SMITH V. HALLIBURTON CO., 1994-NMCA-055,
118 N.M. 179, 879 P.2d 1198 (Ct. App. 1994)
VIRLON L. SMITH, SR., Individually and
as Personal
Representative of the Estate of DENNIS SMITH,
Deceased; ABEL CABELLO; and FIFTY-FIVE WELL
SERVICING, INC., Plaintiffs-Appellants,
vs.
HALLIBURTON COMPANY and STEVENS & TULL, INC.,
Defendants-Appellees, and DANA CORPORATION; WILSON
MANUFACTURING CO., a Subsidiary of Dana
Corporation; WILSON-WICHITA, INC.; and
HARTFORD ACCIDENT AND INDEMNITY
COMPANY,
Cross-Defendants-Appellees, and GREGORY RIG SERVICE AND
SALES, INC.,
Defendant-Cross-Claimant-Appellant.
COURT OF APPEALS OF NEW MEXICO
1994-NMCA-055, 118 N.M. 179, 879 P.2d 1198
APPEAL FROM THE DISTRICT COURT OF LEA
COUNTY. Alvin F. Jones, District Judge
Petition for Writ of Certiorari Filed
July 14, 1994, Denied August 10, 1994
Mark Stout, Lowell Stout, Stout &
Stout, Hobbs, New Mexico, Attorneys for Plaintiffs-Appellants Virlon L. Smith,
Sr., Individually and as Personal Representative of the Estate of Dennis Smith,
Deceased, and Abel Cabello.
Harold L. Hensley, Jr., James M. Hudson,
Hinkle, Cox, Eaton, Coffield & Hensley, Roswell, New Mexico, Attorneys for
Plaintiff-Appellant Fifty-Five Well Servicing, Inc.
C. Barry Crutchfield, Templeman &
Crutchfield, Lovington, New Mexico, Attorneys for
Defendant-Cross-Claimant-Appellant Gregory Rig Service and Sales, Inc.
John A. "Jad" Davis, Jr., Kemp,
Smith, Duncan & Hammond, P.C., Midland, Texas. Bruce T. Thompson, Civerolo,
Hansen & Wolf, P.A., Albuquerque, New Mexico, Attorneys for
Defendants-Cross-Defendants-Appellees Dana Corporation, Wilson Manufacturing
Co., and Hartford Accident and Indemnity Co.
{1} Plaintiffs and Defendant
Gregory Rig Service and Sales, Inc. (hereinafter "Plaintiffs") appeal
from a district court decision granting motions for summary judgment and
dismissing an amended complaint based on negligence, breach of warranty, and
products liability and a cross-claim filed by Gregory Rig. We must determine
whether the law of the forum or the law of the state of incorporation controls
Plaintiffs' right to sue Defendant Wilson Manufacturing Co., the actual
manufacturer of the product, and Defendant Wilson-Wichita, Inc., which merged
with Wilson Manufacturing after the product was sold, but dissolved prior to
the date of the accident. We also must determine whether New Mexico has
personal jurisdiction over Defendant Dana Corporation, the parent company. We
conclude that the law of the state of incorporation controls Plaintiffs' right
to sue Wilson Manufacturing and Wilson-Wichita, and that New Mexico lacks
personal jurisdiction over Dana Corporation. Therefore, we affirm the district
court's order.
{2} The amended complaint and
cross-claim arise out of an accident that occurred on April 5, 1989 when the
racking or tubing board separated from the derrick of a well servicing unit.
The complaint alleged that a well servicing unit owned by Plaintiff Fifty-Five
Well Servicing, Inc. was negligently designed or constructed by Gregory Rig,
Dana Corporation, its subsidiaries or predecessors in interest and caused both
personal injuries and property damage.
