Knapp v. Bullock Tractor Co.

BLEDSOE, District Judge (after stating the facts as above). The contentions of defendants in both cases seem to be directed to the point that, because they are engaged in interstate commerce, they are not “doing business” in the state of California within the terms of the law of said state providing for service of summons. Section 411 of the Code of Civil Procedure of California reads: — 549 — “The summons must be served by delivering a copy thereof as follows: * * 2. If suit is against a foreign corporation, or a nonresident joint stock company or association, doing business and having a managing or business agent, cashier or secretary within this state- To such agent, cashier, or secretary. * * * 6. In all other cases to the defendant personally.” And much, if not most, of the argument has been expended in the effort to cite a multitude of cases to the effect that defendants are engaged in interstate commerce, and therefore are not amenable to the laws of the state of California. [1] Without in any wise attempting to refer to these authorities, it suffices to say that, since the decision in International Harvester Co. v. Kentucky, 234 U. S. 579, 587, 34 Sup. Ct. 944, 58 L. Ed. 1479, the fact that a foreign corporation may be engaged in interstate commerce docs not in any wise serve to render it immune from the assertion of jurisdiction by the state courts in any state in which it may be engaged in doing business, and in which appropriate provision is made by the law thereof for the assertion of jurisdiction over it. Atkinson v. U. S. Operating Co., 129 Minn. 232, 152 N. W. 410, L. R. A. 1916E, 241; Armstrong Co. v. N. Y. Central, 129 Minn. 104, 151 N. W. 917, L. R. A. 1916E, 232, Ann. Cas. 1916E, 335. Out of the multitude of authorities cited, and which have been examined by the court in the course of its labors, no really satisfactory, comprehensive, and scientifically accurate determination of yvhat is necessary or may be sufficient to constitute “doing business” in a state has been encountered. In cases like those at bar, in which the corporation obviously is seeking to do all the business it can, and yet all the while escape the jurisdiction of the local tribunals, it probably would not do to accept the general statement indulged in by the Supreme Court in St. Louis Ry. Co. v. Alexander, 227 U. S. 218, 227, 33 Sup. Ct. 245, 248 (57 L. Ed. 486, Ann. Cas. 1915B, 77), where Mr. Justice Day declared: “In a general way it may bo said that the business must be such in character" and extent as to warrant the inference that the corporation bad subjected itself to the jurisdiction and laws of the district in which it is ¡.■erved and in which it is bound to appear when a proper agent has been served with process.” . In so far as that inay seem to imply a conscious “subjection” of itself to the “jurisdiction and laws of the district,” it could hardly ever occur in a case like the ones at bar that the inference could be drawn. Much more compelling language was indulged in by the same court in the International Harvester Case, supra, where the same justice declared: “We are satisfied that the presence of a corporation within a state necessary to the service of process is shown when it appears that the corporation is there carrying on business in such sense as to manifest its presence within the state.” In similar vein, Mr. Justice Brandéis in a recent decision (Philadelphia & Reading Ry. Co. v. McKibbin, 243 U. S. 264, 37 Sup. Ct. 280, 61 L. Ed. 710, decided March 6th, 1917) says : “A foreign corporation is amenable to process to enforce a personal liability, in the absence of consent, only if it is doing business within the state in — 550 — such manner and to such extent as to warrant the inference that it is present there.” [2-4] So, also, it was said by Judge Hawley, of this circuit, in Doe v. Springfield Boiler & Mfg. Co., 104 Fed. 684, 687, 44 C. C. A. 128, 131: “The general consensus of opinion is that the corporation must transact within the state some substantial part of its ordinary business by its officers or agents appointed and selected for that purpose, and that the transaction of an isolated business act is not the carrying on. or doing business in a state.” Just what may be meant in that statement by the phrase “some substantial part of its ordinary business” is perhaps indefinite; but I think, upon reason and authority, it may be said that if the corporation is engaged in a more, or less continuous effort, not merely casual, sporadic, or isolated, to conduct and carry on within the state some part of the business in which it is usually and generally engaged, it may be said with due and becoming propriety to be “doing business” within such state. Copper Mfg. Co. v. Ferguson, 113 U. S. 727, 5 Sup. Ct. 739, 28 L. Ed. 1137; Vaughn Machine Co. v. Lighthouse, 64 