International Shoe Co. v. State , 22 Wash. 2d 146 ( 1945 )

As a member of this court, I feel impelled by a strong sense of duty to dissent from the able opinion prepared by the majority. I write this dissent prior to completion of its circulation among my fellow judges. I write it with a sincere hope that I may change the views of the writer and convince all of the judges that the majority opinion as now written is incorrect.

This case comes to us upon an agreed statement of facts, which reads:

"International Shoe Company is a Delaware Corporation. It has its principal place of business in the City of St. Louis, Missouri. Its principal business consists of manufacture and sale of boots, shoes and other footwear. It maintains places of business where manufacturing is carried on and from which its merchandise is sold in the states of Missouri, Arkansas, Illinois, Kentucky, North Carolina, Pennsylvania, New York and New Hampshire. Its merchandise is sold through its several selling divisions or branches, the following branches being the only ones doing any sort of business with residents of the State of Washington:

"Roberts, Johnson Rand Peters Friedmann-Shelby Specialty

"It has not a place of business in the State of Washington; maintains no general agent in the State of Washington. It makes no contracts, either of sale or of purchase in the State of Washington. It maintains no stock of merchandise in the State of Washington and makes no deliveries of merchandise in intra state commerce in the State of Washington. . . .

"The manner in which the business of International Shoe Company is carried on in the State of Washington, is generally as follows:

"Salesmen are employed from the head office at St. Louis and work under the direct supervision and control of sales managers with offices in St. Louis, and are required as part of their duties to spend certain time each year in St. Louis, Missouri for the purpose of receiving direct personal instructions as to their duties, as to the line of shoes which they are to offer to the trade, the methods of selling, conditions of selling, and to receive information with reference to construction and new types and kinds of shoes which are to be offered to the trade. Said employees or salesmen are given a sample line, which samples uniformly consist of only one shoe of a pair, and no sales are made by salesmen from such samples. They are merely used to display to prospective purchasers. Some of the salesmen rent sample rooms in business buildings and the expenses of such rental and maintenance is paid by the salesmen and they are reimbursed on an expense account by the International Shoe Company. Other salesmen maintain no permanent sample rooms, but rent rooms in hotels or business buildings in the various cities to which they travel.

"Such transactions as the International Shoe Company has with persons in business, or who reside in the State of Washington, involving the sale and distribution of its merchandise to merchants in the State of Washington and are conducted as follows:

"Each salesman is given a designated territory in which to solicit orders. The authority of the salesman is limited to exhibiting samples of the merchandise for which they solicit orders to merchants who are probable buyers thereof; endeavor to procure orders on prices and terms fixed by the International Shoe Company. If orders are obtained, to transmit them to the office of the International Shoe Company outside the State of Washington for acceptance or rejection, and if orders are accepted by the International Shoe Company the merchandise called for by such orders is shipped F.O.B., shipping point, from outside of the State of Washington. Practically all merchandise shipped by International Shoe Company into the State of Washington is on orders approved in St. Louis, Missouri and shipped therefrom. The merchandise which is shipped into Washington is invoiced at the point of shipment and invoices are payable at point of shipment from which point collections are made. No salesman has power or authority to bind the International Shoe Company to any contract or to finally conclude any transactions in its behalf, the salesman's duties and authority being limited strictly to the solicitation of orders.

"The salesmen are under the direct control and direction of the International Shoe Company and are not permitted to be engaged in an independently established trade, occupation, profession or business of the same nature involved in their employment by the International Shoe Company.

"On October 10, 1941, a copy of Notice of Assessment by the Commissioner of Unemployment Compensation and Placement, was delivered to and left with one, E.S. ALLEY, a salesman of the International Shoe Company, at Seattle, Washington, demanding payment of delinquent contributions or interest, in the sum of $6,000. Said sum was not arrived at by calculation of the wages earned by salesmen of the International Shoe Company within the State of Washington, but was an arbitrary figure set by the Commissioner. E.S. Alley is a salesman of the International Shoe Company, employed upon the terms and under the authority and for the purpose as hereinabove referred to for employees of International Shoe Company within the State of Washington. A copy of the same notice of assessment was also placed in the United States mails, postage fully prepaid, addressed to International Shoe Company at St. Louis, Missouri, on the 10 day of October, 1941. Thereafter, and on the 18th day of October, 1941, International Shoe Company filed with the Department of Unemployment Compensation and Placement, its special appearance, motion to quash service and objection to jurisdiction."

The principal question is whether appellant is doing an intrastate business or is engaged in interstate commerce.

Involved in this question is the determination of whether the soliciting of business amounted to "doing business" so as to render the foreign corporation amenable to service of process.

The appellant was not properly served within the meaning of Rem. Rev. Stat., § 226, which reads:

"The summons shall be served by delivering a copy thereof, as follows: — . . .

"9. If the suit be against a foreign corporation . . . doing business within this state, to any agent, cashier or secretary thereof; . . ."

If at the time E.S. Alley, one of the salesmen mentioned in the stipulated statement of facts, was served with process, the company was doing an interstate business, of course our courts would have no jurisdiction, because the Federal government, under the provisions of subsection 3, of § 8, Art. I of the constitution, has exclusive power "To regulate commerce with foreign nations and among the several states and with the Indian tribes."

