BUCKEYE BOILER COMPANY v. FLYNT

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Court of Appeal, Second District, Division 3, California.

The BUCKEYE BOILER COMPANY, a corporation, Petitioner, v. SUPERIOR COURT of the State of California FOR the COUNTY OF LOS ANGELES, Respondent; Wayman P. FLYNT, Real Party in Interest.

Civ. 33337.

Decided: January 24, 1969

Murchison, Cumming, Baker & Velpmen and Ronald R. McQuoid, Los Angeles, for petitioner. No appearance for respondent. Margolis & McTernan, Los Angeles, for real party in interest.

Petitioner, the Buckeye Boiler Company, an Ohio corporation, seeks a writ of mandate to compel the superior court to enter its order quashing service of summons is an action brought by plaintiff, the real party in interest in this proceeding, to recover damages for personal injuries. Petitioner was served by making personal delivery to the Secretary of State, as authorized by section 411, subdivision 2 of the Code of Civil Procedure1 and section 6501 of the Corporations Code.2 Petitioner appeared specially (Code Civ.Proc. § 416.3) and moved to quash the service of summons on the ground that it was not doing business in this state. The motion was granted without prejudice to a further application for substituted service by plaintiff supported by a showing of further jurisdictional facts. Substituted service was effected a second time and again petitioner moved to quash service upon the same grounds. The second motion was heard upon affidavits and was denied.

Plaintiff alleges in his second amended complaint that he was injured in the course of his employment in Ontario, California, by the explosion of a pressure tank, used in connection with the spraying of liquid under air pressure, caused by the negligent manufacture of the pressure vessel by petitioner. Plaintiff also joined as a defendant the hospital in which he was treated following the explosion and alleged that he suffered damages caused by negligent treatment which he received at the hospital.

The facts presented in the affidavits and interrogatories filed in support of and in opposition to petitioner's motion to quash are not in dispute. Plaintiff is a resident of California and was regularly employed here at the time of his injury. The witnesses to the accident and the subsequent treatment of plaintiff all reside in California.

Petitioner has its principal place of business and offices in Dayton, Ohio. Petitioner is engaged in the manufacture of unfired pressure vessels; it does not affix valves or any attachment to the vessels. Petitioner has no agent, office, sales representative, exclusive agency or exclusive sales outlet in California. It dose not sell on consignment and has no commission agreement with any person or entity in California. Petitioner maintains no office, warehouse of stock of merchandise or materials in California. Petitioner owns no property in California and has no bank accounts here. Petitioner has qualified to do business in no state other than Ohio and has no salesmen outside of Ohio. Petitioner solicits sales outside the state of Ohio through independent manufacturers' representatives who sell petitioner's products on a commission basis. These representatives are located in Kentucky for the state of Kentucky; in Columbus, Ohio, for the states of Michigan, Indiana, Ohio, Pennsylvania and West Virginia; in Pennsylvania for the states of Pennsylvania, New Jersey, New York, Connecticut, Maryland and Delaware; in North Carolina for the states of Virginia, North Carolina and South Carolina; and in Georgia for the states of Georgia, Florida and Alabama. Petitioner does not and has not advertised. All contacts with customers are made either throgh manufacturers' representatives or direct contact with the customer by petitioner. For a period of five years prior to the date of plaintiff's injury and continuing to the present, petitioner has sold air pressure reservoir tanks to Cochin Manufacturing Company, an an Ohio corporation, which maintains a manufacturing facility in South San Francisco, California. Cochin orders some tanks directly from its South San Francisco facility; it negotiates the sale of some tanks through its Ohio office. The price of the tanks is $55 to $60 each. Petitioner ships the tanks directly to the Cochin facility in South San Francisco. Cochin manufactures hydraulic automobile lifts for service stations. The tanks purchased from petitioner are integrated into the hydraulic lifts prior to sale by Cochin. Annual gross sales from petitioner to Cochin during the past two or three years have ranged from $25,000 to $35,000. The hydraulic lift devices manufactured by Cochin are distributed to purchasers throughout the state of California and in other states. Cochin pays for merchandise purchased by Cochin from its South San Francisco facility directly to petitioner in Ohio.

Plaintiff's employer, General Electric Company, has never, so far as the records of Petitioner and General Electric show, purchased a vessel or anything else from petitioner. It is the normal procedure at the plant at which plaintiff was employed to arrange purchases of needed materials wherever possible from suppliers located within the state of California. Affixed to the pressure vessel, the explosion of which injured plaintiff, was a plate bearing the legend: ‘The Buckeye Boiler Company Dayton, Ohio. Built 1960–150 lbs. maximum.’

