Lundgren v. Superior Court
Decision Date | 29 October 1980 |
Court | California Court of Appeals Court of Appeals |
Parties | Robert A. LUNDGREN and Lundgren, Sumner & Co., Petitioners, v. The SUPERIOR COURT OF LOS ANGELES COUNTY, Respondent, Lyonel L. KAHNE, Jean Belden, Murray Gutman and Audrey Krausnick, Real Parties in Interest. Civ. 58954. |
William R. Dickerson & Associates and George E. Dalton, Los Angeles, for petitioners.
Barbara Rudick Jacobs, Los Angeles, and Gerald Goldfarb, Beverly Hills, for real parties in interest.
No appearance by respondent.
This is a proceeding in mandate to review an order of the Los Angeles Superior Court denying a motion to quash the service of process on Robert A. Lundgren, a certified public accountant (hereinafter R. A. Lundgren) whose residence and professional office are in Oregon, and Lundgren, Sumner & Co., an Oregon professional corporation (hereinafter Lundgren P. C.).
The superior court action arises out of a transaction which closed on March 2, 1979, whereby Photo Factory, Inc., an Oregon corporation, acquired all of the outstanding shares of Parkwood Camera Stores, Inc., a California corporation. In exchange the four shareholders of Parkwood, named Kahne, Krausnick, Gutman and Belden, received shares of the stock of the Oregon corporation.
United Business Investments, Inc. brought an action in Los Angeles Superior Court (No. C 292506) against Parkwood, Photo Factory and the four who had been Parkwood shareholders, to collect money allegedly due for services rendered as a broker in the sale of Parkwood. On October 1, 1979, the four shareholders filed in that action an unverified cross-complaint against a number of parties including United Business Investments, Photo Factory, R. A. Lundgren and Lundgren P. C. The gist of the cross-complaint is that the cross-defendants, acting together, had furnished false information to the cross-complainants, and had thereby wrongfully induced the cross-complainants to enter into the March 2 transaction.
The cross-complaint alleges with some particularity, and by reference to documents attached to the cross-complaint, the allegedly false financial statements attributed to Lundgren P. C. which had reported and certified the financial condition of Photo Factory for the fiscal years ending in 1976, 1977 and 1978.
The Lundgren parties were served by mail addressed to their office in Oregon. The motion to quash was supported by three affidavits of R. A. Lundgren and an affidavit of Sumner. The cross-complainants filed two declarations. After a hearing, the respondent court denied the motion by a minute order.
We turn now to a summary of the declarations and affidavits which were submitted to the trial court.
R. A. Lundgren's affidavits included this: He is a certified public accountant licensed in Oregon, and the sole shareholder of Lundgren, Sumner & Company, a professional corporation. At the times mentioned in the complaint, and until June 30, 1979, James F. Sumner was an officer, shareholder and employee of that corporation. The corporation maintained its offices in Oregon, and did not have an office in California or conduct business in California with California residents.
Photo Factory retained Sumner to advise them with respect to the tax effect of the stock exchange which was contemplated. In "approximately March 1979" Sumner went to Los Angeles representing Photo Factory.
R. A. Lundgren had nothing to do with that transaction or the preparation of the financial statements which are attached to the cross-complaint in this action. Those financial statements were prepared in Oregon for Photo Factory, an Oregon corporation.
The declaration of cross-complainant Kahne included the following: He was one of the shareholders of Parkwood. The deposit receipt agreement between Parkwood and Photo signed January 24, 1979, required Photo to observe taking of the inventory and to "review all contracts." The Lundgren firm was given an office in Parkwood's store to conduct its examination of Parkwood records. James Sumner began his examination there on or about January 28, 1979, and worked almost continuously in Los Angeles to and including March 2. Sumner was present at several of the negotiations between Kahne and Berger (President of Photo).
The declaration of cross-complainant Krausnick included the following: On Sunday, January 28, 1979, Sumner appeared at the Parkwood store in Los Angeles for the stated purpose of examining Parkwood's books and records. During the taking of the inventory, Sumner consulted frequently with Photo employees present for the purpose of observing the inventory. Sumner stated he was present so that he could intelligently advise Photo about the value of Parkwood's inventory. Sumner was present from 10 days to two weeks after January 28 and occupied space in the Parkwood office.
The affidavit of James F. Sumner offered in rebuttal included the following: At the times in question Sumner was a certified public accountant licensed in Oregon and an officer and shareholder in Lundgren P.C. He was retained to render accounting services for Photo Factory in Oregon and prepared audited financial statements for the years ending January 31, 1976, 1977, 1978 and 1979. When the 1976, 1977 and 1978 statements were prepared and the opinion letters were issued, he had no knowledge that they would be used in connection with the transaction with Parkwood Camera stores; and the 1979 statement was issued on March 20, after the Parkwood transaction had closed. Photo and its president, Ron Berger, retained his services to advise them with respect to the tax effects of the Parkwood transaction and to look at Parkwood's books and records. In order to look at these records he traveled to Los Angeles on February 25, 1979, and returned to Oregon on February 28, 1979. At that time an inventory was being taken. He observed a portion of that activity but did not supervise it. He did not participate in negotiations, but was present at the March 2, 1979, meeting at which the final agreement was signed. On that day he flew to California and returned to Oregon the same day.
The principles which we must apply to the factual situation revealed in this evidence are set forth in Cornelison v. Chaney (1976) 16 Cal.3d 143, 147-148, 127 Cal.Rptr. 352, 545 P.2d 264:
We first consider the application of these principles to Lundgren, Sumner & Co., a professional corporation, whose activities in this state are not so pervasive as to justify the exercise of jurisdiction over it for all causes of action. We look then to "the quality and nature of (its) activity in the forum in relation to the particular cause of action." It is undisputed that Lundgren P.C. played a significant role in the Photo-Parkwood merger which is the central event in the cause of action. In Oregon, Lundgren P.C. prepared the financial reports which the cross-complaint incorporates as an instrumentality of the alleged fraud. Although Lundgren P.C. disclaims any intent that those reports be used by anyone other than Photo, the validity and...
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