Court Opinion

ID: 9548741
Source: CourtListenerOpinion
Date Created: 2023-08-07 18:08:07.020918+00
Date Added: 2024-06-11T15:19:22.880905
License: Public Domain

*146DISSENTING OPINION BY
MIZUHA, J.
I am not in agreement with the statement in the majority opinion that since the “legislature in 1957 accepted the view that it was unconstitutional to require the registration of a corporation whose business in the Territory was exclusively interstate commerce” it has “accepted the narrow view of the early decisions” wherein “a number of state courts have narrowly construed statutes providing for substituted service on a state officer, apparently in the belief that the constitutional protection of interstate commerce required such narrow construction, * * *.”
The Standing Committee Report No. 334 on S.B. 609 which became Act 315, S.L. 1957 (S. Jour. 1957, pp. 544-45) stated that section 174-2 “was testified to as being unconstitutional.” It further stated that “Creditors will not be affected as the corporations can be sued in our courts.” But the statement in the majority opinion: “This of course was true as long as the corporation remained in the Territory,” does not follow as a matter of course. The main contention of respondent is that service of process can be made upon petitioner, if it were doing business in this State, under the provisions of section 174-1 and section 172-150.
The repeal of section 174-2 was unnecessary. It was a “long arm” statute for service of process upon foreign corporations similar to S.L. 1965, c. 134. However, the legislature in 1957 in an abundance of caution may have accepted the testimony that the domestication provisions of section 174-2 were unconstitutional and believed that it was unnecessary and burdensome for a foreign corporation, as a condition of engaging within the State solely in interstate commerce, to file the registration statement required in said section.
But the repeal of section 174-2 cannot be construed as acceptance by the 1957 legislature, the architects of a new *147Hawaii, of “the narrow view of the early decisions” defining what is doing business in a state, thereby narrowing the scope of jurisdiction where the question is whether a foreign corporation is amenable to legal process.
The repeal of section 174-2 may have “left a hiatus should a corporation carrying on interstate commerce in the Territory thereafter absent itself, leaving no officer or managing agent here.” But that is true only in situations where the foreign corporation was engaged solely in interstate commerce, without doing business in this State. It is unnecessary for us to supply a deficiency which does not exist. There are facts from which the lower court determined that the petitioner was doing business in this State under the provisions of section 174-1 and therefore amenable to service of process under 172-150.
Detsch & Co. v. Calbar, Inc., 228 Cal. App. 2d 556, 556-57,39 Cal. Rptr. 626, 633, cited in the majority opinion is not applicable to this case. The relevant statute under which the foreign corporation was served was Corporations Code, section 6504, which provided in part: “A foreign corporation which has transacted intrastate business in this State and has thereafter withdrawn from business in this State may be served with process in the manner provided in this chapter in any action brought in this State arising out of such business, whether or not it has ever complied with the requirements of Chapter 3 of this part.” (Emphasis theirs). The case was decided on the narrow definition given to “transacting intrastate business” by Corporations Code, section 6203 which defined the term as “entering into repeated and successive transactions of its business in this State, other than interstate or foreign commerce.” (Emphasis added). We do not have a statute similar to Corporations Code, section 6203 and are not restricted to such a narrow definition in determining whether a foreign corporation, engaged in inter*148state business, is also doing business in this State thereby subjecting itself to process under the provisions of sections 174-1 and 172-150. See S. Howes Co. v. W. P. Milling Co., 277 P.2d 655 (OMa. 1954), appeal dismissed, 348 U.S. 983.
At the time the legislature repealed 174-2 in 1957 it also added section 174-7.5, R.L.H. 1955 (Supp. 1963) which provides, among others, that a foreign corporation “shall not be considered to be doing or carrying on business in the State for the purposes of this chapter [chapter 174, R.L.H. 1955] by reason of carrying on in the State any one or more of the following activities:
*********
“(i) Transacting any business in interstate commerce.
“(j) Conducting an isolated transaction completed Avithin a period of thirty days and not in the course of a number of repeated transactions of like nature.”
The activities of foreign corporations mentioned in this section are definite restrictions on the power of this State to require foreign corporations to qualify under the provisions of section 174-1. By the repeal of section 174-2, it does not follow that foreign corporations “transacting business in interstate commerce” may not also transact business in the State under the provisions of section 174-1.