This court is committed to the rule that corporations doing an interstate business cannot be held liable to our state laws.Lilly-Brackett Co. v. Sonnemann, 50 Wash. 487, 97 P. 505;Smith Co. v. Dickinson, 81 Wash. 465, 142 P. 1133; AlaskaPac. Nav. Co. v. Southwark Foundry Machine Co., 104 Wash. 346,176 P. 357; Rawleigh Co. v. Harper, 173 Wash. 233,22 P.2d 665; State ex rel. Paraffine Companies v. Wright, 184 Wash. 69, 49 P.2d 929; Brandtjen Kluge v. Nanson, 9 Wash. 2d 362, 115 P.2d 731.

The phrase "doing business within this state" has been defined on many occasions. In Smith Co. v. Dickinson, supra, the facts were that a foreign corporation manufactured merchandise in the state of Nebraska and sold some of its products in this state. Its method of selling was that its representatives took orders here for the merchandise and forwarded those orders to the company at Omaha for approval or rejection. If the order was accepted, the goods were shipped from Omaha to the buyer in this state and sold on credit. The salesman had offices in Seattle and Spokane, at which places he retained exhibit samples belonging to the corporation and also made trips throughout the state for the purpose of selling the goods and at times paid the expenses of proposed customers from their homes to Seattle and Spokane. The agent did not have authority to complete sales, neither could he extend credit nor make collections. In addition, the record disclosed that the agent resold certain goods to other customers and at one time went so far as to sell some of his samples, the sale being closed through the office at Omaha. This court upheld the trial court's decision that the company was not doing business in the state of Washington.

The majority opinion passes the Dickinson case with the observation that it is not in point because it referred to the statute relating to the payment of a fee before an action could be instituted in the courts of this state.

We did not take that view of the case in State ex rel.Paraffine Companies v. Wright, supra.

Nor did the Federal courts so consider it in the cases ofJohanson v. Alaska Treadwell Gold Mining Co., 225 Fed. 270;Zimmers v. Dodge Brothers, 21 F.2d 152; and Klabzuba v.Southern Pac. Co., 33 F.2d 359.

The rule laid down in the foregoing case was approved in the following cases: Macario v. Alaska Gastineau Mining Co.,96 Wash. 458, 165 P. 73; Rawleigh Co. v. Harper, supra; State exrel. Paraffine Companies v. Wright, supra; Brandtgen Kluge v. Nanson, supra; and Procter Gamble Co.v. King County, 9 Wash. 2d 655, 115 P.2d 962.

I call the attention of the students of this problem to the extensive citation of cases in 60 A.L.R., pages 1020 to 1030, inclusive. A reading of those cases brings forth the information that the principle announced in Smith Co. v. Dickinson,supra, is approved by practically all the courts in the Union.

In another line of cases, we have considered the question of whether a corporation is doing business within a certain county. This proposition has arisen in those cases in which a corporation was sued and it contended that the court did not have jurisdiction within the provisions of Rem. Rev. Stat., § 205-1 [P.C. § 8542-1], which reads:

"An action may be brought in any county in which the defendant resides, or, if there be more than one defendant, where some one of the defendants resides at the time of the commencement of the action. For the purpose of this act, the residence of a corporation defendant shall be deemed to be in any county where the corporation transacts business or has an office for the transaction of business or transacted business at the time the cause of action arose or where any person resides upon whom process may be served upon the corporation, unless hereinafter otherwise provided."

In the following cases, this court has held that a corporation was not doing business in a county unless it transacted therein a part of its usual and ordinary business, which must be continuous in the sense that it is distinguished from merely casual or occasional transactions: State ex rel. Wells Lbr. Co. v.Superior Court, 113 Wash. 77, 193 P. 229; State ex rel.American Sav. Bank Trust Co. v. Superior Court, 116 Wash. 122,198 P. 744; Alto v. Hartwood Lbr. Co., 135 Wash. 368,237 P. 987; State ex rel. Seattle Nat. Bank v. Joiner, 138 Wash. 212,244 P. 551; State ex rel. Yakima Trust Co. v. Mills,140 Wash. 357, 249 P. 8; State ex rel. Harrington v. Vincent,144 Wash. 246, 257 P. 849; State ex rel. Kerr Glass Mfg. Corp. v.Superior Court, 166 Wash. 41, 6 P.2d 368; State ex rel.Hoffman v. Superior Court, 168 Wash. 472, 12 P.2d 607; State ex rel. ParaffineCompanies v. Wright, supra.

