Moran v. Bombardier Credit, Inc.

• Decision Date: 21 October 1992
• Docket Number: No. CA,CA
• Citation: 39 Ark.App. 122,839 S.W.2d 538
• Parties: Ken MORAN and Rita S. Moran, Appellants, v. BOMBARDIER CREDIT, INC., Appellee. 92-233.
• Court: Arkansas Court of Appeals

Page 538

839 S.W.2d 538

39 Ark.App. 122

Ken MORAN and Rita S. Moran, Appellants, v. BOMBARDIER CREDIT, INC., Appellee.

No. CA 92-233.

Court of Appeals of Arkansas Division I.

Oct. 21, 1992.

Terence C. Jenson, Benton, for appellants.

Brian Rosenthal, Little Rock, for appellee.

ROGERS, Judge.

Ken and Rita Moran, Louisiana residents, appeal from an order of the circuit court of Garland County that denied their motion to dismiss for lack of personal jurisdiction an action brought by appellee, Bombardier Capital, Inc. (formerly Bombardier Credit, Inc.), a Massachusetts corporation with its principal place of business in Vermont.

The facts in this case are not disputed. In January 1986, Taylor's Marine, Inc., of Garland County, by its officers, Kevin and Lori Taylor, entered into a financing agreement with appellee. A provision directed that any disputes regarding the agreement would be governed by the laws of New York State. In 1987, to "induce [appellee] to extend credit to [Taylor's Marine, Inc.,]" appellants signed a guaranty for up to $50,000.00 in loans. Subsequently, appellee provided the additional financing. When Taylor's Marine defaulted on the loan, appellee brought this action in Garland County to secure payment from appellants. Appellants alleged the court lacked in personam jurisdiction and moved to dismiss the complaint.

In his letter opinion, the trial judge addressed the jurisdictional issue as follows:

The Defendants' guaranty of the Arkansas debt is substantial. It would appear that no stronger contact could be imagined than Plaintiff would refuse an extension of credit "but for" Defendants' guaranty [this is true, whether Defendants physically entered the State and signed, mailed or "faxed" the guaranty]. Accordingly the Court finds that there is personal jurisdiction.

Subsequently, the court granted appellee's motion for summary judgment and awarded appellee $50,000.00.

On appeal, appellants contend that the trial court erred in exercising in personam jurisdiction over them. We agree and reverse the trial court's decision.

To determine whether a court has in personam jurisdiction over a nonresident defendant, we must undertake a two-part analysis. First, we must consider whether the nonresident defendant's actions satisfy the requirements of the Arkansas long-arm statute. Second, we consider whether the exercise of personal jurisdiction is consistent with due process. Szalay v. Handcock, 307 Ark. 232, 235, 819 S.W.2d 684, 685 (1991); Capps v. Roll Service, Inc., 31 Ark.App. 48, 53, 787 S.W.2d 694, 697 (1990).

The Arkansas long-arm statute states what is required for Arkansas to exercise jurisdiction with respect to the transaction of business by a nonresident defendant:

1. A court may exercise personal jurisdiction over a person, who acts directly or by an agent, as to a (cause of action) (claim for relief) arising from the person's:

(a) Transacting any business in this state.

Ark.Code Ann. § 16-4-101(C)(1) (1987). The supreme court has stated that the purpose of the "transacting business" provision is to permit Arkansas courts to exercise the maximum in personam jurisdiction allowable by due process. Szalay v. Handcock, 307 Ark. at 236, 819 S.W.2d at 686; CDI Contractors, Inc. v. Goff Steel Erectors, Inc., 301 Ark. 311, 312, 783 S.W.2d 846 (1990).

Any decision whether or not to exercise judicial jurisdiction over a transaction must also address the due process requirements embodied in International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). Under International Shoe, supra, and its progeny, the well-recognized test is whether such "minimum contacts" exist between the nonresident defendant and the forum state "such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.' " Id. at 316, 66 S.Ct. at 158 (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 343, 85 L.Ed. 278 (1940)).

