Petition — Overmyer v. Forsythe

IN THE

Supreme Court of the United

“Supreme Court, U. § 7}

| FILED

JUL 26 1978

:

EL RODAK, JR., CLERK

“78141

D. H. OVERMYER,

Petitioner,

vs.

Max W. ForRSYTHE, HELEN H. ForsyTHE, E. BUSH

HAYDEN and JEAN MULLIKEN,

Respondents.

Petition for Writ of Certiorari to the United States Court

of Appeals for the Ninth Circuit.

SCHWARTZ, ALSCHULER & GROSSMAN,

MARSHALL B. GROSSMAN,

FRANK KAPLAN,

1880 Century Park East, Suite 1212,

Los Angeles, Calif. 90067,

(213) 227-1226,

Attorneys for Petitioner.

Parker & Son, Inc., Law Printers, Los Angeles. Phone 724-6622

a

SUBJECT INDEX

. Page

BREE Ce ERIS OT SOE 1

EL aE Oe Ce 2

Constitutional Provision and State Statute Involved.. 2

i rs ecaseilicbbiatinn 2

Ee SS 2c ssicemienbtidminbpanenbns 3

Reasons for Granting the Writ ............................-- 8

I

The Approval of Personal Jurisdiction Over Peti-

tioner by the Court Below Conflicts With the

Teaching of This Court in Hanson v. Denckla.

The Question of Personal Jurisdiction Over

Petitioner Raises an Important Question of

Federal Law Which Should Be Settled by This

OO AEE EIR A en ee 8

A. Petitioner Could Not Be Subject to the

Jurisdiction of the California Court Unless

He Engaged in Some Act by Which He

Purposefully Availed Himself of the Privi-

lege of Conducting Activities Within Cali-

fornia, Thereby Invoking the Benefits and

Protection Of [0s Laws ..........-0:ccccccccosescsoe. 8

B. The Court Below Erred in Concluding

That Petitioner Purposefully Availed Him-

self of the Privilege of Conducting Activi-

ties Within the Forum State and That

Jurisdiction Over Him Was Reasonable.... 10

ii. iii.

Page Page

C. The Holding of the Court Below Is an Guarantee

Unwarranted Expansion of the Scope of

Personal Jurisdiction and Will Have an

Inimical Effect Upon the Willingness of Notice of Motion and Motion to Dismiss .............. 40

Non-Residents to Guarantee Interstate Answer to Plaintiffs’ First Interrogatories to De-

Business Transactions .......................c0.0+- 15 fendant Filed Nov. 25, 1974 .00uw........eeeceeeeeee 42

II Affidavit of Max W. Forsythe

The California Long-Arm Statute Permits Per- Affidavit of Herbert W. Richards

sonal Jurisdiction Over Non-Residents to the

“Outer Limits” of Due Process. However, the

Decision of the Court Below Erroneously Ex-

pands the Scope of Jurisdiction Beyond That

Permitted by the State Courts and Invites

Plaintiffs to Forum-Shop in the Federal Courts

to Obtain Jurisdiction Over Non-Resident De-

A Complaint on Continuing Guaranty .................... 37

aS DLE Ter SS At OR ES Oe ON EAR 16

SPI ics iaesiichecsecdshesdsimacniaiaeiacdardiccsansbgbuadieckasibonen cans 20

Ss SII Sci chiicstesiesaxvstnninpenesmerniens App. p. 1

ITT Siinsdissclhasiass Liotneatiantoushenitetdhndciaciomesethantindenniasietenion 10

Order Denying Motion to Dismiss ........................ 11

Findings of Fact and Conclusions of Law ............ 13

EEE A AE he SOT EO TT eT 20

Stipulation of Agreed Statement of Facts ............ 21

Affidavit of Max W. Forsythe .....................020000... 25

Affidavit of D. H. Overmyer in Support of Mo-

oe ct co, Oe NTE TE ta ER 31

SOI SUIT « <i asissisalsnctiinicucclisciddehipenpneielaieadiiatiasibuakies 33

iv.

TABLE OF AUTHORITIES CITED

Cases Page

Aurea Jewelry Creations, Inc. v. Lissona, 344 F.

me. ETS CRRA + BOT D nnsencicserscnctstietscines 14, 15

Belmont Industries, Inc. v. Superior Court, 31 Cal.

App.3d 281, 107 Cal.Rptr. 237 (1973 )..16, 17, 18

Buckeye Boiler Co. v. Superior Court, 71 Cal.2d

893, 458 P.2d 57, 80 Cal.Rptr. 113 (1969) ...... 17

Conn v. Whitmore, 9 Utah 2d 250, 342 P.2d 871

RIED :dccsicscacantnaticc eenaennceaceebaanaacnennameiens 16

Cornell University Medical College v. Superior

Court, 38 Cal.App.3d 311, 113 Cal.Rptr. 291

RROD wih niidicacies epee 19

D. H. Overmyer v. Frick Co., 405 U.S. 174 (1972)

sssensibanipahiiichp Stsshealbead be orodicaciadelteshidonataeani an aaiaaaaenmaeat 15

Fourth Northwestern National Bank v. Hilson In-

dustries, Inc., 264 Minn. 110, 117 N.W.2d 732

RED Sinthcncccertcrnsinicaalcpenesacaiensiaieane Neb 16

Hanson v. Denckla, 357 U.S. 235 (1958) ...... 8,9, 10

ainleeanhiccbetssesteinsacsivigidsicoo titiachanlicdadtcuan anaemia Ma, 82, &4

Interdyne Co. v. SYS Computer Corp., 31 Cal.App.

3d 508, 107 Cal.Rptr. 499 (1973) .....000000000..... 20

International Shoe Co. v. Washington, 326 U.S. 310

SUID © enipiiinchsusnsiniecocieitnssanes tidaniemeditmaaeeiiaial cans 8

L. D. Reeder Contractors v. Higgins Industries, 265

ees Same CH Ce. BS voseittecnicseinaiacecapeticne 9

McGee v. International Life Insurance Co., 355

By See CODEE D. «x.cicicsoneinmnabunmoumeaibeas 13

Perkins v. Benguet Consolidated Mining Co., 342

We RF CRIDER icesntscnios eee 8

Page

Sandnes’ Sons, Inc. v. United States, 462 F.2d 1388

Ee A >, GAM Mann eed age RDN RN ORE MORSE ID 15

Sibley v. Superior Court, 16 Cal.3d 442, 546 P.2d

322, 128 Cal.Rptr. Cal.Rptr. 34 (1976) ............

Scadanadaaanenbeaeetemsacieee aan 10, 11, 12, 13, 14, 16, 17

Threlkeld v. Tucker, 196 F.2d 1101, cert. denied,

ae Ges ee ER ects osetia see 16

Tiffany Records, Inc. v. M. B. Krupp Distributors,

Inc., 276 Cal.App.2d 610, 81 Cal.Rptr. 320

CTDOED dntiieccnaaencnmmdannasins 19

Whittaker Corp. v. United Aircraft Corp., 482 F.2d

SUE CIRCE sieninctgendadenendeeicaapanen 15, 16

Rules

Federal Rules of Civil Procedure, Rule 12(b)(2) .. 6

Statutes

California Code of Civil Procedure, Sec. 410.10 ....

United States Code, Title 28, Sec. 1254(1) ............ 2

United States Constitution, Fourteenth Amendment

ener ba ns

IN THE

Supreme Court of the United States

October Term, 1978

D. H. OVERMYER,

Petitioner,

vs.

Max W. ForSYTHE, HELEN H. FORSYTHE, E. BUSH

HAYDEN and JEAN MULLIKEN,

Respondents.

Petition for Writ of Certiorari to the United States Court

of Appeals for the Ninth Circuit.

Petitioner D. H. Overmyer prays that a Writ of

Certiorari issue to review the judgment and opinion

of the United States Court of Appeals for the Ninth

Circuit entered in this case on April 17, 1978. Peti-

tioner’s Petition for Rehearing and Rehearing En Banc

was denied by an Order dated June 16, 1978.

Opinions Below.

The opinion of the United States Court of Appeals

for the Ninth Circuit is not yet reported. It is reproduced

at pages 1-9 of the appendix filed with this Petition

(hereafter cited as “App.”). The Order of the United

States District Court for the Northern District of Cali-

fornia denying petitioner’s motion to dismiss for lack

of personal jurisdiction and its later Findings of Fact

and Conclusions of Law and Judgment have not been

reported, They are reproduced at App. 11-20.

a an

Jurisdiction.

The Judgment of the Court of Appeals sought to

be reviewed was entered April 17, 1978 (App.

1-9). The Petition for Rehearing and Rehearing En

Banc was denied by an Order dated June 16, 1978

(App. 10). The jurisdiction of this Court is invoked

under 28 U.S.C. §1254(1).

Constitutional Provision and State Statute Involved.

The Fourteenth Amendment to the United States

Constitution provides, in part:

‘

‘*, . . Nor shall any State deprive any person

of life, liberty, or property, without due process

OCW. cs 2

California Code of Civil Procedure §410.10 states

in full:

“A court of this state may exercise jurisdiction

on any basis not inconsistent with the Constitution

of this state or of the United States.”

Questions Presented.

I. Respondents brought a diversity action in a Cali-

fornia federal court against petitioner, a New York

resident. The action was based upon petitioner’s pur-

ported guaranty of certain alleged obligations of a

corporation (not party to the action) in connection

with a lease by the corporation of certain property

located in Oregon. Although the negotiation of the

underlying lease transaction occurred in California, peti-

tioner neither participated in the negotiations nor was

present in California during them. Some time during

the negotiation of the underlying lease transaction re-

spondents-lessors insisted upon petitioner’s guaranty as

—

a condition to their execution of the lease. Petitioner,

upon learning of this demard, signed a guaranty in

New York. California’s long-arm statute is co-extensive

with the due process clause of the Fourteenth Amend-

ment. Where petitioner’s contacts with California were

otherwise insignificant and the guaranty was only given

at the insistence of the respondents, was petitioner

constitutionally subject to personal jurisdiction in Cali-

fornia?

Il. In diversity actions against non-resident defend-

ants, should federal courts reach for and expand the

scope of jurisdicticn over non-residents beyond that

permitted by the state courts of the forum state so

as to encourage forum shopping and increase the burden

of diversity jurisdiction upon the federal judiciary?

Statement of the Case.

Respondents filed an action against petitioner in the

United States District Court for the Northern District

of California premised upon petitioner’s purported guar-

anty of certain alleged lease obligations of D. H.

Overmyer, Inc. (Oregon) (hereafter “Oregon, Inc.”),

an Oregon corporation (App. 1). The alleged lease

obligations arose out of a sale and leaseback transaction

between Oregon, Inc. and respondents for a warehouse

and office in Portland, Oregon (App. 1-2). At the

time the lease and guaranty were executed, petitioner

was the sole owner of D. H. Overmyer, Inc. (Ohio)

(hereafter “Ohio, Inc.”), which in turn was the sole

owner of Oregon, Inc. (App. 1). Neither Oregon,

Inc. nor Ohio, Inc. were named as defendants in the

action.

Two of the four respondents are, and at all relevant

times have been, residents of the State of California.

diniiies

The other two respondents are, and at all times relevant

have been, residents of the State of Oregon and the

District of Columbia, respectively (App. 13).

Petitioner is, and at all relevant times has been,

a resident of the State of New York (App. 21, 31).

Petitioner has at no relevant time been a resident

of the State of California (App. 31). Petitioner’s place

of business is, and at all times relevant has been,

the State of New York (App. 31). At no time has

the petitioner personally maintained an office, had a

telephone listing or employees within the State of Cali-

fornia (App. 31).

In October 1968, respondent Max W. Forsythe (here-

after referred to as “Forsythe”) was informed by a

California real estate broker that Oregon, Inc. was

offering for sale and leaseback a warehouse and office

located in Portland, Oregon (App. 1). The broker of-

fered to put Forsythe in touch with a representative

of the corporation to discuss details of the potential

investment (App. 43).

After some preliminary investigation of the corpora-

tion and the warehouse and office in Portland, Forsythe

concluded that he would be interested in the possibility

of the proposed purchase and leaseback, but only upon

certain terms and conditions (App. 43).

Forsythe and his personal attorney then met with

J. R. B. Fitzsimmons (hereafter “Fitzsimmons” ), assist-

ant secretary of Ohio, Inc. and an attorney, for a period

of several days in October, 1968, in Menlo Park,

California, in order to negotiate the sale and leaseback

with Oregon, Inc. (App. 44).

