Arnesen v. Raymond Lee Organization, Inc.

• Decision Date: 30 April 1973
• Citation: 107 Cal.Rptr. 744,31 Cal.App.3d 991
• Court: California Court of Appeals Court of Appeals
• Parties: Robert F. ARNESEN, for himself and on behalf of a class of persons similarly situated, Plaintiffs and Appellants, v. The RAYMOND LEE ORGANIZATION, INC., et al., Defendants and Respondents. Civ. 40652.

Page 744

107 Cal.Rptr. 744

31 Cal.App.3d 991

Robert F. ARNESEN, for himself and on behalf of a class of persons similarly situated, Plaintiffs and Appellants, v. The RAYMOND LEE ORGANIZATION, INC., et al., Defendants and Respondents.

Civ. 40652.

Court of Appeal, Second District, Division 1, California.

April 30, 1973.

Norman G. Axe, Beverly Hills, Marvin E. Jacobs, and Gerald L. Price, Beverly Hills, for plaintiffs and appellants.

Adams, Duque & Hazeltine, Bruce A. Beckman, Richard T. Davis, Jr., and Bruce L. Ashton, Los Angeles, for defendants and respondents.

THOMPSON, Associate Justice.

This is an appeal pursuant to Code of Civil Procedure section 904.1, subdivision (c), from an order of the trial court quashing out of state service of summons upon three of five named defendants in an action brought on behalf of a class and an individual plaintiff. By reason of a failure of appellant to support his position by a factual showing in the trial court, we affirm the order.

Appellant filed his verified complaint in the case at bench purporting to allege seven causes of action. The first five counts are on behalf of a nationwide class consisting of 'all . . . persons . . . who have dealt with defendants and for whom defendants have prepared patent applications . . . or (who have) entered into a contractual relationship for alleged services and for which plaintiffs have paid to defendants good and valuable consideration. . . .' The sixth and seventh causes of action are alleged on behalf of the named plaintiff alone. Defendants are The Raymond Lee Organization, Inc. (the corporation), and four of its officers and employees, Raymond Lee (Lee), Lawrence Peska (Peska), Howard Gressey (Gressey), John Dulaine (Dulaine), and Richard Deutschman (Deutschman).

The first cause of action, on behalf of the class, alleges that the class members entered into contracts with the corporation by which the corporation agreed to aid them in the development, patenting, and exploitation of inventions, and pursuant to which the plaintiffs each paid or became obligated to pay fees of approximately $400 to the corporation and assigned to it a 10 percent interest in their respective inventions. It claims that the contracts are illegal and induced by various express and 'implied' misrepresentations of the defendants. The first count seeks rescission of the contracts.

The second count realleges the facts of the first and adds claims of failure of consideration and malice. It seeks rescission and punitive damages. The third count, realleging the matter contained in the first, seeks rescission, the imposition of a constructive trust, and punitive damages, all for fraud. The fourth cause of action alleges that the class members have been damaged by conduct of defendants amounting to the unlawful practice of law. It seeks general and punitive damages. The fifth cause of action realleges the matter in the first and fourth, and asserts that the conduct of the defendants constitutes an unfair trade practice. It seeks injunctive relief and damages.

The sixth cause of action, on behalf of the named plaintiff alone, claims breach of contract and seeks damages of $250 plus rescission. The seventh cause of action, on behalf of only the named plaintiff, claims fraud. It seeks rescission, general damages of $250, and punitive damages.

The corporation and Deutschman filed their answer to the complaint. Lee, Peska, and Gressey, all nonresidents of California, were served outside the state. They moved to quash service, claiming that they were not subject to the personal jurisdiction of the California court. The motions are supported by affidavits. Plaintiff filed a memorandum of points and authorities but no timely declaration in opposition. ² The trial court granted the motions. On this appeal from that order, plaintiff contends that the order of the trial court is erroneous because: (1) the moving defendants committed a tort within the state; (2) Lee entered into a contract in the state in his personal capacity; (3) the separate identity of the corporation should be disregarded thus rendering the individual defendants subject to personal jurisdiction in California; and (4) there will be a failure of justice if the individual defendants are not required to appear.

