Rarden v. R. D. Baker Co.

271 N.W. 712, 279 Mich. 145, 1937 Mich. LEXIS 725

• Court: Michigan Supreme Court
• Decided: March 1, 1937
• Docket: Docket No. 74, Calendar No. 39,306.
• Status: Published

Opinion

Bttteel, J.

In 1930 defendant, a Michigan corporation, on securing a road-building contract in the State of Indiana, obtained a certificate of admission to do business in that State and, in accordance with the provisions of the Indiana corporation law, appointed one Jacob Ulrey as its resident agent. Chapter 215, § 61, of the Acts of Indiana Assembly for the year 1929 (6 Burns Indiana Stat. [1933], § 25-306), provides as follows:

“Each foreign corporation admitted to do business in this State, shall keep constantly on file in the office of the secretary of State an affidavit of its president or a vice-president and its secretary or an assistant secretary, setting forth the location of its principal business office in this State, and the name of some person who may be found at such office as its agent or representative on whom service of legal process may be had in all suits and actions that may be commenced against it. For the purposes of this section the application for admission filed by a foreign corporation shall be deemed to be such an affidavit. As often as such corporation shall change the location of its principal business office in this State or change its agent for service of legal process or such agent shall be removed by death, resignation or incapacity, a new affidavit shall be immediately filed by such officers with the secretary of State. ’ ’

Plaintiffs, trucking contractors in Indiana, contracted to haul materials for defendant on the road-building job until its completion. Defendant dismissed plaintiffs on July 4, 1930, prior to such completion. Defendant claims that thereafter plaintiffs instituted suit against it in the State of Indiana for alleged breach of contract and that a settlement was made between the parties and the suit dismissed. Plaintiffs deny that there was any suit or settlement of the subject matter that was involved later in a suit brought by plaintiffs against defendant wherein plaintiffs recovered the judgment in question in the instant case.

According to the testimony of Mr. Baker, the president of the defendant company, a Mr. Johnson, succeeded Mr. Ulrey in August, 1930, in looking after the Jndiana contract. Johnson’s name was never registered in the office of the secretary of State nor a proper affidavit filed notifying the secretary of State that he ivas to be its resident agent. The corporation no longer maintained a resident agent in the manner required by the Indiana law. In July, 1931, plaintiffs began suit against defendant in the circuit court for Greene county in Indiana, and a summons was duly issued. Service of process could not be had on a resident agent of defendant' in Indiana, as it no longer had one, and an alias summons was issued. It was served upon the secretary of State in accordance with the following statutes which were in force at the time the suit was begun:

Chapter 215, § 68, of the Acts of Indiana Assembly 1929, approved March 16, 1929 (6 Burns’ Indiana Stat. [1933], §25-313), reads as follows:

“Service of Process. Whenever any foreign corporation admitted to transact business in this State shall fail to appoint and maintain in this State an agent upon whom service of legal process may be had, or whenever the certificate of admission of any foreign corporation shall be withdrawn or revoked, then and in every such case the secretary of State shall be irrevocably authorized as the agent or representative of such foreign corporation to accept service of legal process in any suit or proceeding that may be commenced against it for or on account of any obligation or liability growing out of any business done by it in this State. In every such case where service of process is had upon the secretary of State pursuant to this section, he shall forward a copy of the process by registered mail to the corporation at its principal office as shown by the records of his office.

“Any service so had on the secretary of State shall be returnable in not less than thirty days and shall be of the same legal force and validity as if served on the corporation itself.”

Chapter.221, § 1, of the Acts of the Indiana Assembly 1929, approved March 16[l929 (2 Burns’ Indiana'Stat. [1933], §2-804), provides:

“ (f) Process upon a foreign corporation authorized to do business in this State, may be served upon its agent in this State appointed to receive service: Provided, however, That if the persons mentioned in subsections (a), (b), (c), and (f), hereunder cannot be found for service, process may be served upon the secretary of State of the State of Indiana and such secretary of State shall mail such process to the post-office address of the corporation as shown on its last annual report to the secretary of State, and such service shall be sufficient to give the court of issue jurisdiction of the corporation party.”

