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First Professional Leasing Co. v. Rappold

NOVEMBER 14, 1974.




APPEAL from the Circuit Court of Sangamon County; the Hon. RICHARD J. CADAGIN, Judge, presiding.


Rehearing denied December 12, 1974.

Plaintiff, First Professional Leasing Co., Inc., appeals from an order of the circuit court quashing service of summons upon defendant in an action filed for the amount due on an allegedly defaulted lease agreement. The sole issue is whether the trial court erred in refusing to assert jurisdiction. A resolution of this dispute requires an interpretation by this court of the Illinois long arm statute (Ill. Rev. Stat. 1971, ch. 110, section 17(1) (a)).

On November 3, 1972, plaintiff, an Illinois corporation, filed a complaint against defendant, Dr. Samuel T. Rappold, in the circuit court of Sangamon county seeking the amount due on an allegedly defaulted lease agreement executed October 28, 1971, in Springfield, Illinois, between plaintiff and defendant. A copy of said agreement was attached to the complaint. Service was personally served upon defendant, a California resident, in California on November 21, 1972. On January 18, 1973, defendant made a special appearance to contest the jurisdiction of the Illinois court. On March 20, 1973, a hearing was held to determine the jurisdictional issue. Coyn V. Richardson, vice-president of plaintiff corporation, testified that applications for leasing new equipment are received by his company, and a determination of the feasibility of such a transaction is then made. If prospects are favorable, forms and other information are then sent to the applicant who completes the forms and mails them back to the company headquarters in Springfield, Illinois. Richardson stated that such a procedure was followed in regard to the instant lease. He further stated that this lease was approved and executed by plaintiff in Springfield after obtaining financing, was pledged to an Illinois bank, and an Illinois financing statement was filed. Richardson further testified that plaintiff did not solicit the lease in question and that all lease payments were to be sent to plaintiff in Springfield. On cross-examination Richardson testified that the application forms obtained by defendant came from a California lease broker. These brokers submit leases and are paid for such services by the plaintiff company. He further stated that defendant was not advised that the lease was pledged to an Illinois bank, that the financing statement was signed at the same time the lease was submitted to defendant for his signature, and that all transactions were by mail. Defendant in his affidavit alleged that he is a 9-year resident of California, maintains his occupation in California, and has never been physically present in Illinois for any transaction in connection with the present litigation. The lease agreement shows that defendant executed said lease in California. The equipment which was the subject matter of the lease was used solely in California and was purchased by plaintiff from a California distributor and resold to defendant in California. On April 3, 1973, the trial judge entered an order quashing the service of summons on defendant and found defendant to be not subject to the personal jurisdiction of the court.

Traditionally the presence of a potential defendant within the territorial jurisdiction of the court was a prerequisite before the court could assert in personam jurisdiction and bind the defendant personally to its judgment. That hallowed doctrine was first asserted by the United States Supreme Court in Pennoyer v. Neff, 95 U.S. 714. However, the due process limitations on the power of a state to subject nonresidents to in personam jurisdiction was greatly expanded by the Supreme Court in International Shoe Co. v. Washington, 326 U.S. 310, 316, 90 L.Ed. 95, 66 S.Ct. 154, when the court stated that "due process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'" (Emphasis added.) The "minimum contacts" contemplated in International Shoe Co. was further elaborated upon by the court in Hanson v. Denckla, 357 U.S. 235, 253, when it stated that "* * * it is essential in each case 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."

The new jurisdictional yardstick announced by International Shoe Co. and its progeny led to the adoption by the Illinois Supreme Court, in 1955 of what is now commonly referred to as the Illinois long arm statute (Ill. Rev. Stat. 1971, ch. 110, pars. 16, 17). Section 16 provides in relevant part:

"(1) Personal service of summons may be made upon any party outside the State. If upon a citizen or resident of this State or upon a person who has submitted to the jurisdiction of the courts of this State, it shall have the force and effect of personal service of summons within this State * * *."

Section 17(1) further provides:

"(1) Any person, whether or not a citizen or resident of this State, who in person or through an agent does any of the acts hereinafter enumerated, thereby submits such person, and, if an individual, his personal representative, to the jurisdiction of the courts of this State as to any cause of action arising from the doing of any of such acts:

(a) The transaction of any business within this State;

(3) Only causes of action arising from acts enumerated herein may be asserted against a defendant in an action in which jurisdiction over him is based upon this section."

The Illinois Supreme Court has interpreted these two sections to "reflect a conscious purpose to assert jurisdiction over nonresident defendants to the extent permitted by the due process clause." Nelson v. Miller, 11 Ill.2d 378, 389, 143 N.E.2d 673.

• 1 In the present case defendant was never physically present in Illinois. Relying on language in the Illinois Supreme Court case of Grobark v. Addo Machine Co., 16 Ill.2d 426, 158 N.E.2d 73, the first district in Saletko v. Willys Motors, Inc., 36 Ill. App.2d 7, 183 N.E.2d 569, held that physical presence by a defendant or its agent in Illinois is essential to the assertion of jurisdiction by an Illinois court under 17(1)(a). (Also see Kropp Forge Co. v. Jawitz, 37 Ill. App.2d 475, 186 N.E.2d 76 (1st Dist.).) Two years after Grobark, however, our supreme court in Gray v. American Radiator & Standard Sanitary Corp., 22 Ill.2d 432, 176 N.E.2d 761, held that physical presence in the state while committing a "tortious act" within the meaning of section 17(1)(b) is not necessary to subject the nonresident defendant to the jurisdiction of an Illinois court. Accordingly, the first district reversed its holdings in Saletko and Kropp Forge Co. when it held in Koplin v. Thomas, Haab & Botts, 73 Ill. App.2d 242, 219 N.E.2d 646, that physical presence was unnecessary under section 17(1) (a) in order to assert jurisdiction over a nonresident, stating that no substantial reason existed for differentiating personal injury actions under section 17(1) (b) and business transactions under section 17(1) (a) insofar as physical presence of a defendant or his agent is concerned. We agree and hold that physical presence is unnecessary under section 17(1) (a). See also Ziegler v. Hodges, 80 Ill. App.2d 210, 224 N.E.2d 12 (2nd Dist.).

• 2 We must now decide whether an exercise of jurisdiction in the instant case is constitutionally permissible, i.e., whether there are sufficient "minimum contacts" to satisfy due process requirements. We believe that such contacts were present here, and the trial court erred in quashing summons and refusing to assert jurisdiction. We first note that the lease contract was executed in Illinois where it was signed and accepted by the vice-president of the plaintiff corporation thus constituting the last act necessary to give validity to the contract. Secondly, regardless of the status of the California lease broker, the record clearly shows that defendant contacted plaintiff in Illinois and applied for a loan, and that there was further preliminary communication by mail between plaintiff in Illinois and defendant in California before consummation of the agreement. Thirdly, the contract was pledged and the money for the equipment was provided by an Illinois bank. Fourthly, the contract was to be performed in Illinois through the remittance of rental payments by defendant to plaintiff in Illinois, and, in fact, some payments were so sent, thus constituting partial performance in Illinois. Fifthly, defendant signed an Illinois security agreement under the Illinois Commercial Code. We believe that these contacts satisfy due process requirements and an assertion of jurisdiction here would not ...

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