I call especial attention to the last state case cited, and shall discuss the Federal case later. In that case, the question presented was whether or not the Paraffine Companies was transacting business in Thurston county at the time its principal place of business was in King county. The facts were that the company sent salesmen throughout the state to call upon prospective purchasers and to obtain orders which were transmitted to Seattle. In case the orders were approved by the credit department, the sales were made in the home office. No authority to bind the company to sales was given to the salesmen, and all orders were subject to approval. Deliveries were made either from the Seattle warehouse or the factory in California. The products were sold to three merchants of Olympia, two of whom were retail dealers. One of them, the Washington Veneer Company, was supplying other dealers. The salesmen accompanied representatives of the veneer company to various dealers in Thurston county. The dealers were told that the products of the Paraffine Companies would be handled by the local company, which would supply the dealers. The transactions were made in accordance with those statements. It appears that the veneer company ordered goods through the salesmen and made payments approximately every thirty days. This court held that the Paraffine Companies was not transacting business in Thurston county and, in so doing, stated:

"While the veneer company is referred to as a distributor, it purchases from the Paraffine Companies at a discount, in the course of trade, and resells to its own customers at a profit. The other two concerns purchase, in ordinary course, the products that are needed to supply their immediate customers. While the Paraffine Companies' salesmen stimulate trade and solicit the use of its products, purchases are made by the Olympia dealers at the Seattle office.

"We are clear that the Paraffine Companies is not transacting business within Thurston county, as the term has been defined by this court."

The decision was bottomed upon the Dickinson case, from which a liberal quotation was made.

I now call attention to a third series of cases in this state, some of which are not mentioned by the majority, which are directly in point and decisive of the question presented in this case.

In Rich v. Chicago, B. Q.R. Co., 34 Wash. 14, 74 P. 1008, this court held that a railway company was not doing business in this state when it had an agent here who solicited passenger and freight traffic. In that case, we held that the trial court's judgment quashing service upon the agent who solicited the business was correct.

In Arrow Lbr. Shingle Co. v. Union Pac. R. Co., 53 Wash. 629,102 P. 650, it was held that a railway company was not doing business in this state when it maintained an office in Seattle from which advertising matter of the company was distributed and freight and passenger business was solicited. It is true that the agent was paid by other companies, but it is equally true that tickets were sold which frequently were for passage over the defendant railroad company's lines.

In Royce v. Chicago N.W.R. Co., 90 Wash. 378, 156 P. 16, this court approved the action of the trial court in quashing service against a railroad company. Service was made against one who was advertised as the "general agent" of the defendant. The decision was based entirely upon Arrow Lbr. Shingle Co. v.Union Pac. R. Co., supra. In passing, the court stated:

"Considering the multitude of corporations and that, unlike individuals, they can be served through agents, all courts have shrunk from a rule which would soon swamp home tribunals with foreign brawls. Nor have we any desire, through the same rule, to expose our own incorporated merchants and carriers on like service to suits in every other state. Undoubtedly the universal opinion that solicitors for nonresident railroads and commercial houses are not agents for local service arises from these two apprehensions, and it was also foreseen to be unfair, as well as injurious to interstate commerce, to subject such principals to suits in our more than forty states, while the plaintiffs in most cases would be exposed to suit only at home."

In Macario v. Alaska Gastineau Mining Co., supra, this court determined that a mining company was not doing business in this state to an extent to give our courts jurisdiction over it. Its only business was to maintain an office in Seattle and an agent who was named "supply and forwarding agent" and whose duty it was to forward supplies to the company in Alaska. The agent also made hotel and transportation reservations for officers and employees of the company who passed through Seattle on their way to Alaska. That agent had authority to make contracts of purchase when any considerable quantities had to be approved by his home office.

In Alaska Pac. Nav. Co. v. Southwark Foundry Machine Co.,supra, it was held that a person was not an agent who was merely employed as a mechanical engineer of a foreign corporation for the purpose of installing a piece of machinery.

In Watson v. Oregon Moline Plow Co., 113 Wash. 110,193 P. 222, we held that a foreign corporation was not doing business in the state through an agent where the person who it was claimed was an agent was merely buying machinery from the foreign corporation and selling it here on his own account.

As I have mentioned, the Federal courts have passed upon this question.

In Johanson v. Alaska Treadwell Gold Mining Co., supra, an attempt was made to sue a gold mining company in the Federal court of this state. The defendant was a Minnesota corporation and had not complied with the laws of Washington authorizing it to do business here. It had general offices in Alaska and in San Francisco. It appeared further that its agent had purchased goods, wares, and merchandise in Seattle with direction that the same be shipped to the company at Treadwell, Alaska; that all such purchases were subject to the approval of the company; that the duties of the agent were to see that the goods were transported or forwarded from Seattle to Treadwell, Alaska; and that the agent did not pay for any goods or disburse any money. A motion was made to quash the service of summons made upon the agent in Seattle. The Federal court granted the motion and quashed the service, and in so doing, based its decision upon, and quoted from, the Dickinson case, supra.

