Mas v. Owens-Illinois Glass Co.

• Decision Date: 04 September 1940
• Docket Number: No. 64.,64.
• Citation: 34 F. Supp. 415
• Court: U.S. District Court — Eastern District of Virginia
• Parties: MAS v. OWENS-ILLINOIS GLASS CO.

34 F. Supp. 415

MAS v. OWENS-ILLINOIS GLASS CO.

No. 64.

District Court, E. D. Virginia, Richmond Division.

September 4, 1940.

John T. Wingo, of Richmond, Va., and Stone, Boyden & Mack, of Washington, D. C., for plaintiff.

Hunton, Williams, Anderson, Gay & Moore, of Richmond, Va., and Williams, Eversman & Morgan, of Toledo, Ohio, for the defendant.

POLLARD, District Judge.

The plaintiff, George N. Mas, a citizen of the State of Virginia, residing in the City of Richmond, brought this suit seeking to recover damages against the defendant for the alleged appropriation of certain designs for bottles alleged to have been conceived by the plaintiff and to have been manufactured by the defendant. The plaintiff also seeks an accounting, the payment of royalties and a permanent injunction. The defendant being a foreign corporation and not having designated a statutory agent in Virginia, process was served on Frank Jones, an alleged agent of the defendant. The defendant seasonably filed its motion to quash the service of process and to set aside the service of notice and summons on the grounds, among others, that the defendant was not at the time of the service of notice and summons present in the State of Virginia so as to make it amenable to service of process in that State, and that Frank Jones was not at that time an agent of the defendant corporation upon whom service could be made. The questions now before the Court arise on that motion.

While the evidence was exhaustive, it contains few, if any, material conflicts. The differences of the parties arise on the legal significance which should be given to the admitted facts.

Upon consideration of the evidence in the case, the Court makes the following findings of fact:

1. The defendant, Owens-Illinois Glass Company, is a corporation organized and existing under the laws of the State of Ohio and is engaged primarily in the business of manufacturing glass containers. The principal office of the corporation, as set forth in the Articles of Incorporation, is located in Toledo, Ohio. All of its corporate records and books of account are kept in that City and all meetings of its stockholders and directors are held there. All of the general officers of the corporation reside in Toledo, and since April 20, 1924, the defendant has had no other principal office or place of business.

2. The plaintiff, George N. Mas, is now and was at the time of the institution of this suit, a citizen of the State of Virginia, residing in the City of Richmond, within the Eastern District of Virginia.

3. The defendant, Owens-Illinois Glass Company, is not qualified to do business in the State of Virginia as a foreign corporation. It rents no office in that State and makes no allowance to any of its officers, salesmen or employees for office rental in Virginia. The defendant carries on no manufacturing there, and has no factory, warehouse or storehouse in that State. It keeps no bank account and no part of its property has at any time been permanently located in Virginia.

4. Frank Jones, the person upon whom the summons in this suit was served, is listed in the Richmond City Directory for the years 1937, 1938 and 1939 as "Dist. Mgr. Owens-Illinois Glass Co."

5. The Richmond Telephone Directory, Winter Edition, 1939-1940, contains the listing, "Owens-Illinois Glass Co. 19 S. 8th, 2-3403", but defendant has not paid for the rental of a telephone or a listing in said telephone directory.

6. Frank Jones has been employed by the defendant in the beer and beverage bottle division of its business as a salesman since the year 1929. His home is in Richmond but his territory embraces the entire State of Virginia. He has other business connections and only a portion of his time is given to the performance of his duties as salesman for the defendant company. He is paid a fixed salary plus a bonus, the amount of which is dependent on the volume of his sales. The defendant has salesmen other than Jones operating in the State of Virginia. In the year 1938, the defendant sold in Virginia to 103 customers merchandise worth $610,000, of which Frank Jones sold approximately $157,000 to 26 customers, and in the year 1939 the defendant sold in Virginia to 119 customers merchandise worth $656,000, of which Frank Jones sold approximately $190,000 to 36 customers.

7. Frank Jones in the performance of his duties as salesman for the defendant company solicits orders for the purchase of beer and beverage bottles manufactured by it. He is furnished by the company with a standard form of order blank. When Jones succeeds in securing an order he has the buyer sign the order and forwards the same to the defendant at Toledo, Ohio, for acceptance or rejection. Jones has no authority to accept an order and the order form contains a provision that the same shall not become binding on the defendant until approved and accepted by the Owens-Illinois Glass Company at its office in Toledo, Ohio.