{3} The material considered
by the district court in granting summary judgment contains the following
undisputed facts relating to the allegations of the complaint. Wilson
Manufacturing manufactured the well servicing unit, which was sold in 1976 to
Fifty-Five Well Servicing. Gregory Rig did certain repair work on the unit
after it was purchased. In 1977, Wilson Manufacturing merged with
Wilson-Wichita, which was incorporated under Delaware law and was a
wholly-owned subsidiary of Dana Corporation. Dana Corporation is a Virginia
corporation with its principal office and place of business in Ohio. The record
indicates that Dana Corporation formed Wilson-Wichita to acquire the assets of
Wilson Manufacturing and another closely-held corporation. Wilson-Wichita had
one director, an officer of Dana Corporation; Wilson-Wichita's secretary was
Dana Corporation's counsel. The record also indicates that Wilson-Wichita
contemplated selling Wilson Manufacturing as soon as possible. Following the
merger, Wilson Manufacturing continued to operate as a division of
Wilson-Wichita, but, in anticipation of the sale, most or all of its assets
were transferred to Wilson Oil Rig Manufacturing Co. (hereinafter
{*182} "WORMCO"). As anticipated,
WORMCO was sold in 1981 to LTV, and Wilson-Wichita was dissolved on December
31, 1981. An escrow account was established from proceeds of the sale of WORMCO
for purposes of paying claims against Wilson-Wichita.
{4} Dana Corporation moved
for an order dismissing the complaint against it for lack of personal
jurisdiction. Dana Corporation also moved for summary judgment on all causes of
action against it. Wilson-Wichita and Wilson Manufacturing also moved to
dismiss the claims against them as barred by Delaware law, which prohibits suit
against Delaware corporations more than three years after dissolution.
Advancing the same arguments, Dana Corporation and Wilson-Wichita both moved to
dismiss the cross-claim.
{5} The district court
granted summary judgment to Dana Corporation, Wilson Manufacturing, and
Wilson-Wichita on the basis that there was no genuine issue of fact to be
submitted; that Plaintiffs' claim against Wilson-Wichita was barred under
Delaware law; that New Mexico lacked personal jurisdiction over Dana
Corporation; and that Defendants were entitled to summary judgment as a matter
of law. The court also determined that the claims against Hartford Accident and
Indemnity Co. were moot. The parties apparently agree that the district court's
ruling effectively disposed of the claim against Wilson Manufacturing. The
complaint and cross-claim against Dana Corporation, Wilson-Wichita, Wilson
Manufacturing, and Hartford Accident and Indemnity Company were dismissed with
prejudice. Plaintiffs have appealed, claiming that the district court erred in
granting summary judgment because (1) New Mexico, not Delaware, law should have
been applied to determine whether their claim survived the dissolution of
Wilson-Wichita; and (2) the district court did have personal jurisdiction over
Dana Corporation for various reasons.
{6} Summary judgment is a
remedy to be used only when there are no genuine issues of material fact so
that the movant is entitled to judgment as a matter of law.
Roth v.
Thompson, 113 N.M. 331, 334,
825 P.2d 1241, 1244 (1992); SCRA 1986,
1-056(C) (Repl. 1992). If there is no dispute regarding facts and only the
legal effect of the facts remains to be determined, summary judgment is
appropriate.
Gardner-Zemke Co. v. State, 109 N.M. 729, 732,
790 P.2d
1010, 1013 (1990). The parties appear to agree that the material facts are not
in issue. Rather, they disagree on the proper application of the law to the
facts.
{7} We discuss the issues as
Plaintiffs have argued them. However, we believe the issues raised are related.
{8} Plaintiffs in products
liability actions such as this one initially must persuade the court of the
chosen forum that it has personal jurisdiction. That may not be an easy task.
If the successor corporation is a foreign corporation, an injured plaintiff may
have difficulty obtaining personal jurisdiction over the successor in a
convenient forum.
See Miller v. Honda Motor Co., 779 F.2d 769, 772 (1st
Cir. 1985).
As a general rule, the mere relationship of parent
corporation and subsidiary corporation is not in itself a sufficient basis for
subjecting both to the jurisdiction of the forum state, where one is a
nonresident and is not otherwise present or doing business in the forum state.
A foreign parent corporation is not subject to the jurisdiction of the forum
state merely because of its ownership of the shares of stock of a subsidiary
doing business in the state. Ownership coupled with other factors may, however,
give rise to a sufficient jurisdictional basis.
