International Shoe Co. v. State

• Decision Date: 04 January 1945
• Docket Number: 29296.
• Citation: 22 Wn.2d 146,154 P.2d 801
• Parties: INTERNATIONAL SHOE CO. v. STATE et al.
• Court: Washington Supreme Court

154 P.2d 801

22 Wn.2d 146

INTERNATIONAL SHOE CO. v. STATE et al.

No. 29296.

Supreme Court of Washington, En Banc.

January 4, 1945

Rehearing Denied Feb. 6, 1945.

Proceedings by the State of Washington, Office of Unemployment Compensation and Placement, and E. B. Riley, Commissioner against the International Shoe Company, to recover contributions under the Unemployment Compensation Act. From a judgment affirming the decision of the Commissioner, who had confirmed the appeal tribunal's decision adverse to the company, the company appeals.

Affirmed.

SIMPSON C.J., and MILLARD, J., dissenting.

Appeal from Superior Court, King County; Hugh Todd, Judge.

Stern &amp Stern, Allen Orton, and T. M. Royce, all of Seattle, for appellant.

Smith Troy and George W. Wilkins, both of Olympia, for respondents.

JEFFERS Justice.

The proceedings involved in this action were commenced by the department of unemployment compensation and placement hereinafter referred to as the department, to recover contributions claimed to be due from International Shoe Company, hereinafter referred to as appellant, for the period of January 1, 1937, through December 31, 1941. No contention is made by appellant that the amount of the contributions found to be due by the commissioner of unemployment compensation and placement and the superior court of King county was not correct, if appellant is liable for any contributions.

Notice of assessment was personally served upon Edward S. Alley, a salesman employed by appellant, in King county, Washington, on October 10, 1941. On October 18th appellant appeared specially Before the department, and moved to quash the service upon Mr. Alley upon the following grounds: (1) That service of the notice of assessment upon Mr. Alley was not good service on appellant. (2) That appellant is a corporation, organized and existing under and by virtue of the laws of Delaware, and is not engaged in doing business within the state of Washington; that it has no agent or other person within this state upon whom service of process may be made; that it is doing only interstate business. (3) That appellant is not an employer, and does not furnish employment within the state of Washington, within the meaning of those terms, as defined by the unemployment compensation act.

Appellant requested a hearing, and pursuant to such request the matter came on for hearing Before the appeal tribunal upon stipulated facts, supplemented by the testimony of Edward Alley. On January 25, 1943, the appeal tribunal rendered its decision, wherein it denied appellant's motion to quash and held the commissioner was authorized to recover from appellant for the period above mentioned contributions in the sum of $3,159.24.

A petition was duly filed with the commissioner to review the decision of the appeal tribunal. The commissioner thereafter reviewed such decision, and on February 11, 1943, entered an order confirming the decision of the appeal tribunal.

An appeal was taken from the decision of the commissioner to the superior court for King county, which thereafter, on November 10, 1943, entered judgment affirming the decision of the commissioner. This appeal is from the judgment entered by the superior court, and as a basis for such appeal appellant assigns error upon the finding of the trial court that appellant was doing business in Washington so as to be subject to process; upon the finding that Edward S. Alley had sufficient capacity to represent appellant so that service of process could be made upon him; upon the finding that the commissioner had jurisdiction to levy an assessment for contributions to the unemployment compensation fund; and upon the entry of judgment against appellant.

While we do not believe the testimony of Mr. Alley adds anything to the stipulated facts, we mention his testimony because the record shows the facts to be considered were those stipulated, plus the testimony of Mr. Alley.

The pertinent facts may be stated as follows: Appellant is a Delaware corporation, having its principal place of business in St. Louis, Missouri. Its principal business consists of the manufacture and sale of boots, shoes and other footwear. It maintains places of business where manufacturing is carried on, and from which its merchandise is sold in the states of Missouri, Arkansas, Illinois, Kentucky, North Carolina, Pennsylvania, New York and New Hampshire. Its merchandise is sold in Washington through its several selling divisions or branches, the following branches being the only ones doing any sort of business with residents of the state of Washington: Roberts, Johnson & Rand, Peters, Friedman-Shelby and Specialty. So far as appears from the record, these branches seem to be no more than designated sales units to handle appellant's products.

