Green v. Advance Ross Electronics Corp.

Decision Date30 September 1981
Docket NumberNo. 53951,53951
Citation56 Ill.Dec. 657,86 Ill.2d 431,427 N.E.2d 1203
Parties, 56 Ill.Dec. 657 Roy W. GREEN, Jr., Appellee, v. ADVANCE ROSS ELECTRONICS CORPORATION et al., Appellants (Roy W. Green, Sr., Appellee).
CourtIllinois Supreme Court

Patrick W. O'Brien and Gary T. Johnson, Chicago (Mayer, Brown & Platt, Chicago, of counsel), for appellants.

Hinshaw, Culbertson, Moelmann, Hoban & Fuller, Chicago (William J. Holloway, Thomas L. Browne and Stephen R. Swofford, Chicago, of counsel), for appellee.

SIMON, Justice:

This appeal involves the application of that part of the Illinois long-arm statute which relates to commission of tortious acts within this State (Ill.Rev.Stat.1977, ch. 110, par. 17(1)(b)). To be resolved is whether a corporation incorporated or headquartered in Illinois can, in an action claiming breaches of fiduciary duty, gain jurisdiction over a Texas resident who once served it as president and later as a consultant when all of the Texan's corporate responsibilities, including the acts which allegedly injured the corporation, were performed outside Illinois. The principal position of the parties seeking to assert Illinois jurisdiction is that an out-of-State resident submits to the jurisdiction of Illinois courts when he commits a tort which causes a diminution of the funds of a corporation organized or headquartered in Illinois.

Roy W. Green, Sr., the counterdefendant, sold his business in Texas to Advance Ross Corporation (Advance Ross), a Delaware corporation with headquarters in Illinois, in 1970. Upon the sale, he became president of Advance Ross Steel Corporation (Steel), a Texas corporation, the subsidiary of Advance Ross which took over his business. He also became president of another Advance Ross subsidiary, Advance Ross Electronics Corporation (Electronics), incorporated in Illinois. In addition, he became a director of Advance Ross. The businesses and activities in which Steel and Electronics engaged were entirely outside Illinois.

In 1975, Advance Ross replaced Green, Sr., as president of its two subsidiaries with his son, Roy W. Green, Jr., and the service of Green, Sr., as a director of the parent corporation was terminated. From that time until 1978, Green, Sr., served as a consultant for Steel. Advance Ross and Electronics both claim that as a consultant Green, Sr., continued to control significant operations of both of the companies he formerly headed. They contend he exercised influence both directly and through his son. In a deposition, Green, Jr., testified that his father, during his employment as a consultant by Steel, would decide what bidders would be selected to receive contracts from Steel and Electronics and that his father had complete control of all construction being done by these companies.

In 1978, the Advance Ross president directed Green, Jr., to discontinue his father's employment as a consultant. Green, Jr., complied with that order, but upon discharging his father he paid him $26,500, the equivalent of six months' salary, out of Steel corporate funds as "severance" pay. When the president of Advance Ross learned of the payment, he ordered Green, Jr., to return it to the corporation; and when Green, Jr., refused, he too was discharged.

Green, Jr., then brought an action in the circuit court of Cook County against Electronics alleging his employment contract had been breached. He included as a defendant in his Cook County action the parent corporation, Advance Ross, because that corporation had guaranteed all amounts payable by Electronics under the employment contract. Green, Sr., was not a participant in that suit. Electronics and Advance Ross (hereinafter referred to as defendants) then counterclaimed against Green, Jr., and also moved to join Green, Sr., as an additional counterdefendant, claiming that Green, Sr., directly, and as a co-conspirator with his son during the son's employment by Steel and Electronics, had misappropriated corporate assets and improperly converted them to his own use. The alleged misappropriations and conversion consisted of: improperly charging defendants for personal expenses of Green, Sr.; using defendants' employees to perform personal work for Green, Sr., on defendants' time; using defendants' premises and facilities for personal work for Green, Sr., without payment to defendants for such use; receipt of an improper gift by Green, Sr., in the form of the $26,500 severance pay by check drawn on the Steel account in a Longview, Texas, bank; receipt of improper salary payments by Green, Sr., in a month when he received disability pay from defendants' disability insurer; entering on behalf of defendants into an improper retainer agreement with a Texas law firm in which a son of Green, Sr., was a partner and which represented Green, Sr., at the time the firm represented defendants.

