Court Opinion

ID: 6543044
Source: CourtListenerOpinion
Date Created: 2022-07-19 22:17:20.193346+00
Date Added: 2024-06-11T15:55:46.608648
License: Public Domain

Cockrile, C. J., dissenting. Two propositions have been concurred in by a majority of the judges in this cause : 1st, it was agreed, that the White Sewing Machine Company, an Ohio corporation, had begun to carry on business in this State without designating an agent upon whom service could be had when the contract sued on was made ; and 2d, that the statute imposing a penalty upon 'foreign corporations for doing business under such circumstances was inoperative in this case because of the commerce clause of the Constitution of the United States. I concur as to the first proposition and dissent as to the second. A corporation created under the laws of one State has no right to recognition in another State — that is a privilege to be enjoyed only through comity. Having the absolute power of excluding- it from its jurisdiction, the State may, of course, impose such conditions upon the privilege of doing business in its limits as it may think expedient. This doctrine went without qualification for more than three-fourths of a century after the adoption of the Constitution of the United States, when the Supreme Court of the United States engrafted upon it an exception in favor of foreign corporations which were agencies of commerce. The exception was first adverted to in Paul v. Virginia, 8 Wallace, 168. But what was said there was confessedly obiter, and established nothing. It has been said by judges delivering the opinions of that court that the exception was first established in Pensacola Tel. Co. v. Western Union Tel. Co. 96 U. S. 1, in 1877. See Horn Silver Mining Co. v. N. Y. 143 U. S. 305 and 314; Pembina Mining Co. v. Pa. 125 id. 181, 185. But Chief Justice Waite, who delivered the opinion in that case, seems not to have been aware that he was deciding- the question, for, after quoting- the obiter in Paul v. Virginia, above mentioned, he says “ the questions thus suggested need not be considered now,” and gives as a reason for it the fact that the court had placed the invalidity of the State statute under consideration upon the ground that it conflicted with legislation of Congress. I am aware of no case in which it has been ruled that the exception applies to a foreigm corporation which is not itself an ag'ency of commerce. There are dicta which may go further, but there are also expressions of the court so pointed as to indicate that the exception is limited to such corporations as are agencies of commerce — as carriers of freight, passengers or communications. Thus, in Pembina Mining Co. v. Pa. 125 U. S. 185, Judge Field, who first gave expression to the exception, in speaking of the case of Pensacola Tel. Co. v. Western Union Tel. Co. 96 U. S. sup., said it was there held that the telegraph as an agency of commerce and intercommunication came under the controlling power of Congress, and could not be excluded by a State from transacting- its business within its limits. And again in the same case he says the exception extends only to a foreign corporation in the employ of the Federal Government, “ or where its business is strictly commerce.” The same language is quoted with approval through Judge Lamar in McCall v. California, 136 U. S. 112. In Crutcher v. Kentucky, 141 U. S. 47, Judge Bradley, after saying that a State could not restrict the right of a foreign corporation where “the principal object of its org-anization” was “the business of carrying on inter-state commerce” said: “The case is entirely different from that of * * manufacturing corporations, and all other corporations whose business is of a local and domestic nature.” If we concede that the extreme doctrine of Robbins v. Taxing Dist. 120 U. S. 489, must be extended to foreign corporations, the conclusion does not follow that such a corporation engaged in inter-state trade — as selling merchandise — can g-ain a domicile in a State in violation of its statutes merely to gain a vantage ground for the sale of its goods. No method thereafter devised to increase the business of the corporation can exempt it from State control. A manufacturing corporation is connected with commerce; for, if it cannot sell, its output is worthless. Many manufacturing corporations would suspend operations if their sales were limited to the State creating them. They are then in a measure connected with inter-state commerce. But the connection with commerce must be direct in order to work an inhibition of State action. It is not sufficient that the business is remotely or incidentally connected with inter-state or foreign commerce. State legislation which operates upon natural persons and corporate agencies of commerce is not invalidated by the commerce clause of the Constitution, unless it directly affects commerce. Sherlock v. Alling, 93 U. S. 99, 102; Smith v. Ala. 124 ib. 474. The rule g'overning ordinary corporate business cannot be more rigid against the State’s right of regulation or prohibition. In Pembina Mining Co. v. Pennsylvania, 125 U. S. sup., State legislation was upheld restricting the privilegie of a foreign mining company from maintaining an office in Pennsylvania, notwithstanding the maintenance of the office in that State afforded the corporation the opportunity for the sale of its foreign products. So in the Horn Silver Mining Co. v. N. Y. 143 U. S. sup. Following the decisions of the Supreme Court of the United States upon the question of inter-state commerce, the only question in this case open to serious consideration, in my judgement, is, did the White Sewing Machine Company do business in this State ? or, to put the question as Judge Field does in the case of Horn Silver Mining Co. v. N. Y. 143 U. S. sup., did the company do