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  "name": "HARRELSON RUBBER COMPANY v. BOBBY LEE LAYNE, SR. d/b/a BOBBY LAYNE TIRE AND RECAPPING",
  "name_abbreviation": "Harrelson Rubber Co. v. Layne",
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    "judges": [
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    "parties": [
      "HARRELSON RUBBER COMPANY v. BOBBY LEE LAYNE, SR. d/b/a BOBBY LAYNE TIRE AND RECAPPING"
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    "opinions": [
      {
        "text": "WHICHARD, Judge.\nI.\nThe issue is whether the court properly dismissed plaintiffs action for lack of personal jurisdiction over the nonresident defendant. We hold that G.S. 1-75.4(5) confers on our courts authority to exercise personal jurisdiction over defendant; that defendant\u2019s activities meet the minimum contacts test; and that exercise of jurisdiction thus does not offend due process.\nII.\nPlaintiff is a Delaware corporation with its principal office and place of business in Asheboro, North Carolina. Defendant, a sole proprietor in a tire and recapping business, is a citizen and resident of Campbell County, Virginia, and conducts his business there.\nThis action arises from a franchise agreement which the parties executed on or about 1 May 1979. Plaintiff was the franchisor, and defendant the franchisee, under the agreement. The subject of the agreement, inter alia, was the right to utilize a patented retreading process which plaintiff developed.\nPlaintiff sued defendant for breach of the franchise agreement, a $33,623.22 balance due on a promissory note, $13,683.42 plus interest due on an open account, royalty fees of twenty cents per pound of precured tread rubber and cement supplied by plaintiff and used by defendant in retreading tires. Defendant, who was duly served with summons, moved under G.S. 1A-1, Rule 12(b)(2) to dismiss for lack of jurisdiction over his person. Plaintiff appeals from an order granting this motion.\nIII.\nThe test for establishing jurisdiction over nonresident individuals is two-pronged. The first step is to determine whether the \u201clong-arm\u201d statute, G.S. 1-75.4, confers jurisdiction. Buying Group, Inc. v. Coleman, 296 N.C. 510, 513, 251 S.E. 2d 610, 613 (1979). With respect to contracts, this statute confers authority on our courts to exercise jurisdiction in any action which:\na. [ajrises out of a promise, made anywhere to the plaintiff or to some third party for the plaintiffs benefit, by the defendant to perform services within this State or to pay for services to be performed in this State by the plaintiff; or\nb. [ajrises out of services actually performed for the plaintiff by the defendant within this State, or services actually performed for the defendant by the plaintiff within this State if such performance within this State was authorized or ratified by the defendant; or\nc. [a]rises out of a promise, made anywhere to the plaintiff or to some third party for the plaintiffs benefit, by the defendant to deliver or receive within this State, or to ship from this State goods, documents of title, or other things of value; or\nd. [rjelates to goods, documents of title, or other things of value shipped from this State by the plaintiff to the defendant on his order or direction.\nG.S. 1-75.4(5).\nThe franchise agreement, together with the promissory note, constituted a promise by defendant to pay for services actually performed prior to breach and to be performed in the future. G.S. 1-75.4(5)a, b. The services to be performed are illustrated by plaintiff s obligation under the agreement, inter alia, continually to improve its patented retreading process at its Asheboro plant, and to make such improvements available to defendant. Services actually performed in this state by plaintiff for defendant were the preparation and mailing of plaintiffs Supertread \u201cProcess Operating Manual,\u201d and the manufacture of precured tread rubber and cement as authorized under the franchise agreement. Defendant\u2019s own affidavit acknowledged that plaintiff had forwarded to him its \u201cProcess Operating Manual.\u201d An affidavit by plaintiffs president averred that all services provided for in the franchise agreement \u201cwere performed or to be performed by [plaintiff] from either of its North Carolina plants or its offices in Asheboro, North Carolina.\u201d (Emphasis supplied.) An affidavit by a third party, who was familiar with this action and the negotiations between plaintiff and defendant, averred that \u201c[t]he materials and retreading equipment purchased by the defendant from the plaintiff were all shipped from North Carolina.\u201d (Emphasis supplied.)