In Zimmers v. Dodge Brothers, supra, the Federal court in Illinois had before it the question of what was doing business in the state of Illinois. Referring to the facts in the case, the court set them out as follows:

"It is organized for, and does the business of, manufacturing, selling, and dealing in automobiles and automobile parts and accessories. Its principal office is Baltimore, Md. Its factories and principal place of business are located at Hamtramck, Mich., near Detroit, and that is the distributing center for the company's products. It does not have sales agents throughout the country, but sells to independent dealers, who in turn sell to associate dealers or other dealers, or directly to the ultimate purchasers or users. The relation between the company and the dealers is that of vendor and vendee. Dealers are appointed under a written `dealer's agreement,' which becomes effective only upon execution by the company at Hamtramck after execution by the dealer. Dodge Brothers, Inc., grants to the dealer the right to purchase Dodge Brothers motor vehicles and parts for resale in a designated territory, but the manufacturer is not bound to deliver any specified quantity. The manufacturer delivers the motor vehicles and parts to the dealer, by delivering them to a common carrier at Hamtramck, Mich., and thereafter the dealer assumes all the risk of loss and damage. The dealer pays for the motor vehicles and parts purchased, either in cash at the defendant's factory or on presentation of sight draft against bill of lading. Each dealer, at his own expense, maintains salesrooms for the purposes of exhibiting and selling the motor vehicles and parts.

"The defendant has in its employ 25 district representatives, located in 25 of the principal cities of the United States. One of the district representatives is located in Chicago and has an office here. His duties are to look after the interests of the defendant in the Chicago district and to make reports to the defendant from time to time; to investigate and interview men available as dealers and submit recommendations to the officials of the defendant corporation for final approval; to observe if subdealers get an adequate supply of cars from dealers; to assist in settling disputes between dealers; to help the dealers with their sales and service problems; to stimulate sales contests among dealers; to advise the dealers in regard to their used car problems; to inform the dealers about methods of organizing; to talk to salesmen about problems of salesmanship; and to keep the defendant fully informed of conditions prevalent and events happening with respect to the industry in his district.

"He takes no active part in the sale of motor vehicles or parts; he has no authority to make contracts on behalf of the defendant corporation, nor has he done so; he maintains his office and makes all contracts, relating to the upkeep of his office, on his own behalf, and is reimbursed for his expenditures weekly by checks from Detroit, Mich.; his salary check is sent to him bimonthly from Detroit, Mich.; he takes the lease for office space in his own name; he keeps his bank account in his own name, without reference to his position as district representative; and his letter heads do not represent him to be an agent of Dodge Brothers, Inc.

"The district representative has no authority to commit the defendant finally in any way. He has a secretary, whose salary is paid by the company's check from Hamtramck. Persons inquiring at the office in Chicago with reference to service or purchase or exchange of Dodge Brothers automobiles are referred to the Dodge dealer in Chicago. This secretary compiles information from dealers and transmits such information to the company at Hamtramck."

The court held in that case that the facts did not show that the defendant corporation was doing business in the state of Illinois, and quashed the service of summons. In passing upon the question involved, the court cited Rich v. Chicago, B. Q.R.Co., supra, as sustaining authority.

Klabzuba v. Southern Pac. Co., supra, is another case decided in the Federal court for western Washington. In that case, an action was commenced against a Kentucky corporation which was doing some business in this state, but had not complied with our laws relative to foreign corporations doing business here. The facts show that defendant was an interstate carrier by a railroad, but did not own any railroad in the state of Washington nor did it receive, carry, or deliver passengers or freight in this state. Service was made upon an employee of the company whose duty it was to solicit for passenger and freight traffic. The defendant maintained an office in the city of Seattle in charge of a representative who made the solicitations for passenger and freight traffic. It further appears that, when application was made, through tickets were issued from Seattle to outside points on the defendant's line by three railroad companies; that, to expedite the service, blocks of tickets were carried in stock by representatives of defendant and bore the name of one of the initial carriers, but not that of the company sued. Relative to the tickets, the facts show that they constituted a contract between the initial carrier and the passenger, the price being collected by the Southern Pacific; that thereafter an adjustment was made between that railroad company and the initial carrier; and that the defendant ultimately received from the initial carrier its share of the total purchase price.

The court referred to Johanson v. Alaska Treadwell Gold MiningCo., supra, and held that the actions of the defendant company did not constitute doing business in the state within the purview of the law giving the court jurisdiction; and, in so doing, cited as its authority Rich v. Chicago, B. Q.R. Co., supra; ArrowLbr. Shingle Co. v. Union Pac. R. Co., supra; Royce v. Chicago N.W.R. Co., supra; and Macario v. Alaska Gastineau MiningCo., supra.

The first series of cases just discussed lays down a definite uniform rule which defines doing business within this state. The second series follows the reasoning of the first and announces a rule as to what constitutes doing business in a county.

The third series of cases announces the rule relative to what amounts to doing business in this state in order to subject a corporation to actions in the state. A study of these cases brings forth the information that one precise definition of the phrase has been applied and used by this and other courts in determining whether a corporation is doing business within the meaning of Rem. Rev. Stat., §§ 205-1, 226 (9), or Rem. Rev. Stat. (Sup.), § 3836-2 [P.C. §§ 8542-1, 8438, 4656-52].

We should adhere to established rules and principles so long as they do not indicate a palpable mistake or violate justice, reason and law. If we do find that some of our decisions violate the principles just mentioned, we should overrule those decisions and announce a new and proper rule.

In this state, we have one definition for negligence, one for contributory negligence, one for reasonable doubt, and one for proximate cause, including many other words and clauses used by lawyers and judges; and up until the present time, we have had one definition of what constitutes doing business in the state of Washington. I fail to see any reason for changing our rule and providing for two definitions of what is doing business within this state. The only purpose I can see is to give to the unemployment compensation commission a right not accorded to ordinary litigants.

