COVINGTON INDUSTRIES, INC., Plaintiff-Appellant, v. RESINTEX A. G. and Horst Susskind, Defendants-Appellees.
No. 585, Docket 79-7596.
United States Court of Appeals, Second Circuit.
Argued Jan. 10, 1980. Decided June 23, 1980.
Accordingly, the judgment is vacated and the case remanded for further proceedings not inconsistent with this opinion.
F. T. Davis, Jr., Atlanta, Ga. (Stephen J. Smirti, Jr., Colleran, O‘Hara & Kennedy, P.C., Garden City, N. Y., of counsel), for plaintiff-appellant.
William W. Esseks, Riverhead, N. Y. (W. Stanley Blackburn, Atlanta, Ga., Tooker, Esseks, Hefter, Cuddy & Angel, Riverhead, N. Y., of counsel), for defendants-appellees.
Before LUMBARD, MOORE and MESKILL, Circuit Judges.
MESKILL, Circuit Judge:
In 1977, the United States District Court for the Northern District of Georgia (“the Georgia court“) entered a judgment on default of appearance against appellees. Appellants, seeking enforcement, subsequently
Background
Appellant Covington Industries, Inc. is a Georgia corporation with its principal place of business in Atlanta. Haitex Apparel, S.A., a subsidiary of Covington, is a Haitian corporation. Covington and Haitex are engaged in the textile and apparel industry. Resintex A.G., a Swiss corporation, acts as a manufacturer‘s agent in purchasing and selling textiles in Europe and the Far East.
In 1976, Eric Henderson, president of both Covington and Haitex, traveled to the Switzerland office of Resintex and met its manager, appellee Horst Susskind. At this meeting and apparently later in Haiti, Henderson and Susskind negotiated an agreement for purchase through Resintex of denim material from the Hong Kong market. As Judge Pratt found below,1 the parties entered into this agreement on behalf of Haitex and provided that Haitex would establish letters of credit in favor of Resintex in payment for the purchases. It appears, however, that Haitex had difficulty arrang
Alleging breach of contract and fraudulent misrepresentation, Covington filed suit in the United States District Court for the Northern District of Georgia, claiming that the denim material did not meet the contract specifications and that the invoices and bills of lading were therefore false. Although process was served pursuant to court order, neither Resintex nor Susskind entered an appearance in the action. After receiving evidence on damages, the Georgia court entered a default judgment.
Covington subsequently registered the default judgment in the United States District Court for the Eastern District of New York2 and instituted garnishment proceedings against Susskind‘s New York assets, including a bank account. After receiving notice that a restraining order had been issued in regard to this account, appellees moved in the New York court, pursuant to Rule 60(b)(4),
I. Power Of The New York Court To Determine The Validity Of The Judgment Of The Georgia Court.
Before discussing the jurisdiction of the Georgia court, we must first consider the power of the district court for the Eastern District of New York to pass upon the validity of a sister court‘s judgment, and more particularly, the propriety of attacking that judgment in the court of registration by way of a motion under Rule 60(b)(4).
A judgment entered against parties not subject to the personal jurisdiction of the rendering court is a nullity. When, in an enforcement proceeding, the validity of the judgment is questioned on this ground, the enforcing court has the inherent power to void the judgment, whether the judgment was issued by a tribunal within the enforcing court‘s domain or by a court of a foreign jurisdiction, unless inquiry into the matter is barred by the principles of res judicata. Baldwin v. Iowa State Traveling Men‘s Assoc., 283 U.S. 522, 525, 51 S.Ct. 517, 518, 75 L.Ed. 1244 (1931). While the original court‘s jurisdiction is presumptively valid, if the issue of jurisdiction has not previously been litigated it may be raised in the enforcing court. Adam v. Saenger, 303 U.S. 59, 62, 58 S.Ct. 454, 456, 82 L.Ed. 649 (1938).
Such collateral attacks go by different names, depending upon the precise circumstances in which they arise. When purely
Because the court below had the power to entertain appellees’ motion and to grant the relief requested, the outcome of the appeal before us will not be governed by the label placed upon appellees’ manner of proceeding. Adjudication by nomenclature is a relic of ancient practice, contrary to both the letter and spirit of the Federal Rules of Civil Procedure. As we noted in Hadden v. Rumsey Products, Inc., supra at 95, “[I]t would be quite out of harmony with the spirit of Rule 1 [Fed.R.Civ.P.] to hold the appellees bound by the labels placed on the papers submitted to the district court.” See also Comprehensive Merchandising Catalogs, Inc. v. Madison Sales Corp., 521 F.2d 1210, 1211 n.1 (7th Cir. 1975) (Relief from enforcement of purportedly invalid foreign judgment will not be defeated because party may have improperly designated application as motion under Rule 60(b), Fed.R.Civ.P.).
