Lone Star Motor Import, Inc. v. Citroen Cars Corp.

• Decision Date: 02 June 1960
• Docket Number: Civ. A. No. 12940.
• Parties: LONE STAR MOTOR IMPORT, INC., Plaintiff, v. CITROEN CARS CORPORATION, Defendant.
• Court: U.S. District Court — Southern District of Texas

185 F. Supp. 48

LONE STAR MOTOR IMPORT, INC., Plaintiff, v. CITROEN CARS CORPORATION, Defendant.

Civ. A. No. 12940.

United States District Court S. D. Texas, Houston Division.

June 2, 1960.

Hirsch & Westheimer, W. R. Ellis, Houston, Tex., for plaintiff.

Fulbright, Crooker, Freeman, Bates & Jaworski, W. N. Arnold, Jr., Houston, Tex., for defendant.

INGRAHAM, District Judge.

Action for breach of contract. The case is before the court upon defendant's motion to quash summons and complaint after removal of the action from state court.

The controversy concerns a three-year contract between plaintiff, a Texas corporation with its principal place of business at Houston, and defendant, a New York corporation located in the City of New York, for establishment of an exclusive distributorship of certain models of Citroen automobiles in Texas, Oklahoma, Louisiana, Kansas, Arkansas, and Missouri. As distributor, plaintiff was obligated to set up a network of dealers to sell the automobiles and to purchase from defendant a minimum of 600 automobiles the first year, 1,000 automobiles the second year, and 1,200 the third year. Executed on April 1, 1958, the contract was for a period beginning on the date of execution and ending on April 1, 1960. There is no allegation concerning the contract's place of negotiation or execution, though it appears to have been entered into outside of the State of Texas. (Defendant's brief, p. 7). Since the territory of the distributorship included Texas, it would appear that the parties intended the contract to be performed partially in Texas.

Alleging performance of its obligations under the contract, plaintiff claims that it made substantial investments in building a dealership organization to provide sales outlets for defendant's automobiles and in promoting public acceptance of said automobiles in its territory. It is alleged that defendant repudiated the contract in May or July 1959. The petition was filed in the District Court of Harris County, Texas, 80th Judicial District, on November 20, 1959. Citation and copies of said petition were served upon the Secretary of State of Texas as defendant's agent for service of process pursuant to Article 2031b, Revised Civil Statutes of the State of Texas, on November 27, 1959, and were transmitted to the office of defendant at 300 Park Avenue, New York City, New York. The case was removed to this court on December 15, 1959.

It is admitted that defendant is a New York corporation and does not maintain a place of regular business in Texas or a designated agent upon whom service may be obtained upon causes of action arising out of business done by defendant in Texas. It is alleged that this action arises out of business done by defendant in Texas and that under these circumstances service of process may be obtained by delivering to the Secretary of State of Texas, as defendant's agent for service, duplicate copies of process in this action, one of which may be sent by the Secretary by registered mail, return receipt requested, to defendant's home office.

This substituted service is said to comply with Article 2031b, Vernon's Annotated Texas Statutes, which became effective on August 12, 1959. Article 2031b reads in relevant part as follows:

"Sec. 3. Any foreign corporation, association, joint stock company, partnership, or non-resident natural person that engages in business in this State, irrespective of any statute or law respecting designation or maintenance of resident agents, and does not maintain a place of regular business in this State or a designated agent upon whom service may be made upon causes of action arising out of such business done in this State, the act or acts of engaging in such business within this State shall be deemed equivalent to an appointment by such foreign corporation, joint stock company, association, partnership, or non-resident natural person of the Secretary of State of Texas as agent upon whom service of process may be made in any action, suit or proceeding arising out of such business done in this State, wherein such corporation, joint stock company, association, partnership, or non-resident natural person is a party or is to be made a party.

"Sec. 4. For the purposes of this Act, and without including other acts that may constitute doing business, any foreign corporation, joint stock company, association, partnership, or non-resident natural person shall be deemed doing business in this State by entering into contract by mail or otherwise with a resident of Texas to be performed in whole or in part by either party in this State, or the committing of any tort in whole or in part in this State."

