Coons v. American Honda Motor Co.

463 A.2d 921, 94 N.J. 307, 1983 N.J. LEXIS 2742

• Court: Supreme Court of New Jersey
• Decided: August 3, 1983
• Status: Published

Opinions

The opinion of the Court was delivered by

CLIFFORD, J.

This appeal addresses the interpretation and validity, in the context of the Commerce Clause, of N.J.S.A. 2A:14-22, which tolls the running of the applicable statute of limitations in actions against foreign corporations that are not “represented” in this state. Before reaching the constitutional question we must determine how a foreign corporation may be “represented” in New Jersey in order to avoid the tolling provision. We hold that a foreign corporation must obtain a certificate to do business in this state, under N.J.S.A. 2A:13-4, in order to achieve “representation” in the context of N.J.S.A. 2A: 14-22. Further, we hold that N.J.S.A. 2A:14-22 unconstitutionally burdens interstate commerce by requiring a foreign corporation engaged exclusively in interstate commerce to obtain a certificate to do business in order to gain the advantage of the statute of limitations.

I

Plaintiff commenced this suit in 1978 against defendant Honda Motor Co., Ltd. (Honda) and its wholly-owned American distributor, American Honda Motor Co., Inc. (American Honda). The action seeks damages for personal injuries and consequential losses occasioned by an accident on October 30, 1974, when plaintiff was thrown from a motorcycle manufactured by Honda and distributed by American Honda. At all relevant times American Honda was a California corporation that maintained facilities in New Jersey. In contrast, Honda is a Japanese corporation that has never been authorized to do business in this or any other state and carries on no activities here or elsewhere in the United States.

Because plaintiff had started suit four years after the accident, both Honda and American Honda raised as a defense the two-year statute of limitations for personal injury actions, N.J.S.A. 2A:14-1, and moved for summary judgment. The trial court granted American Honda’s motion but denied that of Honda, ruling that the two-year statute of limitations had been tolled by N.J.S.A. 2A: 14-22 because Honda was a foreign corporation that was not “represented” in New Jersey by a person upon whom process could be served.¹ In addition, the trial court held that there were sufficient bases for the exercise of in personam jurisdiction against Honda and that the tolling statute did not violate the equal protection clause of the federal Constitution.

The Appellate Division affirmed the judgment of the trial court. Coons v. Honda Motor Co., Ltd., of Japan, 176 N.J.Super. 575 (1980). After this Court denied cross-motions for leave to appeal, the parties sought review by the Supreme Court, which consented to hear only Honda’s appeal. That Court vacated the judgment below and remanded to the Appellate Division. Honda Motor Co., Ltd. v. Coons, 455 U.S. 996, 102 S.Ct. 1625, 71 L.Ed.2d 857 (1982). Thereafter we certified the cause on our own motion. R. 2:12-1.

That this appeal may be set in its proper context we digress briefly from this chronological recitation to focus on the action of the Supreme Court. The purpose of that Court’s remand was to afford the New Jersey court opportunity for reconsideration in light of the Supreme Court’s decision in G.D. Searle Co. v. Cohn, 455 U.S. 404, 102 S.Ct. 1137, 71 L.Ed.2d 250 (1982), a case raising precisely the same issue as is presented here. In Searle, the Supreme Court held that N.J.S.A. 2A:14-22 survived equal protection and due process challenges. The Court did not resolve the commerce clause challenge, however, stating that the issue was “clouded by an ambiguity in state law” concerning the requirement of representation under the statute.² Id. at 413, 102 S.Ct. at 1144, 71 L.Ed.2d at 259. Justice Blackmun wrote that the ambiguity was created by the following language in a footnote in this Court’s opinion in Velmohos v. Maren Eng’g Corp., 83 N.J. 282 (1980), in which we held the tolling statute constitutional in the face of equal protection and due process attacks: “We note that whatever hardship on foreign corporations might be caused by continued exposure to suit can be easily eliminated by the designation of an agent for service of process within the State.” 83 N.J. at 293 n. 10. Justice Powell dissented from so much of Searle as discussed the Commerce Clause. He found the Velmohos footnote unambiguous, stating that it was “simply a neutral observation that says nothing as to the means of designation of an agent under New Jersey law.” 455 U.S. at 416,102 S.Ct. at 1145, 71 L.Ed.2d at 261 (emphasis in original).