These two statutes were passed at the same session of the legislature and approved on the same day. According to the Indiana law, they are to be construed together and are cumulative. Princeton Coal Mining Co. v. Lawrence, 176 Ind. 469 (95 N. E. 423, 96 N. E. 387); Lincoln School Twp. v. American School Furniture Co., 31 Ind. App. 405 (68 N. E. 301).

It is unnecessary for us to decide whether the secretary of State of Indiana was required to send a copy of the process to defendant corporation by registered mail or only by regular mail, although the clerk in the office of the secretary of State testified that she sent a copy of the process to defendant by • ordinary mail, at its correct address in Michigan, accompanied by a letter written by her. The court records also indicate that a second alias summons was issued, possibly owing to some confusion not fully explained. Defendant claims it received neither the first nor the second alias summons. Its default was entered on its failure to appear in response to the first alias summons and judgment was taken after default. The testimony showed that written notes in the record, kept by the judge who heard the case, were stricken out and it would inferentially appear that the notes referred to the issuance of the second alias summons. The judgment was taken on the first alias summons on May 10, 1932, two days prior to the service on the secretary of State of the second alias. The judgment was for the amount of $1,885.66, and costs.

Plaintiffs then brought suit in the circuit court for Oakland county in this State to recover on the judgment thus previously obtained in Indiana. The case was heard without a jury. The trial judge found that the secretary of State’s office of Indiana never notified the defendant company of the impending litigation as required by the Indiana statutes and that this was a jurisdictional defect rendering the judgment void.

The contention that the Indiana judgment is subject to collateral attack on the ground that it was procured through fraud is not supported by the record. Some testimony would indicate that an attorney who had represented plaintiffs in some former claim or litigation against defendant, was guilty of bad faith in that he turned over the case in which the judgment was secured to a lawyer living in a city some 60 miles away from the seat of the court, and after the litigation was begun, he never mentioned it to defendant’s former counsel although they' both lived nearby in a small city and saw each other very frequently. While this would show a lack of professional courtesy and savors of sharp practice, it would not be sufficient proof that the judgment was fraudulently obtained.

An attempt was made to show a prior settlement of the suit in' question. A letter written by defendant, however, on April 29, 1931, long after the alleged settlement, shows that there .still éxisted a .controversy between the.parties. Plaintiffs unsuccessfully objected to the Tack of proper evidence showing that there had been a previous suit or settlement and claim that proof of such facts should have been shown by records and written documents in ex istence. An alleged settlement prior to the judgment would have been a defense on the merits in the Indiana court, but is not a proper basis for collaterally attacking the judgment when suit is brought upon it in another State. In Hazel v. Jacobs, 78 N. J. Law, 459 (75 Atl. 903, 27 L. R. A. [N. S.] 1066, 20 Ann. Cas. 260), the court held:

“The defense of payment, therefore, by a transaction occurring before the entry of the judgment, is unavailable in an action upon the judgment.”

The case of Smithman v. Gray, 203 Mich. 317, is not contra, for it only holds that payment could be shown to prove that a power of attorney to confess judgment terminated when the debt was extinguished.

The trial court permitted an attorney of over 40 years of experience in Indiana to give secondary evidence as to the rules, practice and procedure of the Indiana courts and officers relevant to the issuance of an alias summons. He testified that an alias summons could only be issued upon an order of the court or by indorsement on the complaint. This testimony, if admissible, went to the regularity of the issuance of the alias summons. It was objected to by plaintiffs who stated that, at most, this was an opinion of the lawyer who had represented defendant; that it was secondary evidence and that the court rules or statutes of Indiana, if any, were the best evidence in proof of these matters. In People v. Lambert, 5 Mich. 349 (72 Am. Dec. 49), repeatedly followed, we upheld a similar objection.

The trial court in the instant case did not base its decision on any invalidity in the issuance of the alias summons. We asked for briefs on the question whether a judgment taken on a first alias summons was valid if there were a second alias summons issued and outstanding. There is much confusion in the record as to just what did occur in reference to the issuance of the second alias. The deletion from the minutes by the trial judge of certain notes made after the first alias summons had been served on the secretary of State indicates that something appeared on his record in regard to the second alias summons, but was later stricken. Both the second as well as the first alias summons were served upon the secretary of State and no motion was filed in the Indiana court to quash either service. As the issuance of the second alias summons did not vitiate a proper service of the first alias, the second may be disregarded in the absence of any showing that defendant was misled thereby. In such instance the question could have been brought up by a motion to quash. Under the circumstances, we hold that the issuance of a second alias summons was a nullity when there is no showing by competent evidence of irregularity in the issuance or service of the first alias summons. In a somewhat similar case, it was held in Farris v. Walter, 2 Col. App. 450 (31 Pac. 231):

