Cohen v. American Window Glass Co.

• Citation: 41 F. Supp. 48
• Parties: COHEN et al. v. AMERICAN WINDOW GLASS CO.
• Decision Date: 30 September 1941
• Court: U.S. District Court — Southern District of New York

41 F. Supp. 48

COHEN et al. v. AMERICAN WINDOW GLASS CO.

District Court, S. D. New York.

September 30, 1941.

Meyer Kraushaar, of New York City, for plaintiffs.

Van Vorst, Siegel & Smith, of New York City, for defendant.

RIFKIND, District Judge.

Defendant moves to dismiss on three grounds:

1. the insufficiency of the complaint;

2. the insufficiency of the service of process;

3. lack of jurisdiction of the subject matter.

According to the complaint plaintiffs are Class A stockholders of the defendant. The defendant is a Pennsylvania corporation authorized to do business in New York. The relief requested in the complaint is that:

1. It be determined that a certain dividend heretofore paid to preferred stockholders is an asset of the defendant, recoverable against its directors.

2. A certain plan of merger approved by defendant's directors be declared illegal.

3. The defendant be enjoined both temporarily and permanently from causing the merger plan to be approved by its stockholders.

4. A receiver under the laws of Pennsylvania be appointed.

An application by plaintiffs for a temporary injunction was denied by Judge Conger on August 19, 1941.

The facts relating to the service of process are as follows:

1. Service on Steele.

The summons and complaint were first served on Charles W. Steele who was a salesman in the employ of defendant. Steele's authority is limited to the solicitation of orders subject to defendant's acceptance at its home office in Pittsburgh. He does not have charge of defendant's New York office. He is one of several salesmen soliciting orders out of the New York office, working under the supervision of defendant's New York salesmanager.

If the summons were served in compliance with either federal rule or state practice it would be adequate, Rule 4(d) (7), Federal Rules Civil Procedure, 28 U.S.C.A. following section 723c; Real Silk Hosiery Mills v. Philadelphia Knitting Mills, 3 Cir., 46 F.2d 25. The service effected upon Steele complies with neither federal nor state practice. Steele is not a "managing or general agent" as that term is used in Rule 4(d) (3) F.R.C.P.; nor is he a "managing agent" as prescribed in Section 229(3) of the New York Civil Practice Act.

The general rule is well stated in Taylor v. Granite State Provident Ass'n, 136 N.Y. 343, 32 N.E. 992, 993, 32 Am.St. Rep. 749, where the court said: "A managing agent must be some person invested by the corporation with general powers involving the exercise of judgment and discretion, as distinguished from an ordinary agent or attorney, who acts in an inferior capacity, and under the direction and control of superior authority, both in regard to the extent of his duty and the manner of executing it". See also: Diamond v. New York, S. & W. R. Co., D.C., 18 F. Supp. 605; Wolitz v. India Tire Co., D. C., 10 F.Supp. 53; Lauricella v. Evening News Publishing Co., D.C., 15 F.Supp. 671; Fort Wayne Corrugated Paper Co. v. Anchor Hocking Glass Corp., D.C., 31 F. Supp. 403; Loeb v. Star & Herald Co., 187 App.Div. 175, 175 N.Y.S. 412; Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 115 N.E. 915; Cochran Box & Mfg. Co. v. Monroe Board Co., 232 N.Y. 503, 134 N.E. 547; Real Silk Hosiery Mills v. Philadelphia Knitting Mills, supra.

Williams v. Bruce's Juices, Inc., D.C., 35 F.Supp. 847 construes a Kentucky statute in the light of the interpretation thereof by the highest court of that state. It does not govern the disposition of the case at bar.

None of the authorities has extended the meaning of managing or general agent to include one who is a mere salesman, locally managed, without discretion in the conduct of the local office except to solicit orders for acceptance by the home office of the corporation. The service upon Steele was, therefore, ineffective.

2. Service upon secretary of state.

Copies of the summons and complaint were also delivered to the Secretary of State. The circumstances relating thereto are not in dispute. In 1915 defendant designated Benjamin Griffen as its agent to receive service of process in New York. Griffen died. No subsequent designation of an agent has been filed by defendant. Section 213 of the General Corporation Law of the State of New York provides:

"Existing authority and designation continued. Every corporation which, at the time this section takes effect, has authority to do business in the state pursuant to a certificate heretofore granted by the secretary of state, shall continue to have such authority. The designation heretofore made by any such corporation of a person upon whom all process against it may be served within the state shall continue in full force and effect until the death, resignation or removal from the state of the person so designated or the filing of an amended statement and designation in accordance with section two hundred fourteen revoking such designation, and thereupon the secretary of state shall become the agent of the corporation upon whom all process in any action or proceeding against it may be served within the state."

This section should be read in connection with Section 229(2) of the New York Civil Practice Act.

A complicating feature is the fact that the pertinent statute was amended after the filing by defendant of its designation of Griffen in 1915. The law then in effect (Section 16 of the General Corporation Law, Laws of 1909, Chapter 28) limited service upon the Secretary of State, in the event of the death or removal of the person designated by the foreign corporation, to "an action upon any liability incurred within this state * * *". Consol. Laws N.Y. c. 23. No such limiting language appears in Section 213 of the General Corporation Law now in effect.

The general principles applicable to service upon the Secretary of State can be briefly stated:

1. When a foreign corporation doing business within the state has not appointed a person to receive service of process then service upon a state official pursuant to state statute is valid as to causes...