Opinion
Page __
__ Cal.App.2d __292 P.2d 578AUTOMOTRIZ DEL GOLFO DE CALIFORNIA S. A. DE C. V., Plaintiff and Respondent,v.Erwin G. RESNICK, W. D. Cowan and R. William Cowan, Defendants and Appellants.Civ. 21263.California Court of Appeals, Second District, Second DivisionJan. 30, 1956Rehearing Granted Feb. 23, 1956.
Levy, Bernard & Jaffee, Los Angeles, by Geo. W. Rochester, Beverly Hills, of counsel, for appellants.
[292 P.2d 579] Francis B. Cobb, Los Angeles, for respondent.
MOORE, Presiding Justice.
Action in three counts for $10,747, balance due on the sales price of eight automobiles. Prior to the sale, appellant Resnick had organized Erbel, Inc., a California corporation. In the autumn of 1952 he induced appellants W. D. and R. William Cowan to join him in operating an automobile retail sales business in Los Angeles under the fictitious firm name of Bi-Rite Auto Sales. They used the corporate name, 'Erbel, Inc. dba Bi-Rite Auto Sales', to carry their bank account, but the corporation issued no stock and obtained no permit to do so. Appellants were therefore in a joint adventure, under an agreement whereby Resnick should have 50 per cent of the profits, and the Cowans 50 per cent divided equally. W. D. Cowan financed the corporation by advancing about $90,000 prior to April 1953. Ultimately, he guaranteed the bank loans to the business in the sum of $100,000 while the assets were worth less than half that sum. Appellants knew in March 1953 that the joint venture and their corporation were insolvent and that in June 1953 their business was running at a loss. They had commenced to do business in November 1952. On February 23, 1953, respondent, a Mexican corporation, sold the eight automobiles to appellants. The gave respondent two checks which were dishonored. Finally, they paid $3,000 on account. Demands for payment of the balance were unavailing. In the meantime, the policy of the business management had brought the corporation to a state of insolvency. In such condition, about May 1, 1953, appellants paid W. D. Cowan $21,000 when the corporation was without funds to pay its creditors, thereby giving him a preference. As a consequence of such payment, appellants were unable to pay respondent's claim. After the adjudication of bankruptcy and the liquidation of the assets of Erbel, Inc., no moneys were available for unsecured creditors.
There was no substantial defense to the debt or to the payment of $21,000 to W. D. Cowan while the joint venture was insolvent. But appellants based their defenses at the trial, and now on appeal, upon the propositions that (1) the action should be abated for the reason that respondent is a foreign corporation, has done business 'repeatedly and successively' in California without having filed its articles, Corporations Code, sec. 6801; (2) the superior court did not have jurisdiction of the action, the United States District Court had acquired jurisdiction of all claims against Erbel Inc. by virtue of the bankruptcy of that corporation.
There is no basis for requiring respondent to file its articles in California. It did no business within this state except as incidental to its foreign commerce. It is a Mexican corporation which made its sales by telephone to its trade in California and came into the state solely for the purpose of making deliveries and collections. It manufactured nothing in California; neither did it peddle its products nor assemble them here for selling. It was, therefore, engaged in foreign commerce only. Charlton Silk Co. v. Jones, 190 Cal. 341, 212 P. 203. The state cannot impose a burden upon any person or corporation engaged wholly in interstate or foreign commerce. W. W. Kimball Co. v. Read, 43 Cal.App. 342, 345, 185 P. 192. Therefore, a foreign tradesman may freely enter this state for the purpose of delivering its merchandise lawfully sold here and of collecting the purchase price thereof. Ibid.
Upon conflicting evidence, the trial court found that the action should not abate by reason of alleged 'repeated and successive' transactions of respondent's business in California, other than interstate or foreign commerce, and concluded that respondent was entitled to maintain its action 'since plaintiff has not transacted intrastate business in the State of California, as that term is defined by section 6203 of the Corporations Code.'