\nThe $38,316.24 promissory note signed by defendant was to be paid to plaintiff at its Asheboro offices in thirty-six monthly installments of $1,064.34. A promise in a note to make payments to a plaintiff in the forum state is a promise to deliver there a thing of value within the meaning of G.S. 1-75.4(5)c. Wohlfahrt v. Schneider, 66 N.C. App. 691, 693, 311 S.E. 2d 686, 687 (1984). Plaintiffs mailing of the \u201cProcess Operating Manual\u201d and shipping of the precured tread rubber and cement, all pursuant to the franchise agreement, constituted the shipping of goods from North Carolina by plaintiff to defendant on defendant\u2019s order or direction. G.S. 1-75.4(5)d.\nWe thus hold that G.S. 1-75.4(5) conferred authority on our courts to exercise personal jurisdiction over defendant.\n> I \u2014 (\nThe second step in the two-pronged test is to determine whether exercise of this statutory power offends the \u201cminimum contacts\u201d requirement of due process. Buying Group, Inc., supra.\nThe \u2018litmus standard\u2019 ... is well-known and was established ... by the landmark case of International Shoe Co. v. Washington [citation omitted]: Due process requires that a nonresident defendant have certain minimum contacts with the forum state such that the maintenance of the suit does not offend \u2018traditional notions of fair play and substantial justice.\u2019\nPhoenix America Corp. v. Brissey, 46 N.C. App. 527, 530, 265 S.E.2d 476, 479 (1980). This Court stated in Phoenix:\nHelpful criteria for analyzing whether minimum contacts are present include: \u2018[T]hree primary factors, namely, the quantity of the contacts, the nature and quality of the contacts, and the source and connection of the cause of action with those contacts, . . . and . . . two others, interest of the forum state and convenience.\u2019\nId. at 530-31, 265 S.E. 2d at 479 (quoting Aftanase v. Economy Baler Co., 343 F. 2d 187, 197 (8th Cir. 1965)). Using these factors as a guide, we examine the facts here, in light of existing case law, to determine whether defendant had sufficient minimum contacts with the forum state.\nA. Quantity of Contacts\nThe trial court found that defendant had made \u201cpurchases of retread rubber on several occasions from plaintiffs plants in North Carolina.\u201d This finding was not challenged by exception in the record. It thus is presumed to be correct and supported by competent evidence, and it is binding on appeal. Tinkham v. Hall, 47 N.C. App. 651, 652-53, 267 S.E. 2d 588, 590 (1980).\nFurther, affidavits in the record support the finding. Defendant\u2019s affidavit admits that plaintiff supplied him with precured tread rubber and cement. This corroborates plaintiffs president\u2019s affidavit, which avers that upon request and authorization of defendant plaintiff manufactured and shipped precured tread rubber and cement for defendant\u2019s use in the Harrelson Supertread Process. These affidavits also show that plaintiff prepared and mailed the \u201cProcess Operating Manual\u201d to defendant from plaintiffs Asheboro plant. The third party\u2019s affidavit, referred to above, states that \u201cmaterials and retreading equipment [were] purchased by the defendant from the plaintiff [and] were all shipped from North Carolina.\u201d\nThis evidence reveals a substantial quantity of contacts by defendant with the forum state, in that plaintiff furnished precured tread rubber to defendant on \u201cseveral occasions\u201d from plaintiffs plants in North Carolina. Plaintiff also furnished equipment and a \u201cProcess Operating Manual\u201d to defendant, and these too were furnished from plaintiffs plants in North Carolina.\nDefendant cites Phoenix, supra, as a basis for finding lack of jurisdiction. In Phoenix the purchase at issue involved a single sale. Plaintiff and defendant had \u201chad dealings\u201d on only one prior occasion. The quantity of contacts thus at best was two, and only one of those related to the action. Further, \u201call the elements of the defendants\u2019 performance . . . [were] to take place outside the forum.\u201d Phoenix, supra, 46 N.C. App. at 532, 265 S.E. 2d at 480.\nHere, by contrast, the parties had an ongoing vendor-vendee relationship authorized by the franchise agreement. Defendant made purchases from plaintiff on \u201cseveral occasions.\u201d Plaintiffs performance under the agreement occurred largely in the forum state. We thus find Phoenix distinguishable and not controlling. We further find the requisite quantity of contacts adequately evidenced.\nB. Nature and Quality of Contacts\nGenerally, \u201c[application of the \u2018minimum contacts\u2019 rule \u2018will vary with the quality and nature of the defendant\u2019s activity.\u2019 \u201d Chadbourn, Inc. v. Katz, 285 N.C. 700, 705, 208 S.E. 2d 676, 679 (1974) (quoting Hanson v. Denckla, 357 U.S. 235, 2 L.Ed. 2d 1283, 78 S.Ct. 1228 (1958)). \u201cThe existence of minimum contacts, therefore, depends upon the particular facts of each case.