However unfortunate our failure to articulate clearly our position in the Velmohos footnote, our intention was, as accurately perceived by Justice Powell, to make no more than a “neutral observation.” At least that was our intention as currently recalled by three members who vote with this opinion and who also sat- in the Velmohos case, and as appears to the other majority member to have been the intention of the Velmohos Court. That we were not entirely successful in expressing that intention is now all too painfully apparent. Although it may be “clear” to our dissenting colleagues what it was that the Velmohos footnote was meant to mean, it should suffice to point out that it was not at all clear to a majority of the Supreme Court, to say nothing of the fact .that five of us who participated in Velmohos cannot now agree upon what it was we were saying in footnote 10. And what we said there takes on considerable significance in this case.

II

We are called upon to examine the suggested forms of representation that would permit a foreign corporation to avoid the tolling statute and avail itself of the statute of limitations. The parties discuss three procedures by which a foreign corporation can gain representation: (1) obtaining a certificate of authority to transact business in the state; (2) merely designating an agent without filing notice thereof with a government agency or official; (3) filing with the Secretary of State a notice designating a representative to accept service of process.

It is indisputable that a foreign corporation can gain the benefit of the statute of limitations by receiving a certificate of authority to do business under N.J.S.A. 14A:13-4.³ The issue is whether another statutorily-authorized procedure exists that would establish representation for the limited purpose of avoiding the tolling effect of N.J.S.A. 2A:14-22.

Plaintiff looks to the language of R. 4:4-4(c)(l) as support for its contention that foreign corporations need only appoint an agent for service of process in New Jersey, rather than register to do business here. That Rule substantially tracks the language of the former statutes, R.S. 2:26-43 to -44, which were amended in 1948 to provide for service on corporations.⁴ Notwithstanding these statutory amendments, when the legislature in 1949 amended the tolling statute to provide the exemption for corporations represented in the state, it chose not to incorporate the concept of “long-arm” jurisdiction that had been sanctioned by the Supreme Court in International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed.2d 95 (1945). “Long-arm” service over corporations was not adopted until 1958, by then R.R. 4:4-4(d) (now R. 4:4-4(c)(l)). See discussion infra at 315. Even a cursory examination of the Rule discloses that it does not purport to serve the purpose of announcing where an identified agent can be found. It in no wise discusses the designation of an agent. An uninformed plaintiff would be faced with the virtually impossible task of locating the unknown appointee and would, in effect, lose the protection that the tolling provision is designed to afford. In addition, the Rule does not provide an independent basis for the designation of an agent to accept service — it merely directs service on a person so designated.

Plaintiff argues that a mechanism that provides notice can be found in N.J.S.A. 14A: 1-6(4), which reads in relevant part as follows: “The Secretary of State shall record all documents, excepting annual reports, which relate to or in any way affect corporations, and which are required or permitted by law to be filed in his office.” The Secretary of State previously held the view that unless a foreign corporation has qualified to do business in the state, it would be unable to designate a registered agent for service of process.⁵ Recently, however, the ' Secretary has acceded to the Attorney General’s contrary position that in accordance with N.J.S.A. 14A:1-6(4) and N.J.S.A. 2A:14-22, a foreign corporation may file with the Secretary of State a notice designating a representative in New Jersey as its agent to accept service of process.

Implicit in the Attorney General’s interpretation is the notion that the tolling statute authorizes foreign corporations to designate agents without registering to do business in the state. Without such authorization foreign corporations would not be able to file notice with the Secretary under N.J.S.A. 14A:1-6(4) because that statute directs the Secretary to record documents that are filed as required or permitted by law. It does not independently authorize the filing of any documents. Inasmuch as there is nothing in N.J.S.A. 2A:14-22 or any other section or rule that authorizes the designation of an agent without registering to do business in the state, we conclude that a foreign corporation cannot file with the Secretary of State notice designating a representative as its agent to accept service of process under N.J.S.A. 14A:1-6(4).

Plaintiff also contends that the legislative history to the predecessor of N.J.S.A. 2A:14-22 supports the position that a foreign corporation need not register to do business in the state in order to designate an agent for service of process. As indicated supra at 313-14 in 1949 the tolling statute was amended and for the first time dealt specifically with a corporate defendant. The amendment excepted from the statute domestic corporations and those foreign corporations maintaining representatives in New Jersey. See Velmohos v. Maren Eng’g Corp., supra, 83 N.J. at 289. The statement accompanying the amendment reads as follows:

Foreign corporations licensed to do business in New Jersey are now deprived by judicial construction of the benefit of the statute of limitations. The purpose of this bill is to correct that situation. New York State found it necessary to make a similar change in its law in view of recent court decisions. [Statement Accompanying Assembly No. 467 (1949) (quoted in Velmohos, 83 N.J. at 290).]

Plaintiff focuses on the language alluding to “a similar change” in New York law. That change had been interpreted to except from the tolling provision those foreign corporations that had appointed agents for service of process but had not registered to do business in New York.

