1. Jurisdiction over a corporation of one state cannot be
acquired in another state in which it has no place of business and
is not found, merely by serving process upon an executive officer
temporarily therein, even if he be there on business of the
company. P. 273 U. S.
2. By common law, and under the Texas statute here involved
(Comp.Stat. 1920, Title 62, Arts. a-c), the liability of one who,
personally or through agents, knowingly makes false statements with
intent that another shall act upon them does not depend upon the
receipt of any benefit by himself. P. 273 U. S.
3. A statute making actionable as a fraud a false promise of
future action by which the other party is induced to enter into a
contract is within state power, and not a violation of due process.
P. 273 U. S.
4 A state constitutionally may make proof of one fact
presumptive evidence of another rationally connected with it, and
may shift the burden of proof. P. 273 U. S.
5. A state statute defining liability and regulating procedure
in cases of fraud in transactions involving purchase of real estate
or of stock in a corporation or joint stock company does not
violate the equal protection clause of the Fourteenth Amendment in
not embracing other frauds. P. 273 U. S.
Page 273 U. S. 120
6. The fact that a state statute defining special classes of
frauds allows recovery of exemplary damages up to twice the actual
damages doe not make it a penal law, and a cause of action arising
under it may be enforced in a federal court in another state where,
though there be no statute of similar import, there is no public
policy against it. So held
of a statute adding no
extraordinary feature to the common law liability for fraudulent
misrepresentations, and in the absence of any showing that
substantial justice between the parties could not be done
consistently with the procedure and practice of the federal courts
in the second state. P. 273 U. S.
Reversed in part, affirmed in part.
Error to a judgment in the district court, in Illinois, on a
verdict for the plaintiff, in an action for common law and
statutory frauds committed in Texas in a sale of lands.
MR. JUSTICE BRANDEIS delivered the opinion of the Court.
This action was commenced in an Illinois court by Mrs. Harry, a
citizen of that state, against Dickinson, a citizen of Texas, and
James-Dickinson Farm Mortgage Company, a Missouri corporation. The
defendants removed the case to the federal court on the ground of
diversity of citizenship. Dickinson, who had been served personally
within Illinois, pleaded to the merits. The company, upon which
service had been made by reading and delivering the summons to
Dickinson "as its president" while he was temporarily in Illinois,
challenged the jurisdiction of the court over it. This objection
was overruled, and it also filed pleas to the merits. The case was
then tried, as against both defendants, before a
Page 273 U. S. 121
jury; the plaintiff got a verdict, and judgment was entered
thereon. Because of a claim that rights guaranteed by the
Fourteenth Amendment had been denied them, a direct writ of error
was allowed under § 238 of the Judicial Code, before the amendment
of February 13, 1925.
The action is in tort to recover damages resulting from false
representations by which the plaintiff was induced to purchase
while in Texas a tract of land located there. The declaration
contains two counts, the first based on the common law liability,
the second on a statute of that state. Act of March 11, 1919, c.
43; General Laws, p. 77; Complete Tex. St.1920, Tit. 62, Arts.
3973a-3973c, p. 639. Dickinson was vice-president and treasurer of
the defendant corporation and also of two other allied
corporations. He, together with James, the president of the
corporations, owned 90 percent of their stock. It was charged that
these corporations were the instruments through which the
fraudulent scheme was carried out. The device employed in effecting
the sale was the taking of the plaintiff and other alleged victims
from the North in midwinter by a special Pullman from Kansas City
to Brownsville, near which the land lies, and securing signatures
from all on the spot. There was evidence to show that the people in
charge of the party made materially false statements concerning the
quality of the land sold. Dickinson did not then talk personally
with the plaintiff, but he was present on the occasion, heard the
false statements then made, took direct part in sales then made,
and later personally induced the plaintiff to anticipate the
payment on notes given as part of the purchase price.
In the course of the trial, a multitude of requests for rulings
made by the defendants were denied. Many other rulings to which
they objected were given. Exceptions were duly taken. As the case
is properly here on constitutional grounds, the jurisdiction of
this Court extends
Page 273 U. S. 122
to a review of all questions. Chaloner v. Sherman,
242 U. S. 455
242 U. S. 457
All have been considered. Only a few require discussion.
