Proctor & Schwartz, Inc. v. Cleveland Lumber Co.

• Citation: 323 A.2d 11,228 Pa.Super. 12
• Parties: PROCTOR & SCHWARTZ, INC. v. CLEVELAND LUMBER COMPANY, Appellant.
• Decision Date: 03 April 1974
• Court: Pennsylvania Superior Court

Page 11

323 A.2d 11

228 Pa.Super. 12

PROCTOR & SCHWARTZ, INC. v. CLEVELAND LUMBER COMPANY, Appellant.

Superior Court of Pennsylvania.

April 3, 1974.

Petition for Allowance of Appeal Denied Sept. 10, 1974.

Matthew M. Strickler, Philadelphia, with him Ballard, Spahr, Andrews & Ingersoll, Philadelphia, for appellant.

Ward T. Williams, Philadelphia, with him Patrick T. Ryan, and Drinker, Biddle & Reath, Philadelphia, for appellee.

Before WRIGHT, President Judge, and WATKINS, JACOBS, HOFFMAN, CERCONE and SPAETH, JJ.

JACOBS, Judge.

In this suit on a contract we are asked to determine whether the Pennsylvania courts may obtain in personam jurisdiction over a Georgia corporation which entered into a contract of purchase with a Pennsylvania corporation. The court below held that the Georgia corporation had sufficient minimum contacts with Pennsylvania to justify the exercise of in personam jurisdiction by the Pennsylvania courts. We agree.

On March 19, 1969, after extensive negotiations in Georgia and by mail and over the telephone, appellant, a Georgia corporation, signed a contract while in Georgia for the purchase and construction of lumber drying equipment and related materials. This contract was accepted and executed by appellee, a Pennsylvania corporation, on March 25, 1969, in Philadelphia, Pennsylvania. Under the terms of the contract Pennsylvania law applies to the agreement and governs its construction and interpretation. Appellant, Cleveland Lumber Company (hereinafter Cleveland), as purchaser agreed that title to the equipment was to be retained by appellee, Proctor & Schwartz, Inc. (hereinafter Proctor), until the purchase price was paid, and further agreed to bear the risk of loss on the equipment shipped by appellee.

Alleging certain defects in the manufacture and installation of the materials purchased, Cleveland refused to make further installment payments to Proctor. Proctor instituted this action on March 9, 1973, to recover from Cleveland the balance due on the purchase price and other related expenses. Service was made upon the Secretary of the Commonwealth of Pennsylvania under Pennsylvania's 'long-arm' statute. Act of November 15, 1972, P.L. ---, No. 271, § 8301 et seq., eff. February 13, 1973, 42 Pa. S. § 8301 et seq. (Supp.1973--74). ¹ Cleveland then filed preliminary objections to the complaint alleging that it was a nonresident corporation which was not doing business in the Commonwealth, thus raising a question of jurisdiction. The court overruled the objections and this appeal followed.

The pertinent facts show that Cleveland (1) maintains no offices in Pennsylvania, (2) has no interest in any real or personal property in Pennsylvania, (3) has not acquired with the exception of the instant transaction any materials, supplies, or financing, or services from any business entity located in this state, (4) has no agents, representatives, or employes in Pennsylvania, (5) has never had any employes, officers, or other individuals representing appellant physically present in Pennsylvania for business purposes, and (6) with the exception of the instant transaction had had no business contacts with Pennsylvania.

Pennsylvania's recently enacted 'long-arm' statute is expressly intended to extend the jurisdiction of the courts of this Commonwealth to the fullest extent permitted by the Fourteenth Amendment. The pertinent section is § 8309(b) which reads as follows:

'(b) Exercise of full constitutional power over foreign corporations.--In addition to the provisions of subsection (a) of this section the jurisdiction and venue of courts of the Commonwealth shall extend to all foreign corporations and the powers exercised by them to the fullest extent allowed under the Constitution of the United States.'

This 1972 statute is but the latest step in the evolution of the Pennsylvania 'long-arm' statute. The corporate 'long-arm' statute as amended in 1963 restricted the reach of the state courts by limiting the definition of 'doing business.' 'Doing business,' the jurisdictional prerequisite, was defined as:

'(t)he entry of any corporation into this Commonwealth for the doing of a series of similar acts for the purpose of thereby realizing pecuniary benefit or otherwise accomplishing an object, or doing a single act in this Commonwealth for such purpose with the intention of thereby initiating a series of such acts . . ..'

