Georgia Lumber & Veneer Corp. v. Solem Machine Co., Civ. A. 1165.

• Citation: 150 F. Supp. 126
• Decision Date: 19 February 1957
• Docket Number: Civ. A. 1165.
• Parties: GEORGIA LUMBER AND VENEER CORPORATION, Plaintiff, v. SOLEM MACHINE COMPANY, Defendant.
• Court: U.S. District Court — Middle District of Georgia

150 F. Supp. 126

GEORGIA LUMBER AND VENEER CORPORATION, Plaintiff, v. SOLEM MACHINE COMPANY, Defendant.

Civ. A. 1165.

United States District Court M. D. of Georgia, Macon Division.

February 19, 1957.

Jones, Sparks, Benton & Cork, Macon, Ga., Alex S. Boone, Jr., Irwinton, Ga., Aaron L. Stein, Chicago, Ill., for plaintiff.

Martin, Snow & Grant, Macon, Ga., for defendant.

BOOTLE, District Judge.

In the State Court, the plaintiff, a Georgia corporation, sued the defendant, an Illinois corporation, for damages resulting from alleged breach of warranties of merchantability and fitness for purpose intended of a sander manufactured and sold by the defendant to plaintiff for smoothing and finishing the surface of plywood produced by plaintiff. The suit was served upon the Secretary of State in accordance with Section 22-1508, Georgia Code Annotated. Prior to the defendant's removal of the suit to this Court, it filed in the State Court its special appearance for the purpose of challenging the jurisdiction of that Court and filed also its motion to quash service advancing the contentions that it is an Illinois corporation, was not doing business in the State of Georgia within the purview of Sections 1507-1510 of Title 22, Georgia Code Annotated, and that, therefore, the service upon the Secretary of State was ineffectual. This plea to the jurisdiction and motion to quash service were not passed upon by the State Court and stand now for disposition by this Court upon the pleadings, affidavits and documentary evidence.

I find the facts to be as stated in the footnote.¹

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This question of jurisdiction consequent upon doing business is answerable by Georgia law. Rosenthal v. Frankfort Distillers Corp., 5 Cir., 193 F.2d 137(3); Smith v. Ford Gum & Machine Co., 5 Cir., 212 F.2d 581 (2 and 3). This would be true if the case had originated in this Court, Smith v. Ford Gum & Machine Co., supra, and is even more plainly true inasmuch as the case originated in the State Court and was removed to this Court, Rosenthal v. Frankfort Distillers Corp., supra; Polizzi v. Cowles Magazines, 345 U.S. 663, 73 S.Ct. 900, 97 L.Ed. 1331. In a removal case Federal jurisdiction is derivative and the Federal Court must pass upon objections to the jurisdiction of the State Court. Ultra Sucro Co. v. Illinois Water Treatment Co., D.C.S.D.N.Y., 146 F. Supp. 393. The Federal law on this question of doing business comes into play only when the State law asserts jurisdiction and the foreign corporation defendant then claims that the jurisdiction so asserted violates the due process clause or the interstate commerce clause of the Federal Constitution. Rosenthal v. Frankfort Distillers Corp., supra.

We find the Georgia law expressed in the following cases: Vicksburg, Shreveport & Pacific Ry. v. De Bow, 148 Ga. 738, 98 S.E. 381; Southeastern Distributing Co. v. Nordyke & Marmon Co., 159 Ga. 150, 125 S.E. 171; Suttles v. Owens-Illinois Glass Co., 206 Ga. 849, 59 S.E.2d 392; Redwine v. Dan River Mills, Inc., 207 Ga. 381, 61 S.E.2d 771; Redwine v. United States Tobacco Co., 209 Ga. 725, 75 S.E.2d 556; Smith v. Nolting First Mortgage Corp., 45 Ga.App. 253, 164 S.E. 219; Dowe v. Debus Mfg. Co., 49 Ga.App. 412, 175 S.E. 676; Montag Bros., Inc., v. State Revenue Comm., 50 Ga.App. 660, 179 S.E. 563; and Williams v. American Refrigerator Transit Co., 91 Ga.App. 522, 86 S.E.2d 336.

Judge George, in Vicksburg, Shreveport & Pacific Ry. v. De Bow, supra, wrote, 148 Ga. on page 744, 98 S.E. on page 384, "Where a foreign trading or manufacturing corporation has a resident agent within this state, who through solicitation obtains an order from a person within this state, although such order is taken subject to the approval of the corporation at its foreign office or place of business, such corporation may be required to answer in this state to such person for a cause of action arising out of business or transactions so initiated," (Emphasis supplied), and goes on to say "While a foreign corporation, with a soliciting agent within the state, may be required to answer here for a breach of contract or duty arising out of business so procured, the mere solicitation of business within the state, `unaccompanied by a local performance of contract obligations,' is not `doing business' within the state, so as to bring the corporation within the jurisdiction of the courts of the state." (Emphasis supplied.)

