Abbott Power Corp. v. Overhead Electric Co.

• Decision Date: 19 July 1976
• Citation: 60 Cal.App.3d 272,131 Cal.Rptr. 508
• Court: California Court of Appeals
• Parties: ABBOTT POWER CORPORATION, etc., Plaintiff and Appellant, v. OVERHEAD ELECTRIC COMPANY, etc., et al., Defendants and Respondents. Civ. 15537.

Page 508

131 Cal.Rptr. 508

60 Cal.App.3d 272

ABBOTT POWER CORPORATION, etc., Plaintiff and Appellant, v. OVERHEAD ELECTRIC COMPANY, etc., et al., Defendants and Respondents.

Civ. 15537.

Court of Appeal, Fourth District, Division 2, California.

July 19, 1976.

Hearing Denied Sept. 29, 1976.

M. Stephen Coontz, Santa Ana, for plaintiff and appellant.

Jones & Wilson and George W. Coleman, Los Angeles, for defendants and respondents.

OPINION

KAUFMAN, Associate Justice.

Plaintiff Abbott Power Corporation (hereinafter 'plaintiff') appeals from an order of the trial court quashing service of summons upon defendant Uhl & Lopez Engineers, Inc. (hereinafter 'Uhl & Lopez'). (See Code Civ.Proc., § 904.1(c).)

Procedural Background

In a complaint filed March 21, 1975, plaintiff sued defendant Overhead Electric Company (hereinafter 'Overhead') and Uhl & Lopez seeking compensatory damages against Overhead for breach of contract and compensatory and punitive damages against Uhl & Lopez for intentionally and maliciously inducing Overhead's alleged breach. Uhl & Lopez made a motion to quash service of process on the ground that the court lacked jurisdiction over it. (See Code Civ.Proc., § 418.10(a)(1).) After considering an affidavit filed in support of the motion and a declaration in opposition thereto, on May 22, 1975, the trial court granted the motion to quash.

Facts

The material facts are not disputed. ¹ Uhl & Lopez is a New Mexico corporation having its principal place of business in Albuquerque, New Mexico. Uhl & Lopez is engaged in the business of consulting electrical engineering and employs electrical engineers licensed as such by the State of New Mexico, none of whom are licensed by the State of California. It does not do any business in the State of California. Uhl & Lopez was retained by the United States Government to perform professional electrical engineering services for a project at the Los Alamos Scientific Laboratory, at Los Alamos, New Mexico. It was to perform the necessary design engineering work and to check and approve the engineering documents of the prime contractor and its subcontractors and suppliers. Uhl & Lopez had no contract with either plaintiff or Overhead.

Overhead is a California corporation having its principal place of business in Sacramento. It is the prime contractor on the government project in Los Alamos, New Mexico. Plaintiff is a California corporation having its principal place of business in Buena Park. In July 1974, plaintiff and Overhead entered into a contract pursuant to which plaintiff agreed to manufacture and supply the electrical switchgear for the Los Alamos project at a price of $275,854.

In October 1974 plaintiff prepared certain engineering drawings and other technical documents and sent them to Overhead which in turn forwarded them to Uhl & Lopez for approval. Notwithstanding that plaintiff had made no objection to nor indicated any deviation from the job specifications, Uhl & Lopez refused to process plaintiff's drawings until Uhl & Lopez received assurances from plaintiff that plaintiff would comply with the job specifications. In December 1974 Uhl & Lopez sent a letter to that effect to Overhead in Sacramento. Overhead, in turn, forwarded a copy of that letter to plaintiff. Patrick Gallagher, president of plaintiff, responded by letter to Overhead, giving such assurances and asking that its drawings and documents be approved as quickly as possible. On January 8, 1975, Uhl & Lopez wrote a second letter to Overhead in Sacramento stating that before work could progress, certain results from tests to be conducted on the equipment to be supplied by plaintiff would have to be provided. On January 21, 1975, Uhl & Lopez again wrote to Overhead in Sacramento requesting 'certified test results' before certain information requested by Overhead could be supplied.

In his declaration in opposition to the motion to quash, Gallagher stated that Uhl & Lopez knew that their requested test results could not be submitted at that time inasmuch as the tests could not be performed by plaintiff until the equipment had been manufactured which, in turn, could not be done until Uhl & Lopez had approved plaintiff's drawings. Gallagher also stated that he had been informed that J. Joseph Lopez, the secretary-treasurer of Uhl & Lopez, had stated, both to the the government contracting officer and to Mr. Ken Stevens, a representative of Overhead, that he did not want the electrical switchgear subcontract work to be performed by an 'independent manufacturer such as plaintiff but wanted the subcontract to be awarded to a 'major' manufacturer.