business as a corporation in this State ? If so, it must submit to any condition the State sees fit to impose upon it. Any other rule would bind the hands of the State authorities, only to subject the public to all the corporate abuses now known or hereafter to be devised. The statement of such a doctrine is startling. This case does not stand upon a single casual transaction in Arkansas, followed by contracts for sales of merchandise which were consummated in Ohio. Nor was the contract which the corporation entered into with Julian, for whom the appellant was surety, simply an agreement to sell merchandise. If those were the only facts in the case, it might be gravely doubted whether the corporation had done business in Arkansas, within the meaning of our Constitution and statute. It has been ruled by the Supreme Court of the United States that a foreign corporation does not by doing a single act of business in one State, with no purpose of doing other acts there, come within the prohibition of a Constitution and statute, which are substantially like our own. Cooper Mfg. Co. v. Ferguson, 113 U. S. 727. See Scruggs v. Scottish Mortgage Co. 54 Ark. 566. And a merchant in Ohio who fills orders for merchandise received from a customer in Arkansas cannot be said to be doing business in the latter State. If neither the one nor .the other constitutes carrying on business in Arkansas, it is difficult' to see how the two together could make out the case. If they do not, and there were no other facts in the record, no question of conflict between the statute and the commerce clause of the Constitution would be presented,' and the discussion of it by the court would be obiter. But the record shows the following state of facts in this case : The White Sewing Company, an Ohio corporation, maintained a resident ag-ent at Little Rock, in this State. The proof does not show that the agent held or sold any machines or other merchandise for the company. He traveled over the State and in the name of the company sold to individuals the exclusive right to ve'nd its merchandise in a limited territory. The consideration for this exclusive privilege was a contract on the part of the vendee, binding himself to sell no other sewing machine, and to canvass the territory assigned to him in the interest of the White machine. The company also bound itself to sell the vendee White sewing machines upon terms fixed by the contract. As a part of this contract the vendee was also required to enter into bond to the company with a surety for the faithful payment of whatever indebtedness might be incurred by him to the corporation under the contract or by any other means, whether the same should arise out of the purchase and sale, or lease, of sewing machines, or the consignment of property or merchandise, or the failure to redeliver or account for the same to the corporation, or for indebtedness arising in any manner whatever. A great number of such contracts were entered into before the corporation complied with the statute. After the one in suit was executed, the corporation complied with the law by filing a certificate designating the agent before mentioned as the person upon whom service might be had, and Little Rock as its principal place of business in Arkansas. The business continued as before. Julian signed one of these contracts and bonds with the appellant as surety, and purchased machines, as set out in my brother Battle’s opinion. The suit is to recover upon the bond thus executed. It is upon the uncontroverted facts above stated that the court concludes that the corporation carried on business in Arkansas. This evidence does not show simply the case of a drummer soliciting contracts for purchase of merchandise, tobe consummated in another State, as was the case of Robbins v. Taxing District, 120 U. S. 489. Nor the mere act of soliciting business for a foreign corporation and nothing more, as in the case of McCall v. California, 136 U. S. sup. It shows the intention of the foreign corporation to gain a domicile in Arkansas, and to carry on its business of selling, leasing- and consigning- machines here through local agents, as it was authorized to do in the State of Ohio. To ascertain whether the corporation did business in Arkansas, we are not required to limit our enquiry to the transaction with which the defendant alone is concerned. If it was carrying on a business in Arkansas before and after the transaction with the defendant, it was competent for him to show that his transaction was of the general class. And when it is proved that the corporation has done acts here manifesting the intent to gain a domicile for the purpose of transacting its business, that is the beginning of its business here, and the contracts which manifest that intention are avoided by the statute. The instant the business is entered upon, the prohibition of the statute attaches, without waiting- to see what the corporation will do next. Suppose the corporation had entered into a contract to hire an office in Arkansas, with the avowed purpose of establishing a domicile here. That would be sufficient proof of the beginning of business here, and as the statute prohibits it from beginning business here until it complies with the law, it could not enforce the contract. The opinion of the court seems to be based upon the theory that the statute cannot have operation because the transaction in suit, if isolated from the others, shows one connected transaction of inter-state commerce and nothing more ; but the argument is untenable, for when it is once established that the corporation is exercising- its functions in a foreign State, as distinguished from the performance of mere commercial acts to be consummated in another State, it becomes subject to State regulation. Horn Silver Mining Co. v. N. Y. 143 U. S. sup.; Baker