Garber v. Bancamerica-Blair Corporation
| Citation | 285 N.W. 723,205 Minn. 275 |
| Decision Date | 12 May 1939 |
| Docket Number | No. 31906.,No. 31913.,31906.,31913. |
| Parties | GARBER v. BANCAMERICA-BLAIR CORPORATION et al. RAND CO. v. SAME. |
| Court | Supreme Court of Minnesota (US) |
Appeal from District Court, Hennepin County; A. W. Selover, Judge.
Actions by Gabriel Garber and by the Rand Company against the Bancamerica-Blair Corporation a New York corporation, and the Bancamerica-Blair Corporation, a Delaware corporation, to rescind the sales of securities within the state by defendants to plaintiffs in violation of the Blue Sky Law and to recover judgment for the purchase price. From orders denying the motions of the Bancamerica-Blair Corporation, a New York corporation, to set aside the service of summons on it, on ground that the court was without jurisdiction, the Bancamerica-Blair Corporation, a New York corporation, appeals.
Reversed.
Junell, Fletcher, Dorsey, Barker & Colman, of Minneapolis, for appellant.
Benjamin Segal, of Minneapolis, for respondent Garber.
Snyder, Gale & Richards and Edmund T. Montgomery, all of Minneapolis, for respondent Rand Co.
The Bancamerica-Blair Corporation, a New York corporation, and the Bancamerica-Blair Corporation, a Delaware corporation, are defendants in both cases. The New York corporation appeared specially in each case and moved to set aside the service of the summons upon it upon the grounds that the court was without jurisdiction, and appeals from the orders denying the motions.
The actions were for rescission of sales of securities within the state by defendants to plaintiffs in violation of the Blue Sky Law of Minnesota (Mason Minn.St.1927, §§ 3996-1 to 3996-28) and to recover judgment for the purchase price. The purchases of the Rand Company amounted to $114,600, of which $23,000 was purchased on May 3, 1929, and $91,600 on October 8, 1929. Plaintiff Garber purchased $2,300 of securities on September 23, 1929.
Jurisdiction of appellant is predicated on its having done business in the state. Apparently jurisdiction of the Delaware corporation was conceded, since the service made upon its agent authorized to accept service of process upon it within the state was not questioned. The motion was heard upon the complaint and voluminous affidavits, containing much hearsay to which neither party objected. There was a showing that appellant was doing business in the state through the Delaware corporation from May, 1929, to October, 1931. Although the showing was strongly disputed, we assume without holding that it sustains a finding that appellant during the mentioned period was doing business in the state of Minnesota.
The complaints allege that "on or about October 15, 1931, defendants closed their offices and places of business and discontinued their transaction of business in, and withdrew and departed from, the State of Minnesota, and at all times thereafter up to June 22, 1937, resided outside of the State of Minnesota." The Delaware corporation alone returned to the state in 1937, leased an office from the plaintiff Rand Company, affixing its corporate seal to the lease, and had its employes in charge of such office. There is no showing that after it returned to the state in 1937 it transacted any business here for the appellant or that it acted as appellant's agent. In fact, the evidence does not show what business, if any, it transacted. In May, 1937, when it is admitted both corporations were absent from the state, the Delaware corporation took a release in settlement of a lawsuit, which released it and appellant from liability to the plaintiff named therein.
The summons and complaint were served upon the Delaware corporation and its agents as the agents of appellant in the Garber case on February 28, 1938, and in the Rand Company case on March 19, 1938.
Service was attempted under Mason Minn.St.1927, § 9231(3), which provides that service of the summons upon a foreign corporation may be made upon any of its officers or agents "within the state." While there was no evidence that appellant was doing business in the state through the Delaware corporation as its agent after the latter's return to the state in June, 1937, plaintiff claims that it has shown an agency by evidence which was not disputed. Appellant owns all the capital stock of the Delaware corporation. The two corporations have identical names without anything to distinguish one from the other and substantially the same officers and directors. They have their main offices in the same rooms in a building in New York. But, each held separate stockholders' and directors' meetings, kept separate books, records and accounts, transacted its business with its own capital and through its own employes and maintained its own branch offices.
Appellant contends that the court was without jurisdiction upon the grounds that it was not doing business in the state at the time of the attempted service of the summons upon it. Plaintiffs contend that the evidence permits a finding that appellant was doing business in the state at that time, since an agency once shown to have existed is presumed to have continued in view of the parent-subsidiary relationship of the two corporations, which dates back to May, 1929. The agency referred to is the one which we have assumed for purposes of decision to have existed during the period from 1929 to 1931.
