Darby v. Superior Supply Co.

• Decision Date: 08 September 1970
• Citation: 224 Tenn. 540,2 Pack 540,458 S.W.2d 423
• Court: Tennessee Supreme Court
• Parties: , 224 Tenn. 540 E. H. DARBY, individually, and d/b/a E. H. Darby & Co. v. SUPERIOR SUPPLY COMPANY, d/b/a Superior Components.

Page 423

458 S.W.2d 423

2 Pack 540, 224 Tenn. 540

E. H. DARBY, individually, and d/b/a E. H. Darby & Co. v. SUPERIOR SUPPLY COMPANY, d/b/a Superior Components.

Supreme Court of Tennessee, at Knoxville.

Sept. 8, 1970.

Courtney, Trost, Leech & Hardin, Columbia, for appellants.

Mark J. Mayfield, Chattanooga, for appellee.

OPINION

HUMPHREYS, Justice.

E. H. Darby, a resident of Florence, Alabama, bought an order of mahogany lumber from Superior Supply Company, a Tennessee corporation with its principal place of business at Chattanooga, Tennessee. Darby bought the lumber for his personal use at his home in Florence, Alabama, the order therefor resulting from correspondence and telephone calls between the parties, without Darby ever entering the State of Tennessee. The lumber was delivered to Darby's agent at Superior's plant in Chattanooga and carried to Florence Alabama. After delivery Darby found he could use only a part of the lumber because of its dimensions. He used this, paid for it, and notified Superior he could not use the balance and would hold it for Superior. Subsequently Superior sued Darby for the balance claimed, $3,639.48 and interest, serving process on him in Alabama by means of Tennessee's long arm statute, § 20--235 T.C.A. Darby sought to have the suit abated on the ground the Tennessee court did not have jurisdiction over him, the attempted service of process being void because in violation of the due process clause of the Constitution of the United States. Darby conceded the validity of the long arm statute, as such, but challenged its use in his case because of the total absence of any activities on his part in the State of Tennessee other than the receipt of the goods for interstate carriage.

Another issue was raised subsequent to the plea in abatement: whether the first order, having been submitted and accepted in writing, was modified by a subsequent, valid parole amendment of the order changing the dimensions of the lumber to be supplied by Superior. Accompanying this issue was the question, whether or not the order, if it had been amended, had been rejected by Darby in time to avoid an acceptance of it on his part.

On these issues, the trial court and the Court of Appeals sustained the service of process as valid under the long arm statute, overruled the defenses based on the order and its rejection, and gave the plaintiff judgment. We granted certiorari. We reverse on the ground that the service of process in this particular case was void, being contrary to the due process of law clause of the Fourteenth Amendment of the Constitution of the United States.

In Pennoyer v. Neff, 95 U.S. 714, 733, 24 L.Ed. 565, the Supreme Court of the United States held that a personal judgment rendered without personal service of process against a nonresident of the state, or the defendant's appearance in the action upon service by publication, was void.

Subsequently, in International Shoe Company v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95, this rule was modified. In the course of its opinion in this case the Court said:

'Historically the jurisdiction of courts to render judgment in personam is grounded on the de facto power over the defendant's person. Hence, his presence within the territorial jurisdiction of the court was prerequisite to its rendition of a judgment personally binding him. * * * But, now that the capias ad respondendum has given way to personal service of summons or other form of notice, due process requires only that in order to subject a defendant to a 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."

In the course of its opinion in International Shoe the Court also said:

'Whether due process is satisfied must depend rather upon the quality and nature of the activity in relation to the fair and orderly administration of the laws which it was the purpose of the due process clause to insure. That clause does not contemplate that a state may make a binding judgment in personam against an individual or corporate defendant with which the state has no contacts, ties, or relations.'

It is worthwhile noting that International Shoe did not spring full formed from the Supreme Court in 1945. As early as 1926, in the case of Hess v. Pawloski, 274 U.S 352, 47 S.Ct. 632, 71 L.Ed. 1091, the United States Supreme Court recognized that a state, by virtue of its special interest in the potentially hazardous activities of a nonresident within its borders, might exercise jurisdiction over him by virtue of that activity. And, in the case of Henry L. Doherty & Co. v. Goodman, 294 U.S. 623, 55 S.Ct. 553, 79 L.Ed. 1097 (1935), the United States Supreme Court held that Iowa could exercise jurisdiction over a nonresident who dealt in securities through an agent in the state, even though the nonresident individual had never been present in the state. The ground of that decision was that 'Iowa treats the business of dealing in corporate securities as exceptional and subjects it to special regulation.'

These two cases recognizing that activities of a defendant in which the state had a right to have a special interest as expressed by its legislature could be brought to court without personal service of process, were the forerunners of McGee v. International Life Insurance Company, 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957).

In McGee, the petitioner, a California, recovered a judgment against the defendant on an insurance contract. The defendant was a foreign corporation which never did business in California, which had never had an agent in the state, and whose only contact with California was the insurance policy in question. Texas, the home state of the insurance company, refused to enforce the judgment obtained by the plaintiff. On these minimum contacts the Supreme Court of the United States held that California properly acquired jurisdiction. That the contract provided a substantial enough connection with the state. It reasoned that the witnesses would be in California; California was the place of delivery; and it was the residency of the insured. However, the real basis of the opinion was the recognition by the court of the special interest that a state has in protecting its residents with respect to insurance contracts sold in the state, insurance being universally recognized as a business affected with a degree of public interest, and so subject to regulation and treatment different from ordinary business.

In the following year, the United States Supreme Court decided Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958). That case involved a controversy over the right to a part of a trust estate settled in Delaware by a Delaware resident who subsequently moved to Florida. The trustee was a Delaware corporation which had no contacts with Florida, so when a Florida court attempted to assert jurisdiction by publication this was resisted. The trustee never appeared, but an appearing party moved to dismiss for failure to acquire jurisdiction over the trustee, who was an indispensable party. The Florida court sustained jurisdiction but the United States Supreme Court held that no jurisdiction had been acquired over the trustee. It reasoned that restrictions on jurisdiction are more than a guarantee of immunity from inconvenient or distant litigation. 'They are a consequence of territorial limitations on the powers of the respective states. However minimal the burden, there must be minimal contacts.' The Court distinguished McGee on the ground California had enacted special legislation to exercise its manifest interest in providing effective redress for citizens injured by insurance companies. It also distinguished McGee on the additional ground that the cause of action in that case arose from the defendant's activities in the state, whereas, in Hanson there were no such activities. The Court then went on to say that in order to be subject to jurisdiction, a nonresident must do some act by which he 'purposefully avails itself of the privilege of conducting activities within the foreign State, thus invoking the benefits and protection of its laws.'

In setting forth this background, Olberding v. Illinois Central Railroad Co., 346 U.S. 338, 74 S.Ct. 83, 98 L.Ed. 39 (1953), must not be overlooked. In that case the United States Supreme Court observed that, 'what may be 'fair play' and 'substantial justice' as to corporations may not be such as to individuals, and cases involving corporations should be received cautiously as precedent for cases involving individual defendants'.

By calling attention to this holding, we do not indicate that the due process language of International Shoe would not apply to individuals, although it is dictum as to such. To the contrary, the reasoning in the case would apply with equal force to the assertion of jurisdiction over individuals where the assertion...