E. A. Lange Medical Co. v. Brace

Kuhn, J. (after stating the facts). The question of whether or not the contract here involved relates to interstate commerce is not without difficulty. It being a Federal question, in its consideration we must necessarily be governed by the decisions of the Federal courts. Counsel for appellant rely upon the case of Butler Bros. Shoe Co. v. Rubber Co., 156 Fed. 1, 84 C. C. A. 167, in which case Judge Sanborn, in an exhaustive opinion, has gone over this subject, and, with reference to the contract there in question, stated the following: “Let us now turn to the contracts, observe what the rubber company agreed to do and what it actually did under them, and determine, if possible; whether or not in making or in performing these agreements it was guilty of doing any business within the meaning of the constitution and statutes of Colorado. It agreed to ship the goods from its warehouse, or its mill, upon the orders of the appellee, to that company in Denver; and it did so. It contracted to do, and it did, nothing more. It never had any office or place of business in Colorado. It never received, stored, handled, or sold any goods, or collected any money for the sales of any goods, in that State under this contract. It never incurred, assumed, or paid any expenses of doing all these things, or of conducting any of the business. The shoe company had and maintained a place of business in Colorado, it rented or [460] owned the place in which the business in Colorado was done, and it agreed to bear all the expenses and losses of receiving, storing, and selling the goods; and it did so. The purchasers of the goods were purchasers from it, solicited and secured by it. They were its customers, and liable to it for the purchase price of the goods. The goods were billed to them in the name of the shoe company as consignee. The profits of the business and the work of the business, the labor of receiving, storing, and selling the goods, were the shoe company’s. The profits constituted its factorage, its compensation, for carrying on the business. There is no question here between the State and the shoe company, or between the shoe company and the purchasers of the goods, or between the rubber company and the purchasers of the goods. The question here is between the consignor and the factor, and it is whether the consignor, which did not agree to do, and did not in fact do, the business of receiving, storing, and selling these goods, or the factor who did contract to do, and did actually do, the business of receiving, storing, and selling these goods, in Colorado, and who received the factorage therefor, was doing that business. In a simple transaction, the true answer seems clear. A farmer sends to a commission merchant in a city a dozen barrels of apples for him to sell. The factor puts them in his store, sells them, receives the proceeds, and remits them, less his factorage. The farmer from time to time sends 1,000 barrels during the season, and they are sold and the proceeds are remitted in the same way. The farmer is not carrying on the business of selling apples in the city, but the factor is. The transaction in hand is larger, but in every element which conditions its legal character and effect it is not different. The transaction between the parties to this suit was interstate commerce. The rubber company did not agree to do, and did not actually do, any of the business of receiving, storing, and selling the goods in Colorado. The shoe company did agree to do, and did do, that business. These facts have driven our minds with compelling force to the conclusion that, within the true intent and meaning of the constitution and statutes of Colorado, the rubber company was not doing business in that State, and [461] the contracts between these litigants are valid and' enforceable.” In the case of Re Monongahela Distillery. Co. (D. C.), 186 Fed. 220, Judge Denison said the following: “The parties had been dealing for years on the ordinary basis of selling and buying, and such basis was changed only because the buyer’s financial standing became so poor that regular sales on credit were not safe. The seller, the Schufeldt Company, adopted this form only for the purpose of avoiding the risk of loss in making a sale on credit, and took no precautions not adapted to that end.' Obviously, when a consignor without the State ships goods to a factor within the State, retaining the title thereto, and contemplating sales by the factor to its customers within the State, the entire transaction partakes of the character of both interstate commerce and doing business by the consignor within the State. Under the rule stated in Higgins v. McCrea, 116 U. S. 671, 6 Sup. Ct. 557, to the effect that the contracts of sale made by a factor in his own name are in law the contracts of the consignor, it would seem that sales so made were sales by the consignor at the selling point, and that when, as in this case, the transaction was not a single instance, but both parties contemplated a permanent arrangement, disposing of a large amount of goods, it constituted doing business at that point; but such conclusion is only argumentative, and the contrary result is reached by the circuit court of appeals of the eighth circuit, in a very elaborate opinion in Butler Bros. Shoe Co. v. Rubber Co., 156 Fed. 1, 84 C. C. A. 167. This decision was made in 1907. A writ of certiorari was denied by the Supreme Court. 212 U. S. 577, 29 Sup. Ct. 686. It has been cited and followed by the circuit court of appeals in the seventh circuit (Atlas Engine Works v. Parkinson, 161 Fed. 229), and I cannot find that it has been in any way questioned. I therefore accept the rule there stated, and think that there are no circumstances in the present case distinguishing it from the Butler Bros. Case. “The question of what is interstate commerce is a Federal question, and the decision of the Supreme [462] Court of Michigan in Neyens v. Worthington, 150 Mich. 580 (114 N. W. 404, 18 L. R. A. [N. S.] 142), would not control, even if parallel; but the circumstances, 1, 2, 3, and 4, pointed out on page 586 of 150 Mich., on page 404 of 114 N. W., on page 142 of 18 L. R. A. (N. S.), fully distinguished the two cases on their facts.” It will be noticed that in the latter opinion the Michigan case of Neyens v. Worthington, 150 Mich. 580 (114 N. W. 404, 18 L. R. A. [N. S.] 142), is distinguished from the Butler Bros. Shoe Co. Case, supra; and the conclusion might well be arrived at that, if that case can be distinguished from the rule established in the Butler Bros. Shoe Co. Case, the instant case might be also distinguished; because here we have a contract which clearly provides for the shipment into this State of the property of the medical company, to be stored and kept by the agent, who under the terms of the contract was to give his entire time to the business of the medical company, which business, it must be said, was to sell and dispose of the property so received in this State. Brace, the agent, signs the contract as salesman, and in the guaranty he is referred to as. the salesman of the plaintiff company. From the terms of the contract, it seems very clear indeed that what was intended thereby was to make Brace the salesman of the plaintiff company to carry on and develop its business in the territory assigned to him. It follows that, by a succession of such contracts and a division of the territory, the medical company could — and probably would — cover the State with salesmen, actively engaged in doing its business. To our minds, it would be rather anomalous to say that this would not be carrying on its business within the State. In our opinion, the circumstances here are as convincing as those pointed out by Judge Denison in the Monongahela Distillery Co. Case, supra, which [463] brought the case of Neyens v. Worthington, supra, from under the rule announced in the Butler Bros. Shoe Co. Case. On the facts, we believe the instant case is readily distinguishable from the Federal cases above referred to, as in both of those cases the factors maintained their own stores and warehouses and had their own customers, did not devote their entire time to the business of the foreign corporation, and were not designated their salesmen in the contracts. We are of the opinion that it must be said that the plaintiff was carrying on its business in the State of Michigan within the meaning of said Act No. 310, Pub. Acts 1907. The trial judge arrived at a proper conclusion in so holding, and the judgment of the lower court is therefore affirmed. Brooke, C. J., and McAlvay, Stone, Ostrander, Moore, and Steere, JJ., concurred. Bird, J., did not sit.