2 James W. Moore et al., Moore's Federal Practice P
4.41-1[6], at 4-370 to -371 (2d ed. 1993) (footnotes omitted).
{9} We first address the
question of whether Delaware law controls the effect of Wilson-Wichita's
dissolution, not only because Plaintiffs make that argument first, but also because
we think their argument concerning Dana Corporation arises in part out of that
{*183} company's relationship with
Wilson-Wichita. In other words, Plaintiffs ask us to find that New Mexico has
personal jurisdiction over Dana Corporation in part because of that entity's
relationship to its subsidiary. If Plaintiffs' cause of action against
Wilson-Wichita survives, they would not need to rely on New Mexico's exercise
of personal jurisdiction over Dana Corporation. If it does not, that might be a
factor in considering the existence of personal jurisdiction over the parent
corporation.
A. Which State's Law Controls the Amenability of
Wilson-Wichita and Wilson Manufacturing to Suit
{10} In this case, Plaintiffs
seek to impose liability on Wilson-Wichita, with which Wilson Manufacturing
merged, for a product the latter sold before the merger. We assume but need not
decide that Plaintiffs would have been entitled to assert successor liability
against Wilson-Wichita as a successor to Wilson Manufacturing. Because
Wilson-Wichita was dissolved more than three years prior to the filing of this
action, and because we conclude that Delaware law controls the effect of
dissolution, we need not decide whether, but for the dissolution,
Wilson-Wichita would have been subject to successor liability, nor whether its
predecessor's contacts with New Mexico were attributable to it for purposes of
New Mexico acquiring personal jurisdiction.
See City of Richmond v. Madison
Management Group, Inc., 918 F.2d 438, 454-55 (4th Cir. 1990) (discussing
authority and reasons behind rule permitting imputation of a predecessor's
actions upon its successor for purposes of liability as well as jurisdiction).
{11} Plaintiffs contend that
New Mexico law, rather than Delaware law, should be applied to the dissolution
of Wilson-Wichita. Based on that contention, they argue that the district court
erred in concluding that their cause of action was barred. We disagree.
{12} Under common law, all
actions to which a corporation was a party were abated upon dissolution of that
corporation.
Oklahoma Natural Gas Co. v. Oklahoma, 273 U.S. 257, 259, 71
L. Ed. 634, 47 S. Ct. 391 (1927). That rule produced a harsh result for those
who had filed suit against a corporation before its dissolution. In order to
ease that harsh effect, a number of states have enacted corporate survival
statutes to extend the period for settling claims against a dissolved
corporation.
See id.; see also 3
Model Business Corporation Act
Annotation § 14.07, at 1505 (3d ed. 1993 Supp.). The majority of those
statutes have a specified time in which suit can be brought against a dissolved
domestic corporation. 3
Model Business Corporation Act Annotated, supra
§ 14.07, at 1505;
see also 16A William M. Fletcher,
Fletcher
Cyclopedia of the Law of Private Corporations § 8143, at 443-45 (Rev. Vol.
1988) [hereinafter
Fletcher]. The period during which actions may be
brought against a dissolved corporation varies from two to five years. 3
Model
Business Corporation Act Annotated, supra § 14.07, at 1505. Delaware law is
illustrative. Delaware law provides that a Delaware corporation is open to suit
for three years following the dissolution of the corporation, and after three
years, all suits are barred. Del. Code Ann. tit. 8, § 278 (Repl. Vol. 1991).
"Ten jurisdictions place no express time limit on survival of remedies . .
. ." 3
Model Business Corporation Act Annotated, supra § 14.07, at
1505. New Mexico is within this group.
Id.
{13} Plaintiffs argue that
corporate dissolution or survival statutes and statutes of limitation are
analogous. They urge us to apply New Mexico law on the ground that the
statutory period within which suit may be brought against a dissolved
corporation is a procedural provision, and the law of the forum should control.
See Nez v. Forney, 109 N.M. 161, 162,
783 P.2d 471, 472 (1989) (New
Mexico courts are to apply the forum state's statute of limitations).
