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J. C. PENNEY COMPANY v. MALOUF COMPANY et al. (two cases).
Action for damages. Fulton Superior Court. Before Judge Williams.
Under the Long-Arm Statute, since the claim must arise from an enumerated act, the time such act occurs determines the rights of the parties. Since the acts forming the basis for jurisdiction occurred in 1966 the original 1966 Long-Arm Statute must be applied. That being so, the third-party defendant, a nonresident corporation, was not within the purview of the Long-Arm Statute.
This case involves an alleged highly flammable maternity smock which caused injury to Mrs. Brenda Jean Holden on June 20, 1966. J. C. Penney Company was the retailer selling Mrs. Holden this smock and Malouf Company is alleged to be the manufacturer. Malouf is a Texas Corporation, not authorized to do business in Georgia, but who shipped its goods into Georgia, including a shipment to Marietta, Georgia. This shipment included, according to J. C. Penney's allegation, the smock in question. Mr. and Mrs. Holden, in companion suits, brought their actions in Fulton Superior Court against J. C. Penney on theories of breach of warranty and negligence. Appeal 46598 involves Mrs. Holden's suit, while appeal 46599 involves Mr. Holden's suit. Since the issues in both appeals are identical, we hereinafter make reference in the singular to Mrs. Holden as plaintiff in the suit involving appeal 46598.
Plaintiff alleges in her complaint that J. C. Penney sold plaintiff a maternity smock made of a highly flammable material which ignited and caused the plaintiff certain grievous injuries; that the sale of such flammable smock was an act of negligence and a breach of various warranties extended by the defendant J. C. Penney to the plaintiff in the sale.
In answer to certain interrogatories propounded, the defendant J. C. Penney answered by stating that based on information obtained from the plaintiff it believed that the maternity smock was manufactured by Malouf. The plaintiff's affidavit also brought out that she examined a picture of a smock manufactured by Malouf and in her opinion "this smock was of the exact same type as the one in suit, although she could not so state as a matter of fact with complete certainty without seeing the color and material of this smock manufactured by Malouf Company."
Based on these facts, defendant filed a third-party complaint, naming Malouf as third-party defendant. In the complaint containing 3 counts, it was alleged that the garment in question was purchased by defendant from third-party defendant and was delivered by third-party defendant to defendant in Marietta, Georgia. In the first count, defendant alleged that any breach of warranty from defendant to plaintiff was the result of a prior breach of warranty by third-party defendant. In the second count, J. C. Penney alleged that any injuries sustained by plaintiff were the result of the active negligence of third-party defendant in manufacturing, selling and delivering the garment in suit, which delivery occurred in the State of Georgia. In the third count, J. C. Penney alleged an express contract of indemnity, showing that third-party defendant warranted the fitness and safety of the garment and agreed to hold defendant harmless for all "claims, liability, loss, damage and expense incurred or sustained by company (J. C. Penney) by reason of any breach of such warranty." Further, the express contract of indemnity provided that Malouf ". . . will indemnify and hold the company harmless from and against any and all claims, liability, loss, cost, attorneys fees, expenses and damages arising or resulting from any defect or alleged defect in merchandise delivered hereunder or from the nature of the materials contained in any such merchandise."
Service of process on Malouf was by service by an attorney admitted to practice in the State of Texas at Malouf's offices and place of business in Dallas, Texas, pursuant to the Georgia "Long-Arm Statute." The third-party complaint was filed August 5, 1970.
Malouf filed various defenses to the third-party complaint, including the jurisdictional defenses that: (1) the Georgia "Long-Arm Statute" is inapplicable to Malouf, since third-party defendant contends that because the injury happened in 1966, application of the Long-Arm Statute must be impermissibly retroactive (before the 1968 amendment making the Long-Arm Statute apply to corporations); and, (2) that Malouf transacted no business and committed no tortious act in the State of Georgia, thereby depriving the court of sufficient contacts to establish jurisdiction. A third ground asserted in Malouf's motion for summary judgment asserted that J. C. Penney was tendering Malouf to plaintiffs as a substitute defendant by virtue of the way in which the third-party complaint was framed.
Malouf then filed a motion to dismiss on the above grounds, attaching thereto the affidavit of Eblen S. Malouf, thereby converting said motion into a motion for summary judgment.
The affidavit of Eblen S. Malouf, president of third-party defendant, showed that the third-party defendant manufactures cotton garments in the State of Texas; that Malouf has never engaged in the manufacture of garments nor made any sales nor otherwise transacted any business in the State of Georgia; that the only contacts Malouf has had with this State is to ship merchandise to Georgia upon or orders placed with it within the State of Texas; that in this instance, orders placed by J. C. Penney for delivery into the State of Georgia are placed by the J. C. Penney Company, Inc. from its office in Dallas, Texas, and are shipped f.o.b. Dallas. The affiant further stated that he was unable to identify the remnants of a piece of cloth, subject matter of the plaintiff's claim, as one used in Malouf's manufacture of garments; that at no time did Malouf transact any business with the plaintiff or have any direct contact with her either in the State of Georgia or elsewhere.
