Opinion ID: 1374193
Heading Depth: 1
Heading Rank: 1

Heading: Doing Business

Text: The facts are not materially in dispute on the issue as to whether Cessna was doing business in Idaho. [1] Cessna's method of doing business was to establish regional distributors throughout the country, assigning certain areas to each. Southern Idaho, including Bonneville county, was assigned by Cessna to its distributor Skyways Aircredit Corporation, located at Ogden, Utah. The contract between Cessna and Skyways Aircredit Corporation is not in the record, but is referred to in the affidavits of the officers of the respective corporations. Retail dealers were appointed by the distributor. The Skyways Aircredit Corporation entered into a written contract with the Idaho Aviation Center, an Idaho corporation having its business situs at Idaho Falls, in Bonneville county. By this agreement the Idaho Aviation Center was appointed as a retail dealer for certain models of Cessna-built aircraft, parts and accessories, in fourteen southern Idaho counties. The form for this Distributor's Dealer Agreement was provided by Cessna, but the use of the form was not mandatory. Cessna did not approve or control the distributor's appointment of the dealer and there was no direct contractual relationship between the dealer and Cessna. The agreement between the distributor and dealer expressly provided that the dealer was not to be considered an agent of the distributor. Aircraft and parts were ordered through the distributor and orders were subject to approval by Cessna at its home office. Cessna did not maintain any stock of goods, inventory, or bank account in Idaho; it had no employees residing in Idaho; it did not retain title to any property shipped into Idaho; it paid no commission or other remuneration to any person or corporation selling its products in Idaho. Under its agreement with Cessna, the distributor was responsible for the servicing of all Cessna aircraft in the area assigned to it, including the service required by the terms of Cessna's warranty. Cessna provided the distributor with advertising and sales promotion materials; Owner's Service Policy and Warranty. The distributor in turn provided the dealer with these materials for use in making sales, and for delivery to the purchasers of Cessna aircraft. The owner's service policy and the warranty were issued under the name of the manufacturer, Cessna, and were delivered to the purchaser by the dealer. The retail purchase order also contains a copy of the warranty, which reads as follows: The Cessna Aircraft Company warrants each new aircraft manufactured by it to be free from defects in material and workmanship under normal use and service, provided, however, that this warranty is limited to making good at The Cessna Aircraft Company's factory any part or parts thereof which shall, within six (6) months after delivery of such aircraft to the original purchaser, be returned to Cessna with transportation charges prepaid, and which upon Cessna's examination shall disclose to its satisfaction to have been thus defective; this warranty being expressly in lieu of all other warranties expressed or implied and all other obligations or liabilities on the part of Cessna, and Cessna neither assumes nor authorizes any other person to assume for it any other liability in connection with the sale of its aircraft. This warranty shall not apply to any aircraft which shall have been repaired or altered outside Cessna's factory in any way so as, in Cessna's judgment, to affect the aircraft's stability or reliability, or which aircraft has been subject to misuse, negligence or accident. By the terms of the contract between the distributor and dealer (prepared by Cessna): Cessna reserved the right to sell directly to certain customers in Idaho; Cessna's warranty was a term of the agreement; the dealer agreed to participate in certain recommended Cessna promotion sales programs; the dealer promised to execute and deliver to each purchaser the Cessna owner's service policy on forms furnished by the distributor and to abide by its terms; dealer agreed to participate in Cessna's recommended identification program as mutually agreed to by distributor and dealer; dealer agreed to use the Cessna uniform accounting system; Cessna was given the right to enforce the provision of the contract concerning the use of trade names, marks, signs or symbols upon termination of the dealership; Cessna was given the right to examine certain records and reports of the dealer; and the dealer was required to maintain a supply of Cessna service parts and special tools. The period of time during which this system or arrangement for the sale of Cessna products in Idaho had existed is not shown by the record. However, it is referred to in the affidavits as having existed over a period of several years. The distributor-dealer agreement was dated in 1962. The president of plaintiff corporation avers in his affidavit that the plaintiff had previously purchased from the defendant dealer, two Cessna aircraft: one a 1957 model and the other a 1960 model. While the distributor-dealer agreement provides for a yearly renewal thereof, it is apparent that the arrangement under which the manufacturer's products were to be sold and serviced in Idaho was intended to be a permanent and continuous business operation, either through the same distributor and dealer, or their successors in like relation to Cessna. No temporary or isolated transaction was comtemplated or involved. However, we must note here that by the terms of the statute, a single act or transaction may render the nonresident amenable to process. It is apparent that Cessna was doing business in Idaho within the definition of I.C. § 5-514(a), supra. Assuming the distributor and dealer were independent contractors and not agents of Cessna, in the ordinary sense