DeSotacho, Inc. v. Valnit Industries, Inc.

• Citation: 350 So.2d 447
• Parties: DeSOTACHO, INC. v. VALNIT INDUSTRIES, INC. SC 2560.
• Decision Date: 30 September 1977
• Court: Supreme Court of Alabama

Page 447

350 So.2d 447

DeSOTACHO, INC. v. VALNIT INDUSTRIES, INC.

SC 2560.

Supreme Court of Alabama.

Sept. 30, 1977.

Loma B. Beaty and John C. Wear, Fort Payne, for appellant.

J. C. Kellett of Kellett & Gillis, P. A., Fort Payne, for appellee.

SHORES, Justice.

This appeal concerns an action on an account brought by DeSotacho, Inc., an Alabama corporation, against a New York corporation, Valnit Industries, Inc. Following perfection of service through the Secretary of State, appellee Valnit Industries filed a motion to dismiss for lack of jurisdiction. This motion was granted April 8, 1977. The trial court decree stated that Valnit Industries had not transacted sufficient business within the State of Alabama to give Alabama courts jurisdiction in the case. DeSotacho appealed to this court.

Valnit Industries is a hosiery supplier with offices in New York City, New York. The corporation is not qualified with the Secretary of State to do business in Alabama nor does it maintain an office or an agent in this state.

On June 19, 1974, Mr. Sigmund F. Hoffman, president of Valnit Industries, visited the manufacturing plant of DeSotacho which was located in Fort Payne, Alabama. Mr. Hoffman inspected the facilities to determine whether DeSotacho was able to manufacture hosiery for customers of Valnit Industries. The record reveals that this was the first visit by any agent of Valnit Industries to the State of Alabama. Mr. Hoffman returned to New York that same day.

The next day in New York City, Mr. Hoffman met with Mr. Ryan, a buyer for Montgomery Ward, Valnit Industries' principal customer. Mr. Ryan approved DeSotacho as a manufacturer. The first order was then placed by Valnit Industries with DeSotacho on June 20, 1974.

Shortly thereafter, a disagreement arose between the parties concerning the price of the hosiery to be manufactured by DeSotacho. This dispute was settled by correspondence and DeSotacho began filling the order.

Further problems arose between the Valnit Industries and DeSotacho due to the method of shipping used by DeSotacho.

Mr. Hoffman returned to Fort Payne, Alabama, spending two days at the manufacturing plant inspecting the facilities and making suggestions for improvements in the shipping process. Three additional trips were made by Mr. Hoffman to Alabama to discuss these business difficulties with plant managers and employees.

Shipments were made by DeSotacho to Valnit Industries through February 10, 1975. At that time, the Valnit Industries' account had an outstanding balance of $35,825.97. Suit was then filed by DeSotacho to recover this amount on July 8, 1975.

The issue on appeal is whether Valnit Industries, through the activities of its agent, Mr. Hoffman, conducted business within the State of Alabama sufficient for Alabama courts to acquire jurisdiction in this cause.

DeSotacho argues in its brief that Valnit Industries, through the actions of its agent Mr. Hoffman, had sufficient contact with Alabama to bring the New York corporation within the jurisdictional provisions of Rule 4.2(a)(2)(A) or 4.2(a)(2)(I) of the current Alabama Rules of Civil Procedure. We must note, as did the trial court, that although Rule 4.2(a)(2)(A)-(I), ARCP, is a codification of existing statutory and case law concerning jurisdiction over nonresident defendants, this particular amendment was not in effect at the time of the acts by Mr. Hoffman or at the time of the commencement of this suit.

Service of process was obtained in this case upon Valnit Industries under the provisions of Title 7, § 199(1), Code of Alabama 1940 (Recomp.1958), which statute is one of several "long-arm" statutes codified in Rule 4, ARCP, as it existed in 1975. Title 7, § 199(1), provides, in pertinent part, as follows:

"Any nonresident person, firm, partnership, general or limited, or any corporation not qualified under the Constitution and laws of this state as to doing business herein, who shall do any business or perform any character of work or service in this state shall, by the doing of such business or the performing of such work, or services, be deemed to have appointed the secretary of state, or his successor or successors in office, to be the true and lawful attorney or agent of such nonresident, upon whom process may be served in any action accrued, accruing, or resulting from the doing of such business, or the performing of such work or service, or relating to or as an incident thereof, by any such nonresident, or his, its or their agent, servant or employee. And such service shall be valid whether or not the acts done in Alabama shall of and within themselves constitute a complete cause of action. . . ."

The power of state courts to render judgments in personam against nonresident defendants through provisions of "long-arm" statutes such as Title 7, § 199(1), has been considered by many courts since the case of Pennoyer v. Neff, 95 U.S. 714, 24 L.Ed. 565 (1877). This court has recognized that the issue of jurisdiction pursuant to "long-arm" statutes poses a federal question of whether subjection of a nonresident corporation to the jurisdiction of Alabama courts comports with federal due process. King & Hatch, Inc. v. Southern Pipe & Supply Co., 5 Cir., 435 F.2d 43 (1970); Boyd v. Warren Paint & Color Co., 254 Ala. 687, 49 So.2d 559 (1950).

The following quote from McGee v. International Life Insurance Co., 355 U.S. 220, 222, 78 S.Ct. 199, 200, 2 L.Ed.2d 223 (1957), summarizes a line of cases that form the foundation for statutes such as Title 7, § 199(1):

"Since Pennoyer v. Neff, 95 U.S. 714, 24 L.Ed. 565, this Court has held that the Due Process Clause of the Fourteenth Amendment places some limit on the power of state courts to enter binding judgments against persons not served with process within their boundaries. But just where this line of limitation falls has been the subject of prolific controversy, particularly with respect to foreign corporations. In a continuing process of evolution this Court accepted and then abandoned 'consent,' 'doing business,' and 'presence' as the standard for measuring the extent of state judicial power over such corporations. See Henderson, The Position of Foreign Corporations in American Constitutional Law, c. V. More recently in International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95, the Court decided that '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. " ' Id., 326 U.S. at page 316, 66 S.Ct. at page 158."

This court, as well as the Supreme Court of the United States, has held that the provisions of Title 7, § 199(1), in regard to substituted service are sufficient to meet the requirements of due process. New York Times v. Sullivan, 273 Ala. 656, 144 So.2d 25, cert. gr., 371 U.S. 946, 83 S.Ct. 510, 9 L.Ed.2d 496 (1962).

Therefore, we must determine if Valnit Industries had certain minimum contacts with this state such that the maintenance of the...