Code of Civil Procedure, section 411, subdivision 2, authorizes service of process on foreign corporations that are ‘doing business in this State.’ The reach of that statute has been stated by the California Supreme Court as follows [internal quotation marks omitted]: ‘That term is a descriptive one that the courts have equated with such minimum contacts with the state that the maintenance of the suit does not offend traditional notions of fair play and substantial justice. International Shoe Co. v. State of Washington, [Office of Unemployment Compensation and Placement] 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95, [161 A.L.R. 1057]. Whatever limitation it imposes is equivalent to that of the due process clause. [D]oing business within the meaning of section 411 of the Code of Civil Procedure is synonymous with the power of the state to subject foreign corporations to local process.’ (Fisher Governor Co. v. Superior Court of City and County of San Francisco, 53 Cal.2d 222, 224, 1 Cal.Rptr. 1, 2, 347 P.2d 1, 2.) The permissible scope of state jurisdiction over foreign corporations and other nonresidents has expanded through the years. ‘In part this is attributable to the fundamental transformation of our national economy over the years. Today many commercial transactions touch two or more States and may involve parties separated by the full continent. With this increasing nationalization of commerce has come a great increase in the amount of business conducted by mail across state lines. At the same time modern transportion and communication have made it much less burdensome for a party sued to defend himself in a State where he engages in economic activity.’ (McGee v. International Life Ins. Co. (1957) 355 U.S. 220, 222–223, 78 S.Ct. 199, 201, 2 L.Ed.2d 223, 226.)

‘But it is a mistake to assume that this trend heralds the eventual demise of all restrictions on the personal jurisdiction of state courts. [Citation] Those restrictions are more than a guarantee of immunity from inconvenient or distant litigation. They are a consequence of territorial limitations on the power of the respective States. 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.’ (Hanson v. Denckla (1958) 357 U.S. 235, 251, 78 S.Ct. 1228, 1238 2 L.Ed.2d 1283, 1296.) ‘Although a foreign corporation may have sufficient contacts with a state to justify an assumption of jurisdiction over it to enforce causes of action having no relation to its activities in that state [Citations], more contacts are required for the assumption of such extensive jurisdiction than sales and sales promotion within the state by independent nonexclusive sales representatives. [Citations] To hold otherwise would subject any corporation that promotes the sales of its goods on a nationwide basis to suit anywhere in the United States without regard to other considerations bearing on ‘the fair and orderly administration of the laws which it was the purpose of the due process clause to insure.’' (Fisher Governor Co. v. Superior Court of City and County of San Francisco, supra, 53 Cal.2d 222, 225, 1 Cal.Rptr. 1, 3, 347 P.2d 1, 3.)

The foregoing statements of the law indicate that the question before us is whether under the circumstances petitioner could reasonably have foreseen that it might be sued in California on a cause of action that did not arise out of a use of petitioner's product by Cochin. This view is borne out by the cases. The requisite foreseeability is present where the action is for personal injury arising out of the use of the petitioner's product in California and the foreign corporation has regularly solicited and made sales in California. (Cosper v. Smith & Wesson Arms Co., 53 Cal.2d 77, 346 P.2d 409; H. Liebes & Co. v. Erica Shoes, Inc., 237 Cal.App.2d 25, 46 Cal.Rptr. 470; Waco-Porter Corp. v. Superior Court In and For Tuolumne County, 211 Cal.App.2d 559, 27 Cal.Rptr. 371; Eclipse Fuel etc. Co. v. Superior Court In and For City and County of San Francisco, 148 Cal.App.2d 736, 307 P.2d 739; Duraladd Products Corp. v. Superior Court of State of California, In and For Sacramento County, 134 Cal.App.2d 226, 285 P.2d 699; See Witkin, Cal.Proc., 1967 Supp., § 88A at p. 170.) In recognition of the fact that today a manfacturer seldom deals directly with consumers in other states, it has been held that if a corporation by its method of distribution ‘inaugurates a flow of its products to the California market’ it is reasonable to hold that manufacturer amenable to substituted service in California where under the circumstances it is foreseeable that the manufacturer's product will be sold to California consumers. (Regie Nationale Des Usines Renault Billancourt, France v. Superior Court of Sacramento County, 208 Cal.App.2d 702, 703, 25 Cal.Rptr. 530; see Gray v. American Radiator & Standared Sanitary Corp., 22 Ill.2d 432, 176 N.E.2d 761.) Even if the defendant corporation has conducted no sales effort directed at California consumers it may be fair to hold it subject to the jurisdiction of this state where a suit arising out of other limited activity in California is reasonably foreseeable. (Twiss Ltd. v. Superior Court of Los Angeles County, 215 Cal.App.2d 247, 252–253, 30 Cal.Rptr. 98 [action for personal injuries sustained while unloading defendant's ship in a California port]; A. R. Industries, Inc. v. Superior Court of Sacramento County, 268 Cal.App.2d 328,a 73 Cal.Rptr. 920 [personal injury action arising from use of 3.8 ton buffing machine sold by defendant with knowledge that the machine was to be used in California].) On the other hand, the requisite foreseeability is not present where there is no showing that the defendant corporation conducted a sales effort directed either generally to all states or specifically to California or that it had other contacts with California. (Leach Co. v. Superior Court of Santa Clara County, 266 Cal.App.2d 493,b 72 Cal.Rptr. 216; Gill v. Surgitool Inc., 256 Cal.App.2d 583, 64 Cal.Rptr. 207; DaSilveira v. Westphalia Separator Co., 248 Cal.App.2d 789, 791–792, 57 Cal.Rptr. 62; Twinco Sales Inc. v. suprior Court In and For City & County of San Francisco, 230 Cal.App.2d 321, 323, 40 Cal.Rptr. 833; Yeck Manufacturing Corp. v. Superior Court, San Diego County, 202 Cal.App.2d 645, 21 Cal.Rptr. 51; Martin Bros. Elec. Co. v. Superior Court In and For Stanislaus County, 121 Cal.App.2d 790, 264 P.2d 183.)

