Cannon v. American Hydrocarbon Corp.

• Decision Date: 19 February 1970
• Citation: 84 Cal.Rptr. 575,4 Cal.App.3d 639
• Court: California Court of Appeals Court of Appeals
• Parties: Louis A. CANNON, Frances Cannon, Sanford A. Cahn and Anne Cahn, Plaintiffs and Respondents, v. AMERICAN HYDROCARBON CORPORATION, Defendant and Appellant. Louis A. CANNON, Frances Cannon, Sanford A. Cahn, Anne Cahn, and Cannon-Rosecrans Land Company, Plaintiffs and Respondents, v. AMERICAN HYDROCARBON CORPORATION, Defendant and Appellant. Civ. 33156, 33157.

Page 575

84 Cal.Rptr. 575

4 Cal.App.3d 639

Louis A. CANNON, Frances Cannon, Sanford A. Cahn and Anne Cahn, Plaintiffs and Respondents, v. AMERICAN HYDROCARBON CORPORATION, Defendant and Appellant.

Louis A. CANNON, Frances Cannon, Sanford A. Cahn, Anne Cahn, and Cannon-Rosecrans Land Company, Plaintiffs and Respondents, v. AMERICAN HYDROCARBON CORPORATION, Defendant and Appellant.

Civ. 33156, 33157.

Court of Appeal, Second District, Division 3, California.

Feb. 19, 1970.

As Corrected March 20, 1970.

Hearing Denied April 15, 1970.

John D. Glynn, Los Angeles, for appellant.

Harold Easton and Alan F. Kane, Los Angeles, for respondents.

FORD, P.J.

In each of the two cases involved herein the defendant corporation has appealed from an order of the superior court denying motions to vacate and set aside the entry of default and the judgment thereafter entered.

The actions were for money alleged to be due and owing by defendant under written guarantees of leases. In each complaint it was alleged as follows: 'Defendant is now and at all times herein mentioned has been a Delaware corporation doing business in the State of California.' Each complaint was filed and summons issued on July 21, 1966. Since the pertinent facts and the questions to be resolved are the same in each case, the matter will be considered herein as though only one case is involved.

On July 19, 1967, the defendant filed a document which constituted a notice of three motions of an alternative nature. The motions were stated to be as follows: 1. For an order vacating an entry of default and a judgment by default. 2. For an order setting aside an entry of default and a judgment by default taken against defendant due to mistake, inadvertence, surprise or excusable neglect and permitting defendant to plead. 3. For an order setting aside an entry of default and a judgment by default against a defendant not personally served, pursuant to section 473a of the Code of Civil Procedure.

For the purpose of obtaining jurisdiction as to the defendant, the plaintiffs had recourse to the provisions of section 6408 of the Corporations Code, ¹ but obtained no order as to service of process from the superior court before personal delivery of the process to a deputy secretary of state in Sacramento. The first question to be resolved is whether the entry of default was improper and the judgment entered thereafter was void because of the omission to obtain such a prior order.

The sheriff of Sacramento County, acting through a deputy, made personal delivery of a copy of the summons and complaint to the deputy secretary of state on August 16, 1966, together with a letter addressed to the Secretary of State which was signed by the plaintiffs' attorney, the body of the letter being set forth in the footnote. ² The Secretary of State forwarded the copy of the summons and complaint to the defendant corporation in Dallas, Texas, but the defendant made no appearance in the action.

On December 28, 1966, the plaintiffs filed a declaration of Louis A. Cannon containing statements that the defendant was a Delaware corporation and had transacted business in California and alleging that the defendant corporation had not qualified to conduct intrastate business in California and that its offices were currently located at 101 Braniff Building, Dallas, Texas, 'Attention: S. Mort Zimmerman.' On the same date the declaration of L. A. Riemer was filed, that declaration containing the statement that the declarant was a former officer of the defendant corporation and statements as to the transaction of business in California by that corporation and the nature thereof, including the execution of 'lease guaranties.'

On January 21, 1967, there was an entry of the defendant's default by the superior court, the body thereof being as follows: 'It appearing to the Court from an examination of the records and files in this action that the defendant(s) AMERICAN HYDROCARBON CORPORATION (a Delaware corporation which conducted intra-state business in the State of California and was required to qualify in the State of California but failed to do so under Sections 6403 ff (sic) of the Corporations Code and is therefore deemed to have designated the Secretary of State of the State of California as the agent upon whom process may be served within this State), having been duly served with summons in the manner required by law, to-wit: Upon the Secretary of State of the State of California, and having failed to answer the plaintiff's (sic) complaint herein, and the time for answering having expired, the default of said defendant(s) is hereby entered according to law.' On March 20, 1967, judgment by the court after default was entered in the superior court.

