ANDALUSIA DISTRIB. v. Singer Hardware Co.

• Decision Date: 07 December 2001
• Citation: 822 So.2d 1180
• Parties: ANDALUSIA DISTRIBUTING CO., INC. v. SINGER HARDWARE CO., INC., and Sam Singer, Jr.
• Court: Alabama Supreme Court

822 So.2d 1180

ANDALUSIA DISTRIBUTING CO., INC. v. SINGER HARDWARE CO., INC., and Sam Singer, Jr.

1001485.

Supreme Court of Alabama.

December 7, 2001.

Mark John Christensen, Andalusia, for appellant.

David A. Hatfield, Eufaula, for appellees.

MOORE, Chief Justice.

Andalusia Distributing Co., Inc. (hereinafter "ADC"), sued Singer Hardware Co., Inc., a Georgia corporation, and Sam Singer, Jr. (hereinafter sometimes collectively referred to as "Singer"), alleging that Singer owed it $108,013.48 on an open account or account stated for goods sold and delivered. The trial court dismissed the action for lack of personal jurisdiction over Singer Hardware and Sam Singer, Jr. The Singers are not residents of the State of Alabama and the trial court held that their contacts with the State of Alabama were insufficient for the application of Alabama's long-arm statute. We reverse and remand.

Singer Hardware owns convenience stores in Georgia. ADC provides goods to convenience stores. ADC supplied goods to Singer Hardware for its convenience stores in Georgia from 1997 until 2000. At some point, Singer Hardware failed to pay for goods that originated in Covington County and were sold to the corporation in Georgia by ADC. When ADC sued to collect payment, Singer claimed that Singer Hardware and Sam Singer, Jr., had insufficient contacts with Alabama to supply an Alabama court with jurisdiction over them. The Singers filed a motion to dismiss, alleging personal jurisdiction was lacking. After hearing arguments by counsel, the circuit court dismissed the action.

ADC argues that the continuing nature of the business transaction it had entered into with Singer and the fact that Sam Singer, Jr., as president of Singer Hardware, telephoned ADC in Alabama to set up the account indicate that it was foreseeable that Sam Singer, Jr., and his company would be haled into an Alabama court if he failed to pay for the purchases. Singer Hardware and Sam Singer, Jr., argue that the relationship between the parties was initiated by an ADC salesman while the salesman was traveling in Georgia, that no representative of Singer Hardware has ever set foot or done business in Alabama, and that ADC is simply reluctant to sue Singer in a Georgia court because it faces a fine for failing to register in Georgia as a foreign corporation.¹

Rule 4.2(a)(2), Ala.R.Civ.P., sets out the circumstances under which an Alabama court has in personam jurisdiction over an out-of-state defendant. That rule sets out what are "sufficient contacts" for in personam jurisdiction. For determining whether personal jurisdiction exists over an out-of-state defendant, this Court has used a two-part analysis:

"1) the determination of whether it is foreseeable to that nonresident defendant that he will be sued in this state; and

"2) the determination of the degree of contact that the nonresident defendant has with this state."

Keelean v. Central Bank of the South, 544 So.2d 153, 156-57 (Ala.1989) (overruled on other grounds by Professional Ins. Corp. v. Sutherland, 700 So.2d 347 (Ala.1997)). Keelean appears to support ADC's argument. In that case, this Court held that the Alabama court had personal jurisdiction over out-of-state guarantors of a loan made at an Alabama bank. Holdco of Pinellas County, Inc., a Florida corporation, had executed and delivered to Central Bank of the South, an Alabama corporation, a promissory note in the principal amount of $4,000,000, guaranteed by several Florida residents. All negotiations involving the note occurred either by telephone or in Florida. The guaranty contained a forum-selection clause that the Court held to be invalid. However, the forum-selection clause contained the following language:

"Guarantor acknowledges further that the negotiation, execution and delivery of this Guaranty constitutes the transaction of business within the State of Alabama and that any cause of action arising under this Guaranty will be a cause of action arising from such transaction of business. Guarantor hereby submits himself to jurisdiction in the State of Alabama for any cause of action arising out of or in connection with this Guaranty and agrees that venue for any such action shall be in Jefferson County, Alabama."

Keelean, 544 So.2d at 155. Sam Singer, Jr., makes much of this provision and this Court's comment upon it in Keelean: "[I]t is clear that the signing of the contracts of guaranty for this loan gave appellants/guarantors the requisite `fair warning' required by Burger King Co. v. Rudzewicz, 471 U.S. 462, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985)...." 544 So.2d at 157.

