Court Opinion

ID: 3512181
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:22:59.534181+00
Date Added: 2024-06-11T14:05:38.997963
License: Public Domain

1 Reported in 4 N.W.2d 89.
The defendant, a New York corporation, now Blair  Co., Inc., appeared specially to object to the jurisdiction of the court and to move the court for an order quashing and setting aside the pretended service of summons and complaint upon said defendant on June 8, 1939, by delivery of copies thereof to the deputy commissioner of securities of the state of Minnesota, and on June 16, 1939, by delivery of copies thereof to the chief clerk of the corporation division in the office of the secretary of state. From the order granting the motion, plaintiff appeals.
The action is to rescind the sale of securities purchased in 1929 by plaintiff through the defendant Delaware corporation, which is alleged to have been a sales agency and subsidiary of respondent, entirely controlled and directed by respondent. The complaint avers that plaintiff disposed of said securities on the market in 1930 without knowing that they had not been registered as required by the blue sky law of this state; and judgment is asked for the purchase price paid less the amount received from the sale. There are sweeping allegations of fraud, but the real ground of rescission is that the securities were not registered by the securities commission. These facts were stipulated for the purposes of the motion to set aside and quash the pretended service of summons on respondent (the service on the defendant Delaware corporation is not questioned): Between May 1929 and October 1931, respondent was transacting a securities business within this state; that it never applied for or received a license to do business as a foreign corporation within this state or appointed a resident *Page 430 
process agent within this state; that respondent never applied for or received a license to do business as a broker, dealer, agent, or otherwise under the Minnesota blue sky law, nor obtained a registration of securities thereunder, nor appointed the chairman of the securities commission, or his successor, as its process agent; that the securities referred to in the complaint as being sold to plaintiff, if the same required registration, were not registered for sale within this state by respondent or anyone else; and that respondent ceased to transact any business in this state in October 1931, and thereupon left the state without filing a certificate of withdrawal or designating the secretary of state as its statutory process agent; and respondent has not done business in Minnesota since October 1931.
In Garber v. Bancamerica-Blair Corp. 205 Minn. 275,285 N.W. 723, it was unsuccessfully contended that jurisdiction of respondent was obtained by service of summons on its codefendant, the Delaware corporation. So on this appeal no attention need be given to the allegations in the complaint as to the connection between the two defendants with reference to the securities herein involved.
We may also eliminate the attempted service of the summons by handing to and leaving copies thereof with the secretary of state or his deputy, for Mason St. 1927, §§ 7493 and 7494, was expressly repealed by the foreign corporation act, L. 1935, c. 200. Section 27 thereof repeals said sections, "reserving to the state, however, all rights to recover fines for violations thereof occurring prior to the effective date of this section and reserving all rights of parties to any action pending in this state at the effective date of this section." By § 30 of that chapter, the effective date of the quoted § 27 was fixed as of March 1, 1936. (Mason St. 1940 Supp. §§ 7495-27 and 7495-30.) Thus almost one year was given plaintiff to come in under §§ 7493 and 7494. The action was not started until 1939. Kozisek v. Brigham, 169 Minn. 57, 210 N.W. 622,49 A.L.R. 1260, is decisive against plaintiff. Moreover, plaintiff virtually concedes that § 7493 is of no avail, but claims that respondent is *Page 431 
estopped to deny that it did not appoint the secretary of state its irrevocable process agent. We consider the claim untenable. The pertinent provisions of § 7494, in force when respondent withdrew from the state, read:
"Any foreign corporation licensed to do business in this state may withdraw therefrom upon filing with the secretary of state a duly certified copy of a resolution duly passed by unanimous vote of its board of directors or corresponding board, or by majority vote of its stockholders, directing such withdrawal and irrevocably appointing the secretary of State of Minnesota and his successors in authority the agent of said withdrawing corporation for service of legal process and other notices upon it in any action or proceeding of any nature or kind arising out of or involving anything done or omitted by said foreign corporation in this state while licensed to do business here. Such appointment of said agent shall continue in force as long as any cause of action, right, or claim against said corporation survives in this state; and service upon such agent shall be deemed personal service upon the foreign corporation so appointing him."
