Pavey Envelope and Tag Corp. v. Diamond Envelope Corp.

• Decision Date: 04 April 1995
• Docket Number: No. 2-94-0821,2-94-0821
• Citation: 271 Ill.App.3d 808,648 N.E.2d 1115,208 Ill.Dec. 193
• Parties: , 208 Ill.Dec. 193 PAVEY ENVELOPE AND TAG CORPORATION, Plaintiff-Appellee, v. DIAMOND ENVELOPE CORPORATION, Defendant-Appellant.
• Court: United States Appellate Court of Illinois

Page 1115

648 N.E.2d 1115

271 Ill.App.3d 808, 208 Ill.Dec. 193

PAVEY ENVELOPE AND TAG CORPORATION, Plaintiff-Appellee, v. DIAMOND ENVELOPE CORPORATION, Defendant-Appellant.

No. 2-94-0821.

Appellate Court of Illinois,

Second District.

April 4, 1995.

Bruce C. Davidson, Chicago, for Diamond Envelope Corp.

David S. Miller, Law Offices of Baker & Miller, Chicago, for Pavey Envelope & Tag Corp.

Justice DOYLE delivered the opinion of the court:

Defendant, Diamond Envelope Corporation, appeals the circuit court's judgment which registered a New Jersey judgment obtained by plaintiff, Pavey Envelope & Tag Corporation, and denied defendant leave to file a counterclaim. Defendant contends that the New Jersey court lacked jurisdiction pursuant to its long-arm statute as limited by Federal due process principles. Alternatively, defendant contends that the circuit court erred by refusing defendant's proposed counterclaim.

Both parties are in the business of manufacturing envelopes. Defendant does so in Naperville, while plaintiff's principal place of business is in New Jersey. Defendant received a large order from Leo Burnett, a large Chicago advertising agency. Alan Jania, defendant's president, decided that defendant could not meet the strict time constraints without enlisting the help of another company. Jania thought of plaintiff because a business acquaintance had become plaintiff's sales manager and had previously expressed plaintiff's desire to do business with defendant.

Jania telephoned his friend. The parties discussed the proposed transaction several times by phone, and plaintiff eventually agreed to do the work. Defendant accepted the offer by mailing a purchase order to plaintiff in New Jersey. The purchase order required plaintiff to deliver the envelopes to an address in Illinois.

Plaintiff filed a complaint in the New Jersey superior court, alleging that defendant had failed to pay the balance due on its account. On October 12, 1993, the New Jersey court entered a default judgment in favor of plaintiff for $15,271.31, plus costs. On December 3, 1993, plaintiff's petition to register the foreign judgment was filed in the circuit court of Du Page County. Defendant objected on the ground that the New Jersey court had lacked personal jurisdiction over it. Defendant also sought leave to file a counterclaim.

Defendant's proposed counterclaim alleged that plaintiff had failed to comply with the time constraints imposed by Leo Burnett. Defendant alleged that it was told by plaintiff's employees that the job could not be finished on time because the machinery was broken. However, upon sending representatives to plaintiff's plant, defendant learned that plaintiff had postponed its job to work on a project for another customer. Defendant sought consequential damages, alleging that as a result of plaintiff missing the deadline its relationship with Leo Burnett was damaged.

The court entered an order registering the New Jersey judgment and denying defendant leave to file its counterclaim. Citing Thompson v. Safeway Enterprises, Inc. (1978), 67 Ill.App.3d 914, 24 Ill.Dec. 561, 385 N.E.2d 702, the court held that a counterclaim may not be filed in an action to register a foreign judgment. Defendant perfected this appeal.

Defendant first contends that the court erred in registering the foreign judgment because the New Jersey court lacked personal jurisdiction under the New Jersey long-arm statute (N.J.Ct.R. 4:4-4(c) (1995)), as constrained by Federal due process principles. Plaintiff responds that jurisdiction in New Jersey was proper.

The United States Constitution provides that the judgments of a State court are entitled to full faith and credit in every other State. (U.S. Const., art. IV, § 1.) To implement the full faith and credit clause, Illinois has enacted the Uniform Enforcement of Foreign Judgments Act (the Act) (735 ILCS 5/12-650 et seq. (West 1992); Practice Management Associates, Inc. v. Thurston (1992), 225 Ill.App.3d 470, 473, 167 Ill.Dec. 767, 588 N.E.2d 408). Under the Act, a judgment debtor may not collaterally attack the foreign judgment except on the ground of fraud in its procurement or the rendering court's lack of jurisdiction. (Practice Management, 225 Ill.App.3d at 474, 167 Ill.Dec. 767, 588 N.E.2d 408.) Thus, when a foreign judgment is sought to be registered, the trial court may consider the question of the foreign court's jurisdiction. (Ace Metal Fabricating Co. v. Arvid C. Walberg & Co. (1985), 135 Ill.App.3d 452, 457, 90 Ill.Dec. 266, 481 N.E.2d 1066.) However, there is a strong presumption that the rendering court had jurisdiction, and it is the defendant's duty to rebut the presumption. (Ace Metal Fabricating, 135 Ill.App.3d at 457, 90 Ill.Dec. 266, 481 N.E.2d 1066; Paine, Webber, Jackson & Curtis, Inc. v. Rongren (1984), 127 Ill.App.3d 85, 90, 82 Ill.Dec. 197, 468 N.E.2d 459.) In determining jurisdiction, the foreign State's law, as limited by due process, controls. Texas Axles, Inc. v. Baillie (1986), 140 Ill.App.3d 760, 761, 95 Ill.Dec. 64, 489 N.E.2d 16.

