regarding the filing of certificates in New York State, permitting
foreign corporations to transact business in that State and maintain an
action. We have been asked for information regarding the requirements of
the Commonwealth of Pennsylvania in this matter and our attorney at
Philadelphia, William S. Furst, Stephen Girard Building, has forwarded
the following opinion.
Herewith follows an opinion embodying the essential points in re
foreign corporations doing business in the State of Pennsylvania.
The Act of Assembly approved April 22, 1874, provides that no foreign
corporation (this includes corporations created by other States) shall
do any business in this Commonwealth until such corporation shall have
established an office and appointed an agent for the transaction of its
business therein, and it shall not be lawful for any such corporation
to do any business in this Commonwealth until it shall have filed in
the office of the Secretary of the Commonwealth a statement under seal
of such corporation, and signed by the President or Secretary thereof,
showing the title and object of said corporation and the name of its
authorized agent, with a penalty attached thereto for violation, that a
person shall be guilty of a misdemeanor, etc.
The words “doing business” do not include a sale in a foreign State,
although the goods are delivered in this State, or taking orders, or
making sales by salesmen through agents going into Pennsylvania from
another for that purpose.
In short, a foreign corporation engaged in strictly interstate
commerce, may advertise its goods, send agents to solicit orders, take
orders, make contracts of sale respecting the same, and ship them to
customers in Pennsylvania, without violating the act, and may sue to
recover the price of any merchandise without filing the statement
required by the act, although the foreign corporation in question has
no office or place of business in Pennsylvania and no part of its
capital invested here.
A foreign corporation, which has not complied with the Act above
stated, but has an office or place of business in Pennsylvania, or any
of its capital invested within the State, cannot enforce contract
rights in the courts of Pennsylvania.
It has been recently decided by the Supreme Court of the State of
Pennsylvania (the court of last resort) that a foreign corporation
which invests most of its capital in the State of Pennsylvania for a
period of six months while constructing a railway, employs large
numbers of men, but does not file a statement in the office of the
Secretary of the Commonwealth, as required by the provisions of the Act
until two months after completion of the work, cannot recover for labor
and materials furnished in doing such work.
With respect to the taxes imposed upon foreign corporations doing
business in the State of Pennsylvania, the Act of May 8th, 1901,
provides that all foreign corporations shall pay to the State Treasurer
for the use of the Commonwealth a bonus of one-third of one per centum
upon the amount of their capital actually employed or to be employed
wholly within the State, and a like bonus upon each subsequent increase
of capital so employed. This is not an annual tax. It has been defined
to be the price paid the Commonwealth for the privilege conferred on
such corporation by its charter. It is therefore in no sense a tax, and
the payment thereof does not relieve any corporation from any tax to
which it is otherwise subject.
Respecting the taxation of foreign corporations, they are taxable like
domestic corporations on so much of their capital stock as is invested
within the Commonwealth under the provisions of the Act of Assembly
approved June 8th, 1898. The tax is imposed annually at the rate of
five mills upon each dollar of the actual value of the whole capital
stock of all kinds invested or represented by capital invested within
the State.
The tax is settled by the accounting officers upon the basis of a
report required to be made by all companies subject to the tax, and
particularly upon the appraisement of the value of the stock contained
in such report. The report is filed between the first and fifteenth of
November in each year.
Foreign corporations are also obliged to file a bonus report annually,
from which should appear whether there has been any increase in the
amount of the capital actually invested within the State, so that the
proper bonus charges may be made upon any such increase as above
stated.
=Opinion No. 19.=
PAYMENT OF CLAIMS BY AN EXECUTOR—TIME FOR FINAL ACCOUNTING.
Occasionally the question arises as to what length of time an executor
has to close an estate, and the following, particularly the second
section, may be helpful:
Question—Can an executor pay a bill of $10 or less, or what is the
largest amount he can pay, without having the claim verified before a
notary, according to law?
2.—Within what time do the laws require that an executor’s accounts
shall be made up and ready for final settlement?
