American Distributing Co. v. Hayes Wheel Co.

• Decision Date: 23 March 1918
• Docket Number: 5772.
• Citation: 250 F. 109
• Parties: AMERICAN DISTRIBUTING CO. v. HAYES WHEEL CO.
• Court: U.S. District Court — Eastern District of Michigan

250 F. 109

AMERICAN DISTRIBUTING CO. v. HAYES WHEEL CO.

No. 5772.

United States District Court, E.D. Michigan, Southern Division.

March 23, 1918

Thomas E. Barkworth, of Jackson, Mich., for plaintiff.

Price &amp Whiting, of Jackson, Mich., for defendant.

TUTTLE District Judge.

This matter comes before the court on a motion by defendant for a judgment non obstante veredicto. The action is assumpsit for the recovery of damages claimed to have been sustained by the plaintiff by reason of the repudiation by defendant of a written contract between plaintiff and defendant, providing for the appointment of the former as the selling agent of the latter, and fixing the terms of such employment. Defendant is a Michigan corporation engaged in the manufacture of automobile wheels in the city of Jackson, Mich., where it has its factory. The plaintiff is an Ohio corporation, and by the contract in question undertook to become selling agent of the defendant for the sale of its wheels throughout the United States. The contract, by its terms, was to continue in force for five years from and after the date of such contract, July 1, 1910. On May 25, 1914, defendant repudiated this contract and terminated all business relations with the plaintiff thereunder. Plaintiff thereupon brought this action to recover commissions alleged to have been earned up to the date of such repudiation and damages alleged to have been sustained by reason of lost commissions which it would have earned during the unexpired balance of the term of the contract. The cause was submitted to a jury, which returned a verdict in favor of plaintiff, and defendant has filed this motion for a judgment non obstante veredicto.

Although several questions were argued on the trial, all of these except two have become immaterial, in view of the charge of the court and the verdict of the jury. The only two questions argued on this motion and necessary to be considered here are the following: First, was this contract void because plaintiff, a foreign corporation, was not authorized to do business in Michigan? and, second, was such contract void for lack of mutuality? The contract involved was in the form of a letter, written by the plaintiff to the defendant, and accepted in writing by the latter, and is as follows:

'July 1, 1910.

The Hayes Wheel Company, Jackson, Mich.-- Gentlemen: We make the following proposal for conducting the sale of your wheels:

'We will undertake the sale of your wheels for automobiles, and power vehicles of all kinds, for the entire United States, upon the following terms and conditions:

'Commissions.-- On all orders received, accepted, and shipped by your company you will pay us 3% of the net sales price charged on orders.

'All inquiries received by you are to be referred to us. Above commission shall be paid to us, our successors or assigns, by your company, its successors or assigns. On all orders for said goods, accepted and shipped by you during the life of this contract, said commission is to be paid between the 10th and 15th day of each month, for all goods paid for during the preceding month. It is understood that commissions are to be paid on collections, no commissions to be paid unless collections are made.

'Credits.-- You are to accept all risks and make all collections on orders accepted by you, it being understood that all orders taken by us shall be submitted for your acceptance.

'Terms of Sale.-- Selling price on all wheels is to be quoted and governed by you, and we are to be immediately notified of all changes in price and market conditions.

'Advertising.-- You are to stand the expense of all advertising, should we mutually decide that such advertising is necessary. All advertising matter and letters sent out by you shall include the following: 'The American Distributing Company, Sales Agents, Jackson, Mich.'

'Expenses.-- Your company shall not be liable for any of our expenses whatsoever, except such as may be mutually agreed upon. Each party shall advertise as it sees fit, and neither party shall be liable for any advertising expenses incurred by the other.

'Samples.-- You will furnish samples for test and inspection whenever this is found necessary.

'Life of Contract.-- It is understood that this contract is made to cover a period of five years from the date of its acceptance by you.

'This proposal, when signed by your company, is to have the full force and effect of a duly executed contract.

'Respectfully submitted,

The American Distributing Company, 'By Chas. G. McCutchen, Pres.

'Accepted by Hayes Wheel Co., by C. B. Hayes, Pres.'

1. Section 1 of act 206 of the Michigan Public Acts of 1901, as amended by act 34 of the Public Acts of 1903, being section 9063 of the Michigan Compiled Laws of 1915, provides that:

'It shall be unlawful for any corporation organized under the laws of any state of the United States, except the state of Michigan, or of any foreign country, to carry on its business in this state, until it shall have procured from the secretary of state of this state a certificate of authority for that purpose. To procure such certificate of authority every such foreign corporation or association shall comply with' certain requirements therein prescribed.

