Johns v. Bay State Abrasive Products Co.

• Decision Date: 24 March 1950
• Docket Number: No. 4874.,4874.
• Citation: 89 F. Supp. 654
• Parties: JOHNS v. BAY STATE ABRASIVE PRODUCTS CO. et al.
• Court: U.S. District Court — District of Maryland

89 F. Supp. 654

JOHNS v. BAY STATE ABRASIVE PRODUCTS CO. et al.

No. 4874.

United States District Court D. Maryland. Civil Division.

March 24, 1950.

Philip V. Hendelberg, Baltimore, Md., W. Hamilton Whiteford, Baltimore, Md., Eugene A. Alexander, III, Baltimore, Md., for plaintiff.

David R. Owen, Baltimore, Md., Richard F. Cleveland, Baltimore, Md., Semmes, Bowen, & Semmes, Baltimore, Md., for Reed Roller Bit Co.

Charles C. G. Evans, Baltimore, Md., Jesse Slingluff, Jr., Baltimore, Md., Marbury, Miller & Evans, Baltimore, Md., Michael Crocker, Baltimore, Md., for Bay State Abrasive Products Co.

CHESNUT, District Judge.

This case was originally instituted in a Maryland State Court and removed to this court on the ground of diversity of citizenship. The defendants, both foreign corporations, have severally moved to dismiss the suit on the ground that they are respectively not subject to the jurisdiction of the court as they are foreign corporations not doing business in the State. The motions have been heard upon affidavits and oral evidence submitted by the respective defendants.

While the merits of the case are not presently to be considered, it will help to an understanding of the question involved on the motions to state very briefly the nature of the complaint which covers five long closely typewritten pages. Very briefly summarized, it is this. The plaintiff was employed as a mechanic by Henry M. Patterson, trading as the Eastern Sales and Engineering Company, located in Baltimore City, which was engaged in manufacture of shafts for light poles. In the manufacture of the shafts the metal is rolled into tubular form requiring welding of the two edges of metal; and further requiring the removal of the excess welding material which accumulates in the process. Patterson made inquiry from the local representative (a Mr. Haines) of one of the defendants, the Reed Roller Bit Company, as to the best type of grinding wheel to be used on one of the latter's pneumatic grinding machines. Haines recommended the use of an abrasive wheel manufactured by the other defendant the Bay State Abrasive Products Company. Thereafter Patterson bought a Reed Roller grinding machine and also separately a wheel made by the Bay State Company from the Carey Machinery and Supply Company, an independent Baltimore dealer. During the use of these two instruments in combination, in the course of his mechanical work for Patterson, the wheel shattered and personally injured the plaintiff. He was given a weekly award against his employer under the Maryland Workmen's Compensation Law, Code Supp.1947, art. 101, § 1 et seq., and, no suit having been brought by the employer or its insurance carrier, this suit for alleged joint or single negligence was brought by the employee Johns against the defendants jointly or separately.

From the evidence in support of the motions I find the following facts. The Bay State Abrasive Products Company is a Massachusetts corporation which has never qualified or registered to do business in Maryland. It has not appointed any agent for service of process in the State, nor was any agent or representative of it served with process in Maryland, and it has not waived the service of such process by voluntary appearance. The suit is not based on any action of that defendant within Maryland. The principal office and factory of the corporation are located in Westboro, Massachusetts. It has no resident agent in the State of Maryland nor any office in the State. It is not listed in any telephone directory in the State and has no bank account or financial transactions therein. It has no property located in Maryland other than that in transit to customers from outside the State. It has a sales promotion agent named C. A. Ahlstrom whose residence and office therein is located in Glenside, Pennsylvania. He is paid by a salary, commission and expense allowance for sales promotion work in part of Pennsylvania, Maryland, Virginia and possibly other nearby States. His duties are solely those of sales promotion. He has no authority to accept orders and does not in fact carry order forms. He visits such sales prospects as he considers likely to be interested in the purchase of Bay State abrasive tools. Orders for the purchase of the Company's products are sent directly by the purchaser to Westboro, Mass., or occasionally sent in by Ahlstrom but he does not accept any of the said orders or accept any payment thereon. All bills therefor are sent from the office of the Company in Westboro, and all payments there made to it. He has no authority to make any contracts for the Company but only to promote sales of its products and demonstrate their utility to respective customers. He estimated that he spent only one-fifth of his time in Maryland. The gross annual sales of the Bay State Company are about $5,000,000 and the annual sales in Maryland about $10,000 to $15,000. Its products are sold in this State by wholly independent dealers who purchase from the Company directly by interstate shipment.

