Jack O'Donnell Chevrolet, Inc. v. Shankles

• Decision Date: 27 October 1967
• Docket Number: No. 67 C 930.,67 C 930.
• Citation: 276 F. Supp. 998
• Parties: JACK O'DONNELL CHEVROLET, INC., Plaintiff, v. Ken SHANKLES and Fort Payne Bank, Defendants.
• Court: U.S. District Court — Northern District of Illinois

276 F. Supp. 998

JACK O'DONNELL CHEVROLET, INC., Plaintiff, v. Ken SHANKLES and Fort Payne Bank, Defendants.

No. 67 C 930.

United States District Court N. D. Illinois, E. D.

October 27, 1967.

COPYRIGHT MATERIAL OMITTED

Elbert F. Elmore, Midlothian, Ill., for plaintiff.

Carey, Filter, Murray & White, Chicago, Ill., for defendant Fort Payne Bank.

MEMORANDUM OPINION

MAROVITZ, District Judge.

Defendant Fort Payne Bank's Motion to Dismiss

Plaintiff corporation, is an automobile dealership, incorporated in Delaware, and maintaining its principal place of business in Illinois. Between December 21, 1966, and February 18, 1967, plaintiff allegedly sold and delivered certain automobiles to defendant Ken Shankles in Illinois. Between those dates, Shankles executed several drafts totaling $14,475, upon the defendant Fort Payne Bank, an Alabama corporation, as purported payment for the autos. The drafts were forwarded in the regular course of business by the Mutual Bank of Chicago, the depositary bank, to the Fort Payne Bank for payment.

It is alleged that the latter received the drafts in the regular course of business, and returned them unpaid because of insufficient funds in the account of Ken Shankles, but did not do so until on or about March 23, 1967, and further, allegedly did not advise the plaintiff of its dishonor of the drafts as required by law.

The complaint is in four counts. Count I seeks recovery from Shankles for the transactions enumerated above. Count II charges the Fort Payne Bank with failing to give timely notice of dishonor to plaintiff as required by Section 4-302 of the Uniform Commercial Code of Alabama, and seeks recovery of $14,475. In Count III, plaintiff charges that the Fort Payne Bank negligently failed to notify the plaintiff of dishonor within a reasonable time, with the alleged result that plaintiff was "hindered and prevented from collecting and receiving the amount of said drafts from Ken Shankles at a time when said Shankles had sufficient assets and sufficient funds deposited with defendant Fort Payne Bank to properly pay said drafts." Finally, in Count IV, plaintiff charges that Shankles and the Fort Payne Bank conspired together to the end that the Bank would honor and pay only those drafts drawn by Shankles which Shankles or his agents gave authority to honor and pay, even though other items or drafts were properly payable. Plaintiff alleges that pursuant to the conspiracy, the defendants caused the drafts payable to plaintiff not to be honored or paid even though they were properly payable, while in the meantime agreeing to pay, or paying, other items drawn by Shankles payable to other payees, even though they were received some time after the drafts payable to plaintiff were presented for payment.

The Fort Payne Bank moves to quash the summons, served upon it at its Alabama facility, on the ground that the service is invalid because this court lacks in personam jurisdiction over the Bank.

Out of state service of process is permitted in Illinois under the provisions of Chap. 110, Sections 16 and 17 (2), Ill.Rev.Stat.¹ Out of state service is permitted in the federal courts, under Rules 4(d) (7) and 4(e), when the law of the state in which the district court sits allows such service in its own courts.

Hence, extraterritorial service of process as such, is permissible in this court. However, if jurisdiction over the person of the defendant is lacking, service of summons upon him lacks a jurisdictional foundation upon which to stand, and must be quashed. Apparently, the plaintiff herein posits jurisdiction over the Fort Payne Bank upon its alleged commission of tortious acts within Illinois. The Bank relates that it has maintained no offices in Illinois, has sent no agents into this state, has transacted no business here, and has committed no tortious acts in Illinois. It thus contends that it cannot be subjected to in personam jurisdiction in this cause.

Section 17 of the Illinois Civil Practice Act, constitutes a statutory basis for jurisdiction over persons involved in certain isolated activities within the state. The statute provides: (in pertinent part)

"Sec. 17 Act submitting to jurisdiction —Process

"(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, 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 such acts:

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

(b) The commission of a tortious act 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."