Some time during the course of negotiations, Forsythe

first disclosed to Fitzsimmons that he would not enter

a

into a proposed purchase and leaseback unless petitioner

personally guaranteed the performance of the lease

by Oregon, Inc. (App. 44). Forsythe therefore insisted,

as a precondition to entering into the sale and leaseback,

that petitioner make such personal guaranty (App.

26). After advising Forsythe that he had no authority

to bind petitioner to a guaranty obligation, Fitzsimmons

apparently communicated Forsythe’s position by tele-

phone to someone in New York (App. 34, 43-4, 48).*

As a result of Forsythe’s insistence on petitioner’s

personal guaranty, on October 18, 1968, petitioner

sent a telegram from New York to Forsythe in Cali-

fornia agreeing to guarantee performance of Oregon,

Inc.’s lease obligations (App. 2). Thereafter, on Oc-

tober 21, 1968, petitioner executed a guaranty in New

York and sent it by mail to Forsythe (App. 2). The

lease between Forsythe and Oregon, Inc. was entered

into on or about October 18, 1968 (App. 35, 37).

At no time did Fitzsimmons state to respondents

or their attorney that he represented petitioner per-

sonally, and at no time has Fitzsimmons been paid

any compensation by petitioner individually (App. 33).

At no time did petitioner travel to California or par-

ticipate in the negotiations in California with respect

to either the guaranty or the sale and leaseback trans-

action (App. 31).

The District Court did not find that Fitzsimmons

represented petitioner personally at any time during

the negotiations in California or otherwise in connection

with the sale and leaseback or the guaranty. Instead,

*It is not clear with whom Fitzsimmons may have talked,

and the District Court made no Finding of Fact on this point.

—_—

it found only that the negotiations were conducted

by and between Forsythe and his attorney, on the one

hand, and Fitzsimmons, “who represented himself to

be an attorney employed [by] D. H. Overmyer Co.

(Ohio)” on the other (App. 14).

By his guaranty, petitioner guaranteed until October

17, 1973, “the full and prompt payment by Tenant

of all sums to be paid, expended and disbursed by

Tenant and the full and prompt performance of any

of the other covenants and conditions of The Lease

at the times and in the manner and mode as provided

by The Lease” (App. 35). As the court below noted,

the lease provided that it, the lease, would be subject

to the jurisdiction of California courts and that Cali-

fornia law would govern (App. 2). There was no

such provision in the guaranty.

Oregon, Inc. allegedly failed in its obligations as

lessee, and on October 25, 1973, respondents sued

petitioner on his guaranty (App. 37-39). Subject matter

jurisdiction in the District Court was invoked pursuant

to the doctrine of diversity of citizenship (App. 37).

On January 28, 1974, petitioner filed a motion to

dismiss respondents’ complaint pursuant to Federal Rule

of Civil Procedure 12(b)(2) on the ground that the

court lacked personal jurisdiction over him (App. 40-

41). The motion was denied (App. 11-12).

This action was thereafter presented on a stipulation

of agreed facts and upon the affidavit of Forsythe

dated May 19, 1975 (App. 21-30). On July 17, 1975,

Findings of Fact and Conclusions of Law were filed

by the District Court (App. 13-19). The court awarded

judgment to the respondents in the sum of $90,618.17

together with interest thereon at the rate of 7% per

=

annum from the date of judgment and attorneys fees

in the amount of $11,796.38 (App. 20). Petitioner

thereafter timely appealed to the Ninth Circuit Court

of Appeals, challenging, inter alia, the District Court's

assumption of personal jurisdiction over him (App.

2).

The Ninth Circuit, after noting that California’s long-

arm statute (CAL. Cope Civ. Proc. Section 410.10)

permits personal jurisdiction to “the outer limits of

due process under the state and federal constitutions,

. . .” (App. 3) first concluded that the petitioner

did not have sufficient contact with California to sup-

port general jurisdiction over him (App. 4). It then

stated, however, that

(a) “[petitioner] participated personally to secure

a benefit for his corporation and, indirectly, him-

self.” (App. 6),

(b) “[petitioner], through Fitzsimmons, interject-

ed himself into the transaction by assuming per-

sonal liability in the event of default on a con-

tract expressly subject to jurisdiction in the Califor-

nia forum.” (App. 7), and

(c) “the guaranty was part of the negotiating

strategy in California.” (App. 7).

From this, the Court apparently concluded that peti-

tioner had “purposefully availed himself of the privilege

of conducting activities within California,” and that

jurisdiction over petitioner was reasonable. It affirmed

the District Court’s judgment (App. 9).

onlbins

REASONS FOR GRANTING THE WRIT.

I

The Approval of Personal Jurisdiction Over Petitioner

by the Court Below Conflicts With the Teaching

of This Court in Hanson v. Denckla. The Question

of Personal Jurisdiction Over Petitioner Raises an

Important Question of Federal Law Which Should

Be Settled by This Court.

A. Petitioner Could Not Be Subject to the Jurisdiction of the

California Court Unless He Engaged in Some Act by

Which He Purposefully Availed Himself of the Privilege of

Conducting Activities Within California, Thereby Invoking

the Benefits and Protection of Its Laws.

The decisions of this Court in /nternational Shoe

Co. v. Washington, 326 U.S. 310 (1945), and its

progeny define the limitations on a state’s power to

assume in personam jurisdiction over a non-resident

defendant. For such jurisdiction to attach, a defendant

must have such “minimum contacts” that maintenance

of the action will not offend “traditional notions of

fair play and substantial justice.” International Shoe

Co. v. Washington, 326 U.S. at 316.

Where a non-resident defendant's activities within

a state are “substantial” or “continuous and systematic,”

there are sufficient contacts between the defendant

and the state to support jurisdiction even if the cause

of action is unrelated to the defendant’s forum activities.

Perkins v. Benguet Consolidated Mining Co., 342 US.

437, 447-48 (1952). This jurisdiction is often referred

to as “general jurisdiction.” In the instant action, the

court below found that petitioner did not have sufficient

onion

contact with California to support general jurisdiction

over him (App. 4).

Where a non-resident’s contacts with the forum state

are insufficient to confer general jurisdiction, the issue

of personal jurisdiction turns on an evaluation of the

nature and quality of the defendant’s contacts in relation

to the cause of action being sued on. Hanson v. Denck-

la, 357 U.S. 235, 253 (1958). For some time, the

Ninth Circuit has adopted the following approach in

making this evaluation:

(1) The non-resident defendant must do some

act or consummate some transaction with the

forum or perform some act by which he purpose-

fully avails himself of the privilege of conducting

activities in the forum, thereby invoking the bene-

fits and protections of its laws. (2) The claim

must be one which arises out of or results from

the defendant’s forum-related activities. (3) Exer-

cise of jurisdiction must be reasonable.

L. D. Reeder Contractors vy. Higgins Industries, 265

F.2d 768, 773-74 n. 12 (9th Cir. 1959). Accord:

Hanson v. Denckla, 357 U.S. 235.

Petitioner respectfully submits that the court below

erred in its determination that the petitioner, through

his guaranty of Oregon, Inc.’s lease obligations, had

“purposefully avail{ed| himself of the privilege of con-

ducting activities in the forum, thereby invoking the

benefits and protections of its laws.” Petitioner further

respectfully submits that the court below also erred

in determining that the exercise of jurisdiction in this

action by the federal court in California was reasonable,

=

B. The Court Below Erred in Concluding That Petitioner Pur-

posefully Availed Himself of the Privilege of Conducting Ac-

tivities Within the Forum State and That Jurisdiction Over

Him Was Reasonable.

Petitioner did not “interject” himself into the sale

and leaseback transaction as part of a “negotiating

strategy.” The simple and clear fact is that sometime

during the negotiations between respondents and Ore-

gon, Inc. (to which petitioner was not a party), For-

sythe insisted upon petitioner’s guaranty as a condition

of going forward with the transaction. But for this

insistence, petitioner would have had no personal in-

volvement in the transaction whatsoever. Accordingly,

personal jurisdiction over him in California was consti-

tutionally impermissible.

“It is essential in each case that there be some

act by which the defendant purposefully avails himself

of the privilege of conducting activities within the forum

state, thus invoking the benefits and protections of

its laws.” Hanson v. Denckla, supra, 357 U.S. 235,

253. An act of a party is simply not “purposeful”

where it is insisted upon or required by another. The

case of Sibley v. Superior Court, 16 Cal.3d 442, 546

P.2d 322, 128 Cal.Rptr. 34 (1976), makes this point

abundantly clear.

In Sibley, the California Supreme Court held that

a non-resident individual guarantor was not properly

subject to the jurisdiction of the California courts under

facts which are strikingly similar to those found in

the case at bar. The facts in Sibley are as follows:

Carlsberg, a limited partnership whose principal place

of business was in California, formed another limited

partnership in California with Sunrise, a Georgia cor-

|

poration, for the purpose of operating two mobile home

parks in Georgia. Sunrise, the Georgia corporation,

was the general partner of the new limited partnership.

Under the terms of the limited partnership agreement,

Sunrise promised to make certain monthly payments

to Carlsberg, and Sibiey, a resident of Florida, guaran-

teed Sunrise’s performance.

The Court found that Sibley’s guaranty had induced

Carlsberg to enter into the new limited partnership

and that it would not have done so in the absence

of that guaranty. It further found that the performance

guaranteed by Sibley involved the payment of certain

monies to Carlsberg in California and that parties to

the partnership transaction other than Sibley had con-

siderable contacts with California in connection with

the negotiation and execution of the entire transaction.

It also appeared that the new limited partnership was

created in California in accordance with the provisions

of the California Corporations Code, the partnership

agreement was negotiated and executed in California

and Sibley’s guarantee was delivered to the plaintiff

in California. 16 Cal.3d at 445.

The Court granted Sibley’s motion to quash service

of summons upon him for lack of personal jurisdiction.

Relying on Hanson v. Denckla, 357 U.S. 235, the

Court held that Sibley, by his execution and delivery

of a personal guaranty, had not purposefully availed

himself of the privilege of conducting business in the

State of California or of the benefits and protections

of California laws.

“Petitioner was not a party to the MTA Part-

nership Agreement and took no part in its negotia-

tion. His only connection with the transaction ap-

parent from the record was as guarantor of the

performance of the Georgia corporation. Petitioner

signed the guaranty agreement in Florida and de-

livered it to another defendant, Peter Thun, who

then took it to California. As indicated, Petitioner

is a resident of Florida; he has never been a

resident of California, does not own any real estate

or personal property in this state, and does not

have any business interests or relations with Cali-

fornia except as a trustee of a testamentary trust

owning property in Cambria, California. Sibley

has not been physically present in the state since

January 1973, when he was here in connection

with a matter unrelated to the transactions before

us.” 16 Cal. 3d at 445.

* * *

“In the present case, the record fails to disclose

that petitioner purposefully availed himself of the

privilege of conducting business in California or

of the benefits and protection of California laws.

Likewise, the record does not indicate that peti-

tioner anticipated that he would derive any eco-

nomic benefit as a result of his guaranty. Although

petitioner may have reasonably foreseen that his

execution or breach of the guaranty agreement

would have some impact in this state, it does

not appear that plaintiff Carlsberg assumed any

obligations to petitioner which he might have

sought to enforce in California. In this regard,

petitioner’s contacts with California seem even

more minimal than those present in Belmont In-

dustries, Inc. v. Superior Court (1973) 31 Cal.

App. 3d 281 [107 Cal.Rptr. 237] (Hg. Den.),

in which jurisdiction was found to be unreason-

——

able; unlike the present case, in Belmont, the

non-resident defendant, which had negotiated a

contract with a California corporation for the pur-

chase of certain drafting services, could have

sought to enforce its contract in the California

courts.” 16 Cal.3d at 447.

The Court also noted that California had no special

interest in assuming jurisdiction over the guaranty trans-

action even though California residents were involved

as plaintiffs, since the guaranty constituted only an

ordinary commercial transaction not subject to special

regulation by the state.

“In the matter before us, a California limited

partnership, in reliance upon the personal guar-

anty by a Florida resident, contributed its hold-

ings of Georgia land to a new limited partnership

for the purpose of acquiring and operating mobile

home parks in Georgia. There are no aspects

of this arms-length transaction which are subject

to special regulation in California or in which

California has otherwise manifested exceptional

interest.” 16 Cal.3d at 448.

In this regard, the Court specifically distinguished

McGee y. International Life Insurance Co., 355 U.S.

220 (1957), where jurisdiction over an out of state

insurance company was compelled on the grounds that

California had enacted special legislation regulating the

activities of foreign insurance companies.