I repeat, if the majority opinion prevails, we will have in this state two definite definitions of doing business which will confuse judges, lawyers, and laymen alike.

To show the baffling condition of our cases which will arise if the majority opinion prevails, I submit the following reasonable assumed situation:

Two actions are commenced upon the same day and filed in the superior court for Thurston county, one of them by John Doe Company against Smith Company. The second is the state of Washington against the John Doe Company.

In the first complaint, the plaintiff alleges that, between the first day of June, 1943, and the 10th day of August, 1944, plaintiff sold and delivered to the defendant goods, wares, and merchandise of the agreed value of one thousand dollars, which defendant refused to pay, though demand has been made therefor; that the plaintiff is a foreign corporation, has not filed its articles of incorporation with the secretary of state of the state of Washington, nor has it paid its annual license fee to the state of Washington; that its business within this state is interstate business conducted in the following manner:

Plaintiff is an Illinois corporation having its business in the city of Chicago, where it manufactures washing machines and sells the same in various states of the Union, including the state of Washington. In the state of Washington its merchandise is sold through several selling divisions or branches in Spokane, Seattle, and Olympia. It maintains no general agent in the state of Washington and makes no contracts of sale in the state. It does not maintain a stock of merchandise in this state and makes no deliveries of merchandise herein. That the manner in which the business is conducted in the state of Washington is generally as follows:

Salesmen are employed from the Chicago office and work under the direct supervision and control of the sales managers in Chicago and are required as part of their duties to spend a certain portion of their time in Chicago for the purpose of receiving direct personal instructions as to their duties relative to the line of machines sold to the trade and the method of selling; further to receive information with reference to construction and new types and kinds of washing machines which are to be offered. The employees or salesmen are given a sample machine, but no sales are made of such samples, they being used for purposes of display to prospective purchasers. Some of the salesmen rent sample rooms in business buildings and expenses of the rental and maintenance are paid by them and they are then reimbursed on an expense account by plaintiff. Some salesmen maintain no permanent sample rooms, but rent rooms in hotels or business buildings in the cities through which they travel. Each salesman is given a designated territory in which to solicit orders. The authority of each salesman is limited to exhibiting samples of the machines for which they solicit orders for the merchandise.

Salesmen endeavor to procure orders on prices and terms fixed by plaintiffs. If orders are obtained, they are transmitted to the office of plaintiff in Chicago, Illinois, for acceptance or rejection, and if orders are accepted by the plaintiff, the merchandise is shipped f.o.b. from shipping points in the state of Washington. The merchandise which is shipped into Washington is invoiced at the point of shipment and the invoices are payable at point of shipment, from which point collections are made. The salesmen have no power or authority to bind plaintiff to any contract or to finally conclude any transaction in its behalf, their duties and authority being limited strictly to the solicitation of orders. It is further alleged that the salesmen are under the direct control and direction of plaintiff and are not permitted to engage in any independently established trade, occupation, profession, or business of the same nature involved in their employment by plaintiff.

The second complaint was filed by the state of Washington, seeking to collect taxes for unemployment compensation insurance from plaintiff. John Doe Company's salesman in Seattle or Olympia is served with complaint and summons, and the company then moves to quash the service on the ground that it is not doing business in this state, and bases its motion upon the allegations of the complaint which are identical with the allegations contained in plaintiff's complaint against Smith Company except as to designation of individuals. Counsel, with the consent of the trial court, agree to argue the cases at the same time.

The trial court is faced with the answer to one question: What amounts to doing business in this state? The trial court then, in rendering its decision upon identical facts, must hold in the first case that plaintiff is not doing business in this state, and in the second case that the same individual is doing business in the state.

There are hundreds of cases written on the subject we have before us. However, it would serve no useful purpose to cite them in this opinion.

I shall content myself by calling attention to the cases cited by the majority. In so doing, I will pay particular attention to the factual situations as compared with those in this case. I shall do this for the reason that each case must necessarily depend on its own facts. St. Louis W.R. Co. of Texas v.Alexander, 227 U.S. 218, 57 L. Ed. 486, 33 S. Ct. 245.

In Green v. Chicago, B. Q.R. Co. (1907), 205 U.S. 530,51 L. Ed. 916, 27 S. Ct. 595, plaintiff brought an action for personal injuries in the Federal court for the eastern district of Pennsylvania. The action was against the Chicago, Burlington Quincy Railway Company, incorporated in Iowa. The sole question presented in that case was the sufficiency of process for jurisdiction in the Federal court. The following facts were present:

