190 F. 879 | U.S. Circuit Court for the District of Eastern Michigan | 1911
The plaintiff is a Michigan corporation. The defendant Aluminum Company of America is a Pennsylvania corporation, with its home office in that state. Service of the original summons was made in Detroit upon one E. H. Brown, a sales agent of the defendant who resides in Grosse P'ointe township, Mich., and does business in Detroit. Service of an alias summons was made at Detroit upon one E. K. Davis, general sales agent of the defendant, who resides in Pennsylvania.
The defendant insists that the service is not sufficient. Several affidavits have been filed in support of the motion, and one in opposition thereto. The testimony of E. K. Davis and other persons was taken by deposition on the part of the plaintiff. When the motion came on to be argued on these affidavits and depositions, the defendant asked that the questions of fact involved be submitted to a jury. The plaintiff’s counsel objected to the delay in the determination of the motion which would ensue if the request should be granted. The request was denied, and a prolonged argument was had before the court.
The controlling facts in the case are substantially uncontradicted, and appear to be as follows:
The defendant has never filed articles of incorporation in Michigan nor paid the franchise fee, nor appointed an agent for the service of process, as required by the Michigan statute in the case of a foreign corporation which desires to do business in the state. Defendant has no plant or property, except as hereinafter staled, within the state of Michigan. It has no warehouse or stock of goods in the state. None of its officers or directors reside in the state, nor any of its employes except Brown. In the latter’s office, maintained as hereinafter stated, were some samples of its manufactured products. Orders for goods to be delivered in Michigan were filled from its factories in other states. Shipments were ordinarily made f. o. b. cars at these factories.
For some years past the defendant has employed one Rutherford as its sales agent for Michigan and Ohio with headquarters at Cleveland, Ohio. Rutherford employed as his salesman, and paid, one E. H. Brown, who also lived in Cleveland. The latter was in Michigan a great deal in endeavoring to sell and in selling goods. In November, 1909, it was deemed best to have this Brown establish himself in Michigan, and in that month he took up his residence in Grosse Pointe, and opened an office in Detroit. After a little this office was leased by the owner of the building to the defendant, whose name appears on the door with Brown’s name as manager. On the stationery used by Brown the defendant’s name appears likewise. The defendant’s name has been inserted for a year or two in the Detroit city directory, and in the telephone directory of Detroit. Defendant pays the rent of the.office and Brown’s salary. His incidental expenses arc
. This business in itself appears to differ in no essential respéct from that which he did when employed by Rutherford and traveling to Michigan .from Cleveland. He is kept informed as to prices. He solicits formal orders for goods, and takes them and reports them either to Rutherford or to the defendant’s principal office in Pennsylvania. These orders are subject to approval or disapproval by his 'superiors in the sales department of the company. In fact, they seem rarely, if ever, to have been disapproved. It appears from the affidavits and depositions of Brown’s superior officers that he had never been given express authority to make a bargain which was not subject to disapproval or rejection by these superiors. In many cases', however, of what Brown calls “small business,” he has made definite •agreements to sell without referring the matter to headquarters. On cross-examination by defendant’s counsel he was asked:
¡ .“Q.' Are there any instances where you undertook to' make a binding (agreement on behalf of the Aluminum Company of America with, the trade, without either having first obtained special authority for the particular iru stauce from the Pittsburg office, or having it understood that the order would have to be forwarded and approved before it would'be effective? A. Yes, sir.
“Q. Under what circumstances would any such ordérs be taken? A; Well, in the ease of where we have a customer of long standing,' not under con*tract, for,instance, or in the general run of small business. . , • '
“Q. Is that authority given you by the Pittsburg office, or was that a business risk you assumed on.your own responsibility? A. I might ,say it"iá the authority which has grown 'up from the authority which 'Mr. Rutherford has ^always given me'. ' '
“Q. Does that authority come from Mr. Rutherford or from the Pittsburg office? A. It has always come from Mr. Rutherford.
“Q. Are those exceptional cases or are they frequent — those whfere yon would undertake to sell to an old customer direct? A. Oh,"they are quite frequent — quite usual.”