In this case, appellees have termed their application as a motion for relief from judgment under Rule 60(b), which in pertinent part provides:
On motion and upon such terms as are just, the court may relieve a party . . . from a final judgment . . . for the following reasons . . . (4) the judgment is void.3
Appellants do not question the suitability of Rule 60(b)(4) as a vehicle for attacking a judgment, in the court of rendition, as having been issued without personal jurisdiction over the defendants. Appellants do question, however, whether Rule 60(b)(4) may be invoked to obtain the same relief in the court of registration.
Although Rule 60(b) does not specify the correct forum for presenting a motion for relief from judgment, the motion is generally brought in the district court rendering judgment. 7 Moore‘s Federal Practice ¶ 60.28[1] (2d ed. 1979). In the usual case, the court of rendition will be more familiar with the facts than the court of registration and perhaps more conversant with the applicable law. Where the 60(b) motion is for relief from a default judgment, however, the assumptions about a rendering court‘s qualifications no longer apply. Where the defendant does not appear to contest jurisdiction and the court does not receive evidence or make findings in the matter except on the issue of damages, the court of rendition is no more familiar with the factual situation than is the court of registration. Under these circumstances, the court of registration therefore seems as qualified to determine the jurisdiction of the rendering court, particularly when the latter is a federal court of coordinate authority.
Recognizing the power in a different court to determine the jurisdiction of the rendering court is particularly appropriate when the party who obtained the default judgment is attempting to enforce it in another court. As Professor Moore notes:
Although the case law is somewhat meager, precedent exists supporting the proposition that Rule 60(b)(4) may be invoked in the registration court to obtain relief from a foreign default judgment attacked as void for lack of personal jurisdiction over the parties against whom it was rendered. In Graciette v. Star Guidance, Inc., 66 F.R.D. 424 (S.D.N.Y.1975), after obtaining a default judgment against the defendant in the United States District Court for the Central District of California, the plaintiff sought enforcement by registering the judgment in the Southern District of New York. Asserting that it had not been susceptible to the personal jurisdiction of the rendering court, defendant moved in the court of registration under Rule 60(b)(4) for relief. Based upon the dictum in Hadden v. Rumsey Products, Inc., supra, discussed above, the court permitted the attack, holding the provision to be an appropriate vehicle for this purpose. Upon consideration of the merits, the court declared the foreign judgment void. See also United States v. Fluor Corp., 436 F.2d 383 (2d Cir. 1970), cert. denied, 402 U.S. 945, 91 S.Ct. 1623, 29 L.Ed.2d 114 (1971); Radiation Technology, Inc. v. Southern Rad, Inc., supra, 68 F.R.D. 296, 299-300 (N.D.Ga.1975); Tommills Brokerage Co., Inc. v. Thon, 52 F.R.D. 200 (D.P.R.1971).
In the instant case, Resintex and Susskind did not appear in the district court of Georgia to contest that court‘s jurisdiction and thus they have not yet been heard on this issue. Baldwin v. Iowa State Traveling Men‘s Assoc., supra, 283 U.S. at 525, 51 S.Ct. at 518. Furthermore, Covington chose to use the machinery of the New York court to enforce its judgment by seeking to reach New York assets. Under these circumstances, for the reasons discussed above, we hold that appellees properly sought to void the Georgia default judgment in the court below via a motion under Rule 60(b)(4).
II. In Personam Jurisdiction Of The Georgia Court.
Covington‘s assertions of jurisdiction are based on the Georgia long-arm statute which states in part:
A court of this State may exercise personal jurisdiction over any nonresident, or his executor or administrator, as to a cause of action arising from any of the acts, omissions, ownership, use or posses
sion enumerated in this section, in the same manner as if he were a resident of this State, if in person or through an agent, he: (a) Transacts any business within this State; or (b) Commits a tortious act or omission within this State, except as to a cause of action for defamation of character arising from the act; or . . . . .
Ga.Code § 24-113.1.
The court below held that Covington had not established in personam jurisdiction over Resintex and Susskind under either subsection (a) or (b).4
A. Transacting Business.
Judge Pratt noted that Covington relies on communications between the parties in Atlanta and Switzerland in the form of telexes to show that Resintex transacted business in Georgia. These telexes led to the establishment of letters of credit in favor of Resintex to pay for denim which was shipped to Haitex, Covington‘s subsidiary in Haiti. A comparison between these contacts and contacts in several cases interpreting subsection (a) of the Georgia long-arm statute is useful in determining whether the Georgia courts would extend the “jurisdictional welcome mat” to these parties. Thorington v. Cash, 494 F.2d 582, 584 (5th Cir. 1974).
