Griese-Traylor Corp. v. Lemmons

• Decision Date: 11 August 1981
• Docket Number: GRIESE-TRAYLOR,No. 1-979A241,1-979A241
• Citation: 424 N.E.2d 173
• Parties: CORPORATION, Defendant-Appellant, v. Floyd N. LEMMONS and Margaret J. Lemmons, Plaintiffs-Appellees.
• Court: Indiana Appellate Court

Page 173

424 N.E.2d 173

GRIESE-TRAYLOR CORPORATION, Defendant-Appellant, v. Floyd N. LEMMONS and Margaret J. Lemmons, Plaintiffs-Appellees.

No. 1-979A241.

Court of Appeals of Indiana, First District.

Aug. 11, 1981.

A. Thomas Cobb, Kightlinger, Young, Gray & De Trude, Indianapolis, for defendant-appellant.

Michael K. Phillips, S. Anthony Long, Phillips & Long, Boonville, for plaintiffs-appellees.

STATEMENT OF THE CASE

NEAL, Presiding Judge.

Defendant Griese-Traylor Corporation (Griese-Traylor) appeals the judgment of the Gibson Circuit Court awarding plaintiffs Floyd and Margaret Lemmons $227,059.88 in damages for breach of contract.

STATEMENT OF THE FACTS

On August 23, 1974, in Evansville, Indiana, Griese-Traylor entered into a contract to purchase the entire capital stock of Lemmons and Company, Inc. (Lemmons and Company) from Floyd and Margaret Lemmons, the president and secretary of the company. ¹

Paragraphs 1.01 and 1.02 of the contract provided:

"Upon the terms and conditions herein setforth, at the closing 'Seller' shall deliver to 'Purchaser' certificates representing Nine Hundred Fifty (950) shares of 'Seller's' Capital Stock of Lemmons and Company, Inc., (hereinafter referred to as the Company) duly endorsed in blank by the 'Seller'. 'Seller' represents that Five Hundred (500) shares of Capital Stock are owned by FLOYD N. LEMMONS and Four Hundred Fifty (450) shares of Capital Stock are owned by MARGARET J. LEMMONS.

Concurrently with the delivery of the Capital Stock as provided above, 'Purchaser' shall pay to 'Seller' the sum of Four Hundred Fifty Thousand Dollars ($450,000.00), of which sum Two Hundred Thirty-seven Thousand Dollars ($237,000.00) shall be paid to FLOYD N. LEMMONS and Two Hundred Thirteen Thousand Dollars ($213,000.00) shall be paid to MARGARET J. LEMMONS.

As further consideration for the sale of the Capital Stock by 'Seller', FLOYD N. LEMMONS, 'Purchaser' agrees to pay the sum of Three Hundred Dollars ($300.00) each week commencing one week after the closing date of this agreement for fifteen (15) years to 'Seller' FLOYD N. LEMMONS. In the event that the 'Seller' FLOYD N. LEMMONS shall fail to survive, the balance of payments due during the fifteen (15) year period shall then be paid to his surviving spouse and in the event that he is not survived by his spouse, then to the Estate of Floyd N. Lemmons. The 'Purchaser' agrees to adjust the weekly payments of Three Hundred Dollars ($300.00) upward in amounts equal to the increase in the cost of living as measured by the Federal Department of Labor for the preceding twelve (12) months on the anniversary date of the closing of this agreement for each of the fifteen (15) years."

The closing took place on October 24, 1974, in Boonville, Indiana, at the offices of Lemmons and Company. Floyd and Margaret endorsed the certificates in blank and tendered them to Ferris Traylor, and received two checks drawn upon the personal account of Ferris and Mary Traylor in the respective amounts of $227,000 and $213,000. ²

Although he had officially resigned the presidency, Floyd continued to render services to the company in the capacity of chief operating officer through December of that year. Another man then assumed responsibility for the operation; Floyd continued to render services as a consultant. This arrangement continued, with Floyd rendering fewer and fewer services, until August 3, 1976, at which time the Lemmonses moved to Florida.

Throughout this time Floyd received $300 per week in the form of Lemmons and Company payroll checks. Appropriate state and federal deductions were taken; he paid taxes on his receipts as regular income. He received three cost-of-living increases pursuant to the contract; thus, payments received in the latter part of 1976 were in excess of $339.

Following his retirement to Florida in August, Floyd continued to receive the weekly payments until December 21, 1976, at which time the payments ceased. Lemmons and Company declared bankruptcy that same month.

