Action Industries, Inc. v. Wiedeman

• Decision Date: 22 September 1975
• Parties: ACTION INDUSTRIES, INC., Appellee, v. Walter J. WIEDEMAN, a/k/a Walt Wiedeman, Appellant.
• Court: Pennsylvania Superior Court

Page 798

346 A.2d 798

236 Pa.Super. 447

ACTION INDUSTRIES, INC., Appellee, v. Walter J. WIEDEMAN, a/k/a Walt Wiedeman, Appellant.

Superior Court of Pennsylvania.

Sept. 22, 1975.

Rehearing Denied Nov. 24, 1975.

J. Jerome Mansmann, Clifford L. Tuttle, Jr., Pittsburgh, for appellant.

John M. Crimmins, Kaufman & Harris, Pittsburgh, for appellee.

Before WATKINS, President Judge, and JACOBS, HOFFMAN, CERCONE, PRICE, VAN der VOORT and SPAETH, JJ.

SPAETH, Judge.

This is an appeal from an order dismissing preliminary objections to jurisdiction and venue. ¹ Appellant contends that the court did not have In personam jurisdiction over him because he is a nonresident not within the reach of Pennsylvania's 'long arm' statute, Act of Nov. 15, 1972, P.L. 1063, No. 271, § 8301 Et seq., eff. Feb. 13, 1973, 42 Pa. S. § 8301 Et seq. (Supp. 1973--74), and that the substituted service used to obtain jurisdiction over him was invalid because the suit was not filed in the county where the action arose as required by Pa.R.Civ.P. 2077--2079.

On November 9, 1973, appellee filed a complaint in trespass alleging breach of employment duties and conversion by appellant. Since appellant is a resident of Ohio, service was made upon the Department of State. On January 24, 1974, appellant filed preliminary objections to the complaint. Although the objections were properly endorsed with a Notice to Plead within twenty days, appellee did not file a responsive pleading. The court below dismissed the preliminary objections without opinion, and this appeal followed.

Appellant initially asserts that because of appellee's failure to respond to the preliminary objections, the allegations of fact made by the objections must be taken as true, and the objections sustained on that basis. It is true that failure to answer preliminary objections endorsed with a notice to plead constitutes an admission. Goodrich-Amram § 1028(c)--2 (Supp.1974). Pa.R.Civ.P. 1029(b) provides:

(b) Averments in a pleading to which a responsive pleading is required are admitted when not denied specifically or by necessary implication. . . .

It does not follow, however, that the preliminary objections must be sustained; that depends upon the facts that have been admitted. Furthermore, there is no admission of conclusions of law as distinct from allegations of fact. Goodrich-Amram § 1028(c)--2. Cf. Philadelphia and Reading Coal and Iron Co. v. Tamaqua Borough Sch. Dist., 304 Pa. 489, 495, 156 A. 75, 76 (1931); Klerlein v. Fred Werner Co., Inc., 98 Pa.Super. 440, 446 (1929). Accepting as true the uncontradicted factual allegations of appellee's complaint and the additional factual allegations of appellant's preliminary objections, 2 Anderson Pennsylvania Civil Practice § 1017.19, the case may be stated as follows.

Appellee is a Pennsylvania corporation with its principal office in Allegheny County. Appellant is a resident of Ohio. On December 17, 1968, appellant and appellee executed an employment contract, effective January 1, 1969, under which appellant was to perform substantial services for appellee in Pennsylvania, specifically in Allegheny County. From January 1, 1969, to July 7, 1971 appellant performed under that contract.

On July 7, 1971, appellant assumed employment duties for appellee in the Plasta-Craft, Inc., plant at 330 Grandview Ave., Wadsworth, Ohio. ² These duties arose in conjunction with an agreement entered into by appellee and Plasta-Craft on July 19, 1969. Under that agreement appellee delivered raw materials to Plasta-Craft, which Plasta-Craft used in the manufacture of plastic household goods for appellee. Appellee retained a purchase money security interest under the Uniform Commercial Code, § 9--101 Et seq., in the raw materials and in the goods produced from those materials. At the time of the agreement, appellant was president of Plasta-Craft, as well as an employee of appellee. To protect appellee's security interest, appellant, as an employee of appellee, was charged with the duty of making periodic telephone reports from the Plasta-Craft plant in Ohio to appellee's office in Allegheny County; in these reports appellant would state the quantities of materials and goods on hand at the plant. Appellee relied on appellant to supply accurate information. ³

On March 31, 1973, Plasta-Craft ceased operations at the Ohio plant, it is now without any assets and has substantial liabilities. On November 9, 1973, appellee filed the complaint in trespass in this action alleging in two counts that it had lost goods having a value of $98,300 as a result of (1) appellant's breach of his employment duties in that he telephoned false information, and (2) appellant's conversion to his own use of materials and goods in which appellee had a security interest.