Reply: 1. The law makes no distinction as to the amount of the
claim against the estate for which an executor should require
vouchers and an affidavit. The statutory provision is as
follows: “The executor or administrator may require satisfactory
vouchers in support of any claim presented, and the affidavit of
the claimant that the claim is justly due, that no payments have
been made thereon, and that there are no offsets against the
same to the knowledge of the claimant,” see Code of Civil
Procedure, Section 2718. If an executor should pay a claim of
any considerable size, without this precaution, and the claim
should afterwards turn out to be unjust, he could be, or
probably would be, required to repay the amount to the estate.
2. The laws of this State do not fix any definite time as the
limit within which an executor must make his final accounting.
Whenever a year has expired since the grant of his letters, the
surrogate may compel the executor to make an accounting of all
that has been done up to that time. If the estate is then in a
condition to be definitely settled this may be done. If there
has been any remissness on the part of the executor this may
properly be dealt with by the surrogate. If the executor has
used due diligence, and still is not ready to make a final
accounting, he may have further time, always, of course, under
the supervision of the court.
=Opinion No. 23.=
A SELLER MAY CONTRACT AGAINST LIABILITY FOR DELAY IN SHIPPING.
Question—A company in Boston sells to A in New York 800,000 feet of
lumber and on the sales slip are the words, “for delivery, one cargo in
June, and one in July.” The lumber was shipped in four cargoes, about
200,000 feet in each. The first two were shipped in July; the third
cargo on the 18th of August, and the fourth on the 21st of August. The
first two cargoes were accepted at the contract price, $27, but the
customer refuses the third and fourth cargoes, claiming that we were
late on the deliveries. It is a well known fact that all through this
year vessels have been very hard to obtain. Has the New York dealer a
right to refuse to accept the third and fourth cargoes at the contract
price? The price has dropped from the spring to the present time from
$27 to say $24. The customer claims the last two cargoes at the going
market price prevailing at the time they arrived. Inasmuch as the
cargoes cannot be sold over again, except at a less price than the New
York customer offered, we were obliged to let him unload the last two
cargoes. We claim that the customer has no right to deduct anything,
owing to the lateness of delivery, because our orders read, “subject to
delays caused by fires, strikes or other causes beyond our control.”
Reply: We suppose the clause quoted by our correspondent,
“subject to delays,” etc., is incorporated in the contract or is
so prominently printed on the order blank that the buyer cannot
fail to understand that the sale is made subject to it. If that
is true, and if it is also true that the delay in this case
actually arose from a cause beyond the control of the sellers,
then the buyer’s position was not tenable at the beginning. It
is possible, however, that the buyer can maintain his position
now by reason of the acquiescence of the sellers. The buyer had
a right to ask that a deduction in the price be made by reason
of the delay. If the sellers had refused this request and
demanded expressly that the cargo be accepted at the contract
price, or not accepted at all, they could have enforced their
demand. It does not appear very clearly what answer the sellers
made to the buyer’s request for a lower price. Our correspondent
says: “Inasmuch as the cargoes cannot be sold over again, except
at a less price than the New York customer offered, we were
obliged to let him unload the last two cargoes.” There was
plainly a dispute as to whether the delay was one which was
excusable under the terms of the contract, and, if the act of
the sellers, or their answer to the request of the buyer for a
lower price, can be construed into an acquiescence in that
request, the sellers are now bound by such acquiescence. If the
sellers have always insisted that the contract price must be
paid, that the goods must be accepted in strict accordance with
the contract, or rejected, then they are in position to collect
the full contract price for all the lumber.
=Opinion No. 24.=
WHEN LUMBER IS SOLD FOR DELIVERY THERE IS A BREACH OF CONTRACT IF NOT
DELIVERED.
