Shealy v. Challenger Manufacturing Company
| Decision Date | 19 May 1962 |
| Docket Number | No. 8510.,8510. |
| Citation | 304 F.2d 102 |
| Parties | Joseph M. SHEALY, Jr., Appellee, v. CHALLENGER MANUFACTURING COMPANY, Inc., Appellant. |
| Court | U.S. Court of Appeals — Fourth Circuit |
B. D. Hayes and Nolen L. Brunson, Rock Hill, S. C. (Hayes & Hayes, Rock Hill, S. C., on brief), for appellant.
Vernon E. Sumwalt, Rock Hill, S. C. (Charles B. Ridley; Ridley & Simrill, and Roddey & Sumwalt, Rock Hill, S. C., on brief), for appellee.
Before SOBELOFF, Chief Judge, and HAYNSWORTH and J. SPENCER BELL, Circuit Judges.
Contending it was not amenable to substituted service of process in South Carolina, the defendant in this tort action sought its dismissal. Its motion was denied, the District Court being of the opinion the Tennessee corporation was "doing business" in South Carolina.1 We allowed an interlocutory appeal under the provisions of 28 U.S.C.A. § 1292 (b). After full consideration, however, we conclude that the order of the District Court was manifestly correct.
The defendant is a Tennessee manufacturer of disappearing or folding stairways of the sort frequently installed in residences to provide access to attic areas. It maintains no place of business in South Carolina, but it sells and delivers its product in quantity to Ross Builders Supplies, Inc. for resale in that state. Ross is a wholesaler or dealer in supplies for the building trades. Its principal office is in Greenville, South Carolina, but it maintains branch offices and sales establishments in a number of other South Carolina cities, including Rock Hill.
Upon an order received by mail or telephone from Ross, the defendant would ship a quantity of its disappearing stairs to the designated Ross branch. Some of these shipments were in trucks owned and operated by the defendant. Deliveries of shipments of the defendant's stairs to the Rock Hill branch of Ross occurred approximately monthly. During 1960 and 1961 these deliveries were invariably made by employees of the defendant using trucks owned by the defendant.
The record shows that each of the Ross branch offices received deliveries of the defendant's stairs. The frequency of such deliveries, except at Rock Hill, is not disclosed. The defendant's president stated in an affidavit, however, that large orders were frequently delivered directly by its employees driving its equipment, while smaller orders were usually shipped by common carrier.
The plaintiff alleges personal injury caused by a defect in one of the stairways manufactured by the defendant. The stairway had been purchased from Ross at Rock Hill by a building contractor for installation in a new residence under construction for the plaintiff.
There is no substantial constitutional question. The defendant's regular and frequent operation of its trucks in South Carolina for the purpose of effecting there local deliveries of its products to its customers clearly provided those "minimum contacts" without which the "due process" clause of the Fourteenth Amendment would prevent state exercise of jurisdiction over a foreign corporation.2 The cause of action arose out of the use in South Carolina of one of the defendant's stairways. It had been purchased in South Carolina from one to whom the defendant had sold and delivered it for resale in that state. The plaintiff lives in South Carolina. Resident there are the witnesses which he must offer to prove the nature and extent of his injury, the source of the stairway, the circumstances of the accident and the defect to which he claims it was attributable. Surely, it will be no more unfair to this defendant to require it to defend this action in South Carolina than it would be to the plaintiff to require him to prosecute the action in Tennessee, the defendant's home.
Since the record discloses that the defendant had substantial contacts with the state of the forum, the cause of action arose there and maintenance of the action there "does not offend traditional notions of fair play and substantial justice," the defendant's "due process" contention is foreclosed by the Supreme Court's decision in International Shoe.
Without elucidation of its bearing upon the question, the defendant points to the fact that the record does not show regular or continual solicitation by the defendant in South Carolina of new orders for acceptance by it in Tennessee. The orders, it says, came without substantial solicitation in South Carolina.
