Roskelley & Co. v. Lerco, Inc., 15987

• Decision Date: 11 April 1980
• Docket Number: No. 15987,15987
• Citation: 610 P.2d 1307
• Court: Utah Supreme Court
• Parties: ROSKELLEY & CO., a corporation, Plaintiff and Respondent, v. LERCO, INC., a Kentucky Corporation, Defendant and Appellant.

Page 1307

610 P.2d 1307

ROSKELLEY & CO., a corporation, Plaintiff and Respondent, v. LERCO, INC., a Kentucky Corporation, Defendant and Appellant.

No. 15987.

Supreme Court of Utah.

April 11, 1980.

John L. McCoy, Salt Lake City, for defendant and appellant.

George S. Diumenti, Bountiful, for plaintiff and respondent.

WILKINS, Justice:

Plaintiff brought action against defendant, a Kentucky corporation, alleging breach of an oral contract to pay a commission or "finder's fee," to plaintiff for its services in connection with the sale of goods by defendant for use in this State by a Utah corporation.

Defendant appeared specially and moved to quash service and dismiss the complaint for lack of jurisdiction over it. ¹ From the order of the District Court, Salt Lake County, denying defendant's motion, and ordering it to answer the complaint within ten days, defendant appeals. All statutory references are to Utah Code Annotated, 1953, as amended.

For the purposes of its motions, defendant filed an affidavit reciting the following facts: (1) The parties had no contract for the payment of commissions. (2) Prior to July, 1975, M. L. Roskelley, plaintiff's representative, telephoned defendant in Kentucky inquiring about the possibility of acting as broker for defendant in Utah, but declined defendant's terms for such a contract. (3) Defendant sold equipment to U. S. Steel Credit Corporation, which in turn leased the equipment to Utah American Steel Co. (4) In June, 1975, plaintiff accompanied officers of Utah American Steel Co. to defendant's plant in Kentucky for the purpose of discussing the specifications of the equipment, but at that time there was no discussion concerning payment of any commission to plaintiff. (5) Defendant sent its employees to Utah following July 16, 1975, to supervise the installation and adjustment of the equipment at the plant of Utah American Steel Co., and for no other purposes. These facts were not controverted by plaintiff by counter-affidavit or otherwise.

Defendant contends on appeal that the State of Utah does not have in personam jurisdiction over defendant under Section 78-27-24 ² or otherwise. We agree that this record does not show that defendant was doing business in this State to such an extent that our Courts would have general jurisdiction, ³ and that if the suit can be maintained here, plaintiff must show that his cause arose out of one or more of defendant's contacts with this State as set forth in Section 78-27-24.

Plaintiff argues that the "minimal contacts" test of International Shoe ⁴ is satisfied, as defendant transacted business in this State, contracted to supply goods in this State, and defendant's employees were physically present in this State.

But we are not here concerned with defendant's contract for the sale of goods to U.S. Steel Credit Corporation, nor with the installation of the equipment at the Utah American Steel plant, and plaintiff's claim does not arise out of those activities. Plaintiff's alleged contract with defendant is collateral to its activities relating to the sale of equipment to U.S. Steel Corporation, and such a contract between plaintiff and defendant, would portray plaintiff's, and not defendant's, services and activities within this State.

We note that the dissent would resolve the question of jurisdiction on the basis of the allegation in plaintiff's complaint that an oral contract was entered into, regardless of defendant's sworn statement of specific facts denying such a contract. The dissent views defendant's statement that it made no commitment to plaintiff regarding a commission as vague and susceptible of many meanings. We view defendant's affidavit as completely contradicting plaintiff's allegation that a contract exists.

Nevertheless, it is the jurisdictional facts, and not whether plaintiff has stated a claim upon which relief may be granted, which concern us here. The statement concerning jurisdiction in plaintiff's complaint is its allegation that defendant "does business within the State of Utah, and has significant contacts with the State of Utah." Significantly, when jurisdiction is drawn into controversy, defendant's affidavit alleges that defendant is not qualified to do business generally in Utah; that the contacts defendant had with plaintiff were initiated by plaintiff; that defendant met plaintiff in Kentucky, not in Utah; that defendant's contract for the sale of equipment was with U.S. Steel Credit Corporation, and not with Utah American Steel; that defendant entered the State of Utah only for the purpose of supervising the installation of that equipment; that plaintiff did not at any time perform any services with regard to such installation in short, that defendant had no purposeful contacts with the State of Utah which would support a finding of jurisdiction for the purpose of litigating this contract for commissions. These facts remain unanswered by plaintiff, and we believe fatally so.