The motions were heard and denied on November 13, 1967, the following statement being included in the minute order: 'The service appears valid under Corporations Code 6408. It does not appear that any procedural defects were prejudicial to defendant.'

Section 6403 of the Corporations Code is in part as follows: 'A foreign corporation shall not transact intrastate business in this State without having first obtained from the Secretary of State a certificate of qualification.' That section sets forth the procedure for obtaining such a certificate. Both section 6403 and section 6408 are in chapter 3 of Title 1, Division 1, Part 11, of the Corporations Code, chapter 3 being entitled 'Qualification for Transaction of Intrastate Business.' The following chapter (chapter 4, §§ 6500--6504) is entitled 'Service of Process.'

The basic statutory provision with respect to the service of summons on a foreign corporation is set forth in section 411 of the Code of Civil Procedure. That section is in pertinent part as follows: 'The summons must be served by delivering a copy thereof as follows: * * * 2. If the suit is against a foreign corporation * * * doing business in this State: in the manner provided by Sections 6500 to 6504, inclusive, of the Corporations Code.'

In section 6501 of the Corporations Code it is provided that if service cannot be made as specified in section 6500 'and it is so shown by affidavit to the satisfaction of the court or judge, then the court or judge may make an order that service be made by personal delivery to the Secretary of State or to an assistant or deputy secretary of state of two copies of the process together with two copies of the order, except that if the corporation to be served has not filed the statement required to be filed by Section 6403 then only one copy of the process and order need be delivered but the order shall include and set forth an address to which such process shall be sent by the Secretary of State.' As has been heretofore noted, section 6408 deals with the situation in which a foreign corporation transacts intrastate business in this state without holding a valid certificate from the Secretary of State, whereas section 6403 sets forth the procedure for obtaining such a certificate of qualification.

Neither section 411 of the Code of Civil Procedure nor section 6408 of the Corporations Code expressly dispenses with an order of the court based upon an appropriate affidavit as a prerequisite to the delivery of process to the Secretary of State in the situation with which section 6408 is specifically concerned. Section 6501 (which has not been amended since 1951) expressly provides, as noted hereinabove, that only one copy of the process and order need be delivered to the Secretary of State where the foreign corporation has not filed the statement required to be filed by section 6403 of the Corporations Code. ³

Service of process upon a foreign corporation may be made only in the manner and form authorized by statute. (Nagel v. P & M Distributors, Inc., 273 Cal.App.2d ---, ---, 78 Cal.Rptr. 65 ^*; Eagle Electric Mfg. Co. v. Keener, 247 Cal.App.2d 246, 251; Tri-State Mfg. Co. v. Superior Court, 224 Cal.App.2d 442, 444.)

An entirely new section 6408 of the Corporations Code was enacted in 1963 and is in its present form (set forth in pertinent part in footnote 1 of this opinion) by virtue of the amendment thereof in 1965. It is to be noted that it contains a plenary provision for service of process on a 'foreign corporation which transacts intrastate business in this state and which does not hold a valid certificate from the Secretary of State and is not exempt from the requirement of holding such a certificate by the provisions of Section 6403.2 of this code.' Therein it is provided that 'such foreign corporation, by transacting unauthorized business in this state, shall be deemed to consent to the jurisdiction of the courts of California in any civil action arising in this state wherein such corporation is named a party defendant and shall be deemed to have designated the Secretary of State as the agent upon whom process directed to the corporation may be served within this state.' As has been noted, section 6408 is in the chapter entitled 'Qualification for Transaction of Intrastate Business,' whereas the following chapter is entitled 'Service of Process.'

The anomaly thus presented was indicated to some extent in the opinion of this court in United States Cap & Closure, Inc. v. Superior Court, 265 Cal.App.2d 408, at pages 412--413, 71 Cal.Rptr. 184, at page 187, wherein it was stated: 'Our holding (that the United States Cap & Closure case presented no valid factual basis for the application of the provisions of section 6408) makes it unnecessary for us to consider and determine the further contentions of the parties regarding the possible overlap in coverage of the withdrawn foreign corporation found in section 6408 and the first paragraph of section 6504 and the effect, if any, upon the validity of service pursuant to section 6408 by reason of the omission of any reference to this section in Code of Civil Procedure, section 411(2). Plainly the Legislature would be well advised to...