Atchison, T. & S. F. Ry. Co. v. Weeks

248 F. 970, 1918 U.S. Dist. LEXIS 1218

• Court: District Court, W.D. Texas
• Decided: January 25, 1918
• Docket: No. 109
• Status: Published

Opinion

SMITH, District Judge

(after stating the facts as above).

[ 1 ] The action in the state court in which the judgment complained of was rendered, being for personal injury, was transitory in its nature, and maintainable in any court properly obtaining jurisdiction of the person of the defendant. Railway Co. v. Sowers, 213 U. S. 55, 29 Sup. Ct. 397, 53 L. Ed. 695; Dennick v. Railroad Co., 103 U. S. 11, 26 L. ; Stone v. United States, 167 U. S. 178, 17 Sup. Ct. 778, 42 L. Ed. 127.

[2] Therefore it is to be determined from the foregoing statement of the facts, whether or not the Atchison Company had by legal service been brought within the jurisdiction of the state court. If it had not, the injunction prayed for should be granted, for it requires no citation of authorities to maintain the proposition that a judgment rendered against a foreign corporation without notice to it as prescribed by law is not due process of law and is void, being in contravention of the Fourteenth Amendment of the Constitution of the United States.

[3] The statutes of Texas providing for service on foreign corporations are as follows (Revised Statutes of Texas):

Art. 1830, par. 28. Foreign, private or public corporations, joint-stock companies or associations, not incorporated by the laws oí this state, and doing business within this state, may be sued in any court within this state having juridsiction over the subject-matter, in any county where the cause of action, or a part thereof, accrued, or in any county where such company may have an agency or representative, or in the county in which the principal office of such company may be situated; or, when the defendant corporation has no agent or representative in the stale, then in the county where the plaintiffs, or either of them, reside. Acts of 1887, p. 131.

Art. 1861. In any suit against a foreign, private or public corporation, joint-stock company or association or acting corporation or association, citation or other process may be served on the president, vice president, secretary or treasurer, or general manager, or upon any local agent within this state, of such corporation, joint-stock company or association, or acting corporation or association. Acts of 1885, p. 79.

Art. 1862. Service may be had on foreign corporations, having agents in this state, in addition to the means, now provided by law, by serving citation upon any train conductor who is engaged in handling trains for two or more railway corporations, whether said railroad corporations, are foreign or domestic corporations, if said conductor handles trains over foreign or domestic corporations’ track across the* state line of Texas, and on the track of a domestic railway corporation within the state of Texas, or upon any agent who has an office in Texas, and who sells tickets or makes contracts for the transportation of passengers or property over any line of railway or part thereof, or steamship or steamboat of any such foreign corporation or company. For the purpose of ob'tai ing service of citation on foreign railway corporations, conductors who are engaged in handling trains, and agents engaged in the sale of tickets or the making of contracts for the transportation of property, as described in this £ rtiele, are hereby designated as agents of said foreign corporations or companies upon whom citation may be served. Acts 1905, p. 30.

It is well settled that foreign corporations can be served with process within the state only when doing business therein, and that such service must be upon an agent who represents the corporation in such business. St. Clair v. Cox, 106 U. S. 350, 1 Sup. Ct. 354, 27 L. Ed. 222; Goldey v. Morning News, 156 U. S. 518, 15 Sup. Ct. 559, 39 L. Ed. 517; Conley v. Mathieson Alkali Works, 190 U. S. 406, 23 Sup. Ct. 728, 47 L. Ed. 1113; Peterson v. Chicago, Rock Island & Pacific Railway Company, 205 U. S. 364, 27 Sup. Ct. 513, 51 L. Ed. 841.

Therefore the question of service in tire state court may be divided into three propositions:

(1) Were the persons served such officers or agents of the Atchison Company as the statutes of the state provide may be served?

(2) Was the Atchison Company at the time of service doing business in the state of Texas?

(3) If so did the persons served represent said Atchison Company in such business?

(4) First taking up the persons served at El Paso, it seems clear from the evidence that at the time of the service of citation upon them neither W. R. Brown nor R. E. Goering was in the employ of the Atchison Company or the officers or agents of said company in any capacity.

