Erlich Foods International v. 321 Equipment Co. , 80 N.C. App. 71 ( 1986 )

JOHNSON, Judge.

In the case sub judice we are called upon to decide the jurisdictional question of whether, consistent with the due process clause of the fourteenth amendment to the United States Constitution, defendant had sufficient contacts with the state of California to allow a superior court of that state to exercise personal jurisdiction over defendant, thereby entitling plaintiff to have the Superior Court of North Carolina give full faith and credit to the California default judgment entered against defendant. We hold that defendant did not have sufficient contacts with the state of California to allow a superior court of that state to exercise jurisdiction over defendant and therefore the trial court was correct in not giving full faith and credit to the California judgment.

The United States Constitution provides “Full faith and credit shall be given in each state to the public acts, records, and judicial proceedings of every other state.” U.S. Const, art. IV sec. 1. We acknowledge that we would be bound by the judgment entered in our sister state if the jurisdictional question raised by defendant had been fully and fairly litigated in the superior court of California from whence the judgment in question was entered. See generally Hosiery Mills v. Burlington Industries, Inc., 285 N.C. 344, 204 S.E. 2d 834 (1974) (judgment entered in the state of New York was not entitled to full faith and credit in the North Carolina Superior Court and therefore the affirmative defense of res judicata by virtue of an award of arbitrators and upheld by the New York Supreme Court could not be asserted by defendant).

In the case sub judice the North Carolina Superior Court found as fact the following:

13. That from the Court file, the Defendant’s special appearance to contest jurisdiction was stricken by the Court and the California Court made no determination as to whether or not the Court had jurisdiction over the foreign corporation.

After extensively reviewing the aforementioned documents upon which Judge Saunders based finding No. 13, we agree with his finding. Our review reveals that: plaintiff did submit in writing to the California court a document dated 1 March 1979 entitled “SPECIAL Appearance to Contest Jurisdiction.” This document moved the court to dismiss the action for lack of jurisdiction over the person of defendant. Attached thereto was a sworn affidavit of Bernard Dalton as president of 321 Equipment Company, denying any contacts with the state of California which would be sufficient to allow a California court to exercise jurisdiction over defendant, 321 Equipment Company. A document entitled “ARGUMENT in Support of Special Appearance to Contest Jurisdiction” was submitted by defendant in support of its special appearance to contest jurisdiction. The document stated, inter alia, “321 Equipment Company has no contacts whatsoever with the state of California, and that the service obtained in this matter was defective.” Defendant further argued consistent with its special appearance that the California court did not have jurisdiction over it. Thereafter, plaintiff unsuccessfully attempted to enter default against 321 Equipment Company but the “clerk . . . declined to do so.” In November 1979, defendant’s counsel received a copy of a document entitled “NOTICE OF MOTION AND MOTION for an Order Entering Default Against 321 Equipment Company, Points & Authorities and Declaration of James Weston and Bruce Altschuld in Support Thereof.” The basis for plaintiffs motion entailed allegations that documents filed by defendant did not constitute proper responses to a serving of summons and complaint and “[did] not serve to make a proper challenge to jurisdiction.” In the preliminary statement to plaintiffs “POINTS & Authorities” plaintiff requested the following:

Under these circumstances, it is Plaintiffs position that the Defendant has made no adequate attempt to challenge the jurisdiction of the court and in fact has, in effect, not responded to the Court’s summons in an appropriate manner. Therefore, Plaintiff respectfully requests that Defendant’s ‘Special Appearance to Contest Jurisdiction’ should be stricken and Default should be entered against the Defendant.

Plaintiffs motion for an order entering default of defendant was heard on 27 November 1979 in the Los Angeles Superior Court. Defendant was not represented at this hearing on plaintiffs motion. Pursuant to plaintiffs motion the court “ordered that the special appearance of 321 EQUIPMENT COMPANY be stricken and that default be entered against Defendant, 321 EQUIPMENT COMPANY.” The court did not consider any of defendant’s grounds for contesting the California court’s exercise of personal jurisdiction over defendant. The court merely granted plaintiffs request to strike defendant’s pleadings because of plaintiffs assertion that they were improper responses to its complaint and summons. We hold that by striking defendant’s special appearance the court effectively precluded the full and fair litigation of defendant’s assertion that the California court should not be allowed to exercise in personam jurisdiction over it.

We now address the question of whether pursuant to the California long-arm statute the assumption of in personam jurisdiction by a California court over defendant offends the due process clause of the United States Constitution. Our review of the North Carolina Superior Court’s decision to deny full faith and credit to the California judgment is to be guided by the statutes and decisions of the courts of California. Montague v. Wilder, Jr., 78 N.C. App. 306, 337 S.E. 2d 627 (1985). The California long-arm statute states, “A court may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States.” Cal. Civ. Proc. Code sec. 410.10.

