decided: September 22, 1975.
ACTION INDUSTRIES, INC.
Appeal from order of Court of Common Pleas, Civil Division, of Allegheny County, Jan. T., 1974, No. 1699, in case of Action Industries, Inc. v. Walter J. Wiedeman, a/k/a Walt Wiedeman.
Clifford L. Tuttle, Jr., with him J. Jerome Mansmann, Carol Los Mansmann, and Mansmann & Mansmann, for appellant.
John M. Crimmins, with him Paul H. Titus, Sholom D. Comay, and Kaufman & Harris, for appellee.
Watkins, P. J., Jacobs, Hoffman, Cercone, Price, Van der Voort, and Spaeth, JJ. Opinion by Spaeth, J.
[ 236 Pa. Super. Page 449]
This is an appeal from an order dismissing preliminary objections to jurisdiction and venue.*fn1 Appellant contends that the court did not have in personam jurisdiction over him because he is a nonresident not within
[ 236 Pa. Super. Page 450]
the reach of Pennsylvania's "long-arm" statute, Act of Nov. 15, 1972, P.L. 271, § 8301 et seq., eff. Feb. 13, 1973, 42 Pa. S. § 8301 et seq. (Supp. 1973-74), and that the substituted service used to obtain jurisdiction over him was invalid because the suit was not filed in the county where the action arose as required by Pa. R. C. P. 2077-2079.
On November 9, 1973, appellee filed a complaint in trespass alleging breach of employment duties and conversion by appellant. Since appellant is a resident of Ohio, service was made upon the Department of State. On January 24, 1974, appellant filed preliminary objections to the complaint. Although the objections were properly endorsed with a Notice to Plead within twenty days, appellee did not file a responsive pleading. The court below dismissed the preliminary objections without opinion, and this appeal followed.
Appellant initially asserts that because of appellee's failure to respond to the preliminary objections, the allegations of fact made by the objections must be taken as true, and the objections sustained on that basis. It is true that failure to answer preliminary objections endorsed with a notice to plead constitutes an admission. Goodrich-Amram § 1028(c)-2 (Supp. 1974). Pa. R. C. P. 1029 (b) provides: "(b) Averments in a pleading to which a responsive pleading is required are admitted when not denied specifically or by necessary implication. . . ." It does not follow, however, that the preliminary objections must be sustained; that depends upon the facts that have been admitted. Furthermore, there is no admission of conclusions of law as distinct from allegations of fact. Goodrich-Amram § 1028(c)-2. Cf. Philadelphia & Reading Coal & Iron Co. v. Tamaqua Borough Sch. Dist., 304 Pa. 489, 495, 156 A. 75, 76 (1931); Klerlein v. Fred Werner Co., Inc., 98 Pa. Superior Ct. 440, 446 (1930). Accepting as true the uncontradicted factual allegations of appellee's complaint and the additional factual allegations of appellant's preliminary objections, 2 Anderson
[ 236 Pa. Super. Page 451]
Pennsylvania Civil Practice § 1017.19, the case may be stated as follows.
Appellee is a Pennsylvania corporation with its principal office in Allegheny County. Appellant is a resident of Ohio. On December 17, 1968, appellant and appellee executed an employment contract, effective January 1, 1969, under which appellant was to perform substantial services for appellee in Pennsylvania, specifically in Allegheny County. From January 1, 1969, to July 7, 1971 appellant performed under that contract.
