Case Name: Helen Portscheller v. Atlas Mutual Benefit Association, a corporation of the State of Delaware
Court: Delaware Superior Court
Jurisdiction: Delaware
Decision Date: 1944-06-19
Citations: 42 Del. 486
Docket Number: No. 55
Parties: Helen Portscheller v. Atlas Mutual Benefit Association, a corporation of the State of Delaware.
Judges: 
Reporter: Delaware Reports
Volume: 42
Pages: 486–510

Head Matter:
Helen Portscheller v. Atlas Mutual Benefit Association, a corporation of the State of Delaware.
(June 19, 1944.)
Richards, Rodney and Terry, J. J., sitting.
Collins J. Seitz for plaintiff.
Clair J. Killoram, for defendant.
Superior Court for New Castle County,
No. 55,
March Term, 1942.

Opinion:
Rodney, J.,
delivering the opinion of the Court:
The present matter comes to the Court in a rather unsatisfactory manner and the opinion of the Court is required upon somewhat insufficient facts. It is a difficult task to attempt to reconcile according to any fixed pattern or standard the diverse rulings on the question as to when a foreign corporation is "doing business" in a fórum state so as to clothe the latter state with jurisdiction over it so as to warrant the service of process. As said in Frink Co. v. Erikson, (1 Cir.) 20 F. 2d 707, 711,
"We have tried, without success, to discover some salient circumstance or point common to all that might be held to be determinative of the instant case."
All of the cases indicate that a correct ruling can only be had upon the facts of the particular case. As is said in St. Louis S. W. R. Co. v. Alexander, 227 U. S. 218, 227, 33 S. Ct. 245, 247, 57 L. Ed. 486, Ann. Cas. 1915B, 77:
"This court has decided each case of this character upon the facts brought before it, and has laid down no all-embracing rule by which it may be determined what constitutes the doing of business by a foreign corporation in such manner as to subject it to a given jurisdiction."
Attention must be drawn to the insufficiency of facts presented to us. • Objection is made by the defendant to the jurisdiction acquired by the Michigan Court by reason of the service of process there. No record of the Michigan Court is before us, but by Item 6 of the agreed statement of facts it is. stipulated that the Michigan judgment was valid if it be found that the defendant, upon the stipulated facts, was "doing business" in Michigan on September 10, 1934, when the policy in suit was issued.
The agreed statement of facts does state the activities of Koch, the admitted agent, who took the application upon which the instant policy or certificate was issued. There is nothing in the record nor statement of facts to indicate whether the activities of Koch, the admitted agent of the defendant in the State of Michigan, represented the only activities of the defendant in that State. Whether or not a foreign insurance corporation is "doing business" in a given state , may depend not alone on the activities of the particular agent responsible for the issuance of the policy in suit, but upon the sum total of the activities of the company through all its various agencies, if more than one.
In 1839 Chief Justice Taney, in Bank of Augusta v. Earle, 13 Pet. 519, 588,10 L. Ed. 274, brought to the fore the difficulties of a corporation exercising its franchises in jurisdictions other than that of its origin. Since then the activities of every state have been directed to some measure of control or regulation of "foreign" corporations, some of which must inevitably do business in states other than that of their incorporation. These statutes both preceded and followed the "due process" clause of the 14th Amendment and, indeed, a few antedated the Augusta case.
Some jurisdiction by a state of a foreign corporation doing business in its boundaries has usually been sought because of one or more of three reasons: (1) A desire to have some general control or oversight of the qualifications of such foreign corporation doing business in the given state; (2) a desire to subject such foreign corporation to some measure of taxation for such doing of business, and (3) for the service of process on such foreign corporation, thereby obviating the requirement of suitors seeking relief in the home state of the corporation. Some care must be exercised in the distinction between the classes, for the requirements of each are not the same, and it has been said that the requirement for "service of process" is the least exacting of the three. With it only are we concerned. See 18 Fletcher on Corporations, Permanent Ed., § 8712; 25 Columbia L. Rev., "An analysis of doing business," 1018,1045.
The concept of a foreign corporation "doing business" in a state as constituting jurisdiction by such state as to the service of process has been arrived at by the application of varying theories. Such jurisdiction was first thought to have at its source the implied consent of the foreign corporation to be bound by the laws of the state in which it was "doing business."
Such was the theory of Old Wayne Mut. Life Ass'n v. McDonough, 204 U. S. 8, 27 S. Ct. 236, 51 L. Ed. 345. When in International Harvester Co. v. Commonwealth of Kentucky, 234 U. S. 579, 34 S. Ct. 944, 58 L. Ed. 1479, it was held that a company solely engaged in interstate commerce was amenable to the laws of the state by reason of doing business in such state, the consent theory of jurisdiction largely gave way to the "corporate presence" theory. It is thus now almost uniformly held that the presence of a corporation within a state necessary to the service of process is shown when it appears that the corporation by its conduct or the acts of its agents is there carrying on business in such sense or to such extent as to manifest its presence within the state.
