Henry R. Jahn & Son, Inc. v. Superior Court In and For San Mateo County

• Decision Date: 26 March 1958
• Citation: 323 P.2d 437,49 Cal.2d 855
• Court: California Supreme Court
• Parties: HENRY R. JAHN & SON, Inc. (a Corporation), Petitioner, v. The SUPERIOR COURT of the State of California, IN AND FOR COUNTY of SAN MATEO, Respondent, American Drying Systems, Inc. (a Corporation), Real Party In Interest. S. F. 19841.

Page 437

323 P.2d 437

49 Cal.2d 855

HENRY R. JAHN & SON, Inc. (a Corporation), Petitioner, v. The SUPERIOR COURT of the State of California, IN AND FOR COUNTY of SAN MATEO, Respondent American Drying Systems, Inc. (a Corporation), Real Party In Interest.

S. F. 19841.

Supreme Court of California, In Bank.

March 26, 1958.

Joseph C. Meyerstein, San Francisco, and Donald J. Kennedy, Palo Alto, for petitioner.

No appearance for respondent.

Pedder, Ferguson & Pedder and Robert J. Pedder, San Francisco, for real party in interest.

TRAYNOR, Justice.

Petitioner, Henry R. John & Son, Inc., seeks a writ of mandate to compel the Superior Court of San Mateo County to set aside its order for substituted service of process and to quash service of summons on petitioner in an action brought by plaintiff, the real party in interest in this proceeding. See Code Civ.Proc. § 416.3. Dante J. Cacciari and Alexander Columbo, individually and as copartners doing business as the C & C Company, were joined as defendants in plaintiff's action. The superior court made an order allowing plaintiff to serve process on petitioner pursuant to section 6501 of the Corporations Code. ¹ Thereafter petitioner appeared specially and moved to set aside the order for service of process and to quash the service of summons. These motions were denied.

Plaintiff alleged in its complaint that it entered into a series of three-party contracts with Jahn and various distributors in South and Central America for the purpose of marketing grain driers in those areas. Jahn had the exclusive right to sell plaintiff's products, and the distributors agreed not to handle competing products. Pursuant to these contracts, Jahn purchased driers from plaintiff and resold them through the various distributors. Business was conducted accordingly for over two years.

Defendants Cacciari and Columbo were associated with a company that manufactured driers for plaintiff according to secret plans and specifications supplied by plaintiff. They resigned from that company, taking plaintiff's plans and specifications with them. Thereafter they conspired with Jahn to take over plaintiff's business. Cacciari and Columbo formed a California partnership to manufacture and sell driers similar to plaintiff's driers, making use of plaintiff's plans and specifications. Jahn became the partnership's exclusive agent for exporting its driers. Jahn and the partners conspired to induce breaches of plaintiff's exclusive contracts with distributors, making use of confidential mailing lists and other data bearing on plaintiff's South and Central American business.

Plaintiff prayed that defendants be enjoined from inducing breaches of its distributorship contracts, using plaintiff's confidential mailing lists and other customer data, manufacturing and selling driers similar to plaintiff's driers, and using plaintiff's plans and specifications. It also prayed for an accounting of the business diverted by the foregoing activities, the appointment of a receiver, and exemplary damages.

There is no merit in Jahn's contention that the affidavit for service on the Secretary of State did not meet the requirements of Corporations Code, section 6501. The existence of the required facts was alleged directly and without qualification. Cf., Columbia Screw Co. v. Warner Lock Co., 138 Cal. 445, 447, 71 P. 498. The statute does not provide that the affidavit cannot be made by the plaintiff's attorney.

Jahn further contends that it was not and is not doing business in this state within the meaning of Code of Civil Procedure, section 411(2) and is therefore not subject to service of process pursuant to Corporations Code, section 6501.

The statute authorizes service of process on foreign corporations that are 'doing business in this State.' That term is a descriptive one that the courts have equated with such minimum contacts with the state 'that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice. '' International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95. Whatever limitation it imposes is equivalent to that of the due process clause. " (D)oing business' within the meaning of section 411 of the Code of Civil Procedure is synonymous with the power of the state to subject foreign corporations to local process.' Eclipse Fuel etc. Co. v. Superior Court, 148 Cal.App.2d 736, 738, 307 P.2d 739, 741; see also, Gray v. Montgomery Ward, Inc., 155 Cal.App.2d 55, 317 P.2d 114; McClanahan v. Trans-America Ins. Co., 149 Cal.App.2d 171, 172, 307 P.2d 1023; Jeter v. Austin Trailer Equipment Co., 122 Cal.App.2d 376, 387, 265 P.2d 130; Kneeland v. Ethicon Suture Laboratories, 118 Cal.App.2d 211, 218-224, 257 P.2d 727, and cases cited; LeVecke v. Griesedieck Western Brewing Co., 9 Cir., 233 F.2d 772, 775; Kenny v. Alaska Airlines, D.C., 132 F.Supp. 838, 850.

