NORTH PACIFIC STEAMSHIP CO., Pеtitioner on Review, υ. GUARISCO et al, Respondents on Review.
CA 13405, SC 27511
Supreme Court of Oregon
Argued and submitted September 3, 1981, affirmed July 7, 1982
647 P2d 920 | 293 Or. 341
William M. McAllister argued the cause and filed briefs for respondents on review. With him on the briefs was Richard C. Josephson, Portland.
CAMPBELL, J.
Before Denecke, Chief Justice, Lent, Linde, Peterson and Campbell, Justices.
Peterson, J., filed a concurring opinion in which Linde, J., joined.
CAMPBELL, J.
Plaintiff North Pacific Steamship Company (North Pacific), a judgment creditor, instituted this suit, styled as a creditor‘s bill in equity, against the several individual and corporate defendants in an effort to have their assets applied against its unsatisfied judgment. The judgment debtor, Pyramid Bulkcarriers (Bulkcarriers), is named аs defendant but its assets have long since been depleted. The principal targets of this suit are several allied corporations and a couple of individuals who managed and controlled Bulkcarriers. In brief, North Pacific seeks to have these defendants held liable for Bulkcarriers’ judgment debt under theories of improper diversion of corporate opportunities and “piercing the corporate veil.”
From a decree generally in favor of North Pacific, several of the defendants appealed; North Pacific cross-appealed. The Court of Appeals reversed upon a finding that the trial court was without jurisdiction over the defendants. 49 Or App 335, 619 P2d 1302 (1980), opinion adhered to, reh den, 50 Or App 285, 622 P2d 1142 (1981). North Pacific petitioned this court for review allеging this finding to be erroneous. We accepted review and are faced with the single issue: For purposes of this creditor‘s bill in equity, were the contacts between the several defendants and this state such as to make the trial court‘s exercise of jurisdiction over them consonant with applicable statutes and the Due Process Clause?1
Cases of this sort have a tendency to generate voluminous and complex records, and this case is no exception.2 Fortunately, however, the evidence relevant to the jurisdictional issue may be briefly stated. First, the cast of characters: Plaintiff North Pacific is a foreign corporation, incorporated under the laws of Liberia, apparently owned and controlled in lаrge part by Portland industrialist Dr. Leonard Schnitzer and attorney Kenneth Lewis. During times material to the present controversy, North Pacific was not licensed to do business in Oregon and was represented here only by its agent, Lasco Shipping Company.
Bulkcarriers, also a Liberian corporation, was incorporated in 1969, maintained its principal offices in Bermuda, and conducted its business out of Louisiana. Its primary business was ocean-going bulk transport with time-chartered vessels in the maritime trade between Gulf ports, the Caribbean, and South America. The original ownership of Bulkcarriers was equally divided between defendant Hellenic, Inc., and another unrelated corporation. Hellenic and
Hellenic, in turn, is a closely-held family corporation controlled by defendant Peter V. Guarisco, a Louisiana resident. Guarisco, who apparently has his fingers in many pies, also is a principal owner, either individually or through family connections, and manager of defendant Pyramid Ventures Group, Inc., (Ventures) and the other corporate defendants. In addition, he was Chairman of the Board of Bulkcarriers, Bulkhandling, and Ventures, as well as an officer or director of the other defendants.
Defendant Ventures was formed under the direction of Guarisco and defendant Donald Scafidi and incorрorated in Louisiana. Its principal purpose was apparently to operate as an agent of Bulkcarriers and not to acquire assets and income for itself. Defendant Scafidi, a Louisiana resident, was the “right-hand man” of Guarisco in these endeavors; although he had little capital investment in the various corporate defendants, he was an officer or director of at least several of them and was involved in their management and operations.
The present controversy had its genesis in a charter agreement entered into between North Pacific and Bulkcarriers. In 1970, North Pacific acquired two self-loading ocean-going cargo vessels, the Pacsea and Pacsun, which it made available for charter operations. Bulkcarriers became interested in the vessels for its Gulf operations and entered into charter negotiations with North Pacific. Schnitzer and Lewis, as officers of Lasco, North Pacific‘s Portland agent, negotiated with Scafidi and a Mr. Richard V. Tedesco, agents for Bulkcarriers, in Portland and Louisiana to effect the charter. The charter contract, as finalized in late 1970, was between Bulkcarriers and North Pacific and was to run for several years.
