Case Name: Geca Stewart et al., Respondents, v. Volkswagen of America, Inc., et al., Defendants, and Volkswagen Werk Aktien-Gesellschaft, Appellant
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1992-06-15
Citations: 181 A.D.2d 4
Docket Number: 
Parties: Geca Stewart et al., Respondents, v Volkswagen of America, Inc., et al., Defendants, and Volkswagen Werk Aktien-Gesellschaft, Appellant.
Judges: 
Reporter: Appellate Division Reports
Volume: 181
Pages: 4–11

Head Matter:
Geca Stewart et al., Respondents, v Volkswagen of America, Inc., et al., Defendants, and Volkswagen Werk Aktien-Gesellschaft, Appellant.
Second Department,
June 15, 1992
APPEARANCES OF COUNSEL
Herzfeld & Rubin, P. C. (Herbert Rubin, David B. Hamm and Linda M. Brown of counsel), for appellant.
Montfort, Healy, McGuire & Salley (E. Richard Rimmels, Jr., of counsel), for respondents.

Opinion:
OPINION OF THE COURT
Per Curiam.
The defendant Volkswagen Werk Aktien-Gesellschaft (hereinafter VWAG), is a German corporation, not authorized to do business in New York. Thus, the plaintiffs, in attempting to serve VWAG with process in this action, utilized the procedure set forth in Business Corporation Law § 307 for service of process on a foreign corporation unauthorized to do business in this State.
Business Corporation Law § 307 (b) (2) provides that service of process upon a foreign corporation not authorized to do business in this State may be made by personal service upon the Secretary of State with notice thereof and a copy of the process sent to "the last address of such foreign corporation known to the plaintiff".
The plaintiffs personally served the Secretary of State in Albany, and then mailed a copy of the summons and complaint, by registered mail, to Volkswagen of America (hereinafter VOA), a wholly owned subsidiary of VWAG, which was located in Englewood Cliffs, New Jersey. Process was sent to VOA "on behalf of' VWAG.
Pursuant to CPLR 3211 (a) (8), VWAG moved to dismiss the complaint insofar as it is asserted against it, arguing that service upon it did not comply with Business Corporation Law § 307 because the summons and complaint were mailed to VOA, in New Jersey, and VWAG never designated VOA as its agent for service of process.
The plaintiffs opposed the motion, asserting that service was proper because, although VWAG did not formally appoint VOA as its agent for service of process, VOA is a "mere department" of VWAG and, therefore, is a proper involuntary agent for service of process.
The Supreme Court agreed with the plaintiffs, finding that other courts have found VOA to be a proper agent to accept service for VWAG, and that VWAG would not be permitted to relitigate that issue. VWAG now argues that Business Corporation Law § 307 must be strictly complied with, and because that statute does not allow for service upon an involuntary agent, service here was improper. We disagree.
It is true, as VWAG asserts, that Business Corporation Law § 307 must be strictly complied with (see, Flick v Stewart-Warner Corp., 76 NY2d 50, 57 ["strict compliance with the procedures of Business Corporation Law § 307 is required to effect service on an unauthorized foreign corporation"]). Thus, in Flick, the court invalidated service where the plaintiff had failed to comply with the requirement of Business Corporation Law § 307 that he send a copy of the process to the foreign corporation by registered mail, return receipt requested, and that he file an affidavit of compliance with such service. Although our dissenting colleague finds that here, as in Flick, the plaintiffs failed to comply with the filing requirements set forth in Business Corporation Law § 307 (c) (2), that issue is not raised by VWAG, and we decline to address it. In Flick, however, unlike the case at bar, there was no involuntary agent involved, and the court, therefore, did not address, let alone specifically preclude, the use of service pursuant to Business Corporation Law § 307 upon an involuntary agent. Nor do we now see reason to preclude the use of Business Corporation Law § 307 in this instance, or to relegate the plaintiffs to the Hague Convention, as VWAG now contends.
The long-standing law in New York regarding service of process upon foreign corporations is that where service is not made upon the foreign corporation, but is properly made upon a local corporation that is so controlled by the foreign corporation that the local corporation can be deemed a mere department of the foreign corporation, the local corporation is considered to be the foreign corporation's involuntary agent for purposes of service (see, Taca Intl. Airlines v Rolls-Royce of England, 15 NY2d 97; Rabinowitz v Kaiser-Frazer Corp., 198 Misc 707, affd 278 App Div 584, affd 302 NY 892; Geffen Motors v Chrysler Corp., 54 Misc 2d 403). Here, service upon VWAG comported with the requirements of Business Corpora tion Law § 307 (b) (2), because the Secretary of State was personally served and a notice thereof and copy of the process was sent to VOA. Thus, if VOA is a mere department of VWAG, VWAG was properly served under Business Corporation Law § 307. This was precisely the holding of the Appellate Division, Third Department, in Luciano v Garvey Volkswagen (131 AD2d 253).
It has been held on prior occasions by several different courts that VOA is a mere department of VWAG and that, therefore, service upon VOA constitutes valid service upon VWAG (see, Schlunk v Volkswagenwerk AG., 145 Ill App 3d 594, 503 NE2d 1045, affd on other grounds 486 US 694; Lamb v Volkswagenwerk AG., 104 FRD 95; Roorda v Volkswagenwerk, A.G., 481 F Supp 868; Ex parte Volkswagenwerk AG., 443 So 2d 880 [Ala]). In each of those cases, VWAG had a full and fair opportunity to litigate the issue of whether VOA was a mere department of VWAG. We note that in the instant action VWAG has consistently failed to address any facts relating to the question of involuntary agency, steadfastly maintaining only that that doctrine is not appropriate where service is made pursuant to Business Corporation Law § 307. Accordingly, the determinations in those cases are binding and conclusive on VWAG in this action (see, Koch v Consolidated Edison Co., 62 NY2d 548, cert denied 469 US 1210).
Furthermore, the rule in New York is that the trial courts must follow an Appellate Division precedent set in any department in the State until its own Appellate Division decides otherwise (see, Mountain View Coach Lines v Storms, 102 AD2d 663). When the plaintiffs here served the defendant VWAG, they followed a method approved by the Appellate Division, Third Department, in a case involving this very defendant (see, Luciano v Garvey Volkswagen, supra). The plaintiffs here had a right to rely on Luciano and the Supreme Court had an obligation to follow it. Luciano was in effect the law of the State at the time of service herein. Under the circumstances of this case, it would be inappropriate for us not to follow the holding in Luciano which, while not binding on us, is nonetheless persuasive (see, Mountain View Coach Lines v Storms, supra, at 665). To the extent that it is noted in the dissent that the Appellate Division, Fourth Department, has resolved this issue in the appellant's favor (see, Brandt v Volkswagen AG., 161 AD2d 1149; Derso v Volkswagen of Am., 159 AD2d 937), we point out that those cases were not decided until after the Supreme Court upheld the service here. Moreover, in each of those cases, unlike the case at bar, VWAG raised a factual question, and presented evidence, as to whether VOA was a mere department of VWAG. Accordingly, we find that for purposes of service in this case, VOA is a mere department of VWAG, and that VWAG was properly served in this action.
Because service upon VOA, VWAG's involuntary agent, was proper under Business Corporation Law § 307, the service provision of the Hague Convention does not apply to this case (see, Volkswagenwerk AG. v Schlunk, 486 US 694, supra).