Both J. C. Penney and Malouf submitted briefs on the points of law involved and the issues raised by Malouf in its answer and motion for summary judgment. Thereafter, on June 1, 1971, the trial judge entered an order sustaining Malouf's motion to dismiss (as converted into a motion for summary judgment by the introduction of evidence) on Grounds 1 and 2: (1) that to apply the Georgia "Long-Arm Statute" to Malouf was a retroactive application and (2) that the requisite jurisdictional contacts were not, as a matter of law, present, thereby depriving the trial court of jurisdiction over Malouf. This order was amended and modified on June 24, 1971, to make the granting of Malouf's motion to dismiss (or motion for summary judgment) a final order pursuant to Section 54 (b) of the Civil Practice Act. Code Ann. 81A-154 (b) (Ga. L. 1966, pp. 609, 658).
From the order and judgment of June 24, 1971, sustaining Malouf's motion to dismiss, J. C. Penney appeals.
1. We first treat appellees' motion to dismiss the appeals on the grounds that they are premature.
There are two principal methods by which an appeal might be brought from orders in multi-claim party cases as to less than all the claims or parties involved. One is, the complaining party may obtain a certificate of immediate review from the trial judge under the provisions of Section 1 (a2) of the Appellate Practice Act (Code Ann. 6-701 (a2); Ga. L. 1965, p. 18; 1968, pp. 1072, 1073). The second method is where the trial judge enters an order upon an express determination that there are no just reasons of delay and upon express direction for the entry of the judgment under the provision of Section 54 (b) of the Civil Practice Act (Code Ann. 81A-154 (b)). See Davis v. Roper, 119 Ga. App. 442 (167 SE2d 685); D. Davis & Co. v. Plunkett, 119 Ga. App. 453 (167 SE2d 663); American Mut. Liab. Ins. Co. v. Moore, 120 Ga. App. 624 (171 SE2d 751); Residential Developments, Inc. v. Dodd, 122 Ga. App. 674 (178 SE2d 333).
Where the second method is used, under the holding of the Supreme Court in Sanders v. Culpepper, 226 Ga. 598, 600 (176 SE2d 83), the appellate court must still determine whether the judgment rendered meets the requirements of finality contained in Section 1 (a2) of the Appellate Practice Act (Code Ann. 6-701 (a2)). In the Sanders case, in ascertaining whether the cause is still pending in the court below, the court pointed out that "where several defendants are sued jointly on a joint cause of action, and there is a final dismissal as to some of the defendants, the judgment of dismissal cannot be reviewed until the final termination of the action; but where several defendants are sued jointly, but not on a joint cause of action, the judgment of dismissal is such a final judgment as can be reviewed immediately."
The motion to dismiss the appeals is denied.
2. We first point out that the Georgia Supreme Court has held that the Long-Arm Statute involves substantive rights and is not procedural. Hence, provisions of that Act may not be applied retroactively. Bauer International Corp. v. Cagles, 225 Ga. 684 (171 SE2d 314). See Buckhead Doctors' Bldg. v. Oxford Finance Companies, 120 Ga. App. 516 (171 SE2d 365); Amos v. Bowers, 121 Ga. App. 801 (175 SE2d 877). Moreover, the Act is in derogation of common law and must be strictly construed. Taylor v. Jones, 123 Ga. App. 476 (3) (181 SE2d 506).
We now consider the Act itself (Code Ann. 24-113.1 et seq.). The Act as originally adopted in 1966 provided for the exercise by courts of this state of personal jurisdiction over a nonresident "as to a cause of action arising from any of the acts, ownership, use or possession enumerated in this section, in the same manner as if he were a resident of the State, if in person or through an agent, he: (a) Transacts any business within this State; or (b) Commits a tortious act within this State, except as to a cause of action for defamation of character arising from the act; or (c) Owns, uses or possesses any real property situated within this State." The Act further provided: "Venue in cases arising hereunder shall lie in any county wherein the business was transacted, the act occurred, or the real property is located." Code Ann. 24-116 (Ga. L. 1966, pp. 343, 344). In 1968, the Act was amended to add corporations within the definition of the term "Nonresident" but as pointed out in Bauer International Corp. v. Cagles, 225 Ga. 684, supra, the Act itself stated that this was not to be construed as expressing the intention of the General Assembly as to the meaning of "nonresident" prior to the effective date of the Act.
The court held in the Bauer case that under the 1966 statute, the term "nonresident" did not include a foreign corporation.
In 1970 the Act was amended to include a cause of action arising from any of the "omissions" enumerated within the Act and included "omission" in Section (b), so that it reads "Commits a tortious act or omission within this State." This Act further added a new Section (c) which provides: "Commits a tortious injury in this State caused by an act or omission outside this State if the tortfeasor regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered in this State."