Plaintiffs' argument, however, is contrary to conventional wisdom. "The
statutory period has been construed as a limitation upon the capacity to sue or
be sued rather than as a statute of limitations." 16A
Fletcher, supra
§ 8144, at 459. Our research indicates that the majority of other jurisdictions
{*184} have determined that corporate
survival statutes are not procedural provisions that are analogous to statutes
of limitation; rather, they contain matters to be controlled by the law of the
state of incorporation.
See, e.g., Sedgwick v. Beasley, 84 U.S. App.
D.C. 325, 173 F.2d 918, 919 (D.C. Cir. 1949);
Indiana Nat'l Bank v.
Churchman, 564 N.E.2d 340, 342 (Ind. Ct. App. 1990) ("the statute
gives life to a right otherwise destroyed.");
Leviathan Gas Pipeline
Co. v. Texas Oil & Gas Corp., 620 So. 2d 415, 418 (La. Ct. App. 1993);
Van
Pelt v. Greathouse, 219 Neb. 478, 364 N.W.2d 14, 20 (Neb. 1985) ("a
statute of limitations relates to the remedy only and not to substantive rights
. . . a survival statute operates on the right or claim itself" (citation
omitted)); 16A
Fletcher, supra § 8167, at 542 (statutes continuing
corporate life after dissolution are not applicable to foreign corporations).
{14} Since we are not bound
by the law of other jurisdictions, however, Plaintiffs urge that this Court
apply New Mexico law by using the interest analysis approach applied by
California in
North American Asbestos Corp. v. Superior Court, 180 Cal.
App. 3d 902, 225 Cal. Rptr. 877 (Ct. App. 1986). In that case, an intermediate
appellate court decided, by a divided panel, that a dissolved Illinois
corporation was subject to suit brought by California residents alleging injury
from asbestos. The defendant corporation conceded that it was licensed to
conduct business in California during the period in which its activities within
California gave rise to the lawsuit. We are not in a position to do as
Plaintiffs ask. Even though New Mexico has not specifically decided whether a
corporate survival statute is procedural or substantive, New Mexico Supreme
Court rule and New Mexico statutes indicate that Delaware law controls the
effect of Wilson-Wichita's dissolution.
{15} New Mexico SCRA 1986,
1-017(B) (Repl. 1992) (Rule 17) states that "the capacity of a corporation
to sue or be sued shall be determined by the law under which it was organized,
unless some statute of this state provides to the contrary." In
Crawford
v. Refiners Co-Operative Ass'n, 71 N.M. 1, 3,
375 P.2d 212, 213 (1962), our
Supreme Court was presented with issues similar to those facing this Court.
Crawford
was decided under the predecessor version of Rule 17, which contained language
identical to the current rule. Following that language, the Court applied
California law, rather than New Mexico law, to determine if the dissolved
corporation could be sued.
Id. Under
Crawford, the law of the
state of incorporation applies, and we are bound by that precedent.
Alexander
v. Delgado, 84 N.M. 717, 718,
507 P.2d 778, 779 (1973).
Plaintiffs suggest that the New Mexico dissolution statute is
a statute that fits the language of Rule 17 as a "statute of this state
that provides to the contrary," and thus New Mexico law should be applied
to the present case. See NMSA 1978, § 53-16-24 (Repl. Pamp. 1983). We
are not persuaded. Rule 17 expresses the general rule. See Sedgwick, 173
F.2d at 919. Further, when statutory language is unambiguous, that language
must be given its clear effect. State v. Jonathan M., 109 N.M. 789, 790,
791 P.2d 64, 65 (1990).
{16} Section 53-16-24
addresses the survival of remedies after the "dissolution of a
corporation." However, that statute is a part of the New Mexico Business
Corporation Act, NMSA 1978, §§
53-11-1 to -18-12 (Repl. Pamp. 1983 & Cum.
Supp. 1992), which defines the term "corporation" to mean "a
corporation for profit subject to the provisions of the Business Corporation
Act,
except a foreign corporation. " (Emphasis added.) Section
53-11-2(A). The legislature has passed laws specific to foreign corporations
which are codified at NMSA 1978, Sections
53-17-1 to -20. Those sections do not
contain a dissolution provision that is inconsistent with Rule 17. We conclude
that Wilson-Wichita is subject to the New Mexico statutes which are specific to
foreign corporations rather than to Section 53-16-24, which controls the
dissolution of New Mexico corporations.
