Loudonville Milling Co. v. Davis

• Decision Date: 14 October 1948
• Docket Number: 7 Div. 952.
• Citation: 37 So.2d 659,251 Ala. 459
• Parties: LOUDONVILLE MILLING CO. v. DAVIS et al.
• Court: Alabama Supreme Court

37 So.2d 659

251 Ala. 459

LOUDONVILLE MILLING CO. v. DAVIS et al.

7 Div. 952.

Supreme Court of Alabama

October 14, 1948

Rehearing Denied Dec. 16, 1948.

Lusk Swann & Burns, of Gadsden, for appellant.

Hood Inzer, Martin & Suttle, of Gadsden, for appellees.

The appellant, an Ohio corporation, with its principal place of business in Loudonville, Ohio, was engaged in the manufacture and sale of flour and other cereal products throughout the country and employed one Lyons as its agent in Alabama paying him a salary and traveling expenses, furnishing him with an automobile to use in procuring Alabama distributors to purchase its products and in looking after its interests with its various distributors. In line with his duties, Lyons contacted appellees and after taking the senior Davis to Ohio for a conference with the president of the company, a contract, the material portions of which appear in the opinion on the first appeal (248 Ala. 202, 27 So.2d 6) but not here considered necessary to particularize, was entered into between the parties whereby the appellees agreed to purchase appellant's flour in 100-barrel lots for resale to appellees' retail customers in certain counties in Alabama.

The notes here sued on were given as a part of the contract to guarantee the payment of the flour delivered under the contract and to secure the faithful performance of the terms thereof. A warehouse was rented by appellees in Gadsden, where their business was located, and the rent was paid by Lyons. Lyons kept one key and Davis & Son the other, and the appellant would ship to itself at Gadsden flour in carload lots from time to time as the need would arise to supply appellees under the contract, notifying Lyons of the shipment; Lyons would then come to Gadsden and arrange for the unloading of the flour and placing it in the warehouse.

Davis & Son would furnish the transportation and labor for the unloading and storing it in the warehouse, but Lyons would reimburse them for one half of the expense. The flour thus stored would then be released to Davis & Son in 100-barrel lots as the last 100 barrels had been paid for and the flour thus released would be segregated, as Davis' flour, from the remainder of the flour, and placed in a different portion of the warehouse from which it was sold by appellees to their Alabama retail customers. Settlement would be made by Davis & Son from time to time for the flour previously released by payment sometimes to Lyons and sometimes directly to the home office. It was a part of Lyons' duty to open up new territory for similar distribution of the products of appellant and to expand the business Lyons made several trips with Davis in the company car to aid appellees in contacting and acquiring new retail customers.

SIMPSON, Justice (after stating the facts).

The suit is on the two promissory notes referred to in the statement of facts.

This is a second appeal. On the first appeal, where decision turned on a matter not here material, it was indicated that to defend on the ground of a conditional delivery of the notes and a noncompliance with the condition an appropriate special plea would be necessary. Loudonville Milling Co. v. Davis, 248 Ala. 202, 205(7-8), 27 So.2d 6. Though decision in the lower court in the case now here was not rested on any such plea, since the case must be retried, we repeat the observation and note that the pleader has seemingly ignored the comment. As indicating the correct practice see Interstate Electric Co. v. Russell, 242 Ala. 233, 5 So.2d 484 (syllabus No. 4), and other cases cited in the first case.

The appellant, suing on the notes, was a foreign corporation and, not having qualified to do business in Alabama, § 233, Constitution of 1901; Code 1940, Title 10, § 192; Title 51, § 339, the trial court denied recovery on this ground.

It is true that when a non-qualifying corporation engages in an intrastate transaction in furtherance of a main corporate function, a contract issuing from such transaction shall at the option of the other party to the contract be void. Code 1940, Title 51, § 342.

