126 F.2d 111 (2nd Cir. 1942), 160, Cohen v. American Window Glass Co.

Docket Nº:160.
Citation:126 F.2d 111
Case Date:February 26, 1942
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

Page 111

126 F.2d 111 (2nd Cir. 1942)

COHEN et al.



No. 160.

United States Court of Appeals, Second Circuit.

February 26, 1942

Page 112

Meyer Kraushaar, of New York City, for appellants.

Arthur B. Brenner, of New York City (Van Vorst, Siegel & Smith, of New York City, on the brief), for appellee.

Before L. HAND, CHASE, and C. E. CLARK, Circuit Judges.

C. E. CLARK, Circuit Judge.

This action was brought by plaintiffs as shareholders of the defendant corporation, alleging the illegality of payment of a dividend and the inequity of a proposed merger of the defendant and a wholly owned subsidiary. Jurisdiction was based on the diversity of citizenship of the parties, with the amount involved exceeding $3, 000. Defendant moved to dismiss on grounds of failure to state a claim upon which relief could be granted, of lack of proper service, and of lack of jurisdiction over the subject matter because it concerned the internal affairs of a foreign corporation. The district court quashed the return of service of the summons and dismissed the action for lack of proper service. 41 F.Supp. 48. Although we disagree on this point, we concur in dismissal on the ground that the court should not assume jurisdiction over the internal affairs of this foreign corporation.

Defendant is a Pennsylvania corporation authorized to do business in New York. It has an office in New York City and several representatives in the state, upon one of whom, C. W. Steele, a salesman, service was made. It had also designated, pursuant to statute, Benjamin Griffen as a person on whom service could be made. Because Griffen had died and no new representative had been chosen, plaintiffs-- not wishing to rely on the service on Steele alone--proceeded under Sec. 229 of the Civil Procedure Act, which provides for service on the secretary of state where the designated representative has died. The district court held that Steele was only a salesman and not within the group enumerated in Rule 4(d), Federal Rules of Civil Procedure, 28 U.S.C.A.following section 723c, or Sec. 229 of the Civil Practice Act, upon whom service could be made as representing the corporation. 41 F.Supp. 48, 49, 50. We agree with its conclusion on this point. But it also held that service on the secretary of state was ineffective. Its finding was that service upon 'a state official as statutory agent to receive service of process * * * is invalid as to causes of action arising outside the state if the statute does not expressly extend the effect of the service to foreign causes or if the courts of the state have limited the effects of the service to domestic causes. ' It decided that this is a foreign cause of action, which is true, and that the New York statute does not 'expressly' cover foreign causes of action, which we feel is an overliteral interpretation of the authorities.

At the time Griffen was designated, the General Corporation Law, Sec. 16, Consol.Laws N.Y. 1909, c. 23, allowed service upon the secretary of state only for causes of action arising within the state. In 1923, Laws 1923, c. 787, this section became Sec. 111 of the Stock Corporation Law, Consol.Laws, N.Y.C. 59, and the limitation was removed, so that it read 'the secretary of state shall be the agent of the corporation upon whom all process in any action or proceeding against it may be served within the state. ' Section 229 of the Civil Practice...

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