\u201d Chadbourn, Inc., supra, 285 N.C. at 705, 208 S.E. 2d at 679; see also Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437, 96 L.Ed. 485, 72 S.Ct. 413 (1952).\nHere, defendant entered into a franchise agreement with plaintiff whereby defendant would receive rights to the patented trademark of Harrelson SUPERTREAD for selling recapped tires. The franchise agreement shows that the parties anticipated a long business relationship. The term of the agreement was for\nthe life of any United States Patent application disclosing and claiming the Harrelson SUPERTREAD Process and for the life of the last to expire of any United States Patent covering the SUPERTREAD Process, and thereafter for so long as Franchisee [defendant] uses the Harrelson Supertread and/or Harrelson Trademark(s) and service mark(s), unless terminated sooner as provided hereinafter.\nSince patents generally have a lengthy life, see 69 C.J.S. Patents \u00a7 164 (1951), and the term of the agreement extended even beyond expiration of plaintiffs patents if defendant continued to use plaintiffs trademarks or service marks, the parties clearly contemplated continuing, systematic activity. In Styleco, Inc. v. Stoutco, Inc., 62 N.C. App. 525, 302 S.E. 2d 888, disc. rev. denied, 309 N.C. 825, 310 S.E. 2d 358 (1983), this Court upheld personal jurisdiction over a foreign corporation on the ground, inter alia, that \u201cthis was not a single-item contract but the parties anticipated they would have a \u2018long, profitable relationship.\u2019 \u201d Id. at 529, 302 S.E. 2d at 891.\nDefendant relies on Andrews Associates v. Sodibar Systems, 28 N.C. App. 663, 222 S.E. 2d 922, disc. rev. denied, 289 N.C. 726, 224 S.E. 2d 676 (1976), in which the defendant\u2019s only contact with the forum state was that on two occasions it entered separate contracts, in Washington, D.C., with a North Carolina business association for delivery of certain goods by plaintiff from plaintiffs North Carolina warehouse. On the ground that there was \u201c[n]o . . . continuing contractual relationship connecting defendant with the forum State,\u201d id. at 669, 222 S.E. 2d at 926, this Court reversed an order finding personal jurisdiction.\nThe facts here are different from those in Andrews. The franchise agreement here states:\nWhereas, Franchisee [defendant] desires to retread tires for certain types of vehicles by the Harrelson SUPERTREAD Process and to market the tires it so retreads, using the commercial benefits of the Harrelson and SUPERTREAD names . . . Franchisor\u2019s technical knowhow, management and marketing expertise . . . commercial reputation of Franchisor . . . and [wjhereas, Franchisee desires the privilege of being a Vendee Franchisor with respect to certain materials and accessories and supplies marketed by the Franchisor ....\nThis and other language clearly evidences that the parties contemplated a continuing contractual business relationship, not one or two isolated transactions. The evidence also shows, and the court found without exception, shipments pursuant to the agreement \u201con several occasions,\u201d not just one or two.\nThe promissory note further evidences the nature and quality of defendant\u2019s contacts. Defendant therein promised:\n[T]o pay to the order of [plaintiff] at its office in Asheboro, North Carolina, the principal sum of [$38,316.24] with interest on principal after the maturity ... in ... 36 equal monthly installments of $1,064.34 ... on the 20th day of each month.\n(Emphasis supplied.) The note thus contemplates repetitive activity occurring in the forum state.\nThe facts in Wohlfahrt, supra, were similar to those here with respect to the promissory note. There plaintiffs sued a nonresident defendant for $43,500, the balance allegedly due under the terms of a note executed incident to defendant\u2019s purchase of various articles of medical equipment from plaintiffs. Defendant appeared specially and moved to dismiss for lack of jurisdiction over his person. This Court held that exercise of jurisdiction over defendant would not offend due process. It stated:\n[D]ue process depends upon whether it is fair and reasonable to require a non-resident defendant to litigate the particular case involved in the forum state. Requiring the defendant to litigate his obligation under the note here seems entirely fair to us. He is the one that promised to make the note payments here, and in doing so he must have anticipated that here is where he would be sued if the payments were not made.\nWohlfahrt, supra, 66 N.C. at 694, 311 S.E. 2d at 688.\nIn Trust Co. v. McDaniel, 18 N.C. App. 644, 197 S.E. 2d 556 (1973), this Court held that \u201c[w]here the nonresident defendant promises to pay the debt of another, which debt is owed to North Carolina creditors, such promise is a contract to be performed in North Carolina and is sufficient minimal contact upon which this State may assert personal jurisdiction over the defendant.