No. 86-577
IN THE SUPREME COURT OF THE STATE OF MONTANA
1987
CONSUMERS UNITED INSURANCE COMPANY,
a foreign corporation,
Plaintiff and Respondent,
-vs-
ROGER JOHN SYVERSON,
Defendant and Appellant.
APPEAL FROM: District Court of the Eighteenth Judicial District,
In and for the County of Gallatin,
The Honorable Joseph Gary, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Landoe, Brown, Planalp, Kommers & Johnstone; Gene I.
Brown argued, Bozeman, Montana
For Respondent :
Poore, Roth & Robinson; John P. Davis argued, Butte,
Montana
Submitted: May 1, 1987
Decided: June 11, 1987
-
Clerk
Mr. Justice John C. Sheehy delivered the Opinion of the
Court.
We determine here that the tests of "traditional notions
of fair play and substantial justice" (International Shoe Co.
v. Washington (1945), 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed.
95) are met to establish jurisdiction of a nonresident
defendant in the Montana court stemming from a bank account
in controversy between Consumers United Insurance Company
.
(Consumers) and Roger John Syverson (Syverson)
Consumers, a Washington, D.C. corporation, brought suit
in the District Court, Eighteenth Judicial District, Gallatin
County, against Syverson, a Texas resident, by filing a
complaint alleging Syverson, while an officer of Consumers,
had made unauthorized loans of Consumers' funds to third
persons and had accepted "kick-backs" or unauthorized
commissions from the borrowing third persons. Consumers
further claimed that the unauthorized funds had been
deposited through wire transfer by Syverson in First Citizens
Bank of Bozeman, Montana (not a party to this action).
Consumers prayed for judgment covering the unauthorized funds
and further damages, or in the alternative, a preliminary
injunction or restraining order conserving the deposited
funds pending the action. Consumers also sought a
declaration that the deposits were subject to a constructive
trust in favor of Consumers.
On receiving the complaint, the District Court entered a
temporary restraining order and show cause order addressed to
Syverson. He appeared and moved to dismiss the action on the
grounds that the District Court lacked jurisdiction of the
action and his person.
All sides concede that Syverson has "not set foot in
Montana;" that Consumers has no contact within Montana; that
an action is presently pending in the Texas courts between
Consumers and Syverson over the same controversy. The
District Court did determine, upon evidence, that the
deposited funds in the Bozeman bank are traceable to the
claimed unauthorized commissions or kick-backs received by
Syverson while acting as an officer of Consumers. No other
contact between Syverson and the forum state, Montana,
appears in this case.
The District Court, after hearing, entered judgment
requiring (1) the funds on deposit in the Bozeman bank be
retained (or invested by stipulation of the parties); (2)
that upon receipt of a certified judgment from the Texas
court, the deposited funds be disbursed in accordance with
the Texas judgment to the prevailing party; and, (3) a
sufficient bond of Consumers to abide the Texas result. The
Montana judgment is final but without prejudice as to the
claims of either party as between them personally.
Syverson has appealed the judgment to this Court again
on the grounds that the Montana courts have no jurisdiction
over the person of Syverson nor the funds deposited in the
Bozeman bank.
Immediately brought into play by the facts of this case
is a consideration of the jurisdiction, if any, of Montana
state courts arising from a wire deposit of funds in a
Montana bank by a nonresident defendant owner.
The complete answer is found in Shaffer v. Heitner
(1977), 433 U.S. 186, 97 S.Ct. 2569, 53 L.Ed.2d 683. In that
case, Heitner, a nonresident of Delaware, filed a
shareholders derivative suit in a Delaware state court,
naming as defendants the Greyhound Corporation and its
subsidiary and 28 present or former corporate officers or
directors. Heitner alleged that the individual defendants
had violated their duties to the Greyhound Corporation by
causing it and its subsidiary to engage in actions which
occurred in Oregon that resulted in corporate liability for
substantial damages in a private antitrust suit and a large
fine in a criminal contempt action. Simultaneously Heitner,
under a Delaware statute, filed a motion for sequestration of
the Delaware corporate property of the individual defendants,
all nonresidents of Delaware, accompanied by an affidavit
identifying the property to be sequestered as stock, options,
warrants and various corporate rights of defendants. Under
the Delaware statute, a sequestration order was issued by the
Delaware state court pursuant to which shares and options
belonging to 21 defendants were "seized" and "stop transfer"
orders were placed on the corporate books. Under the
Delaware statute, the sequestration would remain in effect as
to the nonresidents, to be released when the defendants came
into the action by way of general appearance, thus completely
subjecting themselves to the jurisdiction of the Delaware
court.
The nonresident defendants appeared specially in the
Delaware state court, seeking to quash service of process and
to vacate the sequestration order, contending that the - ex
parte sequestration procedure did not accord them due
process, that the property seized was not capable of
attachment in Delaware and that they, the individual
nonresident defendants, did not have sufficient contacts with
Delaware to sustain jurisdiction of Delaware state courts
under the rule of International Shoe, supra.
The Delaware Court of Chancery asserted quasi - - in rem
jurisdiction which the Delaware Supreme Court affirmed,
ruling out the holding of International Shoe:
There are significant constitutional questions at
issue here but we say at once that we do not deem
the rule of ~nternational Shoe to be one of them.
... The reason, of course, is that jurisdiction
under 5 366 [the Delaware sequestration statute]
remains ... quasi in rem founded on the presence
of capital stock here, not on prior contact by
defendants with this forum. Under 8 Del. C. 5 169
the "situs of the ownership of the capital stock of
all corporations existing under the laws of this
state .. . [is] in this State", and that provides
the initial basis for jurisdiction. Delaware may
constitutionally establish situs of such shares
here, [Citations omitted] it has done so and the
presence thereof provides the foundation for S § 366
in this case.
