Chase & Sanborn Corp., In re

Decision Date19 January 1988
Docket NumberNo. 86-5738,86-5738
Citation835 F.2d 1341
CourtU.S. Court of Appeals — Eleventh Circuit
Parties, Bankr. L. Rep. P 72,191 In re CHASE & SANBORN CORP., f/k/a General Coffee Corp., Debtor. Paul C. NORDBERG, Plaintiff-Appellee, v. GRANFINANCIERA, S.A., a Colombian corporation, and Medex, Ltda, a Latin American corporation, Defendants-Appellants.

William D. Matthewman, Ezell, Menendez, Patterson, Claussen & Daniel, Adam H. Lawrence, Lawrence & Daniels, Miami, Fla., for defendants-appellants.

Gary R. Jones, Miami, Fla., for plaintiff-appellee.

Appeal from the United States District Court for the Southern District of Florida.

Before FAY and HATCHETT, Circuit Judges, and MORGAN, Senior Circuit Judge.

MORGAN, Senior Circuit Judge:

This is an appeal by the Colombian defendants Granfinanciera, S.A. and Medex, Ltda. from an adverse bankruptcy decision by the district court that three money transfers from debtor Chase & Sanborn Corporation, f/k/a General Coffee Corporation ("C & S"), to defendants were fraudulent and, therefore, could be avoided by debtor's creditor/trustee, Paul C. Nordberg. We affirm.

I. FACTS

The money transfers involved in this case consisted of: (1) a $1,500,000 wire transfer on October 21, 1982, from C & S's account in the New York Banque Worms to Granfinanciera's bank account at Banco Real in Miami; (2) a cashier's check for $100,000 dated December 15, 1982, purchased by C & S from Royal Trust Bank in Miami and deposited in Medex's account at Banco Real in Miami; and (3) another cashier's check for $80,000 dated December 16, 1982, purchased by C & S from Royal Trust Bank in Miami and deposited in Medex's account at Banco Real in Miami.

C & S filed a petition for bankruptcy on May 18, 1983. The trustee subsequently sued Granfinanciera and Medex alleging that at the time of the transfers C & S was insolvent 1 and that C & S received no consideration or less than a reasonably equivalent value in exchange for the transfers. Therefore, the trustee alleged, the transfers were fraudulent conveyances which may be avoided pursuant to 11 U.S.C. Sec. 548(a)(2) 2 and which may be recovered from Granfinanciera and Medex for the benefit of the estate of C & S pursuant to 11 U.S.C. Sec. 550(a). 3 Both defendants were properly served in Bogota, Colombia on December 26, 1985. On January 10 1986, the Government of Colombia nationalized Granfinanciera. Granfinanciera and Medex filed motions inter alia to dismiss this suit for lack of personal and subject matter jurisdiction. The bankruptcy judge denied the motions and commenced trial on February 20, 1986. Following several interruptions in the trial, the bankruptcy court entered judgment for the trustee against Granfinanciera and Medex. On appeal, the district court affirmed the judgment of the bankruptcy court.

Defendants appeal alleging neither court properly exercised in personam jurisdiction over defendants, defendant Granfinanciera is an instrumentality of the Colombian government and thus is immune from United States jurisdiction under the Foreign Sovereign Immunities Act, 28 U.S.C. Secs. 1602-10 ("FSIA"), and the trustee's equitable cause of action which sought only monetary relief remains a legal proceeding to which the seventh amendment right to trial by jury attaches.

II. DISCUSSION
A. PERSONAL JURISDICTION

Service of process is the physical means by which personal jurisdiction is obtained over a party. Chapter 11 employs Rules 4(a), (b), (d), (e), and (g)-(i) of the Federal Rules of Civil Procedure for service in adversary proceedings. 4 Rule 4(e) pertains to service upon a party not an inhabitant of or found within a state. Granfinanciera and Medex mistakenly rely on the second sentence of Rule 4(e) 5 to assert that the court must use Florida's long-arm statute to obtain personal jurisdiction over them. This premise ignores the first sentence of Rule 4(e) which states that where a federal statute provides for service of process the court should use that statute. 6 Federal Bankruptcy Rule 7004(d) provides for nationwide service of process and thus is the statutory basis for personal jurisdiction in this case, not Florida's long-arm statute. See Wichita Federal Savings & Loan Ass'n v. Landmark Group, 657 F.Supp. 1182, 1194 (D.Kan.1987); C. Wright & A. Miller, Federal Practice and Procedure, Secs. 1118, 1125 (1987). Cf. Max Daetwyler Corp. v. Meyer, 762 F.2d 290, 295 (3d Cir.), cert. denied, 474 U.S. 980, 106 S.Ct. 383, 88 L.Ed. 336 (1985) (absent a federal statute authorizing nationwide service of process, federal court must turn to state long-arm statutes); Colon v. Gulf Trading Co., 609 F.Supp. 1469, 1474-75 (D.P.R. 1985) (court must use Puerto Rican long-arm statute because admiralty statutes do not provide for nationwide service of process).

