Szantay v. Beech Aircraft Corporation
| Decision Date | 19 January 1965 |
| Docket Number | AC-1108.,AC-1107,Civ. A. No. AC-1105 |
| Citation | 237 F. Supp. 393 |
| Court | U.S. District Court — District of South Carolina |
| Parties | Marie L. SZANTAY, ancillary administratrix c.t.a. of the estate of Elmer D. Szantay, Plaintiff, v. BEECH AIRCRAFT CORPORATION, a corporation, et al., Defendants. Ova N. WEIGER, Mother of S. Wayne Weiger, Deceased, etc., Plaintiff, v. DIXIE AVIATION COMPANY, Inc., et al., Defendants. Margaret CLEMENS, surviving widow of James J. Clemens, Deceased, etc., Plaintiff, v. DIXIE AVIATION COMPANY, Inc., et al., Defendants. |
D. W. Robinson, II, and Henry Hammer, Columbia, S. C., for plaintiffs.
Defendant Beech Aircraft Corporation, asserting that it is a Delaware Corporation with its principal place of business in Wichita, Kansas, that it is not domesticated in South Carolina, and that it had no agent and neither engaged or engages in business activities in the State, seeks to quash service of process upon it and dismiss the complaints for want of jurisdiction. Concomitant is the contention that Beech, because of the asserted facts, has not been properly served with process in any of these actions. Service was effectuated in two ways: by service through the Secretary of State and by service on Hawthorne Aero Sales, Inc., purportedly an agent of Beech. This service was attempted under the statutes cited under footnote 1, infra.
These are companion actions, instituted for the alleged wrongful deaths of both intestates at the hands of defendants. Recovery is sought from defendant Beech Aircraft Corporation (hereinafter called Beech) for the negligent manufacture and design of the airplane in which both deceased were riding; recovery from defendant Dixie Aviation Company, of Columbia, S. C., for negligent servicing of the craft.
Not necessary, but helpful to this determination, is a history of events which shows the craft in question as being sold by Robert Craf, Inc., a Nebraska Corporation, to deceased Elmer D. Szantay, who later flew the plane to Miami, Florida, planned return to Chicago. On return route an overnight stop was made at Columbia, S. C., where the plane was serviced by defendant Dixie Aviation Company. While enroute from Columbia to Chicago the plane crashed near Jellico, Tennessee, on April 1, 1962, with resulting death to the intestates.
The issue upon which this motion to quash service of process lies is whether or not defendant Beech was "present" in this jurisdiction, i. e., were the contacts of Beech sufficient to say that it was "doing business" in South Carolina during the times in question? The South Carolina statutes applicable use the word "transacting business,"1 which has no different connotation than explained in Shealy v. Challenger Mfg. Co., 304 F.2d 102 (4th Cir. 1962).
The Court resorts to the record before it to determine what contacts Beech had with the State of the forum. Admittedly Beech is not domesticated in South Carolina. Plainly, plaintiff must rely on the relationship, the course of conduct, the control, in essence the contract and resulting "involvement" between Beech and Hawthorne Aero Sales, admitted "distributor" for Beech in South Carolina. Hawthorne is not a party to this suit.
The record does show that Beech, through its control of Hawthorne, has such substantial contact with South Carolina so that holding it amenable to service of process does "not offend `traditional notions of fair play and substantial justice.'" International Shoe Co. v. State of Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 158, 90 L.Ed. 95.
The amount of control exercised by Beech is readily apparent upon consideration of several determinative factors. These salient factors appear in the contract between Beech and Hawthorne, including addenda such as the sales policy manual, and other incidental papers in the record. Implementation of such contract is outlined in the deposition testimony of John M. Hawkins, President of Hawthorne.
The sales territory assigned Hawthorne by Beech consisting of parts of South Carolina,2 Georgia and Florida is exclusive, with certain exceptions for sales directly by Beech to governmental agencies, fleet purchases and new model airplanes (which sales Hawthorne is prohibited from making.)
The contract between Beech and Hawthorne provides that:
"Beech agrees that for so long as this agreement is in effect, Beech will not designate any other person, firm or corporation as distributor in said territory; that Beech will not give discounts on the sales of new Beechcraft Airplanes to any other person, firm or corporation within said territory * * *; and that Beech will not sell any new Beechcraft airplanes in said territory otherwise than to distributor; * * *"
Hawthorne is prohibited from assigning its rights to this area to another without Beech's approval. Further, it is prohibited from making sales outside this territory without paying certain fees to the distributor of that territory. For example, the contract provides:
Hawthorne is responsible for "* * * the development of Beechcraft sales and service within his assigned territory only * * *."
the exact number of which is spelled out in the addenda to the contract. For some models, Beech itself furnishes the demonstrators for a nominal fee. Monthly inventory reports of aircraft on hand are required of Hawthorne by Beech
Hawthorne can use only that advertising which is supplied or approved by Beech. It must cease the use of any such material which might be disapproved by Beech, and it cannot advertise out of its territory.
Hawthorne agrees to display Beech's outdoor signs and such other Beech signs as are "necessary to advertise the business properly." These signs are in fact on display. Hawthorne advertises itself as a Beech distributor.
Beech retains exclusive claim to its "Beechcraft" trade name, with Hawthorne losing all right to use the same on termination of the agreement. Hawthorne may not use the name in its own corporate name.
Finally, Beech agrees to pay 50% of the cost of advertising in the yellow pages of the local Charleston Telephone Directory, if Hawthorne uses the Beech advertising agent. In addition, Beech will reimburse Hawthorne for 50% of its advertising cost of soliciting new salesmen.
The contract provides:
Emphasis in original.
To insure that these reports are accurate Beech retains the right to inspect Hawthorne's "business facilities, records, supplies and personnel," apparently at any time.
Beech retains the right to change the discounts and prices of airplanes and parts to Hawthorne at any time, without prior notice to Hawthorne. Furthermore, Beech "recommends" the sales price at which Hawthorne can retail its airplanes. For example, the agreement provides:
"Prices of airplanes, required deposits and discounts applicable thereto, and other terms of purchase shall be as set forth in the BEECHCRAFT SALES POLICY MANUAL." Emphasis supplied.
Beech requires Hawthorne to buy and "* * * at all times to keep on hand and to offer for sale at his place of business a current supply of such genuine Beech spare parts and accessories sufficient to supply adequately the requirements of the territory designated herein." Beech, on the other hand, promises to assist Hawthorne by endeavoring "* * * to establish special arrangements with the manufacturers of parts and accessories not manufactured by Beech in order that purchases thereof by distributor may be made promptly and efficient service rendered with respect thereto."
Hawthorne is prohibited from selling or installing any structural part on Beech airplanes unless the part is manufactured by Beech, without Beech's permission. Similarly, Hawthorne is forbidden to sell or install any parts, equipment or accessories which have been listed by Beech as disapproved.
Hawthorne is required to use the forms furnished by Beech in ordering airplanes. Furthermore, Hawthorne is directed to, and does, use only the forms furnished by Beech in selling the equipment at retail. These forms contain the same warranties given Hawthorne by Beech, and thus Beech is directing Hawthorne to pass on its warranty to the customer. The entire procedure for ordering and delivery of airplanes is tightly regulated by Beech.
Through its wholly-owned subsidiary, Beech Acceptance Corporation, Beech affords its dealers a source to finance the distributors' purchases. Many of the directors of Beech serve in the same capacity with Beech Acceptance Corporation. Hawthorne, in fact, uses this service, and the collateral mortgages held by Beech Acceptance Corporation are customarily recorded in Charleston, South Carolina.
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