178 F. 696 | 3rd Cir. | 1910
The Pennsylvania act of 187! (P. E. 108) was passed to carry into effect article 16, § o, of,the state Constitution:
“So foreign corporation shall do business in this state without having one or more places of business and an authorized agent or agents in the same upon whom process may be served.”
The act itself is as follows:
“An act to prohibit foreign corporations from doing business in Pennsylvania, without having known places of business and authorized agents.
“Section 1. Be it enacted, etc.,' that from and after the passage of this act. no foreign corporation shall do any business in this commonwealth, until said corporation shall have established an office of offices and appointed an agent or agents for the transaction of its business therein.
“Sec. 2. It shall not be lawful for any such corporation to do any business in this commonwealth, until it shall have filed in the office of the secretary of the commonwealth a statement, under the seal of said corporation, and signed by the president or secretary thereof, showing the title and object of said corporation, the location of its office or offices, and the name or names of its authorized agent or agents therein: and the certificate of the secretary of the commonwealth, under the seal of the commonwealth, of the filing of such statement, shall be preserved for public inspection by each of said agents, in each and every of said offices.
“Sec. 3. Any person or persons, agent, officer or employe of any such foreign corporation, who shall transact any business within this commonwealth for any such foreign corporation, without the provisions of this act being complied with, shall be guilty of a misdemeanor, and upon conviction thereof shall be punished by imprisonment not exceeding thirty days, and by fine not exceeding one thousand dollars, or either, at the discretion of the court trying the same.”
As the scope of this statute has been made the subject of earnest controversy, not only in the present case, but in some others that have reached this court, it may not be amiss to review the Pennsylvania decisions; for the construction put upon the act by the Supreme Court of the state is, of course, binding upon the federal tribunals. The first case to reach that court was Barr y. King, 96 Pa. 485, 488, in which it was decided that a foreign corporation which had obeyed the statute and had appointed an agent might be a garnishee in execution attachment. The court said:
“Now by general statutes all foreign corporations, as a condition on which they may transact business in this state, must establish an office and have an agent, a chief purpose of which is that process may be served and such corporation he compelled to answer in all suits or actions brought against them. * * * Natural and artificial persons, citizens of other states, who are doing business here, ought to stand on an equal footing with each other and with the citizens of this state. A natural person who is a citizen of another state coming within the jurisdiction of our courts is liable to all actions as if resident in this state; and legislation has done much to place foreign corporations on an equality with domestic as respects the right to sue and the liability to be sued.”
In Hagerman v. Empire State Co., 97 Pa. 534, the corporation had not appointed an agent under the act, and sought to have a sheriff’s return of service set aside on the ground, inter alia, that the person upon
“That when a foreign corporation transacting business' in this state has failed to establish an office and report the name of its agent to the secretary of the commonwealth, but has some person residing therein who acts as its agent, it must be presumed that the corporation has substituted such agent as one on whom service is authorized to be made, to the extent at least of its unfinished business in this stat^”
These two cases are concerned wdth one object of the act, namely, to compel foreign corporations to come within the reach of domestic process. This is made a condition precedent to their right to transact business within the state. The next case (Kilgore v. Smith, 122 Pa. 48, 15 Atl. 698) refers to another object. The controversy was over the title to certain personal property. The plaintiff’s title was derived from a Maryland corporation and was attacked because the contract that gave him title was made in Pennsylvania, and because it appeared that the corporation had not complied with the act. It was held that the contract was nevertheless good, for the reason that the corporation was not “doing business” within the state; the court saying:
“It has never been held that a citizen of Pennsylvania may not be a member of, or stockholder in, a corporation of another state, or that a contract between such member and his corporation is ultra vires, because the latter had not complied with the provisions of the act of assembly. Nor do we think it material that an occasional meeting of the directors was held at Delta, a town partly in Maryland and partly in this state. Their acts are-not necessarily void for such reason. Morawetz on Corporations, § 533. One of the objects of the act of assembly was to bring corporations, employing their capital in this state and doing business here, within the taxing power of the commonwealth. It does not appear that this corporation brought any of its capital into this state. Its place of business was in Maryland. Its capital, if it had any, was there. It had contracts with some of its members, residing in Pennsylvania, by which they were to can their fruit and hold the same to be disposed of by the corporation. It was a kind of farmers’ co-operative association located in Maryland, with its membership in both states.”
