Arkansas-Best Freight System, Inc. v. Youngblood

• Decision Date: 20 April 1973
• Docket Number: No. FS-73-C-9.,FS-73-C-9.
• Citation: 359 F. Supp. 1115
• Parties: ARKANSAS-BEST FREIGHT SYSTEM, INC., and Arkansas Best Corporation, Plaintiffs, v. John C. YOUNGBLOOD et al., Defendants.
• Court: U.S. District Court — Western District of Arkansas

359 F. Supp. 1115

ARKANSAS-BEST FREIGHT SYSTEM, INC., and Arkansas Best Corporation, Plaintiffs, v. John C. YOUNGBLOOD et al., Defendants.

No. FS-73-C-9.

United States District Court, W. D. Arkansas, Fort Smith Division.

April 20, 1973.

Harper, Young & Smith, Fort Smith, Ark., for plaintiffs.

Jones, Gilbreath & Jones, Fort Smith, Ark., for defendants.

OPINION

JOHN E. MILLER, Senior District Judge.

This action was commenced January 17, 1973, seeking a declaratory judgment determining the rights and liabilities of the parties under the agreements and contracts described in the complaint and made exhibits thereto, and for such other relief to which the parties may be entitled.

The plaintiff Arkansas-Best Freight System, Inc. (ABF), is a corporation incorporated under the laws of the State of Arkansas, and the plaintiff Arkansas Best Corporation (ABC) is a corporation organized under the laws of the State of Delaware. Each plaintiff has its principal office and place of business in Fort Smith, Arkansas. All of the defendants are citizens and residents of the State of North Carolina with the exception of Graden J. Russell, who is a citizen and resident of the State of Texas. The matter in controversy exceeds the sum of $10,000, exclusive of interest and costs.

Jurisdiction of the court exists under 28 U.S.C. § 1332.

It is alleged in the complaint that on April 30, 1971, ABF entered into a written contract with Youngblood Truck Lines, Inc. (YTL), a North Carolina corporation, for the purchase by ABF from defendants of all the outstanding capital stock of YTL and merger with YTL, under the terms, conditions and provisions set forth in the contract and agreement, a copy of which is attached to the complaint as Exhibit 1. At the same time ABC entered into said agreement for the purpose of guaranteeing the performance of the contract by ABF.

The defendant John C. Youngblood was specifically designated in the contract as the agent of all other defendants, stockholders of all the capital stock of YTL.

On the same date the parties entered into an escrow agreement attached to the complaint as Exhibit 2. The contract and escrow agreement were executed on behalf of plaintiffs and by defendant John C. Youngblood, in his individual and custodial capacities, and by defendant Charles W. Moffitt in Washington, D. C., and in the State of North Carolina by all of the remaining defendants, except Graden J. Russell, who executed the same in the State of New Hampshire. The North Carolina National Bank, which is not a party, executed the escrow agreement in the State of North Carolina.

The contract for the sale of the stock was subject to and contingent upon approval thereof by the Interstate Commerce Commission, the North Carolina Utilities Commission, and any other regulatory agency of the United States or of any state whose approval might be a prerequisite to the consummation of the contract. The contract has been approved by such agencies.

On November 15, 1971, at Charlotte, North Carolina, plaintiffs and defendants undertook to consummate said transaction in accordance with the provisions of the contract by the payment by plaintiff ABF to John C. Youngblood for himself and as agent for the other defendants the total sum of $5,072,144.69, and by payment to the North Carolina National Bank pursuant to the escrow agreement the sum of $300,000 as provided therein, making a total payment of $5,372,144.69, which of the parties agreed at that time was the consummation purchase price as defined in the contract, such to future adjustments to be made as provided in the contract and escrow agreement. The consummation was effected as of the close of business on November 14, 1971, the day before the actual payment of the money. On the day the money was paid, Articles of Merger merging YTL into ABF were filed with the Secretary of the State of North Carolina, whereupon YTL was merged into ABF as a survivor and YTL ceased to exist. The Articles of Merger were filed the next day in accordance with the laws of the State of Arkansas with the Secretary of the State of Arkansas, with the result that YTL was wholly merged into ABF, an Arkansas corporation, as a survivor. All of the assets of YTL were transferred to ABF by appropriate conveyances, in further consideration of which ABF agreed to assume and did assume all liabilities of YTL and its wholly owned subsidiary, Youngblood Service Company (YSC), as provided in the contract, thus making YSC a wholly owned subsidiary of ABF. Upon the completion of the merger all books of account and pertinent financial records of the disappearing corporations were physically transferred to ABF's principal office in Fort Smith, Arkansas.

