Bell Atlantic Tricon Leasing Corp. v. Johnnie's Garbage Service, Inc.

439 S.E.2d 221 (1994)

BELL ATLANTIC TRICON LEASING CORPORATION, Plaintiff, v. JOHNNIE'S GARBAGE SERVICE, INC. and Johnnie McBroom, Defendants.

No. 9315SC169.

Court of Appeals of North Carolina.

February 1, 1994.

*223 Smith, Debnam, Hibbert & Pahl by Bettie Kelley Sousa and Byron L. Saintsing, Raleigh, for plaintiff-appellee.

Nichols, Caffrey, Hill, Evans & Murrelle by ToNola D. Brown, Greensboro, for defendants-appellants.

WELLS, Judge.

This appeal presents the issue of whether North Carolina should afford full faith and credit to a default judgment of a New Jersey court against a North Carolina defendant. Defendant argues that New Jersey's exercise of in personam jurisdiction over defendant was constitutionally impermissible, rendering the New Jersey judgment void and unenforceable. We agree, and therefore reverse the superior court's denial of defendant's motion for relief from judgment.

Generally, one state must accord full faith and credit to a judgment rendered in another state. Florida National Bank v. Satterfield, 90 N.C.App. 105, 367 S.E.2d 358 (1988). However, because a foreign state's judgment is entitled to only the same validity and effect in a sister state as it had in the rendering state, the foreign judgment must satisfy the requisites of a valid judgment under the laws of the rendering state before it will be afforded full faith and credit. Boyles v. Boyles, 308 N.C. 488, 302 S.E.2d 790 (1983).

To meet the requirements of a valid judgment, the rendering court must comport with the demands of due process such that it has personal jurisdictionotherwise known as minimum contactsover defendant. International Shoe Co. v. State of Washington, 326 U.S. 310, 66 S. Ct. 154, 90 L. Ed. 95 (1945). The Due Process Clause protects an individual's liberty interest in not being subject to the judgment of a forum with which he has established no meaningful contacts or relations. Id. "A judgment rendered in violation of due process is void in the rendering State and is not entitled to full faith and *224 credit elsewhere." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S. Ct. 559, 62 L. Ed. 2d 490 (1980). N.C.Gen.Stat. § 1A-1, Rule 60(b)(4) allows a party to petition for relief from judgment on the grounds that the judgment is void. A void judgment is a legal nullity which may be attacked at any time. Allred v. Tucci, 85 N.C.App. 138, 354 S.E.2d 291, cert. denied, 320 N.C. 166, 358 S.E.2d 47 (1987).

There are two theories under which plaintiff contends the New Jersey court could properly exercise personal jurisdiction: that defendant consented to jurisdiction, and that defendant established minimum contacts with the State of New Jersey such that the maintenance of the suit in New Jersey would not offend traditional notions of fair play and substantial justice.

We first address the issue of whether the consent to jurisdiction clause contained in the agreement signed by defendant operated as a valid consent to personal jurisdiction of the New Jersey court. Our Supreme Court discussed this type of provision in Johnston County v. R.N. Rouse & Co., 331 N.C. 88, 414 S.E.2d 30 (1992), and noted that:

[T]he consent to jurisdiction provision concerns the submission of a party or parties to a named court or state for the exercise of personal jurisdiction over the party or parties consenting thereto. By consenting to the jurisdiction of a particular court or state, the contracting party authorizes that court or state to act against him.

In the subsequent case of Perkins v. CCH Computax, Inc., 333 N.C. 140, 423 S.E.2d 780 (1992), our Supreme Court discussed the validity of choice of law, forum selection and consent to jurisdiction clauses. In Perkins, the Court upheld the enforcement of forum selection clauses and stated that "Recognizing the validity and enforceability of forum selection clauses in North Carolina is consistent with the North Carolina rule that recognizes the validity and enforceability of choice of law and consent to jurisdiction provisions," citing Johnston County v. R.N. Rouse & Co., supra. The Court held that forum selection clauses are valid in North Carolina unless the litigant demonstrates that the clause was "the product of fraud or unequal bargaining power or that enforcement of the clause would be unfair or unreasonable." Perkins v. CCH Computax, Inc., supra. These cases indicate that generally, the courts of our State will enforce consent to jurisdiction clauses. The United States Supreme Court has held that because the personal jurisdiction requirement is a waivable right, a litigant may give express or implied consent to the personal jurisdiction of the court. Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 102 S. Ct. 2099, 72 L. Ed. 2d 492 (1982). Such forum selection or consent provisions do not offend due process where they have been "freely negotiated" and are not "unreasonable and unjust." The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S. Ct. 1907, 32 L. Ed. 2d 513 (1972).

In D.H. Overmyer Co. v. Frick Co., 405 U.S. 174, 92 S. Ct. 775, 31 L. Ed. 2d 124 (1972), the United States Supreme Court outlined the factors relevant to determination of a contractual waiver of due process rights. The Court applied the standards governing waiver of constitutional rights in a criminal setting, and although the Court did not find that such standards must apply, it held that based on the specific circumstances of the case, the contractual waiver of due process rights was "voluntarily, intelligently, and knowingly" made. Id. In that case, the contract was negotiated between two corporations and was not a contract of adhesion. Furthermore, the waiver provision was expressly bargained for and drafted by the parties' attorneys, and both parties were "aware of the significance" of the waiver provision. Id.

