Foster v. Mooney Aircraft Corp.

• Decision Date: 01 April 1977
• Citation: 137 Cal.Rptr. 694,68 Cal.App.3d 887
• Court: California Court of Appeals Court of Appeals
• Parties: Joyce L. FOSTER et al., Plaintiffs and Appellants, v. MOONEY AIRCRAFT CORP., a Texas Corporation, et al., Defendants and Respondents. Civ. 48670.

Page 694

137 Cal.Rptr. 694

68 Cal.App.3d 887

Joyce L. FOSTER et al., Plaintiffs and Appellants, v. MOONEY AIRCRAFT CORP., a Texas Corporation, et al., Defendants and Respondents.

Civ. 48670.

Court of Appeal, Second District, Division 5, California.

April 1, 1977.

Hearing Denied May 26, 1977.

Seuthe, Bourne, Weisberg & Lesser, Los Angeles, for plaintiffs and appellants

Gibson, Dunn & Crutcher, Richard Chernick and John Loo, Los Angeles, for defendants and respondents.

ASHBY, Associate Justice.

Plaintiffs appeal from an order quashing service of summons on defendant Mooney Aircraft Corporation, a New Jersey corporation (herinafter Mooney), on the ground California may not constitutionally exercise jurisdiction over Mooney.

Plaintiffs are the heirs-at-law of the decedent, Leo Foster, who died as a proximate result of an airplane crash which occurred near Filmore, California, on November 24, 1973. Named as defendants in the complaint were Mooney Aircraft Corporation, a Texas corporation (Mooney-Texas), the manufacturer of the Mooney Mark 20 aircraft which crashed; Spray Craft Company, which repaired and reconditioned the aircraft; several named Federal Aviation Administration inspectors who inspected the aircraft; and unnamed individual and corporate Doe defendants. The complaint for wrongful death alleged that the crash occurred as a result of a structural defect which caused the wing to fall off, and sought recovery based on negligence and strict product liability.

Service of summons was made on Mooney at its principle offices in Kerrville, Texas. Mooney is a New Jersey corporation, a wholly-owned subsidiary of Republic Steel Corporation. It is engaged principally in the business of manufacturing and selling aircraft, aircraft parts, and components. The complaint was amended to name Mooney as Doe corporation 1, and Mooney made a special appearance to contest jurisdiction.

Before discussing the extent of Mooney's contacts with California it is necessary to set forth the historical relation between Mooney and Mooney-Texas, the original manufacturer of the aircraft. According to the affidavit and exhibits produced by Mooney in support of the motion to quash, the aircraft was manufactured by Mooney-Texas and sold to West Texas Flying Service on July 22, 1957. Mooney has no knowledge how the aircraft came into decedent's possession. Mooney-Texas was thereafter adjudged a bankrupt. The petition in bankruptcy was filed February 17, 1969, and the court's order approving the account, discharging the trustee, and closing the estate was entered March 13, 1972.

On March 14, 1969, the assets of Mooney-Texas were purchased out of bankruptcy by American Electronics Laboratories, Inc., a Pennsylvania corporation. American Electronics did not assume the liabilities of Mooney-Texas. American Electronics thereafter operated the business through a subsidiary which it created, Mooney Aircraft Corporation, a Pennsylvania corporation (Mooney-Pennsylvania).

Thereafter the stock of Mooney-Pennsylvania was acquired by Butler Aviation International, Inc., a Pennsylvania corporation. Through its subsidiary, BAACT Corporation, a Pennsylvania corporation, Butler did business as Mooney Aircraft Corporation (Mooney-BAACT).

On August 1, 1973, Republic Steel Corporation formed Mooney, as a subsidiary under New Jersey law. On September 24, 1973, Mooney entered into a purchase agreement with Butler and Mooney-BAACT to purchase the assets of the business. Mooney expressly did not assume any liabilities, including product liabilities.

The sale of assets was effected on October 4, 1973, the same day that Mooney was issued its certificate to do business in Texas.

According to the affidavit in support of the motion to quash, the facts relating to the extent of Mooney's contacts with California are:

1. Mooney presently has in effect two agreements for marketing centers with two California corporations, which have the nonexclusive right to sell the products of Mooney. Under these agreements, all sales must be approved and accepted at Mooney's offices in Kerrville, Texas. Airplanes are always delivered and paid for in Texas. Parts are picked up in Texas or shipped from Texas. Mooney maintains no stock of its products in California.

2. There are five Mooney service centers located in California. They are 'totally unconnected and unaffiliated with' Mooney 'other than that they specialize in servicing 3. Two Mooney employees visited California shortly after the crash to assist the National Transportation and Safety Board in its investigation.

of planes manufactured by' Mooney 'and prior 'Mooney' entities.' Mooney's only income derived from these service centers is the incidental sale of parts by Mooney to such service centers. Such sales of parts (always f.o.b. Texas or delivered in Texas) comprise less than one percent of Mooney's total sales.

4. Some employees of Mooney have visited California for the purpose of locating, contacting, and negotiating with prospective and existing marketing centers and service centers. On those and other occasions, negotiations for sales of both airplanes and parts were conducted by these employees in California. Contracts for the marketing centers and all sales orders were executed in Kerrville, Texas.

5. Mooney has one lease agreement for a piece of production equipment with a California corporation as lessee, with a rental of $200 per month. The agreement was entered into and the equipment was delivered in Texas. At the conclusion of the lease, the property will be returned to Mooney in Texas.

6. Mooney purchases parts from several California entities, and employees of Mooney have visited two of such vendors on occasion to consult with them about production and quality control.

7. Mooney is not qualified to do business in California, has no agent appointed to receive service of process in California, does not maintain offices in California, 'has no agents present in the State of California . . . for the purpose of conducting business of any description in the State of California,' maintains no bank accounts nor any other property in California.

DISCUSSION

California may exercise jurisdiction over nonresident defendants to the fullest extent consistent with the United States and California constitutions. (Code Civ.Proc., § 410.10; Cornelison v. Chaney, 16 Cal.3d 143, 147, 127 Cal.Rptr. 352, 545 P.2d 264.) The basic test is whether the quality and nature of the defendant's activity in relation to the particular cause of action make it fair to exercise jurisdiction. The cause of action must arise out of an act done or a transaction consummated in the forum, or the defendant must perform some other act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protection of its laws. (Cornelison v. Chaney, supra at p. 148, 127 Cal.Rptr. 352, 545 P.2d 264; Buckeye Boiler Co. v. Superior Court, 71 Cal.2d 893, 898, 80 Cal.Rptr. 113, 458 P.2d 57.)

In analyzing the defendant's activities we must focus upon 'economic reality' rather than a mechanical checklist. (Buckeye Boiler Co. v. Superior Court, supra at p. 903, 80 Cal.Rptr. 113, 458 P.2d 57.) An enterprise obtains the benefits and protection of our laws if as a matter of commercial actuality it has engaged in economic activity within this state. (id., at p. 901, 80 cal.rptr. 113, 458 P.2d 57.) a manufacturer engages in economic activity within a state as a matter of commercial actuality whenever the purchase or use of its product within the state generates gross income for the manufacturer and is not so fortuitous or unforeseeable as to negative the existence of an intent on the manufacturer's part to bring about this result. (Id., at p. 902, 80...