\u201d Id. at 647, 197 S.E. 2d at 558 (citing Koppers Co., Inc. v. Chemical Corp., 9 N.C. App. 118, 175 S.E. 2d 761 (1970)). A promise by a defendant to pay his own debt to a North Carolina creditor at its North Carolina offices is a fact which should have some bearing, when considered together with the other facts in the case, in determining whether sufficient minimum contacts exist upon which to assert jurisdiction.\nDefendant relies in part on Buying Group, Inc., supra. The facts there differ significantly, however, from those here. There our Supreme Court held that our courts had no jurisdiction over a nonresident who merely co-signed a note guaranteeing payment of his brother\u2019s indebtedness to plaintiff. It found that the nonresident brother held \u201cno attending commercial benefits to himself enforceable in the courts of North Carolina.\u201d Buying Group, Inc., supra, 296 N.C. at 517, 251 S.E. 2d at 615. By contrast, defendant here was not an accommodation third party co-signer with \u201cno attending commercial benefits to himself enforceable in the courts of North Carolina.\u201d He was, instead, a signatory to a franchise agreement which clearly contemplated continuing systematic business activity between himself and plaintiff. The activity on plaintiffs part was to occur largely within North Carolina. Such activity in fact occurred \u201con several occasions.\u201d Defendant promised to make its payments to plaintiff at its North Carolina offices. Defendant clearly could have enforced its \u201cattending commercial benefits\u201d under the agreement in the courts of North Carolina. The cases thus are readily distinguishable.\nWe find the nature and quality of defendant\u2019s contacts with this state sufficient that exercise of in personam jurisdiction over him by its courts does not offend traditional notions of fair play and substantial justice.\nC. Source and Connection of the Cause of Action with Defendant\u2019s Contacts\nThe causes of action asserted here \u2014 for breach of the franchise agreement to pay for services, balance due on open account for goods delivered, default on the note, and royalty fees per pound due on the precured tread rubber and cement furnished defendant by plaintiff \u2014 arise from the franchise agreement. By entering the agreement, defendant requested precured tread rubber and cement from plaintiff, which was to be delivered from plaintiffs North Carolina plants. Defendant also promised to pay the note to plaintiff at plaintiffs Asheboro office. Moreover, the franchise agreement entitles defendant franchisee to receive $500 for\neach modification and/or improvement disclosed by Franchisee to Assignor or Licensor of Franchisor hereunder, and on which Assignor or Licensor of Franchisor files an application for patent.\nAs noted, the agreement contemplated a continuing contractual relationship over an extended period of time, not one or two isolated transactions. Plaintiff in fact shipped goods to defendant, pursuant to defendant\u2019s request under the agreement, on \u201cseveral occasions,\u201d not just one or two. Repetitive activity in the forum state thus was contemplated by the agreement and in fact occurred. There were \u201cattending commercial benefits\u201d to defendant under the agreement, which defendant could have enforced in the courts of the forum.\nWe thus find that the source of the causes asserted here is in defendant\u2019s contacts with the forum state, primarily the franchise agreement which established a continuing contractual relationship over an extended period of time with a corporate citizen of the forum state; and that the causes are substantially connected with defendant\u2019s contacts.\nD. Interest of the Forum State\n\u201cAny state has a general interest in providing a forum for its residents to settle disputes in which they are involved.\u201d Fieldcrest Mills, Inc. v. Mohasco Corp., 442 F. Supp. 424, 428 (M.D.N.C. 1977).\nNorth Carolina has a legitimate interest in the establishment and operation of enterprises and trade within its borders and the protection of its residents in the making of contracts with persons and agents who enter the state for that purpose.\nByham v. House Corp., 265 N.C. 50, 60, 143 S.E. 2d 225, 234 (1965).\nAs a result of the franchise agreement and promissory note, the nonresident defendant allegedly is indebted to plaintiff, a corporate citizen of this state which was to perform its obligations largely within this state, for approximately $47,000 plus the amount due as royalty fees. The relationship between the parties under the franchise agreement, which was to be performed substantially within this state, together with defendant\u2019s obligation under the note, constituted the establishment of trade within this state. The fact that defendant never was physically present in this state should not control. As stated in McGee v. International Life Insurance Co., 355 U.S. 220, 222-23, 2 L.Ed. 2d 223, 226, 78 S.Ct. 199, 201 (1957), \u201c[t]oday many commercial transactions touch two or more States and may involve parties separated by the full continent.