Springle v. Cottrell Engineering Corp.

Wilner, J., delivered the opinion of the Court. We have before us cross-appeals from a judgment entered by the Circuit Court for Anne Arundel County on an action by Gene Springle. Mr. Springle was a seaman who claims to have been injured while serving aboard the dredge “Richmond”, and he sued the owner of the dredge (Cottrell Engineering Corporation) because of its failure to provide him with maintenance and cure. 1 The threshold question arises from appellee’s cross-appeal; that is, whether the court had jurisdiction to entertain this action in the first place (or, more precisely, whether the court erred in denying its motion raising preliminary objection filed under Maryland Rule 323, alleging a want of jurisdiction over appellee). After pointing out that appellant is a resident of North Carolina, that appellee is incorporated in Delaware and has its principal office in Virginia, and that the incident giving rise to the claim for maintenance and cure occurred in North Carolina, appellee asserts that “[i]n order for a Maryland Court to have jurisdiction over a foreign corporation, one of the requirements set forth in § 6-103 of the Courts and Judicial Proceedings Article (the Long Arm Statute) must be complied with.” Building upon that foundation, appellee attempts to show how it does not meet any of the six requirements for in personam jurisdiction under that statute.

More precisely, appellee’s claim appears to be that this cause of action did not arise from any of the types of contacts with Maryland enumerated in § 6-103, and for that reason, jurisdiction does not exist in this case. The question of jurisdiction may not be decided solely on the basis of § 6-103, however. Drawn into play as well are ²⁶⁹ Courts article § 6-102 (a), Corporations and Associations article § 7-210, and the overlay of due process which, ultimately, circumscribes the reach of the in personam jurisdiction of a Maryland court over a foreign corporation. ' To trace through the interplay of these statutes and concepts, we first must identify what they are. The “bases of personal jurisdiction” of Maryland courts are set forth in Courts article, §§ 6-101 through 6-104.

Section 6-101 consists of definitions. Section 6-102 provides: “(a) A court may exercise personal jurisdiction as to any cause of action over a person domiciled in, served with process in, organized under the laws of, or who maintains his place of business in the state. (b) This section does not limit any other basis of personal jurisdiction of a court of the state.” (Emphasis supplied.) Section 6-103, which is generally referred tó as “long-arm” statute, provides: “(a) If jurisdiction over a person is based solely upon this section, he may be sued only on a cause of action arising from any act enumerated in this section. (b) A court may exercise personal jurisdiction over a person, who directly or by an agent: (1) Transacts any business or performs any character of work or service in the state; (2) Contracts to supply goods, food, services, or manufactured products in the state; (3) Causes tortious injury in the state by an act or omission in the state; (4) Causes tortious injury in the state or outside of the state by an act or omission outside the state if he regularly does or solicits business, engages in any other persistent course of conduct in the state or derives substantial revenue from goods, food, ²⁷⁰ services, or manufactured products used or consumed in the state; (5) Has an interest in, uses, or possesses real property in the state; or (6) Contracts to insure or act as surety for, or on, any person, property, risk, contract, obligation, or agreement located, executed, or to be performed within the state at the time the contract is made, unless the parties otherwise provide in writing.” Section 6-104 codifies the doctrine of forum non conveniens.

It provides: “If a court finds that in the interest of substantial justice an action should be heard in another forum, the court may stay or dismiss the action in whole or in part on any conditions it considers just.” The record here shows that appellee qualified to do business in Maryland in 1964; that, pursuant to State law it appointed and has maintained a resident agent authorized to accept service of process on its behalf; and that service of process in this case was, in fact, duly made in Maryland upon that resident agent so appointed. In that circumstance, § 6-102 (a) would appear to provide an independent basis for jurisdiction over appellee, a basis apart from those set forth in § 6-103 and founded solely upon appellee’s being served with process in Maryland. Two questions arise, however, as to whether § 6-102 (a) may be applied in quite so straightforward a manner. The first is whether, and to what extent, Corporations and Associations article, § 7-210, detracts from this basis of jurisdiction, and the second is whether, and to what extent, jurisdiction may constitutionally attach to a foreign corporation simply by virtue of its being served with process in Maryland.

