Minnehoma Financial Company v. Van Oosten

• Decision Date: 29 September 1961
• Docket Number: Civ. No. 305.
• Citation: 198 F. Supp. 200
• Parties: MINNEHOMA FINANCIAL COMPANY, a Delaware corporation, Plaintiff, v. C. J. VAN OOSTEN, d/b/a Van's Montana Trailer Mart, Defendant.
• Court: U.S. District Court — District of Montana

198 F. Supp. 200

MINNEHOMA FINANCIAL COMPANY, a Delaware corporation, Plaintiff, v. C. J. VAN OOSTEN, d/b/a Van's Montana Trailer Mart, Defendant.

Civ. No. 305.

United States District Court D. Montana, Billings Division.

September 29, 1961

COPYRIGHT MATERIAL OMITTED

Coleman, Lamey & Crowley, Billings, Mont., for plaintiff.

Burke, Hibbs & Sweeney, Billings, Mont., for defendant.

JAMESON, District Judge.

Plaintiff, a Delaware corporation with its principal place of business at Tulsa, Oklahoma, brought this action against defendant, a Montana corporation, to recover on guaranties of conditional sales contracts assigned to plaintiff by defendant and trust receipts executed by defendant. Plaintiff has not qualified to do business in Montana under the provisions of Sections 15-1701 to 15-1713, R.C.M.1947,¹ relating to foreign corporations doing business in the State of Montana. The sole question presented is whether, by reason of plaintiff's failure to comply with these statutory provisions, the contracts between plaintiff and defendant are enforceable in Montana. The case was submitted on an agreed statement of facts, and the parties have agreed upon the amounts due plaintiff if the contracts are enforceable.

Plaintiff was engaged in financing mobile homes, including homes manufactured by Spartan Aircraft Company of Tulsa, Oklahoma. Defendant, a retail mobile home dealer in Billings, Montana, sold homes manufactured by Spartan and was an authorized dealer for Spartan.

Mobile homes purchased by defendant from Spartan were invoiced by Spartan at Tulsa to plaintiff, and then delivered to defendant on trust receipts executed by defendant prior to the deliveries. The trust receipts, signed by defendant in Montana in blank in advance, were mailed to plaintiff at Tulsa, where they were filled in by plaintiff at the time of the transactions.

When defendant sold mobile homes on conditional sales contracts, the contracts were purchased by plaintiff through assignment from defendant. The conditional sales contracts were executed by defendant and the purchasers in Montana. The assignments were likewise executed by defendant in Montana and mailed to plaintiff in Tulsa, for acceptance or rejection. All monies advanced by plaintiff in connection with the trust receipt and conditional sales transactions were transmitted to the defendant or Spartan, as the case may be, by mail from Tulsa. The forms of conditional sales contracts and trust receipts were furnished by plaintiff to defendant.

An agreement "covering purchase of conditional and time sales contracts", dated May 23, 1956, was executed by defendant in Montana and sent to Tulsa for execution by plaintiff there, the agreement reciting that it "was made and entered into in Tulsa, Oklahoma". Defendant, at the request of plaintiff, in accordance with the terms of paragraph 10 of this agreement, repossessed in Montana mobile homes referred to in two counts of plaintiff's complaint.

The business contacts of the plaintiff in the State of Montana, or with residents of Montana, other than as hereinbefore enumerated, are confined to the floor planning and financing of other Spartan dealers in the State of Montana under arrangements identical with those it had with the defendant, together with an occasional checking of the inventory of these dealers by an independent contractor on behalf of plaintiff, as requested by plaintiff by telegram or mail, and, on one occasion in 1959, by a representative of plaintiff who visited Montana for that specific purpose.

The parties have agreed upon the amount due plaintiff on each of six counts in plaintiff's complaint,² and that judgment may be entered for the respective amounts in the event plaintiff prevails in this action.

Defendant contends that plaintiff's failure to comply with Section 15-1701 et seq., R.C.M.1947, renders the various contracts between plaintiff and defendant void and unenforceable. Plaintiff contends that it was not "doing business" in the State of Montana within the meaning of these statutory provisions; and that if so, the transactions constituted interstate commerce and plaintiff was not accordingly required to qualify to do business in Montana.

