Rufo v. Bastian-Blessing Co.

Decision Date17 July 1961
Docket NumberBASTIAN-BLESSING
PartiesClementino RUFO, in his own right; Clementino Rufo; and Anna Rufo, his wife; Donata Cara: David Lanni, a minor, by John F. Lanni, his guardian and John F. Lanni, in his own right, v.COMPANY, a Foreign Corporation and Dockson corporation, a Foreign Corporation. (Five cases.)
CourtPennsylvania Supreme Court

Theodore Voorhees, Philip Price, William H. Lowery and Barnes, Dechert, Price, Myers & Rhoads, Philadelphia, for appellant.

Rudolph J. Di Massa, Philadelphia, for appellees.

Before CHARLES ALVIN JONES, C. J., and BELL, MUSMANNO, BENJAMIN R. JONES, COHEN, BOK, and EAGEN, JJ.

BENJAMIN R. JONES, Justice.

These are appeals by Bastian-Blessing Company [Company], an Illinois corporation not registered in Pennsylvania, from an order of the Court of Common Pleas No. 1 of Philadelphia County which order dismissed the company's preliminary objections to the jurisdiction of the court over its person and held that, under the law and the facts, the Company was amenable to suit in Pennsylvania and subject to the jurisdiction of the Pennsylvania court.

On July 12, 1960, Clementino Rufo [Rufo] and others filed a complaint in assumpsit in the Court of Common Pleas No. 1 of Philadelphia County against the company for breach of implied warranties of fitness for intended purpose, merchantable quality and trade usage. This complaint was served upon the company through the Secretary of the Commonwealth, purportedly in accord with the provisions of Section 1011, subd. B of the Business Corporation Law of May 5, 1933, P.L. 364. 1

The company filed preliminary objections to the complaint challenging the jurisdiction of the court over its person upon the grounds that (1) it was not 'doing business' in Pennsylvania, and (2) the action did not arise out of any 'acts or omissions' of the company in Pennsylvania.

The sole issue is whether the service of process upon the company was valid under the provisions of Section 1011, subd. B which, in pertinent part, provide: 'B. Any foreign business corporation which shall have done any business in this Commonwealth, without procuring a certificate of authority to do so from the Department of State, shall be conclusively presumed to have designated the Secretary of the Commonwealth as its true and lawful attorney authorized to accept, on its behalf, service of process in any action arising out of acts or omissions of such corporation within this Commonwealth.' (Emphasis supplied.)

Section 1011, subd. B clearly sets forth two jurisdictional requirements which must be satisfied before a non-registered foreign corporation may be validly served with process through the Secretary of the Commonwealth: (1) the corporation must have 'done business' in the Commonwealth as that phrase is defined in Section 1011, subd. C 2 and (2) the action must arise out of 'acts or omissions' of the corporation within the Commonwealth.

Section 1011, subd. C provides: 'For the purposes of this section, the entry of any corporation into this Commonwealth for the doing of a series of similar acts for the purpose of thereby realizing pecuniary benefit or otherwise accomplishing an object, or doing a single act in this Commonwealth for such purpose, with the intention of thereby initiating a series of such acts, shall constitute doing business.' Our examination and analysis of the instant record 3 indicates that the company has done business in Pennsylvania within the intendment of Section 1011, subd. C.

The company, a manufacturer of soda fountain and food service equipment as well as control equipment for liquefied petroleum and other high pressure gases, is an Illinois corporation with its principal place of business in Chicago. It has no subsidiary, division, branch or affiliate which does business in Pennsylvania, nor does it own, lease, maintain or otherwise control any office, property or assets of any sort within the Commonwealth.

