Stewart Coach Industries, Inc. v. Moore, C-3-80-228.

• Decision Date: 13 April 1981
• Docket Number: No. C-3-80-228.,C-3-80-228.
• Citation: 512 F. Supp. 879
• Parties: STEWART COACH INDUSTRIES, INC. et al., Plaintiffs, v. Gaile D. MOORE et al., Defendants.
• Court: U.S. District Court — Southern District of Ohio

512 F. Supp. 879

STEWART COACH INDUSTRIES, INC. et al., Plaintiffs, v. Gaile D. MOORE et al., Defendants.

No. C-3-80-228.

United States District Court, S. D. Ohio, W. D.

April 13, 1981.

COPYRIGHT MATERIAL OMITTED

David Stutsman, Elkhart, Ind., for plaintiffs.

Ira Rubin, Dayton, Ohio, for defendant Lenz.

Gaile D. Moore, Dayton, Ohio, for defendant Moore.

DECISION AND ENTRY OVERRULING DEFENDANT LENZ'S MOTION SEEKING AN ORDER OF THE COURT DISMISSING THE COMPLAINT AS TO HIM UPON GROUNDS OF NO PERSONAL JURISDICTION; PLAINTIFFS GIVEN TWENTY DAYS FROM DATE OF RECEIPT OF NOTICE OF DECISION TO EFFECT SERVICE ON DEFENDANT LENZ; PLAINTIFFS' CLAIMS FOR BREACH OF CONTRACT AND FOR FRAUD DISMISSED DUE TO APPLICABLE STATUTE OF LIMITATIONS UPON DEFENDANT LENZ'S AND MOORE'S MOTION TO DISMISS UPON THAT GROUND; MOTION TO DISMISS BY MOORE AS TO CLAIM OF INDUCING BREACH OF CONTRACT OVERRULED; MOTION TO DISMISS BY LENZ AS TO CLAIM OF INDUCING BREACH OF CONTRACT TREATED AS MOTION FOR SUMMARY JUDGMENT UNDER F.R.C.P. 56(e); HEARING DATE SET ON SAID MOTION

RICE, District Judge.

The captioned cause is before the Court upon two motions, to wit:

(1) the motion of the Defendant Harry Lenz, seeking an Order of the Court: (i) dismissing the Complaint against him because he has not been properly served, because the Court lacks jurisdiction over his person, or because Plaintiffs' claims are barred by the statute of limitations; or (ii) dismissing the claims of the remaining individual (i. e. noncorporate) Plaintiff Stewart Gardner against Lenz for reason that the Complaint fails to state any claim on Gardner's behalf; and

(2) the motion of the Defendant Gaile Moore seeking an Order of the Court dismissing the Complaint against him, or dismissing the claims of Gardner against him, for the same reasons advanced by Lenz except that Moore does not contest the propriety of service or this Court's jurisdiction over his person.

I. THE COMPLAINT

Plaintiffs are Gardner and Stewart Coach Industries, Inc. (Coach). It is alleged in the Complaint that Plaintiffs entered into an agreement with Pyramid Group, Inc. (Pyramid), in November, 1969, whereby Pyramid agreed to purchase from Coach all issued shares of a corporate subsidiary of Coach for approximately $345,000, said purchase price payable by Pyramid to Coach in installments through November, 1978. Included as terms of the agreement, to the extent here pertinent, was a provision for an additional payment of approximately $41,000 by Coach's former subsidiary to Gardner after execution of the agreement, and a covenant on Pyramid's part not to effect any net distribution of the acquired subsidiary's assets except under limited circumstances.

It is further alleged in the Complaint that Pyramid has paid only approximately $30,000 against the purchase price set forth in the agreement, and that the assets of Coach's former subsidiary have been distributed in breach of the agreement. It is said that the Defendants Lenz and Moore, as officers of Pyramid, directed and controlled such "fraudulent disposition" of the subsidiary's assets; that the Defendants did so "willfully, knowingly, intentionally and fraudulently;" and that Pyramid's covenant in the agreement not to make such distribution was a "false and fraudulent misrepresentation" made by Lenz and Moore in order to induce Plaintiffs to enter into the agreement. Plaintiffs claim injury in loss of the amount of the purchase price still owing under the agreement, and demand actual and punitive damages totalling over $1,200,000.

II. PROCEDURAL BACKGROUND

Plaintiffs commenced this action in the United States District Court for the Northern District of Indiana on November 26, 1979. Although some difficulties were encountered with respect to Moore, service of process from the Indiana federal court was eventually made on both Defendants in Dayton, Ohio.

