Powder Horn Nursery, Inc. v. Soil & Plant Laboratory, Inc.

• Decision Date: 18 September 1973
• Docket Number: CA-CIV,No. 1,1
• Citation: 20 Ariz.App. 517,514 P.2d 270
• Parties: POWDER HORN NURSERY, INC., an Arizona corporation, Appellant, v. SOIL AND PLANT LABORATORY, INC., a corporation, O. A. Matkin and Jane Doe Matkin, husband and wife, and John E. Rodebaugh and Jane Doe Rodebaugh, his wife, Appellees. 1790.
• Court: Arizona Court of Appeals

Page 270

514 P.2d 270

20 Ariz.App. 517

POWDER HORN NURSERY, INC., an Arizona corporation, Appellant, v. SOIL AND PLANT LABORATORY, INC., a corporation, O. A. Matkin and Jane Doe Matkin, husband and wife, and John E. Rodebaugh and Jane Doe Rodebaugh, his wife, Appellees.

No. 1 CA-CIV 1790.

Court of Appeals of Arizona, Division 1, Department B.

Sept. 18, 1973.

Rehearing Denied Oct. 22, 1973.

Review Denied Nov. 13, 1973.

Carson, Messinger, Elliott, Laughlin & Ragan by Robert W. Holland, Phoenix, for appellant.

O'Connor, Cavanagh, Anderson, Westover, Killingsworth & Beshears by Jeffrey B. Smith, Phoenix, for appellees.

OPINION

HAIRE, Judge.

This appeal presents the question of whether the courts of Arizona may, consistent with the due process clause of the Fourteenth Amendment, exercise In personam jurisdiction over a California corporation and two individual California defendants, when service of process has been made in California pursuant to Rule 4(e)(2), Rules of Civil Procedure, 16 A.R.S.

The defendants have been sued in tort by an Arizona plant nursery for damage to its plants which allegedly occurred because of negligently prepared soil analyses and soil treatment recommendations for which the defendants are responsible.

The trial court dismissed the complaint upon defendants' motion for lack of personal jurisdiction over the defendants. The matter was decided upon the basis of the complaint and certain affidavits and exhibits which are in the record on appeal, and there is no actual controversy as to the facts pertinent to the jurisdiction question.

I. FACTUAL BACKGROUND

Plaintiff is a corporation engaged in the business of growing and maintaining nursery stock for sale in Scottsdale, Arizona. In 1968 a representative of the plaintiff traveled to the offices of the defendant corporation, a soil testing laboratory, in Orange, California. At this meeting plaintiff's representative requested the services of defendant corporation in performing soil analyses and giving expert horticultural advice for plaintiff's nursery, and he received during his visit a promotional pamphlet outlining the services available from the defendant corporation. The plaintiff presented soil samples to the defendant corporation and, later, received by mail in Scottsdale, Arizona, an analysis and recommendation.

On at least five subsequent occasions soil samples were mailed from plaintiff in Arizona to the defendant corporation in California. The samples were analyzed in California and the results together with recommendations were returned by mail to the plaintiff in Scottsdale, Arizona. This relationship continued through 1969 and a portion of 1970, until the alleged damage occurred.

The defendant California corporation has offices and laboratories in the state of Washington, as well as in California. The defendant corporation does not advertise in any media, but appears to be well known in its field, and its pamphlet indicates that it does business with customers in states other than California and Washington, and also with customers in foreign countries. It has had 'sporadic' requests for its services from Arizona customers other than the plaintiff. However, no representative or agent of the defendant corporation has ever been in Arizona concerning the corporation's business and the corporation owns no property in Arizona.

The individual defendants, Rodebaugh and Matkin, are listed as staff members of the Orange, California, office of the defendant corporation. Rodebaugh conducted the personal interview with plaintiff's representative which initiated the relationship here involved. Matkin was listed as a director of the Orange, California, office in the pamphlet and in correspondence received by plaintiff. Both men are officers and employees of the defendant corporation and both signed one or more of the soil analyses sent to plaintiff. Matkin has been a resident of California continuously for more than 46 years; Rodebaugh for more than 6 years. Neither owns property in Arizona nor has either been in Arizona on a work assignment for the defendant corporation.

II. JURISDICTION OVER THE CORPORATE DEFENDANT

Service upon the defendants was made in accordance with the provisions of Rule 4(e)(2), Rules of Civil Procedure, 16 A.R.S. This is Arizona's 'long arm' service of process rule, and in pertinent part provides as follows:

'When the defendant is a . . . corporation . . . which has caused an event to occur in this state out of which the claim which is the subject of the complaint arose, service may be made as herein provided, and when so made shall be of the same effect as personal service within the state.'