The facts with regard to the Reed Roller Bit Company are quite similar. It is a Texas corporation with its principal office and plant at Houston, Texas. It is a large producer of oil-well drilling bits. A few years ago it bought out the Cleveland Tool Company engaged in the manufacture of various pneumatic tools, and conducts the business thereof from Houston as the Cleco Division of the Reed Roller Bit Company. The Company has no warehouse in the State of Maryland, no bank account, no telephone listing and no office. It has never appointed a resident agent for Maryland nor carried any stock of goods in the State. The sales of its product here are made by two dealers, sometimes called distributors, whose only relations to the Reed Roller Company are for the purchase of tools at an allowed dealer's discount. One of these dealers is the Carey Machinery and Supply Company, 119 E. Lombard Street, Baltimore, Maryland, who are dealers in many products in addition to those of the Reed Roller Company. Purchases are made by the dealers from the Houston office of the Reed Roller Company and are shipped to such dealers f. o. b. Houston with freight allowance. The Reed Roller Company has no interest of any kind in the goods sold after delivery and no control over sales made by the dealers or financial interest in their success. No sales are made on a consignment basis. The annual gross sales of the Company for purchases in the United States was approximately $15,000,000; while the average gross purchases in the State of Maryland was about $15,000, or about 1% only of the total dollar sales in the United States.

The Reed Roller Company maintains an office and warehouse in Newark, N. J., with a supervisory representative (one Clarke) who is in charge of the whole northeastern territory for the Company. Clarke has under him six or seven salesmen having different territories in the whole of Clarke's northeastern territory. One of these salesmen or sales promotion representatives is the formerly named Haines whose sales promotion territory includes Maryland, the District of Columbia, Virginia and a part of North Carolina. Haines presently resides at Kingsville, Baltimore County, Maryland, but he is not required to reside in Maryland. He is paid by a flat salary, a commission and an expense allowance. He was requested by some one to see Mr. Patterson, the employer of the plaintiff, for suggestions or advice as to suitable tools for the work heretofore mentioned. He advised the use of a Bay State abrasive wheel to be used in connection with a power pneumatic grinding tool made by the Reed Roller Company. The two instruments were bought by Patterson from the Carey Machinery and Supply Company. They were not sold by Haines and apparently Haines never saw either of the particular instruments. The Company has supplied Haines with a Company owned and registered automobile for solicitation work in his territory.

When the suit was filed in the State Court service of process was made upon the Maryland State Tax Commission. Service was not made or attempted to be made upon either Ahlstrom or Haines as soliciting agents of the respective defendants. The State Tax Commission in turn notified the respective defendants by mail of the pendency of the suit. Such notices were actually received; but as the service was in the nature of a substituted service only, it was obviously ineffective to subject the defendants to a possible liability in personam unless there is some constitutionally valid statute of the State of Maryland applicable to the conditions.

The Maryland Foreign Corporation laws are to be found in Flack's Annotated Code of 1939 with supplements thereto issued in 1943 and 1947. Section 111, art. 23, as now found in the 1947 edition, prescribes procedural regulations with regard to process against domestic and foreign corporations. Subsection (d) provides: "If * * * any foreign corporation required by any statute of this State to have a resident agent, or any foreign corporation subject to suit in this State under Section 119(d) of this Article, has not a resident agent, or has one or more resident agents and two unsuccessful attempts have been made on different business days to serve process upon each of its resident agents, such corporation shall be conclusively presumed to have designated the State Tax Commission as its true and lawful attorney authorized to accept on its behalf service of process in the action in which such process issued, and in such case such process may be served upon the State Tax Commission as the true and lawful attorney of such corporation."

Section 120(a) of Article 23 provides that "Every foreign corporation doing intrastate or interstate or foreign business in this State * * * shall have at least one resident agent in this State whose name and address, as such, have been certified to the State Tax Commission, and also a...