It is to be noted that the appointment is permissive, not mandatory, and relates to foreign corporations licensed to do business in this state and whose board of directors unanimously resolve to withdraw, or whose stockholders by a majority vote so decide. It is also to be noted that there is no provision requiring the secretary of state to notify the corporation of service of process or notice. And, as above intimated, what to us appears more conclusive against the right of plaintiff to invoke the use of this repealed § 7494 to acquire jurisdiction is that no effort was made to do so under the provision mentioned in L. 1935, c. 200.
Plaintiff's appeal must therefore stand or fall upon the service of the summons by handing to and leaving copies thereof with the deputy commissioner of securities on June 8, 1939, under the provisions of Mason St. 1940 Supp. § 3996-11 (L. 1925, c. 192, § 11, as amended by L. 1933, c. 408, § 12), reading: *Page 432 
"Every non-resident person shall, before having any securities registered or being licensed as a broker, dealer, or agent, appoint the 'Commissioner of Securities,' and his successor in office, his attorney upon whom process may be served in any action or proceeding against such person or in which such person may be a party, in relation to or involving any transaction covered by this Act, which appointment shall be irrevocable. Service upon such attorney shall be as valid and binding as if due and personal service had been made upon such person. Such service shall be by duplicate copies, one of which shall be filed in the office of the commission and the other immediately forwarded by registered mail to the person so served at the address on file with the commission. Provided, that any such appointment shall become effective upon the registration of the securities or the issuance of the license in connection with which such appointment was filed."
The quoted section, to be sure, requires the nonresident party to appoint the securities commissioner his process agent before he is allowed to register any securities and before license is issued to deal in such securities, but it does not state that a sale of unregistered securities shall be deemed equivalent to appointing the commissioner as his process agent. This is emphasized by the last sentence of the section, that an appointment even if made shall become effective "upon the registration of securities or the issuance of the license in connection with which such appointment was filed." Respondent never filed an appointment, nor registered these or any securities, nor even applied for a license to deal in securities. In all statutory provisions for obtaining jurisdiction of foreign corporations not doing business in the state, consideration must be given to the due process requirement of U.S. Const. Amend. XIV, as construed by the federal courts. Where a foreign corporation is transacting business in the state when jurisdiction by service of summons is attempted, no difficulty is found, provided the service is made in the manner prescribed by the statute. But here it is stipulated that respondent has not transacted any business in the state since October 1931. Even the *Page 433 
full faith and credit which the federal constitution, art. IV, § 1, requires the courts of one state to give to judgments rendered in another state goes for naught if facts show that the judgment involved was entered against a defaulting foreign corporation upon service of summons on a statutory process agent when the corporation was not transacting any business in the state and the cause of action was upon a contract entered and to be performed in the state of the corporation's domicile. Old Wayne Mut. L. Assn. v. McDonough, 204 U.S. 8,27 S.Ct. 236, 51 L. ed. 345.
We do not intend to refer to the many cases cited by plaintiff relating to insurance contracts where the foreign corporation, while its policy is in force, continues to come into the state of the insured's residence to collect the premiums as they fall due. Nor need we determine the merit of respondent's classification of the various statutes designed to obtain jurisdiction of foreign corporations. In the absence of a statute declaring that a foreign corporation by coming into the state to transact business thereby automatically appoints the statutory named process agent, jurisdiction may not be obtained of the foreign corporation which neither is transacting business in the state at the time of the attempted service of summons nor has appointed a process agent. Our decisions have thus construed the statutes enacted prior to 1941 for the purpose of obtaining jurisdiction of foreign corporations. Kulberg v. Fraternal Union of America, 131 Minn. 131,154 N.W. 748; Wold v. Commercial Men's Assn. 136 Minn. 380,162 N.W. 461; Massey S. S. Co. v. Norske Lloyd Ins. Co. Ltd. 153 Minn. 136, 189 N.W. 714; American L.  I. Co. v. Boraas, 156 Minn. 431, 195 N.W. 271, 272. In the last cited case Mr. Chief Justice Brown stated:
"A different rule is applied where the foreign corporation enters the state for the transaction of business without a compliance with its laws, subsequently withdrawing altogether. In a case of that kind, the presence of the corporation being unlawful, we have held that a showing must be made that the company was *Page 434 
doing business in the state at the time of the commencement of the suit. Louis F. Dow Co. v. First Nat. Bank, 153 Minn. 19,189 N.W. 653."
