Gold Circle Stores v. Chemical Bank-Dommerich Div., BANK-DOMMERICH

• Decision Date: 30 March 1982
• Docket Number: BANK-DOMMERICH
• Citation: 4 OBR 31,4 Ohio App.3d 10,446 N.E.2d 194
• Parties: , 4 O.B.R. 31 GOLD CIRCLE STORES, Appellant, v. CHEMICALDIVISION, et al., Appellees. *
• Court: Ohio Court of Appeals

Page 10

4 Ohio App.3d 10

446 N.E.2d 194, 4 O.B.R. 31

GOLD CIRCLE STORES, Appellant, v. CHEMICAL BANK-DOMMERICH DIVISION, et al., Appellees. ^*

Court of Appeals of Ohio, Tenth District, Franklin County.

March 30, 1982.

Syllabus by the Court

Ohio courts have jurisdiction over an action brought by an Ohio debtor against a foreign person engaged in the business of factoring, who purchased the Ohio debtor's future accounts receivable in an out-of-state transaction, where the suit involves the underlying sales transaction and the purchaser's involvement in the transaction is so great as to give the assignee control over consummation of such sale.

Vorys, Sater, Seymour & Pease and Philip A. Brown, Columbus, for appellant.

Bricker & Eckler, David K. Conrad and Richard Taps, Columbus, for appellees.

WHITESIDE, Presiding Judge.

This appeal by plaintiff Gold Circle Stores from a judgment of the Franklin County Court of Common Pleas raises an issue as to under what circumstances, if any, does the purchase in an out-of-state transaction of Ohio accounts receivable by a person engaged in the business of factoring subject such person to the jurisdiction of the Ohio courts in an action brought by the Ohio debtor to recover payment made upon the account after return of the merchandise for which the payment was made. Plaintiff raises a single assignment of error contending that "the trial court erred in dismissing the complaint for lack of personal jurisdiction."

Plaintiff in its complaint alleges that it is engaged in the business of making retail sales in Franklin County, Ohio, and other locations. In connection with that business, plaintiff purchased a quantity of "micro-eye detectors" from Bel Sales in November 1977 under a guaranteed sale provision providing that any of the items not sold by plaintiff could be returned to Bel Sales for full refund of the purchase price.

In October 1977, Bel Sales had sold all its accounts receivable to defendant Chemical Bank-Dommerich Division. Pursuant to instructions, plaintiff made payments for the merchandise directly to defendant Chemical Bank, rather than to Bel Sales. Later, the merchandise was returned by plaintiff to Bel Sales under the guaranteed sale provision, but plaintiff has not been paid therefor. Plaintiff seeks to recover from defendant Chemical Bank the purchase price for the returned merchandise, payment for which was made to Chemical Bank.

Defendant Chemical Bank filed a motion to dismiss for lack of jurisdiction supported by an affidavit and by a stipulation of the parties. The trial court sustained the motion upon the ground that insufficient contacts with Ohio have been demonstrated to justify personal jurisdiction over defendant Chemical Bank.

The stipulations indicate that defendant Chemical Bank in its factoring business has purchased many open accounts owned by Ohio vendees from its approximately two hundred regular customers, none of whom is headquartered in Ohio. Included in this group of customers was Beltron Sales U.S.A., Inc., (referred to as Bel Sales U.S.A. in the complaint), pursuant to a factoring contract referred to in the complaint, a copy of which was attached to the stipulations. Other than this factoring business, there is no indication of any contact of defendant Chemical Bank with Ohio or Ohio residents. Beltron Sales U.S.A., Inc., is a California corporation; whereas, Chemical Bank is a New York corporation, and the factoring agreement was negotiated and executed entirely outside Ohio.

It is further stipulated that:

" * * * Beltron Sales U.S.A., Inc., advised Gold Circle of the assignment of the invoices to Chemical Bank-Dommerich Division and instructed Gold Circle to make payments thereon directly to Chemical Bank-Dommerich Division. * * * Chemical Bank-Dommerich Division did not communicate directly with Gold Circle."

The so-called Long-Arm Statute, R.C. 2307.382(A), provides in pertinent part, as follows:

"A court may exercise personal jurisdiction over a person who acts directly or by an agent, as to a cause of action arising from the person's:

"(1) Transacting any business in this state;

"(2) Contracting to supply services or goods in this state; * * *."

The parties expressly stipulated that defendant Chemical Bank does not contract to supply services or goods in Ohio, so that the only possible basis for an Ohio court to exercise personal jurisdiction over defendant Chemical Bank would be a finding that the entering into the factoring agreement and accepting the benefits thereunder, including payments of Ohio accounts receivable, constitutes the transacting of business in Ohio.

Although not stressed by the parties, under the factoring agreement with Bel Sales, defendant Chemical Bank received title to the merchandise, especially returned merchandise, as well as to the accounts receivable. Paragraph one of the factoring agreement provides in pertinent part as follows:

"We agree to do all our business through you as our sole factor. The undersigned hereby assigns and sells to you as absolute owners all accounts * * * and other forms of obligations * * * now existing or hereafter created. The undersigned represents and warrants that all receivables are and will be at the time of assignment to you bona fide and existing obligations of its customers arising out of the sale of goods and/or the rendition of services by the undersigned in the ordinary course of its business * * *. You hereby purchase from the undersigned, without recourse to the undersigned, except as set forth hereinafter, all of said receivables acceptable to and approved by you. * * * The undersigned further sells, assigns and transfers to you all of its title and/or interest in the goods represented by receivables and in all such goods that may be returned by customers and all its right of stoppage and transit, replevin and reclamation and as an unpaid vendor and/or lienor. Any goods so recovered shall be treated as returned goods, and shall be set aside, marked with your name and held for your account as owner. The undersigned shall notify you promptly of all such returned goods."

The second paragraph of the agreement provides in part as follows:

" * * * The amount and terms of each sale to a customer of the undersigned shall be submitted to you for your approval in writing, and no sale or deliveries shall be made without such written approval, which may be withdrawn at any time before actual delivery of the merchandise or rendition of the services."

Thus, defendant Chemical Bank had an interest in both tangible and intangible property in Ohio since an indebtedness due from a resident to a nonresident constitutes property within the resident's state. See Pennington v. Fourth National Bank of Cincinnati (1917), 243 U.S. 269, 37 S.Ct. 282, 61 L.Ed. 713. However, the mere presence of property in a state does not establish a sufficient relationship between the owner of the property and the state to support the exercise of jurisdiction over an unrelated cause of action. See Shaffer v. Heitner (1977), 433 U.S. 186, 97 S.Ct. 2569, 53 L.Ed.2d 683.

As stated in the first paragraph of the syllabus of Wainscott v. St. Louis-San Francisco Ry. Co. (1976), 47 Ohio St.2d 133, 351 N.E.2d 466 , in order for an Ohio court to exercise in personam jurisdiction over a foreign corporation, such corporation must have "certain minimum contacts with Ohio such that it is fair that a defendant defend a suit brought in Ohio and that substantial justice is done." Wainscott relied upon International Shoe Co. v. Washington (1945), 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95. In Shaffer, supra, 433 U.S. at pages 203-204, 97 S.Ct. at page 2579, quoting from International Shoe, the court stated:

"Thus, the inquiry into the State's jurisdiction over a foreign corporation appropriately focused not on whether the corporation was 'present' but on whether there have been 'such contacts of the corporation with the state of the forum as make it reasonable, in the context of our federal system of government, to require the corporation to defend the...