National Equipment Rental, Ltd. v. Szukhent

• Citation: 311 F.2d 79
• Decision Date: 06 December 1962
• Docket Number: Docket 27486.,No. 21,21
• Parties: NATIONAL EQUIPMENT RENTAL, LTD., Plaintiff-Appellant, v. Steve SZUKHENT and Robert Szukhent, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

311 F.2d 79 (1962)

NATIONAL EQUIPMENT RENTAL, LTD., Plaintiff-Appellant, v. Steve SZUKHENT and Robert Szukhent, Defendants-Appellees.

No. 21, Docket 27486.

United States Court of Appeals Second Circuit.

Argued October 11, 1962.

Decided December 6, 1962.

Wilbur G. Silverman, Jamaica, N. Y., for plaintiff-appellant.

Harry R. Schwartz, Brooklyn, N. Y., for defendants-appellees.

Before CLARK, MOORE and SMITH, Circuit Judges.

J. JOSEPH SMITH, Circuit Judge.

Defendants, residents of Michigan, obtained farm equipment in Michigan on a lease from plaintiff, a Delaware Corporation with its principal place of business in New York. Claiming default, plaintiff sued for payments under the lease in the Eastern District of New York, the marshal delivering two copies of the summons and complaint to one Florence Weinberg as agent designated in the lease for the purpose of accepting process for defendants in the State of New York. The copies were promptly forwarded by Weinberg to defendants by mail with a covering letter under an agreement between Weinberg and plaintiff to perform this service without compensation. Nothing in the lease required notice to defendants. Plaintiff also notified defendants by mail promptly on the purported service of the process. The United States District Court for the Eastern District of New York, John F. Dooling, Jr., D. J., held the service invalid and quashed the service. Plaintiff appeals. We agree with the District Court that no valid agency of Weinberg for defendants was created by the instrument in suit and affirm the order.

The lease contract here was on a printed form provided by plaintiff. There is no requirement in the purported appointment of the agent for any notice to defendants. A provision for notice would be essential to the validity of a state statute providing for substituted service on a statutory "agent". Wuchter v. Pizzutti, 276 U.S. 13, 48 S.Ct. 259, 72 L.Ed. 446 (1928). There is no such requirement when individuals freely contract for a method of substituted service. Lack of such a provision in a contract of adhesion, here involved, may, however, be considered in determining the meaning and effect of the provisions of the contract. There is no provision in the lease for any undertaking by the purported agent to act for, or give notice to her purported principal. Normally, an agency exists only if there has been a manifestation by the principal to the agent that the agent may act on his account, and consent by the agent so to act, Restatement Agency § 15, and the agent is subject to control by the principal, Restatement Agency § 1. Plaintiff's affidavits demonstrate that Weinberg was acting under an agreement with and supervision of the plaintiff, having undertaken no obligations to defendants, to whom she was unknown. Defendants never dealt with her and had no indication of any undertaking on her part to act as their agent until receipt of the process many months later. The court properly held such a purported appointment unreal and ineffective to create a genuine agency of Weinberg for defendants.

Plaintiff might have provided, with defendants' agreement, that service or notice be waived or that notice be given by plaintiff. See Bowles v. J. J. Schmitt & Co., 170 F.2d 617, 622 (2 Cir. 1948), Gilbert v. Burnstine, 255 N.Y. 348, 174 N.E. 706, 73 A.L.R. 1453 (1931). This would, however, have required defendants' consent, which might or might not have been forthcoming. The illusory purported agency provision, however, is properly held ineffective to subject defendants to suit in New York.

Affirmed.

LEONARD P. MOORE, Circuit Judge (dissenting).

The question here presented goes so much beyond the facts of this particular case that I believe my contrary view should be stated. After all, it may be said, who (except this plaintiff, of course) cares whether a Michigan farmer pays for machinery he has leased in New York? However, the federal jurisdiction problem presented here is of the greatest commercial importance to merchants and consumers who engage in interstate business transactions. Furthermore, the opinion of the majority would appear to be in conflict with Kenny Construction Co. v. Allen, 101 U.S. App.D.C. 334, 248 F.2d 656 (1957) and Green Mountain College v. Levine, 120 Vt. 332, 139 A.2d 882 (1958).

Plaintiff, a Delaware corporation with its principal place of business in New York, is in the business of purchasing equipment on its customers' orders for leasing to the customers on terms and conditions set forth in an instrument denominated a lease. Defendants, residents of Michigan, obtained farm equipment from plaintiff pursuant to such a lease, the last operative clause of which read:

"* * * and the Lessee hereby designates Florence Weinberg, 47-21 Forty-First Street, Long Island City, New York, as agent for the purpose of accepting service of any process within the State of New York."