The eastern point of the railroad was at Chicago, from which place its tracks extended westward. The business for which it was incorporated was the carriage of freight and passengers and the construction, maintenance and operation of the railroad for that purpose. According to the business methods generally pursued, freight and passenger traffic was solicited in other parts of the country than those through which the defendant's tracks ran. For the purpose of conducting this business, defendant employed one Heller, supplied an office for him in Philadelphia, designated him as "district freight and passenger agent," and in many ways advertised these facts to the public. The business of the agent consisted of soliciting and procuring passengers and freight to be transported over the defendant's line. In conducting this business, the company employed several clerks and various traveling passenger and freight agents, who reported to and acted under the direction of the agent. The agent could not sell tickets or receive payment for transportation of freight. When a prospective passenger desired a ticket, he applied to the agent, who took the applicant's name and procured a ticket from one of the railroads running west from Philadelphia. The ticket was on a prepaid order, and the applicant, upon arriving in Chicago, had a right to receive from the defendant company a ticket over that road. At various times, the agent sold tickets to railroad employees who had tickets over intermediate lines. In some cases, to suit the convenience of shippers who had received bills of lading from an initial line for goods routed over the defendant's lines, the agent gave in exchange therefor bills of lading over defendant's line. The bills of lading recited that they should not be in force until the freight had been actually received by defendant.

Touching the validity of the service upon the agent, the court said it depended upon

". . . whether the corporation was doing business in that district in such a manner and to such an extent as to warrant the inference that through its agents it was present there."

The court further 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."

This case has never been overruled, though in some cases it has been distinguished because of a different factual situation existing in the other cases. The rule announced in the above case has been followed by the United States supreme court eight times, by the Federal courts one hundred twelve times, and by the state courts eighty-six times. This court has adhered to the ruling inArrow Lbr. Shingle Co. v. Union Pac. R. Co., supra.

Among the many cases upholding the rule just announced are:St. Louis S.W.R. Co. of Texas v. Alexander (1913),227 U.S. 218, 57 L. Ed. 486; International Harvester Co. v. Kentucky (1914), 234 U.S. 579, 58 L. Ed. 1479; Tyler Co. v. Ludlow-SaylorWire Co. (1915), 236 U.S. 723, 59 L. Ed. 808, 35 S. Ct. 458;People's Tobacco Co. v. American Tobacco Co. (1918),246 U.S. 79, 62 L. Ed. 587; Minnesota Commercial Men's Ass'n v. Benn (1923), 261 U.S. 140, 67 L. Ed. 573, 43 S. Ct. 293; and Davis v.Farmers Co-op. Equity Co. (1923), 262 U.S. 312, 67 L. Ed. 996,43 S. Ct. 556.

In the Harvester Co. case, referred to by the majority as the leading case upon the subject, the facts were stated as follows:

"`The Company's transactions hereafter with the people of Kentucky must be on a strictly interstate commerce basis. Travelers negotiating sales must not hereafter have any headquarters or place of business in that State, but may reside there.

"`Their authority must be limited to taking orders, and all orders must be taken subject to the approval of the general agent outside of the State, and all goods must be shipped from outside of the State after the orders have been approved. Travelers do not have authority to make a contract ofany kind in the State of Kentucky. They merely take orders to besubmitted to the general agent. If any one in Kentucky owes theCompany a debt, they may receive the money, or a check, or adraft for the same but they do not have any authority to make anyallowance or compromise any disputed claims. When a matter cannot be settled by payment of the amount due, the matter must be submitted to the general or collection agent, as the case may be, for adjustment, and he can give the order as to what allowance or what compromise may be accepted. All contracts of sale must be made f.o.b. from some point outside of Kentucky and the goods become the property of the purchaser when they are delivered to the carrier outside of the State. Notes for the purchase price may be taken and they may be made payable at any bank in Kentucky. All contracts of any and every kind made with the people of Kentucky must be made outside of that State, and they will be contracts governed by the laws of the various States in which we have general agencies handling interstate business with the people of Kentucky. For example, contracts made by the general agent at Parkersburg, W. Va., will be West Virginia contracts.'" (Italics mine.)

It will be noticed that I have italicized more of the facts than the majority. I have done this because I contend that the court took notice of all of the facts in the case, including "If any one in Kentucky owes the Company a debt, they [travelers] may receive the money, or a check, or a draft for the same."

On page 587 of the opinion, the court re-emphasized the facts by stating:

"In the case now under consideration there was something morethan mere solicitation. In response to the orders received, therewas a continuous course of shipment of machines into Kentucky.There was authority to receive payment in money, check or draft,and to take notes payable at banks in Kentucky." (Italics mine.)

The court upheld the Green case, but was of the opinion that it did not apply because the factual situation was entirely different.

The holding in the Harvester Co. case could not have been based entirely upon the continuous course or flow of business, because there was a continuous course of business conducted by the companies in both cases.

I call attention to the fact that the facts in the case at bar are like those in the Green case and entirely dissimilar to those present in the Harvester Co. case. The Green case is in point, and the latter case is not in point.

At this time, I desire to emphasize the point that this court has repudiated the continuous flow of business theory inBrandtjen Kluge v. Nanson, supra. In passing upon the question of the effect that the number of transactions had upon the question of doing business in this state, we stated:

"The appellant seeks to distinguish the case of Smith Co. v.Dickinson by saying that, in that case, there was only proof of `isolated transactions' in this state. However, the opinion in that case shows on its face that the transactions of the plaintiff were no more isolated than were the transactions in this case. Whether a foreign corporation is doing business inthis state does not depend upon the number of transactions thatit has, but upon the nature and character of the transactions." (Italics mine.)

