Lummus Cotton Gin Co. v. Arnold

Mr. Justice Hall delivered the opinion of the Court. The bill in this cause was filed by complainant, Lum-mus Cotton Gin Company (a foreign corporation), with its principal office and place of business located in the city of Columbus, State of Georgia, against the defendants W. R. Arnold, H. T. Sansom, J. B. Waldrop, E. D. Cooper, and A. A. Robins, to recover upon two promissory notes mentioned and described in the bill. The bill alleged that on September 20, 1920, complainant sold and delivered to defendants and the Farmers’ — 543 — Co-operative Gin Company (a corporation), -with its office and place of business located at Pinson, in Madison county, Tenn., one 3/80 Saw Lummus automatic air blast ginning outfit complete; that the consideration for said sale was the sum of $7,539.39, one-third of which was paid in cash; that two notes for the sum of $2,513.13 each, representing the remainder of the purchase price of said machinery, were executed and delivered by defendants and the Farmer’s Co-Operative Gin Company to complainant; that one of said deferred purchase-money notes matured and became due and payable January 1, 1921, and the other January 1, 1922, that the sum of $1,300 had been paid on thé note that matured January 1, 1921, but that nothing had been paid on the other note; that both of said notes contained a provision for the payment of ten per cent, attorney’s fees in the event same were not paid at maturity and were collected by an attorney; that the amount then due complainant on said two notes was $3,726.20, principal and interest and attorney’s fees. The bill alleged that numerous demands had been made upon defendants for the payment of the balance due on said notes, which were long past due, but defendants had failed and refused to pay said balance. The bill further alleged that said ginning outfit was sold to the defendants and the Farmers’ Co-Operative Gin Company under and pursuant to a certain conditional sales contract, by the terms of which the title to said machinery was retained by complainant until the deferred pur-chaseúnoney notes should be fully paid; that the Farmers’ Co-Operative Gin Company had been adjudged a — 544 — bankrupt by the District Court of the United States for the Eastern Division of the "Western District of Tennessee ; that complainant had filed a petition in said bankruptcy proceeding, setting forth that said ginning outfit, which was scheduled as an asset of the Farmers’ CoOperative Gin Company, was sold under a conditional sales contract, and alleging that it was entitled to repossess itself of said machinery and sell the same to satisfy the balance due' on the purchase price, or to have the trustee in bankruptcy sell the same and apply the proceeds on said notes; that said machinery had been sold by the trustee in bankruptcy, but that no disposition had been made of the proceeds of said sale; that the amount realized from the sale of said ginning outfit by the trustee in bankruptcy would be shown in the proof. The prayer of the bill was for a decree against defendants for the amount due on said notes, with interest and attorney’s fees, less such sum as might be realized from a sale of the property by the trustee in bankruptcy, and for general relief. Defendants answered the bill. In their answer they set up the following defenses: (1) They denied that complainant had qualified to do business in Tennessee. (2) That defendants signed the contract for the sale and purchase of said ginning outfit and the notes sued on in the capacity of directors of the Farmers ’ Co-Operative Gin Company only, and did not intend to become personally liable on said notes. The answer averred that it was expressly understood between defendants and complainant’s agent, at the time they signed the con — 545 — tract for the sale and purchase of said ginning outfit and the notes sued on, that they were not to be personally liable on said contract and notes. (3) That said notes, in so far as defendants were concerned, were without consideration, and defendants were not liable thereon. On the hearing had upon the pleadings and proof, the ^chancellor dismissed complainant’s bill and taxed it with the costs of the cause. From this decree complainant appealed to this court and has assigned errors. Through its first, second, third, fourth, and fifth assignments of error it is urged that the chancellor committed error in admitting, over the objection of complainant, evidence offered by defendants to the effect that it was expressly agreed and understood between complainant’s agent and defendants, at the time the latter signed said contract to purchase said ginning outfit and the notes sued on, that they were not to be personally liable on said contract and notes.; that this action of the chancellor was erroneous for the following reasons: (a) Said evidence was irrelevant and immaterial. (b) That said evidence could not be heard to alter, vary, or contradict the terms of the written contract and notes signed by said defendants. Therefore defendants’ exceptions to same should have been sustained and said evidence excluded. Though its sixth assignment of error