“In that case (Barndollar v. Patton, 5 Col. 46), the court held that an alias writ could issue where the first writ had proved defective, and had been quashed on motion. Such is not the condition of affairs in the case at bar. The first summons, although defective, was held to be a good and valid writ; consequently the necessity for issuing an alias writ, and the right to exercise the statutory privilege did not exist. ’ ’

To like effect see Gorman v. Steed, 1 W. Va. 1. A contrary view is taken in Mansur v. Pacific Mutual Life Ins. Co., 136 Mo. App. 726 (118 S. W. 1193).

The larger and decisive question in the case is whether sending of notice to the defendant corporation by the secretary of State of Indiana was essential for valid service under the Indiana statutes. For the purpose of this discussion, we assume without deciding that it was necessary to send a copy of the process by registered mail rather than by ordinary mail. The law provides that the secretary of State shall be irrevocably appointed as the agent or representative of the foreign corporation to accept service of process. We hold that the subsequent mailing of a copy of such process is only directory and not mandatory and that the failure of the agent to carry out his duty is chargeable to the principal. A foreign corporation is only admitted to do business in a foreign State in compliance with the latter’s law and impliedly accepts the provisions of such law in its application for admission. The Indiana statute specifically provided that service on the secretary of State shall have the same force, validity and effect as if it were served on the corporation itself. In the recent case of Washington. ex rel. Bond & Goodwin & Tucker, Inc., v. Superior Court of Washington for Spokane County, 289 U. S. 361 (53 Sup. Ct. 624, 89 A. L. R. 653), it was held that a statute of the State of Washington which provided for substituted service on a foreign corporation by serving the secretary of State was constitutional and not violative of due process, although it contained no provision for notice of any sort being sent to the corporation. This, however, does not decide whether, when the State statute does provide for sending a copy of the process by the secretary of State and that the secretary of State shall be the agent of the foreign corporation, his failure to send the notice invalidates the service of process so as to render the judgment void. In Silva v. Crombie & Co., 39 N. M. 240 (44 Pac. [2d] 719), the identical question arose and the court held:

“If the legislature had desired to make the service effective only when the secretary of State had notified such corporation it could have so stated in plain language. * * * The neglect of the secretary of State is not chargeable to the appellant. The legislature chose its terms with discrimination and made it plain that the service of process on the secretary of State is the effective service, not the notice by the secretary of State to .the foreign corporation that renders it effective.”

In National Surety Co. v. Bell, 121 Okla. 48, (247 Pac. 343), where a statute, in addition to providing for service of process on foreign insurance companies through service upon the State insurance commissioner, further required the commissioner to forward a copy of the process to the insurance company and the commissioner inadvertently wrote $1,500 instead of $15,000 in the copy of the process sent to the foreign corporation, it was held that the entry of a default judgment against the insurance company for $15,000 was valid and binding upon the corporation. The court held:

“Whatever may be the omission or default of such insurance commissioner, after a party has done all that is required of him to obtain legal service, then such omission or default, if any there be, is clearly chargeable to the party whom he represents.”

While we are loath to uphold the validity of a default judgment obtained through the mistake, neglect or disregard of defendant’s agent, the secretary of State, we are nevertheless impressed with the fact that the statute makes the secretary of State the agent of defendant and states that “any service so had on the secretary of State * * * shall he of the same legal force and validity as if served on the corporation itself.”

Under the circumstances, notice to the corporation is not a jurisdictional defect. While we appreciate the practical difficulties that may arise, there is nothing unconstitutional in the law and any desired changes must be left to the legislature. Foreign corporations may avoid these undesirable results by maintaining their own agents upon whom service of process can be made in accordance with the law of the foreign State.

We are constrained to reverse the decision of the lower court and remand the case for entry of judgment, with interest and costs. Plaintiffs will recover costs.

Fead, C. J., and North, Wiest, Bushnell, Sharpe, Potter, and Chandler, JJ., concurred.