Burt Drilling, Inc. v. Portadrill

• Decision Date: 04 March 1980
• Docket Number: No. 15709,15709
• Citation: 608 P.2d 244
• Parties: BURT DRILLING, INC., a Utah Corporation and Intermountain Power Project, a Utah Corporation, Plaintiffs and Appellants, v. PORTADRILL, a Division of Smith International, Inc., and Pacific Hydro Corporation, Defendants and Respondents.
• Court: Utah Supreme Court

Page 244

608 P.2d 244

BURT DRILLING, INC., a Utah Corporation and Intermountain Power Project, a Utah Corporation, Plaintiffs and Appellants, v. PORTADRILL, a Division of Smith International, Inc., and Pacific Hydro Corporation, Defendants and Respondents.

No. 15709.

Supreme Court of Utah.

March 4, 1980.

Don R. Peterson of Howard, Lewis & Peterson, Provo, for plaintiffs and appellants.

H. James Clegg of Snow, Christensen & Martineau, F. Robert Bayle, Salt Lake City, for defendants and respondents.

WILKINS, Justice:

Plaintiffs appeal from an order of the Fourth District Court, Utah County, granting a motion by Defendant Pacific Hydro Corporation (herein "defendant" unless otherwise indicated) to quash service and dismiss the complaint as against it. The District Court found that defendant, a California corporation with its principal place of business in San Francisco, California, did not have sufficient contacts with the State of Utah on which to base personal jurisdiction under Section 78-27-24. ¹ Defendant Portadrill did not contest jurisdiction and is not a party to this appeal.

Reversed and remanded for trial on the merits. Costs to plaintiffs.

The facts as alleged in the complaint and in the documents and affidavits of the parties on file are not in dispute, and may be summarized as follows:

Plaintiff Burt Drilling, Inc., a corporation of Utah, (herein "Burt") initiated contact with defendant by requesting a quotation of the purchase price of drilling equipment for use in its drilling business in the states of New Mexico, Utah and others. Defendant responded by sending a proposal to Burt at Burt's Springville, Utah, address, stating the prices of a Portadrill drilling machine mounted on an International Harvester truck chassis, and related equipment. The proposal contains this paragraph:

Above prices are f.o.b. Denver, Colorado, except where noted otherwise, and do not include sales tax, license or other fees. Drive out charge on the drilling machine to Springville, Utah is $1,000.

Burt then ordered the equipment by telephone, and defendant sent an invoice specifying the equipment and prices, which contained the words, "will call Denver . . . drill pipe by common carrier to Utah." The invoice was signed by both parties. Burt and defendant also entered into an agreement by which defendant retained a security interest in the equipment until payment of the full purchase price, which stipulated the situs of the equipment to be Mapleton, Utah. Burt accepted delivery of the equipment in Denver and drove it to a drilling site in New Mexico where it failed to perform properly. The complaint alleges that the machine failed three times between March 18, 1975 and June 10, 1975, and that upon each failure, Defendant Portadrill, the manufacturer, undertook to adjust and repair the rig. However, after the third breakdown, Burt lost its contract to drill at the New Mexico job site, and drove the drilling rig to Utah. In Utah, Burt entered into a contract with Plaintiff Intermountain Power Project, a Utah corporation (herein "Intermountain"), to drill test water wells in Wayne County, Utah. On August 14, 1975 the drilling rig again failed to perform, but this time the drill pipe and attachments fell into the well casing and could not be removed, so that Intermountain had to abandon the well for which it claims damages. At this time, defendant sent representatives to Utah to examine the rig and work with Burt to correct the defects and malfunctions of the rig. The complaint alleges breach of warranties of fitness for a particular purpose, and warranties of merchantability against defendant.

Section 78-27-24 provides:

Any person, notwithstanding section 16-10-102, whether or not a citizen or resident of this state, who in person or through an agent does any of the following enumerated acts, submits himself, and if an individual, his personal representative, to the jurisdiction of the courts of this state as to any claim arising from:

(1) The transaction of any business within this state;

(2) Contracting to supply services or goods in this state;

(3) The causing of any injury within this state whether tortious or by breach of warranty; . . .

Plaintiffs argue that defendant either is subject to the jurisdiction of the Utah courts because it is "doing business" in this State or, as a result of defendant's "minimum contacts" with this State has submitted itself to our jurisdiction within the meaning of subparagraphs (1), (2) and (3), of our "long-arm" statute, cited above.