These theories of jurisdiction, while valuable in their way, are of little aid in determining the difficult question of just what constitutes "doing business," so as to form the basis of a service of process. There has been a tendency to include as one of the factors to be considered the "reasonableness" of the exercise of jurisdiction under the facts of a case, as indicative of the extent and purpose of the corporate presence. This view was indicated in Smolik v. Philadelphia & Reading Coal & Iron R. Co. (D. C.) 222 F. 148; Farmers' & Merchants' Bank v. Federal Reserve Bank, (D. C.) 286 F. 566, at pages 577 and 588, and in Scott, "Jurisdiction over Non Residents doing business within a State," 32 Harvard L. Rev. 883. The suggestion is again made.in Frene v. Louisville Cement Co., 11 U. S. App. D. C. 129, 134 F. 2d 5.11, 519, 146 A. L. R. 926. See 23 Va. Law Rev. 307.
Much reliance is placed by the defendant on Green v. Chicago, B. & Q. R. Co., 205 U. S. 530, 27 S. Ct. 595, 51 L. Ed. 916. There an Iowa corporation maintained an agency in Philadelphia which solicited freight and passenger business,- and in some instances collected money and issued prepaid orders for transportation. The suit was brought to recover damages for a cause of action arising in Colorado. It was held that mere solicitation of business and nothing more did not constitute such a "doing of business" as to form the basis for a service of process. It will be noted that the Green case cited with no evidence of disapproval the case of Denver, etc., R. Co. v. Roller, (9 Cir.) 100 F. 738, 49 L. R. A. 77, 79, which on quite similar facts reached a different conclusion from that of the Green case. The Green case only distinguished the cited case, stating that in it the action has been "brought in the state courts and the question was of the interpretation of a state statute and the jurisdiction of the state courts." [205 U. S. 530, 27 S. Ct. 596, 51 L. Ed. 916.] It will be also noted that is precisely the question in the present case, although it is difficult to see the exact basis of the distinction. See also W. J. Armstrong Co. v. New York Cent., etc., R. Co., 129 Minn. 104, 151 N. W. 917, L. R. A. 1916E, 232, Ann. Cas. 1916E, 335.
In International Harvester Co. v. Commonwealth of Kentucky, 234 U. S. 579, 34 S. Ct. 944, 58 L. Ed. 1479, it was held that solicitation of business plus the receipt of certain money, checks or notes for goods sold in Kentucky did constitute such a "doing of business" in that state so as to sustain a service of process. The Court considered the Green case, which it termed "an extreme case."
The present standing and effect of the Green case has been the subject of some comment. Thus in speaking of it in Frene v. Louisville Cement Co., 77 U. S. App. D. C. 129, 134 F. 2d 511, 518, 146 A. L. R. 926, it is said
"later cases, on the whole, have interpreted 'doing business' more broadly" and "it is impossible to tell how far the decision was due to reluctance to require the defendant and its witnessés to cross the continent and defend in the east a cause of action that arose .in the west."
That this question of hardship as affecting railroads engaged in interstate commerce is an important one may be seen in Davis v. Farmers' Co-op. Equity Co., 262 U. S. 312, 43 S, Ct. 556, 67 L. Ed. 996.
In Hutchinson v. Chase & Gilbert, (2 Cir.) 45 F. 2d 139, 141, Judge Learned Hand says
"possibly the maintenance of a regular agency for the solicitation of business will serve without more. The an swer made in Green v. Chicago, Burlington & Quincy R. Co. perhaps becomes somewhat doubtful in the light of International Harvester Co. v. [Commonwealth of] Kentucky and, if it still remains true, it readily yields to slight additions." See also Wood v. Delaware & H. R. Corp., (2 Cir.) 63 F. 2d 235; Pergl v. United States Axle Co., 320 Ill. App, 115, 50 N. E. 2d 115.
The U. S. Circuit Court for the First Circuit in Canadian Pac. R. Co. v. Sullivan, 126 F. 2d 433, 437, in distinguishing the Green case says "but this case, if it is still the law is not in point." See also 21 R. C. L., p. 1343.
In Haskell v. Aluminum Co. of America, (D. C.) 14 F. 2d 864, 869, the Court felt that the decisions of the Supreme Court "reveal a tendency to confine the principle of the Green case to the particular facts of that case."
