Daoud v. Kleven Inv. Co.

• Decision Date: 11 February 1954
• Docket Number: No. C--492,C--492
• Citation: 30 N.J.Super. 38,103 A.2d 257
• Parties: DAOUD v. KLEVEN INV. CO., Inc. . Chancery Division
• Court: New Jersey Superior Court

Page 38

30 N.J.Super. 38

103 A.2d 257

DAOUD v. KLEVEN INV. CO., Inc.

No. C--492.

Superior Court of New Jersey.

Chancery Division.

Feb. 11, 1954.

Philip G. Steel and Irvin M. Lichtenstein, Camden, for plaintiffs.

Augustus C. Studer, Jr., Newark (McCarter, English & Studer, Newark, attorneys), for defendant Kleven Inv. Co., Inc., a Massachusetts corporation, appearing and moving on its behalf solely for the purpose of contesting the jurisdiction of this court.

HANEMAN, J.S.C.

This is a motion seeking to quash and set aside the service of summons and complaint on the defendant, on the ground that the attempted service of process was illegal, invalid and in violation of the rights guaranteed to the said defendant under the Fourteenth Amendment to the United States Constitution, and was illegally and improperly made in violation of R.R. 4:4--4(d).

The facts as disclosed by the pleadings and affidavits, and which may be considered as proved for the purposes of this motion, are as follows:

It is admitted that the defendant was incorporated under the laws of the State of Massachusetts and has never been authorized by the State of New Jersey to transact business in this State.

The complaint alleges that the defendant made loans to the plaintiffs Daoud Bros. and received and obtained from them various notes, evidences of obligations, etc., which said transactions were tainted with usury, and that the defendant received as a part of said usurious transactions certain valuable pieces of jewelry, precious gems and personal property of great value. During the years of 1951, 1952 and 1953 the defendant transacted and conducted business operations and transactions in the State of New Jersey. The complaint does not allege in what year or years the specific transactions here sued upon were had between them and the defendant.

The plaintiffs demand by way of judgment, Inter alia, discovery, accounting appointment of a receiver, restraint against hypothecating, discounting or suing upon any of the obligations delivered to the defendant, and monetary damages.

Plaintiffs submit a photostatic copy of a report made by the defendant to the Commonwealth of Massachusetts, Department of Corporations and Taxation, to prove the nature of defendant's business, in which the following legend appears: 'Kind of business--Investments.'

The defendant generally denies that the transactions referred to constituted the transaction of any business, and specifically denies that it was engaged in any activity whatever in the State of New Jersey subsequent to September 30, 1952. The defendant further categorically denies that it was an 'investment company' in the contemplation of N.J.S.A. 17:16A--1, and after specifically setting forth the type of business conducted by it, recites as follows:

'(4) The defendant company has never been engaged in the business of making, issuing or guaranteeing investment contracts. It has never issued any securities to the public, nor has it ever made any offerings of any securities to the public. The filing of the Statement of Condition of the defendant company, referred to by the plaintiffs' attorneys, was not required to be filed in the Commonwealth of Massachusetts by any laws of that Commonwealth dealing with investment companies, or companies engaged in the investment business, as defined in N.J.S. 17:16A--1, subdivisions (a) and (c), respectively.'

The service upon which complaint it here made was effectuated in the following manner, (1) by leaving a copy of the summons and complaint in the office of the Secretary of State of New Jersey in the State House, Trenton, New Jersey, together with a fee of $3, with Ernest R. Kerr, chief clerk in said office, and (2) by leaving a copy of the summons and complaint in the office of the Commissioner of Banking and Insurance of the State of New Jersey, in the State House Annex, Trenton, New Jersey, together with a fee of $2, with John T. Connolly, Deputy Commissioner of Banking and Insurance.

Under date of November 13, 1953 Ernest R. Kerr, Chief Clerk, Secretary of State, wrote to Lawrence E. Cooke, secretary, Kleven Investment Co., Inc., 209 Washington Street, Boston, Massachusetts, as follows:

'I am herewith enclosing copy of summons and complaint in re: Maud Daoud, etc. vs. Kleven Investment Co., Inc., which has been served on me. Same is sent to you in pursuance with the provisions of Chapter 124 of the Laws of 1900, a copy of which is also enclosed.'

Under date of November 13, 1953 John T. Connolly, Deputy Commissioner of Banking and Insurance of the State of New Jersey, sent a letter addressed to Mr. Lawrence E. Cooke, secretary, Kleven Investment Co., Inc., 209 Washington Street, Boston, Massachusetts, as follows:

'Enclosed is a copy of summons and complaint in the matter of Maud Daoud, individually and as sole surviving partner of Daoud Bros. a co-partnership and as executrix of the last will and testament of George J. Daoud, deceased, plaintiffs vs. Kleven Investment Co., Inc., Defendant, which were this day served upon the Commissioner of Banking and Insurance.