The New Jersey long-arm statute, as does Illinois', authorizes the State's courts to exercise jurisdiction over a nonresident defendant to the maximum extent consistent with Federal due process principles. (N.J.Ct.R. 4:4-4(c) (1995); see 735 ILCS 5/2-209 (West 1992).) Under the due process clause, a defendant is not subject to personal jurisdiction in the forum State unless he or she has certain minimum contacts with that State such that bringing the action there does not offend " 'traditional notions of fair play and substantial justice.' " (Chalek v. Klein (1990), 193 Ill.App.3d 767, 770, 140 Ill.Dec. 760, 550 N.E.2d 645, quoting International Shoe Co. v. Washington (1945), 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95, 102.) A court must consider three criteria in determining whether a trial court's exercise of jurisdiction over a nonresident satisfies Federal due process standards: (1) whether the nonresident defendant has sufficient minimum contacts with the forum State that he has fair warning that he may be required to defend himself there; (2) whether the action arises out of defendant's contacts with the forum State; and (3) whether it is reasonable to require defendant to litigate in the forum State. Burger King Corp. v. Rudzewicz (1985), 471 U.S. 462, 471-77, 105 S.Ct. 2174, 2181-84, 85 L.Ed.2d 528, 540-44; Autotech Controls Corp. v. K.J. Electric Corp. (1993), 256 Ill.App.3d 721, 725, 195 Ill.Dec. 526, 628 N.E.2d 990.

In situations similar to the present one, New Jersey courts have consistently found personal jurisdiction over the nonresident defendant to be consistent with due process principles. In Avdel Corp. v. Mecure (1971), 58 N.J. 264, 277 A.2d 207, the New Jersey Supreme Court found jurisdiction over a New York corporation which ordered rivets from plaintiff corporation, knowing that they would either be manufactured in New Jersey or procured from other sources. The court noted that the rivets were to be delivered to New York. However, it found that this did not defeat jurisdiction in New Jersey, noting that the contract had a significant impact on both States. Avdel Corp., 58 N.J. at 272-73, 277 A.2d at 211-212; see also Elizabeth Iron Works, Inc. v. Kevon Construction Co. (1976), 155 N.J.Super. 175, 179-80, 382 A.2d 648, 650-51, aff'd (1978), 75 N.J. 332, 382 A.2d 636 (Pennsylvania defendant ordered steel beams from New Jersey plaintiff, knowing they were to be specially fabricated to his order there); Resin Research Laboratories, Inc. v. Gemini Roller Corp. (1969), 105 N.J.Super. 401, 404, 252 A.2d 415, 416 ("since Gemini contacted Resin in New Jersey and Resin's work was done here, where it was reasonable to expect it would be done," Gemini was subject to jurisdiction in New Jersey); Maglio & Kendro, Inc. v. Superior Enerquip Corp. (1989), 233 N.J.Super. 388, 558 A.2d 1371 (Wisconsin court had jurisdiction of New Jersey defendant where defendant requested plaintiff to perform executive search services in Wisconsin).

In the present case, there is no question that defendant contacted plaintiff in New Jersey and that the parties expected the work to be done substantially in New Jersey. Defendant thus had fair warning that it might be called upon to litigate in that State. Defendant acknowledges that the cause of action arose out of its contact with the forum State. Finally, defendant points to nothing particularly unfair about requiring it to defend the action in New Jersey. Defendant argues that its witnesses would have been required to travel to New Jersey. However, it is equally true that plaintiff's witnesses would have had to travel to Illinois had the action been litigated here. In every case involving a nonresident defendant, the defendant will necessarily have to bring witnesses to the forum State if it wishes to defend the action. If this fact alone were sufficient to defeat jurisdiction, so-called long-arm jurisdiction would cease to exist.

Our conclusion that jurisdiction was proper would not change if we were to decide the issue pursuant to Illinois law. In cases involving nonresidents who purchase goods from an Illinois seller, Illinois courts have drawn a distinction between "active" and "passive" purchasers. If the nonresident buyer is a passive party who merely places an order by mail or telephone and accepts the seller's stated price, courts will not exercise in personam jurisdiction over the nonresident purchaser. (Chalek v. Klein (1990), 193 Ill.App.3d 767, 773, 140 Ill.Dec. 760, 550 N.E.2d 645.) On the other hand, "[i]f the buyer departs from a passive role by dictating or vigorously negotiating contract terms or by inspecting production facilities, the unfairness which would be associated with the exercise of long arm jurisdiction over that buyer dissipates, and he or she will be subject to personal jurisdiction in the courts of the seller's State." Chalek, 193...