Story Case

By the laws of the state of Minnesota, it is provided, among other requirements, that no foreign corporation shall be entitled to carry on business within that state, without previously having appointed an agent within the state, upon whom service of process may be had, in case of any actions against the corporation. Failure to comply with all these regulations, render any contract of the corporation voidable at the option of the other party thereto. The National Hardware Company, a corporation organized under the laws of New Jersey, established a branch store in that state, without having complied, or attempted to comply, with the laws in question. In the course of its business, the corporation sold a large consignment of pipes to a local company. The plumbing company refused to pay for them, and suit was brought by the hardware company. The plumbing company maintained that the hardware company had not complied with the laws of the state, and, therefore, could not enforce this contract. Under the facts, as stated, what should be the decision of the Court?

Ruling Court Case. Penn Colleries Company Vs. Mckeever, Volume 183 Neiv York Reports, Page 98

The Penn Colleries Company was a corporation, organized under the laws of West Virginia, and was engaged in mining and selling coal in Pennsylvania. A cargo of coal was sold a man in New Jersey; while the coal was en route to New Jersey, in New York, the New Jersey purchaser rejected the coal. An agent of the colleries company, stationed in New York, sold it to McKeever, the defendant in the present action. It was the first sale of coal the company made in the state of New York. McKeever refused to pay for the coal and this action was brought to recover the price thereof.

McKeever contended that this action could not be maintained in the state of New York. He relied upon a statute of New York, which required all foreign stock corporations, in order to carry on business within the state, to file, with the secretary of state, a certificate that the corporation had complied with all the laws of the state of New York. The law provided, as a penalty for a refusal to file this certificate, that no action might be brought on any contract in the Courts of the state of New York.

It was contended, by the coal company, that it was not doing business in the state of New York, as contemplated in the foregoing statute, in reference to foreign corporations. It was shown that orders for coal were forwarded to the Pennsylvania office, and were filled from there, directly. No books of account, nor bank accounts, were kept in the City of New York, and no coal, or other goods, of the company, were kept in the state; the office was kept there for the convenience of the agent, solely.

Decision

The statute referred to was intended only to apply to corporations which conduct a general business in the state. The corporation, in this case, did not maintain a general business. Their business was transacted entirely from the Pennsylvania office; and only an occasional business transaction was made in the state of New York. For this reason, the Court held that the corporation here was not included within the statute; and that this action might be maintained for the recovery of the price of coal sold to McKeever.

Mr. Justice Gray, who delivered the opinion of the Court, said in part: "I am clearly of the opinion that the statutory provisions were not intended for any such case as this. I think that they should be construed, both upon the fair import of their language, as well as upon a just consideration of the public policy and of the state interests to be promoted, as, simply, preventing foreign corporations from entering the state by agencies and there engaging in the general prosecution of their ordinary business, without first complying with certain requirements of a reasonable nature and evidencing their compliance by obtaining a certificate to the effect."

Judgment was given for the Penn Colleries Company, that it might recover the amount due in respect to the coal sold to the defendant, McKeever.

Ruling Law. Story Case Answer

We have seen that a given state is under no duty to admit corporations, generally, to do business within its territory. But, as a matter of practice, all states do admit foreign corporations, freely. But, in order to protect its own citizens and its own interests, each state generally imposes certain conditions, which foreign corporations must meet before they are entitled to do business therein. Frequently, a state will provide, by way of penalty, that the corporation cannot enforce its contracts, made within the state, unless it has complied with all conditions and requirements. However, the Courts generally enforce these requirements only as against corporations which engage in their business, generally, and not to corporations which do very little business therein. It, of course, might enforce such conditions against them under all circumstances; but, as a matter of policy, it enforces such regulations, only when the foreign corporation is engaged in general business within the state. It is uniformly held that "doing business" within the state requires the maintenance of corporation headquarters, that is, a corporation office, or store. In the Story Case, as the National Hardware Company failed to comply with the statutory requirements, it was engaged in "doing business" within the state of Minnesota; consequently, the contract made by them cannot be enforced against the local plumbing company.