Shortly after the Complaint was filed, Lenz moved to dismiss or quash service contending that extraterritorial service on a nonresident pursuant to Indiana's "long arm" statute was not proper under the Complaint, and not sufficient for personal jurisdiction, absent allegations that Lenz had some kind of contact with Indiana in a personal capacity. In response to Lenz's motion, Plaintiffs sought and obtained leave to amend the Complaint, by interlineation, to allege that the "Defendants personally and individually had contact with the State of Indiana ..." Accordingly Plaintiffs also asserted in memorandum that they would "prove in this cause that the contract between Plaintiffs and Pyramid Group, Inc. was entered into by virtue of negotiations which involved numberous contacts by the Defendants with Indiana, their trips into Indiana, an execution of the contract in Indiana and followed by their actual activities engaged in operating the corporation which is located in Indiana."

Lenz subsequently filed an affidavit stating that he "did not at any time enter the State of Indiana in connection with or in regard to the transaction with Plaintiffs," and further stating that his only connection with the agreement in question was his participation in the final negotiation and execution thereof, all taking place in Dayton, and all done in Lenz's representative capacity as President of Pyramid. Lenz also said that he resigned his position with Pyramid in September, 1971.

It does not appear that Plaintiffs further responded to Lenz's motion, or responded at all to a similar subsequent motion by Moore. No decision was entered on either motion by the Indiana federal court. Some four months after Lenz's affidavit was filed, Plaintiffs obtained an oral order, on oral motion, transferring their cause to this Court.

Immediately after the case was docketed in this Court, Lenz renewed his motion to dismiss based on improper service, lack of personal jurisdiction and additional contentions based upon the statute of limitations and the absence of any stated claim by Gardner. Subsequently, Moore renewed his motion to dismiss, herein, omitting the challenge to personal jurisdiction, and relying instead on the statute of limitations and Gardner's failure to state a claim. Although Plaintiffs obtained from this Court an extension of time to reply to Lenz's renewed motion, in order that they might obtain local counsel as required by S.D.Ohio R. 3.0, Plaintiffs' eventual reply was neither within that extended time nor submitted by local counsel. Plaintiffs have still made no reply to either of Moore's motions (i. e., the motion in Indiana District Court or herein, even though the latter motion has been pending over five months). Finally, although instructed to do so almost six months ago, Plaintiffs have not yet advised the Court regarding their selection of local counsel.

III. PERSONAL JURISDICTION OVER THE DEFENDANTS

The Court considers that Moore has abandoned his challenge to the propriety of service and the exercise of jurisdiction over his person by his omission of those matters from his renewed motion to dismiss as filed herein. In any event, were this Court to reach those questions, it would find no reason to doubt that service on Moore in Ohio, out of Indiana federal court, was authorized by the Indiana "long arm" statute, Ind.Trial R. 4.4(A)(2), and that the exercise of personal jurisdiction by virtue of such authorized service would not exceed constitutional limitations, World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980); International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). The allegations in the Complaint, as amended, are sufficient to support the exercise of extraterritorial jurisdiction under the Indiana statute and the Constitution, by virtue of the nature and substantiality of the Defendants' alleged contacts with Indiana. Moore has offered no evidence to suggest that said allegations are untrue as they affect his amenability to service of process and to personal jurisdiction by courts in Indiana.

The matter is much different with respect to Lenz. The Lenz affidavit directly controverts the allegations in the amended Complaint concerning his amenability to service in Ohio under the Indiana "long arm" statute. The affidavit sets forth facts, with particularity, which support the proposition that Lenz has never acted in a personal capacity in any manner which would cause him to be subjected to proper service of process under Indiana law, or which would allow the constitutional exercise of extraterritorial jurisdiction over his person or by any court in Indiana. Lenz has simply had no personal contact with Indiana, commercial, contractual, tortious, or otherwise. The fact that Lenz was an officer of a corporation which may have had commercial or tortious contacts with Indiana is not a sufficient predicate for "long arm" service upon or personal jurisdiction over Lenz. Weller v. Cromwell Oil Company, 504 F.2d 927, 929 (6th Cir. 1974).

Plaintiffs have not submitted opposing affidavits or other materials to challenge the factual assertions in the Lenz affidavit. Technically, only a motion to dismiss for failure to state a claim, pursuant to F.R. C.P. 12(b)(6), may be converted into a motion for summary judgment and decided upon consideration of matters outside the pleadings. However, where a motion to dismiss for improper service and lack of personal jurisdiction is filed, pursuant to F.R.C.P. 12(b)(2), (5), and said motion is supported by affidavit, it is well settled that "the non-moving party herein, Plaintiffs may not rest upon allegations or denials in his pleadings but his response by affidavit or otherwise must set forth specific facts showing that the court has jurisdiction." Weller, supra, at 930; Garrett v. Ruth Originals Corp., 456 F.Supp. 376, 384 (S.D.Ohio 1978); Oddi v. Mariner-Denver, Inc., 461 F.Supp. 306, 310 (S.D.Ind.1978).

Therefore, this Court finds in the present case that service on Lenz in Ohio was not proper...