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CHURCHILL CORPORATION v. THIRD CENTURY (08/15/90)

filed: August 15, 1990.

CHURCHILL CORPORATION, APPELLANT,
v.
THIRD CENTURY, INC., A/K/A CHASE THIRD CENTURY LEASING COMPANY, INC., APPELLEE. BENSON FISHMAN, INDIVIDUALLY AND TRANSMEDIA, INC., D/B/A PROFESSIONAL MARKETING ADVISORS, APPELLEES, V. THIRD CENTURY, INC. A/K/A CHASE THIRD CENTURY LEASING COMPANY, INC., APPELLANT



COUNSEL

John F. Peoples, Broomall, for Churchill Corp. and Fishman, et seq.

Michael Coughlin, Blue Bell, for Third Century, Inc.

Cavanaugh, Rowley and Hudock, JJ.

Author: Cavanaugh

[ 396 Pa. Super. Page 317]

This consolidated appeal involves two cases in which small Pennsylvania companies who had each leased a single office machine from Chase Third Century Leasing Co., Inc., a Missouri corporation doing business in Pennsylvania, sought to enjoin that company from bringing suits against them in a rural Missouri county. The Courts of Common Pleas in Philadelphia and Montgomery counties reached inconsistent decisions in these factually similar cases. After an extensive review of applicable Pennsylvania, Missouri, and federal law relating to jurisdiction and due process, choice of law, and the enforceability of forum selection clauses, we conclude that the Court of Common Pleas of Philadelphia County was correct in enjoining Third Century from pursuing its Missouri suit and that the Court of Common Pleas of Montgomery County erred in not doing the same. Therefore the injunction entered September 13, 1989 in the Philadelphia (No. 2676 Philadelphia 1989) case is affirmed and the March 8, 1989 denial of the injunction in the Montgomery County case (No. 961 Philadelphia 1989) is reversed and the case remanded with instructions.

The facts of each case are as follows. Plaintiff-appellant in the Montgomery County case is Churchill Corporation, a Pennsylvania corporation doing business within the state. Churchill entered into a contract with Chase Third Century. Churchill did not seek out Chase but rather was induced to

[ 396 Pa. Super. Page 318]

    sign the lease through an office equipment dealer, Select Copy, which secured financing for a facsimile machine through Chase. Churchill used the facsimile machine owned and leased by Chase for a few months until it failed to operate properly. For some time after the machine ceased to function properly, Churchill continued to make payments but when the machine could not be fixed, Churchill ceased to make payments and Chase repossessed the machine. Thereafter, Chase sought to recover the remaining payments on the lease after giving Churchill a small credit.

Chase brought an action for $1,700.00, the sum total of the remaining payments under the lease minus the credit, in the Circuit Court of Randolph County, MO, pursuant to a boilerplate forum selection clause appearing on the reverse side of the lease. That clause stated that jurisdiction would be deemed proper in the Missouri courts and that venue would lie in the Circuit Court of Randolph County. In addition, the lease contained a choice-of-law provision stating that Missouri law would govern the contract and that the contract would be deemed executed in Missouri, regardless of where it was signed.*fn1

It is not disputed that Churchill's president, who signed the lease, never read the forum selection clause and was unaware of its import. The court of Randolph County is located in Moberly, MO, which is sixty miles north of Jefferson City and is accessible only by automobile. Indisputably, it would have cost Churchill far more to defend against the Missouri suit due to the enormous transportation expenses than to have satisfied a default judgment against it. Churchill chose not to defend the suit, but instead brought an action in the Court of Common Pleas of Montgomery County to have Chase dissolve any judgment and dismiss the action. In the alternative, Churchill sought to restrain Chase from docketing a default judgment in the Court of Common Pleas of Montgomery County.

[ 396 Pa. Super. Page 319]

On December 28, 1988, Churchill obtained a temporary restraining order signed by the Hon. Albert Suber. On January 6, 1989, the Hon. Paul Tressler presided over a hearing and overturned the temporary restraining order. By order entered March 8, 1989, the court refused to issue a preliminary injunction and dismissed the action with prejudice for lack of personal jurisdiction over the defendant Chase. Churchill filed this timely appeal.

In the Philadelphia County case, the defendant-appellant is Chase Third Century and appellees are Benson Fishman and Transmedia, Inc., doing business as Professional Marketing Advisors [collectively referred to as Transmedia]. Transmedia is a Pennsylvania corporation which conducts no business in the state of Missouri.

