Equity Associates v. Society for Savings

ARNOLD, Judge. Savings denies that G.S. 55-145 (a)(1) subjects it to the jurisdiction of North Carolina’s courts. We disagree. G.S. 55-145 (a) (1) provides: “(a) Every foreign corporation shall be subject to suit in this State, whether or not such foreign corporation is transacting or has transacted business in this State and whether or not it is engaged exclusively in interstate or foreign commerce, on any cause of action arising as follows: (1) Out of any contract made in this State or to be performed in this State. ...” The contract between Savings and Equity was both made and substantially performed in North Carolina. It was made here because Equity performed the final act necessary to make it a binding agreement by signing it in Greensboro, North Carolina. Goldman v. Parkland of Dallas, Inc., 277 N.C. 223, 176 S.E. 2d 784 (1970) ; Munchak Corp. v. Caldwell, 25 N.C. App. 652, 214 S.E. 2d 194 (1975). The contract was substantially performed here because the motel was built here. Byham v. National Cibo House Corp., 265 N.C. 50, 143 S.E. 2d 225 (1965). Clearly, if G.S. 55-145 (a) (1) is given its plain and ordinary meaning, it encompasses this cause of action. Savings argues that Atlantic Coast Line R. R. v. Hunt & Sons, Inc., 260 N.C. 717, 133 S.E. 2d 644 (1963), and cases following it, restrict the bounds of G.S. 55-145 (a) so that it only *185 reaches those causes of action which arise in North Carolina. Equity argues that the more recent case of Byham v. National Cibo House Corp., supra, extends jurisdiction to the full statutory limits. We hold that, on our facts, Byham controls. Byham, a North Carolina resident, sued Cibo House, a Tennessee corporation, for rescission of a restaurant franchise contract made in Tennessee and to be performed in North Carolina. The cause of action was based on allegations of fraud in the inducement. Thus, the cause of action arose in Tennessee at the time the contract was completed. Cibo House moved to dismiss the action on grounds that North Carolina lacked jurisdiction. The trial court denied the motion, and our Supreme Court affirmed on appeal holding that since the franchise was to operate in North Carolina it was a contract to be substantially performed here. This was enough to comply with G.S. 55-145 (a) (1). We are aware of language in Atlantic Coast Line R. R. v. Hunt & Sons, Inc., supra, which says: “G.S. 55-145 pertains only to local actions. It has no application to any cause of action arising outside the State.” Id. at 721. Similar language appears in Marshville Rendering Corp. v. Gas Heat Eng’r Corp., 10 N.C. App. 39, 177 S.E. 2d 907 (1970), and Dillon v. Numismatic Funding Corp., 29 N.C. App. 513, 225 S.E. 2d 137 (1976). These opinions are to be read in light of their facts. The broad statements, following Hunt & Sons, that no part of G.S. 55-145 provides jurisdiction over a cause of action arising outside North Carolina are obiter dicta and do not control the case at bar. Hunt & Sons and Marshville Rendering Corp. are both tort actions. G.S. 55-145 (a) (4) says, “Every foreign corporation shall be subject to suit ... on any cause of action arising . . . out of tortious conduct in this State. ...” In Hunt & Sons the complaint alleged that the manufacturer of gas water heaters, a Michigan corporation, sold a heater to the plaintiff in Michigan without warning the plaintiff it was inherently dangerous, and that because of this negligence the heater exploded in Virginia. Clearly, the tort occurred outside North Carolina, and G.S. 55-145 (a) (4) could not give jurisdiction to this state’s courts. Marshville Rendering Corp. is remarkably similar. There a Nevada corporation sold a gas boiler to a North Carolina contractor. The sale was completed in Pennsylvania. There was an alleged defect in the boiler, and it exploded in North Carolina. Under our law, the cause of action for tort and breach of warranty arose at the time of sale in Pennsylvania. Therefore, North Carolina had no jurisdiction under G.S. 55-145 (a) (4). *186 Unlike Hunt & Sons and Marshville Rendering Corp., Dillon v. Numismatic Funding Corp., supra, does allege a cause of action for breach of contract. This contract between New York and South Carolina residents was both made and breached in South Carolina. Had it been performed, performance would have occurred in New York. Because the contract was neither made, nor to be performed, here in North Carolina, this state had no jurisdiction under G.S. 55-145 (a) (1). Moreover, the cause of action did not arise out of business solicited by the parties in North Carolina, and thus G.S. 55-145 (a) (2) could not apply. Therefore, the broad assertion in Dillon that G.S. 55-145 applies only to a cause of action arising in North Carolina is dictum. Having decided that G.S. 55-145 (a)(1) gives North Carolina jurisdiction over this cause of action, we still have to determine whether application of this statute to this cause of action meets the due process requirement of the Fourteenth Amendment of the Federal Constitution. We hold that it does. The “minimal contacts” requirement of International Shoe Co. v. Washington, 326 U.S. 310 (1945), says 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 ‘the traditional notions of fair play and substantial justice.’ ” Id. at 316. Regardless of what other contacts may be present, “it is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protection of its laws.” Hanson v. Denckla, 357 U.S. 235, 253 (1958). Savings has performed just such a purposeful act. It has voluntarily joined in a contract to be performed here in North Carolina. “It is sufficient for the purpose of due process if the suit is based on a contract which has a substantial connection with the forum state.” Byham v. National Cibo House Corp., supra at 57, 143 S.E. 2d 232. Accord, Goldman v. Parkland of Dallas, Inc., 7 N.C. App. 400, 173 S.E. 2d 15 (1970), aff’d 277 N.C. 223, 176 S.E. 2d 784 (1970). In addition to the contract itself, Savings was personally served with process at its offices in Connecticut. All of the plaintiffs reside in North Carolina, and they performed acts here which, judging from the parties’ affidavits, will be material *187 to this suit. The motel is in North Carolina, and again judging from the affidavits, facts about its construction and condition will be at issue. Because of these facts, it is reasonable, convenient and fair to require Savings to defend this lawsuit in North Carolina. Due process is satisfied. Byham v. National Cibo House Corp., supra. The order of the court below is Affirmed. Judges Morris and Hedrick concur.