Security Bank, NA v. Tauber

• Decision Date: 11 September 1972
• Docket Number: 269-72.,Civ. A. No. 2601-69
• Citation: 347 F. Supp. 511
• Parties: SECURITY BANK, N. A., Plaintiff, v. Lazlo TAUBER, Defendant. Louis I. KEA, Plaintiff, v. Diane HOFFMAN, Defendant.
• Court: U.S. District Court — District of Columbia

347 F. Supp. 511

SECURITY BANK, N. A., Plaintiff, v. Lazlo TAUBER, Defendant.

Louis I. KEA, Plaintiff, v. Diane HOFFMAN, Defendant.

Civ. A. Nos. 2601-69, 269-72.

United States District Court, District of Columbia, Civil Division.

September 11, 1972.

Leonard C. Collins, Washington, D. C., for plaintiff Security Bank, N. A.

Louis Ginberg, Washington, D. C., for defendant, Lazlo Tauber.

David A. Jones, Chevy Chase, Md., for Louis I. Kea.

Steven K. Yablonski, and Donald T. Bucklin, Washington, D. C., for Diane Hoffman.

MEMORANDUM OPINION

FLANNERY, District Judge.

These two otherwise unrelated cases are treated together in this Opinion because they present similar questions concerning the interpretation and application of the District of Columbia new long-arm jurisdictional statute, found at D.C.Code 13-421. For the reasons set forth hereinafter the Court grants the defendant's motion for summary judgment in the case of Security Bank v. Tauber, Civil Action No. 2601-69 and grants the defendant's motion to dismiss for lack of jurisdiction over the person and lack of service of process in the case of Kea v. Hoffman, Civil Action No. 269-72.

The long-arm statute in the District of Columbia, effective February 1, 1971, provides in relevant parts as follows:

§ 13-423. Personal jurisdiction based upon conduct

(a) A District of Columbia court may exercise personal jurisdiction over a person, who acts directly or by an agent, as to a claim for relief arising from the person's —

(1) transacting any business in the District of Columbia;

. . . . . .

(3) causing tortious injury in the District of Columbia by an act or omission in the District of Columbia;

(4) causing tortious injury in the District of Columbia by an act or omission outside the District of Columbia if he regularly does or solicits business, engages in any other persistent course of conduct, or derives substantial revenue from goods, used or consumed, or services rendered, in the District of Columbia;

. . . . . .

(b) When jurisdiction over a person is based solely upon this section, only a claim for relief arising from acts enumerated in this section may be asserted against him.

D.C.Code § 13-423 (Supp. V 1972).

Once the exercise of personal jurisdiction is authorized by any of the provisions above, service may be made outside the District of Columbia in a number of ways including return-receipt mail. D. C.Code §§ 13-424, 13-431 (Supp. V 1972).

Plaintiffs invoke these sections to support their respective claims of in personam jurisdiction. Of course, the burden of proving jurisdictional facts rests upon the plaintiff. See McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 182, 189, 56 S.Ct. 780, 80 L. Ed. 1135 (1936). In their respective motions, both defendants challenge the attempt by the plaintiffs to shoulder this burden.

In deciding these cases, the Court must determine whether, in light of the facts presented, the assertion of jurisdiction and service of process over the non-resident defendants is authorized by the statute.

Turning first to a consideration of Security Bank v. Tauber, the Court finds that the defendant Tauber as sole stockholder of the L & L Corporation contracted with a general contractor, Whiting-Turner, to construct a building in Rockville, Maryland. The defendant had the right and control of "retainage" so that upon satisfactory performance by a subcontractor of the subcontractor's contract with Whiting-Turner, the defendant could direct the title company holding construction funds to pay the retainage to the subcontractor.

Whiting-Turner subsequently contracted with subcontractor Ray Gaines, Inc. to do certain cement work. Gaines needed money to do the work and, therefore, decided to borrow money from plaintiff Security Bank. As collateral, Gaines assigned to the plaintiff $200,000 of the amount which he would receive for his cement work. Because defendant was the one who controlled the disbursement of the retainage money, Gaines first went to the defendant to have the defendant approve the assignment to plaintiff Bank of $200,000 of any funds Gaines might receive as a result of Gaines' contract with Whiting-Turner. Defendant signed his name approving this assignment.