On July 7, 1971, appellant assumed employment duties for appellee in the Plasta-Craft, Inc., plant at 330 Grandview Ave., Wadsworth, Ohio.*fn2 These duties arose in conjunction with an agreement entered into by appellee and Plasta-Craft on July 19, 1969. Under that agreement appellee delivered raw materials to Plasta-Craft, which Plasta-Craft used in the manufacture of plastic household goods for appellee. Appellee retained a purchase money security interest under the Uniform Commercial Code, § 9-101 et seq., in the raw materials and in the goods produced from those materials. At the time of the agreement, appellant was president of Plasta-Craft, as well as an employee of appellee. To protect appellee's security interest, appellant, as an employee of appellee, was charged with the duty of making periodic telephone reports from the Plasta-Craft plant in Ohio to appellee's office in Allegheny County; in these reports appellant would state the quantities of materials and goods on hand at the plant. Appellee relied on appellant to supply accurate information.*fn3
[ 236 Pa. Super. Page 452]
On March 31, 1973, Plasta-Craft ceased operations at the Ohio plant; it is now without any assets and has substantial liabilities. On November 9, 1973, appellee filed the complaint in trespass in this action alleging in two counts that it had lost goods having a value of $98,300 as a result of (1) appellant's breach of his employment duties in that he telephoned false information, and (2) appellant's conversion to his own use of materials and goods in which appellee had a security interest.
In deciding whether appellant is within reach of the long-arm statute, two questions are presented: whether appellant's conduct was within the relevant provisions of the statute; and if it was, whether the exercise of in personam jurisdiction over appellant in the particular circumstances of this case complies with the constitutional mandate of due process of law.
The long-arm statute, supra, contains three sections under which a nonresident individual may be found amenable to suit in Pennsylvania: §§ 8303,*fn4 8304,*fn5 and
[ 236 Pa. Super. Page 4538305]
. The section most applicable to the present case is § 8305: Causing harm by individuals. It provides: "Any nonresident of this Commonwealth who, acting outside of this Commonwealth, individually, under or through a fictitious business name, or through an agent, servant or employee, shall have caused any harm within this Commonwealth on or after August 30, 1970, shall be subject to service of process in any civil action or proceeding in the courts of this Commonwealth arising out of or by reason of any such conduct. Service of process in any such civil action of proceeding shall be effected through the Department of State as provided in this chapter." (Emphasis added.)
The torts asserted in this case -- breach of employment duties by transmission of false information and conversion -- commenced with acts "occurring outside of this Commonwealth," and concluded with economic "harm within this Commonwealth."*fn6 The telephone calls allegedly
[ 236 Pa. Super. Page 454]
conveying false information originated in Ohio, but were received and detrimentally relied upon in Pennsylvania. The goods that were the subject of the alleged conversion were stored in Ohio, but the harm resulting from the loss of the value of the security interest in those goods occurred in Pennsylvania. This harm arose "out of or by reason of" appellant's alleged conduct. § 8305 therefore supports in personam jurisdiction over appellant.*fn7
In deciding whether the exercise of in personam jurisdiction over appellant complies with due process of law, the standard to be applied was set forth in International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) as follows: ". . . 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 maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" The nature of the "minimum contacts" required under this standard was illustrated in McGee v. International Life Insurance Co., 355 U.S. 220 (1957), where the Supreme Court held that due process was satisfied when jurisdiction was exercised over a nonresident corporation whose only contacts with the forum state were that it mailed a life insurance policy to that state and thereafter received the payment of premiums by mail from that state. The standard was further defined one year later when the Court stated that due process requires that a defendant "purposefully avails itself of the privilege of conducting
[ 236 Pa. Super. Page 455]
activities within the forum State, thus invoking the benefits and protections of its laws." Hanson v. Denckla, 357 U.S. 235, 253 (1958).
In applying this standard, the courts have not hesitated to expand the concept of in personam jurisdiction in conjunction with recent developments in modern transportation and communications. Rosen v. Solomon, supra. See McGee v. International Life Insurance Co., supra at 222-23. The standard, however, does not lend itself to mechanical application; it must be applied on a case-by-case basis. Rosen v. Solomon, supra at 919. In Proctor & Schwartz, Inc. v. Cleveland Lumber Co., 228 Pa. Superior Ct. 12, 19, 323 A.2d 11, 15 (1974), this court, per Jacobs, J., has set forth "certain guidelines which aid in the factual analysis necessary to make the determination of whether the requisite 'minimum contacts' are present in a given case." Although these guidelines were promulgated in a case dealing with a foreign corporation, rather than with a nonresident individual, they are also useful in a similar determination for an individual if they are carefully applied.*fn8 The guidelines are as follows:
"First, the defendant must have purposefully availed itself of the privilege of acting within the forum state thus invoking the benefits and protections of its law . . . . Secondly, the cause of action must arise from defendant's activities within the forum state . . . . Lastly, the acts of the defendant must have a substantial enough connection with the forum state to make the exercise of jurisdiction over it reasonable . . . ."