Appellants vainly contend that respondent was doing intrastate business because its agents now and then resold an automobile after it had been rejected by the vendee. Such is not the law. An alien person or corporation may contribute certain [292 P.2d 580] services in effecting a consummation of its interstate or foreign commerce and yet not do intrastate business. Proctor & Schwartz, Inc. v. Superior Court, 99 Cal.App.2d 376, 382, 221 P.2d 972; York Mfg. Co. v. Colley, 247 U.S. 21, 25, 38 S.Ct. 430, 62 L.Ed. 963. In the last cited case, when the Pennsylvania corporation sued in Texas for the contract price for installing the ice plant it had sold to the defendant, the latter asserted as a defense that the plaintiff in supervising the installation through its engineer was doing business in Texas and had not obtained a permit to do so and therefore could not sue. The court of last resort held that the services of the engineer in Texas were inherently a part of the interstate contract of sale and did not constitute doing business in Texas within the meaning of that state's requirement of a license.
Neither does an act which has been done to consummate a transaction in interstate commerce, not completed by reason of intervening conditions, give it an intrastate character. Memphis Steam Laundry Cleaner v. Stone, 342 U.S. 389, 394-395, 72 S.Ct. 424, 96 L.Ed. 436. Interstate commerce is to be kept clear of burdensome interference such as the levy of a state or municipal tax. Export Leaf Tobacco v. County of Los Angeles, 89 Cal.App.2d 909, 924, 202 P.2d 622; Nippert v. City of Richmond, 327 U.S. 416, 423, 66 S.Ct. 586, 90 L.Ed. 760.
The evidence of respondent shows that orders for the purchase of automobiles were made by appellants' agents over the telephone to respondent's office in Mexico. After sales had been agreed upon, the cars were conveyed to the border, thence into California. If a car was rejected, respondent's agent sold 'it some other place.' He brought no vehicles to California that were sold to defendants without having a prior conversation with them on the telephone whereby they agreed upon a price, subject to approval of the condition of the car. After the vehicles had passed the customs inspection, they were transported to Los Angeles at the expense of the buyers. The proof was that it was too expensive to import an automobile from Mexico unless the sale had been 99 per cent completed. Respondent maintained neither office nor warehouse in California. But having legally sold its merchandise to residents of California, it was proper for it to come here to make deliveries and collect for the merchandise sold. Real Silk Hosiery Co. v. City of Portland, 268 U.S. 325, 45 S.Ct. 525, 69 L.Ed. 982; Sioux Remedy Co. v. Cope, 235 U.S. 197, 202-203, 35 S.Ct. 57, 59 L.Ed. 193.
From the foregoing, it must be apparent that the court was not without jurisdiction by reason of respondent's failure to file with the Secretary of State a 'statement' as required of an entity doing intrastate business by section 6403, Corporations Code. Section 6801 requires that an action based upon intrastate business shall not be maintained until the payment of a penalty in addition to the fees for filing the statement. The conclusion was that 'plaintiff has not transacted intrastate business in the State of California, as that term is defined by Section 6203 of the Corporations Code.'
By subtle arguments, appellants attempt to overcome the finding that they conducted a retail automobile sales business 'as their individual enterprise and as a joint venture among themselves * * * under the trade name and style of Bi-Rite Auto Sales and Erbel, Inc.' Such attempt must fail for the reason that the evidence adopted by the court shows that no stock was ever issued by the corporation; that no appellant ever received 25 per cent of the profits or any share; that they made use of the corporation by having their bank account in its name, and by having the corporate name as a part of the fictitious firm name of their joint venture, to wit, 'Bi-Rite Auto Sales and Erbel Inc.', in the transaction of their automobile business.
They commenced operations in October, 1952, under such fictitious name and so continued until bankruptcy removed the corporation from the world of active creatures. Having operated as a joint venture, each of the three appellants as well as Erbel, Inc. became liable for all its obligations.
[292 P.2d 581] Geisenhoff v. Mabrey, 58 Cal.App.2d 481, 489, 137 P.2d 36. The cited case is in all material respects the same as that at bar. While the corporation there never issued stock, it existed as an entity, received a deed to the property and signed notes for loans. The individuals who managed the business could not successfully claim immunity from liability for the debts they had created.
The arguments: that the agreement for division of the profits was tantamount to a subscription for stock; that appellants violated their trust duty in paying W. D. Cowan, an unsecured creditor, $21,000 while the joint venture was insolvent; that appellants perpetrated a constructive fraud upon respondent; that the United States District Court acquired jurisdiction by virtue of the bankruptcy of Erbel, Inc.--these are interesting but not necessary to a decision of this controversy. Appellants bought the automobiles; did not pay the sum they promised and are therefore liable for the unpaid portion of the purchase price.
Judgment affirmed.
FOX and ASHBURN, JJ., concur.