First Nat. Bank of Minneapolis v. White

• Decision Date: 08 October 1976
• Docket Number: No. 4-76-Civ. 109.,4-76-Civ. 109.
• Citation: 420 F. Supp. 1331
• Parties: FIRST NATIONAL BANK OF MINNEAPOLIS, a National Banking Association, Plaintiff, v. R. Harold WHITE et al., Defendants. R. Harold WHITE et al., Third-Party Plaintiffs, v. CENTRAL AG FINANCE CORPORATION, a Delaware Corporation, Third-Party Defendant.
• Court: U.S. District Court — District of Minnesota

420 F. Supp. 1331

FIRST NATIONAL BANK OF MINNEAPOLIS, a National Banking Association, Plaintiff, v. R. Harold WHITE et al., Defendants.

R. Harold WHITE et al., Third-Party Plaintiffs, v. CENTRAL AG FINANCE CORPORATION, a Delaware Corporation, Third-Party Defendant.

No. 4-76-Civ. 109.

United States District Court, D. Minnesota, Fourth Division.

October 8, 1976.

COPYRIGHT MATERIAL OMITTED

Stuart W. Rider, Jr., and Steven J. Kluz, Rider, Bennett, Egan, Johnson & Arundel, Minneapolis, Minn., for plaintiff.

G. William Smith, Dudley & Smith, St. Paul, Minn., Durrell Nielsen, Charles C. Brown, Morris & Nielsen, Salt Lake City, Utah, for defendants.

Gerald D. Chiss and Michael G. Beland, Rusnak, Deutsch & Gilbert, Ltd., Chicago, Ill., Harold D. Field and George F. McGunnigle, Jr., Leonard, Street & Deinard, Minneapolis, Minn., for third-party defendant.

MEMORANDUM ORDER

LARSON, District Judge.

Plaintiff First National Bank is a federally chartered bank corporation with its offices and facilities in Minnesota. It comes into this Court seeking recovery on a promissory note signed by defendant United Cattle Partnership, a Utah limited partnership in which defendant General Livestock Company is the sole general partner; the individual defendants are all general partners in General Livestock. As of January 1976 United defaulted on its note and First National sold United's collateral, a herd of cattle. It here requests a judgment for the outstanding balance on the note and on various other notes made out to the partnership by individual partners and given as collateral.

Central Ag Finance Corporation is a Delaware corporation whose main offices are in Chicago. It does not routinely conduct business in Minnesota and has made only one loan to a Minnesota resident, in a transaction totally unrelated to this action. Some time prior to the fall of 1975, Central Ag assigned its loan portfolio to Central National Bank, also located in Chicago. Central Ag had made a loan to Bountiful Cattle Co., a Minnesota limited partnership whose general partners were the individuals named as defendants here. Bountiful had also offered cattle as collateral, and its cattle were commingled with those in which First National held a security interest. The cattle apparently were being held on ranches in Arizona and Nevada.

In October 1975 Central National Bank contacted First National to propose a joint venture in which representatives of Central National would conduct a roundup and take over management of the herd, which the creditors believed was being allowed to deteriorate. Central would see to it that the cattle were separated by brand and would submit a bill to First National for its share of the expenses of roundup and maintenance. The arrangement is evidenced by a single letter submitted to this Court by counsel for third party defendant Central Ag, and it appears that negotiations were minimal, each of the banks executing the letter as presented.

The roundup was conducted in the southwest, and First National paid its share of the expenses. Defendants have impleaded Central Ag, claiming mismanagement of the herd so as to bring in a lower price than warranted by the market at the time of sale. They have also counterclaimed against First National on the same grounds.

Defendants have moved to dismiss for lack of personal jurisdiction over the individuals in the partnership or, in the alternative, to transfer this case under 28 U.S.C. § 1404(a) to the District of Utah. Third party defendant moves to dismiss for lack of personal jurisdiction or, alternatively, for failure to state a claim upon which relief can be granted. The motions have been argued orally and briefed extensively, and the parties are currently engaged in a battle for the last word in letters to this Court. The Court's last word on this matter is to (1) grant Central Ag's motion to dismiss it as a third party defendant and (2) transfer the case to the District of Utah.