There is no meaningful distinction between the facts

of this case and those of Sibley. In both cases, the

defendants executed guaranties as an accommodation

to the respective plaintiffs, and the execution of the

guaranties constituted the only significant nexus be-

a) a

tween the defendants, the underlying transactions and

the State of California.* Sibley was not subject to

personal jurisdiction in California. Hanson v. Denckla,

357 U.S. 235, compels the same result here.

Other cases have found ao “purposeful” conduct

by a non-resident defendant who is compelled to under-

take some activity in the forum state. In Aurea Jewelry

Creations, Inc. v. Lissona, 344 F.Supp. 179 (S.D.

N.Y. 1972), for example, a non-resident salesman was

sued by his employer in New York to recover some

property given to him by the employer as samples.

The defendant, apparently at the plaintiff's request,

had come to New York from California, his place

of residence, to sign his employment contract and to

pick up the samples. The defendant thereafter made

two additional trips to New York, one for the purpose

of attending a jewelry show and the other for a discus-

sion with a representative of the plaintiff. During each

of these latter two trips, defendant discussed his activi-

ties as a salesman with plaintiff's representatives.

Defendant moved to dismiss for lack of personal

jurisdiction over him. Plaintiff relied chiefly upon

the defendant’s execution of the contract in New York

in urging that the defendant was subject to the jurisdic-

tion of the New York courts. The District Court granted

defendant’s motion. In so holding, it focused on the

impetus behind the defendant’s contacts with New York.

*Although the Sibley court noted that the record failed to

disclose whether Sibley expected to derive any economic benefit

as a result of his guaranty, presumably he did not assume

a large financial obligation gratuitously and as a stranger to

either the transaction or the primary obligor. In the present

case, petitioner ceased ownership of any interest in Ohio, Inc.

in June, 1969, less than one year after his execution of the

guaranty (App. 42).

oo | 5.

“The purposeful activity in which the defendant

engaged does not evidence a voluntary election

to invoke the protection of the laws of New York.

To the contrary, it manifests activity by the defend-

ant required of him by the plaintiff.” 344 F.Supp.

at 182.

As a matter of contract law, courts often recognize

a distinction between provisions in a contract arrived

at through the give-and-take of negotiation and those

provisions which appear in a contract due to the non-

negotiable insistence of one party. See, e.g., Sandnes’

Sons, Inc. v. United States, 462 F.2d 1388, 1392

(Ct. Cl. 1972) (holding the Government’s refusal to

deal with the plaintiff unless it agreed to certain contract

provisions to be violative of due process); D. H. Over-

myer v. Frick Co., 405 U.S. 174, 186 (1972) (uphold-

ing constitutionality of cognovit note, pointing out that

the note was not insisted upon by the respondent).

C. The Holding of the Court Below Is an Unwarranted Expan-

sion of the Scope of Personal Jurisdiction and Will Have

an Inimical Effect Upon the Willingness of Non-Residents

to Guarantee Interstate Business Transactions.

Because of this case, there is a serious danger that

non-residents will be reluctant to involve themselves

in any way in transactions in distant states. If by

his merely executing a guaranty in his own state,

a non-resident will subject himself to litigation and

expense on the other side of the country, the risk

is clear that interstate commerce will be impeded.

The court below ignored the wisdom of the First

Circuit in Whittaker Corp. v. United Aircraft Corp.,

482 F.2d 1079, 1085 (1973). The Whittaker court

dismissed an action against non-resident purchasers of

—

Massachusetts products for lack of personal jurisdiction

over them. The court emphasized the important interest

in “not discouraging foreign purchasers from dealing

with resident sellers for fear of having to engage in

litigation in distant courts.” The California courts have

also expressed these sentiments. In Belmont Industries,

Inc. v. Superior Court, 31 Cal.App.3d 281, 289, 107

Cal.Rptr. 237 (1973), the court held that to subject

a foreign buyer to the judicial jurisdiction of California

by the simple act of its purchasing services from a

California resident “would hinder interstate business,

contrary to the best economic interest of California.”

See also, Fourth Northwestern National Bank v. Hilson

Industries, Inc., 264 Minn. 110, 117 N.W.2d 732

(1962); Conn v. Whitmore, 9 Utah 2d 250, 342

P.2d 871, 874-75 (1975).

II

The California Long-Arm Statute Permits Personal Ju-

risdiction Over Non-Residents to the “Outer Limits”

of Due Process. However, the Decision of the

Court Below Erroneously Expands the Scope

of Jurisdiction Beyond That Permitted by the

State Courts and Invites Plaintiffs to Forum-Shop

in the Federal Courts to Obtain Jurisdiction Over

Non-Resident Defendants.

The California long-arm statute, CODE OF Civ. PRoc.

Section 410.10, has been interpreted by both the state

and federal courts to provide jurisdiction to the “outer

limits” of the state and federal Constitutions. Threl-

keld v. Tucker, 196 F.2d 1101, 1103 n. 2, cert.

denied, 419 U.S. 1023 (1974); Sibley v. Superior

Court, 16 Cal.3d 442, 445, 546 P.2d 322, 128 Cal.

Rpir. 34 (1976). The jurisdictional test applied by

the California courts is identical to that applied by

—,

the federal courts. Buckeye Boiler Co. v. Superior

Court, 71 Cal.2d 893, 898-99, 458 P.2d 57, 80 Cal.

Rptr. 113 (1969).

The Sibley decision is only the most recent in a

line of California cases which have rejected jurisdiction

over a non-resident because of the non-resident’s lack

of “purposeful” conduct within the state.

In Belmont Industries, Inc. v. Superior Court, 31

Cal.App.3d 281, 107 Cal.Rptr. 237 (1973), a Cali-

fornia corporation brought suit against a Pennsylvania

corporation to recover the value of certain drafting

services rendered by the plaintiff in California in con-

nection with a construction project in Maryland. The

defendant was engaged in the fabrication and erection

of structural steel framework and had telephoned the

plaintiff in regard to submitting a bid for a subcontract

on drafting work for the project. Some time later,

defendant mailed plaintiff a written “purchase order”

from Philadelphia, Pennsylvania, to California confirm-

ing the award of the contract to plaintiff.

Although defendant’s motion to quash service of

the summons based upon the court’s lack of personal

jurisdiction over it was denied by the lower court,

the Court of Appeal reversed and granted a writ of

mandate. In holding that there was no jurisdiction,

the court found that the nature and quality of defend-

ant’s activity was not sufficient so that it could be rea-

sonably compelled to defend itself in a California forum.

“In the case at bench the substance of petition-

er’s activities with reference to this state was the

purchase of drafting services from a resident corpo-

ration, by purchase order executed in Pennsyl-

vania. While it was undoubtedly contemplated that

Viking would perform the services in California

—__

it was not required by the terms of the contract.

The place of Viking’s performance was of no

concern to petitioner so long as the drawings

were prepared on time and in accord with the

original plans and specifications. Petitioner’s only

purpose in entering into the contract was to obtain

final drawings at its plant in Pennsylvania, which

could be utilized by it in fabricating the steel

framework for the Calvert Cliffs job. Viking’s

performance in California cannot give jurisdiction

over petitioner; it is petitioner’s activity that must

provide the basis for jurisdiction. We find no

purposeful activity by petitioner from which it

can be inferred that it intended to conduct business

in California.”

“Although it may be argued that in every in-

stance a state has some interest in providing its

residents with a forum for litigation, we are unable

to say that California has any substantial interest

in providing Viking with a forum to recover pay-

ment for its drafting services. [Citation] Viking

is a sophisticated business entity that has dealt

at arm’s length with petitioner on many occasions.

Viking’s officers have made repeated trips to Penn-

sylvania for the purpose of negotiating and confer-

ring with petitioner on drafting work. The litiga-

tion involves no public interest beyond the rights

of the parties. [Citation].” 31 Cal.App.3d at 288

and 289.

——

In Tiffany Records, Inc. v. M. B. Krupp Distribu-

tors, Inc., 276 Cal.App.2d 610, 81 Cal.Rptr. 320

(1964), the plaintiff, a California corporation in the

business of selling phonograph records at wholesale,

brought suit against thirty-one out-of-state corporations

seeking the recovery of money allegedly due in connec-

tion with the sale of a large quantity of records to

them over a six year period of time. In affirming

an order quashing service of process on the defendants,

the court characterized the activity of the defendants

as follows:

“There were, in essence, no more than purchases

of goods from a California seller by foreign pur-

chasers whose only contact with California was

that orders for records were accepted by appellant

in California and the records were shipped from

California.” 276 Cal.App.2d at 615.

“Respondents conducted no local activities.

Their activities were out-of-state, and, at most

consisted of the out-of-state placement or receiving

of telephone calls, and the mailing of orders.

Though such was apparently frequcnt in some

instances, this is not activity within the state,

but outside of it, and does not constitute that

quality and nature of activity that would make

it ‘fair’ to require any respondent to defend itself

here.” 276 Cal.App.2d at 619.

See also:

Cornell University Medical College v. Superior

Court, 38 Cal.App.3d 311, 113 Cal.Rptr.

291 (1974) (involving the purchase of medi-

cal instruments by Cornell University through

purchase orders forwarded to California by

mail);

—

Interdyne Co. v. SYS Computer Corp., 31 Cal.

App.2d 508, 107 Cal.Rptr. 499 (1973) (no

jurisdiction over a New York corporation

in an action by a California corporation for

the purchase price of computer parts ordered

by the defendant after extensive negotiations

by phone and mail).

The decision of the court below invites needless

forum-shopping and further distorts the underlying poli-

cy of the diversity jursidiction of federal courts. That

jurisdiction was originally designed to give a non-resi-

dent a fair hearing which he might not have been

able to achieve before a partisan state court. However,

the decision below will encourage plaintiffs to bring

diversity actions in the already heavily burdened federal

district courts in California in order to take advantage

of the expansion, albeit erroneous, of the limits of

personal jurisdiction beyond that which is permitted

by California’s state courts. The decision creates the

potential for a needless increase in the burden on

the federal system and should be reversed.

Conclusion.

For the foregoing reasons, petitioner respectfully re-

quests that a Writ of Certiorari be granted.

Respectfully submitted,

SCHWARTZ, ALSCHULER & GROSSMAN,

MARSHALL B. GROSSMAN,

FRANK KAPLAN,

Attorneys for Petitioner.

o

la CET ee ere pe he oe

APPENDIX.

Opinion.

In the United States Court of Appeals, for the Ninth

Circuit.

Max W. Forsythe, Helen H. Forsythe, E. Bush Hay-

den and Jean Mulliken, Plaintiffs-Appellees, v. D. H.

Overmyer, Defendant-Appellant. No. 75-2855, 76-1780.

Filed: April 17, 1978.

Appeal from the United States District Court for

the Northern District of California.

Before: WRIGHT and TANG, Circuit Judges, and

THOMPSON, District Jucge.*

WRIGHT, Circuit Judge:

Defendant appeals from a judgment for plaintiffs

who sued to recover on a personal guaranty. Appellant

Overmyer, a New York resident, was chairman of

the board and sole stockholder of D. H. Overmyer,

Inc. (Ohio) [hereafter Ohio, Inc.], an Ohio corpora-

tion. Ohio, Inc., in turn, was the 100% owner of

D. H. Overmyer, Inc. (Oregon) [hereafter Oregon,

Inc.|, an Oregon corporation. Appellant also was the

chairman of the board and the chief executive officer

of Oregon, Inc. His guaranty of certain obligations

of Oregon, Inc. was the subject of the suit.

I.

FACTS

Plaintiffs learned from a California real estate broker

that a warehouse in Oregon, owned by Oregon, Inc.,

was available for sale and lease back. Forsythe indicated

some interest in it.

*Hon. Bruce R. Thompson, of the District of Nevada.

sialic

For several days, Forsythe and his attorney met

with J. R. Fitzsimmons, an attorney and assistant secre-

tary of Ohio, Inc., parent of Oregon, Inc. As a condition

of the proposed purchase and lease, Forsythe insisted

that Overmyer personally guarantee performance of

Oregon, Inc.’s obligations as lessee. Fitzsimmons tele-

phoned Overmyer in New York to inform him of

Forsythe’s insistence on a personal guaranty. Overmyer

responded by telegram from New York to Forsythe

in California, confirming his willingness to give the

guaranty. Overmyer then executed the guaranty and

forwarded it by mail to Forsythe.