Appellant has no place of business in this state. It makes no contracts, either for sale or purchase in this state. It maintains no stock of merchandise in this state, and makes no deliveries of merchandise in intrastate commerce in this state.

In its business in the state of Washington for four years, 1937 through 1940, appellant employed from eleven to thirteen salesmen, all of whom resided in the state, and whose principal activity was the solicitation of orders for appellant's merchandise to be delivered in this state. Commissions paid to these salesmen for the four years indicate the volume and extent of business carried on by the salesmen for appellant. It is evident that this business did not consist of isolated transactions, but was a continuous course of business, the total commissions paid for 1937 being $36,098.19, for 1938, $32,075.63 for 1939, $33,846.44, and for 1940, $31,879.19, or a total for commissions for the four year period, $133,899.45.

These salesmen are under the direct supervision and control of sales managers, the latter being located in St. Louis. Each salesman has a designated territory within the state. Salesmen have a sample line consisting of one shoe of a pair. These samples belong to appellant, and are given to the salesmen to display to prospective purchasers. Some of the salesmen rent sample rooms in business buildings, and some maintain no permanent sample rooms, but rent rooms in hotels or business buildings in the various cities in their territory. The expense of such rental is paid by the salesmen, and they are later reimbursed by appellant. The authority of the salesmen is limited to exhibiting to merchants who are probable buyers samples of merchandise for which they solicit orders, endeavoring to procure orders on prices and terms fixed by appellant. If orders are obtained, the salesmen transmit them to appellant's office in St. Louis, for acceptance or rejection. If the orders are accepted by appellant, the merchandise called for by such orders is shipped f. o. b. shipping point, from outside the state of Washington. No salesman has authority to bind appellant with any contract, or to finally conclude any transaction in its behalf, nor can be make collections. Salesmen are not permitted to engage in an independently established trade, occupation, profession, or business of the same nature as is involved in their employment by appellant.

The only thing which it can be said Mr. Alley's testimony added to the stipulated facts may be gathered from his somewhat detailed account of the conventions held each year at St. Louis, which the salemen are required to attend, their expenses being paid by appellant. From this testimony it appears that a regular program is followed by appellant through this contact with its salesmen, to keep the company's business at a high level, to eliminate, so far as possible, difficulties arising in the particular territories, and to discuss the credit of Washington purchasers and customers with whom appellant is doing business. The company's business in this state is apparently discussed in great detail, and the salesmen are instructed as to the line of shoes they are to offer to the trade, the method of selling, and conditions of selling. They also receive information with reference to construction and new types and kinds of shoes which are to be offered to the trade.

Rem.Supp. 1941, § 9998-114c, provides:

'At any time after the Commissioner shall find that any contribution or the interest thereon have become delinquent,[22 Wn.2d 151] the Commissioner may issue a notice of assessment specifying the amount due, which notice of assessment shall be served upon the delinquent employer in the manner prescribed for the service of summons in a civil action, except that if the employer cannot be found within the state, said notice will be deemed served when mailed to the delinquent employer at his last known address by registered mail.'

Rem.Rev.Stat. § 226, provides the manner of service of summons in civil actions. Subdivision 9 of § 226 provides that if the suit be against a foreign corporation doing business within this state, the summons shall be served by delivery of a copy thereof to any agent, cashier or secretary thereof.

In the instant case, both methods of service provided for by § 9998-114c, supra, were followed.

The principal question with which we are here concerned is whether or not appellant was doing business in the state of Washington so as to make it amenable to process of the courts of this state.

Before discussing some of the authorities dealing with the question last above stated, we desire to call attention to the fact that we shall first consider the specific question of whether or not appellant is so doing business within this state as to make it amenable to process by the courts of this state, and not whether it is so doing business as to require it, in certain instances, to pay the annual...