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CHASSIS-TRAK, INC. v. FEDERATED PURCHASER

January 7, 1960

CHASSIS-TRAK, INC., Plaintiff,
v.
FEDERATED PURCHASER, INC., Defendant



The opinion of the court was delivered by: WORTENDYKE

Plaintiff here, a corporation of Indiana, sues upon a judgment recovered by it against the defendant, a corporation of New York, on March 10, 1958, in the Marion County Circuit Court of Marion County, Indiana, for $ 11,592,15, and costs.

The defendant here has moved for summary judgment, pursuant to the provisions of F.R.Civ.P. 56, 28 U.S.C.A., upon the ground that the Indiana court lacked jurisdiction over defendant, and both parties have stipulated, in open court, upon the return of notice of that motion, that upon the pleadings, depositions and admissions on file, together with the affidavits and other documents submitted for the purposes of this motion, there exists no genuine issue as to any material fact.

 At the outset it should be noted that although the complaint alleges that the defendant is a corporation of New Jersey, that allegation was denied in the answer, and the Court has been furnished with documentary evidence from which it appears that the defendant is a corporation organized and existing under the laws of the State of New York; its present name having been adopted, on February 4, 1932, being changed from that of Federated Purchasing Service Corp. under which it was originally incorporated on May 3, 1928. The certificate of incorporation of Federated Purchasing Service Corp. provided that its principal place of business should be in the City of New York. On November 28, 1934 there was filed in the office of the Secretary of State of the State of New York, in behalf of the defendant, a certificate pursuant to Section 24 of the Stock Corporation Law of that State, designating the Secretary of State of New York as the agent upon whom process in any action against the corporation within that State might be served, and directing that a copy of any process so served be mailed to the defendant at 25 Park Place, New York City. *fn1" On November 5, 1954, Federated Purchaser, Inc. was duly authorized by the Secretary of State of New Jersey to transact business in New Jersey. This authorization to do business was still effective on the date upon which the pending motion was noticed.

 In support of its present motion defendant contends that the Indiana judgment here sued upon is invalid for lack of jurisdiction in the Indiana Court over the defendant, because (1) the Indiana statute under which the purported service of process upon the defendant in the action there was not in accord with the due process requirement of the Fourteenth Amendment to the United States Constitution, and (2) there was a failure of compliance with the requirements of the Indiana statute, even assuming its constitutionality. The present motion has been duly argued; briefs having been submitted in behalf of the respective parties upon the questions presented thereby.

 From time to time thereafter the respective representatives of the parties were in contact by mail and telephone concerning the merchandise which was the subject of the agreement, and these communications were at all times between the plaintiff's place of business in Indianapolis and the defendant's place of business in Montainside, New Jersey, and all shipping documents in connection therewith were so addressed. *fn2" After the plaintiff had completed its performance of the contract between the parties, plaintiff forwarded its bill to the defendant, at the Mountainside, New Jersey address, as directed in defendant's purchase order. Failing to receive payment thereof in due course, plaintiff, on July 8, 1957, sent its representative to defendant's place of business in Mountainside, New Jersey, where he met Mr. Kornhauser, the representative of defendant who had placed the order for slides, and made demand upon him for payment of the amount due under the contract, viz., $ 11,097.15. To this demand Kornhauser responded that defendant was prepared to pay the amount stated and that payment had been approved by defendant's appropriate department, but that because of vacations payment had been delayed. Kornhauser promised that a check for the amount due would be issued the week then next following. When the check was not received, follow-up telephone calls by plaintiff's employees to defendant's Mountainside, New Jersey place of business evoked successive reassurances of ultimate payment and explanations that delay was caused by vacations involving defendant's personnel. Finally, on September 13, 1957, Kornhauser informed plaintiff's representative by telephone that the matter of plaintiff's claim had been placed in the hands of defendant's attorney, who would determine whether and when payment should be made. After the transmission of this advice defendant's attorney, Copal Mintz, Esq. (who argued the pending motion here in its behalf) wrote to the plaintiff, under date of September 24, 1957, stating that because some of the merchandise purchased by the defendant from the plaintiff was used by the defendant in the performance of its contract with a third party, and because the third party had refused to pay the defendant therefor, payment of the plaintiff's claim by the defendant would be made promptly after and if the third party made its payment to the defendant.

