Nationwide Motorist Ass'n v. NATIONWIDE MOT. ASS'N

• Decision Date: 25 August 1965
• Docket Number: Civ. A. No. 4969.
• Citation: 244 F. Supp. 490
• Parties: NATIONWIDE MOTORIST ASSOCIATION OF MICHIGAN, INC., Nationwide Motorist Association of Ohio, Inc., Fred Mitchell, Edward Nedwick, Louis Hoekstra and Willard A. Rink, Plaintiffs, v. NATIONWIDE MOTORIST ASSOCIATION, INC., Gurn Freeman, Jack Freeman and William Doyle, Defendants.
• Court: U.S. District Court — Western District of Michigan

244 F. Supp. 490

NATIONWIDE MOTORIST ASSOCIATION OF MICHIGAN, INC., Nationwide Motorist Association of Ohio, Inc., Fred Mitchell, Edward Nedwick, Louis Hoekstra and Willard A. Rink, Plaintiffs, v. NATIONWIDE MOTORIST ASSOCIATION, INC., Gurn Freeman, Jack Freeman and William Doyle, Defendants.

Civ. A. No. 4969.

United States District Court W. D. Michigan, S. D.

August 25, 1965.

Varnum, Riddering, Wierengo & Christenson, Grand Rapids, Mich., F. William Hutchinson, Grand Rapids, Mich., of counsel, for plaintiffs.

Warner, Norcross & Judd, Grand Rapids, Mich., Friedman, Koven, Salzman, Koenigsberg, Specks & Homer, Chicago, Ill., Thomas R. Winquist, Grand Rapids, Mich., of counsel, for defendants.

FOX, District Judge.

This is an action by two corporations and four individuals alleging fraud on the part of the defendant Nationwide Motorist Association, Inc. (NMA), and three of its officers.

The fraud is alleged to consist specifically of inducing plaintiff Mitchell to enter into two contracts with NMA (and to form the two corporations to which the contracts were subsequently assigned), and in inducing the four individuals to leave their prior positions and to devote their energies to the business of the plaintiff corporations.

This is a motion by defendants to quash the service of process on each and all of them, and to dismiss the action.

The facts stand as follows: In late 1962, a Mr. DenBesten, agent of defendant corporation, met with plaintiff Mitchell in Grand Rapids, concerning the sale of a Michigan franchise.

Certain representations were made by Mr. DenBesten at that time relating to the size, operations and financial status of defendant NMA, all of which were allegedly relied upon by plaintiff Mitchell and plaintiff Michigan corporation, in the course of its organization and operation.

In addition, Mr. DenBesten left certain documents with Mr. Mitchell containing similar representations which were allegedly also relied upon by plaintiffs Mitchell and the Michigan corporation in the course of its organization and operation. These documents were submitted to the court as exhibits attached to the affidavit of Willard A. Rink.

On January 11, 1963, plaintiff Mitchell met with defendant Gurn Freeman in Chicago to discuss the Michigan franchise. He again met with Freeman and his brother, Jack, in Charlotte, North Carolina, on January 24, 1963, when the matter was discussed again.

All three flew to Chicago, and on the following day, January 25, plaintiff Mitchell met defendant Gurn Freeman at his office in Chicago, and a contract for the Michigan franchise was signed. Defendant Doyle had no personal part in the negotiations on the contract — he did not meet any of the plaintiffs on or before January 25, 1963.

Count I is on behalf of the Michigan corporation, and seeks damages of $500,000 for the false representations.

Count II is on behalf of the Ohio corporation, and seeks similar damages.

The exhibits attached to Mr. Rink's affidavit are again relied upon in this Count. Also, in March and April of 1963, after formation of the Michigan franchise, defendants Gurn and Jack Freeman visited Grand Rapids, and discussed NMA and franchises generally at lunch with the individual plaintiffs. The Ohio franchise was not specifically discussed, but general representations were allegedly made.

Between the dates of the two luncheons, plaintiffs Mitchell and Nedwick had visited Chicago, and the Ohio franchise was specifically discussed at a meeting.

In April of 1963, Mr. DenBesten and Mr. Couls, employees of NMA, and defendant William Doyle came to Grand Rapids to train personnel for the Michigan franchise, and purportedly made general representations about NMA.

On April 26, after this personnel training visit, a contract was signed in Chicago for the Ohio franchise.

Counts III through VI allege on behalf of the individual plaintiffs that they were deceived and induced to leave their respective employments to engage in the motor club business, with consequent loss of reputation and income.

In the cases of both corporate and individual defendants, there is a clear basis for valid service of process, under the law of the State of Michigan.

Michigan Statutes Annotated 27A.705, Comp.Laws 1948, § 600.705, Pub. Acts 1961, Act No. 236, reads as follows:

"The existence of any of the following relationships between an individual or his agent and the state shall constitute a sufficient basis of jurisdiction to enable the courts of record of this state to exercise limited personal jurisdiction over such individual and to enable such courts to render personal judgments against such individual or his representative arising out of the act or acts which create any of the following relationships:

* * * * * *

(2) The doing or causing any act to be done, or consequences to occur, in the state resulting in an action for tort."

Michigan Statutes Annotated 27A.715(2) repeats the same standards as a basis for limited jurisdiction over corporations.

These sections of the statutes provide two bases for the invocation of the "longarm" statute: (1) the doing or causing of an act in the state resulting in an action for tort; and (2) the doing or causing of consequences to occur in the state resulting in an action for tort.

The tort involved in this case is fraud, which, as plaintiffs ably point out in their brief on this motion, contains the following elements:

(1) a material representation by defendants

(2) which was false,

(3) made with the knowledge of its falsehood, recklessly, or without any knowledge of its truth, as a positive assertion,

(4) with the intention that plaintiffs act upon it;

(5) that plaintiffs did act upon it with consequent injury.

McIntyre v. Lyon, 325 Mich. 167, 37 N. W.2d 903.

Thus, referring back to the requirements of Michigan Statutes Annotated 27A.705(2) and 27A.715(2), it is obvious that consequences have occurred in the State, namely,...