Northern Natural Gas Co. v. Superior Court
| Decision Date | 17 December 1976 |
| Citation | 134 Cal.Rptr. 850,64 Cal.App.3d 983 |
| Court | California Court of Appeals |
| Parties | NORTHERN NATURAL GAS COMPANY OF OMAHA, NEBRASKA, a corporation, and Northern Propane Gas Company of Minneapolis, Minnesota, a corporation, Petitioners, v. SUPERIOR COURT of the State of California, IN AND FOR the COUNTY OF FRESNO, Respondent. Ned S. VAN DUYNE, Real Party in Interest. Civ. 3176. |
Northern Natural Gas Company of Omaha, Nebraska, a Delaware corporation ('Natural Gas') and Northern Propane Gas Company of Minneapolis, Minnesota, a Delaware corporation ('Propane Gas') were sued as defendants in respondent court in an action filed by Ned S. Van Duyne, ('Van Duyne'), real party in interest. Natural Gas and Propane Gas filed motions to quash service of summons on the ground that they were foreign corporations not engaged directly or indirectly in business in the State of California and not otherwise subject to the jurisdiction of California. The motions were opposed by Van Duyne and were denied by respondent court. Natural Gas and Propane Gas sought relief through mandamus. We granted an order to show cause.
We conclude that respondent court correctly denied the motion of Propane Gas to quash service of summons, but erroneously denied the motion of Natural Gas to quash service of summons. A peremptory writ will be issued accordingly.
The affidavits in connection with the motion before respondent court disclosed the following facts with reference to petitioners Natural Gas and Propane Gas:
FACTS ABOUT NATURAL GAS COMPANY
F. Vincent Roach, vice president and general counsel of Natural Gas Co. made an affidavit filed in respondent court in which he stated that Natural Gas Company is a Delaware corporation with offices in Omaha, Nebraska. It transacts business in certain midwestern and southwestern states, the business consisting of the operation of a 19,990 mile natural gas pipeline system in twelve states (excluding California), for the distribution of natural gas to 74 utility customers in 1,094 communities with a population of 5.9 million. These communities are located in eleven states in the upper midwest. Natural Gas Company's retail distribution system sells natural gas to residential, commercial, industrial and agricultural customers in eight states (excluding California). The affidavit alleges that the corporation is not qualified to do business in the State of California 1 and does not engage in business activities, maintain an office or offices, maintain books and records, own real property, own tangible personal property, manufacture products, perform services, make sales of goods, maintain a stock of goods, have full or part time salesmen or sales agents offering its products for sale, or conduct activities as a member of a partnership, joint venture or limited partnership, in the State of California.
Gale M. Colburn, vice president of Propane Gas filed an affidavit in respondent court in which he stated that Propane Gas Company is a Delaware corporation. It has offices in Minneapolis, Minnesota and transacts business in 21 midwestern and eastern states, the business consisting of the operation of 283 retail and bulk plant propane operations. It serves 265,000 customers in the midwest and eastern United States under the name 'Norgas' and it is primarily a retail seller of propane gas with wholesale propane gas purchase and sales operations. Associated appliances are also marketed by the corporation at its retail outlets. It employs approximately 1,600 people throughout its area of service. The affidavit alleged that the corporation is not qualified to do business in the State of California and does not maintain an office or offices, maintain books and records, own real property, own tangible or intangible property, manufacture products, perform services, make sales of goods, maintain a stock of goods, have full or part time salesmen or sales agents, or conduct activities as a member of a partnership, joint venture or limited partnership in the State of California.