These two questions are very much interrelated. Section 7-210, which is part of the subtitle dealing with the registration and qualification of foreign corporations, provides: “With respect to any cause of action on which a ²⁷¹ foreign corporation would not otherwise be subject to suit in this State, compliance with this subtitle: (1) Does not of itself render a foreign corporation subject to suit in this State; and (2) Is not considered as consent by it to be sued in this State.” (Emphasis supplied.) There is an historical relationship between these three statutes (§§ 6-102 and 6-103, Courts article, and § 7-210, Corporations article) which emanates from the due process requirements laid down, from time to time, by the Supreme Court. In Pennoyer v. Neff, 95 U. S. 714 (1878), the Court held, in effect, that, in order for a State court to determine the personal liability of a defendant, and to render a valid in personam judgment against him, “he must be brought within its jurisdiction by service of process within the State, or his voluntary appearance.” 95 U. S. at 733 . The Court did permit somewhat of an end run around this principle when it stated, at page 735: “Neither do we mean to assert that a State may not require a non-resident entering into a partnership or association within its limits, or making contracts enforceable there, to appoint an agent or representative in the State to receive service of process and notice in legal proceedings instituted with respect to such partnership, association, or contracts, or to designate a place where such service may be made and notice given, and provide, upon their failure, to make such appointment or to designate such place that service may be made upon a public officer designated for that purpose, or in some other prescribed way, and that judgments rendered upon such service may not be binding upon the non-residents both within and without the State.” This “exception” was not very helpful, however, with respect to foreign corporations, which continued to transact business of varying types and degrees within the borders of ²⁷² many States, without appointing “resident” agents to accept service of process.

In order to bring a foreign corporation within the range of personal jurisdiction permitted by Pennoyer v. Neff, and its predecessors, a number of theories and fictions were tried by the States. See Fletcher Cyclopedia Corporations (1977 Rev.), Vol. 18, § 8640; Jurisdiction of Maryland Courts over Foreign Corporations Under the Act of 1937, 3 Md.L.Rev. 35 (1938); The “Long Arm" Comes to Maryland, 26 Md.L.Rev. 13 (1966). Maryland’s approach to the problem was found in Laws of Md., 1868, ch. 471, codified as Md. Code (1888), art. 23, §§ 288, 290. Section 288 provided that any corporation not chartered by the laws of Maryland “which shall transact business therein, shall be deemed to hold and exercise franchises within this State, and shall be liable to suit in any of the courts of this State, on any dealings or transactions therein.” Section 290 provided that suits may be brought in Maryland “against any corporation not incorporated under its law, but deemed to hold and exercise franchises therein ... by a resident of this State, for any cause of action; and by a plaintiff, not a resident of this State, when the cause of action has arisen, or the subject of the action shall be situated in this State----” Process was permitted to be served upon “any agent of such corporation”.

Maryland, in common with many States, thus adopted the premise that if a foreign corporation “transacted business” in the State, it was subject to the jurisdiction of the State’s courts, at least to the extent that the statute permitted such jurisdiction to be exercised. If service of process could be obtained in accordance with § 290, the Maryland courts were open to any resident of the State upon any cause of action, and to non-residents if the cause of action arose or the subject matter of the action was situate in the State. Maryland courts had no jurisdiction, however, over a suit against a foreign corporation by a non-resident upon a cause of action arising (or a subject matter situate) elsewhere, unless the defendant corporation appeared voluntarily, in which event jurisdiction could be exercised. See Fairfax Forrest Co. v. Chambers, 75 Md. 604 (1892). ²⁷³ The General Assembly rewrote the corporation law in 1908 (Laws of Md., 1908, ch. 240).