By specifically listing in section 174-7.5 the activities of a foreign corporation which do not constitute doing or carrying on business in this State, the legislature clearly recognized that a corporation may be doing business in this State although ordinarily engaged in interstate business. See infra, pp. 16, 17.
We are not concerned here as to Avhat kind of business came under section 174-2. The main issue is whether petitioner was doing business in this State under the provisions of section 174-1.
*149I do not construe the decision below as noted in the majority opinion that “section 172-150 [provides] for service on any foreign corporation that constitutionally could be served, irrespective of the applicability of section 174-1 or 174-2,” nor do I agree with the conclusion that the lower court in finding jurisdiction did not hold that petitioner in 1955 was doing business in this State for service of process to be effective under section 172-150. A careful reading of the “Decision on Motion to Dismiss” and the record indicates that there is no specific reference to section 174-2 in the Decision. In support of its motion to dismiss, petitioner specifically placed in issue the applicability of section 174-1 as follows: “It is apparent that at the time of the isolated transaction by ATLAS ELEVATOR COMPANY, it was not required to file or register with the State of Hawaii, pursuant to the provisions of section 174-1 then in effect,” citing the applicable provisions. It is apparent from the record and decision that the trial court considered whether petitioner was doing business under the provisions of section 174-1 since it found that “ATLAS contracted with the Belle Haven Realty Co. to install the subject elevator in the Waikiki Biltmore Hotel in Honolulu. This contract was made in California and was to be performed in Hawaii. The elevator was installed sometime during the period between March and December of 1955. The installation of the elevator was subject to the provisions of the then current elevator code promulgated and enforced by the local government.” Thus, “it appears to the Court that ATLAS had the responsibility for the installation of the elevator and that this work was an activity which was regulated by the police power of the local government. The record indicates that the time necessary to accomplish the work involved several months, and therefore it would appear that ATLAS enjoyed the protection of the State of Hawaii *150for a considerable period of time while engaging in an activity in furtherance of its own interests.”
The decision further states: “Objection is made to the service on the ground that the activity of ATLAS may not be classified as ‘doing business’ in Hawaii within the meaning of Chapter 174, RLH 1955, which was the law applicable to the parties at the time of the installation.” The decision then referred to another First Circuit Court case Blackburn v. Honolulu Gas Co., Civil No. 11257, where the court stated that section 172-150, R.L.H. 1955, permitted “ * * * service upon a foreign corporation by filing a copy of the process with the ‘treasurer’ to the fullest extent which is constitutionally permissible, and is not limited solely to those corporations who are required to comply with Chapter 174, RLH 1955, but have neglected ‘to do so.’ ” The lower court concluded that “the service of the complaint and summons on ATLAS pursuant to the provisions of Section 172-150, RLH 1955, was good and that the motion should be denied.” From the trial court’s careful examination of the specific ground relied upon by the petitioner in support of the motion to quash, the detailed enumeration of the activities of petitioner in this State, and the reference to the manner of service under section 172-150 and the holding that such service was good, there is only one conclusion: the trial court found that petitioner was doing business in this State, and hence, service of process was effective under the provisions of section 172-150, since petitioner had neglected to file with the Director of Regulatory Agencies. Section 174-2 was never considered. The court couldn’t. It was repealed in 1957.
The majority opinion has failed to distinguish between cases where the question is the “necessity of domesticating before bringing suit, and cases where the question is whether the foreign corporation is amenable to legal *151process. The standards are not the same, and the quality, character, and quantity of business conducted within the state may be sufficient to subject a foreign corporation to process and yet be insufficient to require it to take out a license. * * * Such corporations may be doing business within the state so as to be subject to the jurisdiction of the local courts and yet not be subject to a statute prescribing conditions of their doing business within the state. The basis of the distinction is 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 doing business 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. International Harvester Co. v. Kentucky, 234 U.S. 579, * * Wills v. National Mineral Co., 176 Okla. 193, 55 P.2d 449, 452; S. Howes Co. v. W. P. Milling Co., supra, 277 P.2d 655 (Okla. 1954), appeal dismissed, 348 U.S. 983; Superior Distributing Corp. v. Hargrove, 312 P.2d 893 (Okla. 1957). See Note, 45 Mich. L. Rev. 218-21 (1946); Isaacs, An Analysis of Doing Business, 25 Colum. L. Rev. 1018, 1024-27 (1925); Note, 16 U. Chi. L. Rev. 523-25 (1949); Case Notes, 26 So. Cal. L. Rev. 215-16 (1953).