The record before us does not support the conclusion that petitioner should have expected to defend an action such as this in the state of California. Petitioner's sales effort in California was confined to direct sales to one specific buyer, Cochin Manufacturing Company. Cochin purchased petitioner's pressure tanks as a component for hydraulic lifts manufactured by Cochin; Cochin did not resell the tanks in California for other uses. Plaintiff's cause of action is unrelated to the use of a hydraulic lift manufactured by Cochin. (Compare A.R. Industries, Inc. v. Superior Court of Sacramento County, supra, 268 Cal.App.2d 328,c 73 Cal.Rptr. 920.) Petitioner had no reason to believe that the pressure tanks which it sold to Cochin would find their way into the hands of other buyers in California except as a component of a hydraulic lift manufactured by Cochin. An inference to the contrary cannot be drawn from the fact that the chief of the purchasing department of the plant at which plaintiff was injured stated in his declaration that it is normal procedure for his department to arrange purchases of needed materials ‘Wherever possible’ from suppliers located within the state of California. So far as the record shows it was not possible to purchase petitioner's pressure tanks from any source in California. Therefore, there was no substantial showing that plaintiff's employer purchased the tank which caused plaintiff's injury from a source inside of California.

So far as the record shows the use of petitioner's product in California for a purpose other than as a component of a hydraulic lift manufactured by Cochin is an isolated instance. There is no showing that petitioner marketed its product in such a manner as to give rise to a reasonable inference that petitioner's commercial transactions would result in substantial use and consumption of its product in this state. While petitioner maintained a network of independent sales representatives throughout the eastern United States, to far as the record shows petitioner made no attempt to sell its product generally west of the Mississippi River. There is no showing that any of these representatives made sales or conducted sales promotion directed toward California consumers.

The absence of any activity by petitioner to initiate the flow of its products to California other than sales to a specific buyer for a specific use unrelated to this case distinguishes this case from the cases relied upon by the real party in interest. Thus, in Keckler v. Brookwood Country Club (D.C.N.D.Ill.1965) 248 F.Supp. 645, the court stated that ‘the complaint must affirmatively show that defendant's distribution volume or pattern is of the kind from which a reasonable inference may be drawn that the national channels of commerce have been chosen.’ (248 F.Supp. at p. 650.) The court granted the petitioner's motion to quash and allowed the plaintiff additional time to amend his complaint to show the necessary jurisdictional facts. Here the plaintiff made no showing to the trial court and does not assert to this court that if given additional time he could allege additional jurisdictional facts. In fact, the present proceeding represents plaintiff's second attempt to state such facts, an earlier motion by petitioner to quash service having been granted without prejudice to the right of plaintiff to make a further application for substituted service upon a showing of additional jurisdictional facts.

In Gray v. American Radiator & Standard Sanitary Corp., supra, 22 Ill.2d 432, 176 N.E.2d 761, the defendant corporation manufactured safety valves in Ohio which it sold to a manufacturer of water heaters in Pennsylvania, which in turn marketed its product in Illinois and other states. The plaintiff was injured when the water heater exploded in Illinois. The court noted that the defendant ‘does not claim that the present use of its product in Illinois is an isolated instance’ and that ‘it is a reasonable inference that its commercial transactions, like those of other manufacturers, result in substantial use and consumption in this State.’ (176 N.E.2d at 766.) As we have noted, it is not a reasonable inference from the record in this case that petitioner's commercial transactions result in substantial use and consumption of its product in this state other than as components of hydraulic lifts manufactured by Cochin.

