BORGWARD v. A. W. Woolverton and E. G. Woolverton, Real Parties in Interest.*

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District Court of Appeal, Second District, Division 3, California.

Carl F. W. BORGWARD, G.M.B.H., Petitioner, v. The SUPERIOR COURT of the State of California IN AND FOR the COUNTY of LOS ANGELES, Respondent. A. W. Woolverton and E. G. Woolverton, Real Parties in Interest.*

Civ. 23046.

Decided: May 09, 1958

Overton, Lyman & Prince, Los Angeles, for petitioner. Harold W. Kennedy, County Counsel, and Wm. E. Lamoreaux, Asst. County Counsel, Los Angeles, for respondent. Macbeth & Ford, Los Angeles, for real parties in interest.

Petitioner, one of the defendants in an action for declaratory relief and damages brought by the real parties in interest herein, A. W. Woolverton and E. G. Woolverton, referred to as ‘Woolvertons,’ against Earle C. Anthony, Inc., referred to as ‘Anthony,’ seeks a writ of mandate pursuant to the provisions of section 416.3, Code of Civil Procedure, to compel the respondent court to enter its order quashing the service of summons upon petitioner.

Petitioner asserts service of process upon it did not constitute due process of law. We have concluded petitioner's contention must be sustained.

These facts are undisputed:

Petitioner is a corporation organized under the laws in Germany and having its place of business in Germany; it has not qualified to do business within California. It is engaged in the manufacture and sale of automobiles and automobile parts, all of which are produced in Germany. It has never maintained an office, corporate agent, salesman or representative in California, nor has it maintained a bank account or telephone listing in this state. It has not paid any salary or other compensation to any person within the state. It has not maintained an inventory in California nor has it any interest in property, either real or personal, within this state. It has not sold any of its products in California but has, in addition to its sales in Germany to its importers, on at least one occasion sold automobile parts to persons in California, which parts were ordered by mail and shipped from Germany.

Petitioner has a contract with Anthony. This contract was executed by Borgward in Germany on January 29, 1957; it was mailed to Anthony in California, who made certain modifications to the contract as executed by Borgward, executed it as modified and returned it to Germany where it was accepted by Borgward, as modified. Under this contract Anthony is given the exclusive right to purchase in Germany for export to the eleven western states of the United States, automobiles and automobile parts manufactured by petitioner. Anthony purchases and pays in Germany, prior to shipment, for all products purchased, and title passes to Anthony prior to shipment. Anthony selects its own distributors and dealers and sets the price at which it sells petitioner's products to distributors, all without consultation with, approval of, or authorization from petitioner.

Anthony is and for many years has been a corporation organized and existing under the laws of California and has been engaged in the business, among other things, of selling automobiles at wholesale and retail; and during the term of its contract with petitioner has sold, and under that contract is entitled to sell, automobiles and automobile parts manufactured by others which are in competition with petitioner's products.

Prior to January, 1957, one Thomson held exclusive rights to import petitioner's products into California.

The only employee or agent of petitioner who has been within the state of California in connection with any business of petitioner is one Knemeyer. Knemeyer is employed by petitioner to travel throughout the world to study market conditions and report to petitioner thereon, and has no authority to act in any manner for petitioner except when specific authority is given.

Knemeyer has been in California on but three occasions: In January 1956 when he remained for 14 days, in January 1957 when he remained for nine days, and in October 1957 for 14 days during which time he was served with process in the subject action. During his visit in January 1956 he negotiated a contract with Thomson and approved on behalf of petitioner a letter form of agreement under which Thomson secured the exclusive right to import petitioner's products in certain territory. In January 1957, while in California, he signed a letter terminating Thomson as importer. He also negotiated with Anthony for a contract between petitioner and Anthony and upon specific telephonic directions from his superiors in Germany, prepared and signed a letter purporting to appoint Anthony exclusive importer for all of petitioner's products for the western United States, subject to a contract being entered into between petitioner and Anthony. He signed this letter in the name of the corporation by himself as delegate general.

While the evidence is in direct conflict, there is evidence that after terminating Thomson's contract and while negotiating with Anthony Knemeyer gave certain assurances to the Woolvertons to the effect that should Anthony become exclusive importer for petitioner's products the Woolvertons would be appointed as distributors by Anthony; that they would retain the same dealers under Anthony as they had under Thomson; that petitioner would control Anthony and that Anthony would be fair to the distributors and not favor its own dealers; and that he, Knemeyer, had full authority from petitioner to settle the difficulties then existing between the importer and the distributors. All these assurances, if made, were given before Anthony was appointed exclusive importer and long before any contract existed between Anthony and petitioner. It is these assurances that form the basis for the alleged cause of action against petitioner in the action commenced by Woolvertons against Anthony and petitioner, and which Woolvertons seek to compel petitioner to litigate in this state.

