Ohio State Tie & Timber, Inc. v. Paris Lumber Co.

• Decision Date: 30 December 1982
• Citation: 8 Ohio App.3d 236,456 N.E.2d 1309,8 OBR 309
• Parties: , 8 O.B.R. 309 OHIO STATE TIE & TIMBER, INC., Appellee, v. PARIS LUMBER COMPANY et al., Appellants.
• Court: Ohio Court of Appeals

Page 236

8 Ohio App.3d 236

456 N.E.2d 1309, 8 O.B.R. 309

OHIO STATE TIE & TIMBER, INC., Appellee, v. PARIS LUMBER COMPANY et al., Appellants.

Court of Appeals of Ohio, Tenth District, Franklin County.

Dec. 30, 1982.

Syllabus by the Court

1. The exercise of long-arm jurisdiction in Ohio depends not only upon the [456 N.E.2d 1311] nonresident having sufficient minimum contacts with Ohio to satisfy due process but also upon the fulfillment of one of the specified circumstances found in Civ.R. 4.3(A) and R.C. 2307.382(A).

2. Impact upon Ohio commerce alone is not sufficient to constitute "transacting business" in Ohio such as to confer long-arm jurisdiction under Civ.R. 4.3(A)(1) and R.C. 2307.382(A)(1) with respect to a contract between an Ohio resident and nonresident.

3. The ordering of goods from an Ohio resident by telephone from Kentucky by a Kentucky resident, which goods are to be shipped to Kentucky by the Ohio resident, does not constitute the transaction of business in Ohio by the Kentucky resident who ordered the goods, even though the goods had to be specially ordered to meet the needs of the Kentucky resident, and even though it may impact on Ohio commerce.

4. Where a settlement agreement is reached as to the merits of a case, any dispute as to jurisdiction is waived for the purpose of enforcement of the settlement agreement in the absence of some provision in the agreement itself to the contrary.

5. Although a trial court may dismiss an action without prejudice because of a representation of an out-of-court settlement which never reaches fruition, it cannot grant judgment upon an out-of-court settlement without conducting an evidentiary hearing as to the existence, as well as the terms, of the settlement.

Schottenstein, Hoffman & Fry Co., L.P.A., Carl B. Fry, Barry A. Waller and Rick L. Brunner, Columbus, for appellee.

Greenbaum, Doll & McDonald, Richard A. Getty and James R. Cox, Louisville, Ky., for appellants.

WHITESIDE, Presiding Judge.

Defendants, Paris Lumber Company and its partners, appeal from a decision of the Franklin County Court of Common Pleas and raise three assignments of error, as follows:

"1. The trial court erred in finding that the Defendants-Appellants had sufficient minimum contacts with the State of Ohio to warrant the exercise of personal jurisdiction over them in Ohio.

"2. The trial court erred in failing to hold an evidentiary hearing to resolve factual issues with respect to the existence and terms of an alleged settlement agreement.

"3. The trial court erred in finding that the parties had entered into a binding settlement agreement."

Plaintiff, Ohio State Tie & Timber, Inc., brought this action seeking judgment against defendants for lumber products sold and delivered to defendant Paris Lumber in a series of transactions between November 1978 and March 1980. All defendants filed a motion to quash service of process and dismiss the action for lack of jurisdiction over their persons, which motion was overruled by the trial court.

Defendant Paris Lumber is a Kentucky general partnership engaged in the lumber business in Paris, Kentucky. The individual defendants, partners in Paris Lumber, are also residents of Paris, Kentucky.

In support of their motion to quash, defendants submitted affidavits indicating that: (1) all negotiations connected with the sales involved were conducted by telephone and were delivered by plaintiff to defendant Paris Lumber's place of business in Kentucky; (2) defendant Paris Lumber has never transacted or solicited business in Ohio, and is not authorized to do business in Ohio; and (3) defendant Paris Lumber has no office or place of business in Ohio, has no employees or agents in Ohio, owns no property in Ohio and has never derived any revenue from Ohio. The affidavits indicate that the same is true with respect to the individual defendants.

