King v. Hailey Chevrolet Company

• Decision Date: 16 June 1972
• Docket Number: No. 72-1101.,72-1101.
• Parties: James W. KING, Plaintiff-Appellant, v. HAILEY CHEVROLET COMPANY et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

462 F.2d 63 (1972)

James W. KING, Plaintiff-Appellant, v. HAILEY CHEVROLET COMPANY et al., Defendants-Appellees.

No. 72-1101.

United States Court of Appeals, Sixth Circuit.

June 16, 1972.

Harold H. Gearinger, Chattanooga, Tenn., for plaintiff-appellant; Gearinger, Bowles & Petty, Chattanooga, Tenn., on brief.

T. Maxfield Bahner, Chattanooga, Tenn., for General Motors; Chambless, Bahner & Crawford, Chattanooga, Tenn., of counsel.

Stuart E. Duncan, Chattanooga, Tenn., for Indiana Trailer; Duncan & Breazeale, Chattanooga, Tenn., of counsel.

Before WEICK, McCREE and MILLER, Circuit Judges.

WILLIAM E. MILLER, Circuit Judge.

James King decided to enter the business of hauling mobile homes and purchased a tractor-truck from Hailey Chevrolet Company in Chattanooga, Tennessee. The length of the truck was shortened by Indiana Trailer Supply, Inc., an Indiana corporation with its principal place of business in Elkhart. The purchase price of the truck plus the cost of the modification by Indiana Trailer was financed by General Motors Acceptance Corporation at its Chattanooga office. Subsequent to the modification, King experienced continuous difficulties with the truck until it completely broke down. He then initiated this action against Hailey Chevrolet, GMAC, and Indiana Trailer. On the motions of GMAC and Indiana Trailer, and following the filing of affidavits and answers to interrogatories, the district court rendered summary judgment for GMAC on the merits and dismissed the complaint as to Indiana Trailer for lack of personal jurisdiction. King appeals that decision.¹

The appellant claims first, that there exist factual questions concerning the relationship between Hailey Chevrolet and GMAC, and second, that Indiana Trailer had the necessary minimum contacts with Tennessee required by due process for the exercise of personal jurisdiction.

King is a resident of Ringgold, Georgia several miles south of Chattanooga, Tennessee. He knew that for his business he needed a truck no longer than ten feet, but apparently, the smallest available one was fifteen feet in length. He needed the smaller size vehicle because most states limit by statute the length of the combined truck and mobile home to seventy-five feet. Because most mobile homes are sixty-five feet long, the truck could not exceed ten feet. A truck may, however, be shortened by cutting it into two parts, removing a five foot section of the vehicle, and putting the two main parts back together.

The appellant would not have purchased a truck unless it could have been modified. King apprised Hailey of his needs, and the dealer assured him that the necessary modification could be arranged. The record leaves some doubt as to who actually chose Indiana Trailer Supply, Inc., to perform the necessary adjustment. It is undisputed, however, that Hailey Chevrolet possessed knowledge of the relatively few companies able to perform the desired modification. Also, Indiana Trailer advertised in the "Silver Book," a trade manual distributed by General Motors Corporation to Chevrolet dealers, including Hailey Chevrolet. On at least one other occasion, Indiana Trailer had worked on a vehicle sold by Hailey Chevrolet. In any event, Indiana Trailer was selected.

Before agreeing to sell the truck, Hailey had GMAC confirm that it would finance the purchase by buying the installment sales contract from the dealer. Hailey and King entered into a purchase order contract on September 30, 1970.

Hailey then called Indiana Trailer and the two parties agreed over the telephone on a specific price for the work. The dealer advanced payment to the Indiana corporation. This cost was to be added to the installment sales contract. Thereafter King transported the truck to Elkhart. Ordinarily an employee of the dealer would drive the vehicle, but on this occasion, King drove the truck in order to save the expenses of the Hailey employee.