Section 17 was held constitutional in Nelson v. Miller, 11 Ill.2d 378, 143 N.E. 2d 673 (1957). It stemmed from the Supreme Court's elaboration of the due process requirements governing in personam jurisdiction, which demands that the defendant have sufficient contact with the forum state so that "the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'" International Shoe Co. v. State of Washington, etc., 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L. Ed. 95 (1945). Section 17 was intended to assert jurisdiction over nonresidents to the fullest extent permitted by the due process clause. Nelson v. Miller, supra, at 389-390, 143 N.E.2d 673.

In Gray v. American Radiator and Standard Sanitary Corp., 22 Ill.2d 432, 176 N.E.2d 761 (1961), an Illinois resident sued a foreign corporation which did no business in Illinois, had no office in Illinois, maintained no agents in Illinois, sold no products in Illinois, and solicited no business in this state. The defendant manufactured a safety valve in Ohio to be used in a hot water heater and sold it to another foreign corporation which included the safety valve in its hot water heater. The heater was sold to plaintiff. It exploded in Illinois and caused plaintiff injuries in this state. Plaintiff charged the safety valve manufacturer with negligence. Service was made out of state, and defendant moved to quash. The Illinois Supreme Court stated in upholding jurisdiction over the nonresident corporation: (22 Ill.2d at 435-436, 176 N.E.2d at 762)

"The wrong in the case at bar did not originate in the conduct of a servant physically present here, but arose instead from acts performed at the place of manufacture. Only the consequences occurred in Illinois. It is well established, however, that in law the place of a wrong is where the last event takes place which is necessary to render the actor liable. Restatement, Conflict of Laws, sec. 377. * * *

"* * * We think it is clear that the alleged negligence in manufacturing the valve cannot be separated from the resulting injury; and that for present purposes, like those of liability and limitations, the tort was committed in Illinois."

This being a diversity case, we must follow the law as represented by Gray. Canvas Fabricators v. William E. Hooper, etc., 199 F.2d 485 (7th Cir. 1952). Subsequent cases interpreting Gray have confirmed that an actor need not be physically present in Illinois in order to commit a "tortious act" which would subject him to jurisdiction under Sec. 17(1) (b). McMahon v. Boeing Airplane Co., 199 F.Supp. 908, 909 (N.D. Ill.1961); Anderson v. Penncraft Tool Co., 200 F.Supp. 145 (N.D.Ill.1961).

The cases cited by defendant² in support of his motion, antedated Gray, and were based upon an outdated conception of due process requirements, namely that the actor must have been physically present in the state of injury, and accordingly they are no longer controlling. It cannot be seriously contended any longer that the personal "presence" of a nonresident defendant is necessary, in this state, in order for it to be subjected to the in personam jurisdiction of this court. See Koplin v. Thomas, Haab & Botts, 73 Ill.App.2d 242, 254, 219 N.E.2d 646 (1966).

The sole issue for decision is whether the Fort Payne Bank has had sufficient contact with Illinois, as required by Section 17, to be amenable to jurisdiction therein.

In Anderson v. Penncraft Tool Co., 200 F.Supp. 145 (N.D.Ill.1961), Judge Will recognized the principle stated in Gray that a key inquiry in cases where a nonresident defendant commits an act outside of Illinois which has resulting effects within this state, is whether the defendant had reason to anticipate that his activities would have an effect, or in a proper case, that his product would possibly be used in Illinois.

Another factor of importance is whether the defendant enjoyed the benefit and protection of the law of the forum state by virtue of his activities therein. Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958); Gray v. American Radiator & Standard Sanitary Corp., 22 Ill.2d 432, 440, 176 N.E.2d 761 (1961); Koplin v. Thomas, Haab, and Botts, 73 Ill.App.2d 242, 255, 219 N.E.2d 646 (1966).

We must separately consider the three counts in which defendant Fort Payne Bank is named, since sustenance of jurisdiction over one would not necessarily confer jurisdiction over others. For purposes of jurisdictional disputes, each count must be considered as though it constituted a separate complaint. It is undisputed that all of the Bank's overt actions or inactions, as to all counts, occurred in Alabama.

Count IV charges the Bank with conspiring with Shankles to honor only those of his drafts drawn upon the Bank which he or an agent gave specific authority to honor or pay. Assuming the allegations of Count IV to be true, as we must for purposes of this motion, we believe that when declining to honor and delaying notice of dishonor of the checks payable to plaintiff, the Bank contemplated that such actions would cause injury to an Illinois corporation in...