That the corporation must be “doing business” in the state before the act can affect its contracts was the precise point in Campbell, etc., Co. v. Hering, 139 Pa. 473, 20 Atl. 1061. There a foreign corporation brought suit to recover the price of a printing press, and recovery was resisted on the ground that the act had not been complied with. But the affidavit of defense was held to be insufficient because it did not aver also that the corporation was “doing business” in the state. This fact, the court said, was “essential to his defense,” and the defendant’s omission to aver it was fatal. In Lasher v. Stimson, 145 Pa. 30, 23 Atl. 552, it appeared by a special verdict that an unregistered foreign corporation was “carrying on the business of the manufacture and sale of soap or washing compound within the state of Pennsylvania.” Under these circumstances, it was held that a person who acted as the corporation’s agent was chargeable with knowledge that it could not give him lawful authority to act, and was personally liable upon a
“a condition precedent to i;s recognition and legal existence (in the stale). Tt cannot, by virtue of its charter, exercise its functions beyond the territorial limits of the sovereignty which created it. It cannot transact business in other states or sovereignties without their consent expressed or implied. Any person who assumes to act for it must be considered as having knowledge of its powers and their limitations, and whether it has conformed to the rcqniremenls of ¡he jurisdiction in which ho proposes to represent it. If he does business for it here, in violation of the conditions prescribed, he commits an offense which is punishable by fine and imprisonment.”
The terms laid down by the act were not onerous nor in conflict with any constitutional provision or rule of public policy;
“But they are clearly prohibitory, and they inevitably stamp as unlawful any business transaction within the state by a foreign corporation which has not complied with them. It is only by its observance of them that it can have a legal existence for business purposes within this jurisdiction or acquire contractual rights which our courts will recognize.”
Tlie case of East Side Bank v. Columbus Tanning Co., 170 Pa. 1, 32 Atl. 539, is of no importance in the discussion. But the next decision (Mearshon v. Lumber Co., 187 Pa. 12, 15, 17, 40 Atl. 1019, 1020), required the court to consider a new factor, one that limited the scope of the statute, and modified the sweeping declaration of Lasher v. Stimson, that “any business transaction within the state” was unlawful if the corporation had not obeyed the command of the act. The facts upon which the decision is based are thus stated:
“The plaintiff is a corporation duly incorporated in the state of Michigan. Its manufacturing operations are there conducted; its capital is there invested. None of it is invested here. The order for the goods in question was given to its salesman and agent in Pennsylvania and by him sent to the plaintiff, who executed the order in Michigan. Under all the decisions this is not a doing of business in this state which makes it necessary to comply with the provisions of the act of 1874, and hence .the defense made on that ground has no merit.”
And it was evidently necessary to hold that this was not a doing of business within the state, because, if the statute forbade such a transaction, it encountered the commerce clause of the federal Constitution. This appears by the following quotation from the opinion:
“Passing by that question, the ease (below) was ruled upon the authority of the Blakeslee Mfg. Co. v. Hilton, 5 Pa. Super. Ct. 184. There are other cases which will be referred to presently to the same effect, and we are of opinion that the decisions in all of these cases are correct, and should be followed by us in deciding the present controversy. The plaintiff in that case was a foreign corporation located ill the state of Illinois, and the action was brought to recover the price of a steam pump manufactured in that state and sold to the defendant, a corporation in Pennsylvania. Among other defenses set up in the affidavit of defense was the allegation that the plaintiff was a foreign corporation and had not complied with the requirements of the act of 1874, in reference to establishing an office and appointing an agent wiiiiin the state. Mr. Justice Wickham, delivering the opinion of the court, said: ‘All that is hereby alleged is entirely consistent with the conduct of a foreign corporation engaged in strictly interstate commerce. It may advertise its goods, take orders, make contracts of sale respecting the same, and ship them to customers in this state. It may also employ agents living in Pennsylvania to go from county to county, from town to town, and from*700 person to person to secure orders. Or the agent may never go outside of his own county, city, or' town, thus being in one sense a local agent, and yet be doing a business which is not and cannot be reached under our act of 1874. * ⅜ ⅜ The words “doing any business,” as used in the act, should not' be construed to mean taking orders or making sales by sample by agents coming into our state from another for that purpose. To hold otherwise would make the act offend against the Constitution of the United States as imposing unlawful restrictions on interstate commerce. Cooper Mfg. Co. v. Ferguson, 113 U. S. 727 [5 Sup. Ct. 739, 28 L. Ed. 1127]; Robbins v. Taxing District of Shelby County, 120 U. S. 489 [7 Sup. Ct. 592, 30 L. Ed. 094]; Brennan v. City of Titusville, 153 U. S. 289 [14 Sup. Ct. 829, 38 L. Ed. 719]; and a number of other cases. The above and numerous other decisions of the Supreme Court of the United States and .of the highest tribunals fully establish the rule that a corporation of one state may send its agents to another to solicit orders for its goods, or contract for the sale thereof, without being embarrassed or obstructed by state requirements as to taking out licenses, filing certificates, establishing resident agencies, or like troublesome or expensive conditions.’ The facts of the case cited are quite similar to those of the ease at bar, and we regard the foregoing decision as quite in point, and controlling the question at issue. An entirely similar ruling was made in the case of Cooper. Mfg. Co. v. Ferguson, supra, where it was held that a statute which imposes limitations upon the power of a corporation created under the laws of another state to make contracts within the state for carrying on commerce between the states violates that clause of the Constitution which confers upon Congress the exclusive right to regulate that commerce.”
