Hutchinson v. Chase & Gilbert

Decision Date10 November 1930
Docket NumberNo. 38.,38.
PartiesHUTCHINSON et al. v. CHASE & GILBERT, Inc., et al.
CourtU.S. Court of Appeals — Second Circuit

Merrill, Rogers, Gifford & Woody, of New York City (Joshua D. Jones and Wilson B. Brice, both of New York City, of counsel), for appellants.

Boyd, Chapman & Vreeland, of New York City (John S. Chapman, Jr., of New York City, of counsel), for appellee.

Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges.

L. HAND, Circuit Judge.

The plaintiffs sued the defendant, a Massachusetts corporation, in the state court; the defendant removed for diversity of citizenship, and moved to set aside the service, because it was not doing business within the state of New York. The judge so held, and dismissed the complaint. The plaintiffs do not complain because the judgment was not limited to setting aside the service, and for this reason we treat it as though it had gone no further.

The plaintiffs alleged that the defendant promised in New York to pay for their services in the purchase by it of certain shares of stock, and that they had performed in that state; they demand the contract price, and, by an alternative count, a quantum meruit. Process was served in New York upon the defendant's vice president, who chanced to be there, and the only question is whether the defendant was "present" in such sense that it could be reached in a cause of action arising upon a contract, made in the course of the same activities on which the defendant's supposed "presence" depends. For this reason we have not before us the question discussed in Old Wayne Mut. Life Ass'n v. McDonough, 204 U. S. 8, 27 S. Ct. 236, 51 L. Ed. 345; Simon v. Southern Ry. Co., 236 U. S. 115, 130-132, 35 S. Ct. 255, 59 L. Ed. 492; that is, whether without express consent a foreign corporation may be sued upon transactions arising outside the state of the forum.

The defendant's business is that of an "engineering manager" of public utility corporations, of whose shares it owns a controlling interest, either directly, or through a holding company. These it supervises, looking after their property, and acting as engineer, so far as may be necessary to keep them in operation, and to extend their service. Only one of these is a New York corporation, and this has never been actually engaged in business; the defendant's control of it is by the ownership of a majority of the shares of a company which in turn owns its shares. The defendant leases an office in New York at a small rental, keeps a small bank account there, on which it draws from Boston, where all its work is done, and employs a stenographer. It uses these facilities only upon occasional visits to New York, when its officers wish to bargain for the purchase of company shares. These negotiations never result in closing contracts, because all such are referred to the home office, though at times the formal exchange of papers takes place in New York. Its directors and shareholders have always met in Boston, except that once on two successive days the directors met in New York, and on one of these, the shareholders. This was necessary because of the negotiations for the purchase of shares on that occasion. Its name appears in the telephone book, and of course on the office door. On the other hand the contract in suit was made in New York, and certain bonds of a subsidiary company were once offered for sale here by an underwriter or selling agent, whose prospectus was accompanied by a letter, dated at New York and signed by the defendant. In general, the business is conducted in Boston, where are all its records, and where all its officers and directors reside.

The theory of personal jurisdiction in an action in personam is, ordinarily at any rate, derived from the power over the defendant, consequent upon his presence within the state of the forum. McDonald v. Mabee, 243 U. S. 90, 37 S. Ct. 343, 61 L. Ed. 608, L. R. A. 1917F, 458. The service of a capias subjects him de facto to such commands as its courts may utter, though in its stead a notice will usually serve. Such a theory is not really apposite to a corporation, however conceived, and it is only by analogy that it can be used. So long as it was thought of as a fictitious personality, created by the state of its origin, there were logical difficulties — or at least there were thought to be, — in treating it as existent outside the limits of that state. Bank of Augusta v. Earle, 13 Pet. 519, 10 L. Ed. 274. As to jurisdiction, the express consent of a corporation to be sued elsewhere avoided its territorial limitations (Lafayette Ins. Co. v. French, 18 How. 404, 15 L. Ed. 451; Pennsylvania F. I. Co. v. Gold Issue Mining Co., 243 U. S. 93, 37 S. Ct. 344, 61 L. Ed. 610; Louisville & N. Ry. Co. v. Chatters, 279 U. S. 320, 323, 49 S. Ct. 329, 73 L. Ed. 711), and beginning with Lafayette Ins. Co. v. French, supra, this has been extended to cases where the corporate activities within the foreign state are such as empower that state to exact such a consent. We are not here troubled by the question whether the foreign state had power to exclude the corporation from the activities relied upon. International Harvester Co. v. Kentucky, 234 U. S. 579, 34 S. Ct. 944, 58 L. Ed. 1479.

It scarcely advances the argument to say that a corporation must be "present" in the foreign state, if we define that word as demanding such dealings as will subject it to jurisdiction, for then it does no more than put the question to be answered. Indeed, it is doubtful whether it helps much in any event. It is difficult, to us it seems impossible, to impute the idea of locality to a corporation, except by virtue of those acts which realize its purposes. The shareholders, officers and agents are not individually the corporation, and do not carry it with them in all their legal transactions. It is only when engaged upon its affairs that they can be said to represent it, and we can see no qualitative distinction between one part of its doings and another, so they carry out the common plan. If we are to attribute locality to it at all, it must be equally present wherever any part of its work goes on, as much in the little as in the great.

When we say, therefore, that a corporation may be sued only where it is "present," we understand that the word is used, not literally, but as shorthand for...

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