Question from Buffalo, N. Y.—A sells B a carload of lumber at a given
price delivered, Boston rate of freight for shipment from the West. B
gives directions which are accepted by A for shipment of car to a point
taking a Boston rate of freight. The lumber is shipped as per contract,
and the consignee pays a sight draft with bill of lading attached
according to terms. While in transit the lumber is destroyed. Is the
shipper not responsible to the consignee for the lumber, as it was not
delivered, as the contract called for; and after the lumber is destroyed
does the consignee have an option of insisting on having the shipment
replaced or canceling the order?
Reply: Our correspondent calls attention to the fact that the
contract in this case called for a delivery of the lumber at the
end of transportation. This being so, the seller was bound to
carry and deliver the lumber, as well as to furnish it. The
carrier was an agent of the seller and if the lumber is not
delivered the seller is to look to the carrier for damages,
while the buyer looks to the seller. What the seller undertook
to do in this case was to supply the lumber, to carry it, and
then to deliver it. If he fails in either point he is guilty of
a breach of contract. He has failed to deliver the lumber; the
buyer may regard this as a breach of contract, which it is, and
sue for such damages as may have come upon him as a result of
the breach. The buyer cannot compel the seller to replace this
lumber with other; but if the seller would rather do that than
pay damages, and if the buyer is willing to have it done, then,
of course, it may be done.
=Opinion No. 22.=
A LIQUIDATED DEMAND CANNOT BE SETTLED EXCEPT BY PAYMENT OF THE WHOLE
AMOUNT.
Question—An individual in Providence, R. I., who was indebted to me,
forwarded a check for less than the amount of his entire indebtedness.
He stated on the face of it “settlement in full.” This in nowise
discharged his obligation to me and I wrote him that I would credit his
check on account and requested a remittance of the balance. He takes the
position that under the Rhode Island law he has discharged his
indebtedness. Please advise what rights I hold in the premises.
Reply: We do not find any statute or decision in Rhode Island to
the effect that a payment of this kind constitutes payment in
full. All the reported decisions by the courts of that State we
have been able to find lay down practically the same rules upon
the subject that are enforced by the courts of New York. This
payment was made in New York, and the laws of this State govern
it in any event. The law upon the subject here (and, so far as
we can learn, in Rhode Island, too), is briefly this: If there
is no doubt, and no dispute, as to the amount due, then payment
of less than that amount will not discharge the debt, even
though the creditor agree to accept it as a discharge, if there
is no release under seal and no new consideration given. If the
debt is unliquidated, if there is a doubt or dispute as to the
amount of it, then the debtor’s offer of so much as payment in
full constitutes his estimate of the amount really due. The
creditor cannot accept the money without accepting the estimate.
The debtor has a right to go into court to have the dispute
settled, and if the creditor is unwilling to accept the
condition under which the money is sent he is bound to return
the remittance and allow the whole matter to be determined in
some authoritative way. For decisions to the effect that part
payment of a debt that is liquidated and certain is not payment
in full, even when the creditor accepts the money and uses it,
see 23 N. Y., 684; 108 N. Y., 470; 1 R. I., 496; and 8 R. I.,
381.
=Opinion No. 20.=
PRIVILEGE OF STOPPING LUMBER IN TRANSIT WHEN BUYERS BECOME INSOLVENT.
Question—When lumber has been sold and shipped, and the seller
afterwards directs the carrier not to deliver it to the buyer but to
return it to him, is the carrier under any obligation to return it, or
must he go ahead and deliver it to the buyer, or may he exercise his own
will in matter? What are the legal rights of all parties in such a case?