R. F. Gifford was in the employ of the Atchison Company as conductor, but performed no service for it in the state of Texas. He was also in the employ of the Rio Grande Company as conductor, and his train was operated over both lines, but on crossing the statG line into New Mexico he became the agent of the Atchison Company, and in crossing the state line into Texas he ceased to be the agent of that company and became the agent of the Rio Grande Company. As an essential to the validity of the service upon him it was necessary that he should at the time of service have been the representative of the Atchison Company in business then being done by it in Texas. This essential was lacking. Peterson v. Chicago, Rock Island & Pacific Railway Company, 205 U. S. 364, 27 Sup. Ct. 513, 51 L. Ed. 841.

[5-7J It is contended by counsel for defendants that the Rio Grande Company was owned and operated by the Atchison Company; that by reason thereof the Rio Grande Company and its agents were the agents of the Atchison Company; that through such agents the Atchison Company was doing business in Texas; and that the Rio Grande Company was a mere mask and dummy through which the Atchison Company transacted its business in Texas. Under the evidence and authorities I do not think this contention can be maintained. No question is raised as to the validity of the Rio Grande Company:

Article 6406 of the Revised Statutes of Texas forbids the acquisition or ownership of any railroad within the state by any corporation except one chartered under the laws of the state; and section 6, article 10, of the Constitution of Texas forbids the consolidation of any railroad organized under the laws of the state, with any railroad organized under the laws of any other state or of the United States. Hence the organization of the Rio Grande Company and the operation of its line by it was in harmony with the policy of the state of Texas in such matters and consistent with the Constitution and the laws of the state. And if, as contended, the Atchison Company had in fact become the real owner of the Rio Grande Company’s railroad and was operating it as such owner, such ownership and operation was unlawful. However, if as a matter of fact the Atchison Company was the real owner and operator of the Rio' Grande Company’s railroad, whether lawfully or unlawfully it should be held that such fact constituted doing business in Texas and the service in the state court should be held to1 be valid. Cases may be found holding that where one corporation uses another corporation as a “mask” or a “dummy” to defraud, the person defrauded may sue the. former corporation for any damages he may thereby suffer.

It is also true that one corporation may só use 'another corporation as to bring into existence equities in favor of a third party upon which such third party may maintain an action against the former. But such is not the case here. The question in the state court was, and the question here is, purely and simply one of jurisdiction, and in no sense did it enter into the merits of the case or affect the right of said Kelso to recover in a court having jurisdiction. His cause of action arose in the state of California, and the courts of that state were open to him, and of course it is to be presumed that he could secure in those courts every right to which he was entitled. And, as already stated, he also had the right to bring his suit in any court having jurisdiction of the subject-matter, and which could by proper service secure jurisdiction over the person of the Atchison Company. He chose to bring his suit in a Texas court. He does not and cannot claim any. rights accruing to him from fraud or deception or any other conditions producing equities in his favor arising from any alleged connection between the Atchison'and Rio Grande Companies. The question is, Were the actual relations of these two companies such as to justify the holding that the business of the Rio Grande Company in Texas was in truth and in fact the business of the Atchison Company? It is clear they were not.

The Rio Grande Company was a separate legal entity, possessing all the legal attributes of a valid railroad corporation. It had its own officers and board of directors, who had and exercised the immediate and exclusive supervision and control and management of its property and business. It had its own employés, its own treasury, and its own rules and regulations. It kept its own accounts, and had no relations with the Atchison Company inconsistent with its own management and proprietary interest. And there is no evidence that the Atchison Company owned any proprietary interest in the property of the Rio Grande Company or exercised, or attempted to exercise, any control or management over its business.

It is true that a large majority and possibly all the stock of the Rio Grande Company was owned by the Atchison Company, but this fact does not even tend to’ show that the-latter owned or controlled the property of the latter or gave it the right to control its business. The property of a corporation is owned by the corporate entity, and not by the owner or owners of its stock. This is true whether the stock is owned by two or more persons or only one, or whether it is owned by a natural person or by a corporation engaged in the same business. Cook on Corporations, § 709, and authorities therein cited; Peterson v. Chicago, Rock Island & Pacific Railway Company, 205 U. S. 364, 27 Sup. Ct. 513, 51 L. Ed. 841; Pullman Palace Car Co. v. Missouri Pacific Company, 115 U. S. 587, 6 Sup. Ct. 194, 29 L. Ed. 499; Conley v. Mathieson Alkali Works, 190 U. S. 406, 23 Sup. Ct. 728, 47 L. Ed. 1113.