In the spring of 1971, difficulties began to develop. North Pacific contends that Bulkcarriers, realizing that a West Coast longshoremen‘s strike was imminent and that the financial market for ship chartering would plummet as a result, tried to back out of the deal. Bulkcarriers arguеd that operational problems with the ships and crews, which were supplied by North Pacific, and the dissatisfaction of their principal customers justified their cancelling of the charter. In any event, Bulkcarriers ceased charter payments and the ships were returned to North Pacific on June 30, 1971, one day before the strike.
At North Pacific‘s instance, arbitration of the dispute ensued. Proceedings were held in Portland, New Orleans, and New York during 1971 and 1972 and resulted in a finding that Bulkcarriers had wrongfully breached its charter contracts as of June 30, 1971. The arbitrators set North Pacific‘s damages at $842,350.67.
Shortly after the award was announced, North Pacific brought an action in Federal District Court for the Eastern District of Louisiana to have the award entered as a judgment of the court. On May 18, 1973, judgment was entered in favor of North Pacific against Bulkcarriers for the amount stated plus interest at 7 percent per annum until paid. North Pacific executed upon Bulkcarriers’ Louisiana bank account, capturing $118,000, but inasmuch as Bulkcarriers had no further assets subject to execution North Pacific‘s judgment has gone largely unsatisfied. Further efforts by North Pacific to obtain satisfaction in Louisiana bogged down, and in 1975 it instituted the present action in Multnomah County Circuit Court. North Pacific‘s approach here was two-fold: 1) it brought a cause of action at law for fraud alleging that Scafidi and Tedesco made material misrepresentations during the contract negotiations; and 2) it brought the present suit styled as a crеditor‘s bill in equity.
Defendants from the beginning have vigorously challenged the Oregon courts’ jurisdiction over them. Soon after service upon them they all joined in a special appearance, by way of motion to quash service, requesting dismissal of the suit
Defendants then moved for a order of dismissal upon grounds of forum non conveniens, alleging that a similar action was already pending in Louisiana, a more convenient forum; this motion, however, was also denied.
The battle of motions and pleadings continued until finally, in late 1978, the case was tried. The action at law for fraud was split from the creditor‘s bill in equity for separate trial and then stayed pending a final decree in this suit. A final decree was entered in January 1979 generally in North Pacific‘s favor. In its findings of fact and conclusions of law the court, in relevant part, found and concluded as follows: the court had jurisdiction over all the remaining defendants; none of the defendants was the “alter ego” of Guarisco or Hellenic; and defendants Ventures, Bulkcarriers, and Bulkhandling had engaged in a plan to divert business from Bulkcarriers to Bulkhandling and Ventures, and ultimately to defendant Transbulk, Ltd., for the purpose of avoiding payment of North Pacific‘s judgment. A decree was entered against Ventures, Bulkcarriers, and Bulkhandling for the sum of $1,009,769.32 (the amount of the outstanding judgment against Bulkcarriers, plus interest). In addition, the court concluded that North Pacific had not established any basis for recovery under either fraud or general equitable principles and noted that the former finding would operate to collaterally estop North Pacifiс‘s maintenance of the pending fraud action.
Several of the defendants appealed; North Pacific cross-appealed. The Court of Appeals reversed, finding that the circuit court had improperly exercised jurisdiction over the defendants for purposes of the creditor‘s bill. In an appeal by North Pacific from summary judgment entered for defendants in the fraud action, however, the court in reversing noted that personal jurisdiction might exist over the relevant defendants for purposes of that action. See 49 Or App 331, 333, 619 P2d 1306 (1980). We accepted review of the creditor‘s bill suit in the hopes of clearing up this jurisdictional muddle.