The basic test as stated by the California courts with which we are to determine if in personam jurisdiction may fairly be exercised over defendant is as follows:

The basic test is whether the quality and nature of the defendant’s activity in relation to the particular cause of action make it fair to exercise jurisdiction. The cause of action must arise out of an act done or a transaction consummated in the forum, or the defendant must perform some other act by which he purposely avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protection of its laws.

Foster v. Mooney Aircraft Corp., 68 Cal. App. 3d 887, 892, 137 Cal. Rptr. 694, 697 (1977). The pertinent findings of fact made by the North Carolina Superior Court are as follows:

1. The Plaintiff is a California corporation with its principal office in Los Angeles, California.

2. The Defendant is a North Carolina corporation with its principal office in Gaston County, North Carolina.

3. That on July 12, 1978, the Plaintiff, who is a poultry broker, contracted with Truckers Exchange Company to deliver an order of frozen poultry from Mississippi to Massachusetts.

4. Truckers Exchange Company is a Mississippi corporation.

5. Truckers Exchange Company contracted in North Carolina with the Defendant to make the delivery of the said poultry from Mississippi to Massachusetts and the Defendant pursuant to said contract, delivered the poultry from Mississippi to Massachusetts by the most direct route.

6. Because of disagreement over the temperature of the poultry on delivery, the poultry was rejected by the ultimate buyer, the U.S. Army, resulting in alleged losses by the plaintiff.

7. The plaintiff filed a lawsuit in the Superior Court of the State of California for the county of Los Angeles on January 24,1979, naming as Defendants, Truckers Exchange Company and the Defendant herein.

8. On March 9, 1979, the Defendant, 321 Equipment Company, filed a Motion To Dismiss the California action as to it and made a special appearance contesting jurisdiction on the grounds that Defendant did not have sufficient contacts with the state of California to permit personal jurisdiction.

9. The Defendant, 321 Equipment Company, does not maintain an office in the state of California, has no employees, agents or other personnel in the State of California, does not advertise, promote or solicit business in the State of California and the incident which is the subject of this lawsuit did not arise out of any contract for services or goods to be made, performed or delivered within the State of California.

10. The only evidence in the California case and in the North Carolina case that the Defendant had any contacts at all with the State of California are two declarations filed by James Weston and Bruce Altschuld stating that they had talked with some person in North Carolina that indicated the Defendant had delivered cargo in the past in California.

11. That the aforesaid affidavits by James Weston and Bruce Altschuld were refuted by oral testimony of F. Brenard (sic) Dalton and further, the aforesaid affidavits were based on inadmissible hearsay evidence.

The foregoing findings of fact made by the trial court are amply supported by the record in the case sub judice. Whenever affidavits filed in support of motions to quash service of process for lack of jurisdiction are in conflict with those opposing it, we must deem that the trial court resolved such conflicts against the appellant and in support of its order. Tiffany Records, Inc. v. M. B. Krupp Distributors, Inc., 276 Cal. App. 2d 610, 81 Cal. Rptr. 320 (1969).

On 18 February 1985, Bernard Dalton testified in proceedings in the Superior Court of Gaston County. Mr. Dalton’s testimony supports the court’s findings and establishes that defendant was not licensed to do business in California. James Weston, in his Declaration, purported to have spoken by telephone with a person named Bill Byers, who said that he was part owner of defendant, 321 Equipment Company. Mr. Weston stated that the telephone number he used was (704) 867-2317. Mr. Dalton testified that Mr. Byers never had been connected with defendant, 321 Equipment Company. Moreover, Mr. Dalton testified that the telephone number (704) 867-2317 is the telephone number of another company named 321 Equipment Leasing Company. The telephone number used by defendant, 321 Equipment Company, is (704) 867-2315. Bruce Altschuld, in his Declaration, stated that he used telephone number (704) 867-2314 to call 321 Equipment Company. However, Mr. Altschuld could not even recall whom he spoke with on the telephone. Mr. Altschuld declared that this unidentified person “indicated” that defendant had done business in California in the past. However, Mr. Dalton’s testimony established the fact that defendant, 321 Equipment Company, was not licensed to do business in the state of California prior to the filing of this lawsuit. The record supports Mr. Dalton’s assertion that defendant, 321 Equipment Company, was not licensed to do business in the state of California and that it was not within the realm of possibility that defendant hauled freight to California prior to deregulation.

We conclude that (1) the quality and nature of defendant’s activity in relation to his particular cause of action does not make it fair for a California Court to exercise jurisdiction; (2) plaintiffs cause of action does not arise out of an act done or transaction consummated in California; (3) defendant has not performed any act by which it purposely availed itself of the privilege of conducting activities in the forum, and did not invoke the benefit and protection of California’s laws; (4) under California law defendant does not have sufficient minimum contacts with the state of California to subject defendant to jurisdiction in that state. Accordingly, the judgment is

Affirmed.

Judges WHICHARD and PHILLIPS concur.