Exercise of this Congressional grant of authority is not boundless, however. The due process clause of the fifth amendment 7 constrains a federal court's power to acquire personal jurisdiction via nationwide service of process. 8 Pioneer Properties, Inc. v. Martin, 557 F.Supp. 1354, 1358 (D.Kan.1983); In re Fotochrome, Inc., 377 F. Supp. 26, 29 (E.D.N.Y.1974) (construing former bankruptcy statute), aff'd, 517 F.2d 512 (2d Cir.1975); In re Deak, 63 B.R. 422, 428 (Bankr.S.D.N.Y.1986); In re A & W Publishers, Inc., 39 B.R. 666, 667 (Bankr.S.D.N.Y.1984).

We look to International Shoe v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945) and its progeny for guidance in determining whether due process is satisfied here. 9 See Lapeyrouse v. Texaco, Inc., 693 F.2d 581, 586 (5th Cir.1982); Bamford v. Hobbs, 569 F.Supp. 160, 166 (S.D.Tex.1983). The Court, in International Shoe, found that:

[D]ue process requires ... that in order to subject a defendant to judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend "traditional notions of fair play and substantial justice."

326 U.S. at 316, 66 S.Ct. at 158 (citing Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 343, 85 L.Ed. 278 (1940)). Inquiry into a defendant's contacts must not be mechanical. Id. 326 U.S. at 319, 66 S.Ct. at 159. Instead, a court must weigh the facts of each case to determine whether the requisite "affiliating circumstances" are present. Kulko v. California Superior Court, 436 U.S. 84, 92, 98 S.Ct. 1690, 1697, 56 L.Ed.2d 132 (1978); Hanson v. Dencla, 357 U.S. 235, 246, 78 S.Ct. 1228, 1235-36, 2 L.Ed.2d 1283 (1958). In a minimum contacts inquiry where a defendant is an alien, the emphasis is on the fairness and reasonableness of requiring the defendant to appear in the United States. In re Deak, 63 B.R. at 430. See Max Daetwyler Corp., 762 F.2d at 294. Factors to be considered include (a) the extent of the defendant's purposeful interjection into the forum state; (b) the burden on the defendant of defending in the forum; (c) the extent of conflict with the sovereignty of defendant's state; (d) the forum state's interest in adjudicating the dispute; (e) the most efficient judicial resolution of the controversy; (f) the importance of the forum to plaintiff's interest in convenient and effective relief; and (g) the existence of an alternative forum. 10 In re Deak, 63 B.R. at 430, citing Insurance Co. of North America v. Marina Salina Cruz, 649 F.2d 1266, 1270 (9th Cir.1981).

1. Extent of defendant's purposeful interjection into Florida

The debtor, C & S, ordered the transfers out of which this cause of action arose from its Miami office. The transfers, in United States currency, were made from the debtor's New York and Miami bank accounts. Under 11 U.S.C. Sec. 548(a)(2) a fraudulent conveyance is established when a non-creditor of an insolvent debtor receives a transfer without returning value or consideration for the transfer. See Mayo v. Pioneer Bank and Trust Co., 270 F.2d 823, 829 (5th Cir.1959), cert. denied, 362 U.S. 962, 80 S.Ct. 878, 4 L.Ed.2d 877 (1960); 11 In re Health Gourmet, Inc., 29 B.R. 673, 677 (Bankr.D.Mass.1983). The fraudulent conduct and its injurious effect occurred in Miami.

Moreover, the record supports the finding of the district court that the defendants conducted numerous international business transactions utilizing their bank accounts in Miami, as well as New York, Chicago, and San Francisco.

2. Burden on defendants of defending transfers in Florida

Modern means of communication and transportation have lessened the burden of defending a lawsuit in a distant forum. See World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292-93, 100 S.Ct. 559, 564, 62 L.Ed.2d 490 (1980); Hanson, 357 U.S. at 251, 78 S.Ct. at 1238, McGee v. International Life Insurance Co., 355 U.S. 220, 222-23, 78 S.Ct. 199, 200, 2 L.Ed.2d 223 (1957). There appear to be relatively few impediments to defending this particular lawsuit. Transportation between Bogota and Miami is readily available. Compare Insurance Co. of North America, 649 F.2d at 1271 (no direct transportation to or from defendant shipyard to forum). Granfinanciera and Medex are good-sized banking concerns which, presumably, have access to at least telephone lines, if not the more sophisticated electronic telecommunication equipment available today.

3. Extent of conflict with Colombia's sovereignty

The doctrine of comity between sovereign nations dictates that we examine possible conflicts with Colombia's sovereignty. As discussed infra, Granfinanciera is presently an instrumentality of the Colombian government. This fact would, in most instances, bear negatively on the reasonableness of personal jurisdiction. See Insurance Co. of North America, 649 F.2d at 1272. These transfers occurred and this case was filed, however, before Granfinanciera's nationalization. Thus, as discussed infra, any benefits of sovereignty do not attach to this cause of action.

This cause of action arises under United States Bankruptcy laws....

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