As noted above, the single issue before us is whether the circuit court‘s exercise of jurisdiction over the defendants in this case was proper under applicable statutes and consonant with federal constitutional due-process guarantees.4
The brief recital of the facts evidences, at most, only a tenuous connection between the several defendants and this state. None of the defendants is a resident or domiciliary of Oregon, none was “present” here at the time the suit was filed, and
The applicable Oregon statute pertaining to personal jurisdiction over non-resident defendants in force at the time this suit was filed was
“Any person, firm or corporation whether or not a citizen or a resident of this state, who, in person or through an agent, does any of the actions enumerated in this subsection, thereby submits such person *** to the jurisdiction of the courts of this state, as to any cause of action or suit or proceeding arising from any of the following:
“(a) The transaction of any business within this state;
“(b) The commission of a tortious act within this state; ***”
1. Jurisdiction from concomitant fraud action?
In addition to the creditor‘s bill, North Pacific brought a fraud action alleging, in substance, that Bulkcarriers through its agents Scafidi and Tedesco made fraudulent misrepresentations during the charter contracting negotiations which induced North Pacific to enter into the charter agreement without sufficient financial guarantees. Since part of the contracting took place in Portland, Oregon courts could exercise personal jurisdiction over defendants Bulkcarriers and Scafidi for the purpose of adjudicating this fraud cause of action.
North Pacific is attempting to use the jurisdiction over the defendants obtained in that action to justify jurisdiction over them in this creditor‘s bill suit. The Court of Appeals implicitly rejected this approach when it dismissed this suit for lack of jurisdiction over the defendants while remanding the fraud action for trial. We agree.
The statute upon which North Pacific is relying,
“Only causes of action or suit or proceedings arising from acts enumerated in this section may be asserted against a
defendant in an action or suit or proceeding in which jurisdiction over such defendant is based upon this section.”
The intent of this provision is that, despite the liberalization of the rules pertaining to joinder of claims against already served defendants, where the defendant is a non-resident of the state and jurisdiction was obtained over it through use of a “long-arm” statute, each separate claim or cause of action stated against such defendant must have its own independent jurisdictional grounds. See generally Restatement (Second) of Judgments § 12 (Tent. Draft No. 5, 1978). For example, where plaintiff brings a tort action аgainst a non-resident defendant and obtains jurisdiction over him based on the fact that the tort occurred in-state, a separate breach of contract action against the same defendant cannot be joined unless there are independent grounds pertaining to the breach of contract for finding jurisdiction over the defendant on that claim.
Applying this rule to the case at bar, it is clear that personal jurisdiction over Bulkcarriers and Scafidi for purposes of the fraud action does not translate to personal jurisdiction over them and the rest of the defendants for purposes of this creditor‘s bill. Although the two cases are related, they are too tenuously connected to allow the personal jurisdictional basis for one to suffice for the other.
We therefore conclude that for personal jurisdiction to be exercised over the defendants in this creditor‘s bill suit there must be established sufficient and adequate contacts between them and this state relating to the bases for relief sought here — contacts relevant to the fraud action are not necessarily relevant to this suit.
2. Out-of-state acts with in-state effects.
Part of the basis for North Pacific‘s claim for relief in this creditor‘s bill suit is its allegations that the defendants conspired to deplete Bulkcarriers’ assets and to have corporate opportunities available to it diverted to other of the defendants, particularly Bulkhandling and Transbulk, for the purpose of preventing North Pacific from satisfying its judgment against Bulkcarriers. North Pacific contends that out-of-state acts by a non-resident defendant done for the purpose of causing an in-state effect are sufficient to give this state‘s courts personal jurisdiction over the defendant.
Under certain circumstances this may well be a valid proposition. See 1 Restatement (Second) of Conflicts of Law §§ 37 and 50 (1971); Annot., 24 ALR3d 532, 565 [§ 4(b)] (1969). Before personal jurisdiction can be predicated upon such a ground, however, the applicable jurisdictional statute must allow it.