The lease, but not the guaranty, provided that it

would be subject to the jurisdiction of California courts

and that California law would govern. Oregon, Inc.

failed in its obligations as lessee. Late in 1973, Ohio,

Inc., along with its numerous subsidiaries, including

Oregon, Inc., filed petitions in bankruptcy under Chap-

ter XI. Virtually all Overmyer corporations were in

substantial arrears to landlord purchasers.

In October, 1973 plaintiffs sued on the guaranty’

and, after Overmyer’s motion to dismiss for lack of

personal jurisdiction was denied, the case went to trial.’

The court granted judgment for plaintiffs, for $90,-

618.17, with 7% interest from the date of judgmert

and attorney’s fees of $11,796.38. On appeal, Overmyer

challenges the jurisdiction of the district court.

1In a suit against Oregon, Inc., an Oregon state court awarded

plaintiffs a judgment for rent, property taxes, interest and attor-

neys’ fees.

2Trial was to the court on affidavits.

~ a

II.

NO. 75-2855

A. Jurisdiction.

Plaintiffs have the burden to establish jurisdiction.

KVOS, Inc. v. Associated Press, 299 U.S. 269, 278

(1936). Upon a motion to dismiss for lack of personal

jurisdiction, the burden varies according to the nature

of the pre-trial proceedings in which the jurisdictional

question is decided. Data Disc, Inc. v. Systems Tech.

Assoc., 557 F.2d 1280, 1285 (9th Cir. 1977). What-

ever degree of proof is required initially, a plaintiff

must have proved by the end of trial the jurisdictional

facts by a preponderance of the evidence.

The jurisdictional inquiry involves a two-step analysis.

First, we see if any statute of the state in which

the district court sits confers personal jurisdiction over

appellant. See Fed. R. Civ. P. 4(e). Next, we ascertain

whether the state’s assertion of jurisdiction accords

with principles of due process.

The applicable California statute is § 410.10 of

the California Code of Civil Procedure.* It has been

interpreted to provide that the limits on the jurisdiction

of the state’s courts are “coextensive with the outer

limits of due process under the state and federal con-

stitutions, as those limits have been defined by the

United States Supreme Court.” Data Disc, Inc. v. Sys-

tems Tech. Assoc., Inc., 557 F.2d at 1286 (citations

§Cal. Code Civ. Pro. § 410.10:

A court of this state may exercise jurisdiction on any

basis not inconsistent with the Constitution of this state

or of the United States.

oe ae

omitted). Thus, the usual two-step analysis collapses

into a single search for the outer limits of what due

process permits. Cf. Amba Marketing Systems, Inc.

v. Jobar Int’l., Inc., 551 F.2d 784, 788-89 (9th Cir.

1977).

A series of decisions, beginning with /nternational

Shoe Co. v. Washington, 326 U.S. 310 (1945), defines

the limitations on a state’s power to assume in personam

jurisdiction over an out-of-state defendant. Hanson v.

Denckla, 357 U.S. 235 (1958); McGee v. International

Life Insurance Co., 355 U.S. 220 (1957). A defendant

must have such “minimal contacts” with the forum that

maintenance of the suit will not offend traditional

notions of fair play and substantial justice. Data Disc,

Inc., 557 F.2d at 1287, citing International Shoe Co.

v. Washington, 326 U.S. at 316.

When a defendant has “substantial” forum-related

activities, he may be subject to the forum state’s juris-

diction even as to a suit arising from activities unrelated

to the forum. But when his activities are not sufficiently

pervasive to support general jurisdiction, the inquiry

must turn to an evaluation of his forum-related activities

as they relate to the specific cause of action.

Because defendant did not have enough contact with

California to support general jurisdiction over him,*

we must evaluate his contact with the state in his

role as guarantor of Oregon, Inc.’s obligations.® This

*Overmyer’s contacts with the forum cannot be fairly charac-

terized as so “substantial” or “continuous and systematic” as

to render him generally amenable to the jurisdiction of the

California courts. Data Disc, Inc., 557 F.2d at 1287.

‘Courts have recognized that under California’s longarm stat-

ute and the due process clause, a defendant may be subject

to California jurisdiction when he has caused an effect in

that state by an act or omission elsewhere. Quattrone v. Superior

—

circuit has adopted the following analytical approach

to that evaluation:

(1) The nonresident defendant must do some

act or consummate some transaction with the

forum or perform some act by which he purpose-

fully avails himself of the privilege of conducting

activities in the forum, thereby invoking the bene-

fits and protections of its laws. (2) The claim

must be one which arises out of or results from

the defendant’s forum-related activities. (3) Exer-

cise of jurisdiction must be reasonable.

Data Disc, Inc., 557 F.2d at 1287 (citations omitted).

The question is whether Overmyer, by guaranteeing

the corporation’s obligations as lessee of the Oregon

warehouse, personally availed himself of the privilege

of conducting activities in California so as to invoke

the benefits and protections of its laws. In answering

the question, we view the facts with a common sense

perspective and evaluate carefully the fundamental fair-

ness of the challenged jurisdictional exercise in light

of the facts.

While we have attempted carefully to organize

the various legal theories which may be derived

from plaintiffs’ arguments and the case law in

this area, it must be cautioned that questions of

personal jurisdiction admit of no simple solutions

and thai ultimately due process issues of reason-

ableness and fairness must be decided on a case-

Court, 44 Cal.App.3d 296, 303, 118 Cal. Rptr. 485, 552

(1975); McGee v. International Life Ins. Co., 355 U.S. 220

(1957). Jurisdiction properly rests on the “effects” rationale

“unless the nature of the effects and of the individual’s relation-

ship to the state make the exercise of such jurisdiction unreason-

able.” Sibley v. Superior Court, 16 Cal.3d 442, 446, 128

Cal.Rptr. 34, 36 (1976) (emphasis deleted),

_

by-case basis. Perkins v. Benguet Consol. Mining

Co., 342 U.S. 437, 446, 72 S.Ct. 413, 96 L.Ed.

485 (1952); Amba Marketing Systems, Inc. v.

Jobar Int'l, Inc., 551 F.2d 784, 789 (9th Cir.

1977); Wright v. Yackley, 459 F.2d 287, 290-

91 & n.7 (9th Cir. 1972); Gardner Eng’r. Corp.

v. Page Eng’r. Co., 484 F.2d 27, 30-31 (8th

Cir. 1973); Benjamin v. Western Boat Building

Corp., 472 F.2d 723, 725 (Sth Cir.), cert. denied,

414 U.S. 830, 94 S.Ct. 60, 38 L.Ed.2d 64 (1973).

Wells Fargo & Co. v. Wells Fargo Express Co., 556

F.2d 420, 426 (9th Cir. 1977).

The sale-lease contract between plaintiffs and Oregon,

Inc. was negotiated in California, and expressly was

subject to interpretation under California law by Cali-

fornia courts. Overmyer was not a party to it. He

did, however, guarantee Oregon, Inc.’s obligations under

it. The guaranty, a separate contract between different

parties, was requested as a condition of plaintiffs’ assent

to the sale-lease agreement. At their request, attorney

Fitzsimmons called Overmyer who agreed in his per-

sonal capacity to guarantee the corporation’s obliga-

tions. Although the primary negotiations were between

plaintiffs and the corporation, Overmyer participated

personally to secure a benefit for his corporation and,

indirectly, himself.

An out-of-state act having an effect within the state

may be sufficient to support jurisdiction and in such

a case we must be particularly careful to assure that

the exercise of jurisdiction is reasonable. “The degree

to which a defendant interjects himself into the state

affects the fairness of subjecting him to jurisdiction.”

Data Disc, Inc., 557 F.2d at 1288 (citations omitted),

-

Overmyer, through Fitzsimmons, interjected himself

into the transaction by assuming personal liability in

the event of default on a contract expressly subject

to jurisdiction in the California forum. The guaranty

was part of the negotiating strategy in California.°

The courts generally respect corporate boundaries

in jurisdictional contexts. We held recently that where

“[nJjothing in the record indicates that the formal

separation between parent and subsidiary is not scrupu-

lously maintained[,] . . . the activities of the parent

are irrelevant to the issue of jurisdiction over the

absent subsidiary.” Uston v. Grand Resorts, Inc., 564

F.2d 1217, 1218 (9th Cir. 1977) (citations omitted).

See also Mizokami Bros. v. Baychem Corp., 556 F.2d

975, 977 (9th Cir. 1977). Moreover, a corporate

officer who has contact with a forum only with regard

®To place the facts of this case in context, and to explain

further the fundamental fairness of finding jurisdiction over

Overmyer, we note that this dispute does not arise from a

single, isolated transaction.

Between 1969 and 1973 Overmyer visited California an aver-

age of twice a year to meet with general managers and vice-

presidents of his California subsidiaries and to review their

operations. Overmyer’s corporations listed the California ware-

houses for sale and lease-back with a real estate brokerage

firm, Fox & Carskaden, Inc., in Menlo Park, California, and

these brokers negotiated sales and lease-backs of at least thirteen

Overmyer warehouses to California residents. D. H. Overmyer,

pursuant to the above-described course of business, personally

guaranteed performance of his corporations’ obligations to ten

California residents. Between 1968 and 1973, D. H. Overmyer

personally met with the above-named brokers in California

several times in connection with the negotiation of these sales

and lease-backs. These brokers are the same ones who negotiated

the sale and lease-back of the Oregon warehouse involved

in this case.

We recognize that a share of Overmyer’s California contacts

were made in his capacity as a corporate officer. But we note

that he regularly involved himself personally in his corporations’

ventures by giving his personal guaranty for corporate obliga-

tions.

po

to the performance of his official duties is not subject

to personal jurisdiction in that forum. See Chem Lab

Products, Inc. v. Stepanek, 554 F.2d 371 (9th Cir.

1977).

To affirm the finding of jurisdiction in this case,

however, does not require that we dismantle the corpo-

rate structure. While Overmyer could have remained

behind the multiple veils of his complex business or-

ganization, he chose not to do so. As a fair result

of that considered business decision, he became subject

to jurisdiction in California."

B. Other Alleged Errors.

Overmyer’s other allegations of error are insubstan-

tial. Having failed to argue the point at trial, he may

not object to Forsythe’s alleged lack of standing to

sue. We note, however, that the persons to whom

Forsythe assigned his interests in the lease were properly

joined as parties plaintiff. The trial judge held that

the appellant had not sustained his burden to prove

that plaintiff had a duty to mitigate damages or had

failed to do so under the terms of the lease. The

record indicates that his conclusion was correct.

7It would defeat reason and common sense to hold that

service of process must be quashed simply because Overmyer

remained in New York and sent a telegram promising the

guaranty, and later the guaranty itself, to the plaintiffs in

California or because the guaranty was executed at the request

of the plaintiffs.

The guaranty transaction was intimately bound up with the

California-based negotiations and Overmyer must have expected,

in light of his previous experiences, that the plaintiffs might

request a personal guaranty from him as part of the transaction.

See note 6, supra.

widliion

Ill.

No. 76-1780

In a companion appeal Overmyer challenges the

district court’s orders directing him to answer post

judgment interrogatories and to post a supersedeas bond

pending appeal. He has answered the interrogatories

and our decision in No. 75-2855 renders relief from

the bond requirement unnecessary. The issues in the

second appeal have become moot.

IV.

CONCLUSION

The judgment of the district court is affirmed. The

appeal in No. 76-1780 is dismissed for mootness.

—~

Order.

In the United States Court of Appeals, for the

Ninth Circuit.

Max W. Forsythe, Helen H. Forsythe, E. Bush Hay-

den and Jean Mulliken, Plaintiffs-Appellees, v. D. H.

Overmyer, Defendant-Appellant. No. 75-2855, 76-1780.

Filed: June 16, 1978.

Before: WRIGHT and TANG, Circuit Judges, and

THOMPSON, District Judge.

The panel as constituted in the above case has

voted to deny the petition for rehearing. Judges Wright

and Tang have voted to reject the suggestion for a

rehearing en banc.

The full court has been advised of the suggestion

for an en banc hearing, and no judge of the court

has requested a vote on it. Fed. R. App. P. 35(b).

The petition for rehearing is denied and the sug-

gestion for a rehearing en banc is rejected.

|

Order Denying Motion to Dismiss.

United States District Court, Northern District of

California.

Max W. Forsythe, et al., Plaintiffs, vs. D. H. Over-

myer, Defendant. No. C-73-1900 LHB.

Filed: April 5, 1974.

