Steinway v. Majestic Amusement Co.

• Citation: 179 F.2d 681
• Decision Date: 09 February 1950
• Docket Number: No. 3901.,3901.
• Parties: STEINWAY v. MAJESTIC AMUSEMENT CO. et al.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

179 F.2d 681 (1949)

STEINWAY v. MAJESTIC AMUSEMENT CO. et al.

No. 3901.

United States Court of Appeals Tenth Circuit.

December 28, 1949.

Rehearing Denied February 9, 1950.

Neal E. McNeill, Tulsa, Okl., for appellant.

John A. Johnson, Oklahoma City, Okl., for appellees.

Before PHILLIPS, Chief Judge, and BRATTON and MURRAH, Circuit Judges.

MURRAH, Circuit Judge.

Appellant appeals from a judgment of the District Court sustaining a motion to quash attempted service of summons for lack of personal service, and dismissing this cause for improper venue, on the grounds that the appellee Hotel Last Frontier was not transacting business within the meaning of Section 1.17, 18 O.S.A., authorizing service of summons upon the Secretary of State if the foreign corporation sued is "engaging in or transacting business" within the State and fails to maintain a registered agent for the service of process.

Appellant, a resident of New York, and a minority stockholder in the Majestic Amusement Company, an Oklahoma corporation, brought this action against that corporation, the Griffith Consolidated Theatres, Inc. and Griffith Metropolitan Theatres, Delaware corporations, domesticated in the State of Oklahoma, and Hotel Last Frontier, a Nevada corporation. The basis of her action is an alleged conspiracy between all the defendants, whereby Griffith Consolidated acquired a majority of the Majestic stock, which it sold to the Hotel Last Frontier for the purpose of allowing that corporation to vote the Majestic stock in furtherance of Griffith's plan to completely dominate and control its competitor, the Majestic; that by reason of the complete domination and control exercised by Griffith the business of the Majestic has been greatly impaired to the damage of the plaintiff minority stockholder. The prayer is for a judgment declaring Griffith's acquisition of the Majestic stock illegal, and that Griffith and its alleged affiliated corporation, Hotel Last Frontier, be permanently enjoined from voting the same by proxy or otherwise.

The defendant Hotel Last Frontier, not being domesticated or having a registered agent within the State of Oklahoma, process was made upon the Secretary of State in compliance with Section 1.17, supra. By motion to quash the service of summons the Hotel Last Frontier challenged jurisdiction over its person, contending that it was not "engaging in or transacting business" within the State of Oklahoma, and therefore could not be found for service of process. Affidavits, documents, answers to interrogatories, depositions and counter affidavits filed in support of the motion show that the only activity of the Hotel Last Frontier in Oklahoma consisted of voting its Majestic stock by proxy on two separate occasions, thus electing a new Board of Directors for the Majestic corporation. The trial court sustained the motion to quash for lack of personal service; dismissed the action as to the Hotel Last Frontier for improper venue, and as to the Griffith corporations on the grounds that the Hotel Last Frontier was an indispensable party to the action against them.

Rule 4(d) (1, 7), F.R.C.P., 28 U.S.C. A., provides for service of summons upon a foreign corporation in the federal courts in the manner prescribed by the law of the State in which the service is made. The first question then is whether the service was valid under Oklahoma law. If it was not, the case must be affirmed. If it was, the question then arises whether the service deemed valid under local law comports with due process. Bomze v. Nardis Sportswear, 2 Cir., 165 F.2d 33; Vol. 18 Fletcher Cyclopedia Corporation, Sec. 8706, p. 327.

Recognizing that the statutory term "engaging in or transacting business" is incapable of satisfactory definition, the Oklahoma courts, by a process of inclusion and exclusion, have given the term the same meaning and content generally accorded it by federal and other decisions, which have construed it with an eye to due process. Consolidated Flour Mills Co. v. Muegge, 127 Okl. 295, 260 P. 745,¹ R. W. Yates Laundry Machinery Co. v. Hoppe, 160 Okl. 584, 15 P.2d 584; Clement v. Coon, 161 Okl. 216, 18 P.2d 1059; Wills v. National Mineral Co., 176 Okl. 193, 55 P.2d 449, 452.