There is no evidence that petitioner has, at any time, had any right to control or dictate to Anthony in regard to its contracts with or its relationship with distributors or dealers, nor any competent evidence that Knemeyer had any authority to act for petitioner so as to bind it as to any of the assurances allegedly made by Knemeyer.

In May of 1957, the Woolvertons entered into a contract with Anthony, under which they were given by Anthony the distributorship in certain territory for petitioner's products of which Anthony was importer. This agreement was for the period ending December 31, 1957. In August 1957, Anthony notified Woolvertons that it would not renew the agreement on its expiration date of December 31, 1957. Woolvertons, by mail, advised petitioner at Bremen of Anthony's action and petitioner forwarded a copy of this letter to Knemeyer who was then en route to the United States and Canada, asking him to investigate. Shortly after Knemeyer's arrival in California, he was served with the process in the subject action.

Were the contacts of the petitioner with this state such as to make service of process on it constitute due process of law? There is no longer any quantitative yardstick that may be applied in determining whether the contacts of a foreign corporation with this state are such as to constitute doing business in this state and thus make it subject to the jurisdiction of the courts of this state. Each case must be decided on its own facts; and if, under those facts, the contacts of the corporation with the state are of a quality and nature ‘which make it fair to the corporation’ and reasonable and just ‘according to our traditional conception of fair play and substantial justice’ to subject it to the jurisdiction of the courts of this state, then the service of process upon it constitutes due process. International Shoe Co. v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 160, 90 L.Ed. 95; Perkins v. Benguet Consol. Mining Co., 342 U.S. 437, 72 S.Ct. 413, 96 L.Ed. 485; Henry R. Jahn & Son, Inc., v. Superior Court, 49 Cal.2d 855, 323 P.2d 437.

The complaint in the subject action is in four counts. The first seeks declaratory relief as to Woolvertons' rights to a continuation of the contract of distributorship with Anthony. It does not allege a cause of action against petitioner. The only allegation as to petitioner is that it sent Knemeyer to Los Angeles to mediate between Woolvertons and Anthony and that as such mediator he assured Woolvertons that Anthony would not terminate Woolvertons' distributorship as long as they performed their duties diligently and efficiently.

The second count seeks an injunction against the termination by Anthony of its contract with Woolvertons; and while it alleges that it is the intention of petitioner to terminate that contract, it states no facts showing any right of petitioner or any power in petitioner to terminate a contract between Anthony and Wolvertons.

The third count seeks reformation of the contract between Anthony and the Woolvertons.

The fourth count seeks a judgment declaring that an oral contract exists between Woolvertons and petitioner whereby petitioner agreed that if plaintiff would enter into a distributorship agreement with Anthony that said agreement would not be terminated so long as Woolvertons performed the obligations of that contract on their part to be performed.

The fifth count alleges a conspiracy between Anthony and certain defendants sued under fictitious names, to interfere with the alleged oral contract between the Woolvertons and petitioner, and seeks damages on account of alleged acts done by Anthony and the unnamed persons pursuant thereto.

It is evident that Woolvertons, by their complaint, have failed to state any cause of action against petitioner, except one to have it declared that a contract arose out of certain alleged acts of its representative, which contract, if it exists, would be wholly unrelated to any business transacted by petitioner in this state but would relate solely to the performance of a contract between Woolvertons and a domestic corporation, against which corporation, if it breached its contract, Woolvertons have a full and acequate remedy.1

In the present case, petitioner has neither bought nor sold goods in this state, owned any property in this state, employed any persons in this state, nor had any agency in this state. It has not entered into any contracts to be performed within the state with the sole exception of the alleged contract with Woolvertons, the declaration of the existence of which is the sole remedy sought by Woolvertons against petitioner; and this contract, if one exists, is a unilateral contract which gives rise to no rights in petitioner; and the benefits of the contract to petitioner would be wholly incidental to the business conducted by it in Germany. Petitioner has not engaged in any activity whereby it reaped the benefit of the laws of this state or placed itself in a position to call upon our courts to enforce any rights arising out of any transaction in this state.

