CANNON v. AMERICAN HYDROCARBON CORPORATION

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

Louis A. CANNON, Frances Cannon, Sanford A. Cahn and Anne Cahn, Plaintiff and Respondents. v. AMERICAN HYDROCARBON CORPORATION, Defendant and Appellant.

LOUIS A. CANNON, Frances Cannon, Sanford A. Cahn, Anne Cahn, and Cannon-Rosecrans Land Company, Plaintiffs and Respondents, v. AMERICAN HYDROCARBON CORPORATION, Defendant and Appellant.

Div. 33156, 33157.

Decided: October 28, 1969

John D. Glynn, Los Angeles, for appellant. Harold Easton and Alan F. Kane, Los Angeles, for respondents.

For Opinion on Rehearing.  See 84 Cal.Rptr. 575.

In each of the two cases involved herein the defendant corporation has appealed from an order of the superior court denying a motion to vacate and set aside the entry of default and the judgment thereafter entered.

The actions were for money alleged to be due and owing by defendant under written guarantees of leases.   In each complaint it was alleged as follows:  “Defendant is now and all times herein mentioned has been a Delaware corporation doing business in the State of California.”   The complaints were filed and summons issued on July 21, 1966.   Since the pertinent facts and the question to be resolved are the same in each case, the matter will be considered herein as though only one case was involved.

For the purpose of obtaining jurisdiction as to the defendant, the plaintiffs had recourse to the provisions of section 6408 of the Corporations Code,1 but obtained no order as to service of process from the superior court before personal delivery of the process to a deputy secretary of state in Sacramento.   The first question to be resolved is whether the entry of default was improper and the judgment entered thereafter was void because of the omission to obtain such a prior order.

The sheriff of Sacramento County, acting through a deputy, made personal delivery of a copy of the summons and complaint to the deputy secretary of state, together with a letter addressed to the Secretary of State which was signed by the plaintiffs' attorney, the body of the letter being set forth in the footnote.2  The Secretary of State forwarded the copy of the summons and complaint to the defendant corporation in Dallas, Texas, but the defendant made no appearance in the action.

On December 28, 1966, the plaintiffs filled a declaration of Louis A. Cannon containing statements that the defendant was a Delaware corporation and had transacted business in California and alleging that the defendant corporation had not qualified to conduct intrastate business in California and that its offices were currently located at 101 Braniff Building, Dallas, Texas, “Attention:  S. Mort Zimmerman.”   On the same date the declaration of L.A. Riemer was filed, that declaration containing the statement that the declarant was a former officer of the defendant corporation and statements as to the transaction of business in California by that corporation and the nature thereof, including the execution of “lease guaranties.”

On January 21, 1967, there was an entry of the defendant's default by the superior court, the body thereof being as follows:  “It appearing to the Court from an examination of the records and files in this action that the defendant(s) AMERICAN HYDROCARBON CORPORATION (a Delaware corporation which conducted intra-state business in the State of California and was required to qualify in the State of California but failed to do so under Sections 6403 ff [sic] of the Corporations Code and is therefore deemed to have designated the Secretary of State of the State of California as the agent upon whom process may be served within this State), having been duly served with summons in the manner required by law, to-wit:  Upon the Secretary of State of the State of California, and having failed to answer the plaintiff's [sic] complaint herein, and the time for answering having expired, the default of said defendant(s) is hereby entered according to law.”   On March 20, 1967, judgment by the court after default was entered in the superior court.

The notice of motion to vacate and set aside the entry of default and the ensuing judgment was filed on July 19, 1967.   The motion was heard and denied on November 13, 1967, the following statement being included in the minute order:  “The service appears valid under Corporation Code 6408.   It does not appear that any procedural defects were prejudicial to defendant.”

Section 6403 of the Corporations Code is in part as follows:  “A foreign corporation shall not transact intrastate business in this State without having first obtained from the Secretary of State a certificate of qualification.”   That section sets forth the procedure for obtaining such a certificate.   Both sections 6403 and section 6408 are in chapter 3 of Title 1, Division 1, Part 11, of the Corporations Code, chapter 3 being entitled “Qualification for Transaction of Intrastate Business.”   The following chapter (chapter 4, §§ 6500–6504) is entitled “Service of Process.”

The basic statutory provision with respect to the service of summons on a foreign corporation is set forth in section 411 of the Code of Civil Procedure.   That section is in pertinent part as follows:  “The summons must be served by delivering a copy thereof as follows:  * * * 2. If the suit is against a foreign corporation * * * doing business in this state;  in the manner provided by sections 6500 to 6504, inclusive, of the Corporations Code.”

In section 6501 it is provided that if service cannot be made as specified in section 6500 “and it is so shown by affidavit to the satisfaction of the court or judge, then the court or judge may make an order that service be made by personal delivery to the Secretary of State or to an assistant or deputy secretary of state of two copies of the process together with two copies of the order, except that if the corporation to be served has not filed the statement required to be filed by section 6403 then only one copy of the process and order need be delivered but the order shall include and set forth an address to which such process shall be sent by the Secretary of State.”   As has been heretofore noted, section 6408 deals with the situation in which a foreign corporation transacts intrastate business in this state without holding a valid certificate from the Secretary of State, whereas section 6403 sets forth the procedure for obtaining such a certificate of qualification.

