Grobark v. Addo Mach. Co.

• Decision Date: 20 March 1959
• Docket Number: No. 34942,34942
• Citation: 16 Ill.2d 426,158 N.E.2d 73
• Parties: John G. GROBARK et al., Appellants, v. ADDO MACHINE COMPANY, Inc., Appellee.
• Court: Illinois Supreme Court

Page 73

158 N.E.2d 73

16 Ill.2d 426

John G. GROBARK et al., Appellants, v. ADDO MACHINE COMPANY, Inc., Appellee.

No. 34942.

Supreme Court of Illinois.

March 20, 1959.

As Modified on Denial of Rehearing May 22, 1959.

John A. Cook, Chicago, and W. F. Levander, Des Plaines, for appellants.

Chapman & Cutler, Chicago (Keehn Landis, Chicago, of counsel), for appellee.

DAILY, Chief Justice.

The plaintiffs, John G. Grobark and John C. Grobark, filed their complaint in the superior court of Cook County against Addo Machine Company, Inc., herein referred to as Addo, and John P. Berg and Robert Hanson (who are not parties to this appeal). The plaintiff asked judgment for $50,000 against the three defendants and $25,000 as punitive damages against the individual defendants.

Personal service was obtained on Addo in New York City by the sheriff of New York County. The plaintiffs assert jurisdiction over Addo under sections 16 and 17 of the Civil Practice Act (Ill.Rev.Stat.1957, chap. 110, pars. 16, 17) as a case arising out of the transaction of business within the State of Illinois.

Addo filed a special appearance for the sole and limited purpose of objecting to the jurisdiction of the court upon the ground that it had not transacted business within the State of Illinois, and that the matters complained of took place prior to January 1, 1956, the effective date of the amendatory act. The court, upon the complaint, special appearance and certain affidavits, entered an order quashing the service of summons upon Addo. Upon appeal, the Appellate Court affirmed the order of the superior court upon the ground that Addo was not transacting business in the State of Illinois and, therefore, did not submit to the jurisdiction of the courts of Illinois. We granted leave to appeal. Subsequent to the order of the trial court, this court decided, in Nelson v. Miller, 11 Ill.2d 378, 382, 143 N.E.2d 673, the 1955 amendments to sections 16 and 17 apply to a cause of action brought after January 1, 1956, the effective date thereof, even though the action arose prior to such date.

From the allegations of the complaint and the affidavits submitted, it appears that from 1939 to 1953, plaintiffs purchased Addo-X adding machines from Addo for resale. In so doing, they developed a list of customers and dealers which, by the year 1953, had considerable trade value. In 1951 and 1952, because of the volume of plaintiffs' business, Addo made various efforts to obtain the names of plaintiffs' customers and dealers, and its president carried on negotiations with plaintiffs in Chicago to make them exclusive distributors of its adding machines for the Greater Chicago Trading Area, which constituted most of Illinois. Plaintiffs entered into a contract with Addo by which they were appointed its exclusive distributors for such area. The terms of the contract were contained in a letter, dated May 19, 1953, from Addo in New York City, to plaintiffs in Chicago, by which plaintiffs were given the right to purchase the machines at a stated discount from list price, with an additional five per cent discount to provide for dealer development. The letter provided for the cancellation of the exclusive distributorship by either party on three months notice, but in the event of cancellation, plaintiffs were to be given the privilege of continuing to purchase the machines on a dealer basis for a reasonable time. After considerable importuning, on July 24, 1953, plaintiffs gave Addo their list of customers and dealers upon assurance that Addo would fully protect their rights therein.

The complaint further alleges that plaintiffs thereafter entered into various sales efforts in the promotion and sale of Addo's product whereby valuable accounts were obtained; hat from 1953 to 1955, plaintiffs purchased machines for resale in Illinois having a retail value in excess of $150,000; that on July 1, 1955, Addo concelled plaintiffs' exclusive distributorship as of October 1, 1955, and appointed two of plaintiffs' former dealers, the individual defendants, Berg and Hanson, as its distributors, effective August 1, 1955, two months in advance of such effective termination date; that prior to such termination, Addo wrongfully used the plaintiffs' customer and dealer lists by giving them to its newly appointed distributors for the purpose of circularizing their appointment and obtaining plaintiffs' customers and dealers; and that on January 20, 1956, Addo refused to fill any orders of plaintiffs, despite the agreement made that they might continue to purchase machines directly at dealer discount for a reasonable time.

