Walter v. M. Walter & Co., Inc., Docket No. 109491

• Citation: 446 N.W.2d 507,179 Mich.App. 409
• Decision Date: 20 October 1989
• Docket Number: Docket No. 109491
• Parties: Marvin J. WALTER, Frank J. Walter, Michael Walter and Albert Walter, Plaintiffs-Appellees, v. M. WALTER & CO., INC., Defendant-Appellee, Robert G. Walter, D & R Christmas Tree Company, Donald P. Iden, and Croton Partnership, Defendants, and Edwin P. Walter and Richard Grotz, Defendants-Appellants. 179 Mich.App. 409, 446 N.W.2d 507
• Court: Court of Appeal of Michigan (US)

Page 507

446 N.W.2d 507

Marvin J. WALTER, Frank J. Walter, Michael Walter and Albert

Walter, Plaintiffs-Appellees, v. M. WALTER & CO., INC., Defendant-Appellee, Robert G. Walter, D & R Christmas Tree Company, Donald P.

Iden, and Croton Partnership, Defendants,

and

Edwin P. Walter and Richard Grotz, Defendants-Appellants.

Docket No. 109491.

179 Mich.App. 409, 446 N.W.2d 507

Court of Appeals of Michigan.

Submitted June 6, 1989.

Decided Aug. 9, 1989.

Released For Publication Oct. 20, 1989.

[179 MICHAPP 410] Landman, Latimer, Clink & Robb by Steven C. Kohl and Mary A. Owens, Muskegon, for plaintiffs-appellees.

Warner, Norcross & Judd by William K. Holmes and Kathleen M. Henenburg, Grand Rapids, for defendants Edwin P. Walter and Richard Grotz.

Before CYNAR, P.J., and CAVANAGH and KAUFMAN, ^* JJ.

PER CURIAM.

Defendants, Edwin P. Walter and Richard Grotz, appeal by leave granted from the order of the circuit court finding defendants subject[179 MICHAPP 411] to limited personal jurisdiction in Michigan. We affirm.

This case concerns a shareholders' derivative suit against, among others, two of defendant M. Walter & Co.'s officers and directors on the basis of mismanagement of corporate assets and usurpation of corporate opportunities. M. Walter & Co., Inc., is a Delaware corporation that does substantial business in Michigan growing, harvesting and marketing Christmas trees throughout the United States and Canada. The corporation has its principal place of business in Chicago.

Defendant Edwin P. Walter lives in Illinois, and his sole place of employment is at M. Walter & Co. in Chicago where he has performed all fiduciary duties and responsibilities with respect to this suit. He has no other related contacts with Michigan. He was served by mail in Illinois.

Defendant Richard Grotz lives, for tax purposes, in California 8 1/2 months a year, and the balance in Montana. Besides being a director of M. Walter & Co., he owns fifty percent of the stock in A. Walter, Inc., a Montana corporation, which does no business at all in Michigan. Mr. Grotz has been to Michigan only once in the last twenty years, and the visit was unrelated to business. He was served by mail in California.

The trial court found defendants subject to limited personal jurisdiction because the corporation in which they are directors does substantial business in Michigan, and the Michigan long-arm statute, as well as traditional notions of procedural fairness, are not offended by requiring them to come here and defend a suit.

Michigan's long-arm statute, M.C.L. Sec. 600.705; M.S.A. Sec. 27A.705, provides for limited personal jurisdiction over nonresident individuals under certain circumstances. The statute provides in pertinent part:

[179 MICHAPP 412] The existence of any of the following relationships between an individual or his agent and the state shall constitute a sufficient basis of jurisdiction to enable a court of record of this state to exercise limited personal jurisdiction over the individual and to enable the court to render personal judgments against the individual or his representative arising out of an act which creates any of the following relationships:

(1) The transaction of any business within the state.

(2) The doing or causing an act to be done, or consequences to occur, in the state resulting in an action for tort.

* * * * * *

(6) Acting as a director, manager, trustee, or other officer of a corporation incorporated under the laws of, or having its principal place of business within the state.

However, whether jurisdiction under the statute attaches in a particular case requires a two-step analysis. First, whether the exercise of limited personal jurisdiction violates the Due Process Clause of the Fourteenth Amendment of the United States Constitution. If not, then whether the rules of statutory construction support such an exercise of jurisdiction over defendants. Witbeck v. Bill Cody's Ranch Inn, 428 Mich. 659, 666 n. 3, 411 N.W.2d 439 (1987); but see Rainsberger v. McFadden, 174 Mich.App. 660, 662-663, 436 N.W.2d 412 (1989) (statute construed as giving the courts the broadest grant of jurisdiction consistent with due process).

Due process under the Fourteenth Amendment requires that the defendant have sufficient minimum contacts with the forum state such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice. International Shoe Co. v. Washington, 326 U.S. 310, 316, [179 MICHAPP 413] 66 S.Ct. 154, 158, 90 L.Ed. 95, 161 A.L.R. 1057 (1945); Witbeck, supra, 428 Mich. p. 666, 411 N.W.2d 439; Rainsberger, supra, 174 Mich.App. p. 663, 436 N.W.2d 412.

This Court has developed a three-part inquiry to determine whether a nonresident defendant has sufficient minimum contacts with Michigan to support the exercise of limited personal jurisdiction. First, the defendant must have purposely availed himself of the privilege of conducting activities in Michigan, thus invoking the benefits and protections of this state's laws. Second, the cause of action must arise from the defendant's activities in Michigan. Finally, the defendant's activities must have a substantial enough connection with Michigan to make the exercise of jurisdiction over the defendant reasonable. Rainsberger, supra, p. 663, 436 N.W.2d 412; McGraw v. Parsons, 142 Mich.App. 22, 26, 369 N.W.2d 251 (1985), lv. den., 423 Mich. 860 (1985).

The first prong is satisfied as defendants concede M. Walter & Co., Inc., does a substantial business farming, harvesting, and marketing Christmas trees in Michigan. Because of the magnitude of the operations, and a potential "huge loss to the corporation" from plaintiffs' alleged interference that defendant M. Walter & Co. alludes to in its answer, it is clear that the corporation, of which defendants-appellants are directors and officers, has purposely availed itself of the privilege of doing business in Michigan.

The second prong is also satisfied by plaintiffs' allegations in their verified complaint and petition for temporary restraining order, and first amended and supplemental complaint. Plaintiffs accuse defendant M. Walter & Co. of shipping unmarked trees, failing to keep proper...