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THIRD DIVISION
Date Filed: June 23, 2004

No. 1-03-1200

 

The plaintiff, Royal Extrusions Limited, obtained a judgmentagainst the defendant, Continental Window & Glass Corporation, inCanada. Thereafter, the plaintiff registered the judgment in thecircuit court of Cook County and initiated enforcementproceedings. The defendant filed a petition pursuant to section2-1401 of the Code of Civil Procedure (the Code) (735 ILCS 5/2-1401 (West 2000)) to vacate the registration of the judgment. The circuit court denied the petition, and the defendant filed atimely appeal.

The sole issue on appeal is whether the Canadian court hadpersonal jurisdiction over the defendant.

By way of background, the defendant, an Illinois corporationlocated in Chicago, is in the business of fabricating andinstalling windows with plastic frames made out of polyvinylchloride (PVC). For reasons of profitability, the defendantoperates, for the most part, within a 30-mile radius of itsfactory location.

The plaintiff is incorporated pursuant to the laws ofOntario, Canada and is in the business of manufacturing andselling extruded building products, such as window profiles, madefrom PVC. These window profiles are typically used by companies,such as the defendant, to fabricate a window into a finishedproduct. The plaintiff has no employees or offices in Illinois.

The parties had a business relationship commencing in 1994and until 1998 or 1999. There is no dispute as to how businessbetween them was conducted. To purchase product, the defendantwould fax an order to the plaintiff in Canada. The plaintiffwould ship the order accompanied by its invoice. The defendantwould then remit the payment in dollars. There was no writtencontract between the parties other than the terms stated on theback of each invoice.

Based on the defendant's failure to pay for product itordered and received from the plaintiff, the plaintiff sued thedefendant for breach of contract in the Canadian courts. Thedefendant contested jurisdiction but the Master of the SuperiorCourt of Justice - Ontario ruled against it. That ruling wasupheld on appeal by the Superior Court of Justice - Ontario.

Thereafter, the defendant chose not to participate in theCanadian proceedings. The Canadian court awarded the plaintiff ajudgment in the amount of $320,530.33, which included prejudgmentinterest.

On February 5, 2002, the plaintiff registered the Canadianjudgment in the circuit court of Cook County. The plaintiff theninitiated a citation to discover assets proceeding against thedefendant. On May 16, 2002, the defendant filed a section 2-1401petition to vacate the February 5, 2002, judgment order.

In the petition, the defendant asserted that it had nonotice of the registration of the judgment until it was servedwith the citation to discover assets. It further asserted thatit had a meritorious defense to recognition of the Canadianjudgment. The petition was supported by the affidavit of NickGutu, the defendant's president, in which Mr. Gutu averred thefollowing facts.

In 1993, Mr. Gutu met Tony Di Ginosa, a sales representativefor the plaintiff, at a trade show in Stuttgart, Germany. Mr.Gutu visited the plaintiff's facility north of Toronto, Canada,where he met with Domenic Collito, the plaintiff's president. Messrs. Collito and Di Ginosa visited the defendant's facility inChicago. Based on the discussions that took place in Chicago,Mr. Gutu agreed to begin purchasing product from the plaintiff.

In 1996, the defendant began experiencing problems with theplaintiff's products. Based on tests of the product, theplaintiff denied there was a problem. Because of customercomplaints, the defendant incurred additional costs to replacewindows. Mr. Gutu estimated that approximately $700,000 of theplaintiff's product was put into $2.1 million of finishedproduct, which was sold and installed by the defendant and whichis now the subject of the complaints. Mr. Gutu also claimed thatthe plaintiff had breached an exclusivity agreement between theparties by selling product to the defendant's competitors.

The plaintiff filed a response to the section 2-1401petition, supported by reports of the Canadian proceedings andthe affidavits of Messrs. Collitto and Di Ginosa.