The evidence in this record does not reveal that defendant was doing business in this State, which would require substantial and continuous activity here. Indeed, there is no evidence that defendant sold products for use in this State to any resident other than Plaintiff Burt. Hence, we must pursue an analysis concerning minimum contacts.

As this Court announced in its recent case of Abbott G. M. Diesel, Inc. v. Piper Aircraft, Utah, 578 P.2d 850 (1978), there are significant differences between the "doing business" concept and the "minimum contacts" test of International Shoe. ² One basic difference is the extent to which the court may exercise jurisdiction over a defendant within the limitation of the Due Process Clause of the Fourteenth Amendment to the United States Constitution.

If a defendant is found to have been doing business in this State (which as noted above would require substantial and continuous activity), though it had not procured a certificate of authority to transact business from the Secretary of State pursuant to the provisions of Section 16-10-102, defendant is nevertheless deemed to be present in this State. And that defendant may be subject to the jurisdiction of Utah's courts on claims which are related or entirely unrelated to that business in exactly the same manner as any other person who is physically present in this State who is served with process.

Section 78-27-24, however, pertains to jurisdiction over persons concerning claims against them arising from certain "minimum contacts" between those persons and this State. Our statute, § 78-27-24, ante, lists these requisite contacts, any one of which will suffice to satisfy the statute.

Due process requires that defendant's contacts with this State be purposeful on the part of defendant so that it can be said that the defendant reasonably knew that he submitted himself to this jurisdiction to answer for any harm caused by him at the time he voluntarily undertook the action constituting his contact with this State. It is clear that this is the requirement of Hanson v. Denckla, ³ in which the United States Supreme Court said:

. . . it is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.

Here, the allegations of plaintiffs' complaint show that their claims arise out of defendant's contacts with this State, which were: (1) defendant purposefully contracted with a resident of this State, knowing that it was a resident, and (2) defendant purposefully undertook to supply goods to that resident reasonably knowing or anticipating that those goods would be used in this State. It is clear from the language in the documents, quoted above, that defendant knew the equipment would be used in Utah. Further, the allegations of the complaint are that part of the injury caused by the defective goods was sustained here. Defendant therefore has had sufficient contacts with this State to meet the provisions of § 78-27-24(1), (2), and (3), ante.

After determining that § 78-27-24, ante, has been satisfied, the remaining question is whether it is consistent with "our traditional notions of fair play and substantial justice" ⁴ to require defendant to defend this action in our courts. And we hold that assertion of jurisdiction is in harmony with the requirements of due process owed to the defendant under the Fourteenth Amendment. As noted earlier, defendant's actions were purposeful, and with a view to derive substantial economic benefit from the plaintiff. It reasonably knew that if the equipment were defective, any injury caused by such defects could well be sustained here. The very fact that defendant agreed by the security agreement entered into between Burt and defendant that the situs of this expensive equipment ⁵ should be the State of Utah, reveals that defendant sought the protection of the laws of Utah in transacting this business. ⁶ By these acts, defendant has submitted itself to this jurisdiction to answer for any claims arising out of those acts.

MAUGHAN, J., concurs.

STEWART, Justice (concurring in result):

I agree that defendant Pacific Hydro is properly within the jurisdiction of the Utah courts pursuant to this State's Long-Arm Statute, § 78-27-22 et seq., U.C.A. (1953), as amended. However, I think the decision should be placed on that part of the Long-Arm Statute, § 78-27-24(3), which establishes jurisdiction for claims arising from "(t)he causing of any injury within this state whether tortious or by breach of warranty."

The ultimate failure of the drilling rig purchased from defendant Pacific Hydro and the loss of equipment resulting from that failure occurred in Utah. Under the plain terms of § 78-27-24(3) defendant allegedly sustained an "injury within this state." The sole question of substance is whether the exercise of jurisdiction is constitutionally permissible.

In the instant case the defendant sold costly and complicated equipment to a Utah corporate buyer for delivery outside the State of Utah. The equipment malfunctioned, causing damage both out of state and within Utah. In Gray v. American Radiator & Standard Sanitary Corp., 22 Ill.2d 432, 176 N.E.2d 761, 766 (1961), the Illinois Supreme Court, in sustaining long- arm jurisdiction in somewhat similar circumstances,...