Cowan v. First Ins. Co. of Hawaii, Ltd.

• Decision Date: 12 March 1980
• Docket Number: No. 6251,D,I-,6251
• Citation: 61 Haw. 644,608 P.2d 394
• Parties: Stuart M. COWAN, Plaintiff-Appellant, v. FIRST INSURANCE COMPANY OF HAWAII, LTD., Defendant-Appellant, and Frank Cottle, Ardell Marina, Inc., and John Doesefendants-Appellees.
• Court: Hawaii Supreme Court

Page 394

608 P.2d 394

61 Haw. 644

Stuart M. COWAN, Plaintiff-Appellant, v. FIRST INSURANCE COMPANY OF HAWAII, LTD. Defendant-Appellant, and Frank Cottle, Ardell Marina, Inc., and John Does I-X Defendants-Appellees.

No. 6251.

Supreme Court of Hawai'i.

March 12, 1980.

Syllabus by the Court

1. Hawaii's long-arm statute, HRS § 634-35 (1976) was adopted to expand the jurisdiction of the State's courts to the extent permitted by the due process clause of the Fourteenth Amendment.

2. Contracting in the State unquestionably constitutes "transacting business" under HRS § 634-35.

3. Where an interstate contract consummated through the mail or by telephone is involved the place of the last act of execution is not, of itself, determinative of whether any business has been transacted in the forum.

4. It is well-established that a nonresident defendant may be found to have transacted business in a state even though neither the defendant, nor any agent of the defendant, had ever been physically present in the forum.

5. Finding the requisite transaction of business demands an examination of all the defendants' activities within the forum related to the present cause of action.

6. The Court may consider that defendant regularly advertised the sale of ships in national magazines sold in Hawaii and that such advertisements led to the formation of the contract to sell plaintiff's boat located in Hawaii in determining whether defendant's total activities in the State satisfy the transaction of business requirement of HRS § 634-35(a)(1).

7. The due process clause of the Fourteenth Amendment of the United States Constitution operates as a limitation on the jurisdiction of state courts over nonresidents; thus, the application of HRS § 634-35 must comport with the requirements of due process to be valid.

8. Before the courts of Hawaii may enter a binding judgment against a nonresident defendant, the defendant must have certain minimum contacts with Hawaii such that the maintenance of the suit does not offend "traditional notions of fair play and substantial justice."

9. While the interest of the forum state and of the plaintiff in the proceeding are to be considered, 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.

10. One must look to the quality and nature of the defendant's activity to determine whether it is both reasonable and fair to require the defendant to conduct his defense in the forum state.

11. Like other tests requiring the determination of reasonableness or fairness, the minimum contacts test precludes mechanical application; the facts of each case must be weighed to determine whether the requisite affiliating circumstances are present.

Robert E. Rau, Cowan & Frey, Honolulu, for plaintiff-appellant.

Joseph T. Kiefer, Carlsmith, Carlsmith, Wichman & Case, Honolulu, for defendant-appellant First Ins. Co.

Albert Gould, Benjamin L. Carroll, III, Gould & McKenzie, Honolulu, for defendants-appellees.

Before RICHARDSON, C. J., and OGATA and MENOR, ^* JJ.

RICHARDSON, Chief Justice.

Plaintiff-appellant Stuart M. Cowan and defendant-appellant First Insurance Company of Hawaii, Ltd. appeal an order entered by the first circuit court of the State of Hawaii dismissing plaintiff's complaint for lack of personal jurisdiction over nonresident defendants-appellees, Frank Cottle and Ardell Marina, Inc. We find that the circuit court erred in failing to find jurisdiction and vacate the order below.

Plaintiff-appellant Cowan (hereinafter plaintiff) is currently and at all times pertinent to this suit was a resident and citizen of the State of Hawaii. Defendants-appellees, Frank Cottle and Ardell Marina, Inc., are and at all times pertinent to this suit were residents and citizens of California. Defendant-appellee Ardell Marina, Inc. (hereinafter Ardell) is a California corporation engaged in the business of selling yachts and ships with brokerage offices located in Newport, California and Fort Lauderdale, Florida. Defendant-appellee Frank Cottle (hereinafter Cottle) is a yacht broker employed by Ardell.

In his complaint, the plaintiff charged defendants Cottle and Ardell with negligence in the care and custody of his sailboat "Chutzpah" and sought to recover for damages sustained by the boat. ¹ The context in which this claim arose and the critical jurisdictional facts are set forth below.

