Springs Cotton Mills v. Machinecraft, Inc.

• Decision Date: 26 October 1957
• Docket Number: Civ. A. No. 1726.
• Citation: 156 F. Supp. 372
• Court: U.S. District Court — District of South Carolina
• Parties: The SPRINGS COTTON MILLS, Plaintiff, v. MACHINECRAFT, Inc., Defendant.

156 F. Supp. 372

The SPRINGS COTTON MILLS, Plaintiff, v. MACHINECRAFT, Inc., Defendant.

Civ. A. No. 1726.

United States District Court W. D. South Carolina, Rock Hill Division.

October 26, 1957.

Williams & Parler, A. Z. F. Wood, Lancaster, S. C., for plaintiff.

Wyche, Burgess & Wyche, Greenville, S. C., for defendant.

WILLIAMS, District Judge.

This matter is before the Court upon defendant's motion to quash as insufficient service of the summons and complaint upon the Secretary of State of South Carolina on February 24, 1955, as alleged statutory agent of the defendant, and to dismiss the action for want of jurisdiction of the defendant. It presents for decision the question of whether under the facts defendant is to be regarded as doing business in South Carolina on February 24, 1955 and, therefore, present in this state at that time so as to be subject to service and suit therein.

Plaintiff, Springs Cotton Mills, is a corporation organized under the laws of the State of South Carolina, with its principal office in Lancaster County, and is engaged primarily in the business of manufacturing, processing and selling cotton goods. Defendant, Machinecraft, Inc., is a Massachusetts corporation with its offices and manufacturing plant in Whitman, Massachusetts, where it is engaged in the manufacture of Climax rolls, formerly used by the plaintiff in its manufacturing process.

Plaintiff instituted this action against defendant in the Court of Common Pleas of Lancaster County, South Carolina, by service on the Secretary of State on February 24, 1955. On March 10, 1955, the case was removed to this court and thereafter on March 15, 1955, defendant filed its motion to have the service of the summons and complaint set aside upon the following grounds:

"(1) That the defendant, Machinecraft, Inc., is a corporation organized, created and existing under and by virtue of the laws of the State of Massachusetts and is a foreign corporation to the State of South Carolina.

"(2) That the defendant, Machinecraft, Inc., is not now, nor was it at the time of the attempted service of the summons and complaint, nor was it at the times referred to in the complaint, doing business in the State of South Carolina so as to make it amenable to the jurisdiction of the State or Federal Courts in the State of South Carolina.

"(3) That the attempted service of the summons and complaint upon the defendant, Machinecraft, Inc., under Section 10-424 of the Code of Laws of South Carolina for 1952, is invalid."

Service on the defendant through the described means was sought to be made under Title 10, Section 424, Code of Laws of South Carolina for 1952, which reads as follows:

"10-424. Service on foreign corporations generally.

"If the suit be against a foreign corporation other than a foreign insurance company the summons and any other legal paper may be served by delivering a copy to any officer, agent or employee of the corporation found at the place within this State designated by the stipulation or declaration filed by the corporation pursuant to § 12-721. But if such foreign corporation transacts business in this State without complying with said section such service may be made by leaving a copy of the paper with a fee of one dollar in the hands of the Secretary of State or in his office and such service shall be deemed sufficient service and shall have like force and effect in all respects as service upon citizens of this state found within the limits of the same if notice of such service and a copy of the paper served are forthwith sent by registered mail by the plaintiff to the defendant foreign corporation and the defendant's return receipt and the plaintiff's affidavit of compliance therewith are filed in the cause and submitted to the court from which such process or other paper issued.

"Such service may also be made by delivery of a copy thereof to any such corporation outside the State and proof of such delivery may be made by the affidavit of the person delivering the same. Such affidavit shall be filed in the cause and submitted to the court from which the process or other paper issued."

The gravamen of the complaint is that between February, 1948 and January, 1952, plaintiff purchased certain ballbearing Climax rolls manufactured by the defendant, at a cost of $109,539.84, that said rolls proved unusable, and that plaintiff was entitled to judgment for the purchase price.