Defendant D. H. Overmyer having filed a Motion

to Dismiss the above-entitled action; and the same

having regularly come on for hearing this day; and

the Court having reviewed the Notice of Motion, the

Affidavit of D. H. Overmyer in Support of Motion

to Dismiss, the Memorandum of Points and Authorities

in Support of the Motion to Dismiss, the Memorandum

of Points and Authorities in Opposition to Motion

to Dismiss, the Affidavit of Max W. Forsythe, the

Reply Memorandum of Points and Authorities in Sup-

port of Motion to Dismiss, the Supplemental Affidavit

of James R. B. Fitzsimmons in Support of Motion

to Dismiss, and the Supplemental Memorandum of

Points and Authorities in Opposition to Motion to

Dismiss; and Dinkeispiel & Dinkelspiel by Douglas

G. Boven having appeared on behalf of defendant

D. H. Overmyer; and Cullinan, Hancock, Rothert &

Burns by Jerome Sapiro, Jr., having appeared on behalf

of plaintiffs; the Court having heard argument; and

the matter having been submitted; the motion is denied.

Dated: March 29, 1974.

and Signed: April 5, 1974.

/s/ Lloyd H. Burke

Lloyd H. Burke

UNITED STATES DISTRICT JUDGE

=

APPROVED AS TO FORM:

CULLINAN, HANCOCK, ROTHERT & BURNS

By /s/ Jerome Sapiro, Jr.

Jerome Sapiro, Jr.

DINKELSPIEL & DINKELSPIEL

By /s/ Douglas G. Boven*

*Defendant to have 20 days from date of entry of order

within which to answer or otherwise respond to the complaint.

ae

— |,

Findings of Fact and Conclusions of Law.

United States District Court, Northern District of

California.

Max W. Forsythe, et al., Plaintiffs, vs. D. H. Over-

myer, Defendant. No. C-73-1900 WHO.

Filed: July 17, 1975.

This action came on regularly for trial before the

Court without a jury on May 19 and 27, 1975.

The matter having been tried, argued, and submitted,

the Court finds for the plaintiffs and makes the follow-

ing findings of fact and conclusions of law:

FINDINGS OF FACT -

1. Plaintiffs Max W. Forsythe and Helen Forsythe

are and at all times relevant herein have been residents

of the City of Menlo Park, State of California. Plaintiff

Jean Mulliken is and at all times relevant herein has

been a resident of the District of Columbia. Plaintiff

E. Bush Hayden is a resident of the State of Oregon.

2. In October, 1968, defendant Daniel H. Overmyer

was chairman of the board and sole shareholder of

D. H. Overmyer Co., Inc., an Ohio corporation (herein-

after “D. H. Overmyer Co. (Ohio)”), and from Decem-

ber, 1973, to the present date has been president and

treasurer of the same. Said defendant was at the com-

mencement of this litigation a resident of the State

of New York.

3. In October, 1968, D. H. Overmyer Co. (Ohio)

was the sole sharehoider of D. H. Overmyer Co.,

Inc., an Oregon corporation (hereinafter “D. H. Over-

myer Co. (Oregon)”).

4. At all times from 1964 to the present date,

defendant Daniel H. Overmyer has been chairman of

cuniiien

the board and chief executive officer of D. H. Overmyer

Co. (Oregon), and from December, 1973, he has been

president and treasurer of same.

5. On or about October 14 through 18, 1968,

negotiations were conducted by and between plaintiff

Max W. Forsythe and John Wilson, Esy., his attorney,

on the one hand, and James R. B. Fitzsimmons, who

represented himself to be an attorney employed D.

H. Overmyer Co. (Ohio), regarding the purchase by

plaintiffs of certain real property located in Portland,

Oregon, on which stood a warehouse, and for lease

of the aforementioned premises back to D. H. Overmyer

Co. (Oregon).

6. On October 18, 1968, defendant Daniel H. Over-

myer sent to plaintiff Max W. Forsythe a telegram

stating that defendant unconditionaily guaranteed full

performance of each and every obligation under the

proposed lease for the first five years of said lease.

7. On or about October 18, 1968, after receipt

of the aforementioned telegram, plaintiff Max W. For-

sythe entered into agreements of purchase and of lease

with D. H. Overmyer Co. (Oregon). The lease to

said corporation was for a term of 20 years, com-

mencing on October 18, 1968, at a rent of $7,295.83

per month, payable in advance on the 20th day of

each and every month throughout the term of the

lease* The tenant also agreed to pay, as additional

rent, interest at the rate of 6% per year on all overdue

installments of net rent and amounts of additional

rent from ien days after the due date thereof until

paid in full. Under said lease, D. H. Overmyer Co.

(Oregon) also agreed, inter alia, to pay as additional

rent all taxes which were on October 18, 1968, or

thereafter levied, assessed, charged, or imposed against

ee

—\

the lease, the demised premises, or the use or occupa-

tion thereof. The lease provides for payment of attor-

neys’ fees and expenses of litigation in the event of

litigation arising out of breach of lease by the tenant.

The lease gave the lessor, inter alia, the right to perform

the tenant’s obligations as aforesaid in the event tenant

failed to perform same and provided that all sums

paid by the lessor in performing the tenant’s obligations

should be repaid by the tenant with interest at the

rate of 6% per annum.

8. On October 18, 1968, concurrently with the

execution of the aforementioned lease, a guarantee

of the performance of the obligations of the tenant

was executed by D. H. Overmyer Co. (Ohio).

9. On October 21, 1968, defendant Daniel H. Over-

myer executed a formal memorialization of his uncondi-

tional guarantee of the performance of the obligations

of D. H. Overmyer Co. (Oregon) under the aforemen-

tioned lease until October 17, 1973. The same was

delivered by mail to plaintiff Max W. Forsythe in

Menlo Park, California.

10. On or about October 31, 1968, plaintiff Max

W. Forsythe entered into an assignment of the afore-

mentioned lease, pursuant to which he assigned, trans-

ferred and conveyed all of his right, title and interest

in and to the aforementioned lease to all of the plaintiffs

herein.

11. On November 16, 1973, defendant, as chairman

of the board of D. H. Overmyer Co. (Ohio) and

all of its subsidiary corporations, including but not

limited to D. H. Overmyer Co., Inc. (Oregon), filed

in the United States District Court, Southern District

of New York, 44 petitions in proceedings under Chapter

XI of the Bankruptcy Act.

=

12. On April 8, 1974, plaintiffs were awarded judg-

ment in the Circuit Court of the State of Oregon

for the County of Multnomah against D. H. Overmyer

Co. (Oregon), for rent, property taxes, interest, and

attorneys’ fees in the total amount of $107,282.80.

13. In breach of the aforementioned lease, D. H.

Overmyer Co., Inc. (Oregon) failed to pay rent for

the month of April, 1973, and for every month there-

after until expiration of defendant’s guarantee in the

total amount of $40,127.07. Interest is owed on said

unpaid monthly rent installments at the rate of 6%

per annum in the total amount of $4,459.62.

14. In breach of the aforementioned lease, D. H.

Overmyer Co., Inc. (Oregon) failed to pay interest

on the rent paid tardily at the rate of 6% per annum

in the total amount of $1,172.40.

15. In breach of the aforementioned lease, D. H.

Overmyer Co., Inc. (Oregon) failed to pay real prop-

erty taxes on the real property leased to it by plaintiffs

in the years 1971, 1972, and 1973, and plaintiffs have

paid the same with interest charged by the tax collector

of Multnomah County, Oregon, in the total amount

of $42,502.39. Interest on the aforementioned tax and

interest payments advanced by plaintiffs at the rate

of 6% per annum is $2,356.69.

16. Plaintiffs have incurred attorneys’ fees and will

submit a certificate of counsel setting forth in detail

the nature of the services performed and the hours

devoted to such services.

17. Defendant has not carried the burden of proof

that any payments sought by plaintiffs to be recovered

herein are null and void as penalties pursuant to Cali-

fornia Civil Code Section 1670.

=

18. Defendant has not carried the burden of proof

that plaintiffs cannot recover herein until distribution

may be made in the aforementioned Chapter XI pro-

ceedings before the District Court of the United States,

for the Southern District of New York, No. 73 BKCY

1154.

CONCLUSIONS OF LAW

1. Jurisdiction of this Court is properly based on

the diverse citizenship of the parties and the amount

in controversy.

2. The judgment in this action should not be stayed

pending the Chapter XI bankruptcy proceedings of

the D. H. Overmyer Companies. The Chapter XI pro-

ceedings are a personal disability of the principal that

do not affect the liability of the defendants in this

action. California Civil Code Section 2810. Collier

on Bankruptcy, Volume I(a), pages 1537-1539.

3. The guarantee on which plaintiffs sue is, as

a matter of law and by its terms, unconditional. Bank

of America v. McRae, 81 Cal. App. 2d 1, 183 P.

2d 385. California Civil Code Section 2806.

4. Plaintiffs had no absolute duty to proceed against

the principal before attempting to recover from the

defendant guarantor. California Civil Code Section

2845. Moffett v. Miller, 260 P.2d 215.

5. Defendant has failed to meet his burden of

establishing that plaintiffs had the obligation and the

reasonable opportunity to mitigate damages. Vitagraph

Inc. v. Liberty Theatres, Co., 197 Cal. 694 at 699,

242 Pac. 709.

6. Since plaintiffs never terminated the lease of

the principal Overmyer company, plaintiffs were not

—

required to mitigate their damages. California Civil

Code Sections 1951.2, 3308.

7. The lease provisions providing for payment of

six percent interest as a fee for late payment are

not void as a penalty. California Civil Code Section

1670. Walsh v. Glendale Federal Savings and Loan

Association, 81 Cal. Rptr. 804.

8. Interest for late payments is allowable from the

date the underlying payment was due. California Civil

Code Section 3287.

9. Defendant is liable for reasonable attorneys’ fees

since the obligation to pay attorneys’ fees is set forth

in the lease. Grace v. Croninger, 56 Cal. App. 659

at pages 667 and 668.

10. Defendant is indebted to plaintiffs in the

amount of $90,618.17 plus interest at the rate of

seven percent per annum [sic] from date of entry of

judgment until paid.

11. Defendant’s affirmative defenses are dismissed.

12. Defendant is indebted to plaintiffs in the

amount of reasonable attorneys’ fees for services in-

curred herein.

Let judgment be entered accordingly, the plaintiffs

to recover their costs of suit. Plaintiffs will prepare

a form of judgment approved as to form by the defend-

ant and submit it within ten days, together with certifi-

cate of counsel with respect to the attorneys’ fees.

Dated: June 13, 1975;

and signed: July 15, 1975.

/s/ William H. Orrick, Jr.

William H. Orrick, Jr.

United States District Judge

4

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Brin 8 ADD en cits witb nom

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= =

Approved as to form:

CULLINAN, BURNS & HELMER

By

Jerome Sapiro, Jr.

Attorneys for Plaintiffs

DINKELSPIEL & DINKELSPIEL

By

Douglas Boven

Attorneys for Defendant

anise

Judgment.

United States District Court, Northern District of

California.

Max W. Forsythe, et al., Plaintiffs, vs. D. H. Over-

myer, Defendant. No. C-73-1900 WHO.

Filed: July 17, 1975.

This action came on for trial before the court, the

Honorable William H. Orrick, Jr., District Judge, pre-

siding, without a jury on May 19 and 27, 1975,

on stipulated facts, and the evidence adduced by the

parties having been heard and the matter having been

argued by counsel and the court having made its find-

ings of fact and conclusions of law, it is hereby

ORDERED AND ADJUDGED that the plaintiff's

Max W. Forsythe, Helen H. Forsythe, E. Bush Hayden

and Jean Mulliken recover of the deferidant Daniel

H. Overmyer the sum of $90,618.17 with interest there-

on at the rate of 7% per annum as provided by

law and their costs of action and attorneys fees in

the amount of $11,796.38.

Dated at San Francisco, California, this 16th day

of June, 1975.

/s/ William H. Orrick, Jr.

United States District Judge

ale eo & bo es

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Stipulation of Agreed Statement of Facts.

United States District Court, Northern District of

California.

Max W. Forsythe, et al., Plaintiffs, vs. D. “1. Over-

myer, Defendant. No. C-73-1900 WHO.

Filed: May 19, 1975.

The parties hereto agree to present this case on

the following stipulation of agreed facts and upon

the affidvait of Max W. Forsythe dated May 19, 1975,

to be filed concurrently herewith. It is hereby stipulated

that said affidavit may be admitted in evidence herein.

The aforementioned agreed facts are as follows:

1. Defendant Daniel H. Overmyer was at the com-

mencement of this litigation and now is a resident

of the State of New York.