The lawsuit pending before respondent court arose out of a 'license agreement' between Van Duyne and Geni-Chlor International, Inc., a Delaware corporation ('Geni-Chlor') dated April 12, 1974 which Van Duyne claimed had been breached to his damage. Van Duyne also alleged a cause of action for fraud against the defendants. The corporate identity of Geni-Chlor as disclosed by such affidavits in support of the motion and in opposition of the motion may be briefly summarized as follows:
FACTS ABOUT GENI-CHLOR
The forerunner of Geni-Chlor was S.K. & A. Development Corporation. In 1970, Mr. Dan Tucker purchased S.K. & A. and commenced work to manufacture and market pool chlorination devices. Mr. Tucker's intention was to develop a pool purifier/chlorination unit operating on a principle of electrolysis. After a period of testing, Mr. Tucker became satisfied with the unit and in early 1972 began to market the unit in the Concord, California area through Damoto Products, Incorporated. Also in 1972, S.K. & A. became associated with International Consolidated Industries of Oakland, California, for the purpose of developing a national marketing program.
On December 18, 1972, Geni-Chlor was formed under the laws of Delaware. On January 4, 1973, Geni-Chlor acquired the assets of S.K. & A. Geni-Chlor maintains offices and a manufacturing plant in Concord, California, and has a designated agent to receive service of process in California.
Geni-Chlor is a subsidiary of Propane Gas Company, which in turn is a wholly owned subsidiary of Natural Gas Company. 2
Darwin A. Larson is both president of Propane Gas and the president and chairman of the board of Geni-Chlor. Stephen Sulentic and Calvin Forbes are both directors of Geni-Chlor and officers of Propane Gas. Mr. Sulentic is also a director of Propane Gas.
In a bulletin entitled 'The Geni-Chlor Story,' issued by Geni-Chlor to its distributors, the distributors were informed that Geni-Chlor and Propane Gas had in 1972 entered into a joint venture agreement to build and market the Geni-Chlor pool purifier. Propane Gas was already a distributor of Geni-Chlor, marketing Geni-Chlor pool purifiers on the west coast of Florida.
Also in the bulletin entitled 'The Geni-Chlor Story', reference was made to Natural Gas and its financial position and that of its subsidiaries, including the fact that Natural Gas was traded on the New York Stock Exchange.
In another bulletin entitled 'Selling the Company,' it is stated that on December 18, 1969 Geni-Chlor became associated with Propane Gas, a wholly owned subsidiary of Natural Gas Company. Also, in November of 1974, Propane Gas Company bought controlling interest in Geni-Chlor. The same bulletin gives the following model question and answer from a sales training manual circulated among Geni-Chlor distributors:
In his affidavit in opposition to the motion Van Duyne stated:
'Employees of Geni-Chlor International, Inc., including J. Michael Walker who is vice president and general manager of Geni-Chlor and a member of the board of directors of Geni-Chlor, induced me to enter into the licensing contract attached to my complaint by informing me that Geni-Chlor International and Northern Propane Gas Company had in 1972 entered into a joint venture agreement to both build and market the Geni-Chlor pool purifier. That as of this time (April, 1974) Northern Propane Gas Company held an option to purchase virtually all of the Geni-Chlor stock; that the defendant Northern Gas Company was standing behind Geni-Chlor; that the Northern Natural Gas companies were large and financially solvent companies listed on the New York Stock Exchange and that as a licensee with Geni-Chlor, I could rely upon the money and prestige of the Northern Gas companies. At this time and in this regard, I was supplied with the Geni-Chlor Story, which is marked Exhibit A and attached hereto and incorporated herein.
At another point in his affidavit, Van Duyne stated:
'At many sales meetings I was advised, as were other licensees in California to establish 'credibility' of the product by making people aware of the financial position, status and 'credibility' of Northern Propane Gas Company and of Northern Natural Gas Company. This advice was received by me from employees of Geni-Chlor who were operating under the direction and control of Mr. Lars Larson, who at all times was president of Geni-Chlor, chairman of its board of directors and also president of Northern Propane Gas Company.
'Northern Propane Gas Company was thereby aware of the inducements and representations made as to its responsibility for the product sold by its subsidiary.'
A bulletin from Geni-Chlor instructs its distributors not to associate the Geni-Chlor name with Propane Gas...
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