Plaintiff contends that since respondent entered this state and transacted business in unregistered securities in violation of the blue sky law it is estopped to deny the appointment of the securities commissioner its process agent. To support the contention, plaintiff cites and relies on Hess v. Pawloski,274 U.S. 352, 47 S.Ct. 632, 71 L. ed. 1091; Consolidated Flour Mills Co. v. Muegge, 127 Okla. 295, 260 P. 745; Frazier v. Steel Tube Co. 101 W. Va. 327, 132 S.E. 723, 45 A.L.R. 1442. The Hess case held that the Massachusetts statute relating to the operation of motor vehicles by nonresidents upon its highways, G.L. Mass. c. 90, § 3A, as added by St. 1923, c. 431, § 2, which provides that by the act of so entering and operating it "shall be deemed equivalent to an appointment by such nonresident of the registrar or his successor in office, to be his true and lawful attorney upon whom may be served all lawful processes in any action or proceeding against him, growing out of any accident or collision in which said nonresident may be involved while operating a motor vehicle on such a way," etc., did not violate the due process requirement U.S. Const. Amend. XIV. It is to be observed that this statute automatically appoints the process agent of the nonresident the moment his vehicle makes use of the state's highways. Of similar import is Oklahoma St. 1921, § 5442, 18 O. S. 1941, § 472, under which jurisdiction was sought in the Muegge case, reversed, however, in 278 U.S. 559, 49 S.Ct. 17, 73 L. ed. 505, an authority of Wuchter v. Pizzutti, 276 U.S. 13, 48 S.Ct. 259,72 L. ed. 446, 57 A.L.R. 1230 (a similar statute of New Jersey), on the ground that the statute did not provide adequate notice to the nonresident and opportunity to defend. In the Frazier case, the West Virginia Code, c. 54, § 24a, provided:
"The auditor of this state shall be, and he is hereby constituted the attorney in fact for and on behalf of every foreign corporation *Page 435 
doing business in this state, and of every nonresident domestic corporation, with authority to accept service of process on behalf of and upon whom service of process may be made in this state for and against such corporation. No act of such corporation appointing the auditor such attorney in fact shall be necessary."
It is clear that every statute involved in the cited decisions, designated to secure jurisdiction over foreign corporations and of nonresidents, declares and states in no uncertain terms that by the fact of their mere entry into the state to transact business the process agent named in the statute becomes automatically their agent or attorney in fact to accept service of process in any action brought involving such business. It is obvious that there is quite a difference between those statutes and § 3996-11 of our code. Of course, the additions to § 3996-11 by L. 1941, c. 547, § 11, cannot in reason apply to respondent's entry to transact business in securities in 1929.
In Sivertsen v. Bancamerica-Blair Corp. (D.C.) 43 F. Supp. 233
(the same defendants as here, the parties represented by the same attorneys as here, the same sort of action, and like service of summons as here), Judge Nordbye of the federal court, in an exhaustive opinion, set aside the service of summons. It is true that the federal courts follow the construction placed on a local statute by the courts of the enacting state; but we think Judge Nordbye correctly construed our statutes in force and effect at the time of the attempted service of the summons on respondent.
Plaintiff also claims support for the contention that, having entered this state to transact the business of dealing in securities without compliance with our blue sky law, it thereby appointed the process agent therein designated, in the decision of Yoder v. Nu-Enamel Corp. 140 Neb. 585, 300 N.W. 840, overruling Schwabe v. American Rural Credits Assn. 104 Neb. 46,175 N.W. 673. In our opinion, the Nebraska statute, Comp. St. Nebraska, 1929, § 24-1201, may properly be construed as automatically appointing a designated process agent for a foreign corporation entering the *Page 436 
state, and there transacting business in violation or noncompliance with its laws.
The order is affirmed.