Although plaintiff asserts that reference to the New York amendment evidences intent to allow a foreign corporation to appoint an agent for service of process without registering to do business in New Jersey, it is abundantly clear to us that New Jersey’s statute was meant to be “similar” to New York’s, not “identical.” Moreover, we give great weight to the clear expression of legislative intent found in the first two sentences of the statement accompanying the amendment — the purpose was to provide foreign corporations licensed to do business in New Jersey the benefit of the statute of limitations — in concluding, as did Justice Powell in his separate opinion in Searle, that “foreign corporations may designate an agent for service of process only by obtaining a certificate of authority to do business.” 455 U.S. at 419, 102 S.Ct. at 1147, 71 L.Ed.2d at 262-63.⁶

Ill

Having established the means by which a foreign corporation represents itself in order to gain the benefit of the statute of limitations, we now address the Commerce Clause issue: is interstate commerce unconstitutionally burdened by the requirement that in order to avoid the effect of N.J.S.A. 2A:14-22, a foreign corporation must qualify to do business in New Jersey?

As Professor Tribe discusses, in most cases “[s]tate regulation affecting interstate commerce will be upheld if (a) the regulation is rationally related to a legitimate state end, and (b) the

regulatory burden imposed on interstate commerce, and any discrimination against it, are outweighed by the state interest in enforcing the regulation.” L. Tribe, American Constitutional Law § 6-5 at 326 (1978 ed.). See Pike v. Bruce Church, 397 U.S. 137, 90 S.Ct. 844, 25 L.Ed.2d 174 (1980); South Carolina State Highway Dept. v. Barwell Bros., 303 U.S. 177, 58 S.Ct. 510, 82 L.Ed. 734 (1938). Notwithstanding that general rule, the Supreme Court has invalidated state statutes, without balancing the competing interests, as per se violations of the Commerce Clause in the area of licensing requirements imposed on foreign corporations involved in interstate commerce. In a series of decisions the Supreme Court has held that a state cannot discriminate against a foreign corporation engaged in interstate commerce merely because it has failed to qualify to do business in that state. See Allenberg Cotton Co. v. Pittman, 419 U.S. 20, 95 S.Ct. 260, 42 L.Ed.2d 195 (1974); Dahnke-Walker Milling Co. v. Bondurant, 257 U.S. 282, 42 S.Ct. 106, 66 L.Ed. 239 (1921); Sioux Remedy Co. v. Cope, 235 U.S. 197, 35 S.Ct. 57, 59 L.Ed. 193 (1914). Because the statute involved in this case similarly limits a right to those corporations that are licensed regardless of the nature of their business (interstate or intrastate), we consider it in the light of those precedents.⁷

The Allenberg line of cases involved statutes that conditioned the right to sue in state court on a license requirement, regardless of the nature of the business of the foreign corporation. The challengers in each case had attempted to sue in state courts to enforce contracts for the interstate sale of goods. In striking down a Kentucky statute that prevented such a suit, the Dahnke-Walker Court held that

[a] corporation of one state may go into another, without obtaining the leave or license of the latter, for all the legitimate purposes of such commerce; and any statute of the latter state which obstructs or lays a burden on the exercise of this privilege is void under the commerce clause. [257 U.S. at 291, 42 S.Ct. at 109, 66 L.Ed. at 244.]

The Supreme Court spoke in broad terms, declining to limit its decision to the “right to sue” context. Instead, the Court focused on the importance of leaving interstate commerce unfettered. As applied to this case that principle gives rise to the question whether the denial of the statute of limitations defense to unlicensed foreign corporations impermissibly — even though indirectly — forces those corporations to obtain a license to do business in the state.

There is no fundamental right to a statute of limitations defense. In holding the tolling provision constitutional under the less rigorous equal protection standard, the Searle court stated:

[Statutes of limitation] represent a public policy about the privilege to litigate. Their shelter has never been regarded as what now is called a “fundamental” right or what used to be called a “natural” right of the individual. He may, of course, have the protection of the policy while it exists, but the history of pleas of limitation shows them to be good only by legislative grace and to be subject to a relatively large degree of legislative control. [455 U.S. at 408, 102 S.Ct. at 1141, 71 L.Ed.2d at 256, quoting Chase Sec. Corp. v. Donaldson, 325 U.S. 304, 314, 65 S.Ct. 1137,1142, 89 L.Ed. 1628,1635-36 (1948) (brackets in original).]

That legislative control, however broad, must be subject to constitutional limits. The legislature cannot accomplish indirectly that which it could not do directly; it cannot, in effect, force licensure on foreign corporations dealing exclusively in interstate commerce by otherwise preventing them from gaining the benefit of the statute of limitations defense. The burden thus imposed on interstate commerce is unconstitutional.