It is evident that in the present case each of these guidelines is satisfied. Appellant voluntarily entered into
[ 236 Pa. Super. Page 456]
a contract to perform substantial services for appellee in Allegheny County; he thus invoked the benefits of Pennsylvania law. His activities occurred in Ohio, but they also occurred in Pennsylvania, for his allegedly false telephone reports were received here, and the economic harm suffered as a result of his alleged conversion was suffered here. Finally, although the long-arm statute may not always reach as far for a nonresident individual as for a foreign corporation, the exercise of jurisdiction in this particular case is reasonable. The Commonwealth unquestionably has an interest in resolving a suit brought to safeguard the rights and property of one of its residents, including a corporate resident. Proctor & Schwartz, Inc. v. Cleveland Lumber Co., supra; Aquarium Pharmaceuticals, Inc. v. Industrial Pressing & Packaging, Inc., 358 F. Supp. 441 (E.D. Pa. 1973). Appellant was not a minor employee of appellee but a business man and president of Plasta-Craft. His contacts with Pennsylvania originated in a commercial setting; and his assumption of his employment duties was actuated by a profit motive. "The emphasis of the [long-arm] statute is upon doing something in Pennsylvania for the purpose of making a profit." McAndrew v. Burnett, 374 F. Supp. 460, 462 (M.D. Pa. 1974). Accord: Stepnowski v. Avery, supra. Appellant's performance in reporting to appellee was unsupervised by any other employee of appellee, so that appellee's reliance on appellant was complete. Appellant must have anticipated that a failure to make accurate reports would have substantial consequences in Pennsylvania. "It is not unreasonable . . . to expect foreign businessmen who involve themselves, to [a significant] degree . . . in commercial transactions with citizens of their state to accept the corresponding burden of accepting service and defending themselves in a court of that state." Aquarium Pharmaceuticals, Inc. v. Industrial Pressing & Packaging, Inc., supra at 445. Moreover, nowhere in the record does it appear that it would be
[ 236 Pa. Super. Page 457]
physically or financially awkward for appellant to defend himself in this state. "Mere inconvenience to the defendant is not sufficient to deny plaintiff the forum of his choice." Proctor & Schwartz, Inc. v. Cleveland Lumber Co., supra at 16. And see Rosen v. Solomon, supra, and Zimmermann v. Zimmermann, supra, where individual defendants from far greater distances than Ohio -- California and Florida, respectively -- were required to defend in Pennsylvania.
The exercise of jurisdiction here is further supported by the decisions in two similar cases. In Southeast Guaranty Trust Co., Ltd. v. Rodman & Renshaw, Inc., 358 F. Supp. 1001 (N.D. Ill. 1973), the defendants' only contact with the forum was their allegedly inaccurate response to one telephone call from a resident Illinois corporation. The court there held that this contact was of such a nature as to satisfy the due process clause, stating: "While this sending into the state of misinformation occurred over the telephone, it cannot be seriously argued that the lack of actual physical presence of the defendant vitiates any finding of jurisdiction." Id. at 1009. In Parise v. AAA Warehouse Corp., 384 F. Supp. 1075 (W.D. Pa. 1974), where suit was brought against an Indiana warehousing corporation for personal injuries suffered by a Pennsylvania resident within the Commonwealth, but resulting from negligent conduct outside the Commonwealth, the required minimum contacts were established on the basis of the annual distribution of 100 advertising brochures within the Commonwealth, and the injury within the Commonwealth caused by the non-resident's negligence. Appellant's contacts were more extensive than in either of these cases.