The fact that a large volume of petitioner's products are sold in California does not, in any wise, tend to establish the doing of business by petitioner in California for it is undisputed that when these products enter California they are not the property of petitioner and are not offered for sale or sold by it here. If petitioner were to be held subject to process here because its products were sold here by residents of this state, then any foreign corporation whose products, although sold abroad, are imported into this state, by the buyer, would likewise be subject to the process of our courts. It is inconceivable that the state should be held committed to such an unwise, unfair and unreasonable policy.

In our opinion, it would not be fair to petitioner, under the facts here, to make it subject to the jurisdiction of our courts; nor would it be in accordance with the traditional concepts of fair play or substantial justice so to do. Service of process on petitioner by serving Knemeyer did not, therefore, constitute due process.

Let a peremptory writ of mandate issue as prayed.

While I concur with the holding of the majority of this court that service of process on petitioner did not constitute due process of law, I am of the opinion that, even though its contacts were sufficient to render it amenable to the service of process under the rules laid down by the Supreme Court of the United States and by the Supreme Court of this state in the cases cited by the majority, still petitioner was not, under the statutes of this state, subject to the service of process.

What foreign corporations shall be subject to the service of process as well as how they shall be served, is a matter of legislative discretion. Perkins v. Benguet Consol. Mining Co., 342 U.S. 437, 72 S.Ct. 413, 96 L.Ed. 485. ‘[W]here the legislature has provided for jurisdiction of a foreign corporation based upon something more than the minimum of due process (as that concept changes with the attrition of the years) it is not for the courts to set up some new and different standard.’ Confidential, Inc., v. Superior Court, 157 Cal.App.2d 75, 320 P.2d 546, 550.

Section 411(2) of the Code of Civil Procedure provides that a foreign corporation ‘doing business' in this state may be served with summons in the manner provided by sections 6500–6504 of the Corporations Code. This section is purely procedural in character. It does not purport to define what constitutes ‘doing business' in this state. On the other hand, the legislative policy of the state as to what foreign corporations shall be subject to the jurisdiction of the courts of this state, and the manner in which that jurisdiction may be obtained, is set forth in part 11, title 1, division 1 of the Corporations Code. (This part includes sections 6200–6804 of the Crop.Code and will be hereinafter referred to as part 11.)

By section 6203 of the Corporations Code ‘doing business' is defined as: “Transact[ing] intrastate business' means entering into repeated and successive transactions of its business in this State, other than interstate or foreign commerce.'1 By section 6300 of the Corporations Code, foreign corporations engaged solely in interstate or foreign commerce are excluded from the application of the provisions of part 11. It is thus apparent that the only foreign corporations which are subject to the provisions of part 11, including those provisions providing for the service of process (Corp.Code §§ 6500–6504), are those who have engaged in repeated and successive transaction of their business in this state.

Under the provisions of part 11, a corporation which has not engaged in business in this state, within the meaning of section 6203 of the Corporations Code, is not required to qualify to do business in this state or to appoint an agent upon whom service of process may be made, and it is only to foreign corporations required to so qualify or appoint an agent, that the provisions of sections 6500–6504 of the Corporations Code are applicable.

The codes are to be construed as a single statute (Armenta v. Churchill, 42 Cal.2d 448, 455, 267 P.2d 303; In re Porterfield, 28 Cal.2d 91, 100, 168 P.2d 706, 167 A.L.R. 675), and are to be construed so as to harmonize one with the other giving effect to all provisions if that be possible. People v. Trieber, 28 Cal.2d 657, 661, 171 P.2d 1; Southern Pac. Co. v. Railroad Comm., 13 Cal.2d 89, 100, 87 P.2d 1055; People v. Pryal, 25 Cal.App. 779, 781–782, 147 P. 114, 115.

If section 411(2) of the Code of Civil Procedure be construed as making subject to the process of the courts of this state, any foreign corporation having any contact with this state which would make service upon it amount to due process, even though those contacts were not such as to make the provisions of part 11 applicable to it, then the provisions of part 11 limiting its application to foreign corporations whose contacts with the state have amounted to ‘repeated and successive transactions' of its business in the state become meaningless and ineffective. On the other hand, if the definition of ‘doing business' as set forth in part 11 is applied to ‘doing business' as used in section 411(2), both statutes are made effective.

Undoubtedly the Legislature may, by appropriate statute, make a foreign corporation subject to the jurisdiction of our courts without that corporation having engaged in repeated and successive transactions of its business in this state; and under such statute a single contact with this state may be sufficient, depending upon the nature and character of that contact, to make substitute service of process upon it constitute due process. See Ins. Code, §§ 1610–1615; McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223. The Legislature, however, has not sought to make foreign corporations, such as petitioner, engaged solely and purely in commercial business, so subject to process.