In new section 67 (of art. 23), it provided that “any person or corporation, whether a resident or a non-resident of this State, may sue any foreign corporation regularly doing business or regularly exercising any of its franchises herein for any cause of action.” Facilitating the exercise of this right, section 68 required every foreign corporation (except insurance companies) “which has a usual office or place of business in this State” to file with the Secretary of State (1) a copy of its charter, and (2) an annual certificate stating, among other things, “the name and address of its agent, resident in this State, and authorized to accept service of process upon it” and “its willingness that so long as any liability remains outstanding against it in this State, the authority of such agent shall continue until a substitute is appointed____” This change introduced the concept (and requirement) of a “resident agent” and expanded the right to sue on matters not arising within the State to non-residents. See Hagerstown Brewing Co. v. Gates, 117 Md. 348 (1912). On the other hand, it limited jurisdiction to those foreign corporations “regularly” doing business or exercising their franchises in Maryland. Whereas under the earlier law State jurisdiction rested exclusively upon the “presence” of a foreign corporation presumed by reason of its transacting business in the State, the device of requiring the appointment of a resident agent authorized to accept service of process added another theory, or fiction, upon which such jurisdiction could be based — that of consent.

This is a theory that won apparent Supreme Court approval in Pennsylvania Fire Insurance Co. v. Gold Issue M. & M. Co., 243 U. S. 93 (1917). In 1937, the General Assembly, as part of another major revision in the corporation law, again dealt with the question of jurisdiction over foreign corporations. Laws of Md., 1937, ch. 504. In new § 118 of art. 23, it provided a tri-partite jurisdiction, fairly described by Professor Kenneth Reiblich in 3 Md.L.Rev. at 36, 37 (supra) as follows: “(1) a general jurisdiction to be asserted over all foreign corporations ‘doing business’ in ²⁷⁴ Maryland, regardless of where the cause of action arose, and regardless of where the plaintiff is a resident; (2) a continuance of such jurisdiction after the corporation has ceased to do business in Maryland, as to causes of action arising out of business done in Maryland, or in favor of Maryland residents and others with a usual place of business in Maryland; (3) jurisdiction for any cause of action arising out of any act done in Maryland, whether or not the corporation is regularly doing business, if plaintiff is a resident or has a usual place of business in Maryland.” Section 119 required every foreign corporation, with exceptions not relevant here, to have at least one resident agent in the State.

It provided also that “service of process upon any such resident agent of a foreign corporation shall bind such foreign corporation in any action in which it is subject to suit in this State.” (Emphasis supplied.) Section 105 provided that, if a resident agent could not be found, or served, process could be served upon “any agent or other person expressly or impliedly authorized to accept such service”, and further that, if a foreign corporation failed to appoint a resident agent “such corporation shall be conclusively presumed to have designated the State Tax Commission as its true and lawful attorney authorized to accept on its behalf service of process in the action in which such process issued....” Immediately, considerable apprehension was expressed that the registration requirements and the sanctions for their violation might constitute an undue burden on interstate commerce, at least with respect to corporations doing only interstate business. 2 There was, indeed, a legitimate basis for that concern; in Sioux Remedy Co. v. Cope, 235 U. S. 197 (1914), the Supreme Court had stricken down a somewhat ²⁷⁵ analogous scheme enacted by South Dakota. 3 The Attorney General attempted to answer that concern, avoid the objections raised to the South Dakota statute, and thus sustain the facial validity of the new law by construing the registration requirement, and the effect of compliance with it, very narrower. In response to an inquiry by the State Tax Commission, he opined: 4 “It should be noted that the requirement of registration, by designating an agent for the service of process, does not subject foreign corporation doing an interstate business to suit in any case where such corporations would not have been subject to suit under the preexisting law. In other words, the requirement of designating an agent does not enlarge the liabilities of such corporations, since Section 118, as amended, appears to be no broader in substance than in its previous form, as enacted by Chapter 240 of the Acts of 1908.” (Emphasis supplied.) Two months later, the Attorney General made clear that this statement applied as well to “corporations doing a foreign business.” 22 Op.Atty.Gen. 262 (1973). Here, he concluded: “As we construe the amended statute, the State requires every foreign corporation, doing interstate or foreign business in the State in such a manner and to such an extent that it is subject to suit in this State, to disclose how it can be reached by process in actions in which it is subject to suit in this State. ²⁷⁶ No attempt is made to exact from the corporation a consent to be sued in this State in actions in which it could not otherwise be so sued. “If compliance with the registration requirement constituted consent to suit in this State, in actions in which the corporation could not constitutionally be made subject to suit, the registration requirement would be unconstitutional.” 5 Professor Reiblich acknowledged these two opinions in his rather comprehensive law review article.