v. State, 44 Ark. 134. That the acts of the corporation in this case are not mere commercial transactions of the character indicated", seems apparent. The sales by the corporation of exclusive territory within which the vendees might sell White sewing- machines, and the covenant on their part that they would sell none other, are contracts executed and to be performed in Arkansas ; and if they have any connection with inter-state commerce, it is remote; the terms of the contracts show that they relate, not only to domestic commerce, but to transactions having no connection with commerce at all. The contract sued upon is one of suretyship, which, like the contract of insurance and indemnity, is not the subject of commerce. These matters were not transactions of inter-state commerce but were business transacted in the State independently of commerce. When the corporation conformed to the State law after the contract in question was made, it declared its domicile in Arkansas, and thereafter became subject of course to the operation of the statute ; by continuing its business thereafter in identically the same manner as it had done before, we see its own. conclusion as to the effect of its prior acts in giving it a domicile here, and do no injustice in giving' those acts their legal effect. According to the decisions above cited, they rendered the corporation amenable to State regulation. The defendant’s cause might be rested here. But I think it may be fortified still further. If the foreign corporation were strictly an agency of commerce, entering the State for the purpose of carrying on the business of inter-state commerce, I think it should be held that the regulation is not a restriction upon commerce. What is the regulation? It is that the foreign corporation doing' business in this State shall make known its place of business here and designate the agent upon whom service shall be had. No license fee or tax is demanded of the corporation. Not even a fee for defraying the expense of the regulation is required. The regulation then is nothing more than that the corporation doing business here shall consent to be found here, and shall designate the officer upon whom service shall be had and where he may be found. In theory the domicile of a corporation is only in the State where it is created, and the general rule, in the absence of legislation, is that it can be found no where else. But when it sends its agents into a foreign State to transact its business, it is really as much represented by them there as in the State of its creation. It is competent for the legislature of the foreign State to enact that personal service maybe had on the corporation by service on agents in its borders who transact the company’s business there. The corporation doing business thereafter in the foreign State is presumed to assent to that rule. American Casualty Co. v. Lea, 56 Ark. 539. But it was found often inconvenient for the creditor of the corporation to prove the agency of ^the person served, and so, to make the matter simpler, some of the States enacted that some particular State officer should be authorized to receive service for the corporation. That is the law in this State as to insurance companies. In the same line, as to other corporations, it requires them to designate a person who shall be its agent to receive service. That is fairer to the corporation than to compel it to run the risk of having judgment rendered against it by service on some one of a number of persons transacting business for it, who may not have the interest of the corporation enough at heart to notify it of the pendency of the suit. It is better for the creditor because he is relieved of doubt as to the proper person upon whom to get service. To enforce the regulation, the penalty of avoiding the contract made in violation of it is imposed. That the regulation is reasonable and within the power of the State has never been doubted. St. Clair v. Cox, 106 U. S. 350; Cooper Mfg. Co. v. Ferguson, 113 id. sup. “Legislation, in a great variety of ways, may affect commerce and persons engaged in it without constituting a regulation of it within the meaning of the Constitution. * * * And it may be said, generally, that the legislation of a State, not directed against commerce or any of its regulations, but relating to the rights, duties, and liabilities of citizens, and only indirectly and remotely affecting the operation of commerce, is of obligatory force upon citizens within its territorial jurisdiction, whether on land or water, or eng'aged in commerce, foreign or inter-state.” Sherlock v. Alling, 93 U. S. 99; Nashville, etc. Ry. v. Alabama, 128 id. 96; L. R. & Ft. S. Ry. v. Hanniford, 49 Ark. 291. This legislation is not directed against commerce or any of its regulations, but relates onty to the rig'ht of the citizen to sue in the jurisdiction where the cause of action arises, and imposes upon the corporation only the duty of submitting to that jurisdiction. The domestic corporation is required to show by record where its principal place of business is, and the law specifies that service may be had on its officers. ‘‘It does not lie in any foreign corporation to complain that it is subjected to the same law as the domestic corporation.” Horn Silver Mining Co. v. N. Y. 143 U. S. sup. When a State no longer possesses the power to compel every corporation doing' business within its jurisdiction, whether exclusively engaged in inter-state or foreign commerce or not, to give publicity to its affairs in so simple a matter as making known its officers and place of business, there will remain but little of value in its reserved rights. I think the judgment should be reversed, and the complaint dismissed. MansEieed, J. I concur with the Chief Justice in dissenting, on the grounds stated in his opinion.