Jacobs v. Ass'n of Independent Colleges & Schools

219 S.E.2d 837, 265 S.C. 459, 1975 S.C. LEXIS 291
CourtSupreme Court of South Carolina
DecidedNovember 19, 1975
Docket20111
StatusPublished
Cited by7 cases

This text of 219 S.E.2d 837 (Jacobs v. Ass'n of Independent Colleges & Schools) is published on Counsel Stack Legal Research, covering Supreme Court of South Carolina primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Jacobs v. Ass'n of Independent Colleges & Schools, 219 S.E.2d 837, 265 S.C. 459, 1975 S.C. LEXIS 291 (S.C. 1975).

Opinion

Gregory, Associate Justice:

This is an appeal from the order of the circuit court denying appellant’s motion for an order dismissing the action based upon lack of jurisdiction of the South Carolina Courts or in lieu thereof, to quash the return of the summons and complaint. The basic issue is whether appellant had sufficient contacts with this State to sustain the service of process [462]*462upon it without “offending traditional notions of fair play and. substantial justice.”

Appellant, The Association of Independent Colleges and Schools (hereinafter referred to as AICS) is a non-profit corporation chartered under the laws of the District of Columbia. Its principal and sole offices are located in Washington, D. C. It has no employees except in Washington, D. C. "and it neither owns nor controls any property outside of Washington, D. C. It has never had any telephone number, bank account, office, or other place of business in South Carolina.

Respondents are former students of Draughon’s Business College, Inc. (hereinafter referred to as Draughon’s) who "have instituted this action as a class action for approximately three hundred (300) students who attended Draughon’s after September 3, 1971. They have sued appellant in tort for negligent accreditation. Appellant was served under the provisions of Section 10-424, 1962 Code of Laws, as amended.

Draughon’s operated a post high school business college in Greenville, South Carolina for a number of years prior to April, 1973, when it filed for bankruptcy in the Federal District Court. As a result of Draughon’s bankruptcy, over 300 students were left as unsecured creditors of the bankrupt school with 'incomplete educations; with no solvent entity to make'any refund for tuition fees paid in advance; and, in many cases, unpaid loan obligations for funds borrowed to pay tuition in advance. These worthless refund claims are in excess of One Hundred and Fifty Thousand and no ($150,000.00) Dollars. The appellant issued its accreditation to Draughon’s on or about February, 1971, and continued it through the time when Draughon’s filed bankruptcy in April of 1973.

In order for a corporation to be amenable to service of process in this State, such corporation need only have such contacts herecso■ that maintenance of..an [463]*463action against it will not offend traditional notions of fair play and substantial justice. Boney v. Trans-State Dredging Co., 237 S. C. 54, 115 S. E. (2d) 508 (1960); Carolina Boat and Plastics Co. v. Glascoat Distributors, Inc., 249 S. C. 49, 152 S. E. (2d) 352 (1967); Peeler v. South Carolina Helicopters, Inc., 263 S. C. 487, 211 S. E. (2d) 344 (1975). In Boney, supra, this Court established four considerations to be applied in determining whether a foreign corporation had sufficient contacts in the state to confer jurisdiction :

1. the duration of the corporate activity in the state;

2. the character of the corporate acts giving rise to the suit ;

3. the circumstances of their commission; and

4. the balancing of the inconvenience to the parties, respectively, in conferring or refusing to confer jurisdiction over the foreign corporation.

In its May, 1973 directory, appellant listed six (6) business schools in South Carolina, including Draughon’s, as accredited. AICS’s agents come into the State of South Carolina at least once every six (6) years to inspect its currently accredited schools. Appellant’s agents have made more frequent inspections in the state in the past several years. This has apparently occurred since AIC’s rules require re-inspection when a school is sold or other substantial changes in the school’s business- occur. At least two (2) such inspections occurred in 1974 at Rutledge Business Colleges in Spartanburg and Greenville. Appellant sent inspection teams to Draughon’s once in July, 1970, in connection with its initial application, and a second time in May, 1972, in connection with a special investigation to inspect the student loan refund situation.

The corporate acts of AICS in South Carolina consist of regular, periodic collection of data by two-man inspection teams on inspection visits lasting an average of two days. [464]*464This on-the-spot collection of data is an integral part of the accreditation process. Information submitted by the school is verified'and impressions and data are sent to Washington,' D'. C. where it plays an important part in the decision by the Accrediting Commission to grant accreditation.

Although the final decision of whether to'grant accreditation is made outside of South Carolina, the accreditation itself is a continuing stamp of approval by AICS in South Carolina. It is a continuous holding out by AICS that a school meets its standards. AICS allows their seal to be used by schools accredited by it in their bulletins and advertising, knowing the public will see it and rely on it. This accreditation is relied on by many students in making their selection of a school to attend. It is also the basis and condition precedent to the making of thousands of dollars of student loans by lending institutions in South Carolina. The inspection visits and the routine' allowance of the use of its seal by accredited members are both done by AICS in the ordinary course of conducting its affairs.

AICS is a non-profit organization which charges for its services. It has received significant annual income from the six (6) accredited schools for its accreditation and related services. Appellant requires a fixed annual fee of $50.00 from all accredited institutions, plus an annual fee based on gross receipts with a minimum fee of $225.00, for a total minimum per school of $275.00. The annual fee of Draughon’s for 1962 was $850.00. A fee for re-inspection is at least $300.00. There were two- (2) inspections in South Carolina in 1974.

As to the relative inconvenience to the parties, to require respondents to go to Washington, D. C. to bring this suit "seems to be a far greater inconvenience than to require appellant, who has periodicálly come into this State, to come here to defend. Virtually all the numerous respondents are located in South Carolina and' virtually all objective evidence concerning the alleged tort, including the [465]*465recruiting practices, personnel, faculty, policies and procedures of Draughon’s is located here. Many of appellant’s witnesses are from outside the District of Columbia and they would have to travel regardless of the situs of the trial. While we agree with appellant that jurisdiction cannot be conferred on the grounds of mere convenience, it is well established that an “ ‘estimate of the inconveniences’ which would result to the corporation from trial away from its ‘home’ or principal place of business is relevant.” International Shoe Co. v. State of Washington, 326 U. S. 310 at 317, 66 S. Ct. 154 at 158, 90 L. Ed. 95 (1957). Boney v. Trans-State Dredging Co., supra. Carolina Boat and Plastics Co. v. Glascoat Distributors, Inc., supra.

(T)he boundary line between those activities which justify the subjection of a corporation to suit, and those which do not, cannot be simply mechanical or quantitative. The test is not merely, as has been suggested, whether the activity, which the corporation has seen fit to procure through its agents is a little more or a little less.

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Jacobs v. ASSOC. OF INDEP'T COL. AND SCH.
219 S.E.2d 837 (Supreme Court of South Carolina, 1975)

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Bluebook (online)
219 S.E.2d 837, 265 S.C. 459, 1975 S.C. LEXIS 291, Counsel Stack Legal Research, https://law.counselstack.com/opinion/jacobs-v-assn-of-independent-colleges-schools-sc-1975.