Uhlich v. Hilton Mobile Homes

• Decision Date: 13 March 1964
• Docket Number: No. 10056,10056
• Citation: 126 N.W.2d 813,80 S.D. 478
• Parties: Art UHLICH and Pauline Uhlich, Plaintiffs and Respondents, v. HILTON MOBILE HOMES, a Corporation, Defendant and Appellant.
• Court: South Dakota Supreme Court

Page 813

126 N.W.2d 813

80 S.D. 478

Art UHLICH and Pauline Uhlich, Plaintiffs and Respondents, v. HILTON MOBILE HOMES, a Corporation, Defendant and Appellant.

No. 10056.

Supreme Court of South Dakota.

March 13, 1964.

Rehearing Denied April 10, 1964.

Stephens, Riter & Mayer and Robt. D. Hofer, Pierre, Hunt & Degnan, Guttenberg, Iowa, for defendant and appellant.

Martens, Goldsmith, May & Porter, Pierre, for plaintiffs and respondents.

BIEGELMEIER, Presiding Judge.

This appeal concerns the validity of jurisdiction obtained by service of a summons on the Secretary of State as agent for defendant, without a written appointment provided by South Dakota statutes for foreign corporations.

There are two parts to the question whether a foreign corporation can be held subject to suit within a state. The first, a question of state law, is: Has the state provided for bringing a foreign corporation into its courts under the circumstances presented? If so, the second question may arise. Does such attempt violate the due process clause or the interstate commerce clause of the Constitution of the United States?

Turning our attention to the first question, plaintiffs contend defendant Iowa Corporation transacted business in this state and thus is deemed to have assented to service of process here made under Clay v. Kent Oil Co., 72 S.D. 629, 38 N.W.2d 258.

SDC 11.2002 states no foreign corporation 'shall transact business' in this state until it has filed a certified copy of its charter in the office of the Secretary of State. SDC 11.2003 also requires such a corporation to make and file a statement:

'(6) That it constitutes and appoints the Secretary of State its true and lawful agent upon whom the summons, notices, pleadings, or process in any action or proceeding against it may be served in respect to any liability arising out of any business, contract, or transaction in this state * * *.'

It appears plaintiffs resided in Ft. Pierre, South Dakota, and sometime in October 1961 they purchased a Hilton trailer from a dealer, Airport Road Trailer Sales, in Bismarck, North Dakota. This transaction took place between the dealer and plaintiff, Art Uhlich. This dealer and others hereafter mentioned are not either agents or franchised dealers of defendant, but independent business people who sell Hilton and other trailers. The North Dakota dealer ordered the trailer from defendant by phone and at Uhlich's request directed the trailer to be delivered to it at Ft. Pierre. About October 31, 1961, defendant filled the order by delivering it to an independent trucker, who transported it to Ft. Pierre, at which place he turned it over to an agent of Airport Road Trailer Sales. The title was transferred to, and the trailer was later paid for by, Airport Sales, which transferred it to plaintiffs. Plaintiffs first complained to Airport Sales of some missing bunk beds after which these were put in by a serviceman. The serviceman was a former employee of defendant, but was not in its employ at the time these and other services here mentioned were performed. He was resident of Iowa and in business for himself, but did service and repair for Hilton trailers when directed by defendant. Other complaints were made to Airport Sales; apparently these brought no action so plaintiffs wrote defendant about them. Defendant answered by letter it would send the serviceman with material to remedy their complaints. At the direction of the defendant, the serviceman made two trips to Ft. Pierre, and after telephoning defendant, made some repairs to the trailer. At these times he put in a counter in a different trailer Hilton had sold to a Ft. Pierre dealer and serviced another trailer nearby. On one of these occasions he used a truck owned by defendant. It further appears defendant has built 1800 trailers in 4 1/2 years; that of 25 Hilton trailers hauled by one trucker from April to October 1960, 8, 10 or 12 of these were to South Dakota dealers. Defendant's sales manager visits South Dakota once or twice a year and calls on dealers who sell or have inquired about selling Hilton Trailers. Dealers in at least three cities in South Dakota sell these trailers and over a period of four years three or four others have done so. As stated, these dealers are independent and not exclusive or franchise dealers. Defendant furnished them with brochures and sales material.

