Southwark Foundry & Machine Co. v. Franz Foundry & Mach. Co.

CourtUnited States Courts of Appeals. United States Court of Appeals (6th Circuit)
Citation48 F.2d 714
Docket NumberNo. 5652.,5652.
Decision Date10 April 1931

Clan Crawford, of Cleveland, Ohio (Squire, Sanders & Dempsey, of Cleveland, Ohio, on the brief), for appellant.

Willis Bacon, of Akron, Ohio (Burch, Bacon, Sifling & Pheley, of Akron, Ohio, on the brief), for appellee.

Before MOORMAN, HICKS, and HICKENLOOPER, Circuit Judges.

HICKENLOOPER, Circuit Judge.

Appellee, plaintiff below, brought its action in the court of common pleas of Summit county, Ohio, upon an account for work and labor done under contract with the defendant, a foreign corporation. The petition was drawn in the short or Code form. Return of summons shows service upon one David M. Donley, "managing agent" of the defendant. The cause was removed to the United States District Court, and thereafter the defendant, appearing specially for the purpose of such motion and for no other purpose, moved the court to set aside and quash the pretended service of summons upon the ground that it was made upon the statutory agent of the company, designated under section 179 of the General Code of Ohio, that the cause of action stated in plaintiff's petition grew out of business transacted by the defendant outside the state of Ohio and before the defendant was authorized to do business in such state, and that service upon such agent was therefore not authorized in this case. There is no contention that at the time of suit the defendant was not present, in so far as it could be present, and doing business in Ohio. Mitchell Furniture Co. v. Selden Breck Construction Co., 257 U. S. 213, 42 S. Ct. 84, 66 L. Ed. 201, is cited as controlling authority for the position taken. An affidavit setting forth these facts was filed with the motion and made part thereof by reference. The motion to quash being overruled, the defendant filed a general denial, stating, however, that it was "not waiving or intending to waive its motion to quash service of summons heretofore filed, or its objection to the jurisdiction of this court over its person, but still protesting that the court is without jurisdiction," etc. The overruling of the motion to quash is assigned as the error principally relied upon.

In the early half of the nineteenth century all corporations were regarded as purely artificial legal entities, existing only in contemplation of law, and incapable of having a recognized legal existence outside the boundaries of the several sovereignties by which they were created. Cf. Bank of Augusta v. Earle, 13 Pet. 519, 10 L. Ed. 274. Whether this doctrine should continue to be accepted to its full import as the basis of judicial determination, in view of the changed and changing conditions of corporate business, is perhaps the determinative question here. It is common knowledge that Delaware and New Jersey corporations exist, for example, whose only plants and whose general offices are located, and all of whose business is transacted, except possibly the annual meetings of stockholders or periodic meetings of the boards of directors, outside the states of their creation. From the earliest times, however, it was recognized that a foreign corporation might "consent" to be sued in a jurisdiction other than that of its creation. This consent was but a fiction of the law (Smolik v. Phila. & R. Coal & Iron Co., 222 F. 148 D. C. N. Y.; Penn Fire Ins. Co. v. Gold Issue Mining Co., 243 U. S. 93, 96, 37 S. Ct. 344, 61 L. Ed. 610), and was said to be implied from the designation of a statutory agent upon whom service of summons could be made, or even from transacting business within the state without making such designation; but the implication of consent, where relied upon, was extended no further than was expressly required by the legislation prescribing the conditions precedent to doing business within the state and the construction which had been placed upon that legislation by the court of last resort in such state. Simon v. So. Ry., 236 U. S. 115, 130, 35 S. Ct. 255, 59 L. Ed. 492; Mitchell Furniture Co. v. Selden Breck Construction Co., supra.

But the later decisions of the Supreme Court, although still as of course relying upon the established doctrine of a limited, implied consent where the corporation had not designated an agent to accept service, or, having designated such agent, had substantially withdrawn from doing business within the state, seem also to recognize at least a partial abandonment of the old doctrine that a corporation could have no legal existence outside the state of its creation (to avoid the effect of which the fiction of implied consent had been created), and to accept as a fact the more modern and practical view that a corporation may be transacting business in a foreign state to such extent "as to warrant the inference that it was present there." St. Louis S. W. Ry. v. Alexander, 227 U. S. 218, 33 S. Ct. 245, 57 L. Ed. 486, Ann. Cas. 1915B, 77; Philadelphia & Reading Ry. Co. v. McKibbin, 243 U. S. 264, 265, 37 S. Ct. 280, 61 L. Ed. 710; Rosenberg Bros. & Co. v. Curtis Brown Co., 260 U. S. 516, 43 S. Ct. 170, 67 L. Ed. 372; Bank of America v. Whitney Bank, 261 U. S. 171, 172, 43 S. Ct. 311, 67 L. Ed. 594. Such position is wholly inconsistent with the earlier doctrine, and if, as held in St. Louis S. W. Ry. v. Alexander, page 226 of 227 U. S., 33 S. Ct. 245, 247, a corporation may be regarded as transacting business in a foreign state "to such an extent as to subject it to the jurisdiction and laws thereof," either consent to be there served with summons, as any domestic corporation is served, must be implied in every such case, or an application of the doctrine of implied consent must be considered as no longer necessary where the facts warrant the inference of actual presence.

This we think is the distinction between the instant case and the cases of Mitchell Furniture Co. v. Selden Breck Constr. Co. and Kelly v. Johnson Nut Co., 38 F.(2d) 177, 178 (C. C. A. 6). In each of these cases the defendant had withdrawn from the state. The question then was whether such consent to be sued in Ohio, as is implied from the designation of an agent to accept service of summons, extended to transitory causes of action which arose outside the state, or only to those which arose "in respect of business transacted within the state." Both decisions recognized that jurisdiction over an absent defendant must depend upon the scope to be given to the implied consent, but neither decides that service upon the statutory agent is invalid if such service is made while the defendant is transacting business within the state, and while the inference of presence there is warranted. This last issue is the...

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