As to the “commerce clause” problem, he stated that the current law was unclear as to whether a corporation by qualifying “could consent (and therefore waive any right to object) to unreasonable burdens imposed on its interstate business.” Reiblich’s principal concern involved due process principles. He considered the opinions of the Attorney General to stand for the proposition that “compliance with section 119 (qualification) would not be deemed a consent to jurisdiction not otherwise present.” (p. 38). Citing no authority, however, he noted, “But under the cases to date, compliance with the qualification sections of such a law has been taken to be consent to the jurisdiction provisions.” Reiblich saw the problem as involving the distinction between foreign corporations that complied with the requirements of § 119 and qualified and those that ignored the statutory requirement. Relying upon Pennsylvania Fire Insurance Co. v. Gold Issue M. & M. Co., supra, he concluded, contrary to the opinion expressed by the Attorney General, that, “as to the qualifying corporation, the prevailing present opinion would be that the provisions of the Maryland law are entirely valid as far as the ‘due process’ objection is concerned, even though qualification is taken to be consent to jurisdiction.

In such case jurisdiction is said to rest upon the express consent of the foreign corporation and may be asserted as broadly as the law allows.” ²⁷⁷ The situation, he concluded, was different with respect to “non-qualifying” corporations. As to them, the “express consent” basis of jurisdiction did not exist; and, absent that, jurisdiction under § 118 (a) could be based only upon a showing that the defendant corporation was “doing business” in the State. This created a number of problems for a would-be plaintiff, however. Isolated contacts with the State would not suffice; for jurisdiction to lie under the “doing business” theory, a greater quantum and regularity of contact was necessary — that sufficient to establish the corporation’s “presence” in the State.

Even where that hurdle was cleared, Reiblich questioned whether jurisdiction based solely upon “doing business” might not constitutionally be limited to causes of action arising in the State. The net effect of this disparity between the practical scope of jurisdiction arising from “consent” and that arising from “doing business” would be to reward the corporation that ignored the requirements of § 119 and failed to qualify in Maryland and, conversely, to penalize those corporations that complied with the law. Reiblich believed that, from a “due process” point of view, equal jurisdiction could exist under either approach — that “doing business” amounted to an implied consent, and that the same jurisdiction applicable to a qualifying corporation upon an “express consent” theory could also be applied to a non-qualifying corporation doing business in Maryland. He recognized, however, that, for policy reasons, it may be inappropriate for the Maryland, courts to exercise the jurisdiction that they constitutionally and by statute possessed where the cause of action did not arise in this State.

The answer to that, he suggested, was an expanded use of the doctrine of forum non conveniens — that the court simply decline to exercise its jurisdiction if another forum existed and was more appropriate. The opinions of Professor Reiblich and the Attorney General were not shared by Judge Eugene O’Dunne of the Circuit Court for Baltimore City. In Steinwender, Stoffregen & Co. v. Ritchey, et al. (Daily Record, Sept. 14, 1940), that court, basing its decision primarily upon Sioux Remedy Co. v. Cope, supra, declared the registration requirements of ²⁷⁸ sections 119 and 120, as enacted by ch. 504, unconstitutional as applied to a foreign corporation doing any interstate business in Maryland. The court declared “the registration provision and appointment of resident agent, and deposit of [the $200 penalty exacted for failure to comply] unconstitutional, as attempted to be applied to interstate commerce, but as being entirely constitutional when applied exclusively to intrastate commerce.” Shortly after this decision by Judge O’Dunne, the General Assembly convened for its 1941 session, in which it enacted Laws of Md., 1941, ch. 687.

