Ponder v. Aamco Automatic Transmission, Inc.

• Citation: 536 S.W.2d 888
• Decision Date: 03 May 1976
• Docket Number: No. KCD,KCD
• Parties: Edwin W. PONDER, Appellant, v. AAMCO AUTOMATIC TRANSMISSION, INC., a corporation, Respondent. 27100.
• Court: Court of Appeal of Missouri (US)

Page 888

536 S.W.2d 888

Edwin W. PONDER, Appellant, v. AAMCO AUTOMATIC TRANSMISSION, INC., a corporation, Respondent.

No. KCD 27100.

Missouri Court of Appeals, Kansas City District.

May 3, 1976.

Von Erdmannsdorff, Kuhlmann & Zimmerman, Kansas City, for appellant.

John J. Alder, Richard D. Rixner, Donald L. Zemites, Shawnee Mission, Kan., Milton Skeens, Kansas City, for respondent.

Before SHANGLER, P.J., and SWOFFORD and SOMERVILLE, JJ.

SHANGLER, Presiding Judge.

The plaintiff brought a petition in two counts for actual and punitive damages against Aamco Transmissions, Inc., and John Hale and Roy Hale, a partnership. The defendants Hale operated an automotive service center under a franchise agreement with Aamco Automatic Transmissions, Inc., a Pennsylvania corporation. The plaintiff had service of process on the defendant partners and also on John Hale, described on the return of the sheriff as Manager of Aamco Transmission Corporation. The partnership answered the petition but Aamco made no response.

The plaintiff then filed an amended petition which reiterated the causes of action against the parties but redesignated the corporate defendant as Aamco Automatic Transmissions, Inc. Service of process on the corporate defendant was made on Roy Hale as Manager of Aamco Automatic Transmissions, Inc. Once again, Aamco failed to answer the petition. Thereafter, the plaintiff voluntarily dismissed the defendants Hale.

Aamco did not appear at the trial and a judgment by default was entered against the corporation for $700 actual and $50,000 punitive damages on Count I and $355.35 actual and $15,000 punitive damages on Count II of the petition. ¹ A general execution issued. Aamco moved for quashal of the pretended service of process and to stay execution of the judgments.

The plaintiff contended to the court that the judgments had issued upon the service of process prescribed for foreign corporations by § 506.150, RSMO 1969, and therefore were valid exercises of jurisdiction. That statute provides:

The summons and petition shall be served together . . .

(3) Upon a domestic or foreign corporation . . . by delivering a copy of the summons and of the petition to an officer, partner, a managing or general agent, or by leaving the copies at any business office of the defendant with the person having charge thereof, or to any other agent authorized by appointment or required by law to receive service of process . . .

The corporate defendant contended that Aamco neither conducted business at the automotive service premises of the defendants Hale nor constituted them as agent to accept service on behalf of the corporation; thus Aamco was neither amenable to service nor properly served and was not subject to the jurisdiction and judgment of the court.

The court took evidence on the motions and set aside the default judgments for want of proper service of summons and jurisdiction over the defendant corporation. The plaintiff has appealed.

A summons is a process, a means by which a defendant is subjected to the jurisdiction and judgment of the court which has issued the writ; it is also notice to a party of the proceeding against him and that he has opportunity to appear and defend his right of life, liberty and property. State ex rel. Ballew v. Hawkins, 361 S.W.2d 852, 857(7--10) (Mo.App.1962); 62 Am.Jur.2d, Process, § 2. The requirements for process and the manner of service are wholly as constituted by statute, and where not met, the court is without power to adjudicate. State ex rel. Minihan v. Aronson, 350 Mo. 309, 165 S.W.2d 404, 407(3, 4) (1942).