We point out that Section (a) and old Section (c) now listed as (d) have remained unchanged since the original statute. The compass of Section (b) has as of July 1, 1970 (see Code Ann. 102-111; Ga. L. 1968, pp. 1364, 1365; 1969, p. 7) been expanded by the addition to (b) and of (c) so that now both tortious acts and omissions committed within and without the state may furnish a basis for jurisdiction. Although the section with regard to transacting business has not changed from 1966 to the present, as above pointed out, whether a corporation could transact business in the state did change effective with the 1968 Act.
The language of the Act as originally promulgated in 1966 is plain in its intent that the cause of action must arise from the acts enumerated in Section 1 of the statute. Jurisdiction is not acquired merely because a nonresident transacts business in the state or happens to own, use or possess real estate or commits a tortious act. The claim itself must have arisen from the transaction of the business, from the use, ownership or possession of the real estate or from the tortious act. This requirement is emphasized in the article on the Georgia Long-Arm Statute by Weissman, 4 GSBJ 13, which points out that under the statute: "An appearance does not confer such jurisdiction with respect to causes of action not arising from an act enumerated in Section 1 of this Act." Code Ann. 24-114 (Ga. L. 1966, pp. 343, 344). In Deveny v. Rheem Mfg. Co., 319 F2d 124, 127, citing Hanson v. Denckla, 357 U. S. 235 (78 SC 1228, 2 LE2d 1283), the court determined that the cause of action must arise out of an act done or transaction consummated in the forum state. This court has recently so held in the case of Castleberry v. Gold Agency, 124 Ga. App. 694 (185 SE2d 557), where it was pointed out that other business which a party did in this State would be irrelevant where the jurisdiction was asserted pursuant to the Long-Arm Statute since that section requires that the cause of action arise from the act of transacting business. See Smith v. Piper Aircraft Corp., 425 F2d 823, 825; Kaye-Martin v. Brooks, 267 F2d 394, 397; Bryant v. Finnish National Airline, 22 A. D. 2d 16 (253 NYS2d 215); and numerous cases collected in Anno. 27 ALR3d 397.
There is no reliance on the section relating to the ownership, use or possession of the property. This section is not in issue here. We thus categorize the two basic grounds of jurisdiction contained in the 1966 statute as transacting any business (Section (a)) and tortious act (Section (b)).
A similar argument was made to the Supreme Court in Southern R. Co. v. Ins. Co. of North America, 228 Ga. 23 (183 SE2d 912), that the application of a 1970 amendment would not be retrospective since the right to call upon a party for indemnity did not accrue until after the passage of the amendment. While not expressly passing upon the merits of that argument, the court held that the occurrence which was the subject matter of the complaint happened in 1966 and thus the 1970 amendment to Code 20-504 had no application to the indemnification covenant of the contract in question.
Under the Long-Arm Statute, since the claim must arise from an enumerated act, we look to the time of that act to ascertain what provision of the Long-Arm Statute would be germane. See F. H. Ross & Co. v. White, 224 Ga. 324 (161 SE2d 857). See in this connection Focht v. American Cas. Co., 103 Ga. App. 138 (118 SE2d 737); Thompson v. Abbott, 226 Ga. 353, 357 (174 SE2d 904). If the third party bases its cause of action on tortious act or injury, then we apply the law applicable at the time of the act or injury. If the third party's action is predicated on the third-party defendant's transacting any business, then the controlling law would be that in effect when the third-party defendant was transacting any business out of which arose the third party's cause of action. In short, the act on which jurisdiction is based must be related to the cause of action. Therefore, we look to the time of such act to determine what the parties' rights were and are under the Long-Arm Statute.
It is therefore evident that if the third-party plaintiff is attempting to rely on the commission of a tortious act, it may not rely on the provisions of the 1970 statute but only on the statute as written in 1966 since that is the time the tortious act or injury occurred.
If reliance is placed on the third-party defendant's transacting any business, the business would have had to have been transacted with relation to the occurrence in 1966. For, if the transaction of the business did not give rise to the cause of action, the third-party complaint would have no jurisdictional basis. In this case, the third-party complaint specifically set forth that the garment allegedly causing injury was purchased by the third-party plaintiff from the third-party defendant under a contract by which the third-party defendant warranted the safety of the merchandise and agreed to indemnify the third-party plaintiff. Thus, the jurisdictional right to bring in the third-party defendant is, of necessity, derivative of the 1966 occurrence. We therefore determine whether the third-party defendant was transacting business as of that time.
Under either principal theory under which jurisdiction is asserted, the third-party plaintiff is inexorably bound to that period of time when the 1966 statute was in effect. The 1968 and 1970 amendments simply do not apply. Therefore, since the third-party defendant was a foreign corporation, it was not within the ambit of the 1966 statute. Bauer International Corp. v. Cagles, 225 Ga. 684, supra; Smith v. O'Neal Steel, 225 Ga. 778 (171 SE2d 519).
Judgments affirmed. Jordan, P. J., and Evans, J., concur.
Savell, Williams, Cox & Angel, Edward L. Savell, John A. Dunaway, for appellee.
Greene, Buckley, DeRieux & Jones, Burt DeRieux, Alfred B. Adams, III, for appellant.
Friday May 22 14:48 EDT

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