2. In October 1968, defendant Daniel H. Overmyer

was chairman of the board and sole shareholder of D.

H. Overmyer Co., Inc., an Ohio corporation (herein-

after “D. H. Overmyer Co. (Ohio)”), and at all times

since December, 1973, he has been president and treas-

urer of the same.

3. In October 1968, D. H. Overmyer Co. (Ohio)

was the sole shareholder of D. H. Overmyer Co.,

Inc., an Oregon corporation (hereinafter “D. H. Over-

myer Co. (Oregon)”).

4. At all times from 1964 to the present, defendant

Daniel H. Overmyer has been chairman of the board

and chief executive officer of D. H. Overmyer Co.

(Oregon), and at all times since he has been president

and treasurer of same.

5. On October 18, 1968, defendant Daniel H. Over-

myer sent to plaintiff Max W. Forsythe a telegram

onde

stating that defendant unconditionally guaranteed full

performance of each and every obligation under the

proposed lease for the first five years of said lease.

A copy of said telegram is Plaintiffs’ Exhibit No.

1 herein.

6. On or about October 18, 1968, plaintiff Max

W. Forsythe entered into agreements of purchase and

of lease with D. H. Overmyer Co. (Oregon). The

lease to said corporation was for a term of twenty

(20) years, commencing on October 18, 1968, at

a rent of $7,295.83 per month, payable in advance

on the 20th day of each and every month throughout

the term of the lease. A copy of said lease is Plaintiffs’

Exhibit No. 2 herein. The tenant also agreed to pay,

inter alia, interest, real property taxes, and attorneys’

fees and expenses of litigation as set forth in sections

3.01, 3.02, 3.03, 4.01, 11.01, 15.02, 15.04, and 15.08

of said Plaintiffs’ Exhibit 2.

7. On October 18, 1968, a guarantee of the per-

formance of the obligations of the tenant was executed

by D. H. Overmyer Co. (Ohio) and delivered to plain-

tiff Max W. Forsythe in Menlo Park, California. A

copy of said guarantee is Plaintiffs’ Exhibit No. 3

herein.

8. On October 21, 1968, defendant Daniel H. Over-

myer executed the personal guarantee. A copy of said

guarantee is Plaintiffs’ Exhibit No. 4 herein. The same

was delivered by defendant Daniel H. Overmyer via

mail to plaintiff Max W. Forsythe in Menlo Park,

California.

9. On November 16, 1973, defendant, as chairman

of the board of D. H. Overmyer Co. (Ohio) and

all of its subsidiary corporations, including but not

limited to D. H. Overmyer Co., Inc. (Oregon), filed

a ae ee

wth

a ee

a

in the United States District Court, Southern District

of New York, 44 petitions in proceedings under Chapter

XI of the Bankruptcy Act. The proceeding involving

D. H. Overmyer Co. (Ohio) is Bankruptcy No. 73B

1129, and that for D. H. Overmyer Co. (Oregon)

is Bankruptcy No. 73B 1154, in said Court.

10. The affidavit of defendant Daniel H. Overmyer

in support of his motion to dismiss these proceedings,

dated January 21, 1974, may be received in evidence

as Defendant’s Exhibit B. The affidavit of James R.

B. Fitzsimmons, dated March 22, 1974, filed in support

of said motion herein may be received in evidence

as Defendant’s Exhibit C.

11. The affidavit of plaintiff Max W. Forsythe

in opposition to the motion of defendant to dismiss

this action for lack of venue, dated March 5, 1974,

may be received in evidence as Plaintiffs’ Exhibit No.

15. The affidavit of Herbert W. Richards, dated March

27, 1974, filed in opposition to defendant’s aforemen-

tioned motion to dismiss may be received in evidence

as Plaintiffs’ Exhibit No. 16. The declaration of John

P. Wilson, dated March 8, 1974, filed herein in opposi-

tion to defendant’s aforementioned motion to dismiss

may be received in evidence as Plaintiffs’ Exhibit No.

17.

- 12. Plaintiffs’ Exhibits Nos. 1, 2, 3, 4, 5, 6, 7,

8, 9, 13 and 14 may be received in evidence herein.

13. The Court may take judicial notice of plaintiffs’

Exhibits 11 and 12.

14. The Court may at trial rule upon the admissibil-

ity in evidence, or its ability to take judicial notice,

of Plaintiffs’ Exhibit No. 10 and Defendant’s Exhibit

A.

—24— | —

Dated: May 19, 1975. | Affidavit of Max W. Forsythe.

CULLINAN, BURNS & HELMER | United States District Court, Northern District of

/s/ By Jerome Sapiro, Jr. | California.

Jerome Sapiro, Jr. Max W. Forsythe, et al., Plaintiffs, vs. D. H. Over-

Attorneys for Plaintiffs myer, Defendant. No. C-73-1900 WHO.

DINKELSPIEL & DINKELSPIEL State of California, County of San Francisco—ss.

/s/ By Douglas Boven Filed: May 19, 1975.

Douglas Boven |

Attorney for Defendant I, Max W. Forsythe, being first duly sworn, say:

1. Iam a plaintiff herein, and I make this affidavit

pursuant to the agreement between plaintiffs and de-

fendant to present this action for trial upon an agreed

statement of facts.

2. Plaintiffs Max W. Forsythe and Helen Forsythe

were at the commencement of this litigation and now

are residents of the City of Menlo Park, State of

California. Plaintiff Jean Mulliken was at the com-

mencement of this litigation and now is a resident

of the District of Columbia. Plaintiff E. Bush Hayden

was at the commencement of this litigation and now

is a resident of the State of Oregon.

| 3. On or about October 14 through 18, 1968,

in the City of Menlo Park, California, affiant and

John Wilson, Esq., affiant’s attorney, on the one hand,

and James R. B. Fitzsimmons, who represented himself

to be an attorney employed by D. H. Overmyer Co.

(Ohio), on the other hand, conducted negotiations

regarding the purchase by plaintiffs from D. H. Over-

myer Co. (Oregon) of certain real property located

in Portland, Oregon, on which stood a warehouse,

and for lease of the aforementioned premises back

to D. H. Overmyer Co. (Oregon).

— a

4. Affiant declined to enter into the aforementioned

purchase and leaseback with D. H. Overmyer Co.

(Oregon) unless the obligations of said corporation

under the leaseback were guaranteed both by D. H.

Overmyer Co. (Ohio) and by defendant Daniel H.

Overmyer.

5. On or about October 18, 1968, after affiant

received the telegram, a copy of which is Plaintiffs’

Exhibit No. 1, herein, affiant entered into agreements

of purchase and of lease with D. H. Overmyer Co.

(Oregon). A copy of said lease is Plaintiff's Exhibit

No. 2 herein.

6. A guarantee of the performance of the obliga-

tions of the tenant dated October 18, 1968, executed

by D. H. Overmyer Co. (Ohio), was delivered to

affiant on that date in Menlo Park, California. A

copy of said guarantee is Plaintiff's Exhibit No. 3

herein.

7. A written unconditional guarantee by defendant

Daniel H. Overmycr dated October 21, 1968, was

received by affiant in Menlo Park, California, during

October, 1968. A copy of said guarantee is Plaintiffs

Exhibit No. 4 herein.

8. On or about October 31, 1968, affiant entered

into an assignment of the aforementioned lease, pur-

suant to which he assigned, transferred and conveyed

all of his right, title and interest in and to the afore-

mentioned lease to all of the plaintiffs herein. A copy

of said assignm... is Plaintiff's Exhibit No. 5 herein.

9. In March, 1973, plaintiffs herein filed an action

in the Circuit Court of the State of Oregon for the

County of Multnomah entitled Max W. Forsythe, et

al., Plaintiffs vs. D. H. Overmyer Co., Inc., an Oregon

— =

corporation, Defendant, being Civil Action No. 389587.

Plaintiffs were represented therein by McCarty, Swin-

dells & Nelson, attorneys at law.

10. On April 8, 1974, plaintiffs were awarded judg-

ment in the aforementioned action in the Circuit Court

of the State of Oregon for the County of Multnomah

against D. H. Overmyer Co. (Oregon), for rent, prop-

erty taxes, interest, and attorneys’ fees in the total

amount of $107,282.80. A copy of said judgment is

Plaintiff's Exhibit No. 10 herein. Said judgment has

not been satisfied in whole or in part.

11. Affiant and affiant’s wife, plaintiff Helen For-

sythe, have at all times since October 14, 1968, main-

tained the records of plaintiffs regarding receipts, dis-

bursements, and correspondence relating to plaintiffs’

interests in the aforementioned real property.

12. Affiant knows of his own knowledge, and plain-

tiffs’ business records indicate, that plaintiffs have not

received rent under the aforementioned lease for the

month of May, 1973, or for any month thereafter

through expiration of defendant’s guarantee, in the

total amount of $40,127.07. Interest on said unpaid

monthly rent computed to May 19, 1975, at the rate

of 6% per annum, is $4,459.62.

13. Affiant knows of his own knowledge, and plain-

tiffs’ business records indicate that, D. H. Overmyer

Co. (Oregon) was more than ten days late in making

payments of rent by a total of nine hundred seventy-

seven (977) days prior to expiration of defendant's

guarantee. Attached as Exhibit A and incorporated

herein by this reference is a schedule showing the

dates plaintiffs received rent payments from D. H.

Overmyer Co. (Oregon) from April, 1970, through

niin

October, 1973. Said table has been constructed from

entries on payment vouchers and bank deposit records

maintained by plaintiffs in the ordinary course of busi-

ness. Interest on said late payments, at the rate of

6% per arnum, computed over that number of days,

is $1,172.40.

14. D. H. Overmyer Co. (Oregon) failed to pay

real property taxes on the real property leased to

it by plaintiffs in the years 1971, 1972 and 1973.

Plaintiffs’ Exhibit 6 is a true and correct copy of

a statement received by plaintiffs from Massachusetts

Mutual Life Insurance Co. showing unpaid real property

taxes on said real property as of January 8, 1974.

Plaintiffs’ Exhibit 7 is a true and correct copy of

a letter sent by plaintiff Helen W. Forsythe on behalf

of all plaintiffs to Mr. Bruce Libby, an employee

of Massachusetts Mutual Life Insurance Company, on

January 11, 1974. Plaintiffs’ Exhibit 8 is a true and

correct copy of a statement received in Portland,

Oregon, by plaintiffs from the Tax Collector of Multno-

mah County, Oregon, on or about February 15, 1974,

showing real property taxes due on said real property

and interest thereon as of February 15, 1974, in the

total amount of $42,502.39. Plaintiffs have paid said

real property taxes for the years 1971, 1972 and 1973,

with interest charged by the Tax Collector of Multno-

mah County, Oregon, in the total amount of $43,-

662.43. Plaintiffs’ Exhibit 9 is a true and correct

copy of plaintiffs’ cancelled checks for said payments.

Interest on the aforementioned tax and interest pay-

ments advanced by plaintiffs computed at the rate

of 6% per annum to May 19, 1975, is $2,356.69.

15. On April 11, 1974, plaintiffs filed Proofs of

Claims in the aforementioned proceedings under Chap-

—

ter XI of the Bankruptcy Act in the matter of D.

H. Overmyer Co. (Ohio) and D. H. Overmyer Co.

(Oregon).

16. No distribution has been received by plaintiffs,

or any of them, from the aforementioned bankruptcy

proceedings.

17. No receiver was appointed to manage the ware-

house which was the subject of the aforementioned

lease prior to the commencement of the aforementioned

bankruptcy proceedings, and no rents were collected

by plaintiffs, or any of them, from any subtenant

of said warehouse prior to rejection of the aforemen-

tioned lease by the receiver in the aforementioned

bankruptcy proceedings in January, 1974.

18. Affiant’s affidavit in opposition to the motion

of defendant to dismiss this action for lack of venue,

dated March 5, 1974, is incorporated herein by this

reference.

19. Plaintiffs incurred and were awarded $7,500

attorneys’ fees for services rendered by McCarty, Swin-

dell & Nelson in connection with the aforementioned

litigation against D. H. Overmyer Co. (Oregon) in

the Circuit Court of the State of Oregon.

20. Affiant is informed by Cullinan, Burns & Hel-

mer, plaintiffs’ attorneys in connection with this litiga-

tion, that the services rendered by said attorneys and

their professional employees on behalf of plaintiffs have

involved more than 200 hours of time and out-of-

pocket expenses in excess of $250.

Dated: May 19, 1975.

/s/ Max W. Forsythe

Max W. Forsythe

=

Subscribed and sworn to before me this 19th day

of May, 1975.