Plaintiff, alleging default under the lease, commenced this action in the Eastern District of New York. The Marshal delivered two copies of the summons and complaint to defendants' designated agent, Florence Weinberg, who promptly mailed them to defendants with a covering letter, explaining that they had been served upon her as the defendants' agent in accordance with the provisions of the lease. On the same day, plaintiff itself notified defendants by certified mail of the service of process on Florence Weinberg. Twenty-two days after this service, counsel for defendants notified plaintiff's attorney that he was appearing specially to set aside the service of the summons and complaint. The District Court held the service invalid and quashed it.

The clause appointing the agent was no fine print clause buried in an oppressively long and complex instrument. The entire contract is only 1¼ pages long and the agency provision is in the last paragraph appearing directly above defendants' signatures. The clause was included in the contract for the purpose of subjecting defendants to suit in the courts¹ in New York and for no other purpose. Without such a clause plaintiff might well have refused to make the contract. To carry a New York obtained judgment to the other forty-nine States for enforcement is quite a different matter than trying lawsuits and engaging counsel for this purpose in these other States.

The trial court found that it was plaintiff's established practice to assure that prompt notice was sent to defendants of any action it brought against them. That citizens of different states may agree in advance that any disputes arising out of a commercial transaction between them shall be subject to the jurisdiction of the courts of a designated state is well established. United States v. Balanovski, 236 F.2d 298 (2d Cir. 1956); Kenny Construction Co. v. Allen, 101 U.S.App.D.C. 334, 248 F.2d 656 (1957); Erlanger Mills, Inc. v. Cohoes Fibre Mills, Inc., 239 F.2d 502 (4th Cir. 1956); Bowles v. J. J. Schmitt & Co., Inc., 170 F.2d 617 (2d Cir. 1948); Gilbert v. Burnstine, 255 N.Y. 348, 174 N.E. 706, 73 A.L.R. 1453 (1931); Restatement, Conflicts § 81; Restatement, Judgments § 18; Cf. Adams v. Saenger, 303 U.S. 59, 58 S.Ct. 454, 82 L.Ed. 649 (1938).

The only question presented by this appeal² therefore is whether the service made on Florence Weinberg is service on "an agent authorized by appointment * * * to receive service of process" within the meaning of Rule 4(d) (1) of the Federal Rules of Civil Procedure.³ The majority's strained search for the contract's "meaning" and "effect", and their invocation of Wuchter v. Pizzutti, 276 U.S. 13, 48 S.Ct. 259, 72 L.Ed. 446 (1928) to provide the unexpressed intendment of the parties do not obliterate the federal nature⁴ of the question being here decided. Although my colleagues do not expressly evince a desire to remove Rule 4(d) (1) from the books entirely, they not only substantially rewrite the Rule but also write for the parties a contract into which they probably never would have entered.

The majority initially concede that the constitutionally dictated requirements of Wuchter v. Pizzutti, supra, do not apply to contracts entered into by individuals. Then, in the guise of construing the contract in question, they read those same requirements into Rule 4(d) (1). That this is the effect of their decision is made clear by their concern that "there is no provision in the lease for any undertaking by the purported agent to * * * give notice to her purported principal." In Wuchter, the Supreme Court held invalid the non-resident motorist statute in question because "the statute of New Jersey * * * does not make provision for communication to the proposed defendant." Rule 4(d) (1) is now construed to mean that any agency arrangement that does not impose upon the designated agent a contractually unassailable duty to send notice is not sufficient to subject the appointing party to the personal jurisdiction of the courts of the designated state. The fact that notice was actually given is held to be of no consequence.

The Supreme Court, in Wuchter, declared that in those situations in which a State may subject a non-resident individual to the jurisdiction of its courts other than through personal service within the State, due process requires that the statutory scheme provide a means of service reasonably calculated to apprise the defendant of the proceedings against him. Compare Wuchter, supra, with Hess v. Pawlowski, 274 U.S. 352, 47 S.Ct. 632, 71 L.Ed. 1091 (1927). See McGee v. International Life Insurance Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957); Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865 (1950). In that case the Court was dealing with the limitations on the coercive powers of the States imposed by the due process clause of the Fourteenth Amendment, and not with arrangements for service of process voluntarily agreed to by individuals. As Cardozo, J., said in related context, ...