The objection to the jurisdiction over the
corporation was taken by a plea in abatement. The decision thereon
was made upon a demurrer to the replication. By these pleadings, it
was admitted that the residence and principal place of business of
the corporation was in Missouri; that it had never been a resident
of Illinois; that Dickinson, its president, was in Illinois on
business of the corporation at the time of the service; but that it
has not engaged in, or carried on, business within the state.
Jurisdiction over a corporation of one state cannot be acquired in
another state or district in which it has no place of business and
is not found, merely by serving process upon an executive officer
temporarily therein, even if he is there on business of the
company. Philadelphia & Reading Ry. Co. v. McKibbin,
243 U. S. 364
Rosenberg Bros. v. Curtis Brown Co., 260 U.
; Bank of America v. Whitney Central National
Bank, 261 U. S. 171
Lumiere v. Wilder, 261 U. S. 174
261 U. S. 177
The objection to the jurisdiction over the corporation should have
been sustained. As it was not waived by the later proceeding in the
case, the judgment against this defendant is reversed, with
directions to dismiss the action as to it. This reversal does not
require that the judgment be reversed also as to Dickinson.
Compare Camp v. Gress, 250 U. S. 308
250 U. S.
It is contended on several grounds that the
statute violates the due process clause. One ground is that the
statute includes among the persons jointly and severally liable for
the actual damages "all persons deriving the benefit of said
fraud." This provision is said to be unconstitutional. The argument
is that thereby the state undertakes to fix a liability for damages
regardless of participation in the wrong, so that, where a
Page 273 U. S. 123
has received the money arising from a fraudulent sale, every
stockholder becomes liable for the tort, and that, by making the
liability joint and several, the statute makes one person liable
for the wrong of another although there was neither participation
in nor ratification of it, nor even knowledge. At common law, every
member of a partnership is subject to such a liability, Strang
v. Bradner, 114 U. S. 555
McIntyre v. Kavanaugh, 142 U. S. 138
142 U. S. 139
and often stockholders of corporations are made similarly liable by
statute. Compare Thomas v. Mattiessen, 232 U.
, 232 U. S. 235
Buttner v. Adams,
236 F. 105. The case presented by the
pleadings and the evidence, so far as Dickinson is concerned, is,
however, a very different one from that suggested. He is not sued
as stockholder, and the count on the Texas statute does not charge
him with full liability for the loss suffered because, as
stockholder, he received some benefit. It charges specifically that
"the defendants, and each of them, derived the benefit of the fraud
and deceit." And their liability is sought to be enforced primarily
because "they represented themselves to the plaintiff to be the
owners" of the large tract of land, and cheated her "through their
authorized agents." If Dickinson, either personally or through
agents, made knowingly false statements with intent that the
plaintiff should act upon them, his liability, either at common law
or under the statute, would not depend upon the receipt of any
benefit by him. See Nevada Bank v. Portland Nat. Bank,
F. 338; Hindman v. First Nat. Bank,
112 F. 931, 944-945;
Goldsmith v. Koopman,
140 F. 616, 621; Talcott v.
179 F. 676, 680. There was in the evidence ample
support for a finding of such deception.
Another contention is that the statute violates the due process
clause in providing that actionable fraud shall exist not only when
there is "a false representation of a past or existing material
fact," but also if there is a
Page 273 U. S. 124
promise to do some act in the future, which is made as a
material inducement to another party to enter into a contract and
but for which promise said party would not have entered into said
contract. . . ."
The contention is groundless. To modify the substantive and
procedural law so that recovery may be had in tort for a breach of
contract is well within the power of a state. An action for deceit
was long the sole remedy for a breach of warranty, and it still
lies in some jurisdictions. See F. L. Grant Shoe Co. v.
Laid, 212 U. S. 445
212 U. S. 449
Nash v. Minn. Ins. & Trust Co.,
163 Mass. 574, 587;
Carter v. Glass,
44 Mich. 154. Recovery in contract on a
tort that is waived is common. See Crawford v. Burke,
195 U. S. 176
195 U. S. 194
Here, moreover, no such change is brought about by the statute.
