Bonhiver v. Louisiana Brokers Exchange of Baton Rouge, Inc.

• Decision Date: 17 May 1966
• Docket Number: No. 3-66-Civil 63.,3-66-Civil 63.
• Parties: Homer A. BONHIVER, as Receiver of American Allied Insurance Company, Plaintiff, v. LOUISIANA BROKERS EXCHANGE OF BATON ROUGE, INC., Defendant.
• Court: U.S. District Court — District of Minnesota

255 F. Supp. 254

Homer A. BONHIVER, as Receiver of American Allied Insurance Company, Plaintiff, v. LOUISIANA BROKERS EXCHANGE OF BATON ROUGE, INC., Defendant.

No. 3-66-Civil 63.

United States District Court D. Minnesota, Third Division.

May 17, 1966.

R. L. Sorenson and Briggs & Morgan, St. Paul, Minn., for plaintiff.

A. Patrick Leighton and Faricy, Moore, Costello & Hart, St. Paul, Minn., for defendant.

MEMORANDUM

LARSON, District Judge.

Homer Bonhiver, Receiver of an insolvent Minnesota insurance corporation, American Allied Insurance Company (Allied), commenced this action against defendant Louisiana Brokers Exchange of Baton Rouge, Inc., (Brokers), a Louisiana corporation, based upon a contract between the parties.

Service upon defendant was accomplished in accordance with the Minnesota One Act Statute, Minn.Stat. § 303.13 Subd. 1(3).¹ In an action arising from a contract between a foreign corporation and a Minnesota resident, which calls for performance in whole or in part by either party in Minnesota, that statute authorizes substituted service upon the Secretary of State. Contending it had no contacts with Minnesota sufficient to justify substituted service, defendant moves to quash and set aside the summons, and for dismissal of the action. While defendant suggests that service upon the Secretary of State under the One Act Statute is inappropriate for a foreign insurance company, the point is not pressed since defendant acknowledges that the action could be reinstated by service on the Commissioner of Insurance.² In view of defendant's willingness to have the motion disposed of under the One Act Statute, there is no occasion to consider whether it was only a broker or agent, as plaintiff argues, rather than an insurance company.³ Thus the questions for decision are whether the One Act Statute can be construed to apply to the circumstances of this case; and, if so, whether such a result would be consistent with "traditional notions of fair play and substantial justice"⁴ embodied in the due process clause.

Plaintiff's action arises from an oral contract between defendant and Allied, by which defendant was to act as a broker in the sale of Allied insurance in Louisiana. Plaintiff seeks recovery of (1) premiums allegedly due Allied and (2) on an account stated. It appears that the contract was made in Louisiana.⁵ In addition to this, defendant cites several other circumstances in support of its contention that it did not have contacts with Minnesota of sufficient magnitude to justify application of the statute in this case. Richard Cochran, defendant's president, states by affidavit that Brokers is not licensed to do business in Minnesota; maintained no agents or offices here; and wrote no insurance in this State. It is also stated that Allied sought out Brokers and solicited the business arrangement, officials of the former making more trips to Louisiana than Brokers' officials made to Minnesota. With respect to visits by its officials to Minnesota, defendant suggests they were primarily geared to generating good will rather than for the purpose of solidifying details of the contractual relationship. Nonetheless, Mr. Cochran indicates that at least one meeting in Minneapolis was convened for discussion concerning Brokers' handling of automobile insurance for Allied.

The various affidavits submitted by plaintiff present these additional facts. Forms, instructions, supplies, etc., were sent from Minnesota to Louisiana. Policies written by defendant were forwarded to Allied in Minnesota for acceptance or rejection. Premiums, less defendant's commission, were to be sent to Minnesota and Brokers mailed regular, routine reports to Allied in Minnesota. In addition, at least a portion of the travel expenses for Brokers' representatives were paid by Allied, including the cost of accommodations and entertainment in Minnesota. By corporate resolution, defendant authorized the establishment of an account with a Minnesota bank, and a $25,000 loan was obtained from that bank by defendant, secured by collateral of a Minnesota corporation, a subsidiary of Allied. According to Mr. Cochran, the account was opened and the loan obtained in connection with Brokers' issuance of automobile insurance for Allied.⁶

Despite their presentation of numerous factors indicating the existence or absence of jurisdictional contacts with Minnesota, each party relies primarily on a single facet of the relationship between Brokers and Allied in support of their respective arguments. On the authority of Fourth Northwestern Bank v. Hilson Industries, Inc., 264 Minn. 110, 117 N.W.2d 732 (1962), defendant maintains the controlling aspect of the relationship is that Allied, the Minnesota resident, was the aggressor. Plaintiff, citing Kornfuehrer v. Philadelphia Bindery, Inc., 240 F.Supp. 157 (D.Minn. 1965) and Paulos v. Best Securities, Inc., 260 Minn. 283, 109 N.W.2d 576 (1961), argues that defendant's obligation to remit the net premiums to Minnesota is sufficient to uphold substituted service under the One Act Statute.