It will be observed that in Mearshon v. Lumber Co., and in Blakeslee Mfg. Co. v. Hilton, the manufacturing operation of the company was conducted outside the state of Pennsylvania, so that the sale and shipment of the product to a resident of this commonwealth was clearly commerce between the states.
The two cases of American Clay Mfg. Co. v. American, etc., Co., 198 Pa. 189, 47 Atl. 936, and Hovey’s Estate, 198 Pa. 385, 48 Atl. 311, may be passed over as of no particular value. But People’s Building Ass’n v. Berlin, 201 Pa. 1, 50 Atl. 308, 88 Am. St. Rep. 764, is much more pertinent. There it'was held that a New York building association did not do business in Pennsylvania merely by lending money to a member residing in Pennsylvania, and by taking a mortgage on his realty within the state. The further facts upon which the decision is predicated are as follows:
“As we have already seen, under the articles of association and the bylaws, and as a matter of fact, the business of the association was done in New York. Its corporate functions were all exercised there. The applications for stock and for the loan were made and considered in New York and there accepted. By the express terms of the by-laws, the money paid by the stockholders and borrowers was to be paid there, as was-also the payment of the money to the defendant by the association in conqfietion of the transaction. In the contemplation of the law, the entire contract, from inception to the finish, was performed in New York.
“The opinion of the superior court seems to be grounded upon the assumption that the transaction involved the investment of employment of a part of the plaintiff’s capital within the state of Pennsylvania. The money was. however, loaned on the bond, a New York contract, and the mortgage was given merely as security. The plaintiff took no title to any property in Pennsylvania by the transaction. It merely made a loan of part of its capital to one of its stockholders, who was a citizen of Pennsylvania. The capital, if employed in the state of Pennsylvania, was so employed by a citizen of Pennsylvania, and not by the plaintiff corporation. In so far as the business*701 of loaning money M as concerned, it was carried on in tlie state of New York, and not in the state of Pennsylvania.”
It may be noted, in passing, that the court also referred to Swing v. Munson, 191 Pa. 582, 43 Atl. 312, 58 L. R. A. 223, 71 Am. St. Rep. 772 (a suit on a policy of insurance issued by a foreign company), which is often cited in this connection, and distinguishes it on the ground that:
“Insurance cases stand upon a basis of their own. The business of insur-anee lias been held not to be commerce, as an insurance policy has been defined merely as a contract of Indemnity, and for this reason not protected as interstate commerce.”
In Delaware River, etc., Co. v. Railway Co., 204 Pa. 22, 53 Atl. 533, the thought that underlay the decision in People’s Ass’n v. Berlin was again referred to, and it was held that, where a foreign corporation came into Pennsylvania and-prosecuted its ordinary business here without registration, the act applied to it and forbade recovery on a contract that was made before the statutory requirements had been fulfilled. The present Chief Justice pointed out that:
“This act has been liberally construed, and isolated transactions between a foreign corporation and citizens of this state have been held not to come within its prohibition, and only such corporations as have entered this state by their agents and prosecuted their ordinary business here have boon con-si rued as ‘doing business’ in violation of the act.”
But he went on to show that the plaintiff was clearly within the prohibition of the act, because:
“It came into the state with its agents and workmen and for the period of six months was engaged in the continuous prosecution of its ordinary business. employing a large amount, if not all, of its capital and creating new obligations day by day.”