 Summons in the action in the Indiana court, which resulted in the judgment here sued upon, issued February 13, 1958 and was addressed to the Secretary of State of Indiana as the resident agent for Federated Purchaser, Incorporated, which is therein recited as 'a foreign corporation not admitted to do business in Indiana, whose address is 1021 U.S. Rte. 22, Mountainside, New Jersey.' It was served upon the Secretary of State of Indiana either on the 17th or the 18th of February, 1958, and was by him sent on February 19, 1958 with notice of the action, by United States registered mail, with return receipt requested, to the named defendant at the New Jersey address recited in the summons, directed defendant to appear and answer on or before March 7, 1958, and was admittedly received by defendant on February 21, 1958 at its Mountainside, New Jersey, address.

 On February 25, 1958 Copal Mintz, as attorney for the defendant, wrote to the Secretary of State of Indiana, stating that the summons mailed to the defendant by the Secretary, issued out of the Indiana court in the case therein recited, had been turned over to the said attorney by the defendant, and inquired whether there was any record in the Secretary's office of his appointment as resident agent for the defendant. On the same date defendant's said attorney wrote to the attorney for the plaintiff in this Indiana action, advising him also that the summons had been turned over to him, and inquiring of said Indiana attorney 'on what you base your right to attempt to effect service of process in the manner which you followed.' Although defendant's attorney engaged in further correspondence with both the Indiana Secretary of State and with the attorney for the plaintiff in the Indiana action, no appearance was ever entered by or on behalf of the defendant in the Indiana suit. Counsel for the defendant admitted, during the course of the argument on the pending motion, that he intentionally allowed the Indiana case to proceed to judgment by default because he believed that the Indiana court had not obtained jurisdiction over the defendant.

 Section 25-316 of the Indiana statute, pursuant to which the plaintiff undertook to issue and serve the summons in the Indiana action, provides as follows:

 'The engaging in any transaction or the doing of any business in this state by any foreign corporation not licensed nor admitted to do business in this state under any existing act or any act hereafter enacted shall be deemed equivalent to an appointment by such foreign corporation of the secretary of state or his successor in office, to be the true and lawful authority and agent of such foreign corporation upon whom may be served all lawful processes, writs, notices, or orders in any action or proceeding against such foreign corporation arising or growing out of, directly or indirectly, any act or thing done by such corporation within the state of Indiana. The engaging in any transaction or the doing of any business in this state * * * under any existing act or any act hereafter enacted shall be significant of the agreement of such foreign corporation that any such process, writ, notice, or order against it, which is so served, shall be of the same legal force and effect as if served upon a designated resident agent of such foreign corporation.'

 It cannot be successfully disputed that the present defendant was a foreign corporation with respect to the State of Indiana, and that it was not licensed or admitted to do business in that State under any existing act of the legislature thereof. It is equally undisputed that said defendant became a party to a business transaction with a corporation of the State of Indiana, and that the cause of action asserted by the plaintiff against the defendant in the Indiana court arose or grew out of such business transaction. Therefore, if the Indiana statute, supra, is constitutional with respect to the circumstances surrounding the case in which the Indiana judgment was recovered, it would appear to control here. By the terms of the Indiana statute, defendant's participation in the transaction out of which the Indiana case arose must be deemed equivalent to an appointment of the Indiana Secretary of State as defendant's agent for the service of process, and, if process had been served in accordance with the statute, such service would be equivalent, in legal effect, to service upon an agent of the defendant resident in Indiana impliedly designated by the defendant for the purpose of receiving such service.