The fact that the two corporations had the same president and had common agents and employés to a certain extent does not alter the case as the evidence showed they were paid in proportion to the business done for each company.

Therefore it must be held that at the time of service in the state court the Atchison Company was not doing business in El Paso county, and that neither the service upon W. R. .Brown, nor upon R. E. Goer-iug, nor upon L. F. Gifford was sufficient service upon or secured jurisdiction over said company.

[8, 9] The only other person upon whom service in the state court was had was R. J. Parker. He was located at Amarillo, Potter county, Tex., and was a “general manager” of the Atchison Company, one of the agents expressly designated by the statutes of the state upon whom service of a foreign corporation might be made. Therefore the only question as to him is whether or not at the time of service he was the representative of the Atchison Company in relation to any business it was then doing in Texas. There is no dispute as to the facts regarding this question. Said Parker was located at Amarillo, where he kept an office at which he performed his duties as the general manager of said company. The lines of said company’s railway under his management were extensive, and were in the states of Oklahoma, Kansas, Colorado, and New Mexico, but did not extend into Texas. His duties in relation to said lines were to direct the operation of the trains and service upon said lines and to look after the maintenance of the company’s properties upon said lines and he performs his duties from Amarillo by means of telegrams and letters. There are also at Amarillo other employes of said Atchison Company, to wit, a general superintendent, superintendent, trainmaster, general foreman, chief engineer, and mechanical superintendent, and they, under the directions of said Parker, assist him in the performance of his duties. Upon this state of facts I hold that said company was doing business in Texas, and that service upon said Parker was proper, and brought said company within the jurisdiction of the state court in El Paso, and, the company not having objected to the venue, said court, properly rendered judgment by default. The question whether a foreign corporation is doing business in a given state is to he determined from the facts of each particular case, and not from any fixed definite rules. The service performed for the Atchison Company in Texas was an essential part of its business, for the protection of which the company could invoke the laws and the courts of the state. It was in no sense spasmodic or temporary, but permanent and continuous, in its nature, such as to indicate the presence of the corporation itself in the state.

There are many decisions- — too numerous to be cited here — in which given statements of fact are discussed and held to show, or not to show, the doing of business by a corporation in a state, but I believe a careful examination of them with proper deductions will support the conclusion I have reached in this case upon- this point. One case I consider specially strong in support of my conclusion is Washington, Virginia Railway Co. v. Real Estate Trust Co., 238 U. S. 185, 35 Sup. Ct 818, 59 L. Ed. 1262.

[10] I do not agree with the contention of complainant that the service upon said Parker was invalid, because the cause of action upon which the suit was brought in the state court arose outside of the state of Texas. The cases of Old Wayne Life Association v. McDonough, 204 U. S. 22, 27 Cup. Ct. 236, 51 L. Ed. 345, and Simon v. Southern Railway Co., 236 U. S. 115, 35 Sup. Ct. 255, 59 L. Ed. 492, cited in favor of this proposition, are not in point. In those cases “substituted” service was had, and in neither case was service had upon an agent of the corporation, and therefore, if good at all, it could be good only in causes of action arising out of the, business of the corporation in the state in which the suit was brought. It is not believed that any decision of a kderal court can be found holding that where service was had upon the agent of a foreign corporation doing business within the state where suit is brought, such service is not good because the cause of action did not arise in that state. The statutes of-the various states providing for service upon foreign corporations seem to be based upon the theoi y that an agent doing the business of a corporation in a state brings the corporation itself into the state, and that it may fairly be presumed ihat such agent would notify the governing body of the corporation of any service of citation upon him. No such presumption may be indulged in cases where there is substituted service upon an official of the state and not upon an agent of the corporation.

In view of the foregoing opinion I hold that the judgment in the state court was rendered upon valid service, and is itself valid. Therefore the injunction prayed for should be denied, and judgment is rendered accordingly.