The issues in this case concern the applicability of the 1955 amendments to sections 16 and 17 of the Civil Practice Act. Ill.Rev.Stat.1955, chap. 110, pars. 16, 17. As amended, those sections authorize the entry of judgments in personam on personal service of summons outside the State in enumerated classes of cases.

The applicable part of section 17 is as follows:

'(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 said person, and, if an individual, his personal representative, to the jurisdiction of the courts of this State as to any cause of action arising from the doing of any of said acts:

'(a) The transaction of any business within this State;

'(2) Service of process upon any person who is subject to the jurisdiction of the courts of this State, as provided in this section, may be made by personally serving the summons upon the defendant outside this State, as provided in this Act, with the same force and effect as though summons had been personally served within this State.

'(3) Only causes of action arising from acts enumerated herein may be asserted against a defendant in an action in which jurisdiction over him is based upon this section.

'(4) Nothing herein contained limits or affects the right to serve any process in any other manner now or hereafter provided by law.'

The pertinent part of section 16 is as follows:

'(1) Personal service of summons may be made upon any party outside the State. If upon a citizen or resident of this State or upon a person who has submitted to the jurisdiction of the courts of this State, it shall have the force and effect of personal service of summons within this State; otherwise it shall have the force and effect of service by publication.'

Mr. Chief Justice Stone stated in International Shoe Co. v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 158, 90 L.Ed. 95, 'Historically the jurisdiction of courts to render judgment in personam is grounded on their de facto power over the defendant's person. Hence his presence within the territorial jurisdiction of a court was a prerequisite to its rendition of a judgment personally binding him,' citing Pennoyer v. Neff, 95 U.S. 714, 733, 24 L.Ed. 565, 572.

Since Pennoyer v. Neff, significant social, technological, and legal developments have occurred. These new developments have necessitated a re-examination of former rigid concepts of in personam jurisdiction. However, in attempting to re-evaluate the concepts of in personam jurisdiction, in the light of changes in our modern complex society, many courts resorted to numerous fictions such as the granting of consent to be sued.

In the International Shoe Co. case the court made fiction yield to forthright and realistic considerations of fairness in the determination of what constitutes jurisdiction to determine personal rights. 'Whether due process is satisfied must depend rather upon the quality and nature of the activity in relation to the fair and orderly administration of the laws which it was the purpose of the due process clause to insure. That clause does not contemplate that a state may make binding a judgment in personam against an individual or corporate defendant with which the state has no contacts, ties or relations. * * * But to the extent that a corporation exercises the privilege of conducting activities within a state, it enjoys the benefits and protection of the laws of that state. The exercise of that privilege may give rise to obligations, and, so far as those obligations arise out of or are connected with the activites within the state, a procedure which requires the corporation to respond to a suit brought to enforce them can, in most instances, hardly be said to be undue.' 326 U.S. at page 319, 66 S.Ct. at page 160.

Thus, due process requires only that, in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he must have certain minimum contacts with it so that the maintenance of the action does not offend traditional notions of fair play and substantial justice, and, in addition, that the defendant be properly notified of the action against him so that he may adequately defend himself.

In Nelson v. Miller, 11 Ill.2d 378, 143 N.E.2d 673, this court held that sections 16 and 17 of the Civil Practice Act reflect a conscious purpose to assert jurisdiction over nonresident defendants to the extent permitted by the due process clause. In order to satisfy due process there must be minimum contacts with the State plus adequate notice to defend. There is no doubt that sections 16 and 17 afford adequate notice, since there is provision for personal service.

While the constitutional question is always present in determining whether a State, consistent with due process, can enter an in personam judgment against a non-resident defendant, nevertheless it is important to avoid placing the cart before the horse. If, for example, there are no minimum contacts with the State in a particular case, it will be unnecessary to decide whether the State, consistent with due process, can assume jurisdiction, unless the State assumes jurisdiction erroneously, and thereby violates due process.

In the case of International Shoe Co....