 The validity of the judgment sued upon in the present case depends, of course, upon whether the Indiana court had personal jurisdiction over the defendant. The State of Indiana was empowered to impose conditions not obstructive of interstate commerce or violative of constitutional due process, upon the transaction of business in the State by a foreign corporation which might see fit to refrain from maintaining or designating someone therein upon whom service of process might be made in state litigation which might be brought against the foreign corporation. By way of paraphrase, Indiana has statutorily said 'We do not preclude foreign corporations from transacting business in our State without maintaining or designating someone in this State upon whom process may be served; but if they do exercise this right, they shall be deemed, by so doing, to have authorized our Secretary of State to receive service in their behalf.' The Indiana statute further provides that service of any process against a foreign corporation under the circumstances stated shall be made by leaving a duplicate copy thereof with a fee of $ 1.00 with the Secretary of State, or in his office, and that such service shall be sufficient service upon the foreign corporation, provided that a notice thereof and a copy are forthwith sent by registered mail with return receipt requested addressed to the foreign corporation 'at the principal office of such foreign corporation designated in the articles of incorporation.' (Emphasis supplied.) It is obvious that, irrespective of the constitutional validity of the Indiana statute, there was a failure of compliance with one of its express requirements. Although the summons was duly served upon the Indiana Secretary of State, and defendant received timely notice of the institution of the suit in the form of a copy of the summons, the notice of such suit and the copy of the summons, although sent forthwith by registered mail with request for return receipt, were not 'addressed to such foreign corporation at the principal office of such foreign corporation designated in the articles of incorporation' as required by the Indiana statute. Because of this non-compliance with the Indiana statutory requirement it might be deemed unnecessary to determine whether, in the event such compliance had been accomplished, the actuality of receipt of notice by the defendant rendered the procedure adopted equivalent to constitutional due process. *fn3" But see Old Wayne Mutual Life Association v. Flynn, 1903, 31 Ind.App. 473, 68 N.E. 327. Nevertheless, against the possibility that the respect in which the Indiana statute was not complied with might not be considered critical, we examine also the constitutional question.

 'To obtain a valid judgment, the party seeking it must (a) proceed in a competent court; (b) give his opponent reasonable notice of the litigation and grant him a reasonable opportunity to be heard; and (c) establish 'judicial jurisdiction' over the defendant involved. * * * Judicial jurisdiction exists whenever a state has sufficient contact with a person to make the exercise of jurisdiction reasonable, i.e., to make it consistent with the requirements of due process for the state to try in its courts a particular case relating to that person.' L.D. Reeder Contractors v. Higgins Industries, 9 Cir., 1959, 265 F.2d 768, 770-771.

 The modern criterion appropriate for the determination of the constitutionality of a state statute which purports to subject to the jurisdiction of its courts a foreign corporation not licensed to do business nor maintaining an agent for service of process in the state, is to be found in International Shoe Co. v. State of Washington, 1945, 326 U.S. 310, 66 S. Ct. 154, 157, 90 L. Ed. 95. The statute considered in that case (Unemployment Compensation Act, Wash.R.S. ยงยง 9998-103(a) et seq.) required employers to contribute to a State fund a specified percentage of the wages payable annually for his employees' services in the State. The statute authorized service of an order and notice of assessment of delinquent contributions by mailing the notice by registered mail to an employer not found within the State at his last known address. The order of assessment was made administratively reviewable by an appeal tribunal whose decision was subject to ultimate judicial review in the highest court of the State. International Shoe Co. was a Delaware corporation, having its principal office in St. Louis, Missouri. It had no office in the State of Washington, made no 'contracts either for sale or purchase of merchandise there,' maintained no stock of merchandise in that State, and made no 'deliveries of goods in intrastate commerce.' The corporation did, however, employ several Washington residents as salesmen, whose principal activities were confined to that State, and whose compensation was in the form of commissions based upon the amount of their sales therein. The activities of these salesmen within the State were limited to exhibition of samples and solicitation of orders from prospective buyers of the merchandise, at prices and on terms fixed by International Orders secured were transmitted to the office in St. Louis for acceptance or rejection. Accepted orders were filled at and shipped f.o.b. from points outside the State of Washington to purchasers within that State, invoiced and paid for at the place of shipment. No salesman was authorized either to enter into contractr or to make collections. The Supreme Court held that the foregoing facts disclosed 'presence' of the foreign corporation in the State so as to render it constitutionally amenable to the process criticized. International's activities in Washington were neither 'irregular' nor 'casual' but were 'continuous and systematic,' resulting in 'a large volume of interstate business, in the course of which (the foreign corporation) received the benefits and protection of the laws of the state * * *. The obligation * * * sued upon arose out of those very activities.' Such activities constituted, in the opinion of the Supreme Court, 'sufficient contacts or ties with the state of the forum to make it reasonable and just according to our traditional conception of fair ...


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