The plaintiff claims the authority of § 506.150(3) to validate the judgments against Aamco. A foreign corporation is amenable to service--and a judgment in personam--by the terms of that statute only if it is doing business in this state. Collar v. Peninsular Gas Company, 295 S.W.2d 88, 91(4) (Mo.1956). The statute also requires that the delivery of process be upon one of the class authorized to receive service for the corporation. These observances are not only jurisdictional to a valid judgment as a matter of local law, but the requirement that a foreign corporation 'do business' within the forum to be amenable to personal service is one of federal due process according to the jurisprudence reflected by § 506.150(3). Hall v. Wilder Mfg. Co., 316 Mo. 812, 293 S.W. 760, 762(2) (1927). This constitutional requisite is met by evidence that the foreign corporation 'entered the state and engaged there in carrying on and transacting, through its agents, the ordinary business in which it is engaged'. State ex rel. Ferrocarriles Nacionales de Mexico v. Rutledge, 331 Mo. 1015, 56 S.W.2d 28, 38(13) (1932), cert. den. 289 U.S. 746, 53 S.Ct. 689, 77 L.Ed. 1492 (1933).

As presently appears, the evidence shows that there was no agreement of agency between the Hales and Aamco, either for the conduct of business or to receive service of process on behalf of the corporation. ² The question thus raised is whether, on the evidence, the foreign corporate franchisor was doing business within Missouri through the activity of the franchisee. Or, put another way, whether the Hales in fact operated the transmission service center as an agency of Aamco rather than as an independent business.

As the comment in 36 Am.Jur.2d, Foreign Corporations, § 363 articulates, it is often difficult to determine whether a local dealer who markets the products of a foreign corporation is in fact an independent business or so far under the control of the foreign company that the dealer becomes merely a conduit for the passage of goods from the foreign manufacturer to the consumer:

(The) difficulty arises chiefly from the fact that under some marketing practices, the local handling of such products is often pursuant to contracts which . . . in varying degree, restrict independent action (of the local dealer), regulate future relations of the parties and the manner and terms of disposal of the products, provide for co-operation and assistance on the part of the foreign company, and create a somewhat anomalous relation between such company and the local dealer, partaking both of the character of seller and purchaser and that of principal and agent. Whether the local dealer's activities pursuant to such a contract will be held to constitute doing business in the state on the part of the foreign corporation ordinarily depends on whether the effect of the terms of the particular contract is deemed to include the creation of a relation of principal and agent in respect to the foreign corporation's business. If it is, the corporation is ordinarily regarded as doing business in the state . . .. If the effect of the contract is deemed to be no more than the creation of the relation of seller and buyer, however, a contrary view is taken. The question depends on the sense of the agreement as a whole. (Emphasis supplied.)

In the consideration of this issue, the New York Court of Appeals has held that where the foreign corporation is a separate entity, unmingled in ownership with the domestic enterprise, a valid inference of agency does not arise, and the foreign corporation has neither 'presence' in the forum state nor is 'doing business' in the traditional sense as to allow personal service and jurisdiction for a general judgment. Delagi v. Volkwagenwerk AG of Wolfsburg, 29 N.Y.2d 426, 328 N.Y.S.2d 653, 655, 278 N.E.2d 895(1) (1972). Finding no inference of agency, the opinion noted the court had never held a foreign corporation to be 'doing business' on the basis of control exerted over franchise dealers unless there was at least a parent-subsidiary relationship, and then only when the control over the subsidiary was so complete as to render it in fact merely a department of the parent.

A comparable logic underlies our decision in Ward v. Cook United, Inc., 521 S.W.2d 461 (Mo.App.1975). In that case Cooks Discount Department Store was a Missouri retail outlet and division of the national discount house, Cook United, Inc., an Ohio corporation, not licensed to do business in this state. The plaintiff brought an action for false arrest and imprisonment against Cook United with directions that service of process be made on: Cook United, Inc. d/b/a Cooks Discount Department Store . . . (SERVE: STORE MANAGER). A default judgment for actual and punitive damages was entered pursuant to the return of the sheriff which certified service upon Operation Manager, Sam Wray. Wray was the manager of the local retail...