The plaintiff made the loan and Gaines subsequently defaulted. The plaintiff now charges that it believed that there was a contract between defendant and Gaines and that it would not have loaned the money if it had known that Gaines' contract was with Whiting-Turner and not the defendant. Therefore, plaintiff has initiated this action against defendant claiming damage as the result of misrepresentation. In response the defendant asserts that the plaintiff's own negligence in failing to ascertain the nature of and the parties to the contract caused its loss.

The defendant, a resident of the State of Maryland who had his business office in the State of Virginia, received service of process in Virginia. He has not developed any real estate or conducted any other business in the District of Columbia since 1964.

The defendant's signing of the assignment paper took place in Virginia, after which Gaines took the paper to the plaintiff Bank in the District of Columbia. Although the defendant knew Gaines would take this action, he did nothing in the District of Columbia in connection with the assignment. Plaintiff alleges that the District of Columbia's long-arm statute applies since defendant acted through an agent "causing tortious injury in the District of Columbia by an act or omission in the District of Columbia." 13 D.C.Code § 423(a) (3).

Although this action was filed several months before the long-arm statute took effect, retroactive application of the statute has been recently upheld, and thus the Court will treat the statute as applicable in this case. See Liberty Mutual Insurance Co. v. American Pecco Corp., 334 F.Supp. 522 (D.D.C.1971).

A recent case treating the problems raised by the new long-arm statute is Margoles v. Johns, 333 F.Supp. 942 (D. D.C.1971). In Margoles, the plaintiff, a resident of Illinois, alleged that defendant, a newspaper reporter in Wisconsin, made defamatory statements in two telephone calls from Wisconsin to the District of Columbia. In analyzing the statute, the Court stated "the statute clearly separates the act from the tortious injury and affords personal jurisdiction over non-residents only when both act and injury occur in the District." Id. at 944. Thus, the Court reasoned that although the injury occurred in the District, and although the injury did not occur until the conversation was heard in the District, nevertheless the allegedly tortious act occurred in Wisconsin and, therefore, both the act and the injury did not occur in the District. As a result, defendant's motion to quash service of process was granted.

In the present case, plaintiff bases its cause of action on the alleged misrepresentation occurring when the defendant signed the assignment at his office in Virginia. Clearly then, the act took place in Virginia. However, contrary to plaintiff's contention, it is also apparent that Gaines was not defendant's agent. Gaines was not acting on behalf of defendant when he went to the bank, but was acting on his own behalf. Although the defendant may have known the destination and purpose of Gaines after defendant signed the paper, he did not direct Gaines to do anything on his behalf.

Alternatively, plaintiff contends that § 13-423(a)(4) of the long-arm statute applies. This section would grant jurisdiction even if the act complained of took place outside of the District as long as the injury took place in the District of Columbia and the defendant "regularly does or solicits business, engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed, or services rendered, in the District of Columbia."

Apparently, plaintiff bases his assertion on the fact that although all of defendant's real estate development took place outside of the District of Columbia, he settled some of these transactions in the District of Columbia office of the District-Realty Title Company, and had a bank connection in the District of Columbia.

Margoles makes clear that unlike § 13-423(a)(1), § 13-423(b) does not limit § 13-423(a)(4) to doing only that business which gives rise to the claim for relief. Thus, regularly doing any kind of business within the District or engaging in any kind of persistent course of conduct within the District will subject defendant to long-arm jurisdiction. The question thus presents itself whether defendant's use of a District title company and a District bank sufficiently satisfies the "regularly doing business" or the "regularly engaging in any persistent course of conduct" requirements. This issue cannot be resolved by applying a mechanical formula as resolution must depend on the facts of each case. Cf. Franklin National Bank v. Krakow, 295 F.Supp. 910 (D.D. C.1969).

In approaching the resolution of this question, this Court is impressed with the apparent Congressional intent to confine the minimum contacts set out in this section of the statute to those contacts which are continuing in nature. The statute does not say "doing business" or even "doing substantial business". Rather it clearly specifies "regularly doing business". Moreover, the statute does not say "engages in a course of conduct" or even "engages in a significant course of conduct". Instead, Congress, consistent with their use of "re...