Improvements in transportation, travel and communication have worked a transformation of our national economy and with it techniques of merchandising, selling, and of doing business, so that today many commercial activities touch two or more states. See McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed. 223. With these developments, the tendency of legislatures and courts has been to expand jurisdiction over nonresident persons and foreign corporations. Examples are the statutes permitting service of summons on nonresident motorists using public highways, one act, one tort and other so-called 'Long Arm' statutes. See SDC 1960 Supp. 33.0809, as amended by Ch. 226, 1963 Session Laws; ch. 27, 1961 Session Laws, amending SDC 11.2108 and 28 Mo.L.Rev. 352; Huck v. St. P. M. & O. Ry. Co., 4 Wis.2d 132, 90 N.W.2d 154 and Hill v. Electronics, 253 Iowa 581, 113 N.W.2d 313. This trend, however widespread it may be, weakens state sovereignty much in the same way encroaching federal power does, for the states in which these defendants reside are less able to protect their interests. The plaintiff of today may be the defendant of tomorrow in the other state and a judgment unassailable on jurisdictional grounds may then be enforced against him in his own state. 28 Mo.L.Rev. at p. 337. Caution therefore and judicial restraint must be the guide for courts in this field.

Defendant's business is manufacturing and selling trailers; in advertising its product, encouraging its sales, shipping them in considerable numbers into this state, sending its sales manager into the state to enlist and retain dealers to sell the trailers and directing the repair of them at its expense were all acts done in this state in furtherance of this goal. By Exhibit 1, it appears title to the trailer remained in defendant 'until the full price thereof shall have been paid in cash at Guttenberg, Iowa'. Payment was not made until Nov. 12, 1960 so the transfer of title from defendant to the dealer of the trailer involved in this action took place in South Dakota. These facts were sufficient to conclude defendant was transacting business here. Christierson v. Hendrie & Bolthoff Mfg. & Supply Co., 26 S.D. 519, 128 N.W. 603; Brewster v. F. C. Russell Co., 78 S.D. 129, 99 N.W.2d 42, and the pamphlet 'What Constitutes Doing Business' by the Corporation Trust Co. That being so it is deemed to have appointed the Secretary of State as agent for service of process.

This precisely was the holding of the court in Clay v. Kent Oil Co., 72 S.D. 629, 38 N.W.2d 258, where it wrote:

'If appellant (foreign corporation) had complied with the requirements of SDC 11.20 it was bound to have named the Secretary of State and none other as its agent upon whom process was to be served * * * (and) was required also to agree that service of summons upon the Secretary of State should be accepted irrevocably as a valid service upon it * * * we think it proper to hold that if a foreign corporation fails to comply with the laws of this state, but is still engaged in business therein, and permitted to carry on such business, it must transact its business here subject to the laws of the state, and its assent to service upon the Secretary of State is implied.'

Cf. Yoder v. Nu-Enamel Corporation, 8 Cir., 117 F.2d 488 construing a Nebraska statute.

We turn now to the second question, if jurisdiction is approved, does that conclusion violate the due process clause of the 14th amendment of the Constitution of the United States? That is a federal question, (Pulson v. American Rolling Mill Co., 1 Cir., 1948, 170 F.2d 193; Arrowsmith v. United Press Int'l., 2 Cir., 1963, 320 F.2d 219) and must be decided in accord with decisions of the United States Supreme Court. See Oskey Bros. Petroleum Corp. v. Gorder, S.D., 109 N.W.2d 893, at to interstate commerce; Nerlund v. Schiavone, 250 Minn. 160, 84 N.W.2d 61 and Belk v. Belk, 250 N.C. 99, 108 S.E.2d 131, 72 A.L.R.2d 1203 as to due process.

Brewster v. F. C. Russell Co., supra, presented the question of jurisdiction over a foreign corporation based on personal service of a summons in this state on its managing agent as permitted by Supreme Court Rule 87 of 1939--SDC 1960 Supp. 33.0807(2). There was reviewed the history and development of jurisdiction from Pennoyer v. Neff, 95 U.S. 714, 24 L.Ed. 565 in 1878 including the various tests of 'Consent', 'Presence' and 'Doing Business' as bases thereof down to the recent opinions of the courts of the United States. The 1945 decision, International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95, 161 A.L.R. 1057 announced a standard governing the state's exercise of personal jurisdiction over a foreign corporation--that it have contacts or ties with the forum state making it reasonable and just according to traditional notions of fair play and substantial justice to permit the state to enforce obligations there incurred. It wrote:

'But to the extent that a corporation exercises the privilege of conducting activities within a state, it enjoys the benefits and protection of the laws of that state. The exercise of that privilege may give rise to obligations; and, so far as those obligations arise out of or are connected with the activities within the state, a procedure which requires the corporation to respond to a suit brought to enforce them can, in most instances, hardly be said to be undue.'

Applying International standards, the activities of defendant Hilton were neither irregular nor casual. It can hardly be said an 'estimate of...