On redirect examination he testified that such bargains for “small business’-’ would be made probably once a week, might be oftener, and majibe not; that by “small business” he meant “orders for say fifty pounds of sheet or a hundred pounds, or five hundred, orders— scattered orders from people who do not use much”; that it might mean as much as one hundred dollars a week. “Q. That .kind of business you handle entirely yourself, do you not? A. Yes, sir.”
He further testified that these “small business” orders were transmitted by him to the Pittsburg office and filled by shipments .from the manufacturing plants of the corporation. Pie further testified 'that the defendant had the right to refuse to carry out such sales, though he mentions no case of refusal to abide by his agreement of this kind, and said.that he did not always advise the buyer of the company’s right to refuse. Occasionally Brown, at the request of the company’s treasurer, pressed delinquent debtors in Michigan for payment of overdue accounts. Occasionally scrap metal from factories in Michigan was bargained for by .Brown, but apparently more often the bargain was made by some nonresident agent of the company.
Davis, the other person served, was the head of the sales department
Upon these facts defendant contended (a) that it was not doing business in Michigan in such sense that it was subject to suit in this court when this action was brought; (b) that, if it was doing business in Michigan in the sense mentioned, neither Brown nor Davis were such an agent as that service upon him was binding.
Plaintiff contended (a) that the defendant “was found” in the district; and (b) that Brown'and Davis were proper agents upon whom to serve the writs.
Expressions in several cases would indicate that what was done was clearly a doing of business in Michigan by’the defendant for the purpose of giving jurisdiction. See St. Louis Wire, etc., Co. v. Consolidated Wire Co. (C. C.) 32 Fed. 802; Doe v. Springfield Boiler Co., 104 Fed. 684, 44 C. C. A. 128; Frawley v. Penn. Cas. Co. (C. C.) 124 Fed. 259. And a recent case in New York, in effect, so holds. Chadeloid Chem. Co. v. Chicago, etc., Co. (C. C.) 180 Fed. 770.
If policies of insurance are in force in favor of residents of a state, pn which premiums are to be paid, and under which losses may have to be paid and investigations and adjustments made in the state, the insurance company is for purposes of suit doing business in such state. Conn. Life Ins. Co. v. Spratley, 172 U. S. 602, 19 Sup. Ct. 308, 43 L. Ed. 569; Lumberman’s Ins. Co. v. Meyer, 197 U. S. 407, 25 Sup. Ct. 483, 49 L. Ed. 810; Commercial Mutual Acc. Co. v. Davis, 213 U. S. 245, 29 Sup. Ct. 445, 53 L. Ed. 782.
The last decision of the Supreme Court to which my attention has been called (International Text-Book Co. v. Pigg, 217 U. S. 91, 30 Sup. Ct. 481, 54 L. Ed. 678, 24 L. R. A. [N. S.] 493) it seems to me tends to the same conclusion, although the precise question under consideration was not involved. In this case, in view of the following facts, it was held that the plaintiff was doing business in Kansas. The company maintained no office in the state. It paid a resident agent'who solicited and forwarded to it applications for scholarships in the plaintiff’s correspondence schools, and collected and remitted deferred payments on scholarships. The plaintiff sent to the pupil text-books and instruction papers, and gave its instructions through ■the mail. A statute forbidding recovery to the plaintiff in a suit brought by it because it was doing business without complying with a state statute was held inapplicable because a burden on interstate commerce, not because the company was not carrying on business in Kansas.
It was, however, strongly urged upon the argument that what was done in Michigan was in the main only solicitation of interstate trade, and that by doing such business the corporation did not subject itself to suit here. It appears to be generally agreed that, if a foreign corporation sends its salesmen through a state to solicit orders for goods to be shipped into it, the corporation is not subject to suit in the state as doing business there. Wm. Grace Co. v. Henry Martin Co., 174 Fed. 131, 98 C. C. A. 289; Bruner v. Kansas Moline Co., 168 Fed. 220, 93 C. C. A. 504; Strain v. Chicago, etc., Co. (C. C.) 126 Fed. 831; Coit v. Sutton, 102 Mich. 324, 60 N. W. 690. 25 L. R. A. 819. The same rule is applied to a traveling solicitor of advertising to be published in another state.. Boardman v. S. S. McClure Co. (C. C.) 123 Fed. 614. In this district this rule has been followed in at least two unreported cases. Globe Tobacco Co. v. Bloch Bros. Co., No. 3939 in Equity (no written opinion); Whitney v. Anheuser-Busch Co., No. 8363 (no written opinion).