Some of the cases illustrating the principle are: Royal Insurance Co. v. All States Theaters, 242 Ala. 417, 6 So.2d 494; Cable Piano Co. v. Estes, 206 Ala. 95, 89 So. 372; Alabama Western R. v. Talley-Bates Construction Co., 162 Ala. 396, 50 So. 341; Muller Mfg. Co. v. First Nat. Bank of Dothan 176 Ala. 229, 57 So. 762; American Amusement Co. v. East Lake Chutes Co., 174 Ala. 526, 56 So. 961; Farrior v. New England Mortgage Security Co., 88 Ala. 275, 278, 7 So. 200.

However, a transaction involving no more than a sale, transportation and delivery of out-of-state goods by a nonresident to a local party on orders taken in Alabama would be an act of interstate commerce to which the laws of this state are not and could not be applicable. American Amusement Co. v. East Lake Chutes Co., supra, 174 Ala. at page 529, 56 So. 961; Hurst v. Fitz Water Wheel Co., 197 Ala. 10, 72 So. 314; Cobb v. York Ice Machinery Corp., 230 Ala. 95, 159 So. 811; Puffer Mfg. Co. v. Kelly, 198 Ala. 131, 73 So. 403; Mertins v. Hubbell Publishing Co., 190 Ala. 311, 67 So. 275; E. A. Foy Co. v. Haddock, 191 Ala. 101, 67 So. 978; J. R. Watkins Co. v. Hamilton, 32 Ala.App. 361, 26 So.2d 207.

The decisive question then is whether the business transacted under the contract to secure which the suit notes were given was local business in Alabama as distinguished from acts of commerce between states. On this issue our conclusion is that the transactions were of the latter class, in interstate commerce and, therefore, immune from state interference or state regulation.

To reduce the facts to a brief analysis, the milling company was merely selling to appellees, under a previously executed consignment contract, it goods, to be delivered in 100-barrel lots, as previous deliveries had been paid for.

The temporary storing of the flour in the warehouse and its release to appellees was in execution of the contract to deliver these interstate goods and but a necessary incident to keeping the free flow of commerce from the nonresident to its local vendee. No such flour was commingled with the mass of local commerce, nor was it open to or offered for sale to any other customer or the general public (Kehrer v. Stewart, 197 U.S. 60, 25 S.Ct. 403, 49 L.Ed. 663); but, in its original form, was held on consignment for Davis' use alone as they operated under the previously executed contract. Grand Union Tea Co. v. Evans, D.C., 216 F. 791.

The business did not become intrastate because of the residence in Alabama of its agent, Lyons, who represented appellant in procuring new distributors, and obtaining contracts with them such as was undertaken with the appellees. Authorities, supra; 20 C.J.S., Corporations, § 1840(b), page 57; 11 Am.Jur. 45, § 46.

Nor was the interstate character of the sale under a contract to purchase goods to be shipped from another state affected by the fact that the goods were consigned to the shipper and the shipper's agent looked after the proper receipt of the goods. 'The interstate character of a sale, made on a contract for the purchase of goods which are to be shipped from another state, is not affected by the fact that the goods are consigned to the shipper or the agent to whom the order is given and are to be delivered by the agent. This is true even though the agent collects the purchase price of the goods from the purchaser and maintains an office which is used as headquarters while soliciting orders and as a distributing point after the goods are shipped * * *'--11 Am.Jur. 47, § 49.

This is true even though the consignee nonresident maintains a temporary warehouse for the purpose of receiving the consigned goods for delivery to their customers on orders taken. Lee v. LaFayette, 153 Ala. 675, 45 So. 294; 60 A.L.R. 1028.

This Lee case, last above, is clearly decisive of the question here posed for determination. There, the trafficking in the goods was held to be acts of interstate commerce and not subject to state regulation. It appears from the agreed statement of facts there that a nonresident stove manufacturer solicited orders through agents selling by sample, who took the orders and notes subject to approval of their principal, shipped the stoves under approved orders to a temporary warehouse in LaFayette. Alabama, and afterwards sent a deliveryman who delivered the stoves in the original form to the buyers from the temporary warehouse. Orders for the future delivery of ranges were sometimes taken by said salesmen before said ranges had been shipped from St. Louis and sometimes while the ranges were in transit from St. Louis to said temporary warehouse. The warehouse was moved from time to time to make delivery more convenient in the area in which the stoves were being sold.

The system of doing business in the instant case is not substantially different...