App. Div. 138, 71 N. Y. Supp. 801; Neyens v. Worthington, 150 Mich. 580, 114 N. W. 404, 18 L. R. A. (N. S.) 142; Penn Collieries v. McKeever, 183 N. Y. 98, 75 N. E. 935, 2 L. R. A. (N. S.) 127. Within these limits and upon the facts adduced in the cases at bar, there can be no conclusion other than that each of the defendant corporations is doing business within the state of California. The other questions in the case are as to the sufficiency of the service had. [5, 6] In the Tractor Company Case service was had upon a corporation that was in every sense of the word a “business agent” of the defendant in California. Some criticism is indulged in because of the fact that the complaint alleges, as adverted to hereinabove, that defendant’s principal place of business in California was in Los Angeles. Obviously, however, no service could have been made upon defendant’s business agent at its place of business in Los Angeles. So to do would have been for plaintiffs to have served themselves in a suit by them against defendant. Such would doubtless have failed to comply with the due process requirements of the law. St. Clair v. Cox, 106 U. S. 350, 1 Sup. Ct. 354, 27 L. Ed. 222. There is no reason, however, why, though defendant’s principal place of business in California may have been, as alleged, in Los Angeles, service could not have been made upon an appropriate business agent located elsewhere within the state. Although, in view of the holding of the sufficiency of the service on the business agent of defendant, the question of the sufficiency of the service upon the secretary of state is not necessary to a decision herein, yet, since motion has been made to quash it, I am constrained to hold that such motion should be granted. Such service was had pursuant to the provisions of section 405 of the Civil Code of California, which is contained in title 1, part IV, of said Code, entitled “Foreign Corporations,” and provides as follows: “Designation of Person on Whom Process may he Served — Service on Secretary of State Valid, When., — Every corporation other than those created by — 551 — or under the laws of this state must, at the time of filing the certified copy of its articles of incorporation, file in the office of the secretary of state a designation of some person residing within the state upon whom process issued by authority of or under any law of this state may be served. A copy of such designation, duly certified by the secretary of state, is sufficient evidence of such appointment. Such process may be served on the person so designated, or, in the event that no such person is designated, then on the secretary of state, and the service is a valid service on such corporation.” This section would seem to he in conflict with the provisions of section 411 of the Code of Civil Procedure heretofore referred to, which provides how summons in a civil action “must be served,” and in the face of such conflict it might be contended with some show of reason that, in a case involving the question of sufficiency of service of summons, the provisions of the Code of Civil Procedure should control. However, that contention seems to be foreclosed by the decision of the Supreme Court of the state of California in Olender v. Crystalline Mining Co., 149 Cal. 482, 484, 86 Pac. 1082, where the court seems to hold that the act providing for service upon the secretary of state is a "substitute” for the service formerly prescribed by the Code of Civil Procedure. In my judgment, however, in so far as section 405, supra, purports to provide for service of process upon a foreign corporation by substituted service upon the secretary of state, it fails to comply with the due process clause of the federal Constitution and is, to that extent, void. [7] I am aware, of course, that this precise question was passed upon adversely to the conclusion just announced by the Supreme Court of California in the Olender Case, supra. I am also aware, however, that it is the duty of this court to declare the law, in so far as rights secured under the federal Constitution are concerned, unlrammeled by decisions of state courts, which in this respect, at least, are not -binding upon it. [8] It is noticed that no provision is made in the section of the Civil Code referred to for the sending of any notice by the secretary of state to the corporation sought to be subjected to the jurisdiction of the state tribunal. In this respect the case is essentially different from that of Mutual Reserve Association v. Phelps, 190 U. S. 147, 158, 23 Sup. Ct. 707, 47 L. Ed. 987, and is brought within the terms of the decisions in King Tonopah Mining Co. v. Lynch (D. C.) 232 Fed. 485; Southern Ry. Co. v. Simon (C. C.) 184 Fed. 959, and Pinney v. Providence Roan Co., 106 Wis. 396, 82 N. W. 308, 50 L. R. A. 577, 80 Am. St. Rep. 41. The Circuit Court in the