In S. Howes Co. v. W. P. Milling Co., supra, defendant was a foreign corporation not domesticated in the State of Oklahoma and service of summons was had upon it by service on the Secretary of State under statutes similar to sections 174-1 and 172-150, R.L.H. 1955. Defendant objected to the jurisdiction of the court over it because it was a foreign corporation. The plaintiff, a Muskogee, Oklahoma company, purchased a corn with cob and husk separator from defendant through an independent broker, Ward R. McGavren, in Oklahoma. The *152machine was guaranteed by defendant. McGavren, in collaboration with the defendant, gave detailed instructions to the plaintiff for the construction of an elevator and shuck house. Plaintiff built these structures in conformity with the instructions. McGavren was in Muskogee when the machine was installed. After the installation was completed, the machine was put into operation, and, within a few hours, the shucks were set on fire by friction and carried into the shuck house while still burning. The resulting fire destroyed the shuck house. McGavren was notified, and he went to Muskogee, where the machine was started and another fire began. After investigation by a salesman of defendant from Kansas City, defendant sent other fans to be substituted in the mill. The trouble was not eliminated and plaintiff sued for damages.
Defendant argued that the factual situation indicated only an isolated transaction, or a single transaction not continuous in nature; therefore, it was not “doing business” within the State of Oklahoma and was not subject to local process. The Oklahoma court stated:
“* * * Such argument is not based upon reason and justice. Courts of a particular state should have jurisdiction over all disputes arising out of contracts made (or to be performed) within the state, regardless of the number of contracts of the defendant which were made (or to be performed) there. Moreover, the test as to what activities will subject the foreign corporation to suit is ‘qualitative’ not simply ‘mechanical’ or ‘quantitative’. Marlow v. Hinman Milking Machine Co., D.C., 7 F.R.D. 751, 753, and cases cited therein. Therein it was said that the question is whether defendant was ‘doing business’ not the number of transactions or length of time it was doing business. The defendant there was a foreign corporation whose agents solicited orders for milking machines, which *153were shipped by the corporation from its factory located in another state. Its agents advised with the purchasers how to use, or operate the machines and sometimes made minor repairs. There the facts were held sufficient to constitute ‘doing business’ within the state. * * *” S. Howes Co. v. W. P. Milling Co., 277 P.2d 655, 657-58.
The Oklahoma court had no difficulty in holding that the foreign corporation was “engaging in or transacting business” within the state “as to be sued in this state and service of process obtained upon it.” It further stated at 657:
“* * * Whenever the question has been raised of whether a corporation’s activities within the meaning of these statutes constitutes ‘doing business’ (a term not defined by statute) this Court has held almost without exception that the corporation was liable to local process. * * * The multiple standard for ‘doing business’ is categorically stated to be the law in 20 C.J.S., Corporations, § 1828, and was recognized in the Wills case, supra [Wills v. National Mineral Co., supra, 176 Okla. 193, 55 P.2d 449].”
In Northern Supply, Inc. v. Curtiss-Wright Corp., 397 P.2d 1013 (Alaska 1965), a foreign corporation was the manufacturer of a road scraper sold in Alaska by an Alaskan corporation to Wright Tractors & Tractor Service, Inc. In litigation between Wright and the Alaskan corporation, the former claimed that the scraper was defective and that the Alaskan corporation had breached its warranty as to the condition of the scraper. The Alaskan corporation filed a third party complaint against the foreign corporation contending that if there had been a breach of warranty, the foreign corporation and not the Alaskan corporation was responsible. Since there was no officer or agent of the foreign corporation in Alaska upon *154whom process could be served, service of the third party complaint and summons was made by delivering copies to the State Commissioner of Commerce in accordance with rule and statute.