of that term, nevertheless they were the agencies or instrumentalities by means of which Cessna carried on the sales and servicing of its products in this state. Through them it delivered to plaintiff its owner's service policy and its written warranty. Those instruments were issued under the name, and by the authority, of Cessna. Cessna, its distributor and dealer were bound by the terms thereof. The delivery in Idaho of these documents was an act done and authorized by Cessna in Idaho, for the purpose of realizing a pecuniary benefit and to accomplish, transact or enhance its business purpose and objective, to wit: the sale of its products in this state. Cessna assigned the territory in Idaho to its distributor, knowing and intending that, through the distributor and the dealer, its owner's service policy and warranty would be used to promote sales of its products in Idaho, and would be delivered to and relied on by purchasers of its products in Idaho. Privity of contract between Cessna and its Idaho dealer, or between Cessna and the purchaser in Idaho, was not essential to bring Cessna's operation within the statutory definition of doing business in this state, nor to render it liable on its warranty to a resident of this state who purchased its product in reliance thereon. Gray v. American Radiator & Standard Sanitary Corp., 22 Ill.2d 432, 176 N.E.2d 761 (1961); Northern Supply, Inc. v. Curtis-Wright Corporation, Alaska, 397 P.2d 1013 (1965); International Shoe Co. v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95, 161 A.L.R. 1057 (1945). We are not here concerned with the question as to whether Cessna was doing business in this state within the meaning of I.C. Title 30, ch. 5, such as to necessitate compliance with the requirements of that chapter, to qualify it to do business in this state on a parity with domestic corporations. Obviously a foreign corporation may sell its products in Idaho via interstate commerce without complying with that law. The question here is whether Cessna has done any act within this state by reason of which it has subjected itself to the jurisdiction of the courts of this state, tinder the provisions of the long arm statute (I.C. § 5-514). Some of the authorities cited by defendant deal with doing business within the meaning of chapter 5, supra. Such authorities are not in point and for that reason will not be discussed here. Whether or not a foreign corporation is `doing business' within a state depends upon the issues involved in the proceedings in which the question is raised. Such a corporation may be doing business within the state so as to be subject to the jurisdiction of the local courts and amenable to service of process therein, and yet not be subject to a statute regulating foreign corporations or prescribing conditions of their doing business within the state. The basis of this distinction lies in the fact that the power of the state to subject a foreign corporation to local regulations is restricted by the commerce clause of the Federal Constitution, but that a state may subject such a corporation which is `present' in the state to service of process therein, notwithstanding the fact that the local activities of the corporation are confined to transactions in interstate commerce, the state's power to provide for such service of process not being affected by the commerce clause of the Federal Constitution. 60 A.L.R., Annotation, 994, at 995. See authorities there cited, and also: S. Howes Co. v. W. P. Milling Co., Okl., 277 P.2d 655 (1954); Wills v. National Mineral Co., 176 Okl. 193, 55 P.2d 449, 452 (1936); Tice v. Wilmington Chemical Corporation (Iowa) 141 N.W.2d 616 (1966); Anno., 146 A.L.R. 941, at 942. The purpose of the 1961 Act and particularly § 5-514 thereof, was to furnish, so far as possible, a local forum to residents of this state who have a grievance against a nonqualifying foreign corporation, growing out of its business activities here. The statute is remedial and is to be liberally construed to achieve that purpose. Ford Motor Co. v. Arguello, Wyoming, 382 P.2d 886, 896 (1963). Cf. McCall v. Martin, 74 Idaho 277, 280, 262 P.2d 787 (1953); Keenan v. Price, 68 Idaho 423, 438, 195 P.2d 662, 670 (1948). The Illinois statute extending the jurisdiction of the local courts to foreign corporations not qualified to do business in Illinois was enacted in 1955 (Ill.Laws 1955, pp. 2238, 2245-2246). Our 1961 Act is similar to that of Illinois and is said to have been based thereon. [2] In Gray v. American Radiator & Standard Sanitary Corporation, 22 Ill.2d 432, 176 N.E.2d 761 (1961), the Illinois statute was held to have extended the jurisdiction of the local courts to a foreign corporation charged with having committed a tortious act within the state. The court held that: Foreign corporation, which manufactured in Ohio safety valve incorporated in Pennsylvania in hot water heater which was sold to consumer in Illinois, where it exploded injuring Illinois resident, was subject to jurisdiction of Illinois court after service of summons was made upon its registered agent in Ohio. (Syllabus No. 6). and that the statute, so extending the jurisdiction of the Illinois court, did not violate due process of law. In the course of its opinion the court said: Where the alleged liability arises, as in this case, from the manufacture of products presumably sold in contemplation of use here, it should not matter that the purchase was made from an independent middleman or that someone other than the defendant shipped the product into this State. With the increasing specialization of commercial activity and the growing interdependence of business enterprises it is seldom that a manufacturer deals directly with consumers in other States. The fact that the benefit he derives from its laws is an indirect one, however, does not make it any the less essential