 Neither section 411 of the Code of Civil Procedure nor section 6408 of the Corporations Code expressly dispenses with an order of the court based upon an appropriate affidavit as a prerequisite to the delivery of process to the Secretary of State in the situation with which section 6408 is concerned.   Section 6501 expressly provides, as noted hereinabove, that only one copy of the process and order need be delivered to the Secretary of State where the foreign corporation has not complied with section 6403 of the Corporations Code, which is the case now before this court.   Accordingly, it is manifest that it is the legislative intent that process for which provision is made in section 6408 of the Corporations Code shall be served upon the Secretary of State only after an order of the court with respect thereto, based upon a supporting affidavit, has been made.

 Service of process upon a foreign corporation may be made only in the manner and form authorized by statute.  (Nagel v. P & M Distributors, Inc., 273 Cal.App.2d 176, ––– *, 78 Cal.Rptr. 65;  Eagle Electric Mfg. Co. v. Keener, 247 Cal.App.2d 246, 251, 55 Cal.Rptr. 444;  Tri-State Mfg. Co. v. Superior Court, 224 Cal.App.2d 442, 444, 36 Cal.Rptr. 750.)   As this court stated in Tri-State at page 444, 36 Cal.Rptr. at page 751:  “It is elementary that substituted service upon a foreign corporation may be made only in the manner and form authorized by statute.   An indispensable requisite is an affidavit showing that the corporation sought to be served is subject to California jurisdiction and that personal service of process cannot be had.”

The declarations of Mr. Cannon and Mr. Riemer, even if they could be considered to be otherwise sufficient, a question which we do not decide on the present appeals, were filed on December 28, 1966, after the delivery of process to the Secretary of State and cannot serve to validate such delivery of process which was not made pursuant to court order.   The record does not disclose any effective service of process on the defendant.   As stated in Eagle Electric Mfg. co. v. Keener, supra, 247 Cal.App.2d 246, at pages 250–251, 55 Cal.Rptr. 444, at page 448:  “In any event, when a judgment on the face of the judgment roll is void, attack can be made upon it at any time;  the court has the right and power any time to vacate a void entry of default and a void default judgment.  * * * Conformance with the statute is deemed jurisdictional and absence thereof deprives the court in the particular action of power to render a judgment.”

In view of the fact that defendant's motion in each case should have been granted for the reasons stated hereinabove, it is not necessary to consider the merits of the alternative grounds of the motion which were respectively based upon the provisions of section 473 and section 473a of the Code of Civil Procedure.

The order of the superior court of November 13, 1967, in superior court case No. 889739 (2d Civ. No. 33156) denying the defendant's motion to vacate and set aside the default entered on January 20, 1967, and the judgment by court after default entered on March 20, 1967, is reversed with directions to the superior court to grant that motion and to otherwise proceed in accordance with the law as set forth hereinabove.   The order of the superior court of November 13, 1967, in superior court case No. 889740 (2d Civ. No. 33157) denying the defendant's motion to vacate and set aside the default entered on January 20, 1967, and the judgment by court after default entered on March 20, 1967, is reversed with directions to the superior court to grant that motion and to otherwise proceed in accordance with the law as set forth hereinabove.

FOOTNOTES

1.   The pertinent portions of section 6408 are as follows:“(a) Any foreign corporation which transacts intrastate business in this state and which does not hold a valid certificate from the Secretary of State and is not exempt from the requirement of holding such a certificate by the provisions of Section 6403.2 of this code may be subject to a penalty of twenty dollars ($20) for each day that such unauthorized intrastate business is transacted;  and such foreign corporation, by transacting unauthorized business in this state, shall be deemed to consent to the jurisdiction of the courts of California in any civil action arising in this state wherein such corporation is named a party defendant and shall be deemed to have designated the Secretary of State as the agent upon whom process directed to the corporation may be served within this state.  * * *(c) Service on a corporation pursuant to this section may be made by personal delivery to the Secretary of State, or to an assistant or deputy secretary of state, of one copy of the process, together with a written statement signed by the party to the action seeking such service, or by his attorney, setting forth an address to which such process shall be sent by the Secretary of State.  [¶ ] Upon receipt of the process and his fee therefor, the Secretary of State shall forthwith forward the copy of the process, together with a statement indicating the date upon which the process was served upon the Secretary of State, by registered or certified mail, charges prepaid, with request for return receipt, to the corporation at the address specified in said written statement.  [¶ ] The corporation shall appear within 30 days after delivery of the process to the Secretary of State.   The Secretary of State shall keep a record of all such process served upon him and shall record therein the time of service and his action in respect thereto.   The certificate of the Secretary of State, under his official seal, certifying to the receipt of the process and the forwarding of such process to the corporation, shall be competent and prima facie evidence of the matters stated therein.”

2.   “Pursuant to Section 6408 of the Corporations Code of the State of California I advise you that the above designated process is being served upon American Hydrocarbon Corporation, a Delaware corporation, which was required to qualify in the State of California but failed to do so under Sections 6403 ff [sic] of the Corporations Code.“Accordingly, said corporation is deemed to have designated the Secretary of State as the agent upon whom process may be served within this State.“You are hereby advised that said process should be sent as follows:American Hydrocarbon Corporation101 Braniff BuildingDallas, TexasAttention:  S. Mort Zimmerman.“Dated:  August 9, 1966.”

FOOTNOTE.  FN* Advance Report Citation:  273 A.C.A. 191, 196.