Solicitation in one state of orders for acceptance in another, contemplating interstate shipments of goods, is within the protection of the commerce clause of the Federal Constitution. That fact was once thought to bear heavily upon the constitutionality of an exercise of jurisdiction by the state in which the solicitation was conducted.3 It led to controversy whether such solicitation in the state of the forum, alone, was enough to satisfy the constitutional prerequisites of an assertion of jurisdiction.
It had not been thought, however, that such solicitation was a sine qua non of jurisdictional power. If the defendant, like the maker of the better mousetrap, is fortunate enough to get the business without active solicitation, it does not gain immunity from an exercise of jurisdiction by those states in which it engages in substantial activity of a different sort.4 A foreign corporation, busily present in a state effecting direct deliveries of its wares to its customers, cannot escape the jurisdiction of the state upon the ground its orders were unsolicited. A seller's distribution of his wares may be a substantial activity whether the precedent contracts were solicited by the buyers or by the seller.
The defendant earnestly contends, however, that South Carolina's interpretation of her service of process statute is more restrictive than the constitutional limitations upon her power. "Transacting business," within the meaning of South Carolina's service of process statutes,5 the defendant says, requires considerably more activity within the state than the minimum contacts requirement of due process.
We, of course, are bound by South Carolina's interpretation of her service of process statutes.
We also accept the principle that a restrictive state interpretation of her statutes should not be disregarded, though we may think it was influenced by supposed constitutional limitations, which, after the Supreme Court's decision in International Shoe, we know to be inapplicable.6 The principle, however, has largely lost applicability to this situation. The decision of the Supreme Court in International Shoe came down more than sixteen years ago. Since then, the law has moved on in the state courts as it has in the federal. In the process, the more recent decisions illuminate the old. When the state courts, themselves, march along with the evolving constitutional doctrine born so inauspiciously with Bank of Augusta v. Earle,7 greatly enlarged with Lafayette Insurance Co. v. French,8 and still further expanded in International Shoe Co. v. State of Washington,9 a state court's more recent excursion in the direction of its newly revealed horizon may foreclose a slavish acceptance as controlling of an earlier decision, though factually closely analogous. When a state's interpretation of her service of process statute has already moved forward in keeping with the relaxation of earlier declarations of constitutional restraint upon her power, there is no longer a place for hesitancy to assume that it will.
In considering South Carolina's interpretation of her service of process statutes, we lay aside decisions defining her power to tax or regulate foreign corporations. It is true that her domestication statute and some of her taxing statutes predicate applicability upon the transaction of business within the state in language quite similar to that employed in the service of process statutes. It is also true that in an earlier day it may have been thought that such statutes were conterminous and that South Carolina's Supreme Court has relied upon cases arising under one of these related statutes when the question for decision arose under another.10
Later, however, the Supreme Court of South Carolina, clearly recognized the disparity in the reach of these related statutes. After first holding that Ford Motor Company was doing business in South Carolina within the meaning of her service of process statute,11 it was held that the same company was subject to service but was not doing business in that state within the meaning of the requirements of her domestication statutes.12 Relying heavily upon Liquid Veneer Corporation v. Smuckler,13 the Supreme Court of South Carolina plainly announced that her interpretation of the service of process statute was influenced only by consideration of the requirements of the Fourteenth Amendment to the Federal Constitution, while its interpretation of South Carolina's regulatory and taxing statutes was influenced by additional considerations, particularly, the restrictions of the commerce clause of the Federal Constitution.
The contrasting decisions in the Ford Motor Company cases provide emphatic demonstration that the same or similar language is given a broad construction by South Carolina when the question arises in terms of the jurisdiction of her courts, but is restrictively construed when the question is the extent of the authority of South Carolina officials to assess taxes or impose penalties.
Turning to decisions construing South Carolina's service of process statutes, we find later cases which strip from the defendant all of the comfort it finds in the earlier ones.
In 1938, South Carolina's Supreme Court held a foreign corporate vendor's direct deliveries of its goods in South Carolina was not enough to give South Carolina courts jurisdiction of a local cause of action against the vendor.14
In 1946, however, very shortly after the decision of the United States Supreme Court...
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