Gillis v. Clark Equipment Co.

• Decision Date: 28 November 1978
• Parties: Monroe Dan GILLIS et ux., Plaintiffs-Appellants, v. CLARK EQUIPMENT COMPANY and Amoco Chemicals Corporation, Defendants-Appellees. 579 S.W.2d 869
• Court: Tennessee Court of Appeals

Page 869

579 S.W.2d 869

Monroe Dan GILLIS et ux., Plaintiffs-Appellants, v. CLARK EQUIPMENT COMPANY and Amoco Chemicals Corporation Defendants-Appellees.

579 S.W.2d 869

Court of Appeals of Tennessee, Eastern Section.

Nov. 28, 1978.

Robert E. Pryor, Frank Flynn, Jr., Knoxville, for plaintiffs-appellants.

Fred H. Cagle, Jr., Knoxville, for Amoco Chemicals Corp.; Frantz, McConnell & Seymour, Knoxville, of counsel.

Ray J. Campbell, Jr., and Arthur D. Byrne, Knoxville, for Clark Equipment Co.; Poore, Cox, Baker, McCauley, Ray & Byrne, Knoxville, of counsel.

OPINION

FRANKS, Judge.

This case presents the issue of whether there is jurisdiction to adjudicate a claim against foreign corporations doing business in this state where the cause of action arises from activities unconnected with this state.

The complaint alleges plaintiffs are residents of Tennessee and plaintiff Gillis was injured while operating a fork-lift in the State of Massachusetts. The defendants are the owner and the manufacturer and seller of the fork-lift, and their negligence is alleged to be the proximate cause of plaintiffs' damages.

Service of process was perfected upon the defendants' registered agents, appointed as a condition of doing business in this state, pursuant to T.C.A., § 48-1201, Et seq.

Defendants filed motions to dismiss, alleging the cause of action arose in the Commonwealth of Massachusetts and is unrelated to any business conducted within the State of Tennessee. The trial judge sustained the motions and dismissed the suit on the grounds that a foreign corporation is not subject to suit in Tennessee for claims arising wholly outside the state and relied upon T.C.A., § 20-220. ¹

Plaintiffs have appealed, insisting that Tennessee law affords bases of jurisdiction to adjudicate this cause of action: viz., (1) T.R.C.P., 4.04 ² provides for service of process upon foreign corporations qualified to do business in this state. (2) Section (f) of T.C.A., § 20-235, the so-called "Long Arm Statute", provides for jurisdiction over nonresidents to the limits of due process and the nonacceptance of jurisdiction herein would create an anomalous situation, I. e., a foreign corporation not available for service within this state would be subject to broader jurisdiction than one doing business here and subject to instate service of process. Finally, it is insisted that the determination made in DeLaney Furniture Co., v. The Magnavox Co. of Tennessee, 222 Tenn. 329, 435 S.W.2d 828, decided in 1968, is not controlling since it does not follow prior Tennessee law and for the further reason that the Rules of Civil Procedure and section (f) of the Tennessee Long Arm Statute have since been enacted.

All of plaintiffs' contentions merit consideration and will be discussed in the order presented.

First, plaintiffs contend that T.R.C.P., 4.04 and T.C.A., § 20-220, provide alternative bases of jurisdiction over foreign corporations, I. e., if a foreign corporation is served by any one of the procedures outlined in 4.04, T.C.A., § 20-220 would be totally inapplicable. The primary authority cited by plaintiff is Gallaher v. Chemical Leaman Tank Lines, Inc., 367 F.Supp. 1063 (E.D.Tenn.1973). The federal district court in that case stated:

(T)his court is of the opinion that T.C.A. § 20-220 and Tennessee Rule of Civil Procedure 4.04(4) are procedural alternatives. Otherwise, the framers of the Tennessee Rules would have seen fit to incorporate the limitation(s) (of 20-220) into the procedure for serving process. at p. 1065.

This analysis is not persuasive. T.C.A., § 20-220, by its terms purports to be jurisdictional. It provides for no method of service upon a foreign corporation; thus, the procedure for serving process on foreign corporations for any cause of action is established by other statutory authority or the Rules. Whereas, T.R.C.P., 4, outlines the various methods available for giving effective notice to a defendant and, upon compliance, the defendant is subjected to the court proceeding: it does not purport to include the substantive law of jurisdiction. Accordingly, T.C.A., § 20-220, provides no procedural alternative to T.R.C.P., 4.04, and the Rule provides no substantive alternative to the statute.

Plaintiffs' reliance on Rule 4.04 is misplaced but understandable since the traditional foundation of judicial jurisdiction in transitory actions is based upon the physical presence of the defendant. See McDonald v. Mabee, 243 U.S. 90-91, 37 S.Ct. 343, 61 L.Ed. 608. And, as in the case of a foreign corporation, it is generally understood that unless the corporation has voluntarily submitted to jurisdiction, judicial jurisdiction is asserted on the basis of the activities of the corporation within the forum state.