'The enclosed summons and complaint are being sent to you by this Department as required by the revised statutes without attempting to pass on the legal efficacy thereof.'

Plaintiffs seek, in brief, to sustain the validity of the service upon the defendant upon the following bases:

1. Since the defendant is a foreign corporation doing business in New Jersey without express permission had from this State, it has, by implication, consented to make itself amenable to the jurisdiction of the courts of this State and is estopped from denying the efficacy of service upon the Secretary of State who would have been its authorized agent or attorney for that purpose under N.J.S. 2A:15--26, N.J.S.A., had it complied with the laws concerning the licensing of foreign corporations for the transaction of business in New Jersey. The failure of the defendant to so appoint said public official constitutes an election to accept him as such agent.

2. In the light of the provisions of N.J.S.A. 14:15--5, which is a reciprocal and retaliatory statute, and the provisions of the Annotated Laws of Massachusetts, vol. 6, chapter 181, sections 3 and 3A, the defendant is presumed to have appointed the Secretary of State of the State of New Jersey as its agent.

3. Service was made upon the Commissioner of Banking and Insurance in conformity with N.J.S. 2A:15--31, N.J.S.A.

In order to dispose of plaintiffs' first contention, it becomes necessary to consider generally the question of service upon the agent of a foreign corporation transacting business in a State, without express permission first had to that end and the application of those principles to the pertinent rules and statutes.

Express provision for service upon a foreign corporation is made in R.R. 4:4--4(d) and N.J.S 2A:15--26, N.J.S.A. It is conceded that plaintiffs did not make service as required under R.R. 4:4--4(d) and hence it will not be necessary to discuss the provisions of this rule, except as hereafter stated.

Although originally a foreign corporation not authorized or licensed to transact business in a State could be sued only in the jurisdiction of its incorporation, it is now recognized that such corporation may be sued in the foreign jurisdiction. Cowell v. Colorado Springs Co., 100 U.S. 55, 25 L.Ed. 547 (1879); American & Foreign Christian Union v. Yount, 101 U.S. 352, 25 L.Ed. 888 (1880); Canada Southern Ry. Co. v. Gebhard, 109 U.S. 527, 3 S.Ct. 363, 27 L.Ed. 1020 (1883); Baltimore & O.R. Co. v. Harris, 12 Wall. 65, 79 U.S. 65, 20 L.Ed. 354 (1871); Barrow S.S. Co. v. Kane, 170 U.S. 100, 18 S.Ct. 526, 42 L.Ed. 964 (1898).

The theory upon which courts of a State first assumed jurisdiction of a foreign corporation carrying on business within its confines without a license to do such business and without an agent specifically appointed for the service of process, was that of implied consent to such jurisdiction through the 'presence' of such corporation within the State. St. Clair v. Cox, 106 U.S. 350, 1 S.Ct. 354, 27 L.Ed. 222 (1882); St. Louis S.W.R. Co. of Texas v. Alexander, 227 U.S. 218, 33 S.Ct. 245, 57 L.Ed. 486 (1912).

Primarily and basically, the question is one of due process. In order for the foreign state to acquire jurisdiction the attempted service must comply with the due process clause of the Fourteenth Amendment of the United States Constitution, and be reasonably calculated to give notice to the defendants. There must be something more to justify service upon a foreign corporation than an implied consent to jurisdiction arising from the corporation having at some time transacted business within the confines of that State.

The theory of personal jurisdiction upon an individual in an action In personam is ordinarily derived from the power over an individual defendant consequent upon his presence within the State of the forum, and his presence within the territorial jurisdiction of the court at the time of service of the summons and complaint is a prerequisite to the rendition of a personal judgment binding upon him. Pennoyer v. Neff, 95 U.S. 714, 24 L.Ed. 565 (1877).

Similarly, in order to obtain legal and valid service upon a foreign corporate defendant, it must be present in the State where such service is sought to be made. It is, of course, not possible for a corporate defendant itself to be physically present since the corporate personality is a legal fiction. The only manner in which its presence can be manifested is by the activities of those authorized to act on its behalf in the transaction of business for it.

In Philadelphia & %.R.r. c/o. v. McKibbin, 243 U.S. 264, 37 S.Ct. 280, 61 L.Ed. 710 (1910), the court said:

'A foreign corporation is amenable to process to enforce a personal liability, in the absence of consent, only if it is doing business within the state in such manner and to such extent as to...