William L. Bonnell Co. v. Katz

• Decision Date: 26 February 1960
• Citation: 23 Misc.2d 1028,196 N.Y.S.2d 763
• Parties: WILLIAM L. BONNELL COMPANY, Inc., Plaintiff, v. Albert KATZ, Defendant.
• Court: New York Supreme Court

Page 763

196 N.Y.S.2d 763

23 Misc.2d 1028

WILLIAM L. BONNELL COMPANY, Inc., Plaintiff, v. Albert KATZ, Defendant.

Supreme Court, Special and Trial Term, New York County, Part XIX.

Feb. 26, 1960.

Daniel S. Berman, New York City, for plaintiff.

Eckhaus, Eckhaus, & Eschen, New York City, Marvin Eschen, New York City, of counsel, for defendant.

HAROLD BAER, Justice.

The suit here is on a series of notes and a written guarantee. The defendant has admitted his obligation under the notes and guarantee but raises the affirmative defense that plaintiff is prohibited by section 218 of the General Corporation Law from maintaining this action. The plaintiff, a foreign corporation incorporated in the State of Georgia, admittedly has failed to obtain a certificate of authority pursuant to section 210 of the General Corporation Law.

Section 218 of the General Corporation Law provides as follows:

'A foreign corporation, other than a moneyed corporation, doing business in this state shall not maintain any action in this state upon any contract made by it in this state, unless before the making of such contract it shall have obtained a certificate of authority. * * *.'

The only inquiry here is whether the plaintiff is 'doing business' within the State so as to bring it within the prohibition of section 218 of the General Corporation Law .

Plaintiff's name appears on an office door and building directory located in the Empire State Building, as well as in the Manhattan telephone and classified directories. However, there is uncontroverted testimony that the tenant of the office is one Julius Itts & Sons, Inc. (hereinafter referred to as 'Itts'), plaintiff's New York sales representative, and that Itts pays for the rental of the office as well as for the telephone listings. All the furniture and equipment in the office is the property of Itts. Plaintiff has one salaried employee in the Empire State Building office who is paid directly from its plant in Georgia and whose functions can best be described as those of a 'detail man'. Among his other duties, one of his primary functions is to make preliminary credit checks on prospective customers; with final approval on credit, resting in the hands of the plaintiff corporation's comptroller, who is located at the plaintiff's plant in Georgia. All of the orders solicited by plaintiff's sales representative, Itts, are transmitted to Georgia for approval. All merchandise is shipped from the Georgia plant via an interstate carrier, to the plaintiff's customers in New York. Plaintiff does not maintain a warehouse here nor does it have any inventory here. All billings and invoices originate at plaintiff's plant in Georgia. Plaintiff maintains no bank account in New York. However, most of the collections are made at the New York office and are then sent to plaintiff's factor who is located in New York City.

Julius Itts, the president of Frank Itts & Sons, Inc., is admittedly a director, stockholder, and officer of the plaintiff corporation; however, he denies ever having acted in that capacity here. His sole compensation from plaintiff is that which he receives in the form of commissions as plaintiff's sales representative. There is no evidence of any directors' or stockholders' meeting ever having been held here.

At the outset, it should be noted that while a foreign corporation may be considered as present within the State for the purpose of obtaining jurisdiction over it, such a determination does not necessarily carry the conclusion that the corporation is 'doing business' within the State to the extent of requiring compliance with section 218 of the General Corporation Law (International Text Book Co. v. Tone, 220 N.Y. 313, 115 N.E. 914; Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 267, 115 N.E. 915, 917) . It should be noted that there is a presumption that a foreign corporation is doing business in its own State and not in New York within the meaning of section 218 of the General Corporation Law requiring a foreign corporation doing business in New York to have a certificate of authority (Angldile Computing Scale Co. v. Gladstone, 164 App.Div. 370, 374, 149 N.Y.S. 807, 811; Suss v. Durable Knit Corp., 4 Misc.2d 666, 671, 147 N.Y.S.2d 363, 369; National Merchandising Corp. v. Powers, 8 Misc.2d 881, 168 N.Y.S.2d 507).

It has been held that in construing statutes which license foreign corporations to do business within our borders we are to avoid unlawful interference by the State with interstate commerce. 'The question in such cases is not merely whether the corporation is here, but whether its activities are so related to interstate commerce that it may, by a denial of a license, be prevented from being here [International Text-Book Co. v. Pigg, 217 U.S. 91, 30 S.Ct. 481, 54 L.Ed. 678]' (Tauza v. Susquehanna Coal Co., supra, 220 N.Y. at page 267, 115 N.E. at page 719). 'A corporation of one state may go into another, without obtaining the leave or license of the latter, for all legitimate purposes of such commerce; and any statute of the latter state which obstructs or lays a burden on the exercise of this privilege is void under the commerce clause' (Dahnke-Walker Milling Co. v. Bondurant, 257 U.S. 282, 291, 42 S.Ct. 106, 109, 66 L.Ed. 239). 'There can be no question that a foreign...