/s/ Ann Ferguson

Notary Public, State of California

[ Seal ]

ow} ]

Affidavit of D. H. Overmyer in Support of

Motion to Dismiss.

United States District Court, Northern District of

California.

Max W. Forsythe, et al, Plaintiffs, vs. D. H. Over-

myer, Defendant. No. C-73-1900 LHB.

State of New York, County of New York—-ss.

Received: March 5, 1974.

D. H. OVERMYER being first duly sworn, \deposes

and says:

I am the named defendant in the above-entitled

action, and have personal knowledge of the facts set

forth herein, and submit this affidavit in support of

my motion to dismiss the complaint in this action

on the ground that this court lacks jurisdiction over

my person or the subject matter of this action.

Now and at all times material hereto, and specifically

from a date prior to October of 1968, I have resided

in the State of New York, and at no time from said

date to and including the present have I resided in

the State of California. My place of business at all

times material hereto is and has been 201 East 42nd

Street, New York, New York.

I executed the guaranty which is attached as Exhibit

“B” to the complaint in this action, and did so in

New York. I did not execute the guaranty in the

State of California, nor did I travel to or participate

in any negotiations in California with respect to the

guaranty or the lease referred to therein. At no time

have I personally transacted business, maintained an

office, had a telephone listing, employee, etc. within

the State of California.

_—

The said guaranty which is attached to the complaint,

on its face, relates to an Oregon corporation, and

refers to a lease of real property located in the County

of Multnomah, State of Oregon, and does not refer

to a California corporation or California real property.

For the foregoing reasons, I respectfully request that

this motion in all respects be granted and that this

action be dismissed.

/s/ D. H. OVERMYER

D. H. OVERMYER

Subscribed and sworn to before me this 21st day

of January, 1974.

/s/ Patricia A. Zuckerman

Notary Public, New York

_—

Reply Affidavit.

United States District Court, Northern District of

California.

Max W. Forsythe, et al., Plaintiffs, vs. D. H. Over-

myer, Defendant. Index Neo. c-73-1900 WHO.

State of New York, County of New York—-ss:

JAMES R. B. FITZSIMMONS, being duly sworn,

deposes and says, I am an attorney and counselor

at law, admitted to practice in the Courts of the

State of New York, and I submit this affidavit in

reply to the affidavit of MAX W. FORSYTHE.

In October, 1968, my services were retained by

the OVERMEYER corporate organization. I represented

the corporations in approximately thirty real estate

closings involving sale-lease-back transactions in var-

ious parts of the United States. The sale-leaseback

transaction between plaintiffs and D. H. OVERMYER

CO., INC. a California Corporation, and D. H. OVER-

MYER CO., INC. (OREGON) was one of these trans-

actions.

Because most of the real estate closings involved

similar, if not identical, sale-leaseback transactions, ne-

gotiations leading up to and including the actual ex-

ecution of the documents tended to follow fixed pat-

terns. The transactions between defendants and plain-

tiffs was one of these transactions.

In none of these real estate closings did I ever

state to a purchaser or his attorney that I represented

DANIEL H. OVERMYER personally. I was never

paid any compensation by the individual DANIEL

H. OVERMYER. FORSYTHE’S statement that

DANHEE H. OVERMYER wished to give personal

a, *

to OVERMYER’S personal HabHity in that DANIEL

H. OVERMYER, upon information and belief, was a

corporate officer of each of the aforementioned cor-

porate entities.

During many of these closings problems arose which

necessitated telephone conferences with corporate head-

quarters in New York. In practically every such situa-

tion, I communicated by telephone with GEORGE

HAYS, an Executive Vice President of the corporate

organization, and I did not speak with DANIEL H.

OVERMEYER personally. Thus, I cannot recall speak-

ing with DANIEL H. OVERMYER personally abcut

his guarantee. However, I emphasize that a personal

conference with OVERMYER almost never occurred

during the course of these real estate closings.

of the events leading te the execttion ef the saletease

back transaction is given only by MAX FORSYTHE.

the plaintHf in this action and that said narrative is

net substantiated by an affidavit from JOHN H.-

fidavit fron HERBERT VW RICHARDS. the real

estate breker; both of when were present during the

/s/ James R. B. Fitzsimmons

JAMES R. B. FITZSIMMONS

Sworn to before me this 22nd day of March, 1974.

/s/ Stanley Alex Schwartz

STANLEY ALEX SCHWARTZ

Notary Public, State of New York

No. 8558055, Qual. in Bronx Co.

[ Seal ]

SUNGARD aaanA io cals ssccacncacer ak aioe erence Dea Wee nnn nc > LT ne 2a OR oe

a.)

Guarantee.

This is a guarantee by D. H. OVERMYER, an

individual (hereinafter referred to as “DHO”), to Max

W. Forsythe, (hereinafter referred to as “Landlord”).

Negotiations between D. H. Overmyer Co., Inc.

(Oregon), an Oregon corporation (hereinafter referred

to as “Tenant) and Landlord have culminated in the

execution, concurrently herewith, of a Lease dated Oc-

tober 18, 1968, between Tenant and Landlord (herein-

after referred to as “The Lease”).

In consideration of Landlord entering into The Lease,

DHO hereby unconditionally guarantees until October

17, 1973 (hereinafter referred to as “The Guarantee

Term”) to Landlord the full and prompt payment

by Tenant of all sums to be paid, expended and dis-

bursed by Tenant and the full and prompt performance

of any of the other covenants and conditions of The

Lease at the times and in the manner and mode as

provided by The Lease.

This is a continuing guarantee, and shall not be

affected by any change, modification, alteration, assign-

ment, renewal, compromise, extension, acceleration or

supplement of The Lease or any part thereof. No

act or omission on the part of Landlord and no agree-

ment of any kind between Landlord and Tenant shall

in any manner or to any extent release or change

or modify or affect the obligation and liability of

DHO.

This guarantee shall be an independent obligation

of DHO and is independent of the obligations and

liabilities of Tenant. A separate action or actions may

be brought against DHO, irrespective whether action

willis

be brought against Tenant and whether Tenant be

joined in any such action or actions.

DHO expressly waives any and all demands and

notices of every type, nature, kind and description

whatsoever which he might otherwise be entitled by

law, including, the following being by way of specifica-

tion and not by way of limitation; notice of acceptance

hereof; protest; presentment; notice of protest; notice

of the incurring by Tenant of obligations or liabilities;

default; notice of default; or breach of non-payment.

This guarantee shali inure to the benefit of Landlord

and its successors and assigns; and shall be binding

upon DHO and his heirs, representatives, successors

and assigns.

DATED: October 21, 1968.

/s/ D. H. Overmyer

D. H. OVERMYER

/s/ J. R. B. Fitzsimmons

J. R. B. FITZSIMMONS

Witness

- on BVA OI Ot a ae Pee ei et | eens on A

eS ae res 2 wate 9 ry ner ae

NSF

— =

Complaint on Continuing Guaranty.

United States District Court, Northern District of

California.

Max W. Forsythe, Helen H. Forsythe, E. Bush Hay-

den and Jean Mulliken, Plaintiffs vs. D. H. Overmyer,

Defendants. Civil No. C-73-1900.

Filed: Oct. 25, 1973.

Plaintiffs allege:

1. PlaintiffS MAX W. FORSYTHE and HELEN

H. FORSYTHE are residents of the State of California.

Plaintiff E. BUSH HAYDEN is a resident of the State

of Oregon. Plaintiff JEAN MULLIKEN is a resident

of the District of Columbia. Plaintiffs are informed

and believe and therefore allege that Defendant D. H.

OVERMYER is a resident of the State of New York.

The matter in controversy exceeds, exclusive of interest

and costs, the sum of TEN THOUSAND ($10,000.00)

DOLLARS.

2. On or about October 18, 1968, Plaintiff MAX

W. FORSYTHE entered into a lease of real property

with D. H. OVERMYER, CO., INC., an Oregon cor-

poration, a copy of which is attached hereto marked

Exhibit “A” and by reference made a part hereof.

3. On or about October 21, 1968, MAX W. FOR-

SYTHE entered into a written continuing guaranty

with D. H. OVERMYER, whereby said individual un-

conditionally guaranteed to promptly pay to MAX

W. FORSYTHE, as landlord, all sums due and payabie

under the covenants and conditions of the lease dated

October 18, 1968. It was further provided that the

guaranty shall inure to the benefit of the successors

and assign: of the landlord, MAX W. FORSYTHE.

= =

A copy of said guaranty is attached hereto, marked

Exhibit “B” and by reference made a part hereof.

4. On or about October 31, 1968, MAX W. FOR-

SYTHE executed an ASSIGNMENT OF LEASE

whereby he transferred all of his right, title and interest

‘in and to the lease dated October 18, 1968 (attached

hereto as Exhibit “A”) to E. BUSH HAYDEN, JEAN

MULLIKEN and HELEN H. FORSYTHE, a copy

of said Assignment of Lease is attached hereto, marked

Exhibit “C” and by reference made a part hereof.

5. By the terms of the lease dated October 18,

1968, there is now due, owing and unpaid from D.

H. OVERMYER, CO., INC., to Plaintiffs the sum of

Fifty-One Thousand Seventy Dollars Eighty-One Cents

($51,070.81) for rent; interest at the rate of 6%

per annum as computed on the delinquent monthly

payments as set forth in the lease, said interest present-

ly exceeds One Thousand Dollars ($1,000.00); the

sum of Forty-Seven Thousand Three Hundred Twenty

Dollars and Twenty-Four Cents ($47,320.24) for un-

paid real property taxes for 1971-1973, and interest

thereon, which currently amounts to in excess of Four

Thousand Five Hundred Dollars ($4,500.00). Said

sums amount to in excess of One Hundred Three

Thousand Dollars ($103,000.00). Although demand

has been made on both D. H. OVERMYER CO.,

INC., and D, H. OVERMYER, individually, each of

said parties has refused to pay the sums due, or any

part thereof, all to Plaintiffs’ damage. Plaintiff asks

leave to amend this pleading at the time of trial to

set forth the exact balance due from defendant.

6. Section 15.08 of the lease provides that in the

event tenant shall be in default in the performance

=" =

of any obligation under the lease and an action is

brought for the enforcement thereof in which it is

determined that tenant was in default, tenant shall

pay to landlord all expenses incurred in connection

therewith, including reasonable attorney’s fees. Plaintiffs

have been required to hire attorneys to enforce their

claim and reasonable attorneys fees to date is the

sum of Seven Thoussnd Five Hundred Dollars ($7,-

500.00).

WHEREFORE, Plaintiffs demand judgment against

Defendant in the sum of Fifty-One Thousand Seventy

Dollars and Eighty-One Cents ($51,070.81) as rent,

interest at the rate of six (6%) percent per annum

on the delinquent monthly rental payments, Forty-Seven

Thousand Three Hundred Twenty Dollars and Twenty-

Four Cents ($47,320.24) for delinquent real property

taxes, and the interest accrued thereon, together with

costs reasonable attorneys fees and expenses incurred

in connection with this litigation.

Dated: October 24, 1973.

/s/ Timothy C. Wright

Attorney for Plaintiff

—40—

Notice of Motion and Motion to Dismiss.

United States District Court, Northern District of

California.

Max W. Forsythe, et al, Plaintiffs, vs. D. H. Over-

myer, Defendant. No. C-73-1900 LHB.

Filed: January 28, 1974

TO PLAINTIFFS AND TO THEIR ATTORNEYS

OF RECORD, TIMOTHY C. WRIGHT, ESQ.

AND JOHN P. WILSON, ESQ.:

PLEASE TAKE NOTICE that on Friday, February

15, 1974, at 11:00 a.m. or as soon thereafter as the

matter can be heard in Courtroom No. 6, U.S. Court-

house, 450 Golden Gate Avenue, San Francisco, Cali-

fornia, before Honorable Lloyd H. Burke, U.S. District

Judge, defendant will move the Court for. its order

dismissing this action.

This motion is made on the ground that the Court

lacks jurisdiction over the defendant, and is based

on this notice, the pleadings, records and files in this

action, the attached affidavit and memorandum of

points and authorites, and such further oral and docu-

mentary evidence as may be presented at the hearing

of this motion.

Dated: January 24, 1974.

DINKELSPIEL & DINKELSPIEL

/s/ By Bruce W. Belding

Bruce W. Belding

Attorneys for Defendant

-

_— |

MEMORANDUM OF

POINTS AND AUTHORITIES

1. The defense of “lack of jurisdiction over the

person” may be raised by motion.