But the fact that the salesmen are itinerant is not the criterion. If a railroad company maintains an office and a resident agent in a state where it has no lines, but that agent only solicits traffic for its lines outside the state, the business done does not subject it to suit in the state of the agent’s residence. This has been repeatedly and at length authoritatively held. Green v. Chicago, B. & Q. R. R. Co., 205 U. S. 530, 27 Sup. Ct. 595, 51 L. Ed. 916; Maxwell v. Railroad Co. (C. C.) 34 Fed. 286; Fairbank v. Railroad Co., 54 Fed. 420, 4 C. C. A. 403, 88 L. R. A. 271; Wall v. Railroad Co., 95 Fed. 399, 37 C. C. A. 129; Earle v. Railroad Co. (C. C.) 127 Fed. 235; McGuire v. Railroad Co. (C. C.) 155 Fed. 230. The same rule has been applied to resident agents soliciting advertisements to be published outside the state. Union Asso. Press v. Times Star Co. (C. C.) 84 Fed. 419. And to an agent soliciting the purchase of goods. Case v. Smith, etc., Co. (C. C.) 152 Fed. 731; Hefner v. Amer. Tube, etc., Co. (D. C.) 163 Fed. 866. See, also, Dixie Mattress Co. v. Stearns, etc.. Co., 185 Fed. 431, 107 C. C. A. 501.
Against the argument based on these cases plaintiff urged that the rule is that if the agent has authority to close a bargain for goods, and not merely to solicit an order which may be approved or rejected by liis nonresident principal, in such case the principal is doing business in the state where the agent resides. Irons v. Rogers (C. C.) 166 Fed. 781: Palmer v. Chicago Herald Co. (C. C.) 70 Fed. 887.
Plaintiff further urged that the evidence in the case showed that Brown had power to close bargains in Michigan and exercised it. Ought the doctrine of the solicitation cases to be held to cover this case, if it is true that the agent had power, express or implied from a course of dealing, to make binding contracts of sale? If this case is not governed by the general principles announced in the cases first above mentioned, in my opinion defendant must be held, at least for
Upon his own testimony it is clear that he did frequently, and over a considerable-period of time, close bargains with his employer’s cus-tomery in Michigan for what he calls “small business.” In the main these transactions were verbal, but they were referred to headquarters and the employer carried them out.
Defendant insists that .Brown had no authority to make such bargains. But it cannot well deny knowledge of what he did nor adoption of his course, since it shipped goods to carry out the bargain. Chicago Pneumatic Tool Co. v. Philadelphia, etc., Co. (C. C.) 118 Fed. 852.
Upon these facts and under the test of selling in the state as distinguished from soliciting orders in the state, as well as under the doctrine of the cases first referred to, it must be held that the defendant was- doing business in Michigan so' as to give jurisdiction to the court of this .case.;
Attention in the,litigation seems to have been given to the interstate commerce act rather than to the act of 1890. The former act contains no provision like that in section 7 of the act of 1890, and a controversy under it would doubtless be governed by the act of 1888. Whether or not the decision is to be deemed by implication to uphold
In the Macon Grocery Case there was no allusion to section 7, nor was the action one at law for the recovery of damages. That section confers no express right to file a bill, but does confer expressly a right to sue for damages wherever the defendant “resides or is found.” The act of 1890 was passed some two years after the act under consideration in the Macon Grocery Case, and it may properly be assumed with the language of that act in mind. The seventh section of the act of 1890 does not by its phrasing suggest that Congress intended an action to be brought where the defendant was “found” only when diverse citizenship did not exist between the parties. I am not satisfied that the rule in the Macon Grocery Case applies to an action at law under section 7, even if the plaintiff and the defendant are inhabitants of different states, nor that the Macon Case holds that the action must be brought in the state of which the defendant is an inhabitant, notwithstanding it may be “found” in the state of plaintiff’s residence. My view finds support in the language used by the court in the course of argument in Ware Tobacco Co. v. American Tobacco Co. (C. C.) 178 Fed. 120.
In the absence of some clear decision to the contrary, my conclusion is that this action at law should not be dismissed merely because there is diverse citizenship between the parties.
From these conclusions, it follows that the motion to set aside service of process upon the defendants must be denied.