Judge Pratt cited O.N. Jonas Co. v. B & P Sales Corp., 232 Ga. 256, 206 S.E.2d 437 (1974), as a leading case on the scope of the Georgia statute. In Jonas, agents of the nonresident appellees visited the appellant‘s plant in Georgia, purchased goods from the appellant by mail or telephone and had the goods shipped F.O.B. shipping point. Holding that these contacts were insufficient for subsection (a) jurisdiction, the Georgia Supreme Court stated that transacting business within the state required that a nonresident purposefully do an act or consummate a transaction within the state, that the cause of action arise from or be con
The district court in Fowler Products Co. v. Coca-Cola Bottling Co., 413 F.Supp. 1339 (M.D.Ga.1976), stated that subsection (a) did not authorize jurisdiction over a nonresident defendant corporation which purchased manufactured goods from a Georgia corporation after sending specifications and a sales agreement by mail into Georgia and then accepting delivery F.O.B. Georgia. Although noting that the trend in Georgia is to construe subsection (a) most liberally, the court also cited Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958), as a reminder that this type of trend did not “herald[s] the eventual demise of all restrictions on the personal jurisdiction of state courts.” Id. at 251, 78 S.Ct. at 1238. See also Interstate Paper Corp. v. Air-O-Flex Equipment Co., 426 F.Supp. 1323 (S.D. Ga.1977) (no jurisdiction over nonresident corporation which manufactured goods ordered through mail by Georgia corporation and shipped goods F.O.B. shipping point) and Charia v. Cigarette Racing Team, Inc., 583 F.2d 184 (5th Cir. 1978) (insufficient contacts with forum state (Louisiana) to satisfy due process where Florida defendant, pursuant to mail and telephone communications, manufactured a boat for plaintiff, negotiated plaintiff‘s checks drawn on a Louisiana bank, and shipped the boat to Louisiana F.O.B. Florida).
The facts in the instant case clearly do not supply sufficient contacts to establish jurisdiction under subsection (a) of the Georgia long-arm statute. The parties agree that Resintex is a Swiss corporation headquartered in Switzerland. Resintex asserts that it does not have offices or do business in the United States. The telex communications and letters of credit constitute the only contact Resintex or Susskind have had with Georgia. The goods were delivered to Haitex in Haiti and Resintex sent invoices for the goods to Georgia through normal banking channels when it drew on the letters of credit. We are unable to locate any Georgia decision which holds that such minimal contacts with the forum state can justify labeling these activities as transacting business. Although the Georgia courts may construe subsection (a) in a liberal manner as stated in Fowler, no decision seems to reach as far as Covington would have us go in the instant case. We are constrained to hold, therefore, that Judge Pratt‘s application of the transacting business section of the Georgia long-arm statute was proper.
B. Tortious Act Jurisdiction.
Covington also urges that in personam jurisdiction over Resintex and Susskind can be premised on subsection (b) of the Georgia long-arm statute. Alleging that Resintex and Susskind fraudulently misrepresented the denim‘s shrinkage factor in communications and invoices sent into Georgia, Covington argues that these activities constitute a tortious act out of the state leading to injury within the state. Georgia courts have interpreted subsection (b) to include this type of “tortious act without, injury within” conduct. See Atlanta Coliseum, Inc. v. Carling Brewing Co., 411 F.Supp. 253 (N.D.Ga.1976).
It appears, however, that Covington‘s proper claim here is for breach of contractual warranty, not tortious injury. Georgia courts have held that generally a breach of contract does not constitute a tort. Synthetic Industries, Inc. v. Whitlock, Inc., 439 F.Supp. 1297, 1300 (N.D.Ga.1977). Further, as stated in Interstate Paper Corp. v. Air-O-Flex Equipment Co., supra, 426 F.Supp. at 1327, “[t]o maintain a suit in tort, the breach of duty must be one imposed by the law and not merely by the contract itself.” In the instant case Resintex allegedly supplied goods whose shrinkage factor exceeded that specified in the contract. Resintex‘s duty was one imposed by the terms of the contract, not by the law.
We are also persuaded by the reasoning of Judge Pratt that Resintex‘s activities do not fall within either exception to the general rule that breach of contract does not constitute a tort as those exceptions are set forth in Synthetic Industries, 439 F.Supp. at 1300. Under those exceptions, a breach of contract may be considered a tort if either a special relationship exists between the parties or the breach resulted from an obligor‘s misfeasance rather than nonfeasance. Following the analysis in Synthetic Industries, Judge Pratt stated that the relationship between the parties here was simply that of purchaser and seller. After discussing the difficulty distinguishing between misfeasance and nonfeasance, Judge Pratt determined that the instant injury, as in Synthetic Industries, was a purely economic one for which courts are reluctant to supply redress under a theory of negligence.5
In its attempt to qualify for “tortious act without, injury within” jurisdiction, Covington cites several decisions discussing the application of subsection (b). In Coe & Payne Co. v. Wood-Mosaic Corp., 230 Ga. 58, 195 S.E.2d 399 (1973), the Supreme Court of
Having determined that neither subsection (a) nor subsection (b) of the Georgia long-arm statute encompasses Resintex‘s activities, we affirm the judgment below.6
LUMBARD, Circuit Judge (concurring):
I agree with the conclusion of the majority that the New York district court could entertain a Rule 60(b) motion to vacate the registered Georgia federal court judgment and that the Georgia court lacked in personam jurisdiction over defendants. I write separately because I reach this conclusion by a somewhat different route.