In June 1986, Chase and Transmedia entered into a lease for a Minolta copying machine. The machine delivered to Transmedia was in fact a Royal copier. Transmedia did not seek out Chase but rather leased the machine from Chase, for financing purposes, at the suggestion of the dealer of the machine, American Duplicating, Inc. As in the other case, the signatory, Mr. Fishman, never read the forum selection clause, which appeared on the back of the lease. (It should be noted that in both leases, the lessee's signature appears on the bottom of the front side of the lease; however, there is a notation on the front to see the reverse side for additional terms and conditions.)

The copier machine failed to operate properly. Investigation revealed that the serial number on the machine was not genuine and that the machine, though represented to be new, was actually used. Transmedia made twelve lease payments before it ceased to make further payments. Chase repossessed the machine and thereafter filed suit in the Circuit Court of Randolph County for the remaining payments on the lease. In its Missouri petition [equivalent to a complaint under Pennsylvania law], Chase did not set forth any credit due to Transmedia for the value of the repossessed machine.

[ 396 Pa. Super. Page 320]

After being served with the Missouri petition, Transmedia sought injunctive relief in the Court of Common Pleas of Philadelphia County. Chase filed a petition to remove the case to the U.S. District Court for the Eastern District of Pennsylvania; it was denied and the case remanded back to Philadelphia. Chase filed preliminary objections for lack of jurisdiction by reason of the forum selection clause contained in the lease. The court denied the preliminary objections and granted injunctive relief following a hearing on the matter. Chase has appealed from the injunction which prevents it from continuing prosecution of its suit in Randolph County.

In these cases, we must determine, first, whether the Pennsylvania courts have jurisdiction to hear these cases and, second, whether the granting of injunctive relief is proper under the circumstances. We must do so by reference to the appropriate law, since this case involves choice-of-law issues as well. Finally, constitutional considerations of due process must inform our decision since the fundamental question in this appeal is whether Churchill and Transmedia, by virtue of each having leased a single office machine, should be required to defend suits brought in Missouri, a forum with which neither has significant ties.

Chase argues that Pennsylvania courts do not have jurisdiction to hear these cases. It contends that the forum selection or "consent-to-jurisdiction" clause appearing in the form lease deprives any court except the Circuit Court of Randolph County of jurisdiction and venue to hear cases arising under the lease.

However, even if we momentarily assume the validity of the forum selection or consent-to-jurisdiction clause to create personal jurisdiction in the Missouri courts over Churchill and Transmedia, it does not necessarily follow that the clause operates to deprive Pennsylvania courts of jurisdiction as well. In Central Contracting v. Youngdahl, 418 Pa. 122, 209 A.2d 810 (1965), the Pennsylvania Supreme Court reviewed the law relating to contractual forum selection and found that it would be against public policy where

[ 396 Pa. Super. Page 321]

    the parties are brought before a competent tribunal to allow an agreement made in advance of the dispute to oust the tribunal's jurisdiction.*fn2 Also, In Rea's Appeal, 13 W.N.C. 546 (1883); Healy v. Eastern Building and Loan Association, 17 Pa. Super. 385 (1901) (plaintiff's agreement to sue only in a New York county could not deprive Pennsylvania courts of their jurisdiction to hear the case). Therefore, the Court of Common Pleas of Montgomery County erred in finding that the lease deprived that court of its jurisdiction to hear the case.

Pennsylvania does have personal and subject matter jurisdiction over these disputes. Chase Third Century is a corporation doing business nationwide and licensed to do business in Pennsylvania. It negotiates and contracts to finance and lease office equipment to Pennsylvania companies and individuals for the purpose of realizing pecuniary benefit. Therefore, Chase is amenable to suit under the Pennsylvania long-arm statute, which appears at 42 Pa.C.S.A. ยง 5322. See, McCrory Corp. v. Girard Rubber Corp., 459 Pa. 57, 327 A.2d 8 (1974).

The exercise of jurisdiction by Pennsylvania is also constitutional under federal law: Chase has purposefully availed itself of the privilege of conducting activities within the Commonwealth thus invoking the benefits and protections of its laws. E.g., Burger King v. Rudzewicz, 471 U.S. 462, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985).

Next, we must determine whether Pennsylvania should decline to exercise jurisdiction because of the forum selection clause. A Pennsylvania court should decline to proceed with the cause when the parties have freely agreed that litigation shall be conducted in another forum and where such agreement is not ...


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