Most of the cases involving "solicitations" as constituting a basis for service of process involve solicitations for orders for goods to be shipped from another state. Many of the general principles governing such solicitations are applicable to solicitations concerning insurance in a foreign insurance company. If there be a valid distinction between the two cases it may be partly based upon the distinctive nature of the insurance business and partly upon the fact that in case of orders of ordinary goods the shipment of the goods usually completes the transaction, while in case of life insurance the solicitations often result in a continuing contract involving, monthly or quarterly payments, and usually is only terminated by death. Legal editors have seen sufficient distinction to list cases considering solicitations for orders of goods to be shipped into a state in an exhaustive note in 60 A. L. R. 994, and accord a separate treatment of foreign insurance companies as "doing business" in a state in Merchants & B. Guaranty Co. v. Washington, 185 Okl. 532, 94 P. 2d 930, 137 A. L. R. 1128. In the latter note it is said at 1134:
"It seems reasonably clear that the employment of soliciting agents in a state by a foreign insurer amounts to 'doing business' Within such state."
Substantially the same statement is adopted as the text in 29 Am. Jur., p. 78, as shown by the 1943 supplement.
At this point it seems material to direct attention to the facts of the present case. Koch was admittedly the agent of the defendant, specially named as such. Koch was the paid agent of the defendant. When he collected $6 from an insurance "prospect" he retained $4 as his commission," and sent $2 to the company, but the result was the same as if he had sent the entire $6 to the company and it had then paid to him the $4. As agent for the company he was paid by the company for the business he was doing for it. Koch collected from the insured the initiation fee due to the company and sent it forward; he collected the first month's dues for the company and sent it forward, also. The work that Koch did was at the company's request and in direct furtherance of the purpose of the defendant's corporate existence, and as a consequence of Koch's work, Portscheller became a certificate holder with the defendant, and so remained until he died, and as a like consequence of that work the defendant company received every subsequent month's dues from Portscheller.
Reserving, for the moment, the question of extent of business, it scarcely admits a doubt that Koch, the agent, was "doing business" of some kind in the matter of the Portscheller application, and since it is admitted that Koch was in that matter the agent, and the paid agent, of the defendant in the transaction, then it necessarily follows that then and there the defendant was "doing business" of some kind in Michigan, and business of the exact nature for which it was formed.
In Pennsylvania, Lumbermen's Mut. Fire Ins. Co. v. Meyer, 197 U. S. 407, 415, 25 S. Ct. 483, 485, 49 L. Ed. 810, the agents of a foreign insurance company came into a state to adjust the loss on a policy and were held "doing business" there. The Court aptly said:
"If not doing business in such case, what was it doing? It is doing the act provided for in its contract, at the very place where, in case a loss occurred, the company contemplated the act should be done; and it does it in furtherance of the contract, and in order to carry out its provisions, and it could not properly be carried out without this act being done; and the contract itself is the very kind of contract which constituted the legal business of the company, and for the purpose of doing which it was incorporated." '
In the present case no express place of payment of loss is mentioned in the policy. The policy is therefore payable in Michigan, the domicile alike of the beneficiary and of the deceased. Bothwell v. Buckbee-Mears Co., 275 U. S. 274, 48 S. Ct. 124, 72 L. Ed. 277.
It was in Michigan, then, that the defendant through Its agent solicited the insured to become a member. It was to that agent in Michigan that he paid his initiation fee and first dues. As a result of this solicitation the deceased in Michigan, during his life, sent his monthly payments direct to the defendant. It was presumably in Michigan that the insured died, and it was in that state that any investigation concerning the death would be made by the defendant, if it was not satisfied with the proofs of its liability, for there all the witnesses were to be found.
There are a number of cases involving service of process as a result of an insurance corporation "doing business" in a state, growing out of solicitations for insurance in a foreign insurance company, which seem of almost precise application. Sparks v. National Masonic Acc. Ass'n, (C. C.) 73 F. 277; McNeely v. Fidelity Mutual Ben. Ass'n, 178 S. C. 247, 182 S. E. 425; State v. United States Mut. Acc. Ass'n, 67 Wis. 624, 31 N. W. 229; Merchants & B. Guaranty Co. v. Washington, 185 Okl. 532, 94 P. 2d 930, 137 A. L. R. 1123; Dixon v. Northwestern National Life Ins. Co., 189 Iowa 1268, 179 N. W. 885; A. Harvey's Sons Mfg. Co. v. Sterling Materials Co., 247 Mich. 317, 225 N. W. 538. See also Union Mut. Life Co. v. Bailey, 99 Colo. 570, 64 P. 2d 1267, where solicitations over the radio were held a "doing of business."