Early on in January Floyd spoke with Ferris Traylor and informed him the payments had stopped; by letter dated January 14, 1977, Floyd again brought the situation to his attention. Finally, on March 2, 1977, Floyd's attorney notified Robert Griese and Ferris Traylor that Griese-Traylor had breached its contract and that a failure to rectify the situation would result in a lawsuit. The complaint was filed May 20, 1977, requesting damages in the amount of $227,059.88, that being the sum of 668 payments at $339.91. The court found for the Lemmonses and awarded damages in the amount claimed.

ISSUES

Griese-Traylor raises the following issues:

I. Whether the trial court erred in exercising jurisdiction over the non-resident defendant;

II. Whether the trial court erred in finding that the payments were made to Floyd Lemmons as further consideration for the sale of capital stock;

III. Whether the trial court erred in excluding evidence of statements made prior to the signing of the contract pertaining to employment; and

IV. Whether the trial court erred in awarding excessive damages.

Issue I.

Griese-Traylor asserts that the trial court lacked personal jurisdiction. Griese-Traylor emphasizes that it is incorporated and maintains its principal place of business and a resident agent in the state of Florida. The corporation shows that it has no business establishment, neither hires nor retains employees, solicits no business, and is not qualified to do business in the state of Indiana. Thus Griese-Traylor argues that the "minimum contacts" requirement of International Shoe Co. v. Washington, (1945) 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95, has not been met. Furthermore, admitting only a single transaction, i. e. the execution of the contract for the sale and purchase of capital stock, Griese-Traylor argues that it was and is not "doing business" in Indiana within the meaning of Ind. Rules of Procedure, Trial Rule 4.4(A)(1).

It is settled law that the due process clause of the fourteenth amendment limits the power of a state court to render a valid personal judgment against a non-resident defendant. World-Wide Volkswagen Corp. v. Woodson, (1980) 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490. Due process requires the following: (1) The defendant must be properly subject to the personal jurisdiction of the court, International Shoe Co., supra; (2) The defendant must receive adequate notice of the suit, Mullane v. Central Hanover Bank & Trust Co., (1950) 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865. In the case at bar we are concerned only with the former.

Most recently, in World-Wide Volkswagen Corp., supra, the Supreme Court commented:

"The concept of minimum contacts ... can be seen to perform two related, but distinguishable, functions. It protects the defendant against the burdens of litigating in a distant or inconvenient forum. And it acts to ensure that the States, through their courts, do not reach out beyond the limits imposed on them by their status as coequal sovereigns in a federal system.

The protection against inconvenient litigation is typically described in terms of 'reasonableness' or 'fairness.' We have said that the defendant's contacts with the forum State must be such that maintenance of the suit 'does not offend "traditional notions of fair play and substantial justice." ' ... The relationship between the defendant and the forum must be such that is 'reasonable ... to require the corporation to defend the particular suit which is brought there.' " (Citations omitted.)

444 U.S. at 291-292, 100 S.Ct. at 564. ³ The Supreme Court further noted that although the due process limitations placed upon state court jurisdiction to protect against inconvenient litigation have been relaxed in response to progress in communication and transportation and the resulting economic interdependence of the states, McGee v. International Life Insurance Co., (1957) 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223; Hanson v. Denckla, (1958) 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283, "we have never accepted the proposition that state lines are irrelevant for jurisdiction purposes, nor could we, and remain faithful to the principles of interstate federalism embodied in the Constitution." 444 U.S. at 293, 100 S.Ct. at 565.

Having briefly noted the constitutional dimensions of the issue, it becomes necessary to consider the Indiana "statute" to be applied in the determination of whether a state court may properly assert personal jurisdiction over a nonresident defendant.

Indiana Rules of Procedure, Trial Rule 4.4 became effective January 1, 1971. It provides in pertinent part:

"(A) Acts serving as a basis for jurisdiction. Any person or organization that is a nonresident of this state, a resident of this state who has left the state, or a person whose residence is unknown, submits to the jurisdiction of the courts of this state as to any action arising from the following acts committed by him or his agent:

(1) doing any business in this state...."

The parties concede that personal jurisdiction in this case cannot be premised upon T.R. 4.4(A)(2)-(7). Griese-Traylor asserts that jurisdiction cannot be based upon subsection (1), arguing its actions did not constitute "doing business" in this state.

As originally submitted to the legislature, the rule provided:

"4.4 (a) Acts within this state serving as a basis for jurisdiction.

4.4 (a) (1) transacting any business in this state;"

1 W. Harvey, Indiana Practice at 298 (1969). The Civil Code Study Commission Comments upon this subsection read, in part, as follows:

"The words to transact 'any business in this state' would seem to be more inclusive than 'doing business.' See Haas v. Fancher Furn. Co., N.D.Ill.1957, 156 F.Supp. 564. But this would probably change little in Indiana, because the Indiana courts have construed the phrase 'doing business' liberally."

Civil Code Study Commission Comments, 1 W. Harvey, Indiana...