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Keywords

contractplaintiffdefendantstatutecorporationcompliance

plaintiffdefendantstatutepleacorporation

Related Cases

Sioux Remedy Co. v. Cope, 235 U.S. 197, 35 S.Ct. 57, 59 L.Ed. 193

Facts

The plaintiff, an Iowa corporation, sold merchandise to the defendants in South Dakota under a written contract. The merchandise was shipped from Iowa to South Dakota, but the plaintiff had not complied with a South Dakota statute that required foreign corporations to file certain documents and appoint a resident agent before they could sue in the state. The defendants argued that the action could not be maintained due to this noncompliance, leading to the dismissal of the case by the state courts.

The action was brought in a court of the latter state, and the defendants interposed a plea to the effect that the action could not be maintained because, as was the fact, the plaintiff had not complied with a South Dakota statute prescribing conditions upon which corporations of other states would be permitted to sue in the courts of that state.

Issue

Whether the South Dakota statute imposing conditions on foreign corporations seeking to sue in state courts is unconstitutional as it burdens interstate commerce.

In that court it was contended that the statute upon which the plea was grounded is, when applied in a case like this, repugnant to the commerce clause of the Constitution of the United States.

Rule

A state cannot impose unreasonable conditions on foreign corporations that would burden their right to engage in interstate commerce, as such actions are restricted by the commerce clause of the U.S. Constitution.

The statute ( Rev. Civ. Code 1903 ) declares (§ 883) that no corporation created under the laws of any other state or territory, for other than religious and charitable purposes, ‘shall transact any business within this state, or acquire, hold, and dispose of property, real, personal, or mixed, within this state, or sue or maintain any action at law or otherwise in any of the courts of this state,’ until it shall have filed in the office of the secretary of state an authenticated copy of its charter or articles of incorporation.

Analysis

The Supreme Court analyzed the South Dakota statute and determined that the conditions imposed on foreign corporations were not only onerous but also had no reasonable relation to the right to sue. The court emphasized that the right to demand payment for goods sold in interstate commerce is intrinsically linked to that commerce, and thus, imposing conditions that restrict this right constitutes a burden on interstate commerce.

The argument advanced in support of this position is, first, that the right to demand and enforce payment for merchandise sold in interstate commerce is no part of such commerce, and therefore may be encumbered without burdening the latter; second, that a state may impose such conditions as it deems appropriate upon the right of foreign corporations to sue in its courts; and, third, that in any event the conditions imposed by the statute are not unreasonable or burdensome.

Conclusion

The Supreme Court reversed the judgment of the South Dakota courts, ruling that the conditions imposed by the state statute were unreasonable and in conflict with the commerce clause, thereby allowing the Iowa corporation to proceed with its action.

These views require that the judgment be reversed and the cause remanded for further proceedings not inconsistent with this opinion.

Who won?

International Textbook Company prevailed in the case because the Supreme Court found that the South Dakota statute imposed unreasonable conditions that burdened interstate commerce.

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