Mills v. Tri-State Motor Transit Company

150 S.E.2d 585 (1966) 268 N.C. 313

Abney MILLS, a corporation,
v.
TRI-STATE MOTOR TRANSIT COMPANY, a corporation, and North Carolina National Bank, a corporation.

No. 289.

Supreme Court of North Carolina.

October 19, 1966.

Blakeney, Alexander & Machen, Charlotte, for defendant appellant. Linde, Thomson, Van Dyke, Fairchild & Langworthy, Kansas City, Mo., of counsel.

Ervin, Horack, Snepp & McCartha, Charlotte, for plaintiff appellee.

LAKE, Justice.

The findings of fact to which the defendant excepts are each supported by evidence in the record and are, therefore, conclusive. Stewart v. Rogers, 260 N.C. 475, 133 S.E.2d 155; Hodges v. Hodges, 257 N.C. 774, 127 S.E.2d 567; Gasperson v. Rice, 240 N.C. 660, 83 S.E.2d 665. These exceptions are, therefore, without merit.

Since, as the trial court found, "Tri-State did not domesticate or qualify to do business in North Carolina," G.S. § 55-143(b) has no application. Since, as the court below also found, the plaintiff is a foreign corporation with its principal office and place of business in South Carolina, G.S. § 55-145 has no application. Thus, the service of the summons for Tri-State upon the Secretary of State did not give the Superior Court of Mecklenburg County jurisdiction over the person of Tri-State unless this action falls within the limits of G.S. § 55-144, which reads:

"Whenever a foreign corporation shall transact business in this State without first procuring a certificate of authority so to do from the Secretary of State or after its certificate of authority shall have been withdrawn, suspended, or revoked, then the Secretary of State shall be an agent of such corporation upon whom any process, notice, or demand in any suit upon a cause of action arising out of such business may be served."

When the principles stated in the opinion of Parker, J., now C. J., in the former appeal of this case to this Court, 265 N.C. 61, 143 S.E.2d 235, are applied to the findings of fact made by the trial court, which findings are amply supported by the evidence, it is apparent that there was no error in the conclusion of the trial court that Tri-State transacted business in North Carolina.

Tri-State was authorized by its own charter to acquire shares of stock in Kilgo. It contracted to do so and, pending the consummation of the purchase, Tri-State was authorized by the contract to manage Kilgo's affairs to such an extent as to substitute, for all practical purposes, the judgment of Tri-State for the judgment of the Board of Directors and officers of Kilgo. Tri-State sent its president to North Carolina to exercise this power granted to it. While he was in this State he exercised Tri-State's right and power to hire and fire the personnel of Kilgo, to select the banks in which Kilgo was to carry its accounts, to issue checks and negotiable instruments in the name of Kilgo, and to purchase equipment for Kilgo and dispose of equipment owned by Kilgo. He testified that he did these things while on loan to Kilgo, but Tri-State paid his salary and Tri-State was obligated by its contract to reimburse Kilgo for any deficit in Kilgo's operations during this period in excess of a specified amount. In so managing the prospective subsidiary of Tri-State, President Boyd was acting as Tri-State's agent for the protection and promotion of Tri-State's interest in such prospective subsidiary. It was Tri-State who had the right to manage the affairs of Kilgo. President Boyd's management of those affairs was Tri-State's management of those affairs. That was the transaction of business in North Carolina by Tri-State. See: Lambert v. Schell, 235 N.C. 21, 69 S.E.2d 11; Harrison v. Corley, 226 N.C. 184, 37 S.E.2d 489; Commercial Inv. Trust v. Gaines, 193 N.C. 233, 136 S.E. 609.

Nevertheless, the service of summons upon the Secretary of State did not give the superior court jurisdiction over the person of Tri-State unless the cause of action upon which the plaintiff sues arose out of the business which Tri-State transacted in North Carolina. Atlantic Coast Line R. R. v. Hunt & Sons, Inc., 260 N.C. 717, 133 S.E.2d 644. The cause of action stated in the complaint is the alleged breach of the contract to purchase the plaintiff's shares of stock in Kilgo. The cause of action is not one "arising out of" the business so transacted by Tri-State in North Carolina unless there is a causal connection between what Tri-State did in North Carolina, through its president, and the plaintiff's cause of action.

The plaintiff does not sue for any act or omission by Tri-State, acting through its president, in the management of the affairs of Kilgo. If Tri-State had never exercised any power to manage the affairs of Kilgo, but in all other respects the facts were as they appear upon this record, the right of the plaintiff to sue for damages for breach of the promise to buy the shares of stock would be the same as it now is. Consequently, the right of action, alleged in the complaint, did not arise out of the actions done for Tri-State by its president in North Carolina in the management of the affairs of Kilgo. Tri-State has transacted no other business in North Carolina.

We may speculate as to whether, in the course of his management of the affairs of Kilgo, the president of Tri-State acquired an insight into the condition of Kilgo which contributed to the decision by Tri-State to break its contract to purchase the plaintiff's shares of stock. If so, the relation between the business transacted in North Carolina and the breach of the contract is too remote to permit the conclusion that the breach arose out of the transaction of the business done in North Carolina.

Consequently, the court below erred in its conclusion that the cause of action alleged by the plaintiff in its complaint arises out of the business transacted by Tri-State in North Carolina. It follows that the court below also erred in its conclusion that it had jurisdiction over the person of Tri-State in this action. The purported service of summons upon Tri-State by leaving a copy thereof with the Secretary of State was a nullity because such service is not authorized by the statute.

The defendant North Carolina National Bank was properly served with summons, but no cause of action is alleged against it and no relief is sought from it except an order that it pay over the deposit now held in escrow for application upon such judgment as the plaintiff may obtain in this action against Tri-State. Since the plaintiff can not obtain a personal judgment against Tri-State in this action, and since the record does not disclose any order of attachment or garnishment of the deposit made by Tri-State in the Bank so as to bring the interest of Tri-State in such deposit within the jurisdiction of the court, the motion of Tri-State to dismiss this action for want of jurisdiction should have been granted.

It is immaterial whether the contract to purchase the stock was to be performed by payment to the plaintiff in South Carolina or by deposit at the North Carolina Bank in Charlotte. If the breach of the contract upon which the plaintiff relies occurred through the failure of Tri-State to make a payment in Charlotte, the cause of action arose in North Carolina, but it did not arise out of business transacted by Tri-State in North Carolina but out of Tri-State's failure to act here as it contracted to do. G.S. § 55-144 does not authorize service of summons upon the Secretary of State in all cases where the cause of action arose in this State.

Reversed.