The complaint, incorporated by reference into Gallagher's declaration, alleges that Uhl & Lopez knew of the contract between Overhead and plaintiff and intentionally and maliciously induced Overhead to breach its contract with plaintiff by purposefully refusing to review and approve plaintiff's drawings.

Issue, Discussion and Disposition

The sole issue is whether Uhl & Lopez had sufficient contacts with the State of California to support judicial jurisdiction over it with respect to plaintiff's cause of action against it for intentionally inducing Overhead to breach its contract with plaintiff.

Section 410.10 of the Code of Civil Procedure provides: 'A court of this state may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States.' 'By imposing no limitation except those imposed by constitutional considerations, this section authorizes the broadest possible exercise of judicial jurisdiction.' (Quattrone v. Superior Court, 44 Cal.App.3d 296, 302, 118 Cal.Rptr. 548; accord: Sibley v. Superior Court, 16 Cal.3d 442, 445, 128 Cal.Rptr. 34, 546 P.2d 322.)

The outer limit of the constitutional exercise of jurisdiction over a foreign corporation was delineated by the United States Supreme Court in International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95, 161 A.L.R. 1057) and McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223. In McGee the high court stated: 'Since Pennoyer v. Neff, 95 U.S. 714, 24 L.Ed. 565, this Court has held that the Due Process Clause of the Fourteenth Amendment places some limit on the power of state courts to enter binding judgments against persons not served with process within their boundaries. But just where this line of limitation falls has been the subject of prolific controversy, particularly with respect to foreign corporations. In a continuing process of evolution this Court accepted and then abandoned 'consent,' 'doing business,' and 'presence' as the standard for measuring the extent of state judicial power over such corporations. . . . More recently in International Shoe Co. v. Washington . . . the Court decided that '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., 326 U.S. at page 316, 66 S.Ct. (154) at page 158.' (355 U.S. at p. 222, 78 S.Ct. at p. 200 (2 L.Ed.2d at pp. 225--226).)

In its 1969 Annual Report to the Governor and the Legislature, the Judicial Council of California commented at length upon the effect of Code of Civil Procedure section 410.10. Its comment in that respect is reprinted as an annotation to Code of Civil Procedure section 410.10 in West's Annotated California Codes. Relying heavily on Restatement Second, Conflict of Laws, the Judicial Council discussed in its comment a number of bases for the exercise of judicial jurisdiction over foreign corporations. Pertinent to the case at hand, among these are 'Doing an Act in State--Foreign Corporations' and 'Causing Effects in State by Act Done Elsewhere--Foreign Corporations.'

With respect to causing effects in the forum state by an act done elsewhere, the judicial council comment reads: 'A state (has) power to exercise judicial jurisdiction over a foreign corporation which causes effects in the state by an omission or act done elsewhere with respect to causes of action arising from these effects, unless the nature of the effects and of the corporation's relationship to the state make the exercise of such jurisdiction unreasonable. (Citations omitted.) ( ) This rule is the same as in the case of a natural person.' (14 West's Anno.Cal.Codes, p. 481; Rest.2d, Conflict of Laws, §§ 37, 50 and comment A to § 50; cf. Martinez v. Perlite Institute, Inc., 46 Cal.App.3d 393, 120 Cal.Rptr. 120; Quattrone v. Superior Court, supra, 44 Cal.App.3d 296, 118 Cal.Rptr. 548; National Life of Florida Corp. v. Superior Court, 21 Cal.App.3d 281, 98 Cal.Rptr. 435.)

"A state has a natural interest in the effects of an act within its territory even though the act itself was done elsewhere. The state may exercise judicial jurisdiction on the basis of such effects over the individual who did the act, or who caused the act to be done, provided that the nature of these effects and of the individual's relationship to the state are such as to make the exercise of jurisdiction fair to the individual and reasonable from the standpoint of international and interestate systems. . . .'

'There are three possible situations: (1) the act was done with the intention of causing effects in the state; (2) the act, although not done with the intention of causing effects in the state, could reasonably have been expected to do so; and (3) the act was not done with the intention of causing effects in the state and could not reasonably have been expected to do so. . . .

'The act may have been done with the intention of causing effects in the state. If so, the state may exercise the same judicial jurisdiction over the actor . . . as to causes of action arising from these effects As it could have exercised if these effects had...