Plaintiff submitted an affidavit of its president, which does not differ substantially from that of defendants, stating that: (1) the contact between the parties was initiated by defendant Paris Lumber by telephone and that plaintiff was persuaded to enter into a transaction with defendant Paris Lumber; (2) all transactions were negotiated and entered into by telephone, being instigated in each instance by defendant Paris Lumber, which offered to purchase materials from plaintiff; and (3) upon receipt of the telephone order, plaintiff accepted it, manufactured the requested products to defendants' specification and caused the requested goods to be shipped to defendant Paris Lumber in Kentucky.

The trial court overruled defendants' motion to quash, finding "defendants have had sufficient minimum contacts with the State of Ohio to create personal jurisdiction in this Court," without further elucidation as to the nature of these contacts other than citing Southern Machine Co. v. Mohasco Industries (C.A.6, 1968), 401 F.2d 374. In Southern Machine Co., supra, the Sixth Circuit Court of Appeals held that entering into a contract and causing a party to set in motion steps to begin to manufacture machines in contemplation of marketing them creates a sufficient impact on the commerce or economy of the state of manufacture that physical presence in the state is not necessary to permit the exercise of jurisdiction over the nonresident party to the contract. This is merely an attempted extension of the due-process doctrine underlying the exercise of so-called long-arm jurisdiction, which is the progeny of International Shoe Co. v. Washington (1945), 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95, which was relied upon in Wainscott v. St. Louis-San Francisco Ry. Co. (1976), 47 Ohio St.2d 133, 351 N.E.2d 466 . In Wainscott, it was held, in paragraph one of the syllabus, that, for an Ohio court to exercise in personam jurisdiction over a foreign corporation, the corporation must have "certain minimum contacts with Ohio, such that it is fair that a defendant defend a suit brought in Ohio and that substantial justice is done." In two more recent authoritative cases, International Shoe Co. was reaffirmed. See World-Wide Volkswagen Corp. v. Woodson (1980), 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 and Rush v. Savchuk (1980), 444 U.S. 320, 100 S.Ct. 571, 62 L.Ed.2d 516.

In World-Wide, it is stated 444 U.S. at page 297, 100 S.Ct. at page 567:

" * * * it is that the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there. * * * The Due Process Clause, by ensuring the 'orderly administration of the laws,' * * * gives a degree of predictability to the legal system that allows potential defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit." (Citations omitted.)

Rush, 444 U.S. at page 328, 100 S.Ct. at page 577 states that: " * * * jurisdiction is lacking, however, unless there are sufficient contacts to satisfy the fairness standard of International Shoe." Under that fairness standard, it is extremely doubtful that defendants had sufficient contacts with Ohio to satisfy due process. However, even if there are such sufficient contacts, this is not dispositive of this case. Recently, in cases such as Southern Machine Co., supra, a doctrine has evolved that due process is satisfied by the transaction of business in one state which affects the transaction of business in another state to such a degree as to cause a significant impact on the commerce of the affected state through contracts with residents of that state such that there should be a reasonable anticipation of being sued in the affected state. Under this doctrine, it is not necessary that the business itself be transacted in the state asserting jurisdiction but only that there be a contract with the residents of the state asserting jurisdiction, which contract has a significant impact on the commerce and business operations in the state asserting jurisdiction.

Recently, this court, in Gold Circle Stores v. Chemical Bank (1982), 4 Ohio App.3d 10, 446 N.E.2d 194, held to the effect that Ohio has not extended long-arm jurisdiction to the limits of due process but, instead, actual transaction of business in Ohio is a prerequisite to the exercise of long-arm jurisdiction under the circumstances. This conclusion is compelled by Civ.R. 4.3(A), which permits service of process outside of Ohio upon a nonresident only under certain specified circumstances, including "[t]ransacting any business in this state," and "[c]ontracting to supply services or goods in this state." Since the goods involved were supplied by an Ohio resident to a Kentucky resident in Kentucky, the second foundation for jurisdiction can have no application. The only possible basis for the exercise of long-arm jurisdiction in this case is a transaction of business in this state by defendants. Thus, the basic issue is whether the activity of defendants constituted transacting business in this state.

R.C. 2307.382(A), the so-called...