Rule 12(b), Federal Rules of Civil Procedure

2. A mandatory prerequisite to establishing jurisdic-

tion is that there be certain “minimum contacts” be-

tween the non-resident defendant and the state seeking

to exercise jurisdiction.

International Shoe v. Washington, 326 U.S. 310

(1944);

California Code of Civil Procedure, Section

410.10, applicable per Arrowsmith vs. United

States International, 320 F.2d 219 (2d Cir.

1963).

3. In this case the necessary “minimum contacts”

are lacking. Plaintiff alleges that he leased certain Ore-

gon real property to an Oregon corporation, and that

defendant, admittedly a New York resident, guaranteed

the lease (Complaint, 41, 2 and 3). The guaranty

was signed in New York, and defendant personally

had no activity in California in connection with this

action (D. H. Overmyer Affidavit). Therefore, defend-

ant urges that plaintiff's attempt to predicate jurisdiction

_¢ based solely on plaintiffs’ California residence be re-

jected, and that this motion be granted.

Dated: January 24, 1974

Respectfully submitted,

DINKELSPIEL & DINKELSPIEL

/s/ By Bruce W. Belding

Bruce W. Belding

Attorneys for Defendant

_— =

Answer to Plaintiffs’ First Interrogatories to

Defendant Filed Nov. 25, 1974.

* * *

INTERROGATORY NO. 2

State whether you are now or have ever been an

officer, director, shareholder or employee of (a) Over-

myer, Inc. (Ohio); (2) D. H. Overmyer, Inc. (Ore-

gon); or (c) Overmyer Distributing Company.

RESPONSE TO INTERROGATORY NO. 2

(a) Officer, director, shareholder, and employee.

(b) Officer, director, shareholder, and employee.

(c) Officer, director, shareholder, and employee.

* * *

INTERROGATORY NO. 4:

For each entity named in Interrogatory No. 2 in

which you are a shareholder, state:

(a) The number of shares you own or have

owned since January 1, 1967;

(b) The percentage of total shares you now

own or have owned since January 1, 1967; and

(c) The inclusive dates of your ownership of

such shares.

RESPONSE TO INTERROGATORY NO. 4

(a) 8 shares of D. H. Overmyer, Inc. (Ohio); no

shares of D. H. Overmyer Co., Inc. (Oregon); 10,000

shares of Overmyer Distribution Services, Inc.

(b) 100% of D. H. Overmyer, Inc. (Ohio). No

shares of D. H. Overmyer Co., Inc. (Oregon). .001%

of Overmyer Distribution Services, Inc.

(c) To June 18, 1969, with respect to D. H. Over-

myer Co., Inc. (Ohio). From May, 1971, to date

with respect to Overmyer Distribution Services, Inc.

. ee

—_.

Affidavit of Max W. Forsythe.

I, MAX W. FORSYTHE, being duly sworn, say:

1. Iam one of the plaintiffs in the above-entitled

action, and I make this affidavit in opposition to the

motion of defendant Daniel H. Overmyer to dismiss

this action for lack of venue.

2. During or about the month of October, 1968,

affiant was told by Herbert W. Richards, a real estate

broker employed by Fox & Carskadon, Inc., in Menlo

Park, California, that D. H. Overmyer Co., Inc., was

offering for sale and leaseback a warehouse and office

located at 19241 N. E. San Rafael Street and N. E.

192 Street, Portland, Oregon, a warehouse and office.

Mr. Richards offered to put me in touch with a repre-

sentative of D. H. Overmyer Co., Inc., in Menlo Park,

California, to discuss details of the potential investment.

3. After some preliminary investigation of D. H.

Overmyer Co., Inc., and of the aforementioned ware-

house and office, affiant concluded that affiant and

his family would be interested in the possibility of

the proposed purchase and leaseback, but only upon

certain terms and conditions.

4. During both affiant’s preliminary investigation

of D. H. Overmyer Co., Inc., and the negotiations

with attorney James R. B. Fitzsimmons, affiant learned

that defendant Daniel H. Overmyer controlled and dom-

inated D. H. Overmyer Co., Inc. (Ohio) and its subsidi-

aries, was the sole shareholder thereof, and was chair-

man of the board not only of D. H. Overmyer Co.,

Inc. (Ohio) and D. H. Overmyer Co., Inc. (Oregon),

but also of D. H. Overmyer Co., Inc., a California

corporation wholly owned by the Ohio corporation.

Indeed, attorney James R. B. Fitzsimmons advised both

—_,

me and my attorney that he could not commit any

of the aforementioned corporations or defendant Daniel

H. Overmyer to enter into any sale or leaseback or

guarantee without the express, personai approval of

defendant Daniel H. Overmyer.

5. Because I understood that defendant Daniel H.

Overmyer wholly dominated and controlled the com-

panies which bear his name, I decided that my family

and I would not enter into the proposed purchase

and leaseback unless defendant Daniel H. Overmyer

personally guaranteed the performance of the terms

and conditions of the purchase and leaseback by D. H.

Overmyer Co., Inc. (Ohio), and by D. H. Overmyer

Co., Inc. (Oregon). I requested my personal attorney,

John P. Wilson, of Menlo Park, California, to review

the proposed transaction. Mr. Wilson and I met in

the law offices of John P. Wilson, at 1075 Curtis

Street, Menlo Park, California, with the aforementioned

Herbert W. Richards and with one James R. B. Fitz-

simmons, whom I understood to be an attorney at

law representing D. H. Overmyer Co., Inc. (Ohio),

and D. H. Overmyer Co., Inc. (Oregon), and defend-

ant Daniel H. Overmyer. Our negotiations were con-

ducted in Menlo Park, California, on or about October

14, 15, 16, 17, and 18, 1968. During the negotiations,

the aforementioned James R. B. Fitzsimmons made

several telephone calls to Daniel H. Overmyer in which

said James R. B. Fitzsimmons obtained the agreement

of his client personally to guarantee performance of

each and every obligation by D. H. Overmyer Co., Inc.

(Ohio), and of D. H. Overmyer Co., Inc. (Oregon),

for a lease of the aforementioned premises. Defendant

Daniel H. Overmyer, through his attorney James R.

B. Fitzsimmons, however, refused to commit himself

— a

to such guarantee for a longer period than five (5)

years.

6. On October 18, 1968, defendant Daniel H. Over-

myer confirmed his commitment to guarantee perform-

ance of the leasehold obligations as aforesaid by a

telegram addressed to affiant in care of the aforemen-

tioned Herbert W. Richards in Menlo Park, California.

A copy of said telegram is attached hereto as Exhibit

1 and, by this reference, incorporated herein.

7. Following receipt of the aforementioned tele-

gram, and in reliance thereon, affiant entered into

the lease of real property with D. H. Overmyer Co.,

Inc. (Oregon), a copy of which is attached to the

Complaint herein as Exhibit A.

8. On October 18, 1968, subsequent to my receipt

of the aforementioned personal guarantee of Daniel

H. Overmyer, my attorney John P. Wilson, and James

R. B. Fitzsimmons, the attorney for defendant Daniel

H. Overmyer and for D. H. Overmyer Co., Inc. (Ohio)

and for D. H. Overmyer Co., Inc. (Oregon), called

the Portland, Oregon, office of Pioneer National Title

Insurance Company and remained in constant contact

with that c“fice until the deed from D. H. Overmyer

Co., Inc. (Oregon), to affiant was recorded on October

18, 1968. Affiant thereupon signed the lease, a copy

of which is attached as Exhibit A to the Complaint

herein, and executed a personal check in the amount

of $340,000.00 in favor of D. H. Overmyer Co., Inc.,

a copy of which is attached as Exhibit B to the Com-

plaint herein. Affiant, attorney John P. Wilson, attorney

James R. B. Fitzsimmons, and Herbert W. Richards

thereupon walked to affiant’s bank, the Menlo Park

Branch of the Bank of America at 633 Santa Cruz

_~

Avenue, Menlo Park, California, where attorney James

R. B. Fitzsimmons cashed the aforementioned check

and paid a brokerage commission to Herbert W. Rich-

ards.

Executed at Menlo Park, California, this 5th day

of March, 1974.

/s/ Max W. Forsythe

MAX W. FORSYTHE

Subscribed and sworn to before me this 5 day of

March, 1974.

/s/ Ethel Enole

Notary Public

Seal

—. =

Affidavit of Herbert W. Richards.

I, HERBERT W. RICHARDS, being duly sworn,

say:

1. During the year 1968 and at all times since

then, I have been an employee of Fox & Carskaden,

Inc., California real estate brokers, having my office

in Menlo Park, California. During 1968 and subse-

quently, D. H. Overi..yer Co., Inc., of which defendant

Daniel H. Overmyer is President, sent to my employer

listings of warehouse buildings which that company

was offering for sale. I, personally, have met with

defendant Daniel H. Overmyer in California several

times since 1967 in connection with the business of

D. H. Overmyer Co., Inc., or its subsidiaries. My

employer and I have acted as brokers in the sale

and leaseback of at least thirteen (13) Overmyer ware-

houses to California residents.

2. During 1968, I became aware that D. H. Over-

myer Co., Inc., was offering for sale and leaseback

a warehouse and office located at 19241 N. E. San

Rafael Street and N. E. 192 Street, Portland, Oregon.

I notified plaintiff Max W. Forsythe of that listing.

During the month of October, 1968, I participated

in negotiations in Menlo Park, California, which led

up. to the execution of the agreements of sale and

leaseback of said warehouse between D. H. Overmyer,

Inc., (Ohio), D. H. Overmyer, Inc., (Oregon), and

plaintiffs herein.

3. Max W. Forsythe, one of the plaintiffs herein,

and attorney John P. Wilson, representing plaintiffs,

directly participated in the aforementioned negotiations.

4. Attorney James R. B. Fitzsimmons purported

to represent both defendant Daniel H. Overmyer and

~—

D. H. Overmyer Co., Inc. (Ohio), and its subsidiaries,

in the aforementioned negotiations. My understanding

that he represented defendant Daniel H. Overmyer,

individually, was reinforced by the statement made

by said James R. B. Fitzimmons that he could not

commit defendant Daniel H. Overmyer to, or enter

into, any guarantee of the performance of the lease

between plaintiffs and D. H. Overmyer Co., Inc.

(Oregon), without the express, personal approval of

defendant Daniel H. Overmyer. The aforementioned

James R. B. Fitzimmons had one or more telephone

conferences with defendant Daniel H. Overmyer after

which said James R. B. fitzimmons represented that

he had obtained the agreement of his client personally

to guarantee the performance of each and every obliga-

tion by D. H. Overmyer Co., Inc. (Ohio), and of

D. H. Overmyer Co., Inc. (Oregon), for a lease of

the aforementioned premises.

5. On October 18, 1968, defendant Daniel H. Over-

myer confirmed his commitment to guarantee perform-

ance of the leasehold obligations as aforesaid by a

telegram addressed to plaintiff Max W. Forsythe in

care of me at my office in Menlo Park, California.

A copy of said telegram is attached hereto as Exhibit

A and, by this reference, incorporated herein. I de-

livered said telegram to plaintiff Max W. Forsythe,

and, following receipt of that telegram, plaintiff Max

W. Forsythe entered into the lease of real property

with D. H. Overmyer Co., Inc. (Oregon), dated Octo-

ber 18, 1968.

6. After the deed from D. H. Overmyer Co., Inc.

(Oregon), to plaintiff Max W. Forsythe was recorded

on October 18, 1968, Max W. Forsythe signed the

—49—

lease dated October 18, 1968, and gave a personal

check in the amount of Three Hundred Forty Thousand

Dollars ($340,000.00) in favor of D. H. Overmyer

Co., Inc., to attorney James R. B. Fitzimmons. Affiant,

attorney John P. Wilson, attorney James R. B. Fitzim-

mons, and plaintiff Max W. Forsythe therefore walked

to the Menlo Park Branch of the Bank of America

at 633 Santa Cruz Avenue, Menlo Park, California,

where attorney James R. B. Fitzimmons cashed the

aforementioned check and paid to affiant a brokerage

commission.

Executed at Menlo Park, California, this 27th day

of March, 1974.

/s/ Herbert W. Richards

HERBERT W. RICHARDS

State of California, County of San Mateo—-ss.

Subscribed and sworn to before me this 27th day

of March, 1974.

/s/ Virginia M. Finney

Notary Public

in and for the State of

California

My commission expires: Nov. 30, 1975.

[Seal]

Service of the within and receipt of a copy

thereof is hereby admitted this .................... day

of July, A.D. 1978.