December i, 1907.] 



THE INDIA RUBBER WORLD 



83 



Rubber Shoes in Interstate Commerce. 



A RECENT (k'cisidii in one of the federal courts, growing 

 out of litigation between two firms in tlie rubber trade, 

 is likely to have an important bearing upon the question 

 of the rights of a corporation under the laws of one state to 

 engage in trade in other states. Briefly, the case is this : The 

 United States Rubber Co., a corporation of New Jersey, con- 

 signed large supplies of rubber footwear to The Butler Brothers 

 Shoe Co., a corporation of Colorado, at Denver, and later 

 brought suit under its contract to secure payment for the goods. 

 In the United States circuit court at Denver a decree was en- 

 tered in favor of the United States Rubber Co., ordering the 

 payment by the defendants of $52,779.83. The case was carried 

 by the latter to the United States circuit court of appeals, and 

 had a hearing at St. Paul, where, on October 25, an opinion (by 

 Circuit Judge Sanborn) was filed, confirming the decree of the 

 circuit court. 



The chief objection of the defendants in the original case to 

 the decree of the court was that the contracts upon which the 

 United States Rubber Co. sued were illegal, and therefore void, 

 because the complainant was a foreign corporation and it carried 

 on business in the state of Colorado without a license, in viola- 

 tion of the statutes of the state. The constitution and laws of 

 Colorado — and of many other states as well — prohibit any foreign 

 corporation from doing any business, acquiring or holding any 

 property, or prosecuting or defending any suit in the state, un- 

 less it has firit filed certain papers with and paid certain fees 

 to the state authorities, and named an agent within the state 

 who can sue or be sued. These regulations the United States 

 Rubber Co. had not complied with, which fact was relied upon 

 by the defendants to estop any action at law by the rubber com- 

 pany. Further, the counsel for the Denver firm argued that the 

 rubber company had an adequate remedy at law in the state 

 courts, and denied the right of the company to resort to the 

 federal courts. 



The decision of tlie circuit court of appeals, wliicli is volumin- 

 ous, reviews the questions above stated in great detail, reviewing 

 many former decisions by the United States circuit courts and 

 by the supreme court that are pertinent to the case. 



An early decision by the supreme court was that a state 

 might exclude the corporation of another state from its jurisdic- 

 tion, or regulate its admission, and that corporations are not 

 within the clause of the constitution of the United States which 

 declares that "the citizens of each state shall be entitled to all 

 privileges and immunities of citizens in the several states." But 

 the broad statement that a state may restrict the action of 

 foreign corporations has been qualified by many later decisions, 

 as new questions have arisen from time to time, with the result 

 that Judge Sanborn holds in the decision here under review : 



"Every corporation empowered by the state of its creation to 

 engage in interstate commerce may carry on that commerce in 

 sound and recognized articles of commerce in every other state 

 in the Union. Every prohibition, obstruction or burden which 

 the other states attempt to impose upon such business is un- 

 constitutional and void." 



The principle involved is, in brief, that whereas every state 

 may regulate business carried on wholly within its own borders 

 as it may see fit, coinmerce carried on between citizens (or cor- 

 porations) of two or more states is interstate commerce, and 

 as such is subject to regulation only by congress, as provided 

 in the constitution of the United States. The constitution of 

 the United States and the acts of congress in pursuance thereof 

 being the supreme law of the land. Judge Sanborn held that 

 the constitution and laws of Colorado should be read in the 

 light of this fact, and that the real intention of the Colorado 



statutes was to apply only to corporations and their acts which 

 did not engage in or constitute interstate commerce. -A large 

 part of the decision, therefore, was devoted to defining interstate 

 commerce. 



Judge Sanborn also held that any corporation in any state 

 has the right to bring or defend suits in the federal courts and 

 to remove suits to them from the state courts, but this point 

 will not be further noticed here. 



In holding that the United States Rubber Co., in the Colorado 

 case, was engaged in interstate commerce, and not merely carry- 

 ing on business within that state, the decision reads : 



"Let us now turn to the contracts, observe what the Rubber 

 Company agreed to do and what it actually did under them, and 

 determine, if possible, whether or not in making, or in pro- 

 forming these agreements it was guilty of doing any business 

 within the meaning of the constitution and statutes of Colorado. 

 It agreed to ship the goods from its warehouse, or its mill, upon 

 the orders of the appellee, to that Company in Denver, and it 

 did so. It contracted to do, and it did nothing more. It never 

 had any office or place of business in Colorado ; it never re- 

 ceived, stored, handled or sold any goods, or collected any money 

 for the sales of any goods in that state under this contract. It 

 never incurred, assumed or paid any expenses of doing all these 

 things, or of conducting any of the business. The Shoe Com- 

 pany had and maintained a place of business in Colorado, it 

 rented or owned the place in which the business in Colorado 

 was done, and it agreed to bear all the expenses and losses of 

 receiving, storing and selling the goods and it did so. The pur- 

 chasers of the goods were purchasers from it, solicited and 

 secured by it. They were its customers and liable to it for the 

 purchase price of the goods. The goods were billed to them in 

 the name of the .Shoe Company as consignee. The profits of 

 the business and the work of the business, the labor of receiving, 

 storing and selling the goods were the Shoe Company's. The 

 profits constituted its factorage, its compensation for carrying 

 on the business. 



"There is no question here between the state and the Shoe 

 Company, or between the Shoe Company and the purchasers of 

 the goods, or between the Rubber Company and the purchasers 

 of the goods. The question here is between the consignor and 

 the factor, and it is whether the consignor, which did not agree 

 to do, and did not, in fact, do the business of receiving, storing 

 and selling these goods, or the factor who did contract to do 

 and did actually do the business of receiving, storing and selling 

 these goods, in Colorado, and who received the factorage there- 

 for, was doing that business. In a simple transaction the true 

 answer seems clear. A farmer sends to a commission merchant 

 in a city a dozen barrels of apples for him to sell. The factor 

 puts them in his store, sells them, receives the proceeds and re- 

 mits them less his factorage. The farmer from time to time 

 sends a thousand barrels during the season, and they are sold 

 and the proceeds are remitted in the same way. The farmer 

 is not carrying on the business of selling apples in the city, but 

 the factor is. The transaction in hand is larger, but in every 

 element which conditions its legal character and effect it is not 

 different. The transaction between the parties to this suit was 

 interstate commerce. The Rubber Company did not agree to do. 

 and did not actually do, any business of receiving, storing ai.d 

 selling the goods in Colorado. The Shoe Company did agree to 

 do, and did so, that business. These facts have driven our minds 

 with compelling force to the conclusion that within the true 

 intent and meaning of the constitution and statutes of Colorado 

 the Rubber Company was not doing business in that state and 

 the contracts between these litigants are valid and enforceable." 