The statute, AS 10.05.642 provided in part: “When a foreign corporation authorized to transact business in the state, or not authorized to transact business in the state but doing so, fails to appoint or maintain a registered agent in the state, or when a registered agent cannot with reasonable diligence be found at the registered office, * * *, the commissioner is an agent upon whom process, notice, or demand may be served. * * *” The question was whether the alleged breach of warranty as to the condition of the road scraper, sold by the Alaskan corporation to Wright, was so connected with the transaction of business in the state by the foreign corporation as to bring AS 10.05.642 into operation. Between April 1960 and September 1962 there was in effect a distribution sales and service agreement between the Alaskan corporation and the foreign corporation. The Alaskan corporation was given exclusive right to sell the foreign corporation’s earth moving equipment and parts and accessories in Alaska. While the agreement was still in effect, the Alaskan corporation ordered three road scrapers from the foreign corporation. One scraper was sold by the Alaskan corporation to Wright. A representative of the foreign corporation came to Alaska to aid and assist in the sale of the scraper.
The Alaskan court did not hesitate in finding that the foreign corporation carried on or transacted business in Alaska within the meaning of AS 10.05.642 when it entered into the distribution agreement with the Alaskan corporation, selling it a scraper pursuant to that agreement. The court held: “We construe that statute as having for its purpose the providing of a local forum for *155residents of the state who have a grievance against a foreign corporation growing out of its business activities within the State.” Northern Supply, Inc. v. Curtiss-Wright Corp., supra at 1015.
The foreign corporation argued that its activities did not amount to transaction of business in Alaska because the provisions of AS 10.05.600, which is similar to our section 174-7.5, limited the scope of the words “transact business” as used in AS 10.05.642. In answer to this contention the Alaska court stated: “The activities mentioned in AS 10.05.600 pertain only to the transaction of business as it relates to the power of the state to require the foreign corporation to obtain a certificate of authority to transact business in the state. AS 10.05.600 does not pertain to those activities which may subject a foreign corporation to the jurisdiction of our courts under AS 10.05.642.” Northern Supply, Inc. v. Curtiss-Wright Corp., supra at 1015.1
The Alaska court also noted that prior to 1960 AS 10.05.642, following section 108 of 2 Model Business Corporation Act, Annot., p. 605 (1960), did not provide for the exercise of jurisdiction in cases where a foreign corporation actually transacted business in Alaska but was not authorized to do so under statutory provisions for obtaining such authorization. In 1960, AS 10.05.642 was amended by adding the words “or not authorized to transact business in Alaska but doing so” and the court construed the broad language as “showing the legislature’s intent to expand the scope of jurisdiction to cover situations where a foreign corporation was in fact transacting *156business in the state, Avhether or not the business Avas of such a nature as to require the corporation to obtain a certificate of authority under state Iuav.” Northern Supply, Inc. v. Curtiss-Wright Corp., supra at 1016.
The position taken by the majority opinion is similar to that taken by courts Avhich are concerned Avith the question Avhether the state may impose restrictions upon interstate commerce or pass laAvs Avhich amount to the regulation of such commerce. But that is not the question before us. We are concerned Avith the question of Avhether the process of our State courts may reach a foreign corporation Avhich has transacted business in our State even though the transaction stems from interstate commerce.
Elcanon Isaacs in An Analysis of Doing Business, 25 Colum. L. Rev. 1018, 1021-27 (1925), distinguishes the degrees of “doing business” under three legal purposes, i.e., service of process, taxation and qualification, the degree of activity required rising in the order named.
Whenever domestication is the issue, the courts have insisted that a foreign corporation must be doing business at a high level since the State dictates the manner in Avhich it is to be licensed, and failure to comply may result in penalties as Avell as denial of the corporation’s right to sue. But Avhen service of process is the question, the decisions haAre been almost unanimous in loAvering the degree of doing business to permit service of process.
This double standard betAveen “doing business” Avhich Avill bring a foreign corporation Avithin a state court’s jurisdiction and “doing business” necessary to subject a corporation to domestication has been applied by most courts. Liquid Veneer Corp. v. Smuckler, 90 F.2d 196 (9th Cir. 1937); Wills v. National Mineral Co., supra, 176 Okla. 193, 55 P.2d 119; Webster v. Doane, 137 Misc. 513, 211 N.Y.Supp. 212; Atkinson v. United States Operating Co., 129 Minn. 232, 152 N.W. 110; Remington Rand *157Inc. v. Knapp-Monarch Co., 139 F. Supp. 613, 617 (E.D. Penn. 1956); Klein v. Sunbeam Corp., Super., 47 Del. 485, 93 A.2d 732; Filmakers Releasing Organization v. Realart Pictures of St. Louis, Inc., 374 S.W.2d 535, 539 (Mo. 1964); Malavasi v. Villavecchia, 62 N.J. Super. 510, 163 A.2d 214; Knight Products, Inc. v. Donnen-Fuel Co., 20 N.Y.S.2d 135, 139-40; Sperling v. McGee, 49 N.Y.S.2d 477, aff’d, 268 App. Div. 925, 51 N.Y.S.2d 274; Suss v. Durable Knit Corp., 4 Misc. 2d 666, 147 N.Y.S.2d 363; William L. Bonnell Co. v. Katz, 23 Misc. 2d 1028, 196 N.Y.S.2d 763; S. Howes Co. v. W. P. Milling Co., supra, 277 P.2d 655, appeal dismissed, 348 U.S. 983; Commonwealth v. Andrews, 42 Pa. D. & C. 505; State v. Ford Motor Co., 208 S.C. 279, 38 S.E.2d 242; Northern Supply, Inc. v. Curtiss-Wright Corp., supra; see Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 115 N.E. 915.
