Bolger v. Dial-A-Style Leasing Corp.

• Decision Date: 10 January 1966
• Docket Number: DIAL-A-STYLE,No. 21128,21128
• Citation: 159 Colo. 44,409 P.2d 517
• Parties: D. P. BOLGER, Plaintiff in Error, v.LEASING CORPORATION, a foreign corporation, and Beauty Industries Incorporated, a foreign corporation, Defendants in Error.
• Court: Colorado Supreme Court

Page 517

409 P.2d 517

159 Colo. 44

D. P. BOLGER, Plaintiff in Error, v. DIAL-A-STYLE LEASING CORPORATION, a foreign corporation, and Beauty Industries Incorporated, a foreign corporation, Defendants in Error.

No. 21128.

Supreme Court of Colorado, In Department.

Jan. 10, 1966.

B. F. Napheys, Jr., B. F. Napheys, III, Denver, for plaintiff in error.

Isaacson, Rosenbaum, Goldberg & Miller, Stephen T. Susman Denver, for defendants in error.

SUTTON, Justice.

The sole question presented for our determination on this writ of error is whether the defendants in error, two New York corporations, were 'transacting business' in Colorado of a sufficient nature to make them amenable to the civil jurisdiction of our courts through the use of substituted service of process on foreign corporations under 1960 Perm.Supp., CRS, Section 31-35-19(3). We shall hereafter refer to the parties by name or as plaintiff and defendants.

Bolger filed an action against Dial-A-Style Leasing Corporation, a wholly owned subsidiary, and its parent company, Beauty Industries Incorporated. He sought a rescission and damages for alleged false representations arising out of a contractual relationship entered into between the plaintiff and Dial-A-Style on February 8, 1963 whereby Bolger became the latter's 'agent' in promoting and selling its services and equipment to beauty parlors in Colorado.

Service of process was obtained on the two defendants in the statutory manner. Thereafter, the defendants made a special appearance through their attorneys and moved to set aside and quash the service of process based on affidavits that Dial-A-Style had not transacted sufficient business in Colorado to render it subject to service in this State and that Beauty Industries had not transacted any business here. The trial court granted the motion to quash and improperly, thereafter, dismissed Bolger's complaint without prejudice. It found that service had been made on July 5, 1963 in accordance with the statute, that both defendants were foreign corporations and 'That neither * * * has transacted business within the State of Colorado so as to render either or both of them amenable to service of process in Colorado,' and that it had no jurisdiction over these two corporations. By writ of error, Bolger seeks to reverse the judgment. We note, in connection with the above mentioned dismissal of the complaint, that the proper procedure is not to dismiss a complaint because of improper or invalid service of process; the trial court should, in such a case, merely hold the service invalid and allow the action to stand so that the plaintiff can continue to seek proper service. To do otherwise could, for example, prevent the tolling of a statute of limitations or harm a plaintiff in some other manner.

The district court had before it the complaint, the two affidavits of the New York companies and the counter-affidavit of Bolger. A reading of these instruments reveals that both defendants have their principal place of business in New Jersey and that the plaintiff first became acquainted with them through an advertisment which appeared in the Wall Street Journal signed by one Herman Perl, the chairman of the board of Beauty Industries. Bolger contacted Perl's office, and was thereafter called upon in Denver by Arthur J. Waldorf, who admittedly was Dial-A-Style's West Coast representative. Dial-A-Style, a separate corporate entity, appears to be the franchising and servicing company for Beauty Industries.

Bolger's complaint and counter-affidavit show that he was made the sole agent of Dial-A-Style. No other persons were hired in Colorado by either of the defendants. It appears that Bolger was to lease certain cameras and processes to beauty salons in Colorado and to sign the agreements as the agent of Dial-A-Style. Copies of the signed leases, which did not require the defendant's prior ratification to become binding, were then sent to the corporation's home office. Title to the machines remained in Dial-A-Style and it was to pay the Colorado taxes thereon. In addition, Dial-A-Style was to supply Bolger with other materials upon request. It appears, however, that at least one billing to plaintiff was made on Beauty Industries' stationery. Dial-A-Style's affidavit admits the appointment of Bolger as 'its sole distributor in Colorado'; that Bolger was required 'to lease out certain machines'; and that 'pursuant to that (its) agreement' it shipped 'three sets of equipment plus miscellaneous supplies' from New Jersey to Bolger in Colorado.

It is asserted that Waldorf had been informed by Bolger's attorney, at the time the franchise agreement was signed, that the defendants would have to qualify to do business in Colorado. In a telephone call at that time this requirement was relayed to the officers and counsel of the two companies in New Jersey. It is alleged that they agreed so to qualify their companies; their promises, however, were never fulfilled.

One further item in the record is that it appears from an exhibit that some public relations work may have been carried on by Beauty Industries in Colorado when it distributed a progress circular printed under its name. The extent of the distribution of this circular is not clear, nor is it clear whether anyone in Colorado except Bolger was exposed to this advertising.

Although Dial-A-Style was...