In Southeastern Distributing Co. v. Nordyke & Marmon Co., supra, the Court, 159 Ga. on page 159, 125 S.E. on page 175, quotes approvingly from People's Tobacco Co. v. American Tobacco Co., 246 U.S. 79, 38 S.Ct. 233, 62 L.Ed. 587, "`As to the continued practice of advertising its wares in Louisiana, and sending its soliciting agents into that state, * * * the agents having no authority beyond solicitation, we think the previous decisions of this court have settled the law to be that such practices did not amount to that doing of business which subjects the corporation to the local jurisdiction for the purpose of service of process upon it'", and then adds "These agents were not domiciled in the state, and did not have the right or authority to make sales on account of the American Tobacco Company, collect money, or extend credit for it. Under these facts the Supreme Court of the United States held that the American Tobacco Company was not doing business in the state of Louisiana so as to be subject to the processes of the courts of that state." (Emphasis supplied.)

In the recent case of Redwine v. United States Tobacco Co., 1953, 209 Ga. 725, 75 S.E.2d 556, 558, the Court said:

"In Vol. 13 Words and Phrases, p. 126, under `doing business', will be found a collection of authorities dealing with what activities will constitute `doing business.' It seems to be rather well established by all the authorities that `doing business' in order to incur tax liability under statutes imposing taxes on persons `doing business' in a State means that a foreign corporation must transact some substantial part of its ordinary business, and that it must be continuous in character as distinguished from a mere casual or occasional transaction; that a single or several transactions is not necessarily conclusive on the question of whether the corporation is `doing business.' Some courts have held that the occasional sale of samples previously sent into a State, was not, alone, sufficient to amount to `doing business.' The term `doing business' has been held to mean more than the term `transacting business.' It has been held that the fact that, on an occasional failure of a party ordering goods to take them, the broker through whom they were ordered was requested by the corporation to sell them on its account did not amount to `doing business.' These rulings are all by courts of other states and will be found in Words and Phrases, supra.

"Whether a person makes money or not, of course, does not determine his liability for taxes under the statute here considered. But whether or not the activities under consideration are engaged in for the purpose of making a profit is important. The isolated instances alleged in the petition above quoted were not for the purpose of making a profit, and none was ever realized or intended to be realized."

In Dowe v. Debus Mfg. Co., supra, Presiding Judge Jenkins wrote:

"`It is essential to the legal rendition of a personal judgment against a foreign corporation, otherwise than by its voluntary appearance, that the corporation be doing business within the state.' Vicksburg, Shreveport & Pacific Ry. v. DeBow, 148 Ga. 738(1), 98 S.E. 381. The character of the activities engaged in by the foreign corporation, which are essential to give the courts of this state such jurisdiction over it, do not consist in the mere solicitation of business within this state by persons seeking and taking orders on commission and transmitting them to the home office for acceptance and shipment, even though the foreign corporation may lend its assistance to the local salesmen by advertising its product within the state, and may aid, train and assist them, in increasing their efficiency in the discharge of their own activities as local salesmen, with the result that such increased efficiency may indirectly have the effect of increasing or expanding the business of the foreign corporation,"

thus recognizing the general rule that "mere solicitation of business" will not suffice. Then he continued:

"But in order for the foreign corporation to be doing business within this state in the sense which would subject it to personal judgment by the courts of this state, it must either maintain an office or place of business within the state, or else there must be a local performance on its part of its own contractual obligations to customers, otherwise than by the mere interstate shipment of goods sold by local solicitors. Southeastern Distributing Co. v. Nordyke & Marmon Co., 159 Ga. 150, 157-161, 125 S.E. 171; Smith v. Nolting First Mortgage Corp., 45 Ga.App. 253(1), 254, 164 S.E. 219; People's Tobacco Co. v. American Tobacco Co., 246 U.S. 79, 38 S.Ct. 233, 62 L.Ed. 587."

In the instant case it would not help much to inquire, as was carefully done in the case of Frene v. Louisville Cement Co., 77 U.S.App.D.C. 129, 134 F. 2d 511, 146 A.L.R. 926, what minimal activities in addition to mere solicitation will suffice to give jurisdiction because here we do not have even the "mere solicitation." The defendant has solicited no business in Georgia through agents domiciled or stationed here, or sent here. A manufacturer's agent, or broker, procured the sales of all items, except the minor repair and supply items and these were ordered by the Georgia customers directly from the defendant's home office and place of business in Illinois.

The only "local performance of contract obligations" done by defendant in Georgia was the furnishing of the "services of demonstrator to...