it is urged by complainant that the chancellor committed error in dismissing complainant’s bill and taxing it with the costs of the cause, because there was no competent evidence in the record to the effect that there was an agreement — 546 — that defendants should not become personally liable on the contract and notes sued on; that the notes and contract upon which plaintiff’s action is predicated cannot be altered, varied, or contradicted by parol evidence; that defendants are estopped, by reason of the written contract, to set np or rely upon any alleged verbal agreement which they claimed to have had with the agent of complainant who solicited the contract. Through its seventh assignment of error complainant insists that the chancellor erred in not holding that complainant was a corporation chartered and organized under the laws of the State of Georgia, and in not holding that defendants were estopped to deny complainant’s corporate existence, because complainant’s corporate existence was properly proved, and the evidence shows that defendants dealt and contracted with complainant as a corporation. Through its eighth and ninth assignments of error complainant insists that the chancellor erred in holding that there was competent or material evidence introduced to show that complainant had not domesticated or complied with the statutes of Tennessee requiring foreign corporations to file an abstract of their charters with the secretary of State before they can become qualified to do business in Tennessee. Through its tenth assignment of error complainant insists that the chancellor erred in not' holding that the transaction forming the predicate of complainant’s suit was an interstate transaction, and that it was not necessary for complainant to qualify to do business in this State before entering into said contract with defend — 547 — ants, and in not granting complaiant a decree against defendants fox the amount found to be due upon the notes sued on, including interest and attorney’s fees.. These are, in substance, the contentions of complainant made in this court. We are of the opinion that it is not necessary to determine the question of whether the chancellor committed error in admitting, over the objection of complainant, parol evidence tending to show that it was expressly agreed and understood between defendants and complainant’s agent, at the time they signed the sales contract and the notes sued on, that they were not to become personally liable on said contract and notes, and that they signed the same as directors only, by agreement with complainant’s agent, to show-the good faith of the corporation, Farmers’ Co-operative Gin Company, the purchaser of said ginning outfit or machinery. We think complainant must be repelled upon the ground that it is a foreign corporation, and had not, at the time of said transaction, complied with the provisions of the Acts of 1891, chapter 122, and the Acts of 1877, chapter 31, prescribing the terms upon which foreign corporations may transact business in this State. These acts require that any foreign corporation, desiring to own property or carry on business in this State, of any kind or character, shall first file in the office of the Secretary of State a copy of its charter. Defendants’ answer expressly denied that complainant had complied with these statutes at the time of the sale of the machinery in question, and at the time of the execution of the notes sued on. This being true, if the — 548 — transaction were an intrastate State one, the burden of proof rested upon complainant to show that it had complied with the statutes above mentioned. Of course, if it were an interstate transaction, then said statutes are not applicable, but complainant is protected under the interstate commerce clause of the federal Constitution.- There is no evidence in the record which tends to show that complainant had complied with the statutes above referred to requiring foreign corporations, desiring to carry on business in this State, to first file in the office of the secretary of State a copy of their charters. Therefore we must inquire and determine whether the transaction, out of which the execution of the notes sued on g-rew, was an interstate transaction. It it were not, then, under our decisions, complainant cannot ask the courts of this State to enforce its contract with defendants and must be repelled. We think the facts show that the sale and delivery of said ginning outfit or machinery by complainant to the Farmers’ Co-Operation Gin Company, a corporation of which defendants were directors, was an intrastate State transaction. It has been held repeatedly by this court that a foreign corporation which does not comply with the Acts of 1877, chapter 31, and the Acts of 1891, chapter 122, cannot maintain an action arising out of business transacted within the State. Amusement Company v. Albert, 128 Tenn., 419, 161 S. W., 488; Cary-Lombard Lumber Company v. Thomas, 92 Tenn., 587, 22 S. W., 743; Harris v. Water & Light Company, 108 Tenn., 245, 67 S. W., 811; Louisville Property Company v. Nashville, 114 — 549 — Tenn., 213, 84 S. W., 810; Lumber Company v. Moore, 