In his affidavit, Mr. Collitto stated that Mr. Gutu hadvisited the plaintiff's facility in Canada and that he wasinformed that the defendant had an interest in forming arelationship with some of the Royal Group members for the purposeof purchasing product from them.⁽¹⁾ After these meetings, theplaintiff and defendant began doing business together. From 1998through the end of 1999, the defendant continued to order productfrom the plaintiff but failed to pay for the product. The amountof the unpaid invoices totaled $237,965.67.

According to his affidavit, Mr. Di Ginosa averred that afterthe trade show in Germany, Mr. Gutu traveled to the plaintiff'sfacility to discuss purchasing product and that during thesediscussions, the parties reached an agreement to do businesstogether. According to Mr. Di Ginosa, Mr. Gutu made anadditional visit to the plaintiff's facilities in Canada prior tothe parties reaching an agreement to do business together.

Following the arguments of counsel, the circuit court issuedits memorandum decision and judgment denying the defendant'ssection 2-1401 petition.

The defendant filed a timely notice of appeal from thedenial of its section 2-1401 petition.

At the outset, the parties disagree as to the applicablestandard of review.

Whether to grant a section 2-1401 petition lies in the sounddiscretion of the trial court. Clay v. Huntley, 338 Ill. App. 3d68, 74, 787 N.E.2d 317 (2003). An abuse of discretion is foundonly if no reasonable person would decide as did the trial court. Clay, 338 Ill. App. 3d at 74.

In Gaidar v. Tippecanoe Distribution Service,Inc., 299 Ill.App. 3d 1034, 702 N.E.2d 316 (1998), after noting the conflictover the standard of review applicable to a case dismissed for lack of personal jurisdiction, this court held that the manifestweight of the evidence standard would apply if the trial courtheard testimony on jurisdictional issues but that a de novostandard of review applied when the trial court heard notestimony and determined jurisdiction solely on the basis ofdocumentary evidence. Gaidar, 299 Ill. App. 3d at 1040.

In making the determination that the Canadian court hadpersonal jurisdiction over the defendant, the circuit court didnot conduct an evidentiary hearing. Therefore, review of thepersonal jurisdiction issue is de novo. See Ruprecht Co. v.Sysco Food Services of Seattle, Inc., 309 Ill. App. 3d 113, 118,722 N.E.2d 964 (1999). But see Skokie Gold Standard Liquors,Inc. v. Joseph E. Seagram & Sons, Inc., 116 Ill. App. 3d 1043,452 N.E.2d 804 (1983) (standard of review does not change becausethe evidence is presented through affidavits).

A foreign judgment that is final and conclusive where itwas rendered is conclusive between the parties, to the extent itgrants or denies recovery of a sum of money, and is enforceablein the same manner as the judgment of a sister state, which isentitled to full faith and credit. 735 ILCS 5/12-619, 12-620(West 2000). However, a foreign judgment is not conclusive ifthe foreign court did not have personal jurisdiction over thedefendant. 735 ILCS 5/12-621(a)(2) (West 2000).

The question is whether Canada had personal jurisdictionover the defendant. The parties agree that question should beanswered through the application of constitutional principles ofdue process.

In determining whether federal due process standards havebeen met, a court must consider the following three factors: (1)whether the nonresident defendant has sufficient minimum contactswith the forum state; (2) whether the cause of action arises outof these contacts; and (3) whether it is reasonable to requirethe defendant to litigate in the forum state. Viktron LimitedPartnership v. Program Data, Inc., 326 Ill. App. 3d 111, 121, 759N.E.2d 186 (2001).

"'The Due Process Clause of the Fourteenth Amendment limitsthe power of a state court to render a valid personal judgmentagainst a nonresident defendant.'" Wiles v. Morita Iron WorksCo., 125 Ill. 2d 144, 149-50, 530 N.E.2d 1382 (1988), quotingWorld-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291, 62 L.Ed. 2d 490, 497, 100 S. Ct. 559, 564 (1980). To subject adefendant to a judgment in personam, due process requires thatthe defendant have certain minimum contacts with the forum statesuch that maintenance of the suit there does not offend"'traditional notions of fair play and substantial justice.'[Citations.]" Wiles, 125 Ill. 2d at 150.

