Nike, Inc. v. Spencer

• Decision Date: 22 November 1985
• Parties: NIKE, INC., a corporation, formerly BRS, Inc., dba Blue Ribbon Sports, Respondent, v. David C. SPENCER, Kathleen S. Spencer, and Daniel Stroick, also known as Dan Stroick, Appellants. A8306-03549; CA A32879.
• Court: Oregon Court of Appeals

Page 589

707 P.2d 589

75 Or.App. 362

NIKE, INC., a corporation, formerly BRS, Inc., dba Blue

Ribbon Sports, Respondent, v. David C. SPENCER, Kathleen S. Spencer, and Daniel Stroick, also known as Dan Stroick, Appellants.

A8306-03549; CA A32879.

Court of Appeals of Oregon.

Argued and Submitted March 4, 1985.

Decided Sept. 25, 1985.

Reconsideration Denied Nov. 22, 1985.

Lloyd W. Weisensee, Portland, argued the cause for appellants. With him on briefs were Williams, Fredrickson, Stark, Hiefield, Norville & Weisensee, P.C., Portland.

E. Andrew Jordan, Portland, argued the cause for respondent. With him on brief were Bolliger, Hampton & Tarlow, Portland.

Before RICHARDSON, P.J., and WARDEN and NEWMAN, JJ.

WARDEN, Judge.

Nike, Inc., as the surviving corporation of a merger with its wholly owned subsidiary, BRS, Inc., brought this action to enforce a guaranty agreement between defendants and BRS for the debts of Barefoot Sports, Inc., a Wisconsin corporation. After denying defendants' motions to dismiss for lack of personal jurisdiction, ORCP 21 A(2), and for failure to state facts sufficient to constitute a claim, ORCP 21 A(8), the trial court granted Nike's motion for summary judgment and entered a judgment in the amount of $152,326.76, representing the unpaid principal balance of Barefoot Sports' account with Nike, together with interest through May 15, 1983, in the sum of $28,775.91, plus interest on the unpaid principal balance at the rate of 18 percent per annum from May 15, 1983, and for attorney fees and costs. Defendants appeal, assigning error to the court's denial of their motions for dismissal and the granting of Nike's motion for summary judgment. We affirm in part, reverse in part and remand.

Nike is an Oregon corporation engaged in the athletic and leisure shoe and apparel business. Its subsidiary, BRS, also was an Oregon corporation and conducted a number of Nike's manufacturing and marketing activities. In 1975, Barefoot Sports established an open credit account with BRS. The application form bears a Nike logo and the legend "BRS, Inc., 6175 S.W. 112th Avenue, Beaverton, Oregon." In December, 1978, BRS requested personal guaranties from the corporate officers of Barefoot Sports, including defendants. In relevant part, the letter, addressed to the attention of defendant David Spencer and requesting the guaranties, read:

"We are booking a July Future II order for $100,000.oo. The payment on this particular order will be broken into 4 equal parts with the first payment starting August 10th and finishing on November 10th.

"We agreed to this arrangement based on the fact there will be a zero balance come June 15, 1979 since your credit line is $100,000.oo.

"We are also requesting personal guaranties signed by you and your wife along with the officers--Wilmer Trodahl and Dan Stroick. In conjunction with this request, we need to review personal financial statements.

"We have carefully reviewed the financial statements made available to us including the latest one dated August 31, 1978. Although profits are being made and retain [sic] to the corporation, the corporate equity is such that we do not feel capable of providing the $100,000.oo credit line without additional security."

A second letter, dated July 5, 1979, stated:

"To confirm our conversation of June the 17th, we are in agreement with your paying the balance of the July Futures over four equal parts with the first payment starting August 10th and finishing on November the 10th. This agreement was made with our Mr. Mike Walsh, with the understanding that you, your wife, Wilmer Trodahl and Dan Stroick would sign Continuing Personal Guarantees and provide personal financial statements. The Personal Guarantees must be of a continuing nature as to justify a $100,000.00 credit line for future orders placed by your company. Therefore, we are enclosing new Personal Guarantees to be signed and returned along with your personal financial statements."

On July 7, 1979, defendants executed a one-page, unconditional guaranty, ¹ which in pertinent part provides:

"IN CONSIDERATION of the extension of Credit by BRS, INC. to

BAREFOOT SPORTS, INC., hereinafter called

(name of business)

debtor, the undersigned do hereby personally guarantee payment, when due, of any indebtedness now or at any time hereafter owing by debtor to BRS, INC. If there be more than one guarantor, whether or not their guarantees shall be evidenced by a single writing, their obligation shall be joint and several.

