Yangming Marine Transport Corp. v. Revon Products U.S.A., Inc.

Decision Date05 February 1988
Docket NumberNo. 21,21
Citation311 Md. 496,536 A.2d 633
Parties, 1988 A.M.C. 2690, 88 A.L.R.4th 451 YANGMING MARINE TRANSPORT CORPORATION v. REVON PRODUCTS U.S.A., INC. Sept. Term 1986.
CourtMaryland Court of Appeals

Charles J. Broida (Scher & Broida, P.A., on brief), Columbia, for appellant.

Stephen F. White (David W. Skeen and Wright, Parks, Constable & Skeen, on brief), Baltimore, for appellee.

Argued before MURPHY, C.J., and SMITH, * ELDRIDGE, COLE, RODOWSKY, COUCH * and McAULIFFE, JJ.

ELDRIDGE, Judge.

Maryland Code (1975, 1985 Repl.Vol.), § 7-202(a) of the Corporations and Associations Article states that, before doing any interstate or foreign business in Maryland, a foreign corporation shall "register" with the State Department of Assessments and Taxation (the Department). 1 Section 7-203(a) of the Corporations and Associations Article provides that, before doing any intrastate business in Maryland, a foreign corporation shall "qualify" with the Department. 2 Finally, under § 7-301 of the same Article, if a foreign corporation is doing or has done "any intrastate interstate, or foreign business" in Maryland without registering or qualifying, then neither the corporation nor any person claiming under it may maintain a suit in any court of this State. 3

The principal question raised in this case is whether Yangming Marine Transport Corporation (Yangming) is doing business in Maryland within the meaning of § 7-301, and is thereby barred from maintaining this action because of its failure to register or to qualify. A second question, to be reached only if the first question is answered in the affirmative, is whether such prohibition, as applied under the circumstances of this case, is inconsistent with the Commerce Clause of the United States Constitution, Art. I, § 8, cl. 3.

I.

Yangming exists under the laws of the Republic of China and is headquartered in Taipei, Taiwan. The parties have stipulated that, at all times relevant to this case, Yangming was "engaged in the transportation of goods by sea for hire in foreign commerce." Yangming is represented in the United States through its agent in New York, Solar International Shipping Agency, Inc.

Yangming operated a weekly container shipping service between several ports on the East Coast of the United States, including Baltimore, and various ports in the Far East, including ports in Korea. Yangming's agent in Baltimore was Maher Shipping, Inc. Maher's duties included husbanding cargo for Yangming's vessels and arranging port services, facilities, and supplies for Yangming's vessels while in the Port of Baltimore.

Yangming advertised its weekly container shipping service from Baltimore in several publications that circulated among Baltimore freight forwarders, steamship agents, ocean carriers, and others engaged in foreign commerce by sea. The advertisements contained Maher's address and telephone number, and disclosed Maher's agency relationship with Yangming.

During port visits to Baltimore, Yangming's ships expended sums of money for Maryland Bay Pilots, tugs and berthing, loading and unloading, and refueling and reprovisioning. Additionally, Yangming shipped cargo from other states as well as Maryland inside containers that traveled by train or truck between the various shippers' premises and the Port of Baltimore. At all times relevant to this case, Yangming had no resident agent in Maryland and had neither registered nor qualified to do business in Maryland.

Yangming's suit against the defendant Revon Products, U.S.A. (Revon), arose out of a dispute over freight charges. In early 1982, a Korean seller agreed to ship certain goods freight prepaid to Revon in Baltimore. The goods were to travel on one of Yangming's vessels. Because of an unrelated dispute between Yangming and the seller, Yangming refused to deliver the original bill of lading. Consequently, Revon could not obtain title to the goods. When the goods arrived in Baltimore in the Spring of 1982, Maher informed Revon that the seller had not paid the freight charges and that Revon would not receive the goods until it discharged this $6,000 obligation. After Revon issued a check and obtained the goods, the seller claimed that it had indeed prepaid the freight and asserted that Revon could not deduct the $6,000 from the contract price. As a result, Revon stopped payment on the check.

In March 1985, Yangming filed a complaint in the Circuit Court for Howard County to recover the $6,000 from Revon. In a motion to dismiss, Revon asserted, inter alia, that the trial court lacked "personal jurisdiction" over Yangming. In its supporting memorandum, Revon explained that Yangming was "doing business" in Maryland without registering or qualifying with the State Department of Assessments and Taxation, in contravention of §§ 7-202 and 7-203. Hence, Revon concluded that, under § 7-301, Yangming could not maintain this action.