He also declared:
“The purpose of the act is to bring foreign corporations doing business in 1his state within the reach of legal process. This purpose is not accomplished by a registration of the corporation at the pleasure of its officers, or when it may be to their interest to appeal to our courts. The act is for the protection of those with whom it does business or to whom it may incur liability by its wrongful acts, and nothing short of a registration before the contract that it seeks to enforce is made can give it a right of action. Any other construction of the act would violate its plain words and wholly defeat its object by affording protection to the corporation and denying it to the public..”
A similar question arose in New York, etc., Construction Co. v. Winton, 208 Pa. 167, 57 Atl. 955. The company was a New Jersey corporation chartered for the purpose of constructing railroads and of mining and transporting coal and other minerals. It lent money to a resident of Pennsylvania; the loan being secured by a mortgage upon his coal property, and the purpose of the loan being to furnish capital to develop his land and to mine the coal, in order that the company might carry it at a profit. The suit was upon the mortgage, and it was held that the company’s failure to register under the act was not a defense; that its agreement with the mortgagor concerning the development of his land was not involved in the suit, but simply the loan of its money; and that the making of the loan was not doing business, because:
*702 “The construction company was not chartered to engage in the business of loaning money, and when it made this loan it was not ‘doing business’ in contravention of the act of April 22, 1874 (P. L. 108). It was incorporated in the state of. New Jersey for the purpose of constructing railroads and of mining and transporting coal and other minerals, etc. Had it employed its capital in carrying on this or any other business in this state, it would have brought itself within the prohibition of the statute. But the money sought to be recovered here was not invested or employed in this state in any business enterprise by the corporation. It was loaned to the appellant’s decedent, a citizen of Pennsylvania, who employed it in his business for his own use and benefit. While a corporation can have no legal existence beyond the sovereignty creating it, yet our state has recognized the comity existing among the several states of the Union, which permits a corporation of one state to sue in a foreign jurisdiction. The exercise of such power by a foreign corporation is not regarded as prejudicial to the interests of the state nor repugnant to its policy. What our Constitution and the statute of 1874 prohibit is doing business in the state by a foreign corporation without having first complied with their provisions. We have already pointed out that the indebtedness attempted to be recovered here does not grow out of any business operations conducted or carried on by the appellee in this state.”
The latest decision of the Pennsylvania court upon this act, so far as we are advised, is De La Vergne Refrigerating Co. v. Kolischer, 214 Pa. 400, 63 Atl. 971. The case was decided upon a point that does not concern us now, namely, that the same person may be a registered agent under the act.and also a commercial agent of the corporation, and that resignation of his commercial agency does not, of itself, affect his agency under the statute. For present purposes, the only value of the case is the fact that it approves the construction announced by the former decisions :
“In the construction of this act this court has held that its purpose is to bring foreign corporations doing business in this state within the reach of legal process, which purpose is not accomplished by a registration at the pleasure of its officers, or when it may be to their interest to appeal to our courts, and that nothing short of a prior registration can give such corporation a legal standing to enforce a contract. It has also been held that a contract made by a foreign corporation before establishing a place of business and registering an authorized agent, as required by the act, is void and cannot be enforced in our courts. Thorne v. Insurance Co., 80 Pa. 15, [21 Am. Rep. 89]; Lasher v. Stimson, 345 Pa. 30 [23 Atl. 552]; Delaware River Quarry, etc., Co. v. Pass. Ry. Co., 204 Pa. 22 [53 Atl. 533].
“We do not question the authority of these cases. The rule therein stated is the settled law of this commonwealth.”
Other questions were raised and decided in the court below, and these are casually referred to in the following language:
“There are other meritorious grounds upon which to affirm the judgment; but, in our view of the law, no useful purpose can be served by discussing them.”
Obviously, however, a passing reference such as this could not have been intended to approve in bulk the findings and opinion of the court below, or to incorporate them into the judgment of the appellate tribunal.
Thére is one more case (Wolff Dryer Co. v. Bigler, 192 Pa. 466, 43 Atl. 1092), and we have reserved it for separate consideration, because it is relied upon by the plaintiff in error as decisive of the present dispute. The reporter’s statement is said to be materially incomplete, and
“By the original contract between the parties, the plaintiff granted to the defendants the right to construct and use a machine for drying bricks, and agreed to sell them the parts of the machine and numerous appliances necessary for its use at a stated price. The buildings required were to he constructed by the defendants. After the machine was set up it was to be tested, and then accepted" or rejected. If accepted, it was to remain the property of the plaintiff until paid for, with the right to remove it if payments were not made as provided by the agreement. If rejected, it was to be removed by the plaintiff at its expense, and all moneys which had been paid or notes which had been given were to be returned, the contract to be canceled, and neither party was to have any claim against the other.”
