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White v. Caterpillar Tractor Co.

Decided: June 29, 1964.


Appeal from the Superior Court of Baltimore City (JONES, J.).

The cause was argued before Henderson, Hammond, Horney and Marbury, JJ., and Anderson J., Associate Judge of the Sixth Judicial Circuit, specially assigned.


HORNEY, J., delivered the opinion of the Court.

The only question presented by this appeal is whether a foreign corporation was "doing business" in Maryland so as to be amenable to suit in this State under Code (1957), Art. 23, § 92(a).

On October 3, 1962, Henry P. White, the plaintiff-appellant, sued Alban Tractor Company (Alban or dealer), a Maryland corporation, and Caterpillar Tractor Company (Caterpillar or manufacturer), the appellee, alleging a breach of warranty by both defendants in the sale of marine engines manufactured by Caterpillar and sold by Alban to be installed in a yacht constructed for the appellant by a North Carolina boat builder. Caterpillar, pursuant to Maryland Rule 124 c, filed a motion raising preliminary objections for the purpose of moving to dismiss the declaration and to quash service thereof on the ground that the lower court lacked jurisdiction. The appeal is from the order granting the motion.

Caterpillar, a California corporation with its principal offices in Peoria, Illinois, manufactures and sells a variety of tractors, earth moving equipment, diesel engines and replacement parts for all such products to customers in the United States as well as throughout the world. Its sales in this country are primarily to dealers for resale, although a small proportion of its equipment sales are to other equipment manufacturers for resale as a part of their products. Caterpillar, pursuant to the provisions of § 90(a) of Art. 23 permitting registration to do business in Maryland without signifying its consent to be sued here, appointed a resident agent to accept service of process in this State. Alban is the principal dealer in Caterpillar products in Maryland. Its territory encompasses the whole state with the

exception of Garrett and Allegany counties.*fn1 In 1961 Caterpillar sales to Alban aggregated about $8,000,000, and in 1962 83% of Alban's sales involved Caterpillar equipment and products.

The relationship between Caterpillar and Alban was governed by a dealership agreement which provided in part that Caterpillar products were to be sold to Alban at a discount for resale at the manufacturer's list price; that the dealer would maintain in its places of business an adequate supply of replacement parts as well as mechanical services and facilities, employ an adequate number of salesmen, parts personnel and experienced and competent mechanics, and advertise Caterpillar products (with the manufacturer sharing 50% of the cost thereof) under the name of Alban in suitable advertising media throughout its territory in accordance with a booklet of rules as to the manner in which the advertising was to be conducted, all to the satisfaction of the manufacturer; that the dealer was to show motion films of Caterpillar products to prospective customers, keep a mailing list of owners and prospective customers of Caterpillar equipment, and send advertising literature to them, and keep records of such mailings and furnish such information to the manufacturer on request; that the dealer was to keep complete records and make monthly reports to the manufacturer as to inventory and sales, demonstrations and soliciting, and equipment sold or serviced; that Alban was to furnish semiannual reports as to its ownership, financial condition and operation; and that the dealer was not an agent of Caterpillar.

A salaried employee of Caterpillar (Donald L. Shook), who was paid a salary plus expenses, resided in Maryland and spent 40% of his working time here as a research engineer. On arriving here, his first activity concerned the testing of a new Caterpillar product -- a cargo vehicle called a "goer" -- at the Aberdeen Proving Grounds. Thereafter, his duties expanded to observing and supervising field tests of component parts installed on customers' machinery to determine whether such parts were suitable for mass production. He termed his work

for the manufacturer in researching and field testing new products as "a fairly important part of Caterpillar's business." He operated out of his home where Caterpillar customers and the dealer could reach him. Among other things, he visited the dealer two or three times a week to set up tests, observe and assist in whatever way he could, but he did no soliciting in this State.

During 1962 some forty-two other Caterpillar employees came into Maryland on one hundred and fifteen occasions covering more than two hundred and fifty man-days. Most of these employees did not come here to solicit orders, but rather in connection with matters concerning the dealership arrangement between Caterpillar and Alban, including matters of sales promotion and servicing responsibilities. More specifically, the purposes of the many visits were: to get acquainted with Alban personnel; to obtain information for product improvement; to procure performance data on Caterpillar products; to discuss advertising and promotion activities; to gather news release material concerning Caterpillar products; to review Alban's sales efforts; to inspect its data processing ...

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