558 P.2d 764 (Wash. 1977), 44160, Crose v. Volkswagenwerk Antiengesellschaft

Docket Nº:44160.
Citation:558 P.2d 764, 88 Wn.2d 50
Opinion Judge:DOLLIVER,
Party Name:Margaret N. CROSE and Robert F. Crose, her husband, Respondents, v. VOLKSWAGENWERK AKTIENGESELLSCHAFT, a Foreign Corporation, et al., Petitioners.
Attorney:Hackett, Beecher & Hart, A. R. Hart, Seattle, for petitioners., Gavin, Robinson, Kendrick, Redman & Mays, Leo C. Kendrick, Joel E. Smith, Yakima, for respondents.
Case Date:January 06, 1977
Court:Supreme Court of Washington

Page 764

558 P.2d 764 (Wash. 1977)

88 Wn.2d 50

Margaret N. CROSE and Robert F. Crose, her husband, Respondents,



al., Petitioners.

No. 44160.

Supreme Court of Washington, En Banc.

January 6, 1977

[88 Wn.2d 51]

Page 765

Hackett, Beecher & Hart, A. R. Hart, Seattle, for petitioners.

Gavin, Robinson, Kendrick, Redman & Mays, Leo C. Kendrick, Joel E. Smith, Yakima, for respondents. [88 Wn.2d 52]

DOLLIVER, Associate Justice.

This is a products liability case in which respondents claim injury from a defective automobile. We issued a writ of certiorari to review the trial court's order denying the following motions: Motion by Volkswagenwerk Aktiengesellschaft (VW-Germany) and Volkswagen of America, Inc. (VW-America) to dismiss for lack of jurisdiction; motion by VW-Germany and VW-America to quash service of process; and motion by VW-America for a summary judgment.

The accident giving rise to this litigation occurred in California while Margaret Crose, one of the respondents, was a passenger in a Volkswagen microbus owned by residents of California. The respondents are residents of Yakima County, Washington. The vehicle was ordered in California for delivery in Germany and was subsequently shipped by the owner to California.

The trial court held that jurisdiction over the petitioners was properly obtained pursuant

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to RCW 4.28.080, which reads, in part:

The summons shall be served by delivering a copy thereof, as follows:

(10) If the suit be against a foreign corporation or nonresident joint stock company, partnership or association doing business within this state, to any agent, cashier or secretary thereof.

Service of process was made upon an officer of VW-Germany in Germany where it is incorporated. VW-America, a New Jersey corporation, was served in that state. Riviera Motors, an Oregon corporation, was served in Oregon and in Washington where it maintains a registered agent, CT Corporation System. VW-Germany and VW-America each contend that they were not 'doing business' in the State of Washington within the meaning of RCW 4.28.080(10); that to subject either of them to in personam jurisdiction would violate the due process clause of the Fourteenth Amendment; and that CT Corporation, while acting as an agent [88 Wn.2d 53] for Riviera Motors, was not an adequate agent for VW-Germany or VW-America. We disagree on each point.

VW-Germany is a German corporation which engages in the manufacture of Volkswagen automobiles, parts and accessories. It manufactured the automobile in which Mrs. Crose was injured. VW-Germany is also listed as the seller of the Volkswagens purchased through the tourist delivery program, through which the automobile in question was purchased. VW-Germany has no office or place of business in Washington under the name Volkswagenwerk Aktiengesellschaft, nor does it pay any state tax.

VW-America, a New Jersey corporation, is the sole importer of Volkswagen automobiles and products into the United States. All the stock in VW-America is owned by VW-Germany. Four of VW-America's 6-member board of directors are on the board of directors of VW-Germany. VW-America sells the products to regional distributors; it does not sell directly to dealers in the State of Washington.

Riviera Motors, originally joined as a party defendant, was dismissed by the trial court pursuant to a motion for a summary judgment. Riviera Motors, incorporated in Oregon, is the regional distributor of Volkswagen automobiles in the Pacific Northwest and Alaska. Riviera Motors did not sell nor did it service the vehicle in question. Neither VW-Germany nor VW-America own stock in Riviera.

The record indicates that the contractual controls exerted by VW-America over Riviera Motors are extensive. No change in the beneficial ownership of Riviera or in the makeup of its executives can be made without the prior written consent of VW-America. All appointments of dealers in the State of Washington by Riviera require the written consent of VW-America. Riviera must maintain certain minimum financial requirements set by VW-America which are subject to review and revision by VW-America. The text of all dealer agreements must be approved in writing by VW-America, and Riviera's approval of any structural change or change in location, beneficial ownership or management of a dealership [88 Wn.2d 54] requires the prior written consent of VW-America. Riviera must use such accounting forms, business machines, data processing equipment and other office equipment as may be required by VW-America, as well as the Volkswagen uniform accounting system. This is merely a sampling of the extensive contractual control of VW-America over Riviera's organization, finances, advertising and personnel.

The statute in question, RCW 4.28.080(10), was enacted into law in 1893. It preceded and is not to be confused with Washington's long-arm statute, RCW 4.28.185. In the past, this court has held RCW 4.28.080(10) requires that the nonresident defendant transact a substantial part of its ordinary business in the state. The business must be continuous in that it is distinguished from merely a causal or occasional transaction. It must be of such a character

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as to give rise to a legal obligation. International Shoe Co. v. Washington, 326 U.S. 310, 319, 66 S.Ct. 154, 90 L.Ed. 95 (1945); Alto v. Hartwood Lbr. Co., 135 Wash. 368, 372, 237 P. 987 (1925); Rich v. Chicago, Burlington & Quincy R.R. Co., 34 Wash. 14, 17, 74 P. 1008 (1904). Also see generally G. Hornstein, Corporation Law & Prac., § 581 (1959).

This court has not previously been confronted with the propriety of in personam jurisdiction under RCW 4.28.080(10) over a foreign corporation with a distribution system comparable to that of the Volkswagen corporations. Petitioners have argued that our decision be determined by State v. Northwest Magnesite Co., 28 Wash.2d 1, 182 P.2d 643 (1947), in which this court held that the two foreign corporations holding the stock in a separate domestic corporation were not 'doing business' within the State of Washington. See also Bankers Holding Corp. v. Maybury, 161 Wash. 681, 297 P. 740 (1931). The stock ownership of VW-Germany in VW-America is not decisive in this case, and we find State v. Northwest Magnesite Co., supra, to be inapplicable.

We have no hesitancy in finding that the distribution scheme for Volkswagen products provides a sufficient basis for holding that VW-America and VW-Germany are [88 Wn.2d 55] 'doing business' in the State of Washington. Our holding is bolstered in this case by...

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