This was the original enactment of what is now Corporations article, § 7-210. It amended § 120 (a) of article 23 6 by adding to it the following italicized language. “Service of process upon any such agent of a foreign corporation shall bind such foreign corporation in any action in which it is subject to suit in this State; but, notwithstanding any other provisions of this Article to the contrary, compliance with this section shall not of itself render a foreign corporation subject to suit in this State, or be construed as a consent by it to be sued in this State, on any cause of action on which it would not be subject to suit in this State if it had not complied with this section (Emphasis supplied, indicating the amendment.) There is no direct legislative history indicating the purpose of this statute; even the title to the Act is silent except to note the article and section amended. This precise question was addressed, however, in Gibson v. United States Lines, 74 F. Supp. 776 (D. Md., 1947) where, after reciting some of the history recounted above, Judge Chesnut concluded, at page 780: “And I think it clearly inferable that the intention of the Legislature in passing the Act of 1941 was to make it clear that if foreign corporations did qualify or register with the State Tax Commission, they ²⁷⁹ would not merely thereby subject themselves to suit in Maryland on causes of action as to which they had a constitutional right to exemption by reason of interstate business.” (Emphasis supplied.) Placing the 1941 Act in context, he opined, at page 779: “In the first place, it is to be noted that so far at least as the liability of foreign corporations to suit in the Maryland State Courts is concerned, the fundamental basis therefor is not the designation of a resident agent, but the ‘doing of business’ within the State. The requirement of the appointment of a resident agent is procedural in nature, to facilitate the service of process on the corporation, and to make the suit against it effective.

The purpose of the Act of 1941 was to make it clear that a foreign corporation, not subject to suit in this State under the provisions of section 119 (as, for instance, where the business is only interstate or foreign as opposed to intrastate), does not subject itself to suit merely by appointing a resident agent.” In this passage, Judge Chesnut construed the 1941 amendment as clearly rejecting the “express consent” basis of jurisdiction — in., “express consent” implied or arising from compliance with the qualification requirements. If, as he put it, the “fundamental basis” of State jurisdiction was the “doing of business”, then the 1941 Act was intended to do nothing more than to satisfy the objections raised in Judge O’Dunne’s opinion, and to express in the Maryland Code what was then perceived to be the constitutional limitation upon State jurisdiction. 7 ²⁸⁰ The constitutional framework within which these various theories operated was changed substantially when the Supreme Court decided International Shoe Co. v. Washington, 326 U. S. 310 (1945). Sweeping away some (but not all) of the fictions upon which jurisdiction over foreign corporations had previously been founded, the Court fashioned a new, more flexible, test which, with citations omitted, it stated thusly ( 326 U. S. at 316 ): “Historically the jurisdiction of courts to render judgment in personam is grounded on their de facto power over the defendant’s person. Hence his presence within the territorial jurisdiction of a court was prerequisite to its rendition of a judgment personally binding him____But now that the capias ad respondendum has given way to personal service of summons or other form of notice, due process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice. ’ “Since the corporate personality is a fiction, although a fiction intended to be acted upon as though it were a fact ... it is clear that unlike an individual its ‘presence’ without, as well as within, the state of its origin can be manifested only by activities carried on in its behalf by those who are authorized to act for it.

To say that the corporation is so far ‘present’ there as to satisfy due process requirements, for purposes of taxation or the maintenance of suits against it in the courts of the state, is to beg the question to be decided. For the terms ‘present’ or ‘presence’ are used merely to symbolize those activities of the corporation’s agent within the state which courts will deem to be ²⁸¹ sufficient to satisfy the demands of due process____ Those demands may be met by such contacts of the corporation with the state of the forum as make it reasonable, in the context of our federal system of government, to require the corporation to defend the particular suit which is brought there.” Fletcher boils all of this down as follows (§ 8640.1): “In other words, the court replaces the implied consent and presence theories with one of reasonableness: Does the corporation have sufficient minimum contacts with the forum to make it reasonable to subject it to the jurisdiction of the forum in view of the quality and nature of the corporate activity.” International Shoe Co. left open the question of whether a foreign corporation possessing the requisite minimum contacts with a State to establish general jurisdiction could yet be sued on a cause of action that was not related to its activities in the State. That question was answered in Perkins v. Benguet Consolidated Mining Co., 342 U. S. 437 (1952), when the Court concluded that due process would not be offended by the exercise of such jurisdiction. Whether jurisdiction should be exercised in such a case was a matter for the State to determine.