The soda fountain equipment is sold through distributors, three of whom are located in Pennsylvania. These distributors purchase the equipment from the company for the purpose of its resale within certain assigned territory and each of these distributors has a written agreement with the company. This agreement recites, inter alia, that: (1) the distributor is not the company's agent or employee for any purpose whatsoever; (2) that the distributor is to develop and maintain sufficient sales personnel to promote aggressively the sale of the company's equipment, provide and maintain a representative display of the equipment, purchase and carry in stock the company's service and repair parts, maintain contacts in order to get the company's equipment installed in new projects, install and service all equipment purchased and resold, conform faithfully to the company's sales plans and policy, refrain from selling items similar to equipment covered in the agreement until after all reasonable efforts to sell the company's equipment have been exhausted, arrange all financing or deferred sales payment terms and arrange follow-up of sales to promote and maintain the goodwill of customers for the company's equipment; (3) the distributor 'shall charge its customers the price for the equipment as set forth in the [Company's] published prices'; (4) the distributor is expected to secure an adequate amount of business, such amount being measured by sales quota assigned by the company; (5) the company retains the right to make direct sales in the territory and effect changes in the assigned territory, the equipment or discounts; (6) the agreement, not assignable, is subject to termination for violation of any of its terms. Under this type of agreement, three Pennsylvania distributors purchased from the company for resale the company's soda fountain and food service equipment.

While the company had no distributors for its control equipment, i. e. for liquified petroleum and other high pressure gases, it did have two sales representatives who covered Pennsylvania. These sales representatives were employed under a so-called 'Rego-Division Sales Arrangement' whereunder they agreed to devote their entire time and efforts to the promotion and sale of the company's products in accordance with the company's instruction and in company-designated territory. While the agreement disclaims designation of the sales representative as an agent, the representative is paid a monthly salary plus a commission when the sales exceed an assigned quota and the sales representative is required to insure his automobile against public liability to limits company-prescribed.

Mr. Lemon, one of the two sales representatives, 4 testified that his duties required him to 'solicit business, assist customers in the selection of equipment, help with service problems which they may encounter and, that, in connection with the sales to customers, he contacts all customers as needed, convince them of the quality of the equipment and service out of it, assist them with their service problems if they have any, and generally try to convince them that it is to their best interests to purchase certain types of Rego equipment.' Customers are classified as such only where they 'may require equipment quite frequently, week by week, month by month and that, having standardized all their equipment, select the equipment that they need, send the order to Chicago for acceptance by the Chicago office'. It was estimated that these customers were visited by Mr. Lemon about two to four times a year--six times at most. On these visits, Mr. Lemon might make out the order for the customer, but the general nature of the visits was described as 'goodwill, assistance with technical problems, public relations and keeping the Bastian-Blessing name in the foreground'. Mr. Lemon also adjusted customer's complaint when authorized.

All sales of the company's products, whether soda fountain or control equipment, were made in Chicago where the company either accepted or rejected the orders of customers who sent in orders to Chicago and all products were shipped directly from the company's plants f. o. b. Chicago or Grand Haven, Michigan. The company has on other financial arrangement with the purchaser than the standard thirty day net. Pennsylvania orders, accepted in Chicago, account for about three per cent of the company's income--about $480,000 to $600,000 annually.

We find no difficulty in holding that the activities of this company carried on and pursued in this Commonwealth through the medium of the distributors,--bound to the company by restrictive type agreements--and, especially, the activities of the sales representatives--full-time employees regularly and systematically soliciting business and engaging in other activities for the company--constituted 'doing business' within the Commonwealth. The sales representatives certainly carried on and performed a 'series of similar acts' in Pennsylvania; to hold that their purpose was not the realization of pecuniary benefit is to ignore the obvious.

The company contends that SWAVELY V. VANDEGRIFT, 397 PA. 281, 154 A.2D 779,* controls the present situation. In Swavely, the sales representatives', who were not full time salaried employees, activities were limited to making recommendations of prospective distributors, and they neither solicited business nor engaged in the other activities which are present in the case at bar. Swavely is clearly distinguishable from the facts in the case at bar. The instant company entered the Commonwealth and had been 'doing business' within the definition of Section 1011, subd. C.

However, even though this company had been 'doing business' within the meaning of Section 1011, subd. B, did the action asserted in this assumpsit complaint arise out of any 'acts or omissions' of the company in Pennsylvania as required by Section 1011, subd. B?

This Court has never...

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