Amco Transworld, Inc. v. M/V BAMBI, 64-H-204.

• Decision Date: 09 August 1966
• Docket Number: No. 64-H-204.,64-H-204.
• Citation: 257 F. Supp. 215
• Parties: AMCO TRANSWORLD, INC., and Pan American Trade Development Corp., Libellants, v. M/V BAMBI, Her Engines, Tackle, Apparel, etc., D/S A/S Banafart and A/S Gulftrade, and Societe Metallurgique de Normandie, Respondents.
• Court: U.S. District Court — Southern District of Texas

257 F. Supp. 215

AMCO TRANSWORLD, INC., and Pan American Trade Development Corp., Libellants, v. M/V BAMBI, Her Engines, Tackle, Apparel, etc., D/S A/S Banafart and A/S Gulftrade, and Societe Metallurgique de Normandie, Respondents.

No. 64-H-204.

United States District Court S. D. Texas, Houston Division.

August 9, 1966.

Bracewell & Patterson, Houston, Tex., Harold R. DeMoss, Jr., Houston, Tex., for libellants.

Baker, Botts, Shepherd & Coates, Houston, Tex., Dale Harvill, Houston, Tex., for respondent D/S A/S Banafart and A/S Gulftrade.

Butler, Binion, Rice, Cook & Knapp, Houston, Tex., Fletcher Etheridge and Richard H. Caldwell, Houston, Tex., for respondent Societe Metallurgique de Normandie.

MEMORANDUM

INGRAHAM, District Judge.

The respondent Societe Metallurgique de Normandie (hereinafter "Societe") has filed its motion to dismiss for want of jurisdiction. Societe was joined as a respondent in a suit brought by the owners and consignees of cargo damaged in transit. Societe is a French corporation and was the vendor of the damaged cargo and the charterer of the vessel on which the goods were shipped. The other respondents in the suit are the vessel "M/V Bambi" and two Norwegian corporations who own the vessel.

Societe received purchase orders from the libellant AMCO Transworld, Inc. (hereinafter AMCO), which Societe accepted in France and mailed notice of acceptance to AMCO. This transaction resulted in the contracts for sale of goods by Societe to AMCO. The goods were sold on a cost and freight basis (c. & f.).

The goods which AMCO purchased from Societe were shipped to Texas pursuant to a voyage charter party between Societe and the co-respondents who own the vessel "M/V Bambi". The terms of the voyage charter party provided that Societe's stevedores would load the cargo in France but the cargo was to be discharged from the vessel free of expense to the charterer.

Societe received the purchase price for the goods sold to AMCO by issuing drafts drawn on a Texas bank. These drafts were honored by the bank pursuant to a letter of credit contract between the bank and the purchaser, AMCO.

Process was served on Societe in this lawsuit pursuant to Article 2031b, Vernon's Annotated Civil Statutes. The motion to dismiss for want of jurisdiction initially raises the basic issue as to what the scope of Article 2031b is.

Article 2031b provides for service of process on the Secretary of State as agent for foreign corporations "doing business" within the purview of the statute. Section 4 of Article 2031b defines "doing business" in the following terms:

"For the purpose of this Act, and without including other acts that may constitute doing business, any foreign corporation * * * shall be deemed doing business in this State by entering into contract by mail or otherwise with a resident of Texas to be performed in whole or in part by either party in this State, or the committing of any tort in whole or part in this State."

In Lone Star Motor Import, Inc. v. Citroen Cars Corp., 288 F.2d 69, at page 73 (5 CA 1961), the following statement (dicta) is made by Judge Brown in reference to the scope of Article 2031b:

"(T)he Texas purpose was to exploit to the maximum the fullest permissible reach under federal constitutional restraints. It was also, as it has been for other states, a means of avoiding the troublesome difficulties of tying amendability amenability of service of process to taxability of a foreign corporation, or denying it access to the courts and related problems of the regulation of the right to do business." (footnotes omitted; parentheticals added).

This interpretation of the scope of Article 2031b has recently been accepted by implication by the Texas Court of Civil Appeals in Trinity Steel Co., Inc. v. Modern Gas Sales & Service, 392 S.W. 2d 861 (1965), error ref. n. r. e. In this case the court tested the amenability of a foreign corporation to service of process under Article 2031b in terms of the constitutional standard of "minimum contacts". The implication of the case is that if a foreign corporation has "minimum contacts", it is necessarily within the scope of Article 2031b. Although Section 4 of Article 2031b is somewhat ambiguous due to the phrase "without including other acts that may constitute doing business",¹ this court adheres to the view that the scope of Article 2031b is as broad as the constitutional standard of "minimum contacts". The determination to be made in this case is whether Societe had the requisite "minimum contacts" in Texas. There is no question raised as to the compliance with the procedural provisions of Article 2031b or the adequacy of notice received by Societe.

A brief summary of the evolution of the "minimum contacts" doctrine will suffice as it has been extensively discussed by many legal scholars.² International Shoe Co. v. State of Washington etc., 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95, 161 A.L.R. 1057 (1945), heralded the new approach by dispensing with the concept of "presence" and directing attention to the particular corporate activity and the contacts with the forum state. Several years later, McGee v. International Life Insurance Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957), illustrated the trend "toward expanding the permissible scope of state jurisdiction". In this case, a single insurance contract with a resident of the forum state was held to be sufficient contact with the state so as to subject the insurer to service of process. Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958), announced the existence of certain limitations on the expanded jurisdiction of the state courts. This case stated that a unilateral activity by those claiming a relationship with the non-resident entity is not a "contact" with the forum state and a non-resident defendant must purposefully avail himself of the privilege of conducting activities within the forum state.

The alleged contacts which Societe had with the State of Texas concerning the contracts for sale of goods to AMCO can be grouped in three categories: (1) Possible contacts arising from method by which Societe was paid for the goods; (2) Possible contacts arising from the fact that Societe was the charterer of the vessel on which the goods were shipped; (3) Possible contacts arising from the solicitation of the contracts from Texas corporations.

I.

Societe received payment for the goods sold to AMCO by virtue of a letter of credit contract between AMCO and a Texas bank. Societe issued drafts on the bank and on presentation of the drafts with the bills of lading, they were duly honored. The bank was then reimbursed pursuant to the letter of credit contract by AMCO and would endorse the bills of lading to AMCO.

The nature of a letter of credit contract is described in Gilmore & Black, The Law of Admiralty (1957), page 104, as follows:

"Involved in a letter of credit arrangement are three separate contracts. There is, first, the contract of sale between the seller and the buyer. Secondly, there is a contract between the issuing bank and its customer, the buyer, which provides for reimbursement of any advances made by the bank for its customer's account. Thirdly, there is the letter of credit itself, which is in substance a promise by the bank to pay drafts drawn by the beneficiary, the seller, up to a stated amount if presented to the bank before the expiration date of the credit with specified documents attached."

Payment by virtue of the letter of credit contract is an accommodation to the purchaser. The vendor, Societe, is only a beneficiary and not a party to the credit arrangement between the bank and AMCO. Societe was a party to the original sales contract with AMCO but it was made and performed outside Texas. It is the view of this court that payment by virtue of the letter of credit contract between the bank and AMCO did not...