The contract further provides that the former North Carolina corporation, YTL, as of the date of the consummation of the contract and the merger date, would cause to be prepared complete financial statements and that the same thereafter would be audited by Arthur Andersen & Co., Independent Public Accountants, which would issue a certified report to all of the parties involved. Thereafter, Arthur Anderson & Co. submitted a report to the plaintiffs at their principal offices in Fort Smith, Ark., and in accordance with the terms of the contract, Douglas Walker & Co., accountants, representing the plaintiffs, examined the submitted report and disagreed therewith. In their statement to the plaintiffs, Douglas Walker & Co. stated that the purchase price as defined in the contract should have been determined to be $5,266,569.00 as of the consummation date of the purchase, subject to further adjustments as provided in the contract. The further adjustments were made by Douglas Walker & Co. and defendants were advised of the findings, and the defendants, upon receiving the report of Douglas Walker & Co., notified plaintiffs that they did not agree to the adjustments and conclusions in the report of Douglas Walker & Co.

On October 27, 1972, at Fort Smith, Ark., the plaintiff ABF and defendants attempted to settle their disagreement but were unable to agree, but they did enter into a written Memorandum Agreement whereby they agreed to amend the Contract of Sale by striking therefrom Articles 1.4 and 1.6 which provided for arbitration of disputed items between the parties by a mutually acceptable third-party accountant. Copy of the Memorandum Agreement deleting those provisions of the contract is attached to the complaint as Exhibit 3. As a result, if the parties are unable to reach an agreement, they are left to their respective legal remedies.

On December 21, 1972, the parties again undertook to reach an agreement on the adjusted consummation but were unable to do so.

The plaintiff and defendants have agreed that they are unable to reach an agreement as to the adjusted purchase price as of the date of consummation of the contract, and defendants have requested plaintiffs to authorize a release of a portion of the aforementioned escrow deposit which the plaintiffs have refused to do.

The plaintiffs are asking the court to declare the rights and liabilities of the parties under the contract in order that the transaction may proceed to a complete and final consummation in accordance with the terms of the contract.

On February 9, 1973, the defendants filed their motion to dismiss, in which they alleged lack of jurisdiction over the person of the defendants, insufficiency of process and insufficiency of service of process. They also alleged that none of the defendants have done any acts in the State of Arkansas that would subject them to service of process by a United States District Court sitting in the State of Arkansas.

The motion was heard by the court on April 12, 1973, at which time the court had before it the entire record, including the documents referred to in the complaint; the affidavits of J. B. Speed and Donald L. Neal, together with the ore tenus testimony of defendant John C. Youngblood, Charles Ephriam, attorney for all the defendants, and Kenneth Barlow.

Prior to the hearing on April 12, the defendants had submitted a memorandum in support of their motion, and plaintiffs had submitted a memorandum in opposition thereto. At the conclusion of the hearing, the defendants submitted requested findings of fact, a chronology of events and a memorandum in answer to the memorandum of plaintiffs above referred to.

In 1963 the General Assembly of Arkansas enacted the Uniform Interstate and International Procedure Act, Ark. Stat.Ann. § 27-2501 et seq. (1962 Repl.). In subsection A of § 27-2502 "person" is defined as including an individual or his executor, administrator or other personal representative, whether or not a citizen or domiciliary of Arkansas, and if a corporation, whether or not organized under the laws of Arkansas.

"C. Personal jurisdiction based upon conduct.

"1. A court may exercise personal jurisdiction over a person, who acts directly or by an agent, as to a (cause of action) (claim for relief) arising from the person's

(a) transacting any business in this State;

* * * * * *

"2. When jurisdiction over a person is based solely upon this section, only a (cause of action) (claim for relief) arising from acts enumerated in this section may be asserted against him.

"D. Service outside the State. When the exercise of personal jurisdiction is authorized by this section, service may be made outside this State."

Section 27-2503 provides:

"A. Manner and proof of service.

"1. When the law of this State authorizes service outside this State, the service, when reasonably calculated to give actual notice, may be made:

(a) by personal delivery in the manner prescribed for service within this State;"

The court has jurisdiction of the subject matter, and the sufficiency of service of process is determined by the provisions of Rule 4, Fed.R.Civ.P., and § 27-2503, Ark.Stat.Ann., (1962 Repl.).

Under Rule 4(d)(7), Fed.R.Civ.P., service may be made as follows:

"Up

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