Ventling v. Kraft

• Decision Date: 16 September 1968
• Docket Number: No. 10478,10478
• Citation: 83 S.D. 465,161 N.W.2d 29
• Parties: Glen VENTLING, E. Paul Martin and Don Clifford, Plaintiffs and Appellants, v. Peter A. KRAFT, Defendant and Respondent.
• Court: South Dakota Supreme Court

Page 29

161 N.W.2d 29

83 S.D. 465

Glen VENTLING, E. Paul Martin and Don Clifford, Plaintiffs and Appellants, v. Peter A. KRAFT, Defendant and Respondent.

No. 10478.

Supreme Court of South Dakota.

Sept. 16, 1968.

Bangs, McCullen, Butler & Foye, R. D. Hurd, Rapid City, for plaintiffs and appellants.

Whiting, Lynn, Freiberg & Shultz, Gene N. Lebrun, Rapid City, for defendant and respondent.

HOMEYER, Judge.

The defendant, Peter A. Kraft, a resident of North Dakota, was personally served with a summons in this action outside the state under the provisions of the 'long arm statute', Ch. 163, Laws of 1965. He appeared specially and moved to quash the service. The motion was granted and this appeal followed.

The single question to be decided is whether the asserted personal jurisdiction over the defendant violated the due process clause of the Fourteenth Amendment to the Constitution of the United States.

The statute in question is patterned after the Illinois Civil Practice Act, ¹ the Uniform Interstate and International Procedure Act, ² and Acts of other states. ³ The six enumerated classes of acts in Section 2 are identical with those contained in the Montana statute. ⁴ The portions of the statute pertinent to this action read:

'Section 2. Subject to jurisdiction. Any person is subject to the jurisdiction of the courts of this state as to any cause of action arising from the doing personally * * * of any of the following acts:

(1) the transaction of any business within the state; * * *

(3) the ownership, use, or possession of any property, or of any interest therein, situated within this state; * * *

(6) acting as director, manager, trustee, or other officer of any corporation organized under the laws of, or having its principal place of business within this state, or as executor or administrator of any estate within this state.'

In addition to (1) appellant urges that (3) and (6) are applicable. We find it unnecessary to consider the latter subsections in the disposition of this appeal.

Under comment ⁵ the Commissioners on Uniform Laws said subsection 1 was derived from the Illinois Act and should be given the same expansive interpretation intended by the draftsmen of that act and given by the courts of that state. ⁶ Courts in that state have said the drafters of the section intended to assert jurisdiction to the fullest extent permissible under the due process clause of the Fourteenth Amendment ⁷ and the restrictive interpretation based upon the old concept of 'doing business' has been discarded. ⁸

Five United States Supreme Court decisions, International Shoe Co. v. State of Washington (1945), 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95; Travelers Health Ass'n v. Commonwealth of Virginia (1950), 339 U.S. 643, 70 S.Ct. 927, 94 L.Ed. 1154; Perkins v. Benguet Cons. Mining Co. (1952), 342 U.S. 437, 72 S.Ct. 413, 96 L.Ed. 485; McGee v. International Life Ins. Co. (1957), 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223, and Hanson v. Denckla (1958), 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283, have established loose guidelines for legislative enactment and judicial construction of 'long arm' statutes now in effect in nearly each of the states. See jurisdictions listed in annotations 19 A.L.R.3d 20 and 20 A.L.R.3d 1204. Perhaps significantly, in cases either allowing or denying jurisdiction under statutory enactments since 1958 the United States Supreme Court has chosen not to interfere or pronounce more precise standards.