126 Tenn., 313, 148 S. W., 212; Heating & Ventilating Company v. McKnight & Merz, 140 Tenn., 563, 205 S. W., 419. In Amusement Company v. Albert, supra, it was held that a foreign corporation is doing business within the State when it transacts therein some substantial part of its ordinary business, and its operations within the State do not consist of mere casual or occasional transactions. Complainant insists that the contract for the sale of the machinery in question to the Farmers’ Co-Operative Gin Company was an interstate commerce transaction because the contract expressly provided that it was subject to acceptance by the complainant at' its home office in Columbus, Ga.; that the undisputed evidence showed that the contract or order was forwarded to complainant at its home office in Columbus, Ga., by its agent who negotiated the contract or order; that it was accepted by complainant at its home office, and said machinery was shipped from the manufacturing plant of complainant in Columbus, Ga. It was held by this court in Lloyd Thomas Company v. Grosvenor, 144 Tenn., 347, 233 S. W., 669; that a contract to appraise property in Tennessee, and which was made in Tennessee by an Illinois corporation, but the contract provided that before becoming valid it must be approved by the Illinois corporation at its office in Chicago, was not a Tennessee contract, but an Illinois contract, and, this being true, the service to be performed by complainant in that case was not an intra — 550 — state transaction. In that case, however, no part of the service called for by the contract was to be performed in Tennessee, nor was any part of it performed 'in Tennessee. The service contracted for by the Illinois corporation in that case was to be performed in the State of Arkansas. The contract under consideration in the instant cause provided that complainant should, through its' agent, superintend the erection of said ginning machinery in a house to be erected and furnished by the Farmers’ CoOperative Grin Company at Pinson, Tenn., and that complainant should be paid for the services of such agent at the rate of $5 per day from the time he left the factory until his return, and that the purchaser should also pay his traveling expenses and his board while engaged in superintending the erection of said machinery. It appears that complainant, through its agent, did superintend the erection of its machinery in the gin house prepared by the purchaser at Pinson, Tenn., and it required about one week to erect said machinery. It also appears from the undisputed evidence that said machinery was not of such complicated character as to render it necessary for complainant to furnish an agent from • its factory to superintend its erection, but that said machinery could have been erected by any mechanic who could read and understand blueprints and drawings. The evidence shows that complainant furnished blueprints and drawings of the machinery in question, showing how each piece of machinery should be installed, and the secretary and treasurer of complainant testified that complainant always furnished such blueprints and drawings — 551 — for the installation of machinery sold by it. He further testified that complainant only superintended the erection of its ginning outfits where the purchaser contracted for it, and that in many cases it sold the machinery without contracting to furnish some one to superintend its erection. He further testified that the sending of a man to superintend the erection of the machinery at the expense of the customer was merely for the convenience of the customer, and depended on whether or not the customer desired such service; that complainant frequently made sales of ginning outfits that were shipped direct to the customer and installed by the customer without the aid of any agent of complainant; that outfits were sold and shipped to Peru, Africa, and Australia, and various foreign countries, without any contract that complainant should superintend the erection of said machinery. Furthermore, it appears that, at the time of the transaction in question, complainant maintained a branch office in the city of Memphis, Tenn., which was in charge of a district sales manager, and had done so for several years. It also maintained a plant at Binghampton, Tenn., where it kept a complete ginning outfit set up and installed, and used the same for demonstration purposes. This plant was located on property owned by'complainant. At the Binghampton plant it also kept a complete stock of repairs for the ginning machinery sold by it, and sold and delivered these repairs to customers from the Binghampton plant; the orders for repairs from customers in Tennessee being received directly at the Memphis office, and such orders filled from the stock maintained at the Binghampton plant. — 552 — At tbe Binghampton plant it maintained and operated a shop for the repair of the ginning machinery operated by its customers. In this shop it maintained and operated a saw sharpener, and sharpened gin saws for its customers. Owners of gin saws in Tennessee, without regard to whether they were from gins sold by complainant or not, desiring