The due process clause requires that a court exercisejurisdiction only over defendants with "'contacts, ties, orrelations'" with the forum State sufficient to provide them withfair warning their activities may subject them to suit there. Wiles, 125 Ill. 2d at 150, quoting Burger King Corp. v.Rudzewicz, 471 U.S. 462, 471-72, 85 L. Ed. 2d 528, 540, 105 S.Ct. 2174, 2181 (1985). This "'fair warning' requirement is metwhen a defendant has '"purposefully directed" [its] activities atresidents of the forum [citation] and the litigation results fromalleged injuries that arise out of or relate to' those activities[citation].'" Wiles, 125 Ill. 2d at 150, quoting Burger King, 471U.S. at 472, 85 L. Ed.2d at 541, 105 S. Ct. at 2182. "Jurisdiction will only be proper where the contacts proximatelyresult from actions by the defendant himself that create a'substantial connection' with the forum State. [Citation.]" (Emphasis in original.) Wiles, 125 Ill. 2d at 151.

In Autotech Controls Corp. v. K.J. Electric Corp., 256 Ill.App. 3d 721, 628 N.E.2d 990 (1993), the plaintiff, an Illinoiscompany, entered into a contract for the sale of its products tothe defendant in New York. During the course of the contract,the defendant placed telephone purchase orders and faxed writtenpurchase orders to the plaintiff in Illinois. When the defendantfailed to pay the balance due, the plaintiff filed suit in thecircuit court of Cook County, and the defendant's president wasserved with summons in New York. The circuit court granted thedefendant's motion to quash and dismiss the complaint.

On appeal, this court reversed, holding that the defendant's activities of maintaining the contractualrelationship through its telephone and faxed purchase orders wassufficient to satisfy the due process requirement that thedefendant have fair warning that it may be sued in Illinois. Autotech Control Corp., 256 Ill. App. 3d at 725.

In G.M. Signs, Inc. v. Kirn Signs, Inc., 231 Ill. App. 3d339, 596 N.E.2d 212 (1992), the Illinois plaintiff manufacturedsigns. The parties met in Illinois as a result of a telephonecall from the Missouri defendant's president to the plaintiff'spresident. The parties subsequently did business together withthe defendant initiating the transactions by phone call orwritten purchase order. In contesting jurisdiction, thedefendant submitted an affidavit of its president averring thatthe defendant had no offices, bank accounts, property, businessfacility or affiliated entities located in Illinois. Inaddition, the plaintiff delivered the products, which weredesigned to the plaintiff's requirements, in Missouri, and thedefendant paid for them either upon delivery or by mail fromMissouri.

The reviewing court upheld the denial of the defendant'smotion to dismiss for lack of jurisdiction. The court stated asfollows:

"We do not consider defendant to be in the category of an ordinary mail order consumer who merely orders a stockitem of merchandise from another State. On the contrary,defendant was an 'active purchaser' who deliberately reachedout beyond its home State to avail itself of the benefits ofcommercial ties with an Illinois company. Its contacts withthe forum State cannot reasonably be characterized asrandom, fortuitous, or attenuated. Defendant's actionsshould have enabled it to predict that it might be subjectto the jurisdiction of this State. Plaintiff has alegitimate interest in using Illinois courts to enforce theobligations that defendant actively and knowinglyundertook." G.M.Signs, Inc., 231 Ill. App. 3d at 344-45.

The court concluded that the plaintiff had met its burden ofshowing that the defendant had sufficient contacts with Illinoisto satisfy federal due process requirements. G.M. Signs, Inc.,231 Ill. App. 3d at 345.⁽²⁾

The defendant argues that G.M. Signs, Inc. isdistinguishable from the present case because, in that case, thedefendant sought out the plaintiff, which had done no salessolicitation, and initiated the commercial relationship with theplaintiff.

