Buffalo Refrigerating Mach Co. v. Penn Heat & Power Co.

• Decision Date: 24 January 1910
• Docket Number: 88.
• Citation: 178 F. 696
• Parties: BUFFALO REFRIGERATING MACH. CO. v. PENN HEAT & POWER CO.
• Court: U.S. Court of Appeals — Third Circuit

178 F. 696

BUFFALO REFRIGERATING MACH. CO. v. PENN HEAT & POWER CO.

No. 88.

United States Court of Appeals, Third Circuit.

January 24, 1910

Edward A. & Wm. T. Day, Reed, Smith, Shaw & Beal, and George E Shaw, for plaintiff in error.

R. A. &amp James Balph, Patterson, Sterrett & Acheson, and Thomas Patterson, for defendant in error.

Before GRAY and LANNING, Circuit Judges, and J. B. McPHERSON District judge.

J. B. McPHERSON, District Judge.

The Pennsylvania act of 1874 (P.L. 108) was passed to carry into effect article 16, Sec. 5, of the state Constitution:

'No foreign corporation shall do business in this state without having one or more places of business and an authorized agent or agents in the same upon whom process may be served.'

The act itself is as follows:

'An act to prohibit foreign corporations from doing business in Pennsylvania, without having known places of business and authorized agents.

'Section 1. Be it enacted, etc., that from and after the passage of this act, no foreign corporation shall do any business in this commonwealth, until said corporation shall have established an office or offices and appointed an agent or agents for the transaction of its business therein.

'Sec. 2. It shall not be lawful for any such corporation to do any business in this commonwealth, until it shall have filed in the office of the secretary of the commonwealth a statement, under the seal of said corporation, and signed by the president or secretary thereof, showing the title and object of said corporation, the location of its office or offices, and the name or names of its authorized agent or agents therein; and the certificate of the secretary of the commonwealth, under the seal of the commonwealth, of the filing of such statement, shall be preserved for public inspection by each of said agents, in each and every of said offices.

'Sec. 3. Any person or persons, agent, officer or employe of any such foreign corporation, who shall transact any business within this commonwealth for any such foreign corporation, without the provisions of this act being complied with, shall be guilty of a misdemeanor, and upon conviction thereof shall be punished by imprisonment not exceeding thirty days, and by fine not exceeding one thousand dollars, or either, at the discretion of the court trying the same.'

As the scope of this statute has been made the subject of earnest controversy, not only in the present case, but in some others that have reached this court, it may not be amiss to review he Pennsylvania decisions; for the construction put upon the act by the Supreme Court of the state is, of course, binding upon the federal tribunals. The first case to reach that court was Barr v. King, 96 Pa. 485, 488, in which it was decided that a foreign corporation which had obeyed the statute and had appointed an agent might be a garnishee in execution attachment. The court said:

'Now by general statutes all foreign corporations, as a condition on which they may transact business in this state, must establish an office and have an agent, a chief purpose of which is that process may be served and such corporation be compelled to answer in all suits or actions brought against them. * * * Natural and artificial persons, citizens of other states, who are doing business here, ought to stand on an equal footing with each other and with the citizens of this state. A natural person who is a citizen of another state coming within the jurisdiction of our courts is liable to all actions as if resident in this state; and legislation has done much to place foreign corporations on an equality with domestic as respects the right to sue and the liability to be sued.'

In Hagerman v. Empire Slate Co., 97 Pa. 534, the corporation had not appointed an agent under the act, and sought to have a sheriff's return of service set aside on the ground, inter alia, that the person upon whom the process had been served had not been so appointed, although he was in fact the agent of the company, and although the sheriff's service would have been good under an earlier statute. The court met this objection by holding:

'That when a foreign corporation transacting business in this state has failed to establish an office and report the name of its agent to the secretary of the commonwealth, but has some person residing therein who acts as its agent, it must be presumed that the corporation has substituted such agent as one on whom service is authorized to be made, to the extent at least of its unfinished business in this state.'