Some courts have long recognized that a false promise is a species
of false representation for which there is remedy in tort,
Church v. Swetland,
243 F. 289, 294-295; Wright v.
248 F. 756, 775, as, for instance, where goods are
obtained on credit by a purchaser who does not intend to pay for
them. See Burrill v. Stevens,
73 Me. 395; Stewart v.
52 N.H. 301.
It is also contended that the statute violates the due process
clause by providing that, whenever a promise thus made has not been
complied with by the party making it within a reasonable time,
"it shall be presumed that it was falsely and fraudulently made,
and the burden shall be on the party making it to show that it was
made in good faith but was prevented from complying therewith by
the act of God, the public enemy or by some equitable reason."
This contention also is groundless. It is well settled that a
state may consider proof of one fact presumptive evidence of
another if there is a rational connection between them, Hawes
v. Georgia, 258 U. S. 1
258 U. S. 4
also that it may change the burden of proof, Minn. & St.L.
R. Co. v. Minnesota, 193 U. S. 53
Page 273 U. S. 125
the lower court gave no charge based upon this provision of the
statute. And it is at least doubtful whether this provision should
be construed as applying to actions brought outside Texas.
It is claimed that the Texas statute violates
the equal protection clause of the Fourteenth Amendment because it
applies only to fraud in transactions involving the purchase of
real estate or of stock in a corporation or joint-stock company.
The contention is clearly unfounded. A statute does not violate the
equal protection clause merely because it is not all-embracing.
Zucht v. King, 260 U. S. 174
260 U. S. 177
A state may direct its legislation against what it deems an
existing evil without covering the whole field or possible abuses.
Farmers' & Merchants' Bank v. Federal Reserve Bank,
262 U. S. 649
262 U. S. 661
The occasion of the legislation is indicated by the urgency
provision of the statute which recites "that there are now in this
state a number of fraudulent land schemes and that a great number
of citizens of this state have been defrauded thereby."
It is urged that a federal court for Illinois
should not enforce the liability under the Texas statute, because
Illinois has not enacted a statute of similar import. The general
rule is that one state will enforce a cause of action arising under
the laws of another; that a federal court of any district will
enforce a cause of action arising under the law of any state; but
that ordinarily the courts of one government will not enforce the
penal laws of another. The argument is that the Texas statute is a
penal law because it provides:
"All persons knowingly
Page 273 U. S. 126
and willfully making such false representations or promises or
knowingly taking the advantage of said fraud shall be liable in
exemplary damages to the person defrauded in such amount as shall
be assessed by the jury, not to exceed double the amount of the
actual damages suffered."
Exemplary damages are recoverable at common law in many states.
A statute providing for their recovery by and for injured party is
not a penal law. Huntington v. Attrill, 146 U.
, 146 U. S.
-683. Compare Atchison, T. & S.F. Ry. v.
Nichols, 264 U. S. 348
264 U. S.
-351. No reason appears why the cause of action
arising under the Texas statute should not be enforced in Illinois.
The Texas statute, as applied in this case, does not add any
extraordinary feature to the common law liability for fraudulent
representations. There is nothing in the public policy of Illinois
with which the statutory cause of action is inconsistent. It is not
shown that substantial justice between the parties cannot be done
consistently with the forms of procedure and the practice of the
federal courts for Illinois.
Reversed as to James-Dickinson Farm Mortgage
Affirmed as to A.D. Dickinson.
* See Pritchard v. Norton, 106 U.
, 106 U. S.
-136; Richmond & D. R. Co. v. Mitchell,
92 Ga. 77; Chicago T. T. R. Co. v. Vandenberg,
470; Jones v. C., St.P., M. & O. Ry. Co.,
488, 490-491; Pennsylvania Co. v. McCann,
54 Ohio St. 10,
17-18. Compare Hoadley v. Northern Transp. Co.,
304. But see Hartmann v. Louisville & N. Ry. Co.,
Mo.App. 88, 98-101.