U.S. Cap & Closure, Inc. v. Superior Court for Los Angeles County

• Decision Date: 30 August 1968
• Court: California Court of Appeals Court of Appeals
• Parties: U.S. CAP & CLOSURE, INC., Petitioner, v. SUPERIOR COURT of the State of California FOR the COUNTY OF LOS ANGELES, Respondent. Pressure Dispensers, Inc., Real Party in Interest. Civ. 33086.

Page 184

71 Cal.Rptr. 184

265 Cal.App.2d 408

U.S. CAP & CLOSURE, INC., Petitioner, v. SUPERIOR COURT of the State of California FOR the COUNTY OF LOS ANGELES, Respondent Pressure Dispensers, Inc., Real Party in Interest.

Civ. 33086.

Court of Appeal, Second District, Division 3, California.

Aug. 30, 1968.

Leonard S. Knox, Chicago, Ill., Christie, Parker & Hale, Edwin L. Hartz, Pasadena for petitioner.

Hastings, Blanchard & Hastings, James H. Hastings, Los Angeles, for real party in interest.

COBEY, Acting Presiding Justice.

This case comes before us upon a petition for a writ of mandate to compel the respondent court to quash the substituted service of summons and complaint upon petitioner, an Illinois corporation ¹ which has never qualified to do business in California. (See Code Civ.Proc. § 416.3.) This service was effectuated pursuant to Corporations Code, section 6408, in an action for breach of a license agreement brought by the real party in interest, Pressure Dispensers, Inc., hereafter called 'Dispensers,' against petitioner. This case appears to be one of first impression so far as the validity of substituted service under section 6408 is concerned.

It is conceded that as of the time of the commencement of the main action, petitioner was not transacting intrastate business in California. However, the claim is made by Dispensers that for approximately four years, ending on February 7, 1967, petitioner transacted such business in this state and thereby rendered itself subject to substituted service pursuant to section 6408. Section 6408 provides that any non-exempt foreign corporation which transacts Intrastate business without having qualified to do so may be served by substituted service upon the Secretary of State. ² We conclude that service upon petitioner pursuant to section 6408 was invalid because petitioner had never engaged in Intrastate business within the meaning of that section.

The evidence taken below established the following facts with respect to petitioner's past transaction of business in California. ³ For over four years ending on February 7, 1967, one Arthur Todd, a manufacturer's representative, who apparently represented other concerns in addition to petitioner, maintained an office first in Whittier, California and later in Montebello, California and solicited orders for petitioner's products in the Los Angeles area. During this time, petitioner first listed Todd's Whittier office and then his Montebello office as its 'West Coast Office' on its letterheads, in national trade advertising, in national manufacturers' registers, and in promotional material and price schedules. During the last three years of Todd's association with petitioner, he earned a total of approximately $3,000 in commissions upon some $30,000 in sales to customers of petitioner who were located in California. These customers were principally four bottle jobbers. Most of the orders which Todd obtained for petitioner came directly to petitioner from the jobbers themselves. But some of the orders were sent in by Todd directly to petitioner. When this occurred, petitioner's acceptance of the order was likewise sent back to the customer through Todd. Todd had no authority to accept or reject the orders he obtained for petitioner. Such decisions were made entirely by petitioner at its office in Chicago, Illinois.

Petitioner filled the orders from its customers located in California by having the ordered products manufactured at certain plants located in Illinois and Ohio. The shipments of the goods so manufactured were made directly from these plants to the customers. Billings for the shipments and collections thereon were made entirely from petitioner's Chicago office. ⁴ Once or twice a year petitioner's president, in company with Todd, did some trouble-shooting with its California customers--principally the already-mentioned four bottle jobbers. Todd received no compensation from petitioner other than the previously mentioned sales commissions which were paid him on all of petitioner's sales to customers located in California regardless of whether or not he obtained the orders personally. None of Todd's business expenses were reimbursed by petitioner. Petitioner never maintained any inventory or other property or funds in California and its name was not listed in any telephone directory of any California locality.

This not a 'doing business' case under Code of Civil Procedure, section 411(2) and such cases are therefore generally irrelevant to the basic question here. (See Carl F. W. Borgward, G.M.B.H. v. Superior Court, 51 Cal.2d 72, 76, 330 P.2d 789.) The question in this case is whether the business petitioner conducted in California through Todd constituted the transaction of intrastate business within the meaning of section 6408. To transact intrastate business means to enter into 'repeated and successive transactions of * * * business in this State, other than interstate or foreign commerce.' (Corp. Code § 6203; see also § 6300.) ⁵ Dispensers has failed to establish that petitioner transacted such business. (Cf. Confidential, Inc. v. Superior Court, 157 Cal.App.2d 75, 79, 320 P.2d 546; Automotriz etc. De California S.A. DeC. V. v. Resnick, 47 Cal.2d 792, 794, 306 P.2d 1, 63 A.L.R.2d 1042.)

The past pattern of petitioner's business activity within this state is very much the same as that disclosed in Detsch & Co. v. Calbar, Inc., 228 Cal.App.2d 556, 39 Cal.Rptr. 626, in which it was held that the foreign corporation was not amenable to substituted service pursuant to the first paragraph of section 6504. That provision, like section 6408, requires the past transaction of intrastate business as the statutory basis for a valid substituted service upon a foreign corporation--there, with regard to a foreign corporation which has 'withdrawn from business' in California.

Dispensers would distinguish Detsch upon three grounds. First, it points to certain factual differences. In Detsch the foreign corporation did no advertising within the state, there was no personal assistance to the local sales representative by any of the corporate officers, and the foreign corporation did not hold out to the trade that it had a west coast office in California. But these facts, although relevant to the foreign corporation's presence in the state for jurisdictional purposes generally, have no relevancy to the character or the nature of the business transacted as being either interstate or intrastate. Secondly, Dispensers points out that the license agreement which is the basis of its suit against petitioner was made here in California in June 1958. However, one isolated transaction obviously does not constitute 'repeated and successive transactions' of intrastate business.

Finally, Dispensers claims that those comparatively few sales in which Todd himself sent the orders directly to petitioner in Chicago and in which petitioner's acceptances were sent through Todd in California to its customers constituted repeated and successive transactions of intrastate business by petitioner. The argument is essentially that since Todd was petitioner's agent, the contract acceptances were not effective upon deposit in the mail at Chicago under the usual rule (see 17 C.J.S. Contracts § 52) but were instead effective only when communicated from Todd to the customers. Thus, Dispensers argues, the contracts were made in California. (Cf. Thorner v. Selective Cam Transmission Co., 180 Cal.App.2d 89, 91, 4 Cal.Rptr. 409.)

This claim misconstrues Todd's role. Todd had no authority either to accept or reject any of the orders which he obtained for petitioner's products. Such orders were accepted or rejected Only by petitioner in Chicago. Therefore the contracts arising from such acceptances were made in Illinois notwithstanding petitioner's use of Todd as a conduit through which it transmitted its acceptances. (...