Following these decisions and one other — McGee v. International Life Ins. Co., 355 U. S. 220 (1957) — a number of States began to enact what became known as “long-arm” statutes, extending local jurisdiction over foreign corporations based solely upon the most minimal activities within the State. Maryland entered these waters in 1964, but in a somewhat confusing way. By Laws of Md., 1964, ch. 95, new sections 94 through 100 were added to article 75 of the Code — the article dealing with “Pleadings, Practice and Process at Law”.

No change in, or reference to, the then-existing provisions of article 23, upon which the State’s jurisdiction had theretofore been based, was made by this Act. In fact, in section 2 of the Act, the General ²⁸² Assembly declared that “this [new] subtitle shall be deemed to be supplementary to any law of this State providing for personal jurisdiction over persons outside this State, and nothing contained shall repeal or modify any law of this State authorizing the exercise of jurisdiction on any basis other than the basis provided herein.” The new Act, after defining the word “person” to include a corporation, whether or not organized under the laws of this State, provided as follows: “95. A court may exercise personal jurisdiction over a person domiciled in, organized under the laws of, or maintaining his or its principal place of business in, this State as to any cause of action. “96. (a) A court may exercise personal jurisdiction over a person, who acts directly or by an agent, as to a cause of action arising from the person’s (1) transacting any business in this State; (2) contracting to supply services in this State; (3) causing tortious injury in this State by an act or omission in this State; (4) causing tortious injury in this State by an act or omission outside the State if he regularly does or solicits business, engages in any other persistent course of conduct in this State or derives substantial revenue from food or services used or consumed in this State; (5) having an interest in, using, or possessing real property in this State; or (6) contracting to insure any person, property, or risk located within this State at the time of contracting.

(b) When jurisdiction over a person is based solely upon this section. “97. When the exercise of personal jurisdiction is authorized by this subtitle, service may be made outside this State. ²⁸³ “98. When the court finds that in the interest of substantial justice the action should be heard in another forum, the court may stay or dismiss the action in whole or in part on any conditions that may be just. “99. A court of this State may exercise jurisdiction on any other basis authorized by law. “100.

Service of process upon any person may, in addition to any other method allowed by law, be made in accordance with Chapter 100 of the Maryland Rules of Procedure or in such other manner as may hereafter be established by rule of the Court of Appeals of Maryland.” With respect to foreign corporations, this new Act created parallel bases of jurisdiction — one arising from the provisions in article 23, and the other arising from these new provisions in article 75. The Act itself was based upon Article I of the then recently approved (1962) Uniform Interstate and International Procedure Act. Section 95, as then adopted, was identical to § 1.02 of the Uniform Act, and provided three alternative bases of in personam jurisdiction: domicile in the State, organization under the laws of the State, or maintenance of a principal place of business in the State. This was more restrictive than what was permitted under preexisting law under which jurisdiction was possible even where none of these three circumstances existed; but, in light of the expanded scope of jurisdiction permitted under § 96 (the general counterpart to § 1.03 of the Uniform Act), this was not thought to be a problem. 8 ²⁸⁴ The relationship between the parallel or alternative bases of jurisdiction spread between articles 23 and 75 came before the Court of Appeals in Gilliam v. Moog Industries, 239 Md. 107 (1965); but the Court addressed only part of the issue.

A non-resident plaintiff sued a foreign corporation, which apparently had not qualified in Maryland and therefore had not appointed a resident agent, on a contract made in Missouri. Process was served on the Department of Assessments and Taxation pursuant to the relevant provisions in article 23. 9 From the factual circumstances in the case, the Court concluded that the defendant corporation (Moog) was not “doing business” in Maryland which, it concluded, was a pre-requisite to jurisdiction under the provisions of article 23, § 92. 10 The plaintiff/appellant then urged the Court to conclude that jurisdiction arose from the new provisions of article 75. The Court acknowledged the new statute, and said of it ( 239 Md. at 111 ): “It seems clear that the purpose of the Legislature in enacting these new provisions was to give the courts of the State personal jurisdiction over all out of state persons and corporations which constitutionally could be reached as having had sufficient Maryland contacts, under the jurisdictional yardstick established by the Supreme Court in ²⁸⁵ cases such as [International Shoe Co., McGee, and Hanson v. Denckla 11 ].” Having so commented, the Court declined to consider whether and to what extent the new statute applied because (1) the