Harrelson Rubber Co. v. Layne

• Decision Date: 17 July 1984
• Docket Number: No. 8319SC1001,8319SC1001
• Citation: 317 S.E.2d 737,69 N.C.App. 577
• Parties: HARRELSON RUBBER COMPANY, v. Bobby Lee LAYNE, Sr. d/b/a Bobby Layne Tire and Recapping.
• Court: North Carolina Court of Appeals

Page 737

317 S.E.2d 737

69 N.C.App. 577

HARRELSON RUBBER COMPANY, v. Bobby Lee LAYNE, Sr. d/b/a Bobby Layne Tire and Recapping.

No. 8319SC1001.

Court of Appeals of North Carolina.

July 17, 1984.

Beck, O'Briant & O'Briant by Adam W. Beck, Asheboro, for plaintiff-appellant.

Moser, Ogburn, Heafner & Miller by D. Wescott Moser and Michael C. Miller, Asheboro, for defendant-appellee.

WHICHARD, Judge.

I.

The issue is whether the court properly dismissed plaintiff's action for lack of personal jurisdiction over the nonresident defendant. We hold that G.S. 1-75.4(5) confers on our courts authority to exercise personal jurisdiction over defendant; that defendant's activities meet the minimum contacts test; and that exercise of jurisdiction thus does not offend due process.

II.

Plaintiff is a Delaware corporation with its principal office and place of business in Asheboro, North Carolina. Defendant, a sole proprietor in a tire and recapping business, is a citizen and resident of Campbell County, Virginia, and conducts his business there.

This action arises from a franchise agreement which the parties executed on or about 1 May 1979. Plaintiff was the franchisor, and defendant the franchisee, under the agreement. The subject of the agreement, inter alia, was the right to utilize a patented retreading process which plaintiff developed.

Plaintiff sued defendant for breach of the franchise agreement, a $33,623.22 balance due on a promissory note, $13,683.42 plus interest due on an open account, royalty fees of twenty cents per pound of precured tread rubber and cement supplied by plaintiff and used by defendant in retreading tires. Defendant, who was duly served with summons, moved under G.S. 1A-1, Rule 12(b)(2) to dismiss for lack of jurisdiction over his person. Plaintiff appeals from an order granting this motion.

III.

The test for establishing jurisdiction over nonresident individuals is two-pronged. The first step is to determine whether the "long-arm" statute, G.S. 1-75.4, confers jurisdiction. Buying Group, Inc. v. Coleman, 296 N.C. 510, 513, 251 S.E.2d 610, 613 (1979). With respect to contracts, this statute confers authority on our courts to exercise jurisdiction in any action which:

a. [a]rises out of a promise, made anywhere to the plaintiff or to some third party for the plaintiff's benefit, by the defendant to perform services within this State or to pay for services within this State or to pay for services to be performed in this State by the plaintiff; or

b. [a]rises out of services actually performed for the plaintiff by the defendant within this State, or services actually performed for the defendant by the plaintiff within this State if such performance within this State was authorized or ratified by the defendant; or

c. [a]rises out of a promise, made anywhere to the plaintiff or to some third party for the plaintiff's benefit, by the defendant to deliver or receive within this State, or to ship from this State goods, documents of title, or other things of value; or

d. [r]elates to goods, documents of title, or other things of value shipped from this State by the plaintiff to the defendant on his order or direction.

G.S. 1-75.4(5).

The franchise agreement, together with the promissory note, constituted a promise by defendant to pay for services actually performed prior to breach and to be performed in the future. G.S. 1-75.4(5)a, b. The services to be performed are illustrated by plaintiff's obligation under the agreement, inter alia, continually to improve its patented retreading process at its Asheboro plant, and to make such improvements available to defendant. Services actually performed in this state by plaintiff for defendant were the preparation and mailing of plaintiff's SUPERTREAD "Process Operating Manual," and the manufacture of precured tread rubber and cement as authorized under the franchise agreement. Defendant's own affidavit acknowledged that plaintiff had forwarded to him its "Process Operating Manual." An affidavit by plaintiff's president averred that all services provided for in the franchise agreement "were performed or to be performed by [plaintiff] from either of its North Carolina plants or its offices in Asheboro, North Carolina." (Emphasis supplied.) An affidavit by a third party, who was familiar with this action and the negotiations between plaintiff and defendant, averred that "[t]he materials and retreading equipment purchased by the defendant from the plaintiff were all shipped from North Carolina." (Emphasis supplied.)