8. The printed order blank contains the following provision as to the terms of sale: "Terms. Thirty days net or cash discount of one per cent (1%) to be allowed Buyer if paid for within ten days from date of invoice. If at any time Buyer's credit, in Seller's judgment, becomes impaired, Seller has right to require payment in advance." In taking orders from his customers in Virginia it was the practice of Frank Jones to change the terms of sale specified in the printed form of contract in order to make the same conform to the defendant's known attitude as to such customer's credit rating. All such changes are made by Jones before the order is sent by him to Toledo for acceptance or rejection. The great majority of merchandise sold in Virginia is made upon the terms specified in the printed form of order. Occasionally the printed terms of sale are departed from and sales are made on sight draft, bill of lading attached, C. O. D., or cash basis. Such sales constitute less than 2% of the total sales. Since 1936 there have been only twelve sight draft bill of lading shipments and six C. O. D. shipments in Virginia. Since September 1, 1939, to the date of the taking of depositions in April, 1940, only one sight draft bill of lading sale had been made in Virginia and there had been no C. O. D. or cash sales.

9. Since September 1, 1938, all shipments of merchandise made by the defendant into Virginia pursuant to orders accepted by it have been made f. o. b. cars or trucks at the plant of manufacture. Prior to that date, some shipments were made f. o. b. the customer's city in the State of Virginia, though the majority of said orders were f. o. b. plant of manufacture. All of the defendant's manufacturing plants are located outside of the State of Virginia and all shipments of merchandise to customers in Virginia are made from points outside of the State of Virginia.

10. In addition to the main duties as salesman in the solicitation and transmission of orders to the defendant, the said Frank Jones performed other services for the defendant in Virginia incidental to his duties as salesman. The defendant supplied Jones and its other salesmen with forms upon which they furnished the defendant reports as to the credit standing of prospective customers. Before submitting such reports, Jones makes inquiries and collects information concerning the financial rating of such customers. However, the furnishing of such reports is the exception and not the rule, and neither Frank Jones nor any other person in Virginia has the authority to extend any credit, all such decisions being made by the defendant at its office in Toledo. In the main customers make payments for merchandise to the defendant's general office in Toledo and it is not part of the duties of Jones to make collection for the goods he has sold. Occasionally, however, he is called upon by the defendant's credit department to assist in the collection of an account, and on very rare occasions he has actually received a check payable to the defendant and transmitted the same to Toledo. All such services relate to delinquent acounts. While the adjustment and settlement of claims are matters exclusively handled by the claims division of the defendant in Toledo, yet there have been instances in which Jones has been called upon to secure and forward the facts as to such claims. It is customary for salesmen to accompany such information with their recommendations and recommendations made by Jones have been rejected and the claims of his customers disallowed by the claims division. On rare occasions when a customer desires a sample of the merchandise, the defendant has used Jones to present such sample and secure the customer's approval or criticism.

11. There is no employee or representative of the Owens-Illinois Glass Company in Virginia whose activities or authority exceeds that of Frank Jones.

The reported cases deal with three classes of litigation involving "doing business", and that term has a legal significance which differs with the type of case to which it is applied. The three general classes of cases involve (1) service of process upon a foreign corporation; (2) taxation; and (3) domestication or qualification under statutes regulatory of foreign corporations. Precedents dealing with one class are of little value in their application to another class. Formerly the theory upon which the courts of a state assumed jurisdiction of a foreign corporation carrying on business within its confines was that of implied consent to such jurisdiction. St. Clair v. Cox, 106 U.S. 350, 1 S.Ct. 354, 27 L.Ed. 222. The abandonment of this "consent theory" in favor of the "corporate presence theory" was foreshadowed in St. Louis, etc., R. Co. v. Alexander, 227 U.S. 218, 33 S.Ct. 245, 57 L.Ed. 486, Ann. Cas.1915B, 77. The latter doctrine is stated by Mr. Justice Brandeis in Philadelphia & Reading R. Co. v. McKibbin, 243 U.S. 264, 37 S.Ct. 280, 61 L.Ed. 710, as follows: "A foreign corporation is...