Unitrac v. Southern Funding Corp.

ARNOLD, Judge. The question which determines this appeal is whether or not Mecklenburg County Superior Court had in personam jurisdiction over defendant Southern Funding Corporation, a resident of Florida. It did not. Plaintiff Unitrac, Inc., claims that defendant had two contacts with North Carolina, which provided the basis for in personam jurisdiction. These were (1) the agreement between Unitrac and Southern Funding for the sale of yarn, as evidenced by a memorandum of sale and contract prepared by John L. Stickley in Charlotte, North Carolina, and (2) the fact that the yarn was shipped to Florida from Charleston, South Carolina, by carriers based in North Carolina. Plaintiff claims that these contacts satisfy the “long-arm” statute G.S. 55-145(a)(l) and the constitutional requirement of due process of law. Under G.S. 55-145(a)(l), the contract can be the basis of in personam jurisdiction if it is made or to be performed in North Carolina. Whether the exercise of jurisdiction under G.S. 55-145(a) (1) comports with due process in turn hinges on whether Southern [145] Funding, the non-resident defendant, had certain “minimum contacts” with North Carolina such that the maintenance of the suit does not offend “traditional notions of fair play and substantial justice,” International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95, 102 (1945). These contacts cannot be the result of “unilateral activity” of those who claim some relationship with the defendant Southern Funding; rather, “it is essential . . . 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 protections of its laws,” Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1239, 2 L.Ed. 2d 1283, 1298 (1958). Where jurisdiction is grounded on a contract, due process is satisfied only if that agreement has a “substantial connection,” with North Carolina, Byham v. House Corp., 265 N.C. 50, 57, 143 S.E. 2d 225, 232 (1965); Goldman v. Parkland, 277 N.C. 223, 229, 176 S.E. 2d 784, 788 (1970). Our courts have found that such a connection exists if the contract is made or is to be performed in North Carolina (thus confirming the constitutionality of the long-arm statute). Harrelson Rubber Co. v. Dixie Tire & Fuels, 62 N.C. App. 450, 453-54, 302 S.E. 2d 919, 921 (1983); General Time Corp. v. Eye Encounter, Inc., 50 N.C. App. 467, 274 S.E. 2d 391, 394 (1981). Generally, a contract is “made” where the final act necessary to make it a binding agreement occurs. General Time Corp., 50 N.C. App. at 472, 274 S.E. 2d at 394. In the present case, the contract clearly was not performed in North Carolina. The yarn was spun in Switzerland, and shipped to South Carolina. Delivery was then made from South Carolina to Florida. Payment was allegedly to be made by defendant in Florida to a “factor” in New York. The parties are in dispute over the question of where the contract was made. The plaintiff relies on Goldman, supra, and argues that the final act necessary to make the agreement binding occurred when Mr. Stickley, in Charlotte, received Mr. Friedman’s order of yarn and then deposited a memorandum of sale and contract in the mail. The defendant argues, however, that the documents prepared by Mr. Stickley provided expressly that the yarn sale agreement [146] did not constitute a binding contract until accepted and confirmed in writing by the plaintiff Unitrac, in Switzerland. The memorandum of sale, which Mr. Stickley said he sent to defendant, had such a term. Plaintiff responds, however, that this transaction is a sale of goods, governed by the U.C.C., and that the documents only confirmed an underlying oral agreement. This agreement was made, plaintiff says, when Mr. Stickley acted, and the signature of Unitrac was a mere formality. Even if we accept plaintiffs analysis, the problem, however, is that the underlying agreement was not originally made between defendant and plaintiffs agent, Mr. Stickley. It was made between Mr. Stickley and Mr. Friedman, who, as the jury found, was not an agent of defendant, authorized to place an order on defendant’s behalf. A contract binding defendant was not made until defendant did some act indicating its intent to be bound, ie., recognized the existence of the contract. See G.S. 25-2-204. The plaintiff argues, and the jury found, that the defendant “ratified” the yarn sale agreement by failing to respond when it received the memorandum and contract for the sale of the yarn. For the purposes of this discussion, we assume that the ratification did occur. Further, we find that the ratification was the last act needed to make a binding contract between defendant and plaintiff. There is no evidence in the record that the conduct by which defendant ratified the contract, however, involved any contact with North Carolina. Defendant’s officers did not call Mr. Stickley or go to North Carolina to consult with him. Rather, the evidence suggests that if defendant received the documents and approved them, it did so in Florida. Given that the final act necessary to make the contract binding occurred outside North Carolina, and that the contract was performed entirely outside North Carolina, we do not find that the contract’s connection with North Carolina was so “substantial” as to support the exercise of in personam jurisdiction by a North Carolina court consistent with G.S. 55-145(a)(l) or the due process clause. [147] Even if defendant’s officers recognized from the documents that Mr. Stickley was involved in the yarn agreement and that he was located in North Carolina, we do not find that this recognition and defendant’s failure to object to the yarn sale is sufficient to show that defendant “purposely availed” itself of the privilege of doing business in North Carolina. Consideration of other factors in this case confirms our view that the defendant should not have been subjected to the in per-sonam jurisdiction of the North Carolina courts. The record suggests that the fact that North Carolina carriers shipped the yarn was purely fortuitous. Neither of the parties did business in North Carolina or was a resident of North Carolina. Since the plaintiff was not a resident of North Carolina, the State had no special interest in asserting jurisdiction to protect one of its citizens. Finally, Mr. Friedman, who initiated the yarn sale, and whose testimony would have been extremely valuable, was a resident of Florida, and could have been subpoenaed there. There are lacking in this case the minimum contacts which are a constitutional prerequisite to the exercise of this state’s power over the defendant pursuant to G.S. 55-145(a)(l). The defendant’s motion for dismissal should have been granted. Reversed. Judges Phillips and Cozort concur.