"Each of the undersigned waives notice of extension of credit to debtor, notice of default and notice of every other kind. Each of the undersigned consents to extensions of maturity, the taking or release of security and all other acts which, without the consent of a party secondarily liable, might impair recourse against such party."

Defendant David Spencer, president of Barefoot Sports, returned the signed guaranty agreement to "Nike--BRS" at its Beaverton address.

On December 31, 1981, BRS merged into Nike. See ORS 57.455 to 57.495. Although it is not entirely clear from the evidence, it appears that before the merger both BRS and Nike were selling goods to Barefoot Sports and that Nike continued to do so after the merger.

Defendants' first assignment of error raises the issue of personal jurisdiction over each of the individual defendants. Our analysis begins with ORCP 4. Specific bases for exercising "long-arm" jurisdiction are enumerated in subsections B through K; subsection L is a catchall provision "extending personal jurisdiction to the outer limits of due process under the Fourteenth Amendment of the United States Constitution." State ex rel. Hydraulic Servocontrols v. Dale, 294 Or. 381, 384, 657 P.2d 211 (1982). Our approach generally is first to determine whether any of the specific provisions applies. If none is applicable, we then examine due process considerations under subsection L, which provides:

"Notwithstanding a failure to satisfy the requirement of sections B. through K. of [ORCP 4], in any action where prosecution of the action against a defendant in this state is not inconsistent with the Constitution of this state or the Constitution of the United States."

The burden is on Nike to allege and prove facts sufficient to establish jurisdiction. State ex rel. Jones v. Crookham, 296 Or. 735, 738, 681 P.2d 103 (1984); State ex rel. Sweere v. Crookham, 289 Or. 3, 7, 609 P.2d 361 (1980). Nike first contends that in this case jurisdiction exists under ORCP 4 E(4):

"A court of this state having jurisdiction of the subject matter has jurisdiction over a party served in an action pursuant to Rule 7 under any of the following circumstances:

" * * *

"In any action or proceeding which:

" * * *

"Relates to goods, documents of title, or other things of value sent from this state by the plaintiff to the defendant on the defendant's order or direction or sent to a third person when payment of such goods, documents, or things was guaranteed by defendant * * *."

Nike's position is that ORCP 4 E(4) applies, "because goods were shipped, at defendants' order, from the State of Oregon to the defendants, and payment was guaranteed by defendants." Alternatively, it argues that personal jurisdiction is proper under ORCP 4 L, because the acts of defendants caused important consequences in Oregon, the cause of action arose from consequences of defendants' activities and the connection is so substantial as to make jurisdiction over defendants reasonable. See State ex rel. White Lumber v. Sulmonetti, 252 Or. 121, 448 P.2d 571 (1968). Defendants counter that ORCP 4 E(4) cannot be the basis for jurisdiction, arguing that Nike does not distinguish between defendants and Barefoot Sports and that, given that distinction, there is no evidence in the record that goods were shipped at defendants' request or to defendants and that plaintiff's reliance on ORCP 4 E(4) requires the unwarranted assumption that the guaranties apply to pre-merger sales by Nike to Barefoot Sports or that the guaranties survived the merger so as to apply to Nike's post-merger sales to Barefoot Sports. More generally, defendants argue that their contacts with Oregon are too minimal to be constitutionally sufficient bases for personal jurisdiction under ORCP 4 L.

At this juncture, we note that the potential applicability of defendants' guaranties of payment for sales by Nike to Barefoot Sports, as distinguished from sales by BRS, is a pivotal issue underlying defendants' second and third assignments or error. Because we agree that that issue is related to the question of jurisdiction, we address it first. That defendants executed personal guaranties to BRS for payment of debts of Barefoot Sports and that a merger of BRS and Nike was effected December 31, 1981, leaving Nike as the surviving corporation, are not disputed. The precise question of law we must decide is whether, following a merger of a corporation and its subsidiary corporation, a guaranty in favor of the subsidiary inures to the benefit of the surviving corporation.

The effect of a corporate merger is statutorily controlled. In relevant part, ORS 57.480(1) provides:

"(1) When a merger or consolidation becomes effective, the effect on the corporations parties to the merger or consolidation is as follows:

"(a) The several corporations parties to the plan of merger or consolidation shall be a single corporation, which, in the case of a merger, shall be that corporation designated in the plan of merger as the surviving corporation, and, in the case of a consolidation, shall be the new corporation provided for in the plan of consolidation.

"(b) The separate existence of all corporations parties to the plan of merger or consolidation, except the surviving or new corporation, shall cease.

" * * *

"(d) Such surviving or new corporation shall thereupon and thereafter possess all the rights, privileges, immunities and franchises,...