Our decision today should not be interpreted as a precedent that will subject any non-resident employee of a Pennsylvania corporation to the jurisdiction of our courts. As has been noted, each case will be decided on its particular facts.
[ 236 Pa. Super. Page 458]
The procedure for service of process under the longarm statute is set forth in 42 Pa. S. § 8307.*fn9 Essentially, the requirements are that process shall be served by registered or certified mail upon the Department of State and upon the defendant at his last known address. Here, service was made in compliance with this section by serving the Secretary of the Commonwealth*fn10 by certified mail, and by sending by certified mail a notice of the suit and a copy of the complaint to appellant's last known address in Ohio; the return receipt was signed by appellant's wife.*fn11
[ 236 Pa. Super. Page 459]
For such substituted service to be valid, however, Pa. R. C. P. 2077, 2078 and 2079,*fn12 which relate to actions against nonresident defendants and the use of substituted
[ 236 Pa. Super. Page 460]
service, must also be complied with.*fn13 At issue here is Rule 2078(a), which requires that unless the defendant is personally served, the action must be commenced in "the county in which the cause of action arose." Appellant takes the position that the cause of action, if any, arose in Ohio, where the raw materials and goods were located, where the loss of the raw materials and goods occurred, and where the duties under the alleged employment relationship were to be performed. Although these factual statements may be correct, they are not dispositive.
In a tort action, the cause of action arises where the injury is inflicted. Thus in Emert v. Larami Corp., 414 Pa. 396, 402, 200 A.2d 901, 904 (1964), the Pennsylvania Supreme Court explained:*fn14 ". . . As no actionable tort could have been committed until a person was injured, it seems clear that . . . the cause of action arose in the county where the tort was in fact committed by the infliction of injury. To give to this Rule [a contrary] construction . . . would in many instances confine the provisions of the Rule to the county of a defendant's residence or place of business, whereas it was intended that the Rule should apply where the person was injured, which is quite often the county of residence of the complaining party." Accord : Openbrier v. General Mills, Inc.,
[ 236 Pa. Super. Page 461340]
Pa. 167, 16 A.2d 379 (1940). Cf. Wilk v. Ensign-Bickford Co., 421 Pa. 161, 218 A.2d 778 (1966). See also Rufo v. The Bastian-Blessing Co., 405 Pa. 12, 173 A.2d 123 (1961) (where the court distinguishes between the place of commission of tortious acts on the one hand, and the place where the injury and the cause of action arose on the other hand.)
Count I of the complaint alleges that appellant violated his employment duties by inaccurate telephone reports, as a result of which appellee suffered economic harm in the amount of $98,300. Since this harm was inflicted in Allegheny County, where the telephone reports were received, where appellee maintains its principal office, and where loss of income is registered, the cause of action stated in Count I arose in Allegheny County.
Count II of the complaint alleges that appellant tortiously converted to his own use the goods in which appellee had a security interest, thereby unjustly enriching himself and causing financial injury to appellee. Appellant argues that a cause of action for conversion arises where the goods are converted, here, in Ohio.*fn15 It does not follow, however, that the cause of action may not also arise somewhere else, for the injury suffered may not be inflicted in only one place. Under the particular facts here, that is what happened. The injury from the alleged conversion may be regarded as the physical
[ 236 Pa. Super. Page 462]
loss of the raw materials and goods; but it may equally readily be regarded as exactly the same as the injury inflicted by the inaccurate telephone reports -- economic harm in the form of the loss of the value of appellee's security interest, suffered in Allegheny County. The reason for the "place of injury" rule is that the injured plaintiff should be allowed to choose the forum of the injury rather than being limited to the forum of the defendant's convenience. This reason is as persuasive in a case of conversion as it is in a case of negligence.
The order of the lower court is affirmed.