Between 1974 and 1976, Ardell, doing business as Ardell Yacht and Ship Brokers, regularly advertised the sale of boats in national publications including, but not limited to, Sea Magazine and Yachting Magazine which were distributed and sold in Hawaii. After reading Ardell's advertisements in such publications, the plaintiff in August 1974 wrote a letter to Ardell inquiring as to the use of their services in the sale of his boat "Chutzpah." On behalf of Ardell, Cottle responded to the plaintiff's inquiry in a letter dated August 20, 1974 stating in part:

I have enclosed a copy of our multiple listing agreement for your inspection, along with a specification form to be filled out if you should decide to list the boat at this time.

The multiple listing agreement forwarded to the plaintiff contained two signature lines, one for the boat owner and one for Ardell. At the time of receipt, the agreement was unsigned. The specification form, enclosed in the same letter, contained a single signature line for the boat owner wishing to enlist Ardell's services.

On August 30, 1974, in Honolulu, the plaintiff signed the listing agreement, completed and signed the specification form and mailed them back to Ardell. The terms of the listing agreement established Ardell as the exclusive central agent for the sale of "Chutzpah" at a listing price of $45,000 and set Ardell's commission at ten percent of the gross sales price. If the plaintiff chose to sell his boat on his own while the agreement was in effect, Ardell would nevertheless be entitled to a service fee of three percent of the selling price. The agreement further stated that Ardell would make arrangements for showing the vessel to interested parties and that it would regularly inform the owner of the progress being made toward the sale of the boat. The agreement was to remain in effect "until the boat was sold unless cancelled by either party by written notice which shall be effective sixty days after receipt."

On September 10, 1974, Cottle wrote back to the plaintiff acknowledging receipt of the signed listing agreement and proceeded to advise the plaintiff on the sale of his boat. The listing agreement was not enclosed with the letter and, although bearing a place for countersignature, was in fact never countersigned by Ardell. Given the boat's location in Hawaii, Cottle suggested that "Chutzpah" be advertised in Sea Magazine at Ardell's special rates and enclosed the necessary forms. These forms were signed by the plaintiff in Hawaii and mailed back to Ardell; consequently, "Chutzpah" was advertised in the October, 1974 issue of Sea Magazine. Shortly after the advertisement was placed, Cottle phoned the plaintiff and, as first suggested in his August 20th letter, urged the plaintiff to relocate the vessel on the west coast to expedite its sale. The plaintiff agreed and at his expense the sailboat was shipped to California and berthed in Ardell's marina where it was allegedly damaged.

To recover for such damages, plaintiff filed suit in Hawaii against defendants Cottle and Ardell. Prior to trial, the defendants moved to dismiss for lack of in personam jurisdiction contending that they lacked the requisite "minimum contacts" with the State necessary to impose jurisdiction under Hawaii's long-arm statute, HRS § 634-35 (1976). ² It is undisputed that Ardell is not licensed to do business in Hawaii; ³ maintains no offices nor owns any assets in the State; has no agents or representatives residing here; has never been listed in the State's telephone directories; and does not advertise in Hawaii publications. After a hearing, the circuit court granted the defendants' motion to dismiss.

On appeal, the plaintiff contends that, contrary to the determination of the lower court, jurisdiction validly exists under HRS § 634-35. The specific statutory provision relied on, HRS § 634-35(a)(1), provides as follows:

(a) Any person, whether or not a citizen or resident of this State, who in person or through an agent does any of the acts hereinafter enumerated, thereby submits such person, and, if an individual, his personal representative, to the jurisdiction of the courts of this State as to any cause of action arising from the doing of any of the acts:

(1) The transaction of any business within this State ;

(Emphasis added). The plaintiff argues that the defendants "transacted business" in Hawaii by: 1) entering into a contract in Hawaii with a Hawaii resident undertaking to manage the sale of personal property located in the State and 2) soliciting business in Hawaii through advertisements for the sale of yachts and boats placed in national magazines distributed and sold here.

The defendants refute the plaintiff's contentions by arguing that the listing agreement at issue became effective in California, not in Hawaii, and that therefore no contract was formed in the State and no business transacted. The defendants maintain that the only other contact with Hawaii proffered by the plaintiff, advertising in national publications sold here, fails to meet both the statutory and constitutional requirements for asserting jurisdiction over nonresidents.

Hawaii's long-arm statute, HRS § 634-35, was adopted to expand the jurisdiction of the State's courts to the extent permitted by the due process clause of the Fourteenth Amendment. ⁴ Thus, the issue presented here is whether, pursuant to HRS § 634-35, the...