1. Defendant, a Maine corporation, marketed its products in
North Carolina through a subsidiary, an Alabama corporation which
it completely dominated through stock ownership and otherwise, but
a distinct corporate entity which did not act as the defendant's
agent, but bought the defendant's goods and sold them to dealers to
be shipped directly from the defendant.
Held:
(a) That the defendant corporation did not thereby do business
in North Carolina so as to be present there and suable in the
federal court. P.
267 U. S.
334.
(b) That the concentration of the Alabama corporation's stock in
the defendant's single ownership and the legal consequences of this
under the Alabama law did not have the effect of rendering its
business in North Carolina the business of.the defendant for
purposes of jurisdiction. P.
267 U. S.
337.
292 F. 169 affirmed.
Appeal from a judgment dismissing an action on contract for want
of jurisdiction over the defendant corporation.
Page 267 U. S. 334
MR. JUSTICE BRANDEIS delivered the opinion of the Court.
Cannon Manufacturing Company, a North Carolina corporation,
brought, in a court of that state, this action against Cudahy
Packing Company, a Maine corporation, for breach of a contract to
purchase cotton sheeting for use in packing meat. The defendant
appeared specially for the purpose of filing a petition for removal
to the Federal Court for Western North Carolina, and the order of
removal issued. In that court, the defendant, appearing specially,
moved that the summons be set aside and the action dismissed for
lack of jurisdiction. The ground of the motion was that the
defendant was not doing business within the state, and had not been
served with process. The only service made was, as the sheriff's
return recites, the delivery of a copy of the
"summons and complaint to Cudahy Packing Company of Alabama,
agent of defendant, Frank H. Ross, to whom papers were delivered,
being process agent of Cudahy Company of Alabama."
The district court, concluding upon the evidence that the
defendant was not present in North Carolina, entered a final
judgment dismissing the action. 292 F. 169. The case is here under
ยง 238 of the Judicial Code, the question of jurisdiction having
been duly certified.
The main question for decision is whether, at the time of the
service of process, defendant was doing business within the state
in such a manner and to such an extent
Page 267 U. S. 335
as to warrant the inference that it was present there.
Bank
of America v. Whitney Central National Bank, 261 U.
S. 171. In order to show that it was, the plaintiff
undertook to establish identity
pro hac vice between the
defendant and the Alabama corporation. The Alabama corporation,
which has an office in North Carolina, is the instrumentality
employed to market Cudahy products within the state; but it does
not do so as defendant's agent. It buys from the defendant and
sells to dealers. In fulfillment of such contracts to sell, goods
packed by the defendant in Iowa are shipped direct to dealers, and
from them the Alabama corporation collects the purchase price.
Through ownership of the entire capital stock and otherwise, the
defendant dominates the Alabama corporation, immediately and
completely, and exercises control both commercially and financially
in substantially the same way, and mainly through the same
individuals, as it does over those selling branches or departments
of its business not separately incorporated which are established
to market the Cudahy products in other states. The existence of the
Alabama company as a distinct corporate entity is, however, in all
respects observed. Its books are kept separate. All transactions
between the two corporations are represented by appropriate entries
in their respective books in the same way as if the two were wholly
independent corporations. This corporate separation from the
general Cudahy business was doubtless adopted solely to secure to
the defendant some advantage under the local laws.
The objection to the maintenance of the suit is not procedural
-- as where it is sought to defeat a suit against a foreign
corporation on the ground that process has been served upon one not
authorized to act as its agent.
Pennsylvania Lumbermen's Mutual
Fire Insurance Co. v. Meyer, 197 U. S. 407;
St. Louis Southwestern Ry. Co. v. Alexander, 227 U.
S. 218,
227 U. S. 226.
See Philadelphia &
Reading
Page 267 U. S. 336
Ry. Co. v. McKibbin, 243 U. S. 264. The
obstacle insisted upon is that the court lacked jurisdiction
because the defendant, a foreign corporation, was not within the
state. No question of the constitutional powers of the state, or of
the federal government, is directly presented. The claim that
jurisdiction exists is not rested upon the provisions of any state
statute or upon any local practice dealing with the subject. The
resistance to the assumption of jurisdiction is not urged on the
ground that to subject the defendant to suit in North Carolina
would be an illegal interference with interstate commerce.
Compare International Harvester Co. v. Kentucky,
234 U. S. 579,
234 U. S.
587-589. The question is simply whether the corporate
separation carefully maintained must be ignored in determining the
existence of jurisdiction.
The defendant wanted to have business transactions with persons
resident in North Carolina, but, for reasons satisfactory to
itself, did not choose to enter the state in its corporate
capacity. It might have conducted such business through an
independent agency without subjecting itself to the jurisdiction.
Bank of America v. Whitney Central National Bank,
261 U. S. 171. It
preferred to employ a subsidiary corporation. Congress has not
provided that a corporation of one state shall be amenable to suit
in the federal court for another state in which the plaintiff
resides whenever it employees a subsidiary corporation as the
instrumentality for doing business therein.
Compare Lumiere v.
Mae Edna Wilder, Inc., 261 U. S. 174,
261 U. S.
177-178. That such use of a subsidiary does not
necessarily subject the parent corporation to the jurisdiction was
settled by
Conley v. Mathieson Alkali Works, 190 U.
S. 406,
190 U. S.
409-411,
Peterson v. Chicago, Rock Island &
Pacific Ry. Co., 205 U. S. 364, and
People's Tobacco Co., Ltd. v. American Tobacco Co.,
246 U. S. 79,
246 U. S. 87. In
the case at bar, the identity of interest may have been more
complete and the exercise of control over the subsidiary
Page 267 U. S. 337
more intimate, than in the three cases cited, but that fact has,
in the absence of an applicable statute, no legal significance. The
corporate separation, though perhaps merely formal, was real. It
was not pure fiction. There is here no attempt to hold the
defendant liable for an act or omission of its subsidiary, or to
enforce as against the latter a liability of the defendant. Hence,
cases concerning substantive rights, like
Hart Steel Co. v.
Railroad Supply Co., 244 U. S. 294,
Chicago, etc., Ry. Co. v. Minneapolis Civic Association,
247 U. S. 490,
Gulf Oil Corp. v. Lewellyn, 248 U. S.
71, and
United States v. Lehigh Valley R. Co.,
254 U. S. 255,
have no application.
The plaintiff contends, on a further ground, that the defendant
was present in North Carolina. The argument is that there is no
such thing as a corporation sole under the laws of Alabama; that
three stockholders are necessary in order to sustain the existence
of a corporate entity; that, where the number of members falls
below three, the entity falls into a state of suspense; that the
defendant, in fact owned all the stock in the Alabama corporation;
that the directors of the latter could not have been
bona
fide directors because not stockholders; that its franchise
was suspended,
First National Bank of Gadsden v.
Winchester, 119 Ala. 168, and that therefore what was done in
North Carolina must have been done by the defendant. No Alabama
case has been cited or found which determines the effect, in that
state, of such alleged suspense. Nor has any case been cited or
found which determines what would be its effect under the law of
North Carolina. It is not contended that the Alabama corporation
was dissolved
ipso facto by this concentration of its
stock, or that its property became, in law, that of the defendant.
It may be that, upon the concentration of its stock in the hands of
the defendant, the franchise of the Alabama corporation became
subject to
Page 267 U. S. 338
forfeiture in a judicial proceeding by the state, or that
thereby its status was reduced from a corporation
de jure
to one
de facto. But whatever might be other legal
consequences of the concentration, we cannot say that, for purposes
of jurisdiction, the business of the Alabama corporation in North
Carolina became the business of the defendant.
Affirmed.