Then follow certain paragraphs not now relevant, and, finally, this:
“The contention that the plaintiff could not maintain an action in this state, because it was a foreign corporation, and had not complied with the provisions of the act of April 22, 1874 (P. L. 108), is without merit. It had no office or place of business in Pennsylvania, and no part o£ its capital was here. The machinery sold was shipped either directly from its factory in Chicago, or upon its orders given to other manufacturers. The fact that its agent came into this state and made contracts for machinery to be delivered here did not bring it within the inhibit ion of the act of 1874. Mearshon & Co. v. Lumber Co., 187 Pa. 12 [40 Atl. 1019, 67 Am. St. Rep. 500].”
In other words, the court seems to put the decision upon the ground that the plaintiff was a manufacturer with a factory in Chicago, and had sold the machine to be delivered in Pennsylvania either upon its own shipment or upon orders given to other manufacturers; and the reference to Mearshon v. Tumber Co. confirms Ihe belief that the decision was based upon this ground alone. We see no reason, therefore, to suspect that the court was diverging in any respect from the construction of the act that had previously been announced, or to modify any of its earlier decisions; but, if it is thought that such a purpose is discernible, and that the court really intended to modify the standard by which the doing of business should be tested, it seems
This court has twice had occasion recently to pass upon the effect to be given to the Pennsylvania statute, and has followed the decisions of the state court by holding that, where a corporation seeks to exercise its charter powers in Pennsylvania, it must first comply with the act. In Pittsburgh Construction Co. v. West Side, etc., Co., 154 Fed. 929, 83 C. C. A. 501, 11 L. R. A. (N. S.) 1145, a West Virginia corporation that was organized to construct railways was denied the right to recover on a construction contract that was entered into three weeks before the company obeyed the statute. And in Colonial Trust Co. v. Montello Brick Works, 172 Fed. 310, 97 C. C. A. 144, it was held that an unregistered Delaware company that was chartered to own the stock and finance the operations of certain Pennsylvania corporations and had exercised its franchises for these purposes was doing business in the state and could not recover upon its contracts made in carrying out its corporate objects.
It seems clear, therefore, that the plaintiff in error was not entitled to recover upon the contract that was sued on in the circuit court. The Buffalo Company is a New Jersey corporation, but had not registered in Pennsylvania at the time when the contract was made. The agreement provided1 (to quote from the brief of .the plaintiff’s counsel) that the defendant—
“was to provide the buildings and construct the foundations ready to receive the machinery and to co-operate in certain other ways in the installation of the same, and the plaintiff in error was to provide and install the machinery, and, upon completion of the same, make a test run of 30 days. Ifor the machinery so installed the defendant in error agreed to pay the sum of $34,200 in the manner following: * * * It was also agreed under the terms of the contract that the machinery should he delivered and installed by the plaintiff in error within 140 days from the date of the contract, provided it was given possession of the building 100 days before the date for completion and was not delayed by any act of the Penn Heat & Power Company, and provided it should not be delayed by reason of strikes, hres, accidents, and other causes beyond its control.
“Under the terms of the contract, the title to the machinery was to remain in the plaintiff in error until the purchase money was paid, and upon failure to pay any installment when due the wliole purchase price was to become due at the option of the plaintiff in error, with the right to retake possession of the machinery. * * *
“The machinery to be delivered consisted of a steam engine, a gas com-presser, ammonia separator, brine cooler, and ammonia condenser, and their connecting parts. All the parts were manufactured by various subcontractors in several states, upon orders and from designs furnished by the plaintiff in error. These different parts were delivered by the subcontractors at the plant of the Penn Heat & Power Company, and were there set up and connected under the direction of Mr. Woodcock, the engineer of the plaintiff in error. This work was .done chiefly by the subcontractors; but the plaintiff in error furnished a few men to assist in this work — four during the period of installation.”
There was a good deal of delay about the completion of the contract, so that the machine was not installed for more than a year, and
Without extending an opinion that is already too long, we hold that the plaintiff was exercising its corporate franchises in Pennsylvania, and was therefore doing business in the state.
The judgment of the Circuit Court is affirmed.