In their motion to dismiss for lack of jurisdiction, the defendants did not contend that the method of service utilized by the plaintiff pursuant to Rule 4(e)(2) failed to give them reasonable notice and opportunity to defend. See Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865 (1950). Rather, their attack goes solely to the Power of the state of Arizona to exercise In personam judicial jurisdiction over them under the circumstances of this case. The Power of a state to exercise its judicial jurisdiction over non-resident individuals and foreign corporations in subject to limits imposed by the due process clause of the Fourteenth Amendment to the United States Constitution. Pennoyer v. Neff, 95 U.S. 714, 24 L.Ed. 565 (1877). While at one time these limits were fairly definite and relatively easy to ascertain, subsequent decisions of the United States Supreme Court have expanded the judicial power of the states, and have set down standards for the ascertainment of the limits of that power which, while simple in formulation, are extremely difficult to analyze and apply to specific fact situations. See particularly International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945); McGee v. International Life Insurance Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed. 223 (1957); and Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958).

Even though expanded In personam jurisdiction was authorized by the cited Supreme Court decisions, Arizona had no statutes or rules authorizing the exercise of this expanded jurisdiction until 1961. ¹ Prior to that time, Arizona's rules relating to the obtaining of jurisdiction through service of process were still tailored to the standards set in the earlier decisions of the United States Supreme Court. In 1961, a State Bar committee was given the task of recommending amendments to extend Arizona's 'long arm' jurisdiction, and the adoption of Rule 4(e)(2), as it now reads, resulted. The new Rule 4(e) (2) provided a method of service for obtaining In personam jurisdiction over non-resident individuals and foreign corporations not only on the traditional basis of 'doing business in the state', but also on the basis of having 'caused an event to occur in this state out of which the claim . . . arose.' This latter phrase is not completely unambiguous, expecially when applied to a fact situation involving an act by the defendant in another state which causes an event or effect to occur in this state without the defendant ever having been present here. However, a close reading of the phrase discloses that it is not the occurrence of the initiating act of causation which is required in this state, but rather that the resulting event or effect be in this state. Strengthening this interpretation are the State Bar committee notes which indicate that by the use of the subject phrase the intent was 'to give to Arizona residents the maximum privileges which the Constitution of the United States permits them to have.' A more restrictive interpretation of the language of Rule 4(e)(2) would not allow Arizona residents to take advantage of the maximum privileges now available under the due process clause of the Fourteenth Amendment, as interpreted in the above-cited United States Supreme Court decisions.

In the fact situation under consideration there is no contention that the defendant corporation was 'doing business' in this state within the meaning of that term as used in Rule 4(e)(2). Therefore our initial inquiry must be directed to determining whether the defendants' entirely out-of-state activities have caused an event to occur in Arizona out of which the plaintiff's claim arose. If we find that the defendant corporation has caused such an event to occur in Arizona, then the Arizona courts have jurisdiction unless we find that the maintenance of the suit in Arizona courts would offend the due process 'traditional notions of fair play and substantial justice'. International Shoe Co. v. Washington, Supra.

We do not find it difficult to answer our first inquiry. Assuming the validity on the merits of plaintiff's claim, the damages suffered by the plaintiff in applying the directions and information given by the defendant corporation are a direct result of the defendant corporation's negligent performance of its contracts with the plaintiff. It cannot be questioned that an event, the damages to plaintiff's nursery stock, occurred in Arizona, and it is this event to which Rule 4(e)(2) speaks. See Phillips v. Anchor Hocking Glass Corp., 100 Ariz. 251, 413 P.2d 732 (1966); Pegler v. Sullivan, 6 Ariz.App. 338, 432 P.2d 593 (1967). The fact that the defendants' initial duty arose out of contract does not preclude assumption of jurisdiction by the state of Arizona, since Rule 4(e)(2) is not in any way limited to tort actions. See Denn v. Southern Peru Copper Corp., 19 Ariz.App. 453, 508 P.2d 340 (1973); Molybdenum Corporation of America v. Superior Court, 17 Ariz.App. 354, 498 P.2d 166 (1972); Cf. McGee v. International Life Insurance Co., Supra. We therefore conclude that in rendering its contractual services to plaintiff, the defendant corporation has caused an event to occur in Arizona out of which the claim arose.

We now...