The tolling statute, N.J.S.A. 2A:14-22, is a forced-licensure provision. Therefore, it must be struck down as a violation of the Commerce Clause. This decision should be given retrospective effect, consistent with the general rule applied in civil cases that a new ruling shall apply to all matters that have not reached final judgment. See Fox v. Snow, 6 N.J. 12, 14 (1950).

Reversed. The cause is remanded to the Law Division for entry of judgment for defendant Honda.

1 N.J.S.A. 2A: 14-22 provides in relevant part:

If any person against whom there is any of the causes of action specified * * * is not a resident of this state when such cause of action accrues, or removes from this state after the accrual thereof and before the expiration of the times limited in said sections, or if any corporation or corporate surety not organized under the laws of this state, against whom there is such a cause of action, is not represented in this state by any person or officer upon whom summons or other original process may be served, when such cause of action accrues or at any time before the expiration of the times so limited, the time or times during which such person or surety is not residing within this state or such corporation or corporate surety is not so represented within this state shall not be computed as part of the periods of time within which such an action is required to be commenced by the section. The person entitled to any such action may commence the same after the accrual of the cause therefor, within the period of time limited therefor by said section, exclusive of such time or times or nonresidence or nonrepresentation (emphasis added).

2 The Supreme Court remanded Searle to the Court of Appeals for the Third Circuit to consider the possible commerce clause violation. That court remanded the matter to the District Court for the District of New Jersey, which subsequently adjourned the matter pending a binding state court interpretation of the “representation” requirement.

3 A foreign corporation that procures such a certificate is then generally amenable to suit in New Jersey, see N.J.S.A. 14A:13-4(l)(d); is required to maintain a registered agent and office, N.J.S.A. 14A:4-1, and to notify the Secretary of State of any changes thereof, N.J.S.A. 14A:4-3; must file annual reports, N.J.S.A. 14A:4-5; and is subject to an annual franchise tax, N.J.S.A. 54:10A-2.

4 Under R. 4:4-4(c)(l), service shall be made as follows:

Upon a domestic or foreign corporation, by serving, in the [general] manner * * *, either an officer, director, trustee, or managing or general agent; or any person authorized by appointment or by law to receive service of process on behalf of the corporation; or the person at the registered office of the corporation in charge thereof. If service cannot be made upon any of the foregoing, then it may be made upon the person at the principal place of business of the corporation in this State in charge thereof, or if there is no place of business in this State, then upon any servant of the corporation within this State acting in the discharge of his duties. If it appears by affidavit of plaintiffs attorney or of any person having knowledge of the facts that after diligent inquiry and effort personal service cannot be made upon any of the foregoing and if the corporation is a foreign corporation, then, consistent with due process of law, service may be made by mailing, by registered or certified mail, return receipt requested, a copy of the summons and complaint to a registered agent for service, or to its principal place of business, or to its registered office.

5 Counsel for Searle obtained — and filed with the Supreme Court — an opinion from the New Jersey Secretary of State determining, in effect, that the registration statute, N.J.S.A. 14A:14-1, was the only means of designating a registered agent for service of process. The opinion reads:

In response to your recent letter, please be advised that it is the view of the Department of State that unless a foreign corporation has qualified to do business in New Jersey, they are unable to designate a registered agent for service of process.

Letter from Frank Capece, Executive Assistant to the New Jersey Secretary of State, to James H. Freis, Esq., (Oct. 22, 1981), cited in Searle, 455 U.S. at 417, 102 S.Ct. at 1146, 71 L.Ed 2d at 261.

6 Significantly, the dissent simply ignores the critical specific language of the statement accompanying the 1949 amendment. As the dissent correctly observes, the purpose of the amendment was to create a situation of “even footing,” post at 329; however, that equality was to be enjoyed by domestic corporations and foreign corporations licensed to do business in the state, not those with, in the words of the dissent, “agents for process in New Jersey.” Id. Because our interpretation is perfectly consistent with the unambiguous declaration of the legislature, we fail to perceive the “irony” that troubles our dissenting colleagues. Id.

7 Although not necessary to our decision, we note that N.J.S.A. 2A: 14-22 would violate the commerce clause under a balancing analysis. The burdens attached to the requirement of obtaining certification to do business in order to avoid the tolling of the statute of limitations, see note 3 supra, at 313, outweigh the benefits that flow from that tolling provision, see Searle, 455 U.S. at 410, 102 S.Ct. at 1142, 71 L.Ed.2d at 257. Because of our resolution of the “representation” issue, we need not address the dissent’s balancing of the benefits against the burden of appointing an agent for service of process rather than obtaining a certificate to do business. See post at 312.