After Indiana Trailer shortened the truck, appellant began his return home. He first experienced difficulty with the truck while driving through Tennessee. Problems developed in the electrical system; the vehicle vibrated; and the rear end of the truck made a roaring noise. Nevertheless, on October 13, 1970, King and Hailey executed an installment sales contract which was purchased by GMAC. Thereafter, King experienced constant trouble with the truck, and it finally completely broke down about two months later. Because of these difficulties, King was unable to use the truck and thus lost the source of his income. When King failed to meet the payments for the vehicle, GMAC repossessed. King apparently failed to receive satisfactory corrective work from the dealer. He could not afford to transport the truck to Elkhart, and Indiana Trailer would not pay the expense for returning the truck. King then instituted this action seeking to recover lost income and other damages.

I

Appellant's theory as to liability on the part of GMAC is that the finance organization acted in concert with Hailey and was as involved with the contract between Indiana Trailer and Hailey as was the dealer. King posits that because GMAC knew of the proposed modification and thereafter financed the cost of the alteration it became a primary party to the contract between Hailey and Indiana Trailer. The district court found no genuine issue as to any material fact concerning the relationship between GMAC and Hailey.

Upon the present record, King was not required to finance his purchase through GMAC. The automobile dealer, prior to completing the sale, merely checked on King's credit and sought to determine whether the installment sales contract would be purchased.

The district court properly held that GMAC was merely a purchaser of commercial paper. There is no suggestion that GMAC was responsible for the alleged negligence which caused King's problems. There are present no facts tending to suggest that GMAC did more than advise the dealer that it would purchase the proposed contract. It was thus proper for the trial court to sustain the motion for summary judgment and to dismiss the action as to GMAC.

II

Concerning Indiana Trailer, appellant contends that the corporation was amenable to the in personam jurisdiction of Tennessee. An assessment of this claim must consider both Tennessee and federal law. In a diversity action, a district court's personal jurisdiction is, of course, determined by the law of the forum. Velandra v. Regie Nationale Des Usines Renault, 336 F.2d 292 (6th Cir. 1964). Here, the applicable law is the Tennessee long-arm statute, T.C.A. § 20-235.² While the appellant claims that jurisdiction over the appellee was obtained under subsections (a), (b), (d), and (e) of the statute, we consider only the assertion that jurisdiction over Indiana Trailer was permissible because the claim here arises out of the transaction of business in Tennessee by Indiana Trailer.

Tennessee has declared that its long-arm statute should be construed as asserting jurisdiction over non-residents to the extent permitted by the due process clause of the Fourteenth Amendment. Darby v. Superior Supply Co., 224 Tenn. 540, 458 S.W.2d 423 (1970). Thus we examine Indiana Trailer's affiliation with Tennessee in light of federal constitutional requirements. The principal teaching on the exercise of jurisdiction by one state over the residents of another is, of course, contained in International Shoe Company v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). There the Supreme Court declared the now familiar standard:

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." Id., at 316, 66 S.Ct. at 158.

The Court further stated:

Whether due process is satisfied must depend rather upon the quality and nature of the activity in relation to the fair and orderly administration of the laws which it was the purpose of the due process clause to insure. That clause does not contemplate that a state may make binding a judgment in personam against an individual or corporate defendant with which the state has no contacts, ties, or relations. Id., at 319, 66 S.Ct. at 160.

In seeking to implement the Court's charge to achieve that fundamental fairness consistent with the orderly administration of the law, this court established a framework for determining the outer limits of in personam jurisdiction based on a single act. Southern Machine Company v. Mohasco Industries, Inc., 401 F.2d 374 (6th Cir. 1968). Since Indiana Trailer's activities in Tennessee admittedly are not sufficient for Tennessee's exercise of jurisdiction over a cause of action arising outside the state, that framework is the reference applicable in this case.

In Southern Machine we noted that: "the doing of an act or the causing of a consequence in the forum state by the defendant can satisfy the requirements of the `minimum contacts' test," Id., at 380. Three criteria for determining the permissible limits of jurisdictional due process were stated in Southern Machine:

First, the defendant must purposefully avail himself of the privilege of acting in the forum state or causing a consequence in the forum state. Second, the cause of action must arise from the defendant\'s activities there. Finally, the acts of the defendant or consequences caused by the defendant must have a substantial enough connection with the forum state to make the exercise of jurisdiction over the defendant reasonable.³

In applying these criteria to the present factual situation, we first determine whether Indiana Trailer purposefully availed itself of the privilege of transacting business in Tennessee.⁴ That corporation would have transacted business in Tennessee if "obligations created by the defendant...