With these cases in mind, we now examine the circumstances surrounding defendant's signing of the lease agreement. When he signed the lease agreement, defendant was a 79-year-old man who ran a small family business. There was no bargaining over the terms of the contract between the parties, who were far from equal in bargaining power. The lease agreement itself was a one page pre-printed form with type on the front and back. The forum selection and consent to jurisdiction provisions were on the back side of the paper, where there was no *225 place for defendant to sign or initial. The provisions were in fine print under a paragraph labeled "Miscellaneous," and were never called to defendant's attention or explained to him. Plaintiff made no showing whatsoever that defendant was actually aware or made aware of the significance of the consent to jurisdiction clause.

Considering all of these factors, we find that defendant did not knowingly and intelligently consent to the jurisdiction of the New Jersey courts. Therefore, enforcement of this provision would be both unfair and unreasonable.

Defendant next argues that no minimum contacts existed such that New Jersey could exercise personal jurisdiction over him. We find merit in this argument.

It is a well recognized principle of our law that in order to resolve the question of the existence of in personam jurisdiction of a forum state over a non-resident defendant, a two-step inquiry must be made. If a defendant is not physically present within the forum, constitutional due process requirements may still be met if defendant had certain "minimum contacts" with the forum state such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice. International Shoe Co. v. Washington, 326 U.S. 310, 66 S. Ct. 154, 90 L. Ed. 95 (1945). In order to be subject to personal jurisdiction, defendant must take some purposeful action within the forum state that invokes for defendant the benefits and protections of the state's laws. Hanson v. Denckla, 357 U.S. 235, 78 S. Ct. 1228, 2 L. Ed. 2d 1283 (1958). The activity of defendant should be of such a nature that defendant could reasonably anticipate being haled into court there. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S. Ct. 559, 62 L. Ed. 2d 490 (1980).

In determining when a potential defendant should reasonably anticipate litigation in an out-of-state forum, the Supreme Court has often referred to the reasoning of Hanson v. Denckla, supra, which provided that:

The unilateral activity of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of contact with the forum State. The application of that rule will vary with the quality and nature of defendant's activity, but it is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws. Id.

The "purposeful availment" requirement ensures that a defendant will not be brought into a jurisdiction solely as a result of "random," "fortuitous," or "attenuated" contacts. Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 104 S. Ct. 1473, 79 L. Ed. 2d 790 (1984). Neither should a defendant be haled into a forum solely as a result of the "unilateral activity of another party or a third person." Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 104 S. Ct. 1868, 80 L. Ed. 2d 404 (1984). Furthermore, minimum contacts are determined by judging each case on its specific facts considering the traditional notions of fair play and justice. Ciba-Geigy Corp. v. Barnett, 76 N.C.App. 605, 334 S.E.2d 91 (1985). In Marion v. Long, 72 N.C.App. 585, 325 S.E.2d 300, appeal dismissed and rev. denied, 313 N.C. 604, 330 S.E.2d 612 (1985), this Court, citing Sola Basic Industries, Inc. v. Parke County, 70 N.C.App. 737, 321 S.E.2d 28 (1984), noted that the factors to be considered in determining whether minimum contacts exist are: (1) the quantity of the contacts, (2) the nature and quality of the contacts, (3) the source and connection of the cause of action to the contacts, (4) the interest of the forum state, and (5) convenience.

Applying the above stated principles of law to the facts before us, we find that defendant had no minimum contacts sufficient to allow a New Jersey court to assert personal jurisdiction over him. The existence of minimum contacts in this case can depend on only one contact: a lease agreement between defendant and Bell Atlantic. Defendant, as noted earlier, was a 79-year-old man who ran a small business operated exclusively in North Carolina. Plaintiff, on the other hand, is a large corporation which does business in several states. When defendant *226 signed the lease agreement, it was not called to his attention that he was contracting with a New Jersey company. Defendant does no business in New Jersey, has never solicited or purposefully directed his activities at New Jersey residents, and has not attempted to avail himself of the protections of the laws of New Jersey.

The exercise of personal jurisdiction by New Jersey over this defendant offends any idea of fair play and substantial justice. Representatives of National Software approached defendant, convinced him to purchase a computer system, installed it in his office, and then had him sign a standardized, pre-printed contract which purports to be the only basis for the State of New Jersey to have jurisdiction over him. Throughout these dealings, defendant was never even informed that he was contracting with a New Jersey company, much less that if a dispute arose and this company decided to sue him, he would have to travel to New Jersey to defend himself.

Based on our evaluation of the circumstances of this case as shown by this record, we conclude that it would be inconsistent with due process of law for a New Jersey court to exercise personal jurisdiction over this defendant. Accordingly, the courts of our State cannot give full faith and credit to the New Jersey judgment. For the reasons stated, the order denying relief from judgment must be reversed and the cause remanded for entry of judgment for defendant.

Reversed and remanded.

EAGLES and WYNN, JJ., concur.