\u201d By entering the franchise agreement, defendant established a relationship with a corporate citizen of this state, which citizen was to perform and partially did perform largely within this state. This state thus has an interest in providing plaintiff, its corporate citizen, with access to its courts to enforce the agreement.\nE. Convenience\nLitigation on interstate business transactions inevitably involves inconvenience to one of the parties. The inconvenience to defendant of litigating in North Carolina is no greater than would be the inconvenience to plaintiff of litigating in Virginia. Under all the circumstances of this case, we find no convenience factors which are determinative of the jurisdictional issue.\nV.\nThe ultimate test for determining the existence of personal jurisdiction over a nonresident defendant is basic fairness. Because the franchise agreement established a continuing contractual relationship with a corporate citizen of this state which was to extend over a considerable period of time, the performance of which was to occur largely in this state, and which contains clear \u201cattendant commercial benefits\u201d to defendant, we perceive no unfairness inherent in requiring defendant to litigate in this state the causes asserted. Indeed, we believe it would be unfair to plaintiff if it could not litigate those causes here.\nFor the reasons and pursuant to the authorities set forth above, we thus hold that the courts of this state have statutory authority to assert personal jurisdiction over the nonresident defendant in this action; that it is fair and reasonable to require him to litigate the matter here; and that the exercise of the statutory authority to assert personal jurisdiction thus comports with the requirements of due process. Accordingly, the order of dismissal is reversed, and the cause is remanded for further proceedings.\nReversed and remanded.\nJudges Arnold and Eagles concur.",
        "type": "majority",
        "author": "WHICHARD, Judge."
      }
    ],
    "attorneys": [
      "Beck, O\u2019Briant and O\u2019Briant, by Adam W. Beck, for plaintiff appellant.",
      "Moser, Ogburn, Heafner & Miller, by D. Wescott Moser and Michael C. Miller, for defendant appellee."
    ],
    "corrections": "",
    "head_matter": "HARRELSON RUBBER COMPANY v. BOBBY LEE LAYNE, SR. d/b/a BOBBY LAYNE TIRE AND RECAPPING\nNo. 8319SC1001\n(Filed 17 July 1984)\n1. Process \u00a7 9\u2014 nonresident defendant \u2014 in personam jurisdiction \u2014statutory authority\nG.S. 1-75.4(5) conferred authority on the courts of N. C. to exercise personal jurisdiction over nonresident defendant, where the evidence tended to show that the parties had a franchise agreement whereby defendant, a Virginia citizen who conducted his business there, was given the right to use a patented retreading process which plaintiff, a Delaware corporation with its principal place of business in Asheboro, developed; plaintiff prepared and mailed its \u201cProcess Operating Manual\u201d to defendant from N. C.; plaintiff manufactured precured tread rubber and cement for defendant in N. C.; all services provided for in the parties\u2019 franchise agreement were performed or to be performed by plaintiff from either of its N. C. plants or its offices in Asheboro; the materials and retreading equipment purchased by defendant from plaintiff were all shipped from N. C.; and a promissory note signed by defendant was to be paid to plaintiff at its Asheboro offices in thirty-six monthly installments.\n2. Constitutional Law \u00a7 24.7; Process \u00a7 9.1\u2014 nonresident defendant \u2014 minimum contacts \u2014personal jurisdiction \u2014no violation of due process\nDefendant nonresident had sufficient minimum contacts with this State and the nature and quality of his contacts were such that exercise of personal jurisdiction over him did not violate his right to due process where plaintiff resident and defendant had an ongoing vendor-vendee relationship authorized by their franchise agreement; defendant made purchases from plaintiff on several occasions; defendant agreed to make payments on its promissory note at plaintiffs N. C. offices; and plaintiffs performance under the agreement occurred largely in this State.\nAPPEAL by plaintiff from Beaty, Judge. Order entered 3 August 1983 in Superior Court, RANDOLPH County. Heard in the Court of Appeals 7 June 1984.\nBeck, O\u2019Briant and O\u2019Briant, by Adam W. Beck, for plaintiff appellant.\nMoser, Ogburn, Heafner & Miller, by D. Wescott Moser and Michael C. Miller, for defendant appellee."
  },
  "file_name": "0577-01",
  "first_page_order": 605,
  "last_page_order": 615
}