The Keelean Court questioned the propriety of holding the guarantors liable:

"But, can those who guaranteed the loan and received no direct benefits from the loan made by Central to Holdco conceivably have foreseen being haled into an Alabama court on this debt? Or, does the mere signing of a guaranty, out of state, for performance in state, present the sufficient contact with the State of Alabama necessary for in personam jurisdiction?"

544 So.2d at 157. The Court then discussed Alabama Waterproofing Co. v. Hanby, 431 So.2d 141 (Ala.1983), in which this Court stated:

"[T]he trial court could have found that the guaranty signed by each appellant was a significant aspect of the negotiations which occurred in Alabama and that it was foreseeable that appellants' transaction would have consequences in this state."

431 So.2d at 145. In Alabama Waterproofing, the negotiations as to the underlying transaction took place in Alabama, but the nonresident defendants signed the guaranty outside Alabama. Nevertheless, it was the foreseeability of being subject to an action in Alabama that determined the outcome in that case. This Court stated that because the consequences of signing the guaranty were foreseeable, sufficient contacts existed with this State to give the Alabama courts in personam jurisdiction over the nonresident defendants.

The Keelean Court appeared to base its decision mainly on the rationale of Alabama Waterproofing, and summarized that part of that decision that explained foreseeability in the case of a loan guaranty:

"It appears from the record that all guarantors were aware that they were guaranteeing payment of the debts and liabilities of a Florida corporation that was borrowing $4,000,000 from an Alabama corporation. It is quite foreseeable that upon default of that loan, they would be held accountable on their contracts of guaranty in the State of Alabama."

544 So.2d at 157. The Keelean Court then commented on the forum-selection clause's giving Holdco "fair warning" of Alabama jurisdiction:

"Furthermore, it is clear that the signing of the contracts of guaranty for this loan gave appellants/guarantors the requisite `fair warning' required by Burger King Co. v. Rudzewicz, 471 U.S. 462, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985)...."

544 So.2d at 157. Therefore, the fact that the contract in Keelean contained a forumselection clause stating that a transaction would be governed by Alabama law was not controlling.

In Millette v. O'Neal Steel, Inc., 613 So.2d 1225 (Ala.1992), this Court stated:

"Without duplicating here our opinion in Keelean, we hold, applying the `effects test' mandated by Calder v. Jones, 465 U.S. 783, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984); Alabama Waterproofing; and Duke v. Young, [496 So.2d 37 (Ala. 1986)], that the Millettes should have foreseen the effects of their guaranty in the State of Alabama in the event of a default by Fabricators[, Inc., a Mississippi Corporation owned by the Millettes]. Moreover, the signing of the guaranty and the negotiation of its modifications in Alabama gave the Millettes the fair notice required by Burger King Co. v. Rudzewicz, 471 U.S. 462, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985)."

In 1980, the Millettes, residents of Mississippi, executed a credit agreement for the purchase of steel products from the plaintiff, O'Neal Steel. O'Neal required the Millettes to personally guarantee the debts of Fabricators, Inc., and even required that they travel to Birmingham in 1982 to execute a modification of the credit agreement. This Court determined that the Millettes had sufficient contact with Alabama for the Alabama court to exercise personal jurisdiction over them. The difference between Singer and the Millettes is the fact that the Millettes traveled to Alabama to renegotiate their agreement.

In Ex parte AmSouth Bank, N.A., 675 So.2d 1305 (Ala.1996), this Court held that the Texas defendant had sufficient contacts with Alabama to subject him to personal jurisdiction. In that case, Lindsey, a Texas resident, had executed a promissory note in favor of AmSouth so that he could enter into a partnership to build apartments in Tennessee. He executed the note in Texas, and the note stated that it should "be governed by and construed in accordance with the laws of the State of Alabama." 675 So.2d at 1306. This Court discussed Keelean, supra, and Steel Processors, Inc. v. Sue's Pumps, Inc. Rentals, 622 So.2d 910 (Ala.1993),² and concluded that Lindsey had submitted to Alabama jurisdiction (1) because the transaction, although it involved mailed payments, was not a one-time transaction, but required Lindsey to make payments semiannually for eight years; (2) because Lindsey was the original obligor on the note, not a mere guarantor, as was the case in Keelean; and (3) because the note gave notice that Alabama law would govern it.

The defendants make much of the fact that the agreements in Keelean, supra, and Ex parte AmSouth Bank, supra,

contained forum-selection clauses indicating that Alabama law would govern. We agree that in each of those cases this Court referred to that fact in concluding that sufficient contacts existed to assert in personam jurisdiction over the out-of-state defendant. However, it was not the sole factor. Considering the language of Keelean, and Ex parte AmSouth Bank, it is questionable...