Case ID: ky_220/html/0504-01.html
Source: Caselaw Access Project
Author: {"author": "Turner, Commissioner—", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Andrews Bros. v. McClanahan, Manager.
    (Decided June 10, 1927.)
    Appeal from Simpson Circuit Court.
    1. Corporations. — State in exercise of police power may only exclude nonresident corporation from doing business, and may necessarily fix terms on wbicb. such corporation may come into state and do business.
    '2, Process. — State does not have power to wholly exclude individual residents of another state from doing business therein, and cannot acquire jurisdiction over their persons by provision for substituted service.
    .'3. Constitutional Law. — Jurisdiction to enter personal judgment by substituted service on individual or partnership composed of persons, none of whom are served within jurisdiction, is not “due process” of law.
    4, Judgment. — Judgment against partnership, based on substituted service of summons on .partnership, members of which resided outside state, by serving complaint on local manager, under Civil Code of Practice, section 51, subsection 6 (Acts 1891-92-93, c. 201), held void.
    BYRON RENFREW for appellants.
    FINN & SIMS and FINN & CROW for appellee.
   Opinion op the Court by

Turner, Commissioner—

Reversing.

Appellee is the manager of the 'Simpson County Strawberry Growers’ Association. Appellants are Abe and Sam Andrews, constituting the firm of Andrews-Bros., and are residents of and doing business in Detroit,. Mich.

In this action by appellee as manager he recovered, personal judgments for money against defendants aggregating $8,261.25.

There was no personal service upon either of defendants, but the judgments are based upon the following service:

“Executed the within summons on Andrews Bros., a partnership composed of Abe Andrews and ¡Sam Andrews, and executed upon Sam Andrews and Abe Andrews, partners doing business in the name of Andrews Bros., by delivering a true copy of the-within summons to H. P. McDonald, their agent and manager in charge of their business which is carried on in Simpson county, Ky., the county in which the cause of action herein occurred, the members of said partnership being residents of another state and now-absent from Kentucky.”

The defendants appeared only for the purpose of entering a motion to quash the return on the summons, and entered -such motion, and, after the filing of affidavits, by each party, the court overruled the motion and held the service to be good. The defendants failing to plead personal judgment went -against them, and they have appealed.

Subsection 6 of section 51 of the Civil Code of Practice is the authority claimed by appellees to validate this service and uphold the judgment. That subsection is. chapter 201 of the Acts of 1891-92-93, p. 911, and is as-follows:

“In actions against an individual residing in another state, or a partnership, association, or joint-stock company, the members of which reside in another -state, engaged in business in this state, the summons may be served on the manager, or agent of, or person in charge of, such business in this state, in the county where the business is carried on, or in the county where the cause of action occurred.”

The precise question involving the effect of service under the above-quoted subsection has been recently passed upon by the Supreme Court of the United States. In the case of Flexner v. Farson, et al., 248 U. S. 289, 39 S. Ct. 97, 63 L. Ed. 250, appealed to the Supreme Court of the United States from the Supreme Court of Illinois, the validity of a service under this subsection was involved.

The case arose in this way: In a Kentucky court a judgment was taken against Farson et al., members of a nonresident partnership, the summons was served in Kentucky upon Flexner, who was the nonresident ag'ent of defendants, and the transaction, out of which the judgment grew took place in Kentucky. The service was had under the quoted statute, and the summons executed thereunder.

The plaintiffs in that judgment went to the state of Illinois and sought to enforce the collection of such judgment in the courts of that state, and procured personal service in that action upon one of the defendants in the judgment. That defendant, among other things, relied upon the unconstitutionality of the quoted subsection and the lack of jurisdiction of the Kentucky court to enter the judgment. It was so held by the Supreme Court of Illinois. 268 Ill. 435, 109 N. E. 327, Ann. Cas. 1916D, 810.

The case was then appealed to the 'Supreme Court of the United States, and Mr. Justice Holmes, after stating the facts, and upon the assumption that Flexner was the agent in Kentucky of the nonresident firm at the time the transaction occurred in Kentucky, said:

“It is argued that the pleas tacitly admit that Washington Flexner was agent of the firm at the time of the transaction sued upon in Kentucky, and the Kentucky statute is construed as purporting to make him agent to receive service in suits arising out of the business done in that state. On this construction it is said that the defendants by doing business in the state consented to be bound by the service prescribed. The analogy of suits against insurance companies based upon such service is invoked. Mutual Reserve Fund Life Association v. Phelps, 190 U. S. 147, 23 S. Ct. 707, 47 L. Ed. 987. But the consent that is said to be implied in such cases is a mere fiction, founded upon the accepted doctrine that the states could exclude foreign corporations altogether, and therefore could establish this obligation as a condition to letting them in. Lafayette Ins. Co. v. French, 18 How. 404, 15 L. Ed. 451; Pennsylvania Fire Ins. Co., v. Gold Issue Mining & Milling Co., 243 U. S. 93, 96, 37 S. Ct. 344, 61 L. Ed. 610. The state had no power to exclude the defendants and on that ground without going farther the 'Supreme Court of Illinois rightly held that the analogy failed, and that the Kentucky judgment was. void. If the Kentucky statute purports to have the effect attributed to it, it cannot have that effect in. the present case. New York Life Ins. Co. v. Dunlevy,. 241 U. S. 518, 522, 523, 36 S. Ct. 613, 50 L. Ed. 1140.
“Judgment affirmed.”

The distinction pointed out in that opinion between the power of the state to provide for substituted service-upon nonresident corporations doing business in it, because the state in the exercise of the police power has the-right to entirely exclude such corporations from doing-business within its borders, and the power of the state to-obtain jurisdiction by substituted service of nonresident, individuals or partnerships, -is too clear for elucidation. The right to fix the terms upon which a nonresident corporation may do business in the state is fundamentally different from the power to subject nonresident individuals _ to the jurisdiction of the courts by substituted, service. In the one case the state in the exercise of its. police power may wholly exclude a nonresident corporation from doing business, and, having that power, it necessarily has the power to fix the terms upon which such corporation may come in to the state and do business. But the power of the state to wholly exclude-individual residents of another state from doing business therein is from its very nature contrary to any conception of our form of government or the federal Constitution, and, not having the right to wholly exclude them, it has no right to acquire jurisdiction of their persons by a provision for substituted service.' It is not due process of law to acquire jurisdiction to enter a personal judgment by a substituted' service upon an individual or partnership composed of persons none of whom are served within the jurisdiction.

It results from the opinion in Flexner v. Farson that the judgment entered by the Simpson circuit court is void, and could not be enforced either in this state or elsewhere. Having this view of the matter, we have not; deemed it necessary to determine whether the act of 1893, quoted, was or not enacted in compliance with section 51 of our state Constitution.

The trial court erred in not quashing the summons, and, for that reason, the judgment is reversed, with directions to set aside the judgment and quash the return.