I

In deciding whether appellant is within reach of the long-arm statute, two questions are presented: whether appellant's conduct was within the relevant provisions of the statute; and if it was, whether the exercise of In personam jurisdiction over appellant in the particular circumstances of this case complies with the constitutional mandate of due process of law.

A

The long-arm statute, Supra, contains three sections under which a nonresident individual may be found amenable to suit in Pennsylvania: §§ 8303, ⁴ 8304, ⁵ and 8305. The section most applicable to the present case is § 8305: Causing harm by individuals. It provides:

Any nonresident of this Commonwealth who, Acting outside of this Commonwealth, individually, under or through a fictitious business name, or through an agent, servant or employee, shall have Caused any harm within this Commonwealth on or after August 30, 1970, shall be subject to service of process in any civil action or proceeding in the courts of this Commonwealth Arising out of or by reason of any such conduct. Service of process in any such civil action of proceeding shall be effected through the Department of State as provided in this chapter. (Emphasis added.)

The torts asserted in this case--breach of employment duties by transmission of false information and conversion--commenced with acts 'occurring outside of this Commonwealth,' and concluded with economic 'harm within this Commonwealth.' ⁶ The telephone calls allegedly conveying false information originated in Ohio, but were received and detrimentally relied upon in Pennsylvania. The goods that were the subject of the alleged conversion were stored in Ohio, but the harm resulting from the loss of the value of the security interest in those goods occurred in Pennsylvania. This harm arose 'out of or by reason of' appellant's alleged conduct. § 8305 therefore supports In personam jurisdiction over appellant. ⁷

B

In deciding whether the exercise of In personam jurisdiction over appellant complies with due process of law, the standard to be applied was set forth in International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945) as follows:

. . . 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 maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'

The nature of the 'minimum contacts' required under this standard was illustrated in McGee v. International Life Insurance Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957), where the Supreme Court held that due process was satisfied when jurisdiction was exercised over a nonresident corporation whose only contacts with the forum state were that it mailed a life insurance policy to that state and thereafter received the payment of premiums by mail from that state. The standard was further defined one year later when the Court stated that due process requires that a defendant 'purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.' Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1240, 2 L.Ed.2d 1283 (1958).

In applying this standard, the courts have not hesitated to expand the concept of In personam jurisdiction in conjunction with recent developments in modern transportation and communications. Rosen v. Solomon, supra. See McGee v. International Life Insurance Co., supra at 355 U.S. 222--23, 78 S.Ct. 199. The standard, however, does not lend itself to mechanical application; it must be applied on a case-by-case basis. Rosen v. Solomon, supra at 919. In Proctor & Schwartz v. Cleveland Lumber Co., 228 Pa.Super. 12, 19, 323 A.2d 11, 15 (1974), this court, per Jacobs, J., has set forth 'certain guidelines which aid in the factual analysis necessary to make the determination of whether the requisite 'minimum contacts' are present in a given case.' Although these guidelines were promulgated in a case dealing with a foreign corporation, rather than with a nonresident individual, they are also useful in a similar determination for an individual if they are carefully applied. ⁸ The guidelines are as follows:

First, the defendant must have purposefully availed itself of the privilege of acting within the forum state thus invoking the benefits and protections of its law . . .. Secondly, the cause of action must arise from defendant's activities within the forum state . . .. Lastly, the acts of the defendant must have a substantial enough connection with the forum state to make the exercise of jurisdiction over it reasonable . . ..

It is evident that in the present case each of these guidelines is satisfied. Appellant voluntarily entered into a contract to perform substantial services for appellee in Allegheny County; he thus invoked the benefits of Pennsylvania law. His activities occurred in Ohio, but they also occurred in Pennsylvania, for his allegedly false telephone reports were received here, and the economic harm suffered as a result of his...