Green, Sr., filed a special and limited appearance to contest jurisdiction in Illinois over his person. The circuit court denied the defendants' motion to join Green, Sr., as an additional party; the appellate court affirmed (87 Ill.App.3d 279, 42 Ill.Dec. 298, 408 N.E.2d 1007). This court granted leave to appeal under Rule 315 (73 Ill.2d R. 315).

There is no dispute that the acts and conduct for which defendants seek to hold Green, Sr., responsible all occurred in Texas. He has not been present in Illinois or had any contact with Illinois residents since at least 1975. There is no suggestion by defendants that any visits Green, Sr., might have made to Illinois before 1975 were related in any way to the conduct complained of in their counterclaim.

The substantive matter with which this appeal is concerned is a Texas dispute. It arises out of an employment relationship performed in Texas, and out of alleged misappropriations, diversions of corporate assets and breaches of fiduciary obligations to the defendants, all of which took place outside Illinois. There is no suggestion that Green, Sr., improperly drew funds out of any Illinois account on which he was a signatory or that he embezzled or converted any funds or other property located in Illinois. All cash payments made to Green, Sr., or for his account were by checks drawn upon the Texas bank account. This account was funded from time to time by checks drawn on defendants' accounts in Illinois.

Although the counterclaim alleges long-arm jurisdiction based on both section 17(1)(a) of the Civil Practice Act, which relates to jurisdiction arising from the transaction of any business within Illinois, and section 17(1)(b), the defendants argue in this court only for jurisdiction based on the latter section. As the defendants assert long-arm jurisdiction solely on the ground that Green, Sr., committed a tortious act within this State, there is no occasion to consider any other possible basis for jurisdiction. Section 17(1) (b) provides:

"(1) Any person, whether or not a citizen or resident of this State, who in person or through an agent does any of the acts hereinafter enumerated, thereby submits such person * * * to the jurisdiction of the courts of this State as to any cause of action arising from the doing of any of such acts:

(b) The commission of a tortious act within this State. " Ill.Rev.Stat.1977, ch. 110, par. 17(1)(b).

In Nelson v. Miller (1957), 11 Ill.2d 378, 389, 143 N.E.2d 673, this court said that the Illinois long-arm statute reflects a conscious purpose to assert jurisdiction over nonresidents to the extent permitted by the due process clause. We do not, however, regard this observation as the equivalent of declaring that the construction and application of section 17(1)(b) depend entirely upon decisions determining in what circumstances due process requirements would permit long-arm jurisdiction. Neither do we read Nelson to say that in applying section 17(1)(b) we should not construe the meaning and intent of our own statute irrespective of the due process limitations generally applicable to State long-arm statutes. A statute worded in the way ours is should have a fixed meaning without regard to changing concepts of due process, except, of course, that an interpretation which renders the statute unconstitutional should be avoided, if possible. Thus, instead of turning to the array of tests which have been articulated to assist in determining whether long-arm statutes as applied exceed permissible constitutional boundaries, we prefer to resolve this appeal by looking to the meaning of our own statute. We determine first whether it should be construed in a way which embraces defendants' claim against Green, Sr. If the answer is in the negative, as we conclude it is, applying the tests the Supreme Court has fashioned in the following decisions to determine whether the assertion of jurisdiction by a State over a nonresident is prohibited by due process safeguards is unnecessary: See Rush v. Savchuk (1980), 444 U.S. 320, 100 S.Ct. 571, 62 L.Ed.2d 516; World-Wide Volkswagen Corp. v. Woodson (1980), 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490; Kulko v. Superior Court (1978), 436 U.S. 84, 98 S.Ct. 1690, 56 L.Ed.2d 132; Shaffer v. Heitner (1977), 433 U.S. 186, 97 S.Ct. 2569, 53 L.Ed.2d 683; Hanson v. Denckla (1958), 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283; McGee v. International Life Insurance Co. (1957), 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223; International Shoe Co. v. Washington (1945), 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95.

As in Gray v. American Radiator & Standard Sanitary Corp. (1961), 22 Ill.2d 432, 435, 176 N.E.2d 761, for the purpose of disposing...

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