Simon Case, supra, states the controlling principle in simple yet apt language: “It is fundamental that the inelhod of citation should be fairly calculated to bring home to the defendant actual notice of the pendency of the action and allow him a reasonable time to put in Ms defense.” If the California statute contained some provision, such as was found in the Phelps Case, supra, for a notification by the secretary of state of the defendant corporation of the fact of service and the pen-dency of suit, it then might fairly be presumed that official action in such behalf would be promptly and properly performed, and that defendant would in due course be given notice of the pending litigation. — 552 — The fact that no provision was made for direct appointment by the foreign corporation of the secretary of state as its agent to receive service of process I consider to be immaterial. If it came into the state to do business, presumably it came in intending to comply with and be bound by tire laws of the state regarding, such a corporation as it was, and it would not be unreasonable to ho.ld that it accepted the privilege of doing business subject to the limitation that service upon the secretary of state, followed by notice to it, should be considered as sufficient. However, the California statute like the Nevada statute and the Louisiana statute contains no provision for notice to the defendant, and in that respect it could easily, and would probably, be true, as is so clearly stated by Judge Farrington in the Lynch Case, supra, that defendant would have absolutely no knowledge at all of the existence of the litigation or of the fact of service. To intimate that, under such circumstances, it nevertheless may be bound, and a valid judgment-secured against it, shocks the conscience and demonstrates that such attempted service constitutes a want of compliance with the due process clause of the Constitution. For these reasons I am constrained to hold, as above indicated, the provision of section 405 above referred to unconstitutional. [9] Service in the Portrait Company Case, though made upon the secretary of the corporation, was not made, in my judgment, in compliance either with the law of the state of California or the general law controlling the situation. Subdivision II of section 411 of the Code of Civil Procedure, heretofore referred to, provides for service upon the secretary of a foreign corporation “doing business and having [maintaining?] a managing or business agent, cashier, or secretary within this state.” This I am persuaded means that service pursuant. to this section can be had upon one of the officers mentioned only in the event that he is engaged in the state in a representative capacity for the corporation in the capacity indicated. Under the general law it would seem that the mere casual presence of an officer of the corporation in the state, not engaged in the business of the corporation, will not suffice to warrant service of process as against the corporation upon him. St. Clair v. Cox, 106 U. S. 350, 358, 1 Sup. Ct. 354, 27 L. Ed. 222. It seems clear from the evidence addueed that Paine was in California purely in his private capacity on a pleasure trip, and not in any wise as representative of defendant corporation. The secretary of a corporation, away from its domicile, “does not carry the corporation in his pocket.” Louden Machinery Co. v. American Malleable Iron Co. (C. C.) 127 Fed. 1008. For this reason I am constrained to hold that motion to quash service of summons as made upon him should be granted. Premo Co. v. Jersey-Creme Co., 200 Fed. 352, 118 C. C. A. 458, 43 L. R. A. (N. S.) 1015. [10,11] It is apparent, from the papers before the court, that there is a managing or business agent of the defendant Portrait Company residing and conducting the business of the corporation in California, to wit: Frank S. Huffman, road manager for entire state, located in Oakland, Cal., and it would seem as if valid service of process might be had upon him. He seems to be of sufficient rank to justify the — 553 — conclusion that it is “reasonably certain that the corporation would be notified of the service.” Denver & R. G. R. R. v. Roller, 100 Fed. 738, 741, 41 C. C. A. 22, 25 (49 L. R. A.77). The question has not been presented or argued in the case, but it would seem, upon reason, as if it were competent for the court now to authorize the issuance of process out of this court in order that service may be had upon the mana «ring agent of defendant aforesaid. Clark v. Wells, 203 U. S. 164, 27 Sup. Ct. 43, 51 L. Ed. 138. Appropriate orders quashing service of summons upon the secretary of state in the one case and upon the secretary of the company in the other will be entered and an order made providing for the issuance of process for service upon the road manager as hereinabove indicated.