North American Phillips Commercial Electronics Corp. v. Gaytri Corp.

John I. Purtle, Justice. The appellant sued for money allegedly due on a leasing contract between the appellant’s predecessor in title and the appellee. The trial court dismissed the complaint finding that the appellant, a foreign corporation, was “doing business” in Arkansas at the time the contract was made without having first qualified to do business in the state as required by the Wingo Act, particularly Ark. Stat. Ann. § 64-1202 (Repl. 1980). That section prohibits a non-qualifying foreign corporation from enforcing a contract made in this state. The test to determine whether the threshold requirements for application of the penalty provisions of the Wingo Act have been met consists of two parts. First, it must be demonstrated that the contract was made by a non-qualifying foreign corporation which was “doing business” in the state; and second, it must be shown that the particular contract in question was made in Arkansas. Further, if it is raised as a defense, to the contention that the act applies, we must consider whether the Commerce Clause of the United States Constitution precludes the application of the sanctions of § 64-1202. Although the appellant has stated two points for reversal, it makes only one argument. The first point stated is simply that the Wingo Act does not apply to this transaction. Although the appellant discusses the terms of the contract providing that it would become effective only upon acceptance in Illinois, the conclusion stated is that it was therefore a contract in interstate commerce. That is also the burden of the appellant’s second stated point. No argument whatever has been made that the appellant was not “doing business” in Arkansas or the contract was not “made” here except to sustain the appellant’s contention that the transaction is protected by the Interstate Commerce Clause. Since we find the appellant did not demonstrate that this transaction fell within the protection of the Commerce Clause, we affirm. Sometime in late 1980 the appellee made a telephone call to Sylvania’s office in Dallas, Texas, inquiring about the possibility of buying or leasing television sets for the Pine Tree Motel, which is owned by appellee. As a result of the telephone call, a representative from Sylvania came to El Dorado, Arkansas, to explore the matter further. The visit by Sylvania culminated in an agreement on December 11,1980, whereby the appellee leased 20 television sets and made the first payment of $338.57. Sylvania also purchased from the appellee the television sets being replaced. Soon after delivery of the new sets they proved defective, and repairs were made by local repair shops and by representatives of Sylvania who worked out of Texas. Title to the new television sets was to be retained by Sylvania until the full agreed price was paid. Sylvania, an Illinois corporation, sold the contract to the appellant, a Delaware corporation, and the payments on the contract were mailed thereafter to Hundred East Credit Corporation, New York, New York. The contract’s express terms stated it would not become effective until it was signed by Sylvania in Schiller Park, Illinois, and that the contract would be governed and construed according to the laws of the State of New York. In claiming that this transaction was entitled to protection as interstate commerce under the Commerce Clause, and thus not subject to state regulation, the appellant presented no witness to describe the nature of its business dealings in Arkansas. Its counsel merely cross examined the appellee’s witness with respect to the nature of the transaction. Our previous decisions interpreting § 64-1201 have concentrated on whether the particular transaction at hand was to be regarded as “intrastate” or “interstate.” In Union Planters National Bank of Tennessee v. Moore, 250 Ark. 272, 464 S.W.2d 786 (1971), we reviewed the question whether the appellant, contractual successor to another Tennessee corporation called Auto-Kar, could enforce a contract of sale of automatic car washing equipment to the appellee, an Arkansas citizen. AutoKar had not registered to do business in Arkansas. Chief Justice Harris said: Nor are we impressed by the argument that this was an interstate transaction. Hogan v. Intertype Corporation, [136 Ark. 52, 206 S.W. 58] points out that one test laid down by Arkansas cases differentiating an interstate transaction from an intrastate transaction is the ownership of the property after it arrives in this state. It has already been pointed out that title was retained by Auto-Kar. Actually, all of the facts heretofore mentioned support the view that this is an intrastate transaction. Let it be remembered that this is not the case of a resident of this state ordering goods from a foreign corporation, and the foreign corporation honoring that order by shipping the goods to the purchaser. To the contrary, the essential acts necessary to putting the car wash into operation were carried out in this state, viz, the contract was entered into in this state, and supervision for construction was furnished at the site. [250 Ark. at 277, 464 S.W.2d at 789] Although our opinion in Union Planters did not cite the Commerce Clause as the basis of it, we recognized an interstate commerce exception to the application of the statute. We are therefore left with the pure federal law question whether and under what circumstances companies engaged in interstate commerce are protected by the Commerce Clause, United States Constitution, art. 1, § 8, cl. 3. The opinion of Judge Overton in Uncle Ben’s Inc. v. Cromwell, 482 F.Supp 1149 (E.D. Ark. 1980), explains that in some instances companies regularly, and continuing to be, engaged in interstate commerce may so “localize” their businesses that they may properly be subject to state regulation, citing generally, Union Brokerage Co. v. Jensen, 322 U.S. 202 (1944), and Eli Lilly & Co. v. Sav-On-Drugs, 366 U.S. 276 (1961). Those cases make it clear that the Supreme Court, by reviewing the overall activities of the company, determines whether a company generally engaged in interstate commerce has “localized” its business in a particular state so as to submit itself to regulation. The United States Supreme Court has held that a state may deny a foreign corporation the right of access to the state courts even though the corporation may be engaged in interstate commerce at the time. Eli Lilly & Co. v. Sav-On-Drugs, Inc., supra. In the Lilly case, New Jersey had enacted a statute substantially the same as the Arkansas statute. In upholding the right of New Jersey to require foreign corporations to register in the state, it was pointed out that a state does not have such power over purely interstate transactions. The opinion went on to state that the Commerce Clause does not prevent states from enacting statutes relating to foreign and interstate commerce. However, the state statute must not be a burden on interstate commerce and must be general in scope. Union Brokerage Co. v. Jensen, supra. Union declared that the state and federal functions in such matters may move freely within the orbits of their respective purposes without impinging upon one another. The Union opinion further stated that a state has a legitimate interest in protecting its citizens who have dealings with foreign corporations and the Commerce Clause does not preempt appropriate legislation by the state. What constitutes interference in interstate commerce is a question of fact to be decided in each case. The concluding paragraph in Union stated: The Commerce Clause does not deprive Minnesota of the power to protect the special interest that has been brought into play by Union’s localized pursuit of its share in the comprehensive process of foreign commerce. To deny the States the power to protect such special interests when Congress has not seen fit to exert its own legislative power would be to give an immunity to detached aspects of commerce related to the objectives of the Commerce Clause. By its own force that Clause does not imply relief to those engaged in interstate or foreign commerce from the duty of paying an appropriate share for the maintenance of the various state governments. Nor does it preclude a State from giving needful protection to its citizens in the course of their contacts with businesses conducted by outsiders when the legislation by which this is accomplished is general in its scope, is not aimed at interstate or foreign commerce, and involves merely burdens incident to effective administration. In the present case it is clear that the appellant did not demonstrate that its operations were of such nature as to preclude the State from exercising its right to require the appellant to comply with the Wingo Act. Nothing presented by the appellant or, for that matter, by the appellee shows that the appellant was entitled to the protection of the Commerce Clause. To have the advantage of that protection and to avoid application of § 64-1202 it was incumbent upon the appellant to show that despite its having done business here it had not so “localized” its business in the sense referred to in the United States Supreme Court cases cited above. Affirmed. Hickman, and Hays, JJ., dissent. Glaze, J., not participating.