In December 1985, the trial court granted Revon's motion to dismiss. Relying on federal diversity cases, the trial judge concluded that, because Yangming's activities in the Port of Baltimore amounted to "doing business" in Maryland, Yangming was required to register under § 7-202 or to qualify under § 7-203. As Yangming had taken neither step, the trial judge held that § 7-301 barred Yangming from bringing an action in any court of Maryland. The trial judge also rejected Yangming's claim that the application of § 7-301 would place an unconstitutional burden on interstate and foreign commerce. In reaching this decision, the trial judge relied on Eli Lilly & Co. v. Sav-On-Drugs, 366 U.S. 276, 81 S.Ct. 1316, 6 L.Ed.2d 288 (1961), in which the Supreme Court had held that, consistent with the Commerce Clause, a state may apply a "closed-door" statute such as § 7-301 to a foreign corporation engaged in both intrastate and interstate business. Equating Yangming's activities with "intrastate" business, the trial judge concluded that Yangming could constitutionally be barred from suing in Maryland courts.

Yangming appealed to the Court of Special Appeals. Before consideration in that court, we issued a writ of certiorari.

II.

As pointed out above, under § 7-301, a foreign corporation that has not complied with § 7-202 or § 7-203 is barred from suing in Maryland if the corporation "is doing ... any intrastate, interstate, or foreign business in this State." This Court, however, has not given § 7-301 an entirely literal construction. Specifically, this Court has not construed § 7-301 as listing three, disjunctive factors, any one of which, if present, could bar an unregistered or unqualified corporation from suing in Maryland courts. Instead, we have held that § 7-301 embodies a test for determining whether a foreign corporation is "doing business" in Maryland. See G.E.M., Inc. v. Plough, Inc., 228 Md. 484, 486, 180 A.2d 478, 480 (1962). Under this test, § 7-301 bars an unqualified or unregistered foreign corporation from suing in Maryland courts only if the corporation is doing such a substantial amount of localized business in this State that the corporation could be deemed "present" here. See, e.g., S.A.S. Personnel Consult. v. Pat-Pan, 286 Md. 335, 339-340, 407 A.2d 1139, 1142 (1979); G.E.M., Inc. v. Plough Inc., supra, 228 Md. at 488-489, 180 A.2d at 480-481.

Earlier, this test was considered analogous to the statutory "doing business" test, used before the enactment of the present Long Arm Statute, 4 to determine whether a foreign corporation was amenable to service of process in the State. See Code (1957), Art. 23, § 92(b); G.E.M., Inc. v. Plough Inc., supra, 228 Md. at 486, 180 A.2d at 480. See also 22 Op.Att'y Gen. 262, 264 (1937). The "doing business" test under § 7-301, however, can no longer be considered analogous to the test for determining whether Maryland may assert personal jurisdiction over a foreign corporation. Chapter 532 of the Acts of 1967 repealed the statutory "doing business" test for service of process. Moreover, under Code (1974, 1984 Repl.Vol.), § 6-103(b)(1) of the Courts and Judicial Proceedings Article (the Long Arm Statute), Maryland may now assert personal jurisdiction over a foreign corporation that "transacts any business" in the State. This Court has repeatedly stated that § 6-103 represents a leislative effort to expand the boundaries of in personam jurisdiction to the maximum extent permitted by the Due Process Clause of the Fourteenth Amendment. Camelback Ski Corp. v. Behning, 307 Md. 270, 274, 513 A.2d 874 (1986), remanded on other grounds, --- U.S. ----, 107 S.Ct. 1341, 94 L.Ed.2d 512 (1987); Mohamed v. Michael, 279 Md. 653, 657, 370 A.2d 551 (1977); Geelhoed v. Jensen, 277 Md. 220, 224, 352 A.2d 818 (1976); Krashes v. White, 275 Md. 549, 558-559, 341 A.2d 798 (1975); Lamprecht v. Piper Aircraft Corp., 262 Md. 126, 130, 277 A.2d 272 (1971); Harris v. Arlen Properties, 256 Md. 185, 195-196, 260 A.2d 22 (1969); Vitro Electronics v. Milgray, 255 Md. 498, 504-505, 258 A.2d 749 (1969); Gilliam v. Moog Industries, 239 Md. 107, 111, 210 A.2d 390 (1965). Therefore, the "transacting business" test under § 6-103(b)(1) requires far fewer contacts with the State than did the "doing business" test. Auerbach, The "Long Arm" Comes to Maryland, 26 Md.L.Rev. 13, 33 (1966); Snyder v. Hampton Industries, Inc., 521 F.Supp. 130, 137 (D.Md.1981), aff'd, 758 F.2d 649 (4th Cir.1985). See S.A.S. Personnel Consult v. Pat-Pan, supra, 286 Md. at 338 n. 1, 407 A.2d at 1141 n. 1. Consequently, under § 7-301, a foreign corporation is "doing business" in Maryland only if the corporation conducts a significantly greater amount of local activity in Maryland than would be necessary for Maryland to assert personal jurisdiction over the corporation. 5

As previously mentioned, under our cases an unqualified or unregistered foreign corporation is barred from suing in Maryland courts only if the corporation is engaged in a substantial amount of localized business...

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