Reply: If one who has sold lumber on credit learns, after it has
been delivered to the carrier, that the buyer is insolvent it is
his right to demand that the lumber be not delivered to the
buyer, but be returned to him. This is known as the right of
stoppage in transit, and it is founded upon the theory that one
who buys on credit is bound by an implied contract to keep his
credit good until the date of payment arrives. In order that the
seller may be entitled to exercise this right the buyer must be
actually insolvent, that is, unable to meet his just obligations
as they fall due; the lumber must be still in the hands of the
carrier, and not yet delivered into the actual or constructive
possession of the buyer. If the lumber is represented by a bill
of lading making it deliverable to the buyer or his order that
must be still under the buyer’s control; if he has transferred
it to a third person, who has taken it for value and in good
faith, the seller’s right of stoppage is gone. If a seller who
has a right to stop the lumber attempts to exercise the right by
directing the carrier not to deliver it the carrier is bound to
obey the direction. The carrier, however, acts at his peril in
any case. If he obeys the instruction and refuses to deliver the
lumber to the buyer, and the buyer is solvent, he may bring an
action of trover against the carrier immediately. On the other
hand, if the carrier disobeys the instruction, and delivers up
the lumber, he makes himself liable to the seller, at least to
the extent of the buyer’s indebtedness for the lumber, if it is
a case in which the seller is justified in exercising his right
of stoppage in transit. Because of these difficulties of his
situation, the carrier is entitled to a reasonable time in which
to investigate the financial condition of the buyer; but if he
finally delivers the lumber to the buyer in any case in which
the seller had a right to countermand the order for their
delivery, and had done so, the carrier must answer for it.
=Opinion No. 27.=
SALES FOR FUTURE DELIVERY.
Frequently the question of credit arises after a contract for future
delivery has been made, and the following may be helpful:
Question—Will you kindly give us your opinion in the following matter: A
makes a sale to B of a certain quantity of lumber for future delivery,
payments to be made on a credit of sixty days’ time. Before the delivery
of lumber begins, A has reason to believe that the responsibility of B
is not satisfactory to him and refuses to ship the lumber except for
cash with discount for the difference in time. What redress has B in
this matter, if he is not in a position to pay cash?
Reply: The refusal of A to ship the lumber to B under
these circumstances constitutes a breach of contract, for
B has an action against A for damages. Something more than
dissatisfaction with B’s financial responsibility is
necessary to furnish A with a valid excuse for his refusal
to ship except for cash.
=Opinion No. 30.=
IN MOST STATES A CONSIGNEE MUST BE NOTIFIED OF THE ARRIVAL OF HIS
LUMBER.
Question—Is a railroad company obliged to notify the consignee of the
arrival of lumber when it is billed and the bill of lading reads: “Order
of shipper, notify consignee,” and if the carriers fail to notify the
consignee, have they the right to charge demurrage or storage for the
lumber so held? Would it make any difference if the lumber were billed
direct to the consignee and were not an “Order notify shipment?” Have
the courts made any rulings of this matter, and where can we find them?
Reply: A railroad company is, of course, bound to comply with
the undertaking set forth in its own bill of lading. If it
accepts goods to be carried and delivered under a bill which
expressly directs it to “notify the consignee” there is no
ground upon which it can escape its obligation actually to
notify the consignee except the impossibility of finding him by
the ordinary means. If the consignee can readily be found the
carrier has not fulfilled the task which it has expressly and in
definite terms undertaken to fulfill until it has found him and
notified him. It has no right to charge demurrage or storage
until such notification has been duly given. If the consignee
cannot be found by the exercise of reasonable diligence then the
attempt to find him will serve the carrier as well as an actual
notification. If the bill of lading does not, in express terms,
direct the carrier to notify the consignee this duty still rests
upon the carrier by common law as it is interpreted in this
State. In some States (Massachusetts, for example) the carrier
is not bound to notify the consignee of the arrival of his goods
unless the contract of carriage expressly so directs. But in New
York the courts hold that this is one of the carrier’s duties,
as carrier, without any special stipulation regarding it. This
is the rule, as the courts of New York have announced it. “The
rules as to the delivery of goods at their place of destination
by a carrier that prevail in this State are as follows: If the
consignee be present upon the arrival of the goods, he must take
them without unreasonable delay. If he be not present, but live
at or in the vicinity of the place of delivery, the carrier must
notify him of the arrival of the goods, and then he has a
reasonable time to remove them. If he be absent, unknown, or
cannot be found, then the carrier can place the goods in its
freight house, and if the consignee does not call for them in a
reasonable time, its liability as a common carrier ceases.”