Plaintiff contends that jurisdiction has been obtained over defendant pursuant to Article 2031b, which became effective prior to the filing of this action and which is remedial in nature. Thus it maintains that application of Article 2031b to permit service upon defendant would not be a retroactive law in violation of Article 1, Section 16 of the Constitution of the State of Texas, Vernon's Ann.St. and that Article 2031b does not violate the due process clause of the Fourteenth Amendment of the Constitution of the United States.

Defendant contends that jurisdiction has not been obtained over it, since termination of the contract occurred prior to the effective date of Article 2031b and because the application of said statute to permit service upon it would be a retroactive law in violation of the state constitution. Prior to the enactment of Article 2031b, it maintains that the law of Texas was that a non-resident corporation having a contract of distribution with a Texas distributor was not doing business in Texas and was not subject to service of process by Texas citation. If Article 2031b applies to it, defendant contends that the statute violates the due process clause of the Fourteenth Amendment.

The court believes that defendant's motion to quash summons and complaint should be granted. As applied to permit service of process upon defendant, Article 2031b is not a retroactive law in violation of Article 1, Section 16 of the state constitution, but it does deprive defendant of due process of law guaranteed by the Fourteenth Amendment of the Federal Constitution.

The court will consider first the alleged retroactive application of Article 2031b. Article 1, Section 16 of the Constitution of the State of Texas states, "No bill of attainder, ex post facto law, retroactive law, or any law impairing the obligation of contracts, shall be made." It is well settled that remedial and procedural statutes of Texas are not subject to the constitutional prohibition against retroactive laws and apply both to pending and future actions, unless otherwise providing. From the date such statutes become operative, all proceedings must be had under the new law. 39 Texas Jurisprudence, Sec. 28, pp. 55-57. The Supreme Court of Texas stated the rule as follows in Phil H. Pierce Co. v. Watkins, 1924, 114 Tex. 153, 263 S.W. 905, at page 907:

"* * * It is the settled law that a litigant has no vested right in a remedy, and that remedial statutes are valid and control the litigation from the date they become a law, and all proceedings taken thereafter must be under the new law."

In McGee v. International Life Insurance Company, 1957, 355 U.S. 220, at page 224, 78 S.Ct. 199, 201, 2 L.Ed.2d 223, the Supreme Court of the United States, construing a California statute for substituted service of process, stated:

"* * * The statute was remedial in the purest sense of that term, and neither enlarged nor impaired respondent's substantive rights or obligations under the contract. It did nothing more than to provide petitioner with a California forum to enforce whatever substantive rights it might have against respondent. At the same time respondent was given a reasonable time to appear and defend on the merits after being notified of the suit. Under such circumstances it had no vested right not to be sued in California."

The Fifth Circuit held that the McGee case authoritatively answers the questions of retroactivity and applicability of state statutes for substituted service of process to non-residents served outside the state under the Federal Constitution. In Bluff Creek Oil Company v. Green, 5 Cir., 1958, 257 F.2d 83, at page 85, the court stated concerning a 1955 Illinois process statute:

"* * * the service of process statute did not add to or create new liabilities which were then sought to be retrospectively asserted. What the process law does is merely provide for the effectual assertion of that right, a means of doing so through local courts. As a remedial, procedural statute, it could constitutionally apply to supply effective machinery for the assertion of existing substantive rights which, of course, on Green's Illinois State Court complaint came into being as a result of the transactions in 1951."

The question of jurisdiction involved in substituted service of process is a remedial or procedural matter not involving a vested right that may be impaired by retroactive application of the statute. Defendant's further contention is that procedural remedies do not have retroactive effect unless such intention is expressed in the act or may be clearly inferred from the circumstances surrounding its passage or immediately preceding it. City of Ft. Worth v. Morrow, Tex.Civ. App., Ft. Worth, 1926, 284 S.W. 275 ref., n. r. e. The Morrow case involved the validity of an appeal granted 11 days before the statute authorizing such an appeal became effective. Clearly the statute could not authorize an appeal before its effective date. This situation is distinguishable from the case at bar in which service of process is sought after the effective date of the statute on a cause of action that accrued before that date. There is equally good authority that a remedial or procedural statute, not otherwise providing, generally applies both to...