The dissent contends that plaintiff, by the allegations in its complaint, has established prima facie jurisdiction and the burden has shifted to defendant to prove lack of jurisdiction. But when jurisdiction is challenged, plaintiff cannot solely rely on allegations of jurisdiction in its complaint in the face of an affidavit by defendant which specifically contradicts those general allegations.

We do not consider the procedure proposed by the dissent to be fair or reasonable, in view of the fact that one of the primary ingredients of the due process inquiry into personal jurisdiction over a non-resident is whether it is more fair and just to require defendant to undertake the added costs and inconvenience of litigating in our courts than it is to require plaintiff to undertake those costs and that inconvenience by pursuing defendant in the state in which defendant resides. Here, the District Court has no power to hear this case on the merits if the facts are as alleged in defendant's affidavit because the Court has no jurisdiction.

The Colorado case, Texair Flyers, Inc. v. District Court, First Judicial District, 180 Colo. 432, 506 P.2d 367 (1970), cited in the dissent, has not been followed in any other jurisdiction. And none of the federal cases cited by the Colorado Court in that case, go so far as to say that only the allegations of the complaint should be considered, so that a defendant is entirely precluded from challenging those allegations at the threshold. Though the federal cases generally hold that plaintiff should not be required to prove all of the merits of his case in a hearing designed for the purpose of determining jurisdiction, a proposition with which we agree, those courts based their determinations on all the pleadings, including affidavits of the parties, and in some of the cases, depositions, answers to interrogatories, and requests for admissions.

Thus, in Surpitski v. Hughes Keenan Corp., 362 F.2d 254 (1st Cir. 1966), the District Court had allowed plaintiff 48 hours to file a motion or counteraffidavit in response to defendant's affidavit and dismissed the complaint when plaintiff's response was to move for further discovery. The Circuit Court reversed and remanded the case to allow plaintiff further discovery for the purpose of determining jurisdiction. And the Court in Alosio v. Iranian Shipping Lines, 307 F.Supp. 1117 (W.D.Pa.1970) stated:

At this stage, however, where it is enough for plaintiffs to show "threshold jurisdiction" sufficient to demonstrate the fairness of allowing them to continue the suit here, United States v. Montreal Co., supra, 358 F.2d (239) at 242-243, the affidavits amply accomplish the demonstration in their favor. This conclusion could not be reached, of course if the problem were one of "weighing" affidavits on the two sides containing square contradictions of each other. It can be and is reached because the sworn allegations in plaintiffs' affidavits of concrete, specific and plainly material facts are in significant respects simply ignored by the ostensibly responsive affidavits. In motion papers that reflect intensive, detailed, expert lawyering on both sides, striking omissions of this sort cannot be overlooked or denied their patent importance. (emphasis added)

We think that a mechanism for determining jurisdiction prior to a trial on the merits, analogous to the mechanism available for summary judgment, Rule 56(e), comports with fairness and due process, and hence that allegations in a complaint should not be able to withstand the force of specific allegations of fact in affidavit form which latter allegations are not challenged. In this case, allegations of specific and material facts in defendant's affidavit are unanswered by plaintiff.

We further believe that the broad construction the dissent would give the term "arose from" is unwarranted, and is unsupported by the cases cited therein. This Court recently held, in the case of Abbott G. M. Diesel, Inc. v. Piper Aircraft Corp., supra, note 3, that there are significant distinctions between the "doing business" concept and the "minimal contacts" test of International Shoe. The older "doing business" concept requires a plaintiff to show that defendant has conducted substantial and continuous business activity within the forum state. Once that is shown, defendant is subject to litigation related or unrelated to that business, as he is a "pseudo-resident." But if the action is brought pursuant to the long-arm statute because defendant is not doing substantial business in the forum state, plaintiff must show that his claim arises out of some contact defendant has with the forum state, some action undertaken by defendant by which it can be shown that defendant has "purposefully availed himself of the privilege of conducting activities within the forum state." ⁵ And it does not here assist the plaintiff to show the contacts defendant has with the forum, if the specific litigation at bar does not...