1. The question is whether a foreign corporation which did business in the state without having designated an agent for service or consented to jurisdiction is subject to jurisdiction after it has ceased doing business in and has withdrawn from, the state. A state, absent consent, may exercise jurisdiction over a foreign corporation only if it is doing business in the state at the time of the service of process. Dahl v. Collette, 202 Minn. 544, 279 N.W. 561; Restatement, Conflict of Laws, § 92. Jurisdiction is predicated on doing business in the state at the time of service of process to conform with inherent and constitutional limitations. "The foundation of jurisdiction is physical power," as Mr. Justice Holmes pointed out in McDonald v. Mabee, 243 U.S. 90, 91, 37 S.Ct. 343, 61 L.Ed. 608, L.R.A.1917F, 458. State courts exercise state power, which is limited by the territorial boundaries of the state to persons and things within its borders. Process of state courts is effective only within the state. Attempted service outside the state is of no effect and void. From this inherent limitation of state power springs the necessity for service of process upon the defendant within the state. Under the due process clause of the 14th amendment of the constitution of the United States, U. S.C.A., a judgment rendered by a state court without jurisdiction acquired by service of process upon the defendant within the state is lacking in due process of law and is absolutely void, even in the state of its rendition. Pennoyer v. Neff, 95 U.S. 714, 24 L.Ed. 565; Riverside & Dan River Cotton Mills v. Menefee, 237 U.S. 189, 35 S.Ct. 579, 59 L.Ed. 910; Sellars v. Sellars, 196 Minn. 143, 264 N.W. 425.
Numerous theories have been advanced to justify doing business in the state as the basis of jurisdiction. One line of cases holds that there is implied consent to jurisdiction where a foreign corporation voluntarily does business in a state other than that of its creation, Lafayette Ins. Co. v. French, 18 How. 404, 15 L.Ed. 451; St. Clair v. Cox, 106 U.S. 350, 1 S.Ct. 354, 27 L.Ed. 222; another group of cases holds that in such a case there is corporate presence of the foreign corporation in the state, Philadelphia & Reading Ry. Co. v. McKibbin, 243 U.S. 264, 37 S.Ct. 280, 61 L.Ed. 710; and another holds that the foreign corporation has thereby submitted itself to the state's jurisdiction, People's Tobacco Co. v. American Tobacco Co., 246 U.S. 79, 38 S.Ct. 233, 62 L.Ed. 587, Ann. Cas.1918C, 537; Restatement, Conflict of Laws, § 92, Comment a. See 25 Col. Law Review 1032; 17 Minn.L.Rev. 270; 19 Minn.L.Rev. 375; 1 Beale, Conflict of Laws, § 87.1 to § 93.1. Perhaps there are still other theories. The so-called consent and submission to jurisdiction, at least so far as they are subjective, and corporate presence, are of course mere fictions and generally are directly opposite to the real facts of the case. Pennsylvania Fire Ins. Co. v. Gold Issue Min. & M. Co., 243 U.S. 93, 37 S.Ct. 344, 61 L.Ed. 610; Flexner v. Farson, 248 U.S. 289, 39 S.Ct. 97, 63 L.Ed. 250; 14 Cal.L.Rev. 12. Perhaps it would be more accurate to say that the foreign corporation has become amenable to the jurisdiction of the state.
The problem is to reconcile jurisdiction of the corporation, which is outside the state, with inherent and constitutional limitations of state power. The justification for holding that doing business in the state is a basis for jurisdiction lies in the assumption that state power extends to the foreign corporation by reason of its activity in the state. This view has been adopted as to non-resident individuals who do acts subject to special regulation by the state. Henry L. Doherty & Co. v. Goodman, 294 U.S. 623, 55 S.Ct. 553, 79 L.Ed. 1097. By whatever theory doing business in the state is justified as the basis of jurisdiction, in the particular case jurisdiction is determined by the nature and extent of the corporate activity within the state. Restatement, Conflict of Laws, § 167; 50 Harvard L. Rev. 892 and 1133.
Speaking in terms of corporate presence, in Bank of America v. Whitney Central National Bank, 261 U.S. 171, 43 S.Ct. 311, 67 L.Ed. 594, the court said that jurisdiction flows from the fact that the corporation itself does business in the state in such manner and to such an extent that its actual presence is established. In Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 115 N.E. 915, the court in applying the corporate presence theory said that the question was whether the corporate activity in the state was such that it could be said to be "here" — that is, present in the state....
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