The present case is, in contrast, a creditor‘s bill in equity; North Pacific is calling upon the equitable powers of the court in an effort to satisfy its judgment out of the
In any event, North Pacific has not established that the defendants’ out-of-state conduct has had any substantial in-state tortious effect. To be sure, the alleged acts may well have severely impacted upon North Pacific, stymieing its attempts to collect on a million-dollar judgment, but a significant tortious effect on interests in this state has not been alleged or shown. North Pacific is not an Oregon corporation. Its incorporators had it incorporated in Liberia, apparently for the purpose of avoiding the incidents of Oregon and American citizenship. And despite the fact that North Pacific finds it advantageous to do business here, setting up an agent corporation for that purpose, it did not register itself to do business in this state. There is some indication in the record that North Pacific is primarily owned and operated by Oregon residents, but the manner, nature, and extent of their injury is anything but clear.8
Given the plaintiff‘s evident reluctance to bring itself within the control, regulation, and protection of our laws and its failure to establish that any interests protected by our laws have been adversely affected by defendants’ activities, there is an insufficient basis for finding that any “tortious act” within the purview of
3. Jurisdiction based on business transacted in-state.
North Pacific‘s final justification for the circuit court‘s exercise of personal jurisdiction over defendants is its contention that this suit arises out of the “transaction of business” by Bulkcarriers within this state and that
We may start with the assumption that Bulkcarriers, in coming into this state to effect a charter contract concerning vessels physically present within this state, may well have made itself amenable to suit here for disputes arising out of performance or breach of this contract.
Creditors’ bills in equity have been an infrequent topic for discussion by this court. As a general matter, a creditor‘s bill is an equitable suit to subject a debtor‘s nonexempt assets to payment of an unsatisfied judgment against him under circumstances where legal remedies are inadequate or unavailable to accomplish that result. Williams v. Commercial National Bank, 49 Or 492, 501-502, 90 P 1012, 91 P 443 (1907). See generally, Dobbs on Remedies § 1.3, p. 11 (1973); 21 Am Jur2d, Creditors’ Bills §§ 1-2 (1981). In order to establish that the available legal remedies are inadequate, the creditor must generally show that his claim has been reduced to judgment and that a legal execution has been attempted and was returned nulla bona, i.e., not fully satisfied.10 Creditors Protective Ass‘n v. Balcom, 248 Or 38, 41, 432 P2d 319 (1967); Ryckman v. Manerud, 68 Or 350, 357-360, 136 P2d 826 (1913). Other than these general requirements, the jurisdictional basis for a creditor‘s bill has not been delineated by this court. Courts in other jurisdictions have tended to view creditor‘s bills as basically in rem or quasi-in rem proceedings. See 21 Am Jur2d, Creditor‘s Bills 53, § 65 (1981). Under such an
approach, the court‘s jurisdiction would be dependent upon and limited by the presence and extent of the debtor‘s property
Regardless of these concerns, and assuming arguendo that personal jurisdiction over the defendants suffices to enable the court to award the relief sought, it is clear that the nature and extent of their contacts with this state are not sufficient to allow the Oregon courts to exercise personal jurisdiction over them for purposes of this creditor‘s bill suit. The language of former
North Pacific‘s present suit is an effort to obtain satisfaction of a Louisiana judgment. Its claim for relief is based upon conduct of the defendants occurring after the breach of contrаct and taking place wholly outside of this state. The fact that the contracting took place in this state, indeed even the fact that there was a contract, is no longer relevant in this creditor‘s bill suit. North Pacific‘s claim for relief is not based upon the contract, but rather upon a foreign judgment; moreover, it is not based upon the contractual events occurring in this state, but rather upon post-breach events unrelated to the contract occurring wholly out-of-state. Thus, although it may be said as a matter of causation that this suit had its genesis in the contract entered into in 1970 in this state, Bulkcarriers’ contacts with this state, relevant as they may have been to a breach of contract action here, are simply not relevant to this creditor‘s bill suit seeking to obtain satisfaction of a foreign judgment.11
Isolated business contacts between the non-resident defendants and this state, irrelevant to plaintiff‘s suit cannot be relied upon to base personal jurisdiction over them. See State ex rel White Lumber v. Sulmonetti, supra, 252 Or at 127. We conclude, this is a suit “arising from” out-of-state activities by non-residents which have no established impact on Oregon interests and which are separate and independent from the prior contract-related activities and not a suit “arising from” the transaction of business in this state by the defendants within the meaning of
PETERSON, J., concurring.
Although I concur in the result, I disagree with the analysis in part 3 of the court‘s opinion.