We conclude that, while plaintiff's position might be correct had he established a factual basis for it in the trial court, his failure to do so requires that the trial court's order quashing service of process be affirmed.

Code of Civil Procedure section 410.10 states: 'A court of this state may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States.' Thus we are required to determine whether, on the record before us, personal jurisdiction may be exercised by a California court on any constitutional basis over defendants Lee, Peska, and Gressey who were served outside the state. We test that record in light of the principles that: (1) where a defendant properly moves to quash out of state service of process for lack of jurisdiction, the burden of proof is upon the plaintiff to establish the facts of jurisdiction by a preponderance of the evidence (Wilson v. Eddy, 2 Cal.App.3d 613, 617, 82 Cal.Rptr. 826; Martin Bros. Elec. Co. v. Superior Court, 121 Cal.App.2d 790, 794, 264 P.2d 183; Briggs v. Superior Court, 81 Cal.App.2d 240, 251, 183 P.2d 758); (2) evidence of those facts or their absence may be in the form of declarations with the verified complaint being treated as a declaration for that purpose (Atkins, Kroll & Co. v. Broadway Lbr. Co., 222 Cal.App.2d 646, 654, 35 Cal.Rptr. 385); (3) where there is a conflict in the declarations, resolution of the conflict by the trial court will not be disturbed on appeal if the determination of that court is supported by substantial evidence (Vibration Isolation Products, Inc., v. American Nat. Rubber Co., 23 Cal.App.3d 480, 482, 100 Cal.Rptr. 269; Atkins, Kroll & Co. v. Broadway Lbr. Co., supra, 222 Cal.App.2d 646, 654, 35 Cal.Rptr. 385); and (4) we are not permitted on appeal to consider evidence not before the trial court (6 Witkin, Cal.Procedure (2d ed.), Appeal, §§ 218, 219).

In the case at bench, respondent defendants properly moved to quash out of state service of summons upon them. Substantial evidence supports the trial court's determination that appellant, plaintiff, failed in his burden of proof of facts establishing personal jurisdiction in the California court despite service of process upon respondents outside the state.

Since respondents were not served with process in California, have not consented to the exercise of personal jurisdiction, and are not in a status relationship with the state upon which personal jurisdiction can be based, personal jurisdiction, if it exists, must be found from activity of respondents so connected with California as to satisfy constitutional requirements. (Gorfinkel & Lavine, Long Arm Jurisdiction in California, 21 Hastings L.J. 1163, 1170.) In that context, two types of activity of respondents within California are asserted by appellant: (1) a general allegation in the complaint that 'All defendants . . . maintain offices and are transacting business in the County of Los Angeles, State of California at 5455 Wilshire Boulevard . . .'; and (2) arguments in appellant's brief that the record establishes that respondents committed a tort in California and respondent Lee individually entered into a contract in this state.

The regular, continuous, and substantial conduct by a foreign corporation of business within a state subjects that corporation to the personal jurisdiction of the state's courts. (International Harvester Co. v. Kentucky, 234 U.S. 579, 34 S.Ct. 944, 58 L.Ed. 1479; Gorfinkel & Lavine, Long Arm Jurisdiction in California, Supra, 21 Hastings L.J. at pp. 1178--1179.) If that principle applies also to individuals doing business in a state, the allegation in the verified complaint at bench standing alone might be sufficient to establish jurisdiction over respondents. The allegation does not stand alone, however. It is rebutted in a fashion justifying the trial court in finding it false for the purpose of the motion to quash. Each of the three respondents filed an affidavit stating in evidentiary terms that he had no business of his own and that his sole business activity was as an employee or officer of the corporation. The trial court was entitled to...