to have such saws filed or sharpened, would send them to complainant at Memphis, and complainant would file and sharpen said saws at its shop in Binghampton, and return the same to the owners, charging them a stipulated price for said service. It appears from the evidence that, after the sale of the machinery involved in this cause, the Farmers’ CoOperative Gin Company, on several occasions, ordered and purchased from complainant’s branch office at Memphis, Tenn., repairs for certain machinery, which was shipped by complainant from its Binghampton plant to the Farmers’. Go-Operative Gin Company at Pinson, Tenn.; said orders being sent directly to the Memphis branch. It also appears that, in negotiating the sale of the machinery in question, one of the inducements to purchase held out by complainant to the Farmers’ Co-Operative Gin Company was the fact that it maintained and kept a stock of repairs at its Binghampton plant in Tennessee, from which, in case of a breakdown in its machinery, it could obtain the necessary parts to replace tho^ which had broken without delay, and without the necessity of ordering from the factory in Georgia. Complainant also kept a stenographer at its sales office in Memphis, and mechanics at its Binghampton plant, — 553 — who sharpened gin saws, etc., for customers. It also had three salesmen traveling from its branch office at Memphis, talcing orders for machinery, and the expenses of these salesmen were kept in the Memphis office. Complainant furnished from its factory the stock of repairs necessary to be kept at its branch office in Tennessee, shipping said stock to said branch office, and settling with said branch office at inventory periods, which was once a year. The collection of accounts owing complainant from its Tennessee customers, and other customers in the Memphis territory, were collected by complainant’s branch office at Memphis. One of the purposes for which complainant was organized, as shown by its charter, was to manufacture, buy, sell, and repair machinery and its parts. We think the foregoing facts show that complainant was engaged in the prosecution of a material portion of its ordinary business in this State, and that the carrying on of such business rendered in amenable to the Acts of 1891, chapter 122, and the Acts of 1877, chapter 31. Browning v. Waycross, 233 U. S. 16, 34 S. Ct., 578, 58 L. Ed. 828. In that case it was held that, where a foreign corporation sold lightning rods to a resident of Georgia, with an agreement to install them on the house of the purchaser, this was not an interstate commerce transaction; that the matter of installation was a doing business within the State, it not appearing that it was an essential and necessary part of the sale of the particular machinery that the seller should install it. See, also Palm Vacuum Cleaner Co. v. Bjornstad, 136 Minn. 38, 161 N. W., 215, L. R. A., 1917C, 1012, and notes — 554 — thereto. The cases cited in the note to-the case last cited show that the rule stated in Browning v. Waycross has been very generally followed. To the same effect is the holding of this court in Healing & Ventilating Company v. McKnight & Merz, supra. Complainant relies chiefly on the case of York Manufacturing Company v. Colley, 247 U. S., 21, 38 S. Ct., 430, 62 L. Ed., 963, 11 A. L. R., 611. The facts of that case are easily distinguishable from the facts in the cause at bar. The contract in that case was for the sale of an ice plant, consisting of many and complicated parts enumerated in the opinion of the court,- to be shipped from a point in Pennsylvania to a point in Texas, and erected by the seller, and it also provided that the seller, in addition to erecting the plant and installing the machinery, should practically test its efficiency before the contract was completed. In other words, the installation of the plant, and the practical test of it after it was installed, was essential to the completion of the contract of sale. The court, in holding that the erection and installation of the machinery under these circumstances did not deprive the transaction of its interstate character, emphasized the fact that the intrinsic value of the machinery there in question largely depended upon its being united and made operative as a whole, and that, on account of its complexity, it was essential to its sale that it be erected by an expert from the factory. That case does not hold that, where the article sold in interstate commerce is not of such a complex character that installation by the seller is essential to its sale, such in — 555 — stallation will be held to he a part of interstate commerce. In the canse at bar the obligation of the purchaser to accept the machinery in question did not to any extent depend upon the installation and erection. of it by the seller; nor, as shown by the testimony of complainant’s secretary and treasurer, Mr. Hollis, was such installation and erection essential to the completion of the interstate transaction. We are of the opinion, therefore, that the case of York Manufacturing Company v. Colley is not controlling. It results that the decree of the chancellor will be affirmed with costs.