee Legislature provided in the last section of the "long-arm" statute (T.C.A. § 20-240) that:

"* * * This law is in the nature of remedial legislation and it is the legislative intent that it be given a liberal construction."

The Court is of the opinion, therefore, that the legislation is intended to exercise the power of the State fully, that is, to the extent allowed under the provisions of the Fourteenth Amendment, but no further. Thus, in determining the scope of the statute, the Court must turn to the case law which defines the limits of state power in this field.

Due process requires that a court have jurisdiction of the person of the defendant before it can render as to him a valid in personam judgment or decree. Vanderbilt v. Vanderbilt, (1957) 354 U.S. 416, 77 S.Ct. 1360, 1 L.Ed.2d 1456. As applied to state exercises of jurisdiction, this restriction is no mere guarantee against inconvenience, but is a consequence of territorial limitations upon the power of the respective states. Hanson v. Denckla, (1958) 357 U.S. 235, 78 S. Ct. 1228, 2 L.Ed.2d 1283. The exercise of jurisdiction over the person requires a basis therefor. In earlier times, the only recognized basis of in personam judicial power was personal service of process upon a defendant physically present in the forum state. Pennoyer v. Neff, (1877) 5 Otto 714, 95 U.S. 714, 24 L.Ed. 565. In the 20th Century, the need for personal jurisdiction over nonresidents arising out of increased commerce and mobility and the easing of the burden of defending foreign litigation via progress in communications and transportation produced a trend toward the expansion of recognized bases of state power over nonresidents. See McGee v. International Life Ins. Co., (1957) 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223. Thus bases of state power other than physical presence (with personal service) were from time to time recognized by the United States Supreme Court, where such state power had been delegated to courts by enactment of appropriate legislation containing proper provisions for notice. See Hess v. Pawloski, (1927) 274 U.S. 352, 47 S.Ct. 632, 71 L.Ed. 1091 (driving an automobile upon the highways of the forum state); Young v. Masci, (1933) 289 U.S. 253, 53 S.Ct. 599, 77 L.Ed. 1158 (loaning automobile in foreign state subsequently driven into forum state); Henry L. Doherty & Co. v. Goodman, (1935) 294 U.S. 623, 55 S.Ct. 553, 79 L. Ed. 1097 (selling securities within the forum state); and Milliken v. Meyer, (1940) 311 U.S. 457, 61 S.Ct. 339, 85 L. Ed. 278 (domicile in the forum state). Piecemeal recognition of state bases of in personam power and the traditional legal fictions upon which in personam jurisdiction was thought to be grounded in these cases came to an end with the landmark case of International Shoe Co. v. State of Washington, (1945) 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95, wherein Chief Justice Stone, speaking for the Supreme Court, laid down the following rule:

"* * * due process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'"

Defendants in the instant case contend that the doctrine of International Shoe is only dictum as to individuals, since the defendant in that case was corporate. This may be true, strictly speaking, but the proposition that the Supreme Court intended that the "minimum contacts" test apply to corporations but not to individuals finds no support in the language used in the International Shoe opinion or in more recent opinions. In fact, the language used by the Court indicates that the International Shoe test has broad application to all nonresident defendants. See International Shoe, supra, at page 319 of 326 U.S., 66 S.Ct. 154, McGee, supra, at page 222 of 355 U.S., 78 S.Ct. 199, and Hanson, supra, at page 250 of 357 U.S., 78 S.Ct. 1228. It is worthy of note in this regard that Chief Justice Stone, in International Shoe, cited as authority for the language quoted above the Milliken, Hess and Young cases, as well as Blackmer v. United States, 284 U.S. 421, 52 S.Ct. 252, 76 L. Ed. 375, and McDonald v. Mabee, 243 U. S. 90, 37 S.Ct. 343, 61 L.Ed. 608, all of which were cases involving individual defendants. Further, the Supreme Court, in Olberding v. Illinois Central R. Co., (1953) 346 U.S. 338, 74 S.Ct. 83, 98 L. Ed. 39, made it clear that the automobile cases rested, not upon the fiction of implied consent to accept process, but upon the substance of the nonresident driver's contact with the forum state, a clear indication that "minimum contacts" is the test for individual as well as corporate defendants. Defendants rely heavily on the case of Flexner v. Farson (1919) 248 U.S. 289, 39 S.Ct. 97, 63 L.Ed. 250, which is said to deny state power to provide for substituted service over nonresident individuals even though they do business in the forum. There are many reasons why Flexner v. Farson is weak authority, not the least of which is that it is inconsistent with the doctrine set forth in the later cases. See the annotation at 94 L.Ed. 1176. Defendants also rely on Pennoyer v. Heff, supra, but, of course, Pennoyer is no longer valid insofar as it limited in personam state power strictly to cases where in-state service had been obtained.

The "minimum contacts" or "substantial justice" standard set out in International Shoe, supra, has been subject to some criticism as being too vague to be of practical use. However, the Supreme Court, in the case of Hanson v. Denckla, cited above, provided some clarification in regard to the "minimum contacts" rule:

"The application of that rule will vary with the quality and nature of the defendant's activity, but it is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." 357 U.S. 253, 78 S.Ct. 1240, 2 L.Ed.2d 1298.

The Court is of the opinion then that it may exercise in personam jurisdiction over these defendants and each of them, if they have certain "minimum contacts" with Tennessee, purposefully established, and of such a nature that the maintenance of this lawsuit does not offend "traditional notions of fair play and substantial justice". Of course, what may be "fair play" and "substantial justice" as to corporations may not be such as to individuals and corporation cases should be received cautiously as precedent for cases involving individual defendants.

Plaintiff contends that each of the defendants has either "transacted business" or "owns property" within the State of Tennessee, and that such activity constitutes sufficient contact with the State to justify the exercise of in personam jurisdiction under the terms of T.C.A. § 20-235:

"Persons who are nonresidents of Tennessee * * * are subject to the jurisdiction of the courts of this state as to any action or claim for relief arising from:

"(a) The transaction of any business within the state;

* * * * * *

"(c) The ownership or possession of any interest in property located within this state;

* * * * * *

"* * * Any such person shall be deemed to have submitted to the jurisdiction of this state who acts in the manner above described through an agent or personal representative."

The complaint alleges that defendants Robert A. Russell, Thomas Anglin Hamilton and the Estate of Edward J. Smith, deceased, are indebted to plaintiff...