{17} For the foregoing
reasons, Delaware law controls whether Wilson-Wichita is amenable to suit
following dissolution. That being the
{*185}
case, the district court did not err in granting Wilson-Wichita (and Wilson
Manufacturing) summary judgment.
B. Whether New Mexico Has Personal Jurisdiction Over Dana
Corporation
{18} The basic principle
underlying the concept of personal jurisdiction is whether there is a
reasonable basis for a state's exercise of jurisdiction. 1
Restatement
(Second) of Conflict of Laws § 24(1) cmt. b (Supp. 1989). New Mexico's
long-arm statute, NMSA 1978, §
38-1-16 (Repl. Pamp. 1987), extends its
legislative expression of personal jurisdiction to the limits of due process.
Allen
v. Toshiba Corp., 599 F. Supp. 381, 388 (D.N.M. 1984). In New Mexico, under
that statute, personal jurisdiction may be exercised over a nonresident
defendant if three conditions exist: the act complained of is one of the
enumerated acts in the New Mexico long-arm statute; the plaintiff's action
arises out of an enumerated act; and the defendant has established minimum
contacts sufficient to satisfy due process.
Salas v. Homestake Enters.,
Inc., 106 N.M. 344, 345,
742 P.2d 1049, 1050 (1987).
{19} The New Mexico long-arm
statute states:
A. Any person, whether or not a citizen or resident of
this state, who in person or through an agent does any of the acts enumerated
in this subsection thereby submits himself or his personal representative to
the jurisdiction of the courts of this state as to any cause of action arising
from:
(1) the transaction of any business within this state;
(2) the operation of a motor vehicle upon the highways
of this state;
(3) the commission of a tortious act within this state
. . . .
Section 38-1-16(A). Plaintiffs' argument for personal
jurisdiction, although it has several facets or bases, depends upon the
soundness and propriety of imputing the activities of Wilson Manufacturing and
Wilson-Wichita to Dana Corporation. Thus, Plaintiffs are contending that Dana
Corporation either transacted business in this state or committed a tortious
act through its subsidiary.
{20} Plaintiffs bear the
burden of establishing the basis of personal jurisdiction on which they rely.
See
Neagos v. Valmet-Appleton, Inc., 791 F. Supp. 682, 686 (E.D. Mich. 1992);
see
also Swindle v. General Motors Acceptance Corp., 101 N.M. 126, 129,
679
P.2d 268, 271 (Ct. App.) (plaintiff had burden of proving jurisdictional
allegation that co-defendants were "involved in an agent-principal relationship"),
cert. denied, 101 N.M. 77,
678 P.2d 705 (1984). Plaintiffs rely on
findings of fact and conclusions of law from the Texas district court entered
in
Hartford Accident & Indemnity Co. v. LTV Corp., No.
CA-3-82-0679-D (N.D. Tex., filed July 11, 1984), to establish Dana
Corporation's express assumption of liability for the actions of
Wilson-Wichita. We think this reliance is misplaced. On appeal in Texas, Dana
Corporation expressed its concern that the district court's decision might be
misread to say that Dana Corporation had vicarious liability for
Wilson-Wichita. The Fifth Circuit stated that such a reading would be incorrect
because "the trial court had no need of a finding of vicarious liability
as a predicate to its judgment . . . ."
Hartford Accident & Indem.
Co. v. LTV Corp., 774 F.2d 677, 681 (5th Cir. 1985).
{21} Plaintiffs also argue
that Dana Corporation is collaterally estopped from relitigating the issue of
its liability due to the Texas district court's decision. Collateral estoppel
applies only to questions of fact and law actually litigated and necessarily
determined.