Jahn's purchase of goods in this state is a regular part of its business. It nevertheless contends that it is not amenable to suit here, invoking Rosenberg Bros. & Co. v. Curtis Brown Co., 260 U.S. 516, 43 S.Ct. 170, 67 L.Ed. 372. The United States Supreme Court, however, has advanced beyond the presence theory of jurisdiction underlying that case. McGee v. International Life Insurance Co., 355 U.S. 220, 78 S.Ct. 199, 200, 2 L.Ed.2d 223; see also, International Shoe Co. v. Washington, 326 U.S. 310, 316-317, 66 S.Ct. 154. Under the minimum contacts test of the International Shoe case regular sales solicitation alone can constitute doing business rendering the foreign corporation amenable to process in actions engendered by such activities. See Travelers Health Ass'n v. Virginia, 339 U.S. 643, 648-649, 70 S.Ct. 927, 94 L.Ed. 1154; Nippert v. Richmond, 327 U.S. 416, 426, 66 S.Ct. 586, 90 L.Ed. 760; Scholnik v. National Airlines, 6 Cir., 219 F.2d 115, 119; Frene v. Louisville Cement Co., 77 U.S. 129, 134 F.2d 511, 515-517, 146 A.L.R. 926; Jeter v. Austin Trailer Equipment Co., 122 Cal.App.2d 376, 385, 265 P.2d 130; Koninklijke Luchtvaart Maatschappij v. Superior Court, 107 Cal.App.2d 495, 500, 237 P.2d 297. Since there is no distinction for jurisdictional purposes between regular selling and regular buying (Sterling Novelty Corp. v. Frank ,& Hirsch D. Co., 299 N.Y. 208, 210, 86 N.E.2d 564, 12 A.L.R.2d 1435; Star Elkorn Coal Co. v. Red Ash Pocahontas Coal Co., D.C., 102 F.Supp. 258, 259), the Rosenberg case is as obsolete for the one as for the other. Many cases anteceding the Rosenberg case and many since the International Shoe case have sustained jurisdiction on the basis of the defendant's purchasing activities in the state. Colorado Iron-Works v. Sierra grande Min. Co., 15 Colo. 499, 25 P. 325, 327-328; Premo Specialty Mfg. Co. v. Jersey-Creme Co., 9 Cir., 200 F. 352, 356, 43 L.R.A., N.S., 1015; Dungan, Hood & Co. v. C. F. Bally, Limited, D.C., 271 F. 517, 519; Payne & Joubert v. East Union Lumber Co., 109 La. 706, 33 So. 739, 740-741; Duluth Log Co. v. Pulpwood Co., 137 Minn. 312, 163 N.W. 520, 521; Sterling Nov.Corp. v. Frank & Hirsch D. Co., 299 N.Y. 208, 212, 86 N.E.2d 564, 12 A.L.R.2d 1435; National Furniture Co. v. Wm. Spiegelman & Co., 198 App.Div. 672, 190 N.Y.S. 831, 832; Scheier v. Stoff, Sup., 142 N.Y.S.2d 716, 717; Star Elkhorn Coal Co. v. Red Ash Pocahontas Coal Co., D.C., 102 F.Supp. 258, 259; see also, Johnson v. Atlantic & Pacific Fisheries Co., 128 Wash. 578, 224 P. 13, 14.

The Supreme Court has emphasized its departure from the presence test by the significance it now attaches to the fact that the cause of action arises out of the defendant's contacts with the state asserting jurisdiction. The Rosenberg case deemed it immaterial that the cause of action arose out of the corporation's New York activities, on the ground that its total activities there did not support the conclusion that it was present. Now, however, it 'is sufficient for purposes of due process that the suit was based on a contract which had substantial connection with (the) State.' McGee v. International Life Insurance Company, 78 S.Ct. 199, 201. '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 activities 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.' International Shoe Co. v. Washington, 326 U.S. 310, 319, 66 S.Ct. 154, 160.

Whenever litigation arises out of business transactions conducted across state lines between parties whose principal places of business are in different states, there may be hardship to the party required to litigate away from home. There is no constitutional requirement, however, that this hardship must invariably be borne by the plaintiff whenever the defendant is not deemed present in the state of plaintiff's residence. In some circumstances there is adequate basis for jurisdiction when the defendant has elected to deal with the plaintiff even though only by mail. McGee v. International Life Insurance Co., 78 S.Ct. 199, 201; Parmalee v. Iowa State Traveling Men's Ass'n, 5 Cir., 206 F.2d 518, 522, 44 A.L.R.2d 410. Again, there is jurisdiction when the cause of action arose out of the breach of a contract made and to be performed in the state (Compania De Astral, S. A. v. Boston Metals Co., 205 Md., 237, 107 A.2d 357, 108 A.2d 372, 49 A.L.R.2d 646, certiorari denied 348 U.S. 943, 75 S.Ct. 365, 99 L.Ed. 738; see also, S. Howes Co. v. W. P. Milling Co., Okl., 277 P.2d 655, 657-658) or even out of a mere isolated act in the state by the defendant or his agent. Nelson v. Miller, 11 Ill.2d 378, 143 N.E.2d 673; Smyth v. Twin State Improvement Corp., 116 Vt. 569, 80 A.2d 664, 25 A.L.R.2d 1193; Hess v. Pawloski, 274...