The Hilson case was a suit by a resident corporation to recover on three promissory notes executed by the nonresident corporate defendant in Ohio, but made payable in Minnesota. Service under the One Act Statute was quashed on the ground that the only connection with Minnesota was that the notes were payable here. Particular emphasis was placed on plaintiff's status as a corporation, rather than an individual, and on the fact that it had taken the initiative in seeking to do business with defendant. Feeling that a resident corporate seller needs less protection than a resident individual buyer, the Court stated, "It would seem shortsighted indeed to discourage the sale of Minnesota products to nonresidents by subjecting buyers to our jurisdiction where the contacts are so casual."⁷ The Court was also impressed by defendant's attempt to accommodate plaintiff by making the notes payable in Minnesota. The relationship between the parties in Hilson arose when plaintiff, the Minnesota resident, sold coolers to defendant. When the product proved defective, defendant refused to pay the contract price and plaintiff went to Ohio to discuss the matter, which was resolved by defendant's execution of the promissory notes. Pointing out that "the dispute here does not concern the making or negotiating of the promissory notes but involves the alleged breach of warranty in the sale of the plaintiff's products,"⁸ the Court also based its decision on balancing of the inconveniences. Indicating that it would be necessary to present the cooler at trial (the cooler weighed over a ton) and testimony of defendant's complaining customers, the Court concluded trial at defendant's locale would be more convenient.

While upholding jurisdiction may have a deterrent effect on the sale of insurance by Minnesota companies through nonresident brokers, Hilson does not suggest this consideration will prevent assertion of jurisdiction where the contacts are more than casual. In addition, the question of relative trial convenience does not have the same significance here since bulky exhibits are probably not required, and undoubtedly few witnesses outside of the contracting parties will be necessary.

An aspect of the Hilson case which defendant deems significant is that Allied was the aggressor in that it sought the relationship. While this factor is mentioned in Hilson, my opinion in the Kornfuehrer case, supra, indicates the view of this Court that who makes the first contact is not determinative. Discussing McGee v. International Life Insurance Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957), I stated:

"The business relations between the parties will not usually depend on the method by which contact was established. Therefore, once the non-resident undertakes to perform a business contract with a Minnesota resident, this Court does not feel that the question of who made the first contact is material."⁹

Although interpretation of a State statute is involved, which calls for adherence to the decisions of the Minnesota court, focus on the initial aggressor in Hilson should not obscure the fact that the court there found no contacts with Minnesota other than the notes being payable here. In this respect the instant case is distinguishable from Hilson and is more analogous to Dahlberg Company v. Western Hearing Aid Center, 259 Minn. 330, 107 N.W.2d 381 (1961), cert. denied, 366 U.S. 961 (1961), decided prior to Hilson and distinguished therein. In Dahlberg like Hilson and the instant case, the action was by a resident corporation. There plaintiff sued three interrelated Oregon corporations based on promissory notes and an open account. Plaintiff manufactured hearing aids, and the dominant defendant corporation was a distributor. The parties entered into a distributorship contract, renewable yearly, under which the nonresident defendant was to furnish plaintiff with sales reports and receipts of payments for products sold. Although it does not appear that the distributorship contract was made in Minnesota, the notes were executed, delivered, and made payable in Minnesota. In addition, defendants' common representative Jones attended several meetings and conferences in Minnesota.¹⁰ On these contacts substituted service was upheld, the Court noting that the nonresidents "have enjoyed the benefits of the laws of this state and they have had access to our courts to enforce any rights in regard to the transactions involved."¹¹ In discussing this decision in the Hilson case, the court also highlighted the extended course of dealing between the parties in Dahlberg and their close business relationship.

The same can be said of the relationship here. Representatives of defendant visited Minnesota on several occasions, during which they enjoyed the benefits and protection of this State. Brokers and Allied commenced their relationship at the...