I am conscious of the fact that the Supreme Court of this state and the District Courts of Appeal1 have applied the minimum contract theory of due process as set forth by the Supreme Court of the United States in International Shoe Co. v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 and Perkins v. Benguet Consol. Mining Co., 342 U.S. 437, 72 S.Ct. 413, 96 L.Ed. 485. But, in none of the cases which have been cited to us has the effect of part 11 of title 1 of division 1 of the Corporations Code been discussed or mentioned.

The record before us is devoid of any evidence that would bring petitioner within the class of corporations subject to process under the provisions of sections 6500–6504 of the Corporations Code. It has not bought or sold goods in this state and while its contract with Thomson made in 1956, was made in this state, the contract did not constitute intrastate business but was solely in furtherance of the business conducted by it in Germany and a part of the petitioners' foreign commerce. Its termination of Thomson as the person having exclusive right to purchase in Germany and import into the western United States, petitioner's products, did not constitute intrastate business but was also merely a part of its business in Germany and inextricably a part of foreign commerce. Its act in seeking through Knemeyer to mediate between Thomson and the distributors and dealers appointed by him to sell the products which he had purchased from petitioner in Germany, did not constitute intrastate business, if it constituted an act of business at all. Its appointment of Anthony as the person having the exclusive right to import its products was but an incident to its business in Germany and cannot be considered apart from the contract it later entered into with Anthony, which having been finally consummated in Germany (by the acceptance there of the contract as modified by Anthony) was a German contract under which petitioner did not attempt to engage in any business in California but only to sell its products to Anthony in Germany with the exclusive right in Anthony to import those products as its own property into California.

The fact that Knemeyer acted as a mediator in an attempt to avoid dissension between Anthony should it become petitioner's importer and Woolvertons should they become a distributor under Anthony, did not constitute the transaction of any business by it in this state; nor does the fact that Woolvertons now claim that, in acting as a mediator, Knemeyer made statements which obligated petitioner to be responsible for any breach of contract by Anthony, change the situation. If their claims are well founded Knemeyer's act at most constituted but an isolated act incidental to petitioner's foreign commerce. In short, petitioner did not engage in ‘repeated and successive transactions' of business in this state and therefore is not subject to process under the provisions of section 6500 of the Corporations Code.

To sum up, it is my opinion that the only foreign corporations which are subject to service of process under section 411(2), Code of Civil Procedure, are such corporations as have transacted business in this state within the meaning of section 6203 of the Corporations Code.

FOOTNOTES

1.  It was admittred at oral argument that Anthony is financially able to respond to any judgment Woolvertons might obtain against it.

1.  ‘[T]o transact business' is synonymous with ‘to do business.’ General Conference of Free Baptists v. Berkey, 156 Cal. 466, 469, 105 P. 411, 412. It is significant that ‘carrying on business' is used as synonymous with ‘transacting business' in section 6804 of the Corporations Code.

1.  West Publishing Co. v. Superior Court, 20 Cal.2d 720, 128 P.2d 777; Thew Shovel Co. v. Superior Court, 35 Cal.App.2d 183, 95 P.2d 149; Boote's Hatcheries & Packing Co. v. Superior Court, 91 Cal.App.2d 526, 205 P.2d 31; Sales Affiliates, Inc., v. Superior Court, 96 Cal.App.2d 134, 214 P.2d 541; Koninklijke Luchtvaart Maatschappy v. Superior Court, 107 Cal.App.2d 495, 237 P.2d 297; Fielding v. Superior Court, 111 Cal.App.2d 490, 244 P.2d 968; Iowa Mfg. Co. v. Superior Court, 112 Cal.App.2d 503, 246 P.2d 681; Kneeland v. Ethicon Suture Laboratories, 118 Cal.App.2d 211, 257 P.2d 727; Jeter v. Austin Trailer Equipment Co., 122 Cal.App.2d 376, 265 P.2d 130; Duraladd Products Corp. v. Superior Court, 134 Cal.App.2d 226, 285 P.2d 699; Eclipse Fuel Engineering Co. v. Superior Court, 148 Cal.App.2d 736, 307 P.2d 739; Gray v. Montgomery Ward, Inc., 155 Cal.App.2d 55, 317 P.2d 114; Henry R. Jahn & Son, Inc., v. Superior Court, 49 Cal.2d 855, 323 P.2d 437.

VALLEÉ, Justice.

SHINN, P. J., concurs.