In the other cases relied upon by plaintiff each defendant corporation, unlike petitioner here, had a reason to expect from the nature and volume of its commercial transactions that its product would find its way into the hands of a substantial number of buyers in the forum state. (Atkins v. Jones, etc., Steel Corp., 258 Minn. 571, 104 N.W.2d 888: Stephenson v. Duriron Co. (Alaska) 401 P.2d 423; Bullard v. Rhodes Pharmacal Co., Inc. (D.C.Mont.1967) 263 F.Supp. 79; see Gillmore v. J. S. Inskip, Inc., 54 Misc.2d 218, 282 N.Y.S.2d 127.)

Plaintiff argues as a basis for the assumption of jurisdiction in this case that most of the evidence related to the accident and plaintiff's injury and treatment is located in California and that if petitioner is not subjected to the jurisdiction of California courts plaintiff will be greatly inconvenienced by the necessity of prosecuting two actions. These considerations are relevant factors to be considered, he argues, under the rule of Fisher Governor Co. v. Superior Court of City and County of San Francisco, supra, 53 Cal.2d 222, 225–226, 1 Cal.Rptr. 1, 3, 347 P.2d 1, 3.3 We must balance the interest of the forum state and the convenience to plaintiff against the inconvenience to petitioner. As we have explained, by reason of the fact that petitioner's sales activity in this state was limited to sales to one customer only for one specific use by that customer and the fact that plaintiff's cause of action is unrelated to such use, the case for assumption of jurisdiction over petitioner in this case is weak. While it is true that plaintiff will be inconvenienced if California does not assume jurisdiction over petitioner in this case, plaintiff's inconvenience of itself is of course an insufficient reason to assume jurisdiction, because the prospect of similar inconvenience is always present in these cases. Similarly, the interest of California in protecting its residents from injury caused by defective products cannot of itself justify an assumption of jurisdiction. The relative availability of evidence and the burden of defense and prosecution on the causes of action against petitioner are closely balanced in this case. All the witnesses and records concerning the explosion of the tank, the extent of plaintiff's injury and his subsequent treatment are here, but all of the evidence concerning the defective manufacture of the tank is in Onio. (See Leach Co. v. Superior Court of Santa Clara County, supra, 266 Cal.App.2d 493,d 72 Cal.Rptr. 216; Twinco Sales, Inc. v. Superior Court In and For City and County of San Francisco, supra, 230 Cal.App.2d 321, 40 Cal.Rptr. 833; Martin Bros. Elec. Co. v. Superior Court In and For Stanislaus County, supra, 121 Cal.App.2d 790, 264 P.2d 183.) Unlike the situation in the Renault case, supra, 208 Cal.App.2d 702, 25 Cal.Rptr. 530, if California rejects jurisdiction the plaintiff will not be denied access to the courts of all of the states of the union. On the contrary, plaintiff is here seeking a remedy in addition to that afforded by the workmen's compensation laws of this state against his employer.

Let a peremptory writ of mandate issue as prayed.

FOOTNOTES

1.  Section 411 provides in pertinent part: ‘The summons must be served by delivering a copy thereof as follows:

FOOTNOTE.  ‘2. If the suit is against a foreign corporation, * * * doing business in this State; in the manner provided by Sections 6500 to 6504, inclusive, of the Corporations Code.’

2.  Section 6501 of the Corporations Code provides: ‘If the agent designated for the service of process be a natural person and cannot be found with due diligence at the address stated in the designation or if such agent be a corporation and no person can be found with due diligence to whom the delivery authorized by Section 6500 may be made for the purpose of delivery to such corporate agent, or if the agent designated is no longer authorized to act, or if no agent has been designated and if no one of the officers or agents of the corporation specified in Section 6500 can befound after diligent search and it is so shown by affidavit to the satisfaction of the court or judge, then the court or judge may make an order that service be made by personal delivery to the Secretary of State * * *.’

FOOTNOTE.  FNa. Advance Report Citation: 268 A.C.A. 344.

FOOTNOTE.  FNb. Advance Report Citation: 266 A.C.A. 521.

FOOTNOTE.  FNc. Advance Report Citation: 268 A.C.A. 344.

3.  As listed in Fisher, relevant factors are: ‘The interest of the state in providing a forum for its residents [Citation] or in regulating the business involved [Citations]; the relative availability of evidence and the burden of defense and prosecution in one place rather than another [Citations]; the ease of access to an alternative forum [Citation]; the avoidance of multiplicity of suits and conflicting adjudications [Citations], and the extent to which the cause of action arose out of defendant's local activities.’

FOOTNOTE.  FNd. Advance Report Citation: 266 A.C.A. 521.

MOSS, Associate Justice.