Ray D. Lillibridge, Inc. v. Johnson Bronze Co.

Finch, J.

The question here presented is the familiar one as to whether the defendant, a foreign corporation, can be said to be doing business in this State so as to be subject, in an action by another foreign corporation, to the service of process by service upon an al eged managing agent. (See Civ. Prac. Act, § 229, subd. 3; Gen. Corp. Law, § 47, subd. 4, as added by Laws of 1920, chap. 916.) Service was made upon one Edward Laterman, who is alleged to be a managing agent of the defendant. The facts show that Laterman was engaged in'business soliciting orders for the products of several companies, including that of the defendant. He was under no contract with the defendant. He maintained and paid the rent and expenses of his own office. His only' compensation from the defendant was the commissions received by him on such orders as were obtained and sent by him out of the State, where they were accepted by the defendant. He made no collections, and it is not shown that he had any authority to represent, or act for, the defendant. Upon his own authority Laterman inserted the name of the defendant in the telephone book and placed the defendant’s name upon the door of his office, followed by “ Edward Laterman, Manager.” Apparently all this was done to facilitate his efforts to obtain orders. Whatever Laterman may have stated with reference to his position or authority does not establish it, since an agent cannot prove his agency or authority by his own declarations. As was said by Hatch, J., in Vitolo v. Bee Publishing Co. (66 App. Div. 582,585): “ It is settled by authority that the declarations of the person claimed to be the managing agent are not sufficient to establish such fact, and that proof which shows only that the claimed managing agent is a representative of the defendant for some purpose, is not sufficient upon which to predicate the fact that he is a managing agent within the meaning of the section of the Code authorizing service to be made upon him. (Coler v. Pittsburgh Bridge Company, 146 N. Y. 281.) ”

Any orders which Laterman obtained were submitted to the defendant at its main office in New Castle, Penn., and the defendant thereafter dealt directly with the customer from New Castle, Penn. Deliveries on any orders accepted at New Castle were made directly from that point, the customers were billed from that point and payments received there. The foregoing facts in themselves do not show any agency in Laterman to act for the defendant. Laterman was rather acting as an independent contractor would act, who received pay for obtaining a definite result, and over whom in the obtaining of the saíne the defendant had no control.

In reaching a conclusion as to whether the defendant was doing business within this State, we must turn to the Federal authorities, since these are binding upon us as the question involves the due process clause of the Federal Constitution. (See U. S. Const. 14th Amendt. § 1.) In Day & Co. v. Schiff, Lang & Co. (278 Fed. 533, 535) Hough, J., said: “ When a motion was made in the State court to set aside this service the judge then presiding in the motion part sent the matter to the official referee to ascertain whether the facts brought the matter within Tauza v. Susquehanna, etc., Co., 220 N. Y. 259, * * * and the learned referee has briefly said that he thinks that case applies. The Tauza case is not the last word from the Court of Appeals of New York. The process of receding from the doctrine of Pope v. Terre Haute Car Co. [87 N. Y. 137] is still going on; but it is not necessary, nor is it permitted, for me to speculate on the question as to whether this service was good under the latest State decisions. The last word from the Supreme Court of the United States is Chipman v. Jeffery Co., 251 U. S. 373, * * *. That was a removed case from this district and (251 U. S. at page 379, * * *) the Supreme Court said: ' We do not wish to be understood that the validity of [the] service would not be of Federal cognizance whatever the decision of a State court.’

“ In other words, the rules for good or bad service of the summons in even a removed case is something to be passed on in accordance with the decisions of the United States courts and not those of the State wherein the service is made.”

So, also, Chief Judge Hiscock, in Dollar Co. v. Canadian C. & F. Co. (220 N. Y. 270), writing for the court, said: “ This court, as was its duty in respect of such a question, yielded to the views of the Supreme Court. (Bagdon v. Phil. & Reading C. & I. Co., 217 N. Y. 432.) Thus a constitutional interpretation has been established different than that which was entertained by the court when the Pope case was decided. The language of section 432 remains precisely as it was then and the rule governing our interpretation of it remains unchanged, and it seems to us that we are now bound to give to its language an interpretation which is in accordance with and not in defiance of the Constitution, even though such interpretation is different than the one which was given under a former and, as it must now be assumed, mistaken idea of the law. The obligation to construe the statute in accordance with the Constitution remains constant, and if the definition of the requirements of the Constitution in respect of this question has been changed, it seems inevitably to follow that we must place upon the statute a construction which will be so modified as to be in accordance with the later view.”

Applying, then, to the aforesaid facts of the case at bar, the rules prescribed by the Federal courts as determinative of when a foreign corporation is doing business within a State, we find that the defendant was not doing business herein. At the most this record shows only a solicitation of orders on behalf of the defendant. In Green v. Chicago, Burlington & Quincy Railway Co. (205 U. S. 530) Mr. Justice Moody, writing for the court, said: “ The business shown in this case was in substance nothing more than that of solicitation. Without undertaking to formulate any general rule defining what transactions will constitute ' doing business' in the sense that liability to service is incurred, we think that this is not enough to bring the defendant within the district so that process can be served upon it.”

A distinction has been made in cases where, in addition to a continuous course of business in the solicitation of orders through agents of the defendants within the State, resulting in a continuous shipment of commodities into the State, there also was authority in the defendants' agents to receive payment in money, check or draft and to take notes payable at banks in the State. (International Harvester Co. v. Kentucky, 234 U. S. 579; followed by Tauza v. Susquehanna Coal Co., 220 N. Y. 259.) In the case at bar none of these additional elements are present, and hence the general rule above referred to is applicable, namely, that mere solicitation of orders is insufficient to constitute “ doing business.”

It follows that the order appealed from should be reversed, with ten dollars costs and disbursements, and the defendant’s motion to vacate the service granted, with ten dollars costs.

McAvoy and Proskauer, JJ., concur; Dowling, P. J., and Merrell, J., dissent.