In the present case, it is unclear who initiated the contactwhen the parties met in Germany. In ruling on the challenge tojurisdiction, the Master was unable to determine where thecontract had been formed due to the conflicting evidence, andtherefore, considered that factor to be neutral.

The defendant also distinguishes Autotech Controls Corp.,arguing that the court did not address the issue of whetherIllinois was a convenient forum for the defendant in which tolitigate. However, while the court did not specifically mentionconvenience, it referred to the requirement that the nonresidentdefendant present a "compelling case that the presence of otherconsiderations would render jurisdiction unreasonable." AutotechControl Corp., 256 Ill. App. 3d at 726. The court pointed outthat the defendant had failed to meet its burden.

Dilling v. Sergio, 263 Ill. App. 3d 191, 635 N.E.2d 590(1994), relied on by the defendant, is distinguishable. In thatcase, the reviewing court upheld a circuit court determinationthat the Illinois plaintiff had not established that theCalifornia defendant had minimum contacts with Illinois. Thecourt determined that a telephone call, wherein the plaintiff lawfirm was retained to represent the defendant, was insufficient toestablish minimum contact with Illinois, in light of the factthat the parties initially met in California, the defendant neverwent to Illinois, and the only other contact with Illinois wasthe defendant's letter to plaintiff in Illinois terminating thelaw firm's services.

In contrast, in the present case, the defendant sent manypurchase orders to the plaintiff in Canada over the term of theirrelationship. Moreover, in Dilling, the court recognized thateven a single transaction may suffice for jurisdiction, if thetransaction gives rise to the cause of action and if thedefendant purposefully availed itself of the privilege ofconducting business in the forum state. Dilling, 263 Ill. App.3d at 196.

The parties do not dispute that the cause of action in thiscase arose out of their agreement.

The Supreme Court has set forth five factors to guide courtsin determining whether it is reasonable to require a nonresidentdefendant to litigate in a chosen forum: (1) the burden on thedefendant of defending the action in the forum state, (2) theforum state's interest in adjudicating the dispute, (3) theplaintiff's interest in obtaining the most efficient resolutionof the action, (4) the interstate judicial system's interest inobtaining the most efficient resolution of the action, and (5)the shared interests of the several states in advancingfundamental social policies. Viktron Limited Partnership, 326Ill. App. 3d at 123; World-Wide Volkswagen Corp., 444 U.S. at292, 62 L. Ed. 2d at 498, 100 S. Ct. at 564.

In connection with the last factor, when concerned with aninternational defendant, courts are to consider the proceduraland substantive polices of those other nations whose interestswould be affected by the assertion of jurisdiction by the forumcourt. Wiles, 125 Ill. 2d at 152. Concomitantly, the forumcourt must be mindful of the federal government's interest inmaintaining its foreign relations policies. Wiles, 125 Ill. 2dat 152. "Quite clearly, therefore, '[g]reat care and reserveshould be exercised when extending our notions of personaljurisdiction into the international field.' [Citations.]" Wiles,125 Ill. 2d at 152-53.

The burden on a defendant forced to litigate in a foreignforum should always be the primary concern in any due processanalysis. Wiles, 125 Ill. 2d at 152.

The defendant maintains that if it was forced to litigate inCanada, it would be unable to secure witnesses to testify on themerits of its argument that the plaintiff sold it a defectiveproduct. The defendant points out that its customers, who haveno stake in the outcome, reside in Illinois and asserts thatthere would be difficulties in compelling them to testify inCanada. The defendant's competitors, who would be witnesses tothe plaintiff's breach of the exclusivity agreement, are alsolocated in Chicago. Finally, the defendant's employees arelocated in Chicago, while its expert witnesses are located in theUnited States.

The defendant relies on Lichon v. Aceto Chemical Co., 182Ill. App. 3d 672, 538 N.E.2d 613 (1989), appeal allowed sub nom.

