Leney v. Plum Grove Bank, s. 80-1058

• Decision Date: 19 February 1982
• Docket Number: Nos. 80-1058,80-1093,s. 80-1058
• Citation: 670 F.2d 878
• Parties: 33 UCC Rep.Serv. 1054 Glen E. LENEY, Plaintiff-Appellant, Cross-Appellee, v. PLUM GROVE BANK, Defendant-Appellee, Cross-Appellant, and Sheldon Moss, Defendant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 878

670 F.2d 878

33 UCC Rep.Serv. 1054

Glen E. LENEY, Plaintiff-Appellant, Cross-Appellee, v. PLUM GROVE BANK, Defendant-Appellee, Cross-Appellant, and Sheldon Moss, Defendant.

Nos. 80-1058, 80-1093.

United States Court of Appeals, Tenth Circuit.

Feb. 19, 1982.

Frank J. Woodrow of Woodrow, Roushar & Weaver, Montrose, Colo., for Glen E. Leney.

Christopher Lane, Denver, Colo. (Marcia G. Enns of Dawson, Nagel, Sherman & Howard, Denver, Colo., and Harry D. Lavery of Berger, Newmark & Fenchel, Chicago, Ill., with him on the brief) for Plum Grove Bank.

Before McWILLIAMS and LOGAN, Circuit Judges, and BOHANON, District Judge ^*.

LOGAN, Circuit Judge.

Glen E. Leney appeals from the district court's entry of summary judgment in favor of Plum Grove Bank (Bank or Illinois bank) in the suit Leney brought to require the Bank to pay on a letter of credit. The Bank cross-appeals the court's denial of a motion to dismiss for lack of personal jurisdiction over the Bank.

Leney is the designated beneficiary in a letter of credit issued by the Bank in which the Bank agreed to pay Leney $130,000 upon compliance with the letter's terms. Illinois resident Sheldon Moss, the Bank's customer and the designated account party, procured the letter of credit from the Illinois bank at its Illinois location. The Bank mailed the letter to California resident Leney's attorney in Montrose, Colorado. According to its terms, Leney would receive payment upon presenting to the Illinois bank the letter of credit accompanied by documents showing Leney had sold to a designated Colorado corporation his interests in the real and personal property known as "Montorse (apparently Montrose) Base Metals Mills and Pokeepsie Mine Group Lease." By affidavit Leney states that the letter of credit was given as part payment for the sale to a Colorado corporation of real property, an ore reduction mill, and related equipment, all located in Colorado. Leney submitted the letter of credit to his bank in California, which transmitted a sight draft signed by Leney to the Illinois bank for payment. The Illinois bank refused to pay on the sight draft, stating it would not honor the letter of credit because of the California bank's improper endorsement and the absence of "necessary documents as described in the Letter of Credit." The California bank resubmitted the draft with an endorsement and a certificate concerning the transfer of the Colorado property. The Illinois bank again refused to honor the submission, asserting it did not comply with the requirements of the letter of credit. Leney then commenced this action.

The district court rejected the Bank's motion to dismiss for lack of personal jurisdiction over the defendant, but held in favor of the Bank on the merits. Cross-appealing on the jurisdictional issue, the Bank asks us to reach that issue only if we determine that the judgment on the merits should not be affirmed. Since a court without jurisdiction over the parties cannot render a valid judgment, we must address the jurisdictional issue first. We hold the court improperly accepted jurisdiction, and therefore we do not reach the merits of the controversy.

To obtain personal jurisdiction over a defendant not a resident of nor found in the forum state, the federal court must follow the state's jurisdictional statute, see Fed.R.Civ.P. 4(e), which is subject to the bounds of constitutional due process. See International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). The trial court concluded that Colorado's "long-arm" statute, Colo.Rev.Stat. § 13-1-124 (1974), subjected the Bank to the court's jurisdiction. It relied upon Van Schaack and Co. v. District Court, 189 Colo. 145, 538 P.2d 425 (1975), in which the Colorado Supreme Court upheld jurisdiction over a Kansas bank that had issued a letter of credit on behalf of its Kansas customer to a Colorado beneficiary in connection with obtaining an extension of time on a Colorado real estate transaction. In its due process analysis, the court found that the bank's actions had a "substantial connection" to Colorado because it had induced the extension of the contract there, its cancellation of the letter of credit caused consequences in Colorado, and the real estate was located in Colorado. Id. at 426. While the factual distinctions between Van Schaack and the case at bar may be unimportant, and while we are bound by the Colorado Supreme Court's interpretation of its own statute, we are not bound by its interpretations of the Due Process Clause of the United States Constitution. See Empire Abrasive Equip. Corp. v. H. H. Watson, Inc., 567 F.2d 554, 556 n.1 (3d Cir. 1977). We must independently determine whether asserting jurisdiction in the federal district court in Colorado over the Illinois bank violates due process.

The Due Process Clause requires that before a court can exercise personal jurisdiction over a nonresident defendant, the defendant must have had such "minimum contacts" with the forum state that maintenance of the suit "does not offend 'traditional notions of fair play and substantial justice.' " International Shoe, 326 U.S. at 316, 66 S.Ct. at 158 (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 342, 85 L.Ed. 278 (1940)). When analyzing individual fact situations under International Shoe's "minimum contacts" or "fundamental fairness" doctrine, some courts have focused upon a defendant's physical connections to the forum state. Others have not regarded the physical contacts as being of overriding importance and have taken what we believe is the proper approach by focusing more broadly on the fairness of requiring the defendant to defend in the forum state. See Casad, Shaffer v. Heitner: An End to Ambivalence in Jurisdiction Theory?, 26 Kan.L.Rev. 61, 64-65 (1977). World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980), declared the defendant's "conduct and connection with the forum State (must be) such that he should reasonably anticipate being haled into court there." In determining whether it may fairly exercise jurisdiction based on the defendant's connections with the forum state, a court may consider the burden on the defendant, the forum state's interest in adjudicating the dispute, the plaintiff's interest in obtaining convenient, effective relief, and the judicial system's interest in efficiently resolving controversies. Id. at 292, 100 S.Ct. at 564.

The Illinois bank's nexus with Colorado was very limited. The Bank's only place of business was in Illinois, and it was not authorized to do business, did no business, and had no agents or employees in Colorado. The...