I. THE THIRD PARTY DEFENDANT—

Jurisdiction over Central Ag must be had, if it is at all available, under the Minnesota longarm statute, M.S.A. § 543.19; Fed.Rules of Civ.Proced. 4(e). The Minnesota Supreme Court has declared that the longarm statutes will be construed to afford the broadest jurisdiction possible within the limits of due process, Hunt v. Nevada State Bank, 285 Minn. 77, 172 N.W.2d 292 (1969), and the Federal courts have adopted this expansive reading of the statutes, B & J Manufacturing Co. v. Solar Industries, Inc., 483 F.2d 594 (8th Cir. 1973). Consequently, this District Court cannot have jurisdiction over a nonresident defendant whose contacts with the forum have been so minimal as to fall short of the standard established in International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945) ("traditional notions of fair play and substantial justice" must be satisfied), and Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958) (defendant must have entered the forum with business purposes sufficient to invoke "the benefits and protections of its laws"). The Eighth Circuit has determined that satisfaction of the due process standard may be measured by examining the nature and quality of defendants' contacts with the forum State, quantity of contacts, source and connection of the cause of action with those contacts, and, to a lesser degree, interest of the forum State and convenience. Aftanase v. Economy Baler Co., 343 F.2d 187 (8th Cir. 1965). Measured thus, the position and conduct of third party defendant Central Ag do not constitute sufficient contact with this forum to satisfy the due process standard.

Central Ag's only contacts with this forum have been one unrelated loan transaction and the written agreement with First National, which was mailed into the State. There are no allegations and no evidence of negotiations or other communications between the banks, aside from the letter and eventual payment. Most of Central Ag's performance took place in Nevada, Arizona, and possibly Illinois. This fact situation falls somewhere between that of Independent School District No. 454, Fairmont, Minn. v. Marshall & Stevens Co., 337 F.Supp. 1278 (D.Minn.1971) (contract between nonresident defendant and nonresident third party defendant, negotiated and largely performed outside the forum, held to be insufficient contacts), and Kornfuehrer v. Philadelphia Bindery, Inc., 240 F.Supp. 157 (D.Minn.1965) (making a contract with a Minnesota resident after considerable negotiation by mail into the State, held to be sufficient contact). Kornfuehrer, supra, involved only the Minnesota single-act longarm statute, which was by its terms enacted in order to protect Minnesota residents who made contracts with nonresident corporations. M.S.A. § 303.13; Kornfuehrer, supra, at 158. These considerations are not applicable here, where the third party plaintiffs seeking to invoke jurisdiction under the Minnesota general longarm statute are nonresidents whose interest in the contract between the banks is peripheral at most. Central Ag's contacts with the State of Minnesota are not sufficient to warrant jurisdiction unless there are other factors in the case that would tend to establish a stronger connection with this forum.

The Court has already noted the small quantity of Central Ag's contacts with the State. It also finds the interest of this forum in resolving a dispute between two nonresidents, engendered by a contract to which only one of them was a party, to be negligible. See Independent School District No. 454, supra, at 1288; Mid-Continent Freight Line v. Highway Trailer Industry, 291 Minn. 251, 190 N.W.2d 670 (1971). While the convenience of the third party plaintiffs might be served by hearing their claims here in the forum in which they are already in litigation, Central Ag's convenience is not served at all, and the third party plaintiffs have argued at length that the suit should be heard in Utah; this forum is actually convenient only for First National Bank, whose presence in the suit is not at issue here.

Third party plaintiffs would argue that Central Ag's contacts with this State, while minimal, are sufficiently connected to the cause of action to warrant jurisdiction. M.S.A. § 543.19(3). See, e. g., Northwestern National Bank v. Kratt, 303 Minn. 256, 226 N.W.2d 910 (1975) (nonresident guarantor of a mortgage was held subject to jurisdiction in an action on the guaranty when most of his contact with the State was only remotely connected to his signing the guaranty). They also claim that First National and Central Ag formed a partnership for the limited purpose of gathering the cattle, that they are thus agents of each other as to all activities concerning the note and the cattle, and that proper service of process on one partner subjects the association, and all of its members to the extent of their interest in the business, to jurisdiction in a suit concerning partnership business. This last assertion is correct as to both joint ventures and partnerships, M.S.A. § 540.15; J. Crane and A. Bromberg, Partnership §§ 59-62 (West, 1968), but the third party plaintiffs are mistaken in their characterization of the scope and nature of the relationship between the two banks, and are therefore mistaken in any claim that Central Ag is subject to jurisdiction because of any connection either between its contacts and the cause of action or between itself and First National.

Central Ag and First National formed an association for the sole purpose of gathering the cattle that constituted collateral for loans made to United and Bountiful. In essence, Central Ag performed services for First National and acted as its agent in rounding up and selling the cattle that carried United's brand. First National did not transact any business with third parties, within or without the State, on behalf of Central Ag or their association. When First National paid Central Ag for...