Reeves v. Wimberly, 107 N.M. 231, 233,
755 P.2d 75, 77 (Ct.
App. 1988). The district court's decision did not concern Dana Corporation's
liability for Wilson-Wichita's prior activities. Rather, it was a declaratory
judgment action that was concerned with determining whether Dana Corporation or
LTV was responsible for reimbursing Hartford Accident and Indemnity Co. for a
suit filed against Wilson-Wichita prior to its dissolution
{*186}
concerning a rig manufactured prior to the sale of WORMCO to LTV. The
issues litigated in Texas concerned liability pursuant to contract between Dana
Corporation and LTV. Further, we cannot say that Dana Corporation had a full
and fair opportunity in Texas to litigate the issue of express assumption of
liability as it bears upon personal jurisdiction in this case. Therefore, the
doctrine of collateral estoppel does not assist Plaintiffs.
{22} Plaintiffs have urged us
to disregard the corporate structure and allow them to pursue Dana Corporation
as the responsible party.
See Miller, 779 F.2d at 772. They contend in
effect that New Mexico may exercise personal jurisdiction over Dana Corporation
because its subsidiary would be liable in tort as Wilson Manufacturing's
successor.
See City of Richmond, 918 F.2d at 454-55. As noted earlier,
we did not address either the issue of successor liability or personal
jurisdiction regarding Wilson-Wichita because we concluded that Delaware law
controls the effect of dissolution. Regarding Dana Corporation, we need not
address the issue of successor liability because we conclude that New Mexico
lacks personal jurisdiction. We note that the law of successor liability is
expanding the reach of personal jurisdiction over foreign corporations.
See
Simmers v. American Cyanamid Corp., 394 Pa. Super. 464, 576 A.2d 376, 390
(Pa. Super. Ct. 1990) ("In Pennsylvania, it is now the law that when the
successor is subject to the liabilities of its predecessor, the acts of a
predecessor corporation may be attributed to its successor for the purposes of
determining whether jurisdiction is proper."),
appeal denied, 593
A.2d 421,
cert. denied sub nom., Chromalloy Pharmaceutical, Inc. v. Boyer,
502 U.S. 813, 116 L. Ed. 2d 38, 112 S. Ct. 62, 112 S. Ct. 63 (1991). Even under
the most expansive view of personal jurisdiction, however, Plaintiffs have not
shown a basis on which New Mexico may exercise its jurisdiction over Dana
Corporation in this lawsuit.
{23} It has been suggested
that there are basically two principles by which corporate form may be
disregarded for purposes of determining whether a parent corporation is
amenable to service of process in the forum state by reason of acts within that
state by a subsidiary corporation or other agent.
See 2
Moore's
Federal Practice, supra P 4.41-1[6], at 4-371 to -372. One is the principle
of agency,
see, e.g., Allen, 599 F. Supp. at 390, and the other requires
such dominion and control that one corporation is the alter ego of the other,
see,
e.g., Rollins Burdick Hunter, Inc. v. Alexander & Alexander Servs., Inc.,
206 Cal. App. 3d 1, 253 Cal. Rptr. 338, 342-43 (Ct. App. 1988);
Scott v. AZL
Resources, Inc., 107 N.M. 118, 121,
753 P.2d 897, 900 (1988) (discussing
requirements for piercing the corporate veil as including a showing of
instrumentality or domination and improper purpose). These two principles may
reflect the approach taken in
Cannon Manufacturing Co. v. Cudahy Packing
Co., 267 U.S. 333, 336-37, 69 L. Ed. 634, 45 S. Ct. 250 (1925) (in
determining whether parent and subsidiary are separate entities for purposes of
jurisdiction, the question is whether parent and subsidiary are separate and
distinct corporate entities). That is, the law of agency and the concept of
piercing the corporate veil may have provided useful exceptions to the holding
in
Cannon Manufacturing Co. and allowed a court to determine that a
parent and its subsidiary were not truly separate. In this case, Plaintiffs
failed to produce evidence sufficient to rebut Dana Corporation's prima facie
showing of separateness, and thus neither of these principles is applicable.
{24} Another, newer
jurisdictional basis over a foreign corporation has been characterized as a
"corporate theory," de facto merger, or continuation of the corporate
entity theory.
See Fehl v. S. W. C. Corp., 433 F. Supp. 939, 944 (D.
Del. 1977).