Section 6 of this act, as amended by act 310 of the Public Acts of 1907, being section 9068 of the Compiled Laws of 1915, is as follows:

'No foreign corporation, subject to the provisions of this act, shall be capable of making a valid contract in this state until it shall have fully complied with the requirements of this act, and at the time holds an unrevoked certificate to that effect from the secretary of state.'

Section 8 of the same act, as amended by act 310 of the Public Acts of 1907, being section 9070 of the Compiled Laws of 1915, provides that this act shall not--

'be construed to prohibit any sale of goods or merchandise which would be protected by the rights of interstate commerce.'

It is conceded that the plaintiff was not thus authorized to carry on business in Michigan at the time of the making of the contract in question. It is also conceded that upon the making of such contract the plaintiff established an office in the state of Michigan from which it carried on its business of securing orders from the entire country for the sale of the wheels manufactured by the defendant. Defendant urgently insists that the plaintiff was at the time of the making of this contract a foreign corporation doing business within the state of Michigan, and that, therefore, it was subject to the provisions of the act just cited, and incapable of making the contract in question, which was therefore void. It is urged by plaintiff that the making of this contract constituted a part of interstate commerce, that such contract was therefore not prohibited by such act, and that, if such act does apply to such contract, the former is an attempt by a state Legislature to regulate and obstruct interstate commerce and is therefore to that extent contrary to the United States Constitution and void. Counsel for both sides have submitted able briefs, which have been carefully examined.

It is, of course, well settled that only Congress can regulate interstate commerce, and that no state can under any guise enact legislation the effect of which is to obstruct or substantially burden such commerce. McCall v. People of the State of California, 136 U.S.

104, 10 Sup.Ct. 881, 34 L.Ed. 391; Crutcher v. Commonwealth of Kentucky, 141 U.S. 47, 11 Sup.Ct. 851, 35 L.Ed. 649; International Text-book Co. v. Pigg, 217 U.S. 91, 30 Sup.Ct. 481, 54 L.Ed. 678, 27 L.R.A. (N.S.) 493, 18 Ann.Cas. 1103; Heyman v. Hays, 236 U.S. 178, 35 Sup.Ct. 403, 59 L.Ed. 527; Rosenberger v. Pacific Express Co., 241 U.S. 48, 36 Sup.Ct. 510, 60 L.Ed. 880; Pennsylvania R. Co. v. Sonman S.C. Co., 242 U.S. 120, 37 Sup.Ct. 46, 61 L.Ed. 188; Butler Bros. Shoe Co. v. United States Rubber Co., 156 F. 1, 84 C.C.A. 167; United States v. Tucker (D.C.) 188 F. 741; Star-chronicle Pub. Co. v. United Press Ass'ns, 204 F. 217, 122 C.C.A. 489; Coit & Co. v. Sutton, 102 Mich. 324, 60 N.W. 690, 25 L.R.A. 819; People v. Bunker, 128 Mich. 160, 87 N.W. 90; City of Muskegon v. Hanes, 149 Mich. 460, 112 N.W. 1077; Fifth Avenue Library Society v. Hastie, 155 Mich. 56, 118 N.W. 727. If the contract in question comes within the prohibition of the statute of Michigan thus invoked, there can, of course, be no doubt that such prohibition not only obstructs and burdens the making of such contract, but actually destroys it. It becomes, therefore, necessary to determine whether the making of such contract was an act of interstate commerce. If so, it was beyond the power of the state to so prohibit it, and the statute in question can have no application to such contract. It is clear that this contract contemplated sales of goods by the defendant in Michigan to purchasers in other states, on orders to be sent from such states into Michigan, and accepted in the latter state, such goods then to be shipped from Michigan to such other states. Any such sale constituted undoubtedly interstate commerce, and could not be affected by legislation of the state of Michigan. Robbins v. Taxing District, 120 U.S. 489, 7 Sup.Ct. 592, 30 L.Ed. 694; Brennan v. City of Titusville, 153 U.S. 289, 14 Sup.Ct. 829, 38 L.Ed. 719; Butler Bros. Shoe Co. v. United States Rubber Co., supra; United States v. Tucker, supra; Fifth Ave. Library Society v. Hastie, supra. Indeed, as has been already stated, such a sale is expressly excepted from the operation of the statute.

It is however, urged that this contract was not in itself a sale in interstate commerce, and did not directly involve commercial intercourse between the state of Michigan...