Crown Controls, Inc. v. Smiley

• Decision Date: 28 May 1987
• Docket Number: No. 16804-5-I,16804-5-I
• Parties: CROWN CONTROLS, INC., a Washington corporation, Respondent, v. Jim SMILEY, an individual, Appellant, and North American Drill Supply, Inc., an Oregon corporation, d/b/a Industrial Associates, Defendant.
• Court: Washington Court of Appeals

Page 832

47 Wn.App. 832

737 P.2d 709

CROWN CONTROLS, INC., a Washington corporation, Respondent, v. Jim SMILEY, an individual, Appellant and North American Drill Supply, Inc., an Oregon corporation d/b/a Industrial Associates, Defendant.

No. 16804-5-I.

Court of Appeals of Washington Division 1.

May 28, 1987.

Reconsideration Denied July 8, 1987.

Jim Smiley, Bend, Or., for James Smiley.

Jeffrey C. Wishko, Lesourd & Patten, Seattle, for Crown Controls, Inc.

WARREN CHAN, Judge Pro Tem. ^*

Jim Smiley appeals from a judgment rendered against him for $9,136.03 plus interest, stemming from the purchase of certain industrial equipment from Crown Controls, Inc. He contends the court erred: (1) in assuming personal jurisdiction over him; (2) in finding him liable as an agent of an undisclosed principal; (3) in failing to determine there had been an election of remedies; and (4) in awarding prejudgment interest. We affirm, but remand for entry of judgment against both the principal and agent.

Jim Smiley operates a manufacturer's representative/distributorship business from his home in Bend, Oregon. Smiley uses various trade names for his businesses, including "Industrial Associates," "Industrial Associates International," "Engineering Products Manufacturing Company," and "Consolidated Leasing." Smiley is also the president of North American Drill Supply, Inc. (NADS), an Oregon corporation. The trade name "Industrial Associates" is owned by NADS and was registered pursuant to Oregon law.

Crown Controls, Inc., is a Washington corporation. It is a manufacturer's representative for chemical controls equipment suppliers.

In June 1983, Smiley telephoned Crown Controls and spoke with its president, Michael Slomer. Smiley identified himself as an agent of Industrial Associates. After several telephone discussions regarding various items of equipment and their prices, Crown Controls agreed to supply and Industrial Associates agreed to purchase certain gas chlorination equipment. The equipment was duly delivered to and accepted by Industrial Associates' agent in Portland, Oregon, and it was then shipped to an Industrial Associates customer in Guam. Crown Controls invoiced Industrial Associates for these shipments in July and August 1983, for a total principal sum of $9,136.03.

At the time of this transaction, Industrial Associates, through Smiley, also purchased certain pump control valves from Crown Controls. The Roll Seal Valve Company, located in Irvine, California, supplied the valves to Crown Controls. Industrial Associates' customers were dissatisfied with these valves and returned them directly to Roll Seal Valve Company.

At no time did Smiley disclose to Crown Controls he was acting on behalf of a corporate entity in general, or NADS in particular. He only disclosed he was acting on behalf of "Industrial Associates." Crown Controls requested credit references from Smiley after some of the equipment had been ordered, and Smiley supplied two bank references. Crown Controls only investigated one of them, which was in the name of "Industrial Associates-International." The second bank account indicated the existence of NADS, Inc., on the monthly statements, but not on the printed checks. Mr. Slomer first knew of the existence of NADS, Inc. when his attorney sent him a copy of the complaint in this case.

Crown Controls was not paid and commenced this action in February 1984. In March 1984, NADS commenced litigation in Oregon against Crown Controls regarding the pump control valve problems. NADS also claimed the pump control valve problems constituted a partial setoff to the amount claimed in this action. In August 1984, Crown Controls obtained a partial summary judgment against NADS in this action for $5,547.92 plus prejudgment interest. There remained for trial the issues of Smiley's personal liability and the claimed setoff. In February 1985, NADS obtained judgment against Crown Controls for $3,363.11 in the Oregon action. That sum was the exact amount alleged as a setoff in this action.

After the partial summary judgment but before trial in this action, Crown Controls conducted a supplemental proceeding against Smiley as president of NADS. Crown Controls then attempted to garnish NADS' bank account, but the account was closed.

Trial of this action proceeded against Smiley in March 1985. The superior court found Smiley had failed to disclose the identity of his true principal. The court also ruled Smiley had sufficient contacts with Washington to justify imposition of personal jurisdiction under the Long Arm Statute, RCW 4.28.185. The court granted Crown Controls the option of taking judgment against Smiley and vacating the partial summary judgment against NADS. Crown Controls selected that option and judgment was entered against Smiley for $9,136.03 plus pre- and post-judgment interest. ¹ Smiley timely appeals.