Certain principles of substantive law with respect to
the assumption by successor corporations of products liability are relevant to
this jurisdictional question . . . . Common to the scope of both jurisdiction
and liability is the fairness of making a corporation which enjoys the benefit
of {*187} business within the state
answerable in that jurisdiction for wrongdoing associated with that business.
Id. at 945. Under this theory, jurisdiction would be
based on Dana Corporation's acquisition of Wilson Manufacturing's assets and
liabilities and on its contacts with New Mexico. See Johnston v. Pneumo
Corp., 652 F. Supp. 1402, 1405 (S.D. Miss. 1987). Even under the corporate
theory, however, contacts with a forum state are not attributed or imputed to a
successor corporation solely through acquisition of assets and liabilities, Johnston,
652 F. Supp. at 1405, although there are differences in the application of this
theory, see City of Richmond, 918 F.2d at 454-55. In connection with
establishing liability, for example, it has been said: "'The test is not
the continuation of the business operation, but the continuation of the
corporate entity.'" See Goucher v. Parmac, Inc., 694 P.2d 953, 954
(Okla. Ct. App. 1984), cert. denied (January 23, 1985) (quoting Pulis
v. United States Elec. Tool Co., 561 P.2d 68, 71 (Okla. 1977)). Plaintiffs
have not shown that under existing case law the corporate theory would support New
Mexico's assertion of personal jurisdiction over Dana Corporation. See
Johnston, 652 F. Supp. at 1406; Fehl, 433 F. Supp. at 947.
{25} Plaintiffs also argue
that New Mexico has personal jurisdiction over the manufacturer of the well
servicing unit in question under "whatever entity name the rig was
manufactured" because the rig in question was sold for use in New Mexico.
They assert that when a manufacturer voluntarily chooses to sell his product so
it will be resold from dealer to dealer, he cannot reasonably claim surprise at
being held to answer in any state for damage the product causes,
Blount v. T
D Publishing Corp., 77 N.M. 384, 390,
423 P.2d 421, 425 (1966), and that
jurisdiction should attach to
any successor corporation. This argument
is closely related to the argument that we may disregard the corporate
structure. That is, both arguments ask us to expand the reach of New Mexico's
jurisdiction beyond existing case law as a matter of sound public policy. For
the following reasons, we may not.
{26} "A state has power
to exercise judicial jurisdiction over a foreign corporation . . . where the
foreign corporation has such a relationship to the state that it is reasonable
for the state to exercise such jurisdiction." 1
Restatement (Second) of
Conflict of Laws § 52 (1971). Our understanding of what is reasonable in
this context has greatly expanded since
Cannon Manufacturing Co. was
decided. As our Supreme Court noted over thirty years ago, "[a] more
liberal policy has grown up over the years with respect to what affords due
process as to a foreign corporation doing business in another state than that
of its creation."
State ex rel. Grinnell Co. v. MacPherson, 62 N.M.
308, 315,
309 P.2d 981, 986,
cert. denied, 355 U.S. 825, 2 L. Ed. 2d 39,
78 S. Ct. 32 (1957). The touchstone is whether there have been "sufficient
minimum contacts,"
Sanchez v. Church of Scientology, 115 N.M. 660,
664,
857 P.2d 771, 775 (1993), determined by purposeful activity. "The
purposeful activity requirement assumes that a defendant will not be subject to
jurisdiction solely as a result of random, fortuitous, or attenuated
contacts."
Id.
{27} Plaintiffs have not
shown sufficient minimum contacts to satisfy Dana Corporation's right to due
process. Not only was the successor subsidiary dissolved prior to the cause of
action arising, but also the predecessor company in effect was sold, in
conjunction with the dissolution, to another company. We recognize that
plaintiffs are in a difficult position, one not infrequently confronted by plaintiffs
injured by products many years after the maker of the product has sold it into
interstate commerce.
See generally Janet B. Fierman, Note,
Assumption
of Products Liability in Corporate Acquisitions, 55 B.U. L. Rev. 86 (1975).
"When the manufacturer of a defective product has been acquired by another
business prior to an individual's injury and the manufacturer has dissolved, a
question arises as to whether the successor business can be held liable for the
torts of its predecessor."
Id. at 86. This creates a conflict in
the policies underlying various relevant legal principles.
