Opinion ID: 2301899
Heading Depth: 1
Heading Rank: 1

Heading: Does the Superior Court have jurisdiction in this cause over the defendant?

Text: The jurisdiction of the Superior Court over the defendant in this cause was raised below by the defendant's motion to quash the service of process upon it. The defendant, an Illinois corporation, is not registered under 1935 Code, § 2247 and has not designated an authorized agent in this state to receive service of process. The service of process in the instant cause was made upon a Vice-President of the defendant who was temporarily in Delaware and was purportedly made pursuant to 1935 Code, § 4589. It was valid if the defendant was doing business in Delaware to an extent to make it amenable to suit within the due process requirements of Article XIV, § 1 of the Federal Constitution and of 1935 Code, § 2247. The motion to quash the service was made upon the theory that the defendant was not doing business within the State of Delaware. The court below denied the motion to quash the service and treated the question as one to be decided solely under the Fourteenth Amendment of the Federal Constitution. Under the rules announced by the United States Supreme Court, a foreign corporation becomes subject to suit in personam within a state other than that of its incorporation when its business activities within that state are such as to justify the inference that it is present there. Philadelphia & Reading Ry. Co. v. McKibbin, 243 U.S. 264, 37 S.Ct. 280, 61 L.Ed. 710. This is the so-called doing business rule. The question of what constitutes doing business in a state other than that of incorporation has been passed upon repeatedly by the federal courts. The process of judicial decision has culminated in International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95, which laid down the rule that a foreign corporation is doing business in a state sufficiently to constitute corporate presence in that state when the business done amounts to solicitation of business with some additional evidence of business activity within the confines of the state. Largely upon the authority of the International Shoe Co. case, the court below denied the defendant's motion to quash the service of process. The business activities of the defendant in Delaware consisted of, first, the active solicitation of business through non-resident salesmen and otherwise over a number of years; second, a continuous course of supervision and policing of the defendant's wholesalers and retailers in connection with the maintenance of a price structure for its products pursuant to its Fair Trade Contracts with Delaware distributors; third, on one occasion, in connection with a sales promotion program, the warehousing in Delaware of a large inventory of electrical appliances from which orders to Delaware retailers were filled; fourth, the institution against the present plaintiff of a suit to enforce its Fair Trade Contract prices; and, fifth, generally speaking, the promotion, advertising and display of its products in Delaware. The court below found the recited instances of business activities of the defendant as facts. These findings are supported by the record and indeed are not challenged by the defendant. Recognizing that each fact standing alone would probably not justify a finding of corporate presence, the court below held that in the aggregate the activities of the defendant amounted to more than mere solicitation of business and thus warranted a finding of corporate presence in Delaware. The court attached particular significance to the storage of an inventory of products in Delaware from which deliveries were made to Delaware retailers and to the defendant's efforts by supervision and policing to maintain its established price structure for its products, since, upon analysis, those efforts were nothing more than direct attempts in Delaware by the defendant to protect its property interest in its trade names and the good will built up for them. Such matters may be said to be a manifestation of corporate presence. Cf. La Porte Heinekamp Motor Co. v. Ford Motor Co., D.C., 24 F.2d 861. On this showing, the court below ruled that the defendant was present in Delaware within the meaning of the due process requirements of the Fourteenth Amendment to the Federal Constitution. We agree. However, the defendant makes an argument not based upon the Fourteenth Amendment, presumably also made to the court below, although certainly not with the same degree of emphasis now placed upon it by the defendant. This argument is that 1935 Code, § 2247, requiring the registration and certification of agents for the acceptance of service of process by foreign corporations seeking to do business in this state, also defines for all other purposes what shall constitute the doing of business by a foreign corporation within the State of Delaware. The argument is based upon the following language appearing in the statute:   ; provided, however, that no corporation created by the laws of any other State, or the laws of the United States, shall be deemed to be doing business in this State (nor shall such corporation be required to comply with the provisions of this Section) under the following conditions, or any of them:       (b) If it employs salesmen, either resident or traveling, to solicit orders in this State, either by display of samples or otherwise (whether or not maintaining sales offices in this State), all orders being subject to approval at the offices of the corporation without this State, and all goods applicable to such orders being shipped in pursuance thereof from without this State to the vendee or to the seller or his agent for delivery to the vendee; provided, that any samples kept within this State are for display or advertising purposes only, and no sales, repairs, or replacements are made from stock on hand in this State;       (d) If its business operations within this State, although not falling within the terms of paragraphs (a), (b) and (c) above, or any of them, are nevertheless wholly interstate in character. We think that the argument made by the defendant as to the proper construction of § 2247 is correct; that is to say, that the section requires the registration of foreign corporations locating in Delaware for the purpose of doing business within its boundaries, and, at the same time, prescribes what acts shall be sufficient to exempt a foreign corporation from the service of process and suit in Delaware courts. This seems clear by reason of the fact that in the proviso quoted above it is provided that if any of the stated conditions are met, such a corporation shall not be deemed to be doing business and, alternatively, shall not be required to comply with the registration provisions of the section. The duality of the Delaware statute appears to be unique among the states. However, we think the motion to quash service still must be denied. We think the defendant must be held to have been doing business within the State of Delaware so as to subject it to the service of process within the definition of doing business in § 2247. The activities related above of the defendant in Delaware do not fall wholly within either sub-section (b) or subsection (d) quoted above. For example, sub-section (b) does not permit sales, repairs or replacements to be made from stock on hand in this state, yet, the defendant, shortly before the institution of this suit, made sales from stock owned by it and held in a warehouse in Delaware. Nor, by the same token, can the defendant bring itself within the provisions of subsection (d). Its filling of orders from stock on hand in Delaware and its policing of its Fair Trade Contracts take it from out of the purview of sub-section (d). Whether, therefore, the motion be considered as being governed solely by the requirements of due process of the Fourteenth Amendment of the Federal Constitution, or whether it be considered as being governed by a limitation upon those concepts imposed by our State Legislature in 1935 Code, § 2247, the result is the same. The defendant is doing business in Delaware and, thus, may be subjected to suit in the courts of Delaware. The motion to quash the service upon the defendant was properly denied.