=Opinion No. 25.=
OBTAINING CERTIFICATES PERMITTING FOREIGN CORPORATIONS TO DO BUSINESS IN
NEW YORK.
A previous opinion contained some information regarding foreign
corporations obtaining certificates to do business in New York. The
following additional information, from our attorney in New York, Mr.
Eustace Conway, 15 William Street, regarding amendments effective
November 1st, will be interesting:
There went into effect on November 1st, 1906, various important
amendments to the corporation Tax Law. The annual franchise tax is
placed on a different basis from what it has been heretofore for
foreign corporations, and the license tax which foreign corporations
have to pay for doing business in this State is also changed as to its
method of determination. Under the new law the measure of amount of
capital stock employed in this State (on which the tax of ⅛ of 1 per
cent. is to be paid for this corporation license to do business here)
is to be such a proportion of the issued capital stock as the gross
assets employed in any business within this State bear to the gross
assets wherever employed in business. As no action shall be maintained
in any of the courts of this State by such foreign corporation without
obtaining a receipt for this license fee, it is important to foreign
corporations expecting to do business here to comply with the statute
and take out the certificate. This tax, of course, is only to be paid
once for the license, unless later an increased amount of capital stock
is employed in the State, but this is not likely to occur. The annual
franchise tax is, of course, a different tax, but it is based on the
same proportion, except that the amount of dividends is also to be
considered.
=Opinion No. 26.=
THE NEW JERSEY LIEN LAW PROTECTS MATERIAL MEN.
Question—Please state whether or not, under the laws of the State of New
Jersey, a seller of building materials comes in under the mechanics’
lien law the same as the man selling his labor.
Reply: Persons furnishing materials for the erection of a
building are called “material men” in the Mechanics’ Lien Law of
New Jersey, and they have a lien which is protected like that of
a laborer. The first section of the law provides that “every
building hereafter erected or built within this State shall be
liable for the payment of any debt contracted and owing to any
person for labor performed or materials furnished for the
erection and construction thereof, which debt shall be a lien on
such building, and on the land whereon it stands.” It is further
provided, in a later section, that “whenever any master-workman
or contractor shall, upon demand, refuse to pay any person who
may have furnished materials used in the erection of any such
house or other building—it shall be the duty of such—material
man to give notice in writing,” etc. As a result of this notice
his lien attaches and his claim is protected.
=Opinion No. 21.=
OBLIGATION OF CARRIERS AS TO NOTICE OF ARRIVAL TO CONSIGNEE.
Question—Is a railroad company, which has accepted lumber for
transportation to a certain point, legally obligated to notify the
consignee at the respective point of the arrival of lumber?
Reply: The law relating to the obligation of a railroad company
to notify the consignee of the arrival of the lumber at the
point of destination is not uniform in all the States. The rule
adopted in New York and in most of the States is that the
carrier must give notice of arrival to the consignee, and that
until notice is given, or a reasonable effort to give notice is
made, the carrier’s liability as carrier continues in force.
=Opinion No. 28.=
BUYERS’ POSITION WHERE, ON ARRIVAL, LUMBER IS NOT IN ACCORDANCE WITH
CONTRACT.
Question—A has sold to B a carload of lumber to be delivered on or
before November 24, payment cash promptly after arrival and examination.
The lumber arrives on the 24th, and A gives on that day to B an
examination order for the lumber, which examination order B accepts. B
uses proper diligence in trying to examine, but, owing to congestion of
cars at the depot the lumber is not unloaded for several days, and he
can only examine it on the 28th. He finds it to be of a quality inferior
to the grade contracted for and rejects it, and his rejection is
sustained by arbitration. B claims the right to go into the market on
the 28th, buy a carload of lumber of the grade contracted for and demand
from A the difference between the contract price and the price paid by
him on the 28th. A maintains that he can only be held responsible for
the difference between the contract price and the ruling market value on
November 24, the last date stipulated in the contract. Who is right?