Aceto Chemical Co. v. J.D.Sales, Ltd., 127 Ill. 2d 611, 545N.E.2d 104 (1989). In Lichon, Campbell, an English company,shipped hazardous material from England for delivery to Aceto'scustomer in Iowa. While passing through Illinois, the truckcarrying the material overturned, and the plaintiff sufferedinjuries. The circuit court dismissed Aceto's third-party actionagainst Campbell for lack of personal jurisdiction. Thereviewing court affirmed the dismissal.

After determining that minimum contacts existed, this courtaddressed whether it violated due process to require Campbell tolitigate in Illinois. The court noted the vast distances betweenIllinois and England. The court recognized that Illinois had aninterest in adjudicating all of the claims in one proceeding butthat the dispute at issue was between Campbell and Aceto, whichdid not claim to be a citizen of Illinois. Moreover, it wasunclear whether Illinois law would control the outcome. Thecourt did consider that requiring Campbell to defend in Illinoiswould deter it from unsafe manufacturing processes and thatCampbell did ship its products to the United States.

However, noting the federal government's interest in itsrelationship with England required the court to exercise greatcare and reserve in extending jurisdiction, the court concludedthat the factors in favor of Illinois's jurisdiction wereoutweighed by the burden placed on Campbell. Lichon, 182 Ill.App. 3d at 686.

Once it has been established that the defendant purposefullydirected his activities at the forum state, or as in this casecountry, the defendant must present a compelling case thatlitigating the dispute would be unreasonable. Viktron LimitedPartnership, 326 Ill. App. 3d at 123. When a defendant entersthe forum state, or as in this case country, in furtherance of abusiness transaction, it is not unreasonable or unduly burdensometo require the defendant to return and litigate there. ViktronLimited Partnership, 326 Ill. App. 3d at 123.

The "vast distance" between the parties in Lichon does notexist in this case. Unlike Lichon, the dispute in this case isbetween an Illinois company and a company located in Canada, ournorthern neighbor. In Lichon, the fact that the accidenthappened in Illinois was its only connection to the dispute,whereas in the present case, Mr. Gutu visited the plaintiff inCanada, the defendant's orders were sent to Canada, and thedispute involved the nonpayment of those orders.

Other factors also favor the Canadian court's exercise ofpersonal jurisdiction over the defendant in this case. Theplaintiff, as a Canadian company, has an interest in litigatingin Canada, and the burden of transporting evidence falls on theparties, not the judicial system. See Viktron LimitedPartnership, 326 Ill. App. 3d at 124; see also Ruprecht Co., 309Ill. App. 3d at 122 (Illinois, as the forum state, has aninterest in making sure that its citizens are paid for goods theymanufacture).

Illinois recognizes a public policy favoring the enforcementof contracts, and such a policy is served by allowing the victimof the breach of contract to assert a cause of action in theforum it chooses. Viktron Limited Partnership, 326 Ill. App. 3dat 125. While the defendant alleges that the plaintiff alsobreached the contract, after cross-examining Mr. Gutu on hisaffidavit submitted in the Canadian proceedings, the Masterconcluded that there would be more witnesses from the Torontoarea than from Chicago.⁽³⁾

We conclude that the Canadian court had personaljurisdiction over the defendant in this case. Therefore, thecircuit court properly denied the defendant's section 2-1401petition.

The judgment of the circuit court is affirmed.

Affirmed.

HOFFMAN, P.J., and KARNEZIS, J., concur.

1. Mr. Collitto explained that the plaintiff is a wholly ownedsubsidiary of Royal Group Technologies Limited.

2. In Autotech Controls Corp. and G.m. Signs, Inc., thefederal and state due process analyses are intertwined.

3. According to the Master's endorsement, cross-examination ofMr. Gutu on his affidavits revealed that "he had been somewhatover zealous in terms of how he had initially expressed himself."