Act of May 5, 1933, P.L. 364, § 1011(C), as amended, 15 P.S. § 2011(C), repealed, Act of November 15, 1972, P.L. ---, No. 271, § 5. Under that statute, jurisdiction could only be predicated upon a finding that the foreign corporation had 'entered' into the Commonwealth by the physical presence of the corporation's agents or property. See Rufo v. Bastian-Blessing Co., 405 Pa. 12, 173 A.2d 123 (1961); Cecere v. Ohringer Home Furniture Co., 208 Pa.Super. 138, 220 A.2d 350 (1966); Optico Corp. v. Standard Tool Co., 285 F.Supp. 46 (E.D.Pa.1968).

In 1968 this requirement of actual corporate presence was deleted as a criterion of 'doing business' and the statute as amended provided that the shipping of merchandise directly or indirectly into or through the Commonwealth would be considered the doing of an act within the Commonwealth. Act of May 5, 1933, P.L. 364, § 1011(C), as amended, Act of July 20, 1968, P.L. 216, § 54, 15 P.S. § 2011(C), repealed, Act of November 15, 1972, P.L. ---, No. 271, § 5. However, this statute was still interpreted to require either a series of acts or a single act with the intention of initiating a series of acts. See Gorso v. Bell Equip. Corp., 476 F.2d 1216 (3d Cir. 1973); Aquarium Pharmaceuticals, Inc. v. Industrial Pressing & Packaging, Inc., 358 F.Supp. 441 (E.D.Pa.1973).

The 1972 amendments to the Pennsylvania 'long-arm' statute seek to remove all Pennsylvania statutory and, therefore, decisional impediments to the exercise of in personam jurisdiction over foreign corporations. The statute reinforced through express language the judicially stated public policy of Pennsylvania to extend in personam jurisdiction 'to the full measure consistent with due process standards.' Aquarium Pharmaceuticals, Inc. v. Industrial Pressing & Packaging, Inc., supra at 444; Scafati v. Bayerische Motoren Werke Ag, 53 F.R.D. 256 (W.D.Pa.1971); Cf. Wenzel v. Morris Distrib. Co., supra. Although the statute retains the requirement of 'doing business' as a jurisdictional trigger, the addition of the new section 8309(b), quoted supra, is clearly intended to liberalize Pennsylvania's position. Under this section those contacts sufficient to satisfy the constitutional requirements of due process are also sufficient to satisfy the 'doing business' requirement of Pennsylvania law. Thus, for purposes of in personam jurisdiction over unregistered foreign corporations the evolution of the Pennsylvania 'long-arm' statute has now become coexistent with the evolution of substantive jurisdictional due process as expressed by the United States Supreme Court.

In the first landmark case of in personam jurisdiction the Supreme Court rejected fictional jurisdictional bases such as presence and implied consent, ² and held that

'due process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that maintenance of the suit does not offend 'traditional notions of fair play and substantial justice'.'

International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945).

In McGee v. International Life Insurance Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957), the Supreme Court in establishing the breadth of the due process clause held that the exercise of jurisdiction based upon the issuance of a single insurance contract in the forum state was not constitutionally impermissible. But a year later the Court suggested that the due process clause requires a defendant to have 'purposefully avail(ed) itself of the privilege of conducting activities within the forum State thus invoking the benefits and protections of its laws.' Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1240, 2 L.Ed.2d 1283 (1958).

These decisions provide only a framework under the broad formula of 'fair play and substantial justice' and a determination of whether or not the 'minimum contacts' of a foreign corporation with a particular state are sufficient to make the corporation constitutionally amenable to process in that state must inevitably be made on an ad hoc case-by-case basis and not by the application of a mechanical rule. Campbell v. Triangle Corp., 336 F.Supp. 1002 (E.D.Pa.1972).

However, we can find certain guidelines which aid in the factual analysis necessary to make the determination of whether the requisite 'minimum contacts' are present in a given case. First, the defendant must have purposefully availed itself of the privilege of acting within the forum state thus invoking the benefits and protections of its laws. Hanson v. Denckla, supra. Secondly, the cause of action must arise from defendant's activities within the forum state. See Southern Mach. Co. v. Mohasco Indus., Inc., 401 F.2d 374 (6th Cir. 1968); Electric Regulator Corp. v. Sterling Extruder Corp., 280 F.Supp. 550 (D.Conn.1968). Lastly, the acts of the defendant must have a substantial enough connection with the forum state to make the exercise of jurisdiction over it reasonable. International Shoe Co. v. Washington, supra; See Southern Mach. Co. v. Mohasco Indus., Inc., supra; See also In-Flight Devices Corp. v. Van Dusen Air, Inc., 466 F.2d 220 (6th Cir. 1972); Kourkene v. American BBR, Inc., 313 F.2d 769 (9th Cir. 1963).

This Court has no difficulty in finding that the first element relating to the purposeful doing of an act within the Commonwealth has been satisfied. The defendant voluntarily entered into a contract with a Pennsylvania corporation which contract was to...