Greyhound Corp. v. Heitner (Del. 1976), 361 ~ . 2 d225, 229.
As might be expected, the United States Supreme Court
held that jurisdiction of the nonresident defendants could
not be acquired in Delaware under its sequestration statute,
saying:
The Delaware courts based their assertion of
jurisdiction in this case solely on the statutory
presence of appellants' property in Delaware. Yet
that property is not the subject matter of this
litigation, nor is the underlying cause of action
related to the property. Appellants1 holdings in
Greyhound do not, therefore, provide contacts with
Delaware sufficient to support the jurisdiction of
that State's courts over appellants. If it exists,
that jurisdiction must have some other foundation.
Shaffer, 433 U.S. at 213, 97 S.Ct. at 2584, 53 L.Ed.2d at
The corollary to the foregoing statement by the United
States Supreme Court is that if the property in the state is
the subject matter of the litigation or if it is related to
the underlying cause of act,ions between the parties,
jurisdiction over the nonresident owner could be acquired by
the state court. The United States Supreme Court in Shaffer
made the corollary clear, although the Delaware statute was
held unconstitutional.
The Supreme Court in Shaffer noted its holdings in the
history of state court jurisdiction over nonresident
defendants in - personam, - - and quasi - - actions
in in rem in rem
from Pennoyer v. Neff (1877), 95 U.S. 714, 5 Otto 714, 24
L.Ed. 565, down to International Shoe. It noted that
International Shoe departed from Pennoyer in that a state
court could subject a nonresident defendant to a judgment -in
personam even though the defendant was not present within the
territory of the forum, but had certain minimum contacts with
it such that the maintenance of the suit did not offend
"traditional notions of fair play and substantial justice."
Shaffer, 433 U.S. at 203, 97 S.Ct. at 2579, 53 L.Ed.2d at
697. "Thus, the relationship among the defendant, the forum,
and the litigation, rather than the mutually exclusive
sovereignty of the States on which the rules of Pennoyer
rest, became the central concern of the inquiry into personal
jurisdiction." Shaffer, 433 U.S. at 204, 97 S.Ct at 2580, 53
L.Ed.2d at 698.
Not touched by International Shoe was the status of
state court judgments over nonresident defendants based on
jurisdiction - - or quasi - -
in rem in rem. The Supreme Court in
Shaffer questioned whether the presence of property in the
state, standing alone, gave the state jurisdiction to
adjudicate owner's rights to the property regardless of the
relationship of the property or the underlying dispute and
the property owner to the forum. Shaffer, 433 U.S. at 205,
97 S.Ct. at 2580, 53 L.Ed.2d at 698. Recognizing that an
adverse judgment - - directly affects the property owner
in rem
by divesting him of his rights before the court, the Supreme
Court decided it was time to consider whether the standard of
fairness and substantial justice set forth in International
Shoe should govern actions - - as well as - personam:
in rem in
The case for applying to jurisdiction - - the
in rem
same test of "fair play and substantial justice" as
governs assertions of jurisdiction in personam is
simple and straightforward. It i s premised on
recognition that " [t]he phrase, ' judicial
jurisdiction over a thing,' is a customary
elliptical way of referring to jurisdiction over
the interests of persons in a thing." Restatement
(Second) of Conflict of Laws 56, Introductory
Note (1971) (hereafter Restatement) .
recosnition leads to the conclusion that in order
This
-
to justify an exercise of jurisdiction - - the
in rem,
basis for jurisdiction must be sufficient to
justify exercising "jurisdiction over the interests
of persons in a thing." The standard for
determining whether an exercise of jurisdiction
over the interests of persons is consistent with
the Due Process Clause is the minimum-contacts
standard elucidated in International Shoe.
Shaffer, 433 U.S. at 207, 97 S.Ct. at 2581, 53 L.Ed.2d at
699-670.
The Supreme Court in Shaffer recognized that
difficulties may arise in applying International Shoe to
jurisdiction quasi - -
in rem. It solved the difficulty by
stating that if the presence of property in a state was to be
the basis of jurisdiction in that state for a judgment
against a nonresident defendant, the property in the state
must be the subject of the action or related to the
underlying controversy.
In the case at bar, we have clearly an item of personal
property, though intangible, that is related to the subject
in controversy, and is in fact the subject of the
controversy. The District Court here specifically found that
the deposited funds in the Bozeman bank were traceable to the
alleged claims of kick-back asserted by Consumers.
Applying the International Shoe factors to this case, as
we must under Shaffer, we examine the relationship among the
defendant, the forum, and the litigation to determine whether
these factors meet the test of minimum contacts so as not to
offend traditional notions of fair play and substantial
justice. In the case at bar, the test is clearly met. There
is a positive nexus between Syverson, who caused the funds to
be deposited in his name in Montana, the forum, where the
deposits are located, and the litigation, which concerns
ownership of the deposits. Moreover, the judgment of the
District Court supports traditional notions of fair play and
substantial justice by effectively making the Bozeman bank a
stakeholder of the deposited funds biding the determination
of the controversy in the Texas courts. Syverson, a resident
of Texas, can have no objection to the resolution of the
underlying controversy in his home state.
We note that the decision of this Court in Gassert v.
Strong (1908), 38 Mont. 18, 98 P. 497, which was decided
under principles of quasi - -
in rem, following Pennoyer, would
be the same if examined under the principles of International
Shoe and Shaffer.
Accordingly, we affirm the judgment of the District
Court in this case. Because of this affirmance, discussion
of the other issues raised by the parties is unnecessary.
s b e.
b Justice
We Concur: /
,
D i s t r i c t Judge, sittidfg f o r
J u s t i c e Frank B. Morrison