Scafidi and Tedesco, as agents for Bulkcarriers, conducted transactions in Oregon and Louisiana to effect the charter. Tedesco is now deceased. The plaintiff‘s complaint in this suit alleged multiple theories of recovery. One of the theories of recovery against the defendant Scafidi was that Scafidi, “by reason of [his] actions and handling of the affairs of Pyramid Bulkcarriers, Inc., [is] also responsible for the judgment [against Bulkcarriers]. ***” Although the trial judge considered that this was an appropriate
The majority states that the question is whether contacts “with this state during charter contracting may be relied upon to justify the exercise of personal jurisdiction *** in this creditor‘s bill.” 293 Or at 353. The majority answers the query in the negative, saying:
“*** Thus, although it may be said as a matter of causation that this suit had its genesis in the contract entered into in 1970 in this state, Bulkcarriers’ contacts with this state, relevant as they may have been to a breach of contract action here, are simply not relevant to this creditor‘s bill suit seeking to obtain satisfaction of a foreign judgment.”
Creditors’ bills, even though independent actions in form, are usually ancillary in the sense that they are brought to collect a judgment obtained in another proceeding. The proceedings are equitable, and are usually in rem rather than in personam, being a continuation in effect of the judgment upon which they are founded in order to achieve a satisfaction thereof. Pierce v. United States, 255 US 398, 41 S Ct 365, 65 L Ed 697 (1920).
An effort to collect a judgment which arises from the transaction of business is as much a consequence of the transaction of business as the cause of action underlying the judgment. Because creditors’ bills are, in a sense, ancillary tо the underlying proceeding, I believe that the creditors’ bill claim against Scafidi has a sufficiently close nexus to his transaction of business in Oregon to support the conclusion that the claim asserted against Scafidi in this case can be said to arise from the transaction of business within Oregon. As noted in footnote 1 of the majority opinion, this court has held that
The plaintiff cites Creditors Protective Ass‘n. v. Balcom, 248 Or 38, 432 P2d 319 (1967), for the proposition that a judgment creditor can proceed by way of a creditors’ bill to obtain a judgment against one who, although not a party to the underlying judgment, actively participated in a fraudulent scheme to hinder the creditors’ collection of the judgment.1 The defendants, in
Linde, J., joins in this concurring opinion.
Notes
“*** Here the holder of the debtors’ property, Shirley Roberts, in concert with the debtors, wrongfully paid over, or allowed to be paid over, amounts due to debtor in order to prevent the plaintiff from reaching the property. We hold that one who actively participates with the debtor in a fraudulent scheme to hinder the creditor‘s enforcement of his judgment, and, pursuant to that scheme, withholds amounts due on garnishment, is personally liable for the amount that garnishment would have realized. ***” 248 Or at 45.
“In any action brought in reliance upon jurisdictional grounds stated in [ORCP 4 B. through L. pertaining to “long-arm” jurisdiction over non-resident defendants], there cannot be joined in the same action any other claim or cause against the defendant unless grounds exist under this rule, or other statute, for personal jurisdiction over the defendant as to the claim or cause joined.”
The drafters ofThe drafters’ comment to“In any action claiming injury to person or property within this state arising out of an act or omission outside this state by defendant, provided in addition that at the time of the injury, either:
“D.(1) Solicitation or service activities were carried on within this state by or on behalf of the defendant; or
“D.(2) Products, materials, or things distributed, processed, serviced, or manufactured by the defendant were used or consumed within this state in the ordinary course of trade.”
The presence of an agent corporation in this state dоes not establish a local injury, inasmuch as the alleged injury was suffered by North Pacific, not Lasco. Nor is it determinative that North Pacific chose to sue here or that it is managed by Portland residents. For a “local injury” to have been established here for purposes of
The doctrine of merger by judgment, of course, is not strictly applicable here inasmuch as it is based on notions of collateral estoppel and res judicata (see Restatement (Second) of Judgments §§ 47-48 (Tent. Draft No. 1, 1973)), concerns not directly pertinent to pеrsonal jurisdiction determinations. There is, however, an analogy. When a judgment creditor seeks to enforce the judgment through either legal execution of an equitable creditor‘s bill, the facts, contacts, and concerns relating only to the underlying claim (which was extinguished by the judgment) are no longer relevant — only those relating to the judgment‘s enforcement are.