It was not within the purview of the rules to include or re-enact substantive law not affected by the rules. § 2 of Acts of 1965, ch. 227 (codified as T.C.A., § 16-113), the enabling act under which the Rules of Civil Procedure were promulgated, provides the rules should not "abridge, enlarge or modify any substantive right." Statutory construction requires statutes be construed in a manner to avoid conflict and specific provisions control over general provisions. See Watts v. Putnam County, 525 S.W.2d 488 (Tenn.App.1975); Cole v. State, 539 S.W.2d 46 (Tenn.Cr.App.1976).

If Rule 4.04 is a jurisdictional alternative, then T.C.A., § 20-220, is rendered meaningless since all permissible forms of service are embraced by the rule. There would be no situation where the statute applied while the rule did not. Thus, the limitation in the statute would be rendered meaningless and would result in repeal by implication, which is not favored and will only be found when there is an irreconcilable conflict between statutes. Massachusetts Mutual Life Ins. Co. v. Vogue, Inc., 54 Tenn.App. 624, 393 S.W.2d 164 (1965).

The method of testing whether a foreign corporation is subject to suit in a particular state is set forth in 36 Am.Jur.2d, Foreign Corporations, § 466 at pp. 469-70, as follows:

There are two parts to the question whether a foreign corporation is subject to suit in a particular state. The first is whether, as a matter of state law, the state has provided for bringing the corporation into its courts under the circumstances of the case presented; The second is whether, as a matter of federal law, the assumption of jurisdiction over the corporation violates the due process or interstate commerce clause of the Federal Constitution. (Emphasis added.)

Jurisdiction over foreign corporations within the limits of due process is a matter of legislative discretion, as stated in Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437, 72 S.Ct. 413, 96 L.Ed. 1332 (1952):

"Provisions for making foreign corporations subject to service in the state is a matter of legislative discretion, and a failure to provide for such service is not a denial of due process. Still less is it incumbent upon a state in furnishing such process to make the jurisdiction over the foreign corporation wide enough to include the adjudication of transitory actions not arising in the state." Missouri P.R. Co. v. Clarendon Co., 257 U.S. 533, 535, 42 S.Ct. 210, 211, 66 L.Ed. 354.

We hold that T.C.A., § 20-220 is jurisdictional and imposes a jurisdictional limitation on service of process perfected under procedures contained in T.R.C.P., 4.04.

The second argument made by plaintiffs is that section (f) of the Long Arm Statute, T.C.A., § 20-235, would be "undermined" by a determination that these defendants are not subject to jurisdiction in Tennessee courts for the alleged cause of action.

Section (f) makes nonresidents who cannot be personally served in this state subject to jurisdiction of Tennessee courts on "(a)ny basis not inconsistent with the constitution of this state or of the United States."

This argument overlooks the basis of jurisdiction under the Long Arm Statute which is not based on defendant's relationship to the state but on the conduct of defendant or particular occurrence or event with consequences within this state. The Long Arm Statute affords a basis for specific jurisdiction upon prescribed circumstances as opposed to general jurisdiction but general jurisdiction over foreign corporations is historically not without limitations.

As observed by the United States Supreme Court in the case of Simon v. Southern Ry., 236 U.S. 115, 130, 135 S.Ct. 255, 260, 59 L.Ed. 492 (1915),

(T)his power to designate by statute the officer upon whom service in suits against foreign corporations may be made relates to business and transactions within the jurisdiction of the state enacting the law. Otherwise, claims on contracts, wherever made, and suits for torts, wherever committed, might, by virtue of such compulsory statute be drawn to the jurisdiction of any state in which the foreign corporation might at any time be carrying on business. The manifest inconvenience and hardship arising from such extraterritorial extension of jurisdiction by virtue of the power to make such compulsory appointments could not defeat the power if in law it could be rightfully exerted. But these possible inconveniences serve to emphasize the importance of the principle laid down in Old Wayne Mut. Life Asso. v. McDonough, 204 U.S. 22(8), 51 L.ed. 351, 27 Sup.Ct.Rep. 236, that the statutory consent of a foreign corporation to be sued does not extend to causes of action arising in other states.

Later, specifically in the case of International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), the United States Supreme Court permitted the exercise of jurisdiction with respect to activities largely unconnected with the forum but arising from in-state contacts nevertheless. At page 320, 66 S.Ct. at page 160 of that Opinion, the Court emphasized that "(t) he obligation which is here sued upon arose out of (the) . . . very activities" relied upon to "establish...