Where it is established that a foreign corporation has been "doing business" within the State of Montana without complying with the provisions of section 15-1701 et seq. with respect to qualification, payment of license fees, and filing annual reports, the corporation is not entitled to enforce any contracts made during the period of noncompliance, notwithstanding a later compliance with the statute. This rule is applicable in the federal as well as state courts in Montana.³

A determination of what constitutes doing business within the state depends primarily upon state law.⁴ In Montana the meaning of the term "doing business in the state" is the same for the regulation of corporations as for service of process, and the same tests are applied in determining whether a corporation is doing business in the state.⁵

The meaning of the phrase "doing business in the state" has been considered by the Montana Supreme Court in a number of decisions and by this court in two prior decisions. Three of the state court cases⁶ and the first of the two cases in this court⁷ were reviewed at some length in Graham and Ross Mercantile Co. v. Sprout, Waldron & Co., D.C.D. Mont.1959, 174 F.Supp. 551. It would serve no useful purpose to repeat that discussion here.

Two additional Montana cases are pertinent. In Uihlein v. Caplice Commercial Co., 1909, 39 Mont. 327, 102 P. 564, 566, the court held that the Schlitz Brewing Company was not doing business in Montana, although it owned real estate and maintained an office in Montana to "see the trade, * * * make sales on the basis of prices and terms furnished by the home office, his terms to be approved and corroborated by the home office". Beer was shipped to Montana f. o. b. Milwaukee. In Caterpillar Tractor Co. v. Johnson, 1935, 99 Mont. 269, 43 P.2d 670, 671, it was stipulated that Caterpillar had "done business in the state of Montana for many years, but (had) never complied with the laws of Montana relative to foreign corporations doing business in this state; all of its business having been done through dealers in this state". It was contended that plaintiff could not maintain its action since it had never qualified to do business in the state. The court rejected this contention, holding that Caterpillar was not "doing business" in the state.⁸

Defendant relies upon two Montana cases, State ex rel. Taylor Laundry Co. v. Second Judicial District Court, supra, and State ex rel. Schmidt v. District Court, 1940, 111 Mont. 16, 105 P.2d 677. In my opinion, both cases are clearly distinguishable. In the Taylor Laundry Co. case the corporation had sold laundry machinery directly, through agents and representatives who travelled throughout the state soliciting business, selling, supervising installation, servicing machines, accepting used machines as payment on the purchase price of new sales, and making adjustments. The court held that, while solicitation by agents of sales of merchandise to be shipped into the state does not constitute doing business, the added activity of adjusting, inspecting, trading and repairing was sufficient to constitute a continuous course of doing business within the state. Even here, the court said that "this case may be said to be close * * *." 57 P.2d at page 776. In the Schmidt case a foreign corporation had qualified to do business in Montana and appointed a statutory agent, who later died and was not replaced. It had never withdrawn its authority to do business in Montana. An employee of the corporation at the time the action was instituted had been selling its products in Montana for about four years. He attended to company business, making sales, keeping the accounts of customers, making collections and adjusting complaints for damaged goods. The court found these facts sufficient to show that the company was engaged in business in Montana and that this employee was its managing agent for service of process. It will be noted that in both the Taylor and Schmidt cases the foreign corporations dealt directly with customers, and rather extensively, through agents in Montana. Their activities were not limited, as here and in the Caterpillar case, to transactions through dealers.

Although none of the Montana cases is precisely in point, it is clear that plaintiff's activities and contacts fall far short of what is required to constitute "doing business in the state", as this phrase has been construed by the Montana Supreme Court with respect both to regulation of corporations and service of process. There is no evidence that plaintiff had any office, place of business or resident agents or employees in the state. It did not deal directly with any customers or purchasers, but solely with dealers. This business was conducted by mail pursuant to an agreement expressly reciting that "it was made and entered into at Tulsa, Oklahoma". The assignments of the conditional sales contracts were subject to plaintiff's acceptance or rejection in Tulsa. The trust receipts signed by defendant in blank were mailed to plaintiff in Tulsa, where they were completed by plaintiff, the receipts reciting "City Tulsa, State Oklahoma". The inventories of dealers in Montana were checked by an independent contractor pursuant to telegraphic or mail request, except upon one occasion when a representative of plaintiff visited Montana for that purpose. Insofar as disclosed by the record, this is the only activity by any representative of plaintiff in Montana. This isolated visit could not be construed as doing business in the state.

I find no merit in defendant's contention that it was acting as an "agent" of plaintiff. Defendant relies specifically upon paragraphs 7 and 10 of the agreement of May 23, 1956. Paragraph 7 simply provides...