The majority stress the holding in Tauza v. Susquehanna CoalCo., 220 N.Y. 259, 115 N.E. 915, in which it was held that a continuous flow of interstate business constituted doing business by a corporation in a state foreign to its place of organization. The writer of the opinion based his holding upon the HarvesterCo. case, but failed to note the factual situation present in that case, which was that, in addition to soliciting business, the Harvester Co. employees made collections for their company.

The supreme court of the United States, in the People'sTobacco Co. case, adhered to this idea by saying:

"The plaintiff in error relies upon International HarvesterCo. v. Kentucky, 234 U.S. 579, but in that case the facts disclosed that there was not only a continuous course of business in the solicitation of orders within the State, but there was also authority upon the part of such agents to receive payment in money, checks and drafts on behalf of the company, and to take notes payable and collectible at banks in Kentucky; these things, taken together, we held amounted to doing business within the State of Kentucky in such manner as to make the Harvester Company amenable to the process of the courts of that State."

The Federal courts in the following cases recognized that the holding in the International Harvester Co. case was grounded upon the fact that agents were doing business by making collections: Hilton v. Northwestern Expanded Metal Co.,16 F.2d 821; Cone v. New Britain Mach. Co., 20 F.2d 593;Buffalo Batt Felt Corp. v. Royal Mfg. Co., 27 F.2d 400;Davega, Inc. v. Lincoln Furniture Mfg. Co., 29 F.2d 164. The facts and holding in the last case are so persuasive that I quote from them at length.

"(1) The defendant secured orders in New York through Shlivek for about $200,000 of furniture per year;

"(2) The defendant sold in New York through Shlivek about $1,000 of furniture per year, which had been shipped there for samples; Shlivek collected some overdue accounts.

"(3) The president and sales manager have come here 10 or 11 times a year, and while here have discussed business matters with Shlivek, and have also at times adjusted accounts with customers.

"(4) The sales manager, C.C. Lincoln, Jr., while in New York, arranged the contract for radio cabinets on which this action is brought, and has also solicited here other orders in radio cabinets.

"This is a very close case. The Supreme Court has said that the test of whether a foreign corporation is amenable to process depends upon whether `it is doing business within the state in such manner and to such extent as to warrant the inference that it is present there.' Philadelphia Reading Ry. Co. v.McKibbin, 243 U.S. at page 265, 37 S. Ct. 280, 61 L. Ed. 710;People's Tobacco Co. v. American Tobacco Co., 246 U.S. at page 87, 38 S. Ct. 233, 62 L. Ed. 587, Ann. Cas. 1918C, 537; RosenbergCo. v. Curtis Brown Co., 260 U.S. at page 517, 43 S. Ct. 171,67 L. Ed. 372. This is a mere reiteration of the earlier statement by the same court that it `has decided each case of this character upon the facts brought before it and has laid down no all-embracing rule by which it may be determined what constitutes the doing of business by a foreign corporation in such manner as to subject it to a given jurisdiction.' St. Louis SouthwesternRy. Co. v. Alexander, 227 U.S. at page 227, 33 S. Ct. 248,57 L. Ed. 486.

"We are, in short, aided only by comparing those decisions in which the facts have been held to show the presence of corporations in foreign states, for the purpose of subjection to the jurisdiction, and the contrary. It has been definitely determined that the mere renting of an office and solicitation of business in the foreign state is insufficient to subject the corporation to service of process. W.S. Tyler Co. v.Ludlow-Saylor Wire Co., 236 U.S. 723, 35 S. Ct. 458,59 L. Ed. 808; People's Tobacco Co. v. American Tobacco Co., 246 U.S. 79,38 S. Ct. 233, 62 L. Ed. 587, Ann. Cas. 1918C, 537. Nor is the fact (if it be the fact, as is disputed) that the cause of action asserted here arose in New York material, unless the corporation was doing business in the sense that is required to subject it to jurisdiction. Rosenberg Co. v. Curtis Brown Co., 260 U.S. at page 518, 43 S. Ct. 170, 67 L. Ed. 372.

"The plaintiff says that much more was done here than the solicitation of orders, and especially relies on InternationalHarvester v. Kentucky, 234 U.S. 579, 34 S. Ct. 944,58 L. Ed. 1479. In that case the traveling salesmen of the harvester company did far more than to take orders to be accepted outside of the state. While it was generally provided, as in the present case, that `all contracts of sale must be made f.o.b. from some point outside of Kentucky, and the goods become the property of the purchaser when they are delivered to the carrier outside of the state,' the agents were authorized to receive money, checks, or drafts from any one within the state who might owe the company and take notes of customers payable therein.

"Here Shlivek [the agent] was paid nothing for collecting accounts. He received no salary, but was only paid a commission based on the contracts which originated through him, and not on the amount realized. He did not receive payment for the furniture shipped from Virginia, or even have a record of the accounts. He occasionally adjusted disputes, subject to the approval of the home office, and procured payment of overdue indebtedness. The president and vice president of the corporation came into New York a few times a year, and made, or sought to make, adjustments; but, if occasional adjustments of accounts within the state are to be regarded as sufficient to subject a corporation to the jurisdiction, no foreign corporation can solicit business in any volume without becoming liable to service of process. Such a result seems a sufficient answer to the suggestion that the adjustment of disputes with customers strengthens the plaintiff's case. The situation is different from that in the Harvester case, where the course of business involved not collection of overdue accounts, but regular payment in the foreign state."

