Miller Brewing Co. v. Capitol Distributing Co. ( 1937 )

The plaintiff and defendant companies are, respectively, Wisconsin and Utah corporations. The plaintiff entered into an agreement with the Capital Distributing Company whereby the former agreed to ship beer to the latter for sale by the latter in Utah. Later, an instrument was signed by defendants W.R. Hess, Fred Lundberg, and I. Eisner, all officers of the Capitol Distributing Company, guaranteeing payment within "30 days from date of each such sale of the price of all such goods now or hereafter to be sold and/or delivered to the said Capitol Distributing Company by the said Miller Brewing Company, including any and all charges said Miller Brewing Company hasmade or may make for cooperage, cases and bottles containing such goods." (Italics added.) The guarantee may have covered some past indebtedness for cooperage, cases, and bottles, but it was mainly to secure the price of future sales. The contract of guaranty was executed in the Salt Lake office of the Capitol Distributing Company, handed to Roloff, an agent for the plaintiff, and sent on to Milwaukee by him.

A net money judgment arrived at by allowing part of the counterclaim was rendered in favor of plaintiff against the Capitol Distributing Company, but judgment of no cause of action was rendered against plaintiff in favor of the individual defendants Hess, Lundberg, and Eisner. Plaintiff appeals alone from this judgment of dismissal. Plaintiff had done nothing as required by sections 18-8-1 to 18-8-3, R.S. Utah 1933, inclusive, which pertain to foreign corporations doing business in Utah. The judgment of dismissal was on the ground that entering into the contract of guaranty in this state was "doing business" therein, and hence, not having qualified, the contract was void. The only question is: Was the making and delivery of the contract of guaranty in this state for the payment of future and past indebtedness for the price of goods sold in interstate commerce "doing business," as those words are used in section 18-8-1, R.S. 1933?

It is said the cases of Dunn v. Utah Serum Co., 65 Utah 527,238 P. 245, and First National Bank v. Parker, 57 Utah 290,194 P. 661, 12 A.L.R. 1373, are controlling in favor of the judgment of the court. We think not. In the Parker Case, it was conceded that the company which transferred the notes to the plaintiff bank was doing business within the state so that the question of whether the giving of the notes was doing business was not before the court. A casual reading of the Dunn Case reveals that the Fort Dodge Serum Company, against whose note and mortgage the defense of failing to qualify was made, did not make the note and mortgage as an incident to interstate sales, and that it leased property of the Utah Serum Company and commenced to carry on the business of making serums. The two cases are not parallel.

In the instant case, the guaranty was incidental to the business of selling goods in interstate commerce. If the goods sold in interstate commerce were such as to permit of a chattel mortgage, a note and mortgage on the articles to secure the sale would not be "doing business." Advance-Rumely 1, 2Thresher Co., Inc., v. Stohl, 75 Utah 124, 283 P. 731. Certainly, therefore, a note unsecured given for the purchase price of interstate sold goods would not be doing business. Is it any more doing business if the note were secured by a mortgage on articles other than the ones sold or by securities handed over to secure the note? The answer seems plain. Charter Oak Life Ins.Co. v. Sawyer, 44 Wis. 387. Certainly, a guaranty agreement by officers of the purchaser to secure the note would be equivalent to a security delivered. And because it secures not only a contemporaneous transaction, but future transactions, would not change the principle. And if it secured a past debt for the price of an interstate sold article, it would not be doing business.Sunny South Lumber Co. v. Neimeyer Lumber Co., 63 Ark. 268,38 S.W. 902; Covey Cotton Oil Co. v. Bank of Ft. Gaines, 15 Ala. App. 529,74 So. 87. Ordinary steps to collect the sale price of interstate sold goods done within the borders of the state where the goods were delivered is not doing business. Taking a note or guaranty for the payment of the debt is one of the means of assuring or collecting it. And so hold the cases. In HeinrichChemical Co. v. Welch (Mo.App.) 300 S.W. 1001, the facts were very similar. Three parties executed a contract of guaranty for goods to be sold to another party. In that case the guaranty was executed in Missouri and sent to Minneapolis, Minn., where its approval was indorsed by the plaintiff company. The fact that it was approved in the state of domicile of the foreign corporation does not differentiate it from the instant case. The principle which controls is that in the instant case and in the Welch Case the transactions were natural and ordinary incidences to interstate commerce. Heinrich Chemical Co. v. Herman (Mo.App.) 251 S.W. 162; Rose City Bottling Works v. GodchauxSugars, Inc., 151 Ark. 269, 236 S.W. 825; General MotorsAcceptance Corporation v. Shadyside Coal Co., 102 W. Va. 402,135 S.E. 272; Wilson v. Ohio Farmers' Ins. Co., 164 Ind. 462,73 N.E. 892; White Sewing Machine Co. v. Sneed (Tex.Civ.App.) 174 S.W. 950; Ichenhauser Co. v. Landrum's Assignee,153 Ky. 316, 155 S.W. 738; Sigel-Campion Live-stock Comm. Co. v. Haston, 68 Kan. 749, 75 P. 1028. When an act done in a state is a mere incident to interstate commerce, it does not violate the statute. Covey Cotton Oil Co. v. Bank of Ft. Gaines, supra; Citizens' Nat. Bank v. Buckheit, 14 Ala. App. 511,71 So. 82.

The judgment is reversed, and the trial court instructed to make and enter findings, conclusions, and judgment in favor of the appellant in accordance with the principles laid down in this opinion. Appellant is awarded its costs.

FOLLAND, C.J., and HANSON, J., concur.