Under strict products liability law, a manufacturer is
liable for the harm caused {*188} to
persons injured by any defective or dangerous products it has sold. In most
jurisdictions today, a plaintiff's cause of action accrues at the time of
injury regardless of the time the defective product left the manufacturer's
control. If, between the time of the sale of the product to the plaintiff and
the time of the plaintiff's injury, the manufacturer has sold its assets to
another business and has dissolved, the plaintiff may try to attach the
manufacturer's liability to the successor corporation. A number of products
liability policies favor a general rule of imposition of liability on successor
corporations. A successor corporation may have more resources than an injured
user; generally, it has responsibility for improving the product and has
benefitted from past sales. Yet, a number of corporate law policies favor a
general rule of nonimposition of liability on successor corporations. A
successor corporation, for planning and insurance purposes, needs to know the
extent of liability assumed.
{28} Dana Corporation had no
reason to anticipate defending a lawsuit more than three years later in New
Mexico. The initial acquisition of Wilson Manufacturing appears to have been an
investment for a limited time and purpose. Dana Corporation had no significant
opportunity either to improve the product or benefit from past sales. Thus, we
think the policies behind successor liability are outweighed by the corporate
law policies against imposition of liability.
{29} Plaintiffs also argue
that Dana Corporation "by assuming the corporate name 'Wilson
Manufacturing Co., a subsidiary of Dana Corporation', is jointly and severally
liable for any liabilities incurred or arising as a result of doing business as
Wilson Manufacturing Co. by reason of Section
53-18-9 N.M.S.A. 1978."
However, that statute provides that one who holds himself out as a corporation
is personally liable for his acts if, in fact, there is no corporation:
"All persons who assume to act as a corporation without authority to do so
are jointly and severally liable for all debts and liabilities incurred or arising
as a result thereof." Section 53-18-9. Section 53-18-9 does not provide
any basis for finding personal jurisdiction over Dana Corporation.
{30} Section 53-18-9 is based
on Section 146 of the Model Business Corporations Act and is intended to
abolish the doctrine of de facto corporations.
See T-K Distribs., Inc. v.
Soldevere, 146 Ariz. 150, 704 P.2d 280, 282 (Ariz. Ct. App. 1985)
(recognizing that the adoption of Section 146 abolished de facto corporations);
Timberline Equip. Co. v. Davenport, 267 Ore. 64, 514 P.2d 1109, 1110-11
(Ore. 1973) (en banc) (comparing Oregon law and noting that the comment to
Section 146 indicates the section was intended to negate the doctrine of de
facto incorporation).
{31} Finally, Plaintiffs
argue that this Court should apply the equitable trust theory, otherwise known
as the trust fund doctrine. Prior to the enactment of dissolution statutes, the
equitable trust theory was created to provide some relief to creditors of
dissolved corporations.
See George I. Wallach,
Products Liability: A
Remedy in Search of a Defendant--The Effect of a Sale of Assets and Subsequent
Dissolution on Product Dissatisfaction Claims, 41 Mo. L. Rev. 321, 328
(1976). The theory allowed creditors of a dissolved corporation to look to a
third party who had received the assets of the corporation to satisfy their
claim so long as the assets were traceable and had not been acquired by a bona
fide purchaser.
Hunter v. Fort Worth Capital Corp., 620 S.W.2d 547, 550
(Tex. 1981). Now, however, the adoption of corporate dissolution statutes has
supplanted the equitable trust theory in most jurisdictions.
See id.
Recently the New Mexico Supreme Court specifically declined to join the
minority of jurisdictions in adopting that theory.
Smith v. Cox, 113
N.M. 682, 684,
831 P.2d 981, 983 (1992).
{32} Wilson-Wichita was
properly dismissed from this suit because the Delaware dissolution statute
controls and more than three years have passed since Wilson-Wichita's
{*189} dissolution. The same rationale applies
to the dismissal of Wilson Manufacturing, which had merged into Wilson-Wichita.
Dana Corporation was also properly dismissed because New Mexico courts lack
personal jurisdiction. The district court's decision is affirmed.
PAMELA B. MINZNER, Chief Judge