The transaction giving rise to this suit involved an agreement between a Swiss corporation (Resintex) and a wholly-owned Haitian subsidiary (Haitex) of a Georgia corporation (Covington) for the purchase and sale of denim. Discussions leading up to the agreement took place in Switzerland and the goods were to be delivered to Haiti. Georgia‘s only contacts with the transaction were: (1) several communications between Resintex in Switzerland and the president of Covington and Haitex in Georgia with respect to financing; (2) financing in part through letters of credit established at Covington‘s Atlanta bank; and (3) arrival at the Georgia bank of invoices and bills of lading forwarded from Switzerland through normal banking channels.
The plaintiffs sought to avail themselves of the enforcement machinery of the New York courts by registering the Georgia judgment of $183,000 pursuant to
As the majority opinion notes, a judgment entered without jurisdiction over the parties is a nullity, and an enforcing court can examine the jurisdiction of the rendering court provided inquiry is not foreclosed by res judicata. See Id.. The Georgia court clearly did not decide the question of jurisdiction over Resintex since judgment was entered following default. Covington nevertheless argues that Rule 60(b)(4), which provides that a court “may relieve a party . . . from final judgment” on the ground that “the judgment is void,” was not a proper vehicle for relief in the New York court from the judgment rendered in the Georgia court.
Although we have not squarely decided the question here presented, our decisions present no impediment to the action taken here by Judge Pratt. In Hadden v. Rumsey Products, Inc., 196 F.2d 92 (2d Cir. 1952), we did not reach the question of whether a registered judgment could be attacked in the court of registration by way of a motion under Rule 60(b), but held that the defendant‘s petition to the New York court could be “treated as an independent action to obtain equitable relief from the [registered] judgment” and that by attempting to register the judgment pursuant to
Of course, Judge Pratt, in the exercise of his discretion, could have held that the Georgia court was a more suitable forum for the motion. See United States v. Fluor Corp., 436 F.2d 383 (2d Cir. 1970); Tommills Brokerage Co., Inc. v. Thon, 52 F.R.D. 200 (D.P.R.1971). Here, however, where the judgment was entered by default in a federal court of collateral jurisdiction, he certainly did not abuse his discretion by declining so to hold.
In Personam Jurisdiction in Georgia
Although Covington asserts that the Georgia court had jurisdiction under either subsection (a) or subsection (b) of the Georgia long-arm statute, its argument in its brief on appeal is limited to subsection (b). Accordingly, I limit my analysis to that subsection.2
The real complaint in this action, however, is that the delivered goods did not conform to the contract specifications. “As a general rule, breach of contract does not constitute a tort.” Synthetic Industries, Inc. v. Whitlock, Inc., 439 F.Supp. 1297, 1300 (N.D.Ga.1977). Covington cannot avoid this general rule by alleging that since the goods did not comply with the contract specifications, the communications containing these specifications were fraudulent. Cf. Unistrut Georgia, Inc. v. Faulkner Plastics, Inc., 135 Ga.App. 305, 217 S.E.2d 611, 612 (1975) (where plexiglass dome did not meet contract specification, duty breached arose “from the contract alone, and is not one imposed by law” despite allegation of “negligent fabrication“). Covington‘s reliance on Thorington v. Cash, 494 F.2d 582 (5th Cir. 1974), is similarly misplaced.3 As the majority notes, in Thorington the non-resident had “purposefully availed himself of the privilege of conducting business within the forum State. . . .” Id. at 587. Surely the same cannot be said of Resintex, particularly since the involvement of the Georgia bank was initiated by Covington when Haitex was unable to obtain sufficient credit in Haiti. Furthermore, the gravamen of the complaint in Thorington was fraud in the inducement to contract, not breach of contract.
Any duty breached by Resintex was a duty arising out of the contract. The breach occurred when noncomplying goods were shipped to Haiti. Since Resintex did not commit a tort in Georgia, and since the contract was neither negotiated, signed nor performed in Georgia, Resintex was not subject to the in personam jurisdiction of the Georgia federal court.