The $38,316.24 promissory note signed by defendant was to be paid to plaintiff at its Asheboro offices in thirty-six monthly installments of $1,064.34. A promise in a note to make payments to a plaintiff in the forum state is a promise to deliver there a thing of value within the meaning of G.S. 1-75.4(5)c. Wohlfahrt v. Schneider, 66 N.C.App. 691, 693, 311 S.E.2d 686, 687 (1984). Plaintiff's mailing of the "Process Operating Manual" and shipping of the precured tread rubber and cement, all pursuant to the franchise agreement, constituted the shipping of goods from North Carolina by plaintiff to defendant on defendant's order or direction. G.S. 1-75.4(5)d.

We thus hold that G.S. 1-75.4(5) conferred authority on our courts to exercise personal jurisdiction over defendant.

IV.

The second step in the two-pronged test is to determine whether exercise of this statutory power offends the "minimum contacts" requirement of due process. Buying Group, Inc., supra.

The 'litmus standard' ... is well-known and was established ... by the landmark case of International Shoe Co. v. Washington [citation omitted]: Due process requires that a nonresident defendant have certain minimum contacts with the forum state such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'

Phoenix America Corp. v. Brissey, 46 N.C.App. 527, 530, 265 S.E.2d 476, 479 (1980). This Court stated in Phoenix:

Helpful criteria for analyzing whether minimum contacts are present include: '[T]hree primary factors, namely, the quantity of the contacts, the nature and quality of the contacts, and the source and connection of the cause of action with those contacts, ... and ... two others, interest of the forum state and convenience.'

Id. at 530-31, 265 S.E.2d at 479 (quoting Aftanase v. Economy Baler Co., 343 F.2d 187, 197 (8th Cir.1965)). Using these factors as a guide, we examine the facts here, in light of existing case law, to determine whether defendant had sufficient minimum contacts with the forum state.

A. Quantity of Contacts

The trial court found that defendant had made "purchases of retread rubber on several occasions from plaintiff's plants in North Carolina." This finding was not challenged by exception in the record. It thus is presumed to be correct and supported by competent evidence, and it is binding on appeal. Tinkham v. Hall, 47 N.C.App. 651, 652-53, 267 S.E.2d 588, 590 (1980).

Further, affidavits in the record support the finding. Defendant's affidavit admits that plaintiff supplied him with precured tread rubber and cement. This corroborates plaintiff's president's affidavit, which avers that upon request and authorization of defendant plaintiff manufactured and shipped precured tread rubber and cement for defendant's use in the Harrelson SUPERTREAD Process. These affidavits also show that plaintiff prepared and mailed the "Process Operating Manual" to defendant from plaintiff's Asheboro plant. The third party's affidavit, referred to above, states that "materials and retreading equipment [were] purchased by the defendant from the plaintiff [and] were all shipped from North Carolina."

This evidence reveals a substantial quantity of contacts by defendant with the forum state, in that plaintiff furnished precured tread rubber to defendant on "several occasions" from plaintiff's plants in North Carolina. Plaintiff also furnished equipment and a "Process Operating Manual" to defendant, and these too were furnished from plaintiff's plants in North Carolina.

Defendant cites Phoenix, supra, as a basis for finding lack of jurisdiction. In Phoenix the purchase at issue involved a single sale. Plaintiff and defendant had "had dealings" on only one prior occasion. The quantity of contacts thus at best was two, and only one of those related to the action. Further, "all the elements of the defendants' performance ... [were] to take place outside the forum." Phoenix, supra, 46 N.C.App. at 532, 265 S.E.2d at 480.

Here, by contrast, the parties had an ongoing vendor-vendee relationship authorized by the franchise agreement. Defendant made purchases from plaintiff on "several occasions." Plaintiff's performance under the agreement occurred largely in the forum state. We thus find Phoenix distinguishable and not controlling. We further find the requisite quantity of contacts adequately evidenced.

B. Nature and Quality of Contacts

Generally, "[a]pplication of the 'minimum contacts' rule 'will vary with the quality and nature of the defendant's activity.' " Chadbourn, Inc. v. Katz, 285 N.C. 700, 705, 208 S.E.2d 676, 679 (1974) (quoting Hanson v. Denckla, 357 U.S. 235, 78 S.Ct 1228, 2 L.Ed.2d 1283 (1958)). "The existence of minimum contacts, therefore, depends upon the particular facts of each case." Chadbourn, Inc., supra, 285 N.C. at 705, 208 S.E.2d at 679; see also Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437, 72 S.Ct. 413, 96 L.Ed. 485 (1952).

Here, defendant entered into a franchise agreement with plaintiff whereby defendant would receive rights to the patented trademark of Harrelson SUPERTREAD for selling recapped tires. The franchise agreement shows that the parties anticipated a long business relationship. The term of the agreement was for

the life of any United States Patent application disclosing and claiming the Harrelson SUPERTREAD Process and for the life of the last to expire of any...