I can have no quarrel with the following cases cited by the majority, because in each of them the foreign corporation employed collectors in the state where they were working: Lamontv. S.R. Moss Cigar Co., 218 Ill. App. 435; Hormel Co. v.Ackman, 117 Fla. 419, 158 So. 171; Wheeler v. Boyer FireApparatus Co., 63 N.D. 403, 248 N.W. 521; International ShoeCo. v. Lovejoy, 219 Iowa 204, 257 N.W. 576; Dobson v. MaytagSales Corp., 292 Mich. 107, 290 N.W. 346.

In fact, the Wheeler case was based upon the entire holding in the Harvester Co. case, from which we have quoted at length.

The case of American Asphalt Roof Corp. v. Shankland,205 Iowa 862, 219 N.W. 28, was based upon the Harvester Co. andTauza cases, and the writer of the opinion was guilty of the same sin of omission as the writer of the Tauza case in that he did not give full credit to all of the facts in the HarvesterCo. case.

In all of the other cases mentioned by the majority are to be found facts similar to those in the Harvester Co. case in that the foreign corporation allows its agents to make collections or to do some other item of local business.

This is especially true of West Pub. Co. v. Superior Court,20 Cal. 2d 720, 128 P.2d 777, in which it appears that the salesmen accepted an initial payment upon books sold and helped collect delinquent accounts.

An exception is Dahl v. Collette, 202 Minn. 544,279 N.W. 561, the writer of which case committed the same error charged in the Tauza case.

The case of Harbich v. Hamilton-Brown Shoe Co., 1 F. Supp. 63, was decided upon the factual situation shown by affidavit. One of the affidavits indicated the following facts:

"After selecting the line of shoes that I desire for my trade, the sales agent then quotes me prices on these shoes and, if the prices are such that I conclude that I can use the shoes profitably, I accept his offer as quoted and direct him to ship me the shoes agreed upon, telling him the sizes that I desire for my trade and he transmits this order to the Hamilton-Brown Shoe Company and it delivers me the shoes in accordance with the trade I have made with its drummer or salesman."

Frene v. Louisville Cement Co., 134 F.2d 511, is not in point because the facts are entirely unlike those in the instant case. To show their difference, I quote as follows:

"However, it is admitted that he [Lovewell, the agent] frequently visits jobs in course of construction where the defendant's products are being used. On these occasions he `would note the manner in which the products were being installed or used and if any difficulties were being experienced, he would make suggestions as to how to overcome them; he would also go over any complaints with regard to the materials' and report them to the home office. He had no authority finally to make adjustments or compromises. Lovewell called at the plaintiffs' house three or four times during the course of construction and `half a dozen times' at another job then being done in the District for the Government. In connection with the latter, he took specimens of the work to government agents `for testing purposes . . . to have approval by the Government.' During these visits he inspected the work as it progressed, saw that the Brixment was properly mixed, was being properly spread, was being used as the defendant intended, and pointed out the values of different brick textures and bondings when used with Brixment. According to the plaintiff Leo Frene, Lovewell carefully looked over the plans and specifications for his house, `visited the work regularly while in course of construction, and pointed out minor and major details to the brick-masons.' Frene also stated he knew `of many other jobs where said Lovewell has not alone sold the Brixment, but has participated in and exhibited his engineering ability and fitness in order to promote and advance the general scheme of the work.'

"Lovewell testified that his employer `told me to go on the job and see how they are progressing, how they like the material, how they are satisfied with it, and so forth' and `the idea is to use my best judgment in promoting satisfactory use of this material.' The record further shows that Lovewell regularly secured information for his employer from various governmental agencies and departments, including the Bureau of Standards, the Procurement Division of the Treasury Department and the Government Printing Office. He admitted this work called upon `his engineering ability and not his sales ability,' that it related in part to specific matters affecting his employer's work, such as failure of its materials to pass government specification with resulting throwback by the contractor, and that the defendant would write instructing him to check up on the matter. He was useful also in securing more general information."

The above opinion contains a lengthy dissertation on the question of doing business. However, the essay has nothing to do with the factual situation present in the case nor with the applicable law. It is only an argument in favor of the so-called "modern trend."

A careful reading of the cases cited by the majority as upholding its contentions reveals that in only two of them, theTauza and Dahl cases, do the facts coincide with those with which we are dealing.

It seems to me that the judgment should be reversed for two reasons: (1) that this court has at various times, upon facts alike to those present here, laid down a definite rule as to what constitutes doing business in this state, which rule is contrary to the one adopted by the majority; and (2) the cases from other jurisdictions have in fact announced rules contrary to those upon which the majority bases its holding.

MILLARD, J., concurs with SIMPSON, C.J.

February 6, 1945. Petition for rehearing denied.