to the conduct of his business; and it is not unreasonable, where a cause of action arises from alleged defects in his product, to say that the use of such products in the ordinary course of commerce is sufficient contact with this State to justify a requirement that he defend here. 176 N.E.2d at 766. Similar rulings were made in McMahon v. Boeing Airplane Company, 199 F.Supp. 908 (D.C.Ill.1961); and Atkins v. Jones & Laughlin Steel Corp., 258 Minn. 571, 104 N.W.2d 888 (1960). In holding that the tort was committed in Illinois where the injury was sustained, the Illinois court cited Restatement of Conflict of Laws, § 377. The same authority in § 326, states that in the formation of a bilateral contract, the contract is made at the place where the offer is accepted. Just as a tortious act may be committed within a state without the presence of the foreign corporation, or its agent, so may business be transacted in the state in the formation of a contract without the presence of the nonresident or its agent. Other cases holding that a nonresident may be subjected to the jurisdiction of the local court by reason of doing business in the state though not physically present therein are: Stephenson v. Duriron Co. (Alaska 1965) 401 P.2d 423, cert. den. 382 U.S. 956, 86 S.Ct. 431, 15 L.Ed.2d 360; Bibie v. T. D. Publishing Corp., 252 F.Supp. 185 (D.C.Cal.1966); Singer v. Walker, sub nom. Longines-Wittnauer Co. v. Barnes Reinecke, 15 N.Y.2d 443, 464, 261 N.Y.S.2d 8, 24, 209 N.E.2d 68 (1965), and commentary in McKinney's Consol.Laws of N.Y., Book 7B Supp., p. 47. See also: 1 Barron & Holtzoff (Wright Revision 1960) § 179; 2 Moore Federal Practice, par. 4.25 (3-5); 73 Harvard Law Rev. 911-934. In Northern Supply, Inc. v. Curtis-Wright Corporation (Alaska 1965) 397 P. 2d 1013, an Alaska resident brought action against a foreign corporation upon a breach of warranty. Although not a decisive factor, the nonresident defendant corporation did send representatives to Alaska to assist the local dealer in culminating the sale of the defective equipment. The court held against the defendant's contention that it had not submitted to the local jurisdiction because it effected the sale through an independent contractor, and because it was transacting business only in interstate commerce. In the case at bar Cessna did not send representatives into Idaho to assist in making the sale to plaintiff. However, it did, through its distributor and retailer, send into Idaho sales promotion brochures and literature and its owner's service policy and warranty. These documents were exhibited to plaintiff and were used by the dealer in accomplishing the sale to plaintiff, all as intended by Cessna. Also, upon discovery of the defective condition of the engine in the aircraft purchased by plaintiff, and upon notice thereof to the distributor, the president and chief mechanic of the distributor and a representative of Continental Motors, manufacturer of the motor, came to Idaho Falls, partially dismantled and examined the engine. Upon determining that it was defective, the vice president of the distributor conferred with Cessna by long distance telephone, after which the engine was removed from the aircraft and shipped to Ogden, Utah. In Eclipse Fuel Engineering Company v. Superior Court, 148 Cal.App.2d 736, 307 P.2d 739 (1957), actions were brought for personal injuries alleged to have been suffered as the result of a boiler explosion. The appellate court held that the foreign corporation executing a contract whereby a sales agency in the state was given exclusive franchise for the sale of the corporation's products within a designated area, was doing business within the state so as to render it amenable to service of process. The essence of doing business is that the corporation is present within the state sufficiently to constitute it just and equitable that it be amenable to process within the state. Milbank v. Standard Motor Const. Co., 132 Cal.App. 67, 22 P.2d 271; Boote's Hatcheries, etc., Co. v. Superior Court, 91 Cal.App.2d 526, 528, 205 P.2d 31. The technical distinction between an independent contractor and an agent is, for this purpose at least, immaterial, except as it may be evidence one way or the other. Thew Shovel Co. v. Superior Court, 35 Cal.App.2d 183, 95 P.2d 149; Moore Machinery Co. v. Stewart-Warner Corp., D.C., 27 F.Supp. 526. It would seem, authority lacking, that the same principle should apply as to the difference between a factor and an agent or employee. Thus the provision in the contract that the parties consider Obergfel to be an independent contractor seems insufficient to absolve the corporation from amenability to service. Thew Shovel Co. v. Superior Court, supra. The essential thing is merely whether the corporations are present within the state, whether they operate through an independent contract, agent, employee or in any other manner. Fielding v. Superior Court, 111 Cal.App.2d 490, 244 P.2d 968, at 970 (1952). `Regie might choose to arrange its marketing process through a hierarcy of its own agents and employees. Then, by establishing agents in California to sell its products, it would undoubtedly be amenable to suit in this state. For reasons of its own it chooses to market its products through a wholly-owned American subsidiary and a network of independently-owned distributorships and dealerships. These choices on its part effect little, if any, alteration in the jurisdictional situation. The contacts exist one way or the other and for precisely the same purposes. The differences are differences only in form and description.   ' Regie Nationale Des Usines Renault, etc. v. Superior Court, 208 Cal.App.2d 702, 25 Cal.Rptr. 530 (1962). See also: Delray Beach Aviation Corp. v. Mooney Aircraft, Inc. (5th Cir. 1964) 332 F.2d 135; Cosper v. Smith & Wesson Arms Co., 53 Cal.2d 77, 346 P.2d 409 (1959).