Prior to the year 1953, defendant sold its products in this state through a partnership known as Watson & Desmond, composed of C. E. Watson and S. P. B. Desmond, both of Charlotte, Mecklenburg County, North Carolina. The partnership maintained its offices in Charlotte, North Carolina and is what is known as a manufacturer's representative, selling products of the defendant as well as products of other manufacturing companies in this territory. This partnership operated under a written sales agreement with the defendant corporation dated April 1, 1947, which provided among other things that Watson & Desmond should have all rights as to the direction of its sales efforts and itineraries of calls in promoting the sale of the rolls and that the manufacturer should have the final right of acceptance or refusal of a purchase order; that if inquiries for rolls came to the manufacturer through sources other than Watson & Desmond, the latter would be notified of such inquiries, that the representative should receive a commission on the sales price of all rolls sold in the territory, either by the partnership or as a result of inquiries made to the manufacturer.

The method by which Watson & Desmond handled sales of the defendant may be summarized as follows: The manufacturer would from time to time issue a quotation to the representative listing the then prevailing price of its Climax rolls. This price was changed from time to time by the manufacturer, such changes being submitted to Watson & Desmond by amended quotations. Sales of Climax rolls were solicited from textile mills, including the plaintiff, by Watson & Desmond and their employees in the name of Watson & Desmond. The purchasing mills issued their purchase orders for said rolls in practically all instances directing the purchase order to Watson & Desmond, Charlotte, North Carolina, but in a few instances directing them to Machinecraft, Inc., c/o Watson & Desmond, Charlotte, North Carolina. There is no evidence that any purchases were made directly from salesmen in the territory or directly by mail to the manufacturer's Whitman, Massachusetts, office.

Upon receipt in Charlotte, North Carolina, of the purchase order from the mill, Watson & Desmond then placed its own covering order on its own form with Machinecraft, Inc., and submitted the same to the defendant corporation at Whitman, Massachusetts, through the United States mails. Upon approval of said order from the representative, Machinecraft sent the cotton mill an acknowledgment of the order through the mails with a copy by mail to Watson & Desmond.

Thereupon, Machinecraft issued a shop order in six counterparts and delivery of the rolls was made in accordance with the purchase order of Watson & Desmond. In most instances, the representative's purchase orders specified that the shipment was to be made and invoices sent to the cotton mill. In accordance with said directions, invoices were sent by Machinecraft through the mail to the cotton mill, with copy by mail to the representative. Upon receipt of payment of said invoices which were received by mail, Machinecraft paid the representative the commission to which it was entitled under the written contract.

The services of Watson & Desmond under the contract of 1947 did not prove satisfactory to the defendant and it was not renewed after the expiration of the five-year period set forth therein.

Although Machinecraft had some of its employees connected with or associated with Watson & Desmond at certain times, there is no evidence in the record that any of these employees were in the State of South Carolina on any business of Machinecraft subsequent to 1952, with the exception of Louis M. Cotchett, President of the defendant corporation, who made one visit to South Carolina in 1953 to try to make an adjustment of the complaint of Springs Cotton Mills.

Machinecraft had no office or place of business anywhere in the State of South Carolina. It has never maintained any address, bank account or stock of goods in this state.

Machinecraft entered into a written contract with Product Sales, Inc., for the sale of its Climax rolls and other manufactured products in the territory formerly handled by Watson & Desmond. This contract is dated September 1, 1951. Some time was required in completing this change of representation. The evidence shows that Springs Cotton Mills and other purchasers of defendant's products were notified that after March 1, 1953, Watson & Desmond would no longer be its sales representative in this territory. Thereafter, defendant's products were handled exclusively by Product Sales, Inc.

The procedure followed by Product Sales, Inc., in consummating sales is quite similar to that followed by Watson & Desmond. It may be described briefly as follows: Orders for said products are solicited by the agents and employees of Product Sales, Inc., from various cotton mills located in South Carolina and other states. Orders for such articles sold are placed directly by said cotton mills variously with the various manufacturers through the United States mail. Upon receipt of said orders, specifications are prepared by Machinecraft, Inc., or other manufacturers to cover the articles specified in the mill's order. Shop orders are thereupon made up in a number of copies, one of which copies designated "Sales" is sent by the manufacturer to Product Sales, Inc., to serve as an acknowledgment to Product Sales, Inc., of the order received from the mill. Product Sales, Inc., thereupon prepares a...