In the first of these cases, International Shoe Co. v. State of Washington, Justice Stone speaking for the court announced the broad framework of the future in personam jurisdiction in these words:

'Historically the jurisdiction of courts to render judgment In personam is grounded on their de facto power over the defendant's person. Hence his presence within the territorial jurisdiction of a court was prerequisite to its rendition of a judgment personally binding him. Pennoyer v. Neff, 95 U.S. 714, 733, 24 L.Ed. 565. But now that the Capias ad respondendum has given way to personal service of summons or other form of notice, due process requires only that in order to subject a defendant to a judgment In personam, if he be not present within the territory of the forum, He have certain minimum contacts with it such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice". (Emphasis in part ours)

The test laid down in International Shoe was first applied in Travelers Health Ass'n v. Commonwealth of Virginia, supra, where the defendant was a nonprofit membership insurance association incorporated and having its only office in Nebraska. The association had no paid agents, but solicited new members in Virginia, usually through unpaid activities of Virginia residents who were already members. Insurance certificates were delivered through the mail and the association investigated benefit claims in Virginia. In an injunction proceeding under a Virginia regulatory statute, defendant was served by registered mail and the contacts of the association were held sufficient to sustain jurisdiction. The court in concluding that the standard of fair play and substantial justice had been met emphasized the interest of the state in having the insurer faithfully comply with its certificate obligation, the systematic and wide delivery of certificates after solicitation, the inconvenience of the certificate holder in reaching the insurer elsewhere, and the availability of the state courts to the insurer.

In McGee v. International Life Ins. Co., supra, the court had before it a single contract of insurance, solicited by mail and serviced in the forum state by an out-of-state insurance company. In sustaining jurisdiction, the court said:

'In a continuing process of evolution this Court accepted and then abandoned 'consent,' 'doing business,' and 'presence' as the standard for measuring the extent of state judicial power over such corporations. See Henderson, The Position of Foreign Corporations in American Constitutional Law, c. V. More recently in International Shoe Co. v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95, the Court decided that 'due process requires only that in order to subject a defendant to a judgment In personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice."' * * *

'Turning to this case we think it apparent that the Due Process Clause did not preclude the California court from entering a judgment binding on respondent. It is sufficient for purposes of due process that the suit was based on a contract which had substantial connection with that State. (Cases cited). The contract was delivered in California, the premiums were mailed from there and the insured was a resident of that State when he died. It cannot be denied that California has a manifest interest in providing effective means of redress for its residents when their insurers refuse to pay claims.' (Emphasis ours)

In Perkins v. Benguet Cons. Mining Co., supra, where the cause of action arose from activities entirely distinct from its activities in Ohio, the court said the business of the corporation done in Ohio was sufficiently substantial and of such a nature as to Permit Ohio to entertain a cause of action against a foreign corporation. While federal due process did not compel the state to open its courts, neither did it prohibit it.

In Hanson v. Denckla, supra, the court took note of the trend of expanding personal jurisdiction over nonresidents:

'As technological progress has increased the flow of commerce between States, the need for jurisdiction over nonresidents has undergone a similar increase. At the same time, progress in communications and transportation has made the defense of a suit in a foreign tribunal less burdensome. In response to these changes, the requirements for personal jurisdiction over nonresidents have evolved from the rigid rule of Pennoyer v. Neff * * * to the flexible standard of International Shoe Co. v. State of Washington * * *. But it is a mistake to assume that this trend heralds the eventual demise of all restrictions on the personal jurisdiction of state courts. * * * However minimal the burden of defending in a foreign tribunal, a defendant may not be called upon to do so unless he has had the 'minimal contacts' with that State that are a prerequisite to its exercise of power over him.

'The cause of action in this case is not one that arises out of an act done or Transaction consummated in the forum State. In that respect, it differs from McGee v. International Life Ins. Co. * * *

'The unilateral activity of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of contact with the forum State. The application of that rule will vary with the quality and nature of the defendant's activity, But it is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities with the forum State, thus invoking the benefits and protections of its laws. International Shoe Co. v. State of Washington.' (Emphasis ours)

Some courts in the consideration of the matter and in passing on similarly worded statutes have said three rules can be drawn from a combined reading of the foregoing cases against which future litigation of a like nature may be tested. ⁹ These rules are: (1) The nonresident defendant must purposefully do some act or consummate some transaction in the forum state. A single event will suffice if its effects within the state are substantial enough to qualify under Rule 3. ¹⁰ (2) The cause of action must be one which arises out of, or results from, the activities of the defendant within the forum. Conceivably a cause of action might come to fruition in...