I cannot reconcile the approach followed by the majority opinion in view of the expressed opinion of the United States Supreme Court that it will accept the decisions of state courts as to what constitutes the doing of business in the state within the meaning of its laws, but will determine for itself whether a foreign corporation’s business was interstate and whether local enactments as applied are repugnant to the commerce clause. Kansas City Steel Co. v. Arkansas, 269 U.S. 148, 150.
The interstate commerce clause has been successfully used by foreign corporations as a magic wand in avoiding jurisdiction by the state courts in the past, but the door has been closed in many phases of state litigation on this defense, especially in tort law. I am amazed that this court is willing to bow to the theory that state jurisdiction in a tort suit by a resident of this city for the alleged negligence of a foreign corporation in the installation of an elevator which took three to four months, will depend on a measured degree of activity — such as whether *158a foreign corporation dug “many miles of ditches” as in General Ry. Signal Co. v. Virginia, 246 U.S. 500.
The criteria of York Mfg. Co. v. Colley, 247 U.S. 21, is inapplicable here. The manner in which the case was brought to the Supreme Court of the United States is significant. In York Mfg. Co. v. Colley, supra, the Supreme Court invoked the interstate commerce clause to strike down an attempt by the State of Texas to deny a foreign corporation the right to sue in its courts to collect a just debt for the sale of ice making machinery to Texas residents. The same reasoning and analysis was applied to the license fees and taxes imposed upon interstate commerce by states or municipalities in Caldwell v. North Carolina, 187 U.S. 622; Rearick v. Pennsylvania, 203 U.S. 507; Dozier v. Alabama, 218 U.S. 124.
The main problem raised by this petition is whether the service upon petitioner, a foreign corporation, is within the constitutional requirements of due process. The test is in this case whether the corporation was doing business in this State at the time it installed the elevator, and whether or not the statute under which the corporation was served provides for a reasonable method of notification. International Shoe Co. v. Washington, 326 U.S. 310. Both tests have been met in the instant case.
I do not believe it was the intent of the 1957 legislature which repealed section 174-2 that a foreign corporation which took three months to install an elevator at Waikiki should be allowed to escape service of process, and that a resident should be forced to sue in foreign courts on a tort claim arising from the alleged negligent installation of the elevator.
There is a distinction between activities of a foreign corporation which will subject the corporation to the domestication requirement of section 174-1 and penalties under sections 174-8 to 174-14, and activities which will *159bring the corporation within the jurisdiction of our courts in a tort suit by a resident of this State under sections 174-1 and 172-150. The term “doing business” for the purpose of subjecting a foreign corporation to the process of our State courts should be “measured by the outer limits of the due process clause of the federal constitution.” Northern Supply, Inc. v. Curtiss-Wright Corp., supra at 1017.
Hence, I cannot agree with the majority’s application of the criteria used by York Mfg. Co. v. Colley, supra, in holding that the activities of the petitioner in this State as enumerated by the lower court in its decision is insufficient to confer jurisdiction under the provisions of sections 174-1 and 172-150, R.L.H. 1955.
I would dismiss the petition and discharge the alternate writ.

 The court noted that this was the interpretation given to section 99 of the Model Business Corporation Act, from which AS 10.05.600 was taken. The comment to section 99 states: “* * * Section 99 does not deal with the determination of what activities may subject a foreign corporation to service of process or local taxation.” 2 Model Business Corporation Act, Annot., § 99, p. 566 (1960).