While leaving every case to its own facts, it is generally understood that to constitute "engaging in or transacting business" in a state, so as to be found or present there for purposes of personal service, a nonresident corporation's activity there must be "substantial", "continuous", and "regular", as distinguished from "casual", "single", or "isolated" acts. International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95, 161 A.L.R. 1057; Rosenberg Bros. & Co. v. Curtis Brown Co., 260 U.S. 516, 43 S.Ct. 170, 67 L.Ed. 372; 18 Fletcher Cyclopedia Corporations, Secs. 8711, 8713 and 8715.

Where a nonresident corporation is organized for the very purpose of holding and controlling the stock of a resident corporation and thus manages and directs the internal affairs of the resident corporation, courts have disregarded the corporate entity and treated it as the alter ego of the nonresident corporation for the purpose of service of process. See Bankers' Holding Corporation v. Maybury, 161 Wash. 681, 297 P. 740, 75 A.L.R. 1237; Cloverleaf Freight Lines v. Pacific Coast Wholesalers Ass'n, 7 Cir., 166 F.2d 626; Annotation, 75 A.L.R. 1242. But, none of the cases we have seen go so far as to hold mere ownership and voting of a majority of the stock of a resident or domesticated corporation by a nonresident corporation sufficient to justify ignoring the corporate entity for the purpose of service of process. On the contrary, the cases relied upon by the trial court hold without deviation that mere ownership and voting of the majority stock of a resident or domesticated corporation in the state does not constitute "doing business" therein, in a manner to make it amenable to personal service, even though by so doing it elects the corporate officers, thus indirectly controlling corporate affairs. Conley v. Mathieson Alkali Works, 190 U.S. 406, 23 S.Ct. 728, 47 L.Ed. 1113; Peterson v. Chicago, Rock Island & Pacific R. Co., 205 U.S. 364, 27 S.Ct. 513, 51 L.Ed. 841; Philadelphia & Reading Ry. Co. v. McKibbin, 243 U.S. 264, 37 S.Ct. 280, 61 L.Ed. 710; Peoples Tobacco Co. v. American Tobacco Co., 246 U.S. 79, 38 S.Ct. 233, 62 L.Ed. 587, Ann.Cas.1918C, 537; Cannon Manufacturing Co. v. Cudahy Packing Co., 267 U.S. 333, 45 S.Ct. 250, 69 L.Ed. 634; Consolidated Textile Corp. v. Gregory, 289 U.S. 85, 53 S.Ct. 529, 77 L.Ed. 1047; Wilhelm v. Consolidated Oil Corp., 10 Cir., 84 F.2d 739; Hutchinson v. Chase & Gilbert, 2 Cir., 45 F.2d 139; American Fire Prevention Bureau v. Automatic Sprinkler Co., D.C., 42 F.Supp. 220.

Without denying the rule of these cases, appellant nevertheless insists that they must now be construed in conformity with the philosophy of International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95, 161 A.L.R. 1057; United States v. Scophony Corp., 333 U.S. 795, 68 S.Ct. 855, 92 L.Ed. 1091, and Frene v. Louisville Cement Co., 77 U.S.App.D.C. 129, 134 F.2d 511, 146 A.L.R. 926, which she contends has broadened the concept of "doing business", "engaging in business", "presence" and "found" to embrace the activities of the Hotel Last Frontier, complained of as the basis for this action.

In the International Shoe Company case the State of Washington levied an unemployment compensation tax against the commissions of salesmen who exhibited samples and solicited orders from prospective buyers to be accepted or rejected by the foreign corporation at a point outside the State. The Washington Supreme Court sustained the service of process on a salesman in a suit to collect the tax, holding that the systematic solicitation of orders in the State, resulting in a continuous flow of the company's product into the State, constituted doing business, so as to make it amenable to process of the courts in that State. The only question before the United States Supreme Court was...