These two cases are concerned with one object of the act, namely, to compel foreign corporations to come within the reach of domestic process. This is made a condition precedent to their right to transact business within the state. The next case (Kilgore v. Smith, 122 Pa. 48, 15 A. 698) refers to another object. The controversy was over the title to certain personal property. The plaintiff's title was derived from a Maryland corporation and was attacked because the contract that gave him title was made in Pennsylvania, and because it appeared that the corporation had not complied with the act. It was held that the contract was nevertheless good, for the reason that the corporation was not 'doing business' within the state; the court saying:

'It has never been held that a citizen of Pennsylvania may not be a member of, or stockholder in, a corporation of another state, or that a contract between such member and his corporation is ultra vires, because the latter had not complied with the provisions of the act of assembly. Nor do we think it material that an occasional meeting of the directors was held at Delta, a town partly in Maryland and partly in this state. Their acts are not necessarily void for such reason. Morawetz on Corporations, Sec. 533. One of the objects of the act of assembly was to bring corporations, employing their capital in this state and doing business here, within the taxing power of the commonwealth. It does not appear that this corporation brought any of its capital into this state. Its place of business was in Maryland. Its capital, if it had any, was there. It had contracts with some of its members, residing in Pennsylvania, by which they were to can their fruit and hold the same to be disposed of by the corporation. It was a kind of farmers' co-operative association located in Maryland, with its membership in both states.'

That the corporation must be 'doing business' in the state before the act can affect its contracts was the precise point in Campbell, etc., Co. v. Hering, 139 Pa. 473, 20 A. 1061. There a foreign corporation brought suit to recover the price of a printing press, and recovery was resisted on the ground that the act had not been complied with. But the affidavit of defense was held to be insufficient because it did not aver also that the corporation was 'doing business' in the state. This fact, the court said, was 'essential to his defense,' and the defendant's omission to aver it was fatal. In Lasher v. Stimson, 145 Pa. 30, 23 A. 552, it appeared by a special verdict that an unregistered foreign corporation was 'carrying on the business of the manufacture and sale of soap or washing compound within the state of Pennsylvania. ' Under these circumstances, it was held that a person who acted as the corporation's agent was chargeable with knowledge that it could not give him lawful authority to act, and was personally liable upon a contract which he had undertaken to make in its behalf. The court said that a foreign corporation must comply with the act as--

'a condition precedent to its recognition and legal existence (in the state). It cannot, by virtue of its charter, exercise its functions beyond the territorial limits of the sovereignty which created it. It cannot transact business in other states or sovereignties without their consent expressed or implied. Any person who assumes to act for it must be considered as having knowledge of its powers and their limitations, and whether it has conformed to the requirements of the jurisdiction in which he proposes to represent it. If he does business for it here, in violation of the conditions prescribed, he commits an offense which is punishable by fine and imprisonment.'

The terms laid down by the act were not onerous nor in conflict with any constitutional provision or rule of public policy;

'But they are clearly prohibitory, and they inevitably stamp as unlawful any business transaction within the state by a foreign corporation which has not complied with them. It is only by its observance of them that it can have a legal existence for business purposes within this jurisdiction or acquire contractual rights which our courts will recognize.'

The case of East Side Bank v. Columbus Tanning Co., 170 Pa. 1, 32 A. 539, is of no importance in the discussion. But the next decision (Mearshon v. Lumber Co., 187 Pa. 12, 15, 17, 40 A. 1019, 1020), required the court to consider a new factor, one that limited the scope of the statute, and modified the sweeping declaration of Lasher v. Stimson, that 'any business transaction within the state' was unlawful if the corporation had not obeyed the command of the act. The facts upon which the decision is based are thus stated:

'The plaintiff is a corporation duly incorporated in the state of Michigan. Its manufacturing operations are there conducted; its capital is there invested. None of it is invested here. The order for the goods in question was given to its salesman and agent in Pennsylvania and by him sent to the plaintiff, who executed the order in Michigan. Under all the decisions this is not a doing of business in this state which makes it necessary to comply with the provisions of

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