Paragon Oil Co. v. Panama Refining & Petrochemical Co.

• Decision Date: 07 March 1961
• Citation: 192 F. Supp. 259
• Parties: PARAGON OIL COMPANY, Inc., as the owner of THE HUNTERS POINT, Libellant, v. PANAMA REFINING & PETROCHEMICAL COMPANY, Inc., Respondent.
• Court: U.S. District Court — Southern District of New York

192 F. Supp. 259

PARAGON OIL COMPANY, Inc., as the owner of THE HUNTERS POINT, Libellant, v. PANAMA REFINING & PETROCHEMICAL COMPANY, Inc., Respondent.

United States District Court S. D. New York.

March 7, 1961.

Hill, Betts, Yamaoka, Freehill & Longcope, New York City, Eli Ellis, New York City, of counsel, for libellant.

Rein, Mound & Cotton, New York City, John P. Wourms, New York City, of counsel, for respondent.

DAWSON, District Judge.

This is a motion to vacate service of the citation and to dismiss the libel on the ground that respondent, Panama Refining & Petrochemical Company, Inc. (hereinafter referred to as "Panama"), is an alien corporation not engaged in the transaction of business in the State of New York and not subject to being sued in the United States District Court for the Southern District of New York.

The action was instituted by the libellant to recover for damages sustained to the tanker S.S. "Hunters Point" while pulling away from her berth in the port of Los Angeles on May 4, 1959.

The citation instituting the instant proceeding was served upon Edgar G. Cross, an Assistant Secretary and Assistant Treasurer of the respondent in New York City.

After this motion had been made, the libellant, pursuant to direction of Judge Weinfeld, took the deposition of Edgar G. Cross on the issue as to whether the respondent was subject to being sued in this district. The facts as shown in that deposition, and in the moving papers, indicate, without substantial controversy, the following:

1. The respondent is a Panamanian corporation, all the shares of which are owned by Ultramar, Ltd., an English corporation. Ultramar, Ltd., also has another subsidiary known as Golden Eagle Refining Company, Inc., which is engaged in the sale of oil and gasoline in California. Golden Eagle, however, maintains a branch office at 420 Lexington Avenue in the City of New York. Mr. Cross is an officer of both Golden Eagle Refining Company, Inc. and the respondent. The citation was served upon him at the office of Golden Eagle in New York.

2. Panama intends to construct an oil refinery in the Republic of Panama. At the present time, apparently, no construction has been commenced. The state of activity is clarified by the commendably forthright testimony of Mr. Cross.

"Q. Now, what is the business of Panama Refining? A. There is no business.

"Q. Hasn't it been engaged in any activity since it has been formed? A. We are not engaged in any activity.

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"Q. You say that Panama Refining has not done business since it has been formed? A. No. We hope to be able at some time to erect a refinery, petrochemical plant down here, but this is in the stage of attempting to put it together.

* * * * * *

"Q. Has Panama Refining delegated or designated any person who is responsible for putting this project into operation? A. No, there is no person designated.

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"Q. Is the respondent, Panama Refining, a going concern? A. No."

In addition, it appears that the respondent's complete staff in Panama consists of an office manager and two or three girls.

3. Panama has no office or telephone in its own name in the City or State of New York. Four of its seven officers, who are also officers of Golden Eagle, reside in the State of New York; a fifth officer is a resident of England; a sixth, a resident of Panama; and, the seventh spends half his time in Newfoundland and half in Panama.

4. The following is a list of the business done by Panama in New York, or its contacts with New York:

(a) In connection with engineering work to be done in Panama, meetings were held in the United States and Panama. Of these, two or three meetings were held in New York at the Golden Eagle offices. At those times preliminary estimates for the work contemplated were received at those offices.

(b) Two or three meetings of the Board of Directors of the respondent corporation were held at the Golden Eagle offices in New York. The last of these meetings was held in April, 1960.¹

(c) The deponent on occasion countersigned some checks in New York. He entertained the wife and daughter of the present vice-president of Panama and Panama's temporary delegate to the U.N. on behalf of the respondent corporation. He also occasionally wrote to Peter Caras, respondent's office manager in Panama, on Panama's letterhead, which was kept at the Golden Eagle offices.

(d) Panama maintained a bank account in New York which was closed out about six months ago. The account was used primarily as a transfer account. Funds were deposited in it by the parent corporation and another related corporation and then transferred to a Panamanian bank. But, in addition, withdrawals were made in New York to cover various traveling and entertainment expenses incurred here.

(e) The Panamanian office reports to Mr. Polk, who is vice-president, general manager and foreman. Mr. Polk divides his time between Canada and Panama. In turn Mr. Polk reports to Mr. Shaheen, Panama's president, in New York.

5. The charter party on which suit was brought was executed in California by Mr. McKay, an assistant treasurer of the respondent, who is a resident of California. Other than Mr. McKay, Panama has no employees and no office in California. One of the libellant's affidavits explains that this charter party was negotiated in the City of New York by Messrs. Addison, Outwater and Associates. After the charter was agreed upon, by libellant and respondent, it was sent to the offices of Golden Eagle in New York. Thereafter it was executed by Mr. McKay in California. None of this is disputed by the respondent.

We are therefore faced with the question of whether Panama may be said, as a result of these contacts, to be doing business in New York.² Whether the respondent is doing business within the meaning of Section 1391(c) of Title 28 of the United States Code is a question of federal law. Jaftex Corp. v. Randolph Mills, Inc., 2 Cir., 1960, 282 F.2d 508; Bach v. Friden Calculating Mach. Co., 6 Cir., 1948, 167 F.2d 679, 681; Danzig v. Virgin Isle Hotel, Inc., D.C.S.D. N.Y.1957, 23 F.R.D. 316, 317; Satterfield v. Lehigh Valley R. R. Co., D.C.S.D. N.Y.1955, 128 F.Supp. 669, 670. The concept of doing business has been extensively developed and liberalized by the Supreme Court. This began with International Shoe Co. v. Washington, 1945, 326 U.S. 310, 66 S.Ct. 1, 54, 90 L.Ed. 95, and continued in Travelers Health Ass'n v. Com. of Virginia ex rel. State Corp. Comm., 1950, 339 U.S. 643, 70 S.Ct. 927, 94 L.Ed. 1154.

The furthest reaches of the doctrine were laid down in McGee v. International Life Ins. Co., 1957, 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223, where service of process was, without dissent, held proper despite the fact that the respondent had never had any officers or agents in California nor had it ever solicited or done any insurance business in California. The sole connection was that the respondent had, pursuant to an agreement to assume the insurance obligations of another company, mailed a reinsurance certificate to a California claimant. As such the Court held that the contract had a substantial connection with the State of California and, in the absence of a denial of adequate notice for sufficient time to prepare its...