This court has considered the following factors in deciding whether or not a nonresident's contacts with the forum state were sufficient to impose jurisdiction: (1) the nature and quality of the contacts with the forum state; (2) the quantity of the contacts with the forum state; (3) the relation of the cause of action to the contacts; (4) the interest of the forum state in providing a forum for its residents; and (5) the convenience of the parties. Capps v. Roll Service, Inc., 31 Ark.App. at 53, 787 S.W.2d at 697; Jagitsch v. Commander Aviation Corp., 9 Ark.App. 159, 163, 655 S.W.2d 468, 470 (1983). Whether the "minimum contacts" requirement has been satisfied is a question of fact, Jagitsch v. Commander Aviation Corp., 9 Ark.App. at 163, 655 S.W.2d at 470, and each question of jurisdiction must be decided on a case-by-case basis. Capps v. Roll Service, Inc., 31 Ark.App. at 53, 787 S.W.2d at 697.

The United States Supreme Court held in McGee v. International Life Insurance Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957), that for purposes of due process, a single contract could provide the basis for the exercise of jurisdiction over a nonresident defendant if the contract had "substantial connection with [the forum] State." Id. at 223, 78 S.Ct. at 201. This court previously has exercised in personam jurisdiction in cases involving a single contract such as a guaranty agreement; however, the facts in these cases are distinguishable from the case at bar.

In Meachum v. Worthen Bank & Trust Co., N.A., 13 Ark.App. 229, 682 S.W.2d 763 (1985), cert. denied, 474 U.S. 844, 106 S.Ct. 132, 88 L.Ed.2d 108 (1985), a resident of Texas challenged an Arkansas court's exercise of jurisdiction. In affirming the trial court's exercise of jurisdiction, we held that although the appellant's contacts with Arkansas were few, they were substantial in nature and quality, stating:

Knowing that the appellee would require his individual guaranty, the appellant sent his financial statement to the appellee in Arkansas and then signed the guaranty agreement which was contained in the lease of personal property between two Arkansas corporations, and admits that he knew the lease would be sent to the appellee in Arkansas, that the property was in Arkansas, and that the payments would be made in Arkansas....

.... The cause of action is directly related to the appellant's signing as guarantor of an Arkansas contract, and then failing to carry out his promise to guarantee; the Arkansas courts are obviously interested in providing a forum for Arkansas citizens to resolve disputes over contracts executed in Arkansas; and considering the fact that most of the parties were residents of this state, we think the convenience of the parties was best served by the hearing of the case in Arkansas.

13 Ark.App. at 233-34, 682 S.W.2d at 766. We also noted that the appellant was extensively involved with the debtor company as director, officer, and general counsel and that the company was directly responsible for the formation of the Arkansas lessee corporation. Id. at 232, 682 S.W.2d at 765.

We also found jurisdiction over a Texas resident in Akin v. First National Bank, 25 Ark.App. 341, 758 S.W.2d 14 (1988). In that case, the court found evidence that the appellant had delivered a signed loan application, a financial statement, and a personal guaranty to a bank in Conway to induce the bank to loan money to an Arkansas resident for the purpose of buying land in Arkansas. The evidence at trial indicated the appellant's intention to go into business on that property and, subsequently, he took deed to it. We concluded that the evidence, taken as a whole, provided support for the theory that the Arkansas resident was acting as a "front" for the appellant. Id. at 347, 758 S.W.2d at 18.

However, in CDI Contractors, Inc. v. Goff Steel Erectors, Inc., 301 Ark. 311, 783 S.W.2d 846 (1990), the supreme court held a single contract was insufficient to confer jurisdiction. There, an Arkansas corporation, acting as general contractor for a Mississippi project, subcontracted with a foreign corporation. Although the subcontractor submitted his bid by telephone to the Arkansas contractor, the contract was formalized in Mississippi and mailed to the contractor's Arkansas business address. The contract provided for payment requests to be mailed to Arkansas, but it contained no provision concerning jurisdiction or applicable law for dispute resolution. Based on these facts, the supreme court held that the foreign corporation's telephone and mail transactions did not, standing alone, satisfy the minimum contacts required by due process to confer jurisdiction on the Arkansas court. Id. at 314, 783 S.W.2d at 847.

In the case at bar, both appellants and appellee argue that the holding in Arkansas Rice Growers Cooperative Association v. Alchemy Industries, Inc., 797 F.2d 565 (8th Cir.1986), supports their position in this appeal. In that case, the Eighth Circuit Court on appeal reversed the finding of liability against the individual defendants for lack of personal jurisdiction. Alchemy Industries, Inc. (Alchemy) and Arkansas Rice Growers Cooperative Association, d/b/a Riceland Foods (Ricela...