The defendant relies heavily upon Old Wayne Mutual Life Ass'n v. McDonough, 204 U. S. 8, 27 S. Ct. 236, 51L. Ed. 345. In that case the Court simply placed a strict construction upon a Pennsylvania statute and held that, under that statute, a foreign corporation had not consented to be bound concerning causes of action arising out of that state. 17 Minn. L. Rev. 289. The Court did not hold that a corporation could not by its conduct or doing business by its proper agencies so manifest its presence in a state as to justify the service of process on it there. But regardless of any distinction the cited case can have no bearing here by reason of the express stipulation filed in the cause. By stipulation No. 6, it is expressly agreed that the Michigan judgment was a valid and binding judgment if it be found, under the stipulated facts, that the defendant company was "doing business" in Michigan at or about the time of the issuance of the Benefit Certificate. That question is the only one presented for solution.
Still reserving for future discussion the consideration of the quantum of business done by the defendant in Michigan, we are of the opinion that such defendant was "doing business" there at the time stated. Every factor, which may be necessary or material seems to be present: (1) Koch was the agent of the defendant; (2) Koch was paid by the defendant for the particular work upon which the suit was based; (3) Koch solicited and received the signed application of the insured; (4) the work was peculiarly in furtherance of the business of the company; (5) in addition to the signed application Koch received the initiation fee due to the company and forwarded it to the company; (6) he received the advance dues to the company and paid them to it; (7) as a consequence of the work of the agent the insured received a contract from the company which remained in existence during his life; (8) as a result of the work of the agent the defendant company received dues on the certificate for a number of years. To all these factors, complete in themselves, may be added the strengthening thought of necessity and convenience. Regulations for service of process upon foreign corporations doing business in a state were primarily enacted for the citizens of the state where the. business was done. This has special application to persons of most moderate means holding small policies of insurance in foreign insurance companies.
The facts of the present case emphasize this thought. When the application was signed and the certificate was issued the.company was incorporated in Colorado as the Capitol Mutual Benefit Association of Denver. By. succession, it is-said that the defendant is now (or was at least when the present- suit was brought) a Delaware Corporation. When it came to Delaware it came as Capitol Mutual Benefit Association of Delaware, and has since become'Atlas Mutual Benefit Association, a corporation of the State of Delaware. If necessity, convenience or "reasonableness" be considered as, of any moment there can be no comparison between requiring the beneficiary of the policy and her witnesses to follow the defendant to distant points of the country (or perhaps to several points) on the one hand and, on the other, compelling the defendant to answer in that state where the insured lived and died, and where his membership was first solicited, and where all witnesses are available.
We must now briefly consider the question of extent or quantum of business done. Many authorities sustain the contention of the defendant that single, isolated or spo radie transactions do not constitute a "doing of business" such as to subject a foreign corporation to service of process in another state. We are again met with the circumscribed nature of the facts as set out in the stipulation, and it is on these facts alone that we must rely. The stipulation states that Koch solicited and obtained the application and payment from Portscheller (the matter in suit) and solicited and obtained the application of one Nicholas Barodte, as to which the same procedure was followed. The stipulation then states:
"the foregoing were the only two applications forwarded to the company but the said Koch solicited numerous other individuals in the State of Michigan for the purpose of having them apply through him for membership in said Association for a. continuous period of approximately thirty days and thereafter the said Fred Koch had no further association or solicited any membership for the Association. "
The limitation of time of thirty days while a circumstance is not, of and in itself, conclusive of the matter. The true answer must, of necessity, depend upon other facts. Suppose a hundred new members had been obtained in the thirty days, it could hardly be contended that the business was isolated or sporadic. In Sparks v. National Masonic Acc. Ass'n, (C. C.) 73 F. 277, some 76 transactions were had in April and May. What portion was had in thirty days does not appear but the defendant herein, in discussing this case, concedes in his brief that such "was undoubtedly a continuous and active course of business."
We are thus remanded to the fact that the agent obtained two applications and "solicited numerous other individuals in the State of Michigan" for the purpose of having them apply for membership. Webster defines "numerous" as referring to persons as including a "great number." We thus have two signed applications, and an additional great number interviewed and solicited. Can the fact of "doing business" be confined to those instances when the activities of the agent proved to be successful? We cannot so construe it. The greater part of the activities of the agent may have and probably did consist in interviews with what were considered potential members, and the attempt to convert these into active membership. Such is the universal experience. The doing of business consists not only in the successful efforts of an agent, but also in the germane and material efforts which failed of success. We have no means of ascertaining the ratio that successful interviews resulting in signed applications might bear to the total number of such interviews or solicitations, but we think that all are to be included in determining the question of business being done. The company wanted members and employed Koch to get applications. He was acting as agent in each solicitation, successful or unsuccessful. He was doing business in each solicitation. We are not concerned with the fact as to whether he was doing a successful business, but whether he was, in fact, doing business.
Under the stipulations we think that judgment should be entered for the plaintiff.