Smiley first contends he did not have the minimum contacts with Washington necessary under the Due Process Clause to justify personal jurisdiction under the Long Arm Statute. Crown Controls argues Smiley waived any minimum contacts argument by failing to raise it in a responsive pleading or written motion. See CR 12(h). The issue was thoroughly litigated by the parties at trial and we will address the issue.

Smiley argues "a single telephone call" is not sufficient to subject an Oregon resident to Washington jurisdiction. An unchallenged finding states Smiley initiated the transaction between the parties, and there were "several" telephone conversations before the parties agreed on a contract. This finding is a verity on appeal. Davis v. Department of Labor and Indus., 94 Wash.2d 119, 615 P.2d 1279 (1980). It is also supported by substantial evidence, as the president of Crown Controls testified Smiley initially telephoned him and he spoke with Smiley approximately four times. In addition, one item was ordered by Crown Controls from a Washington company and shipped to Industrial Associates "F.O.B. Bellevue."

A Washington court may exercise personal jurisdiction if these criteria are met:

"(1) The nonresident defendant or foreign corporation must purposefully do some act or consummate some transaction in the forum state; (2) the cause of action must arise from, or be connected with, such act or transaction; and (3) the assumption of jurisdiction by the forum state must not offend traditional notions of fair play and substantial justice, consideration being given to the quality, nature and extent of the activity in the forum state, the relative convenience of the parties, the benefits and protection of the laws of the forum state afforded the respective parties, and the basic equities of the situation."

Sorb Oil Corp. v. Batalla Corp., 32 Wash.App. 296, 298-99, 647 P.2d 514 (1982), quoting Lewis v. Curry Coll., 89 Wash.2d 565, 568, 573 P.2d 1312 (1978).

Griffiths & Sprague Stevedoring Co. v. Bayly, Martin & Fay, Inc., 71 Wash.2d 679, 430 P.2d 600 (1967), is directly on point. There, plaintiff was a Washington insurance broker and defendant was a California insurance broker. Defendant solicited plaintiff by telephone and mail to procure insurance for one of its customers; plaintiff obtained it from Lloyds of London. The customer failed to pay the premium, and plaintiff sued defendant in Washington to recover the amount. The court held it would not violate due process to impose personal jurisdiction:

In the absence of a connecting tie or link between a nonresident and the forum state, the long-arm statute does not vest jurisdiction in the courts of a forum state where none existed before enactment of the statute. But the statute does tacitly recognize as an economic fact of modern life that large segments of commerce, finance, manufacturing and agriculture inevitably seek out a connection with or link to customers, consumers, users, fabricators, processors, or subcontractors in other states who intend or contemplate that the product, process or article of commerce, manufacturing or agriculture shall be consumed, used or employed in states other than the place of origin or beginning.

The connecting link then may consist of affirmative acts taking place here by which the out-of-state resident overtly submits to jurisdiction or the initiation of a transaction outside the state in contemplation that some phase of it will take place in the forum state or the start of a commercial process outside the forum state on the assumption that the article will be sold, used or acted upon or within many other states but with no particular jurisdiction in actual contemplation. The existence of these phenomena of modern economy are ordinarily enough to bring the parties within the long-arm statute without engendering an unjust or oppressive extension of jurisdiction.

.... When defendant, Bayly, Martin & Fay, insurance brokers in Los Angeles, ordered insurance by telephone and mail from or through plaintiff, Farwest General Agency, insurance brokers in Seattle, Washington, it overtly performed acts making it a party to and participant in a business transaction in Washington even though it was contemplated by Bayly, Martin & Fay that the insurer might be a foreign agency. Defendant thus submitted to the jurisdiction of Washington courts under the long-arm statute as to that particular transaction.

Griffiths & Sprague Stevedoring Co. v. Bayly, Martin & Fay, Inc., supra at 684-685, 430 P.2d 600.

In Peter Pan Seafoods, Inc. v. Mogelberg Foods, Inc., 14 Wash.App. 527, 544 P.2d 30 (1975), defendant was a New Jersey corporation who initiated a business relationship with plaintiff Washington corporation. This court held defendant's conduct in soliciting a series of sales, traveling to Washington to inspect plaintiff's facilities, and the fact most of the goods were delivered "F.O.B. Seattle," provided the minimum contacts necessary to justify imposition of personal jurisdiction. The court particularly relied...