Alliance Steel, Inc. v. Piland, 94,245.

• Decision Date: 19 May 2006
• Docket Number: No. 94,245.,94,245.
• Parties: ALLIANCE STEEL, INC., Appellant, v. Troy PILAND, Terrance Piland, Douglas Grooms, d/b/a Associated Construction and/or Associated Construction Service, and Robert D. Dunlap, d/b/a Dunlap Construction, Appellees.
• Court: Kansas Court of Appeals

134 P.3d 669

ALLIANCE STEEL, INC., Appellant, v. Troy PILAND, Terrance Piland, Douglas Grooms, d/b/a Associated Construction and/or Associated Construction Service, and Robert D. Dunlap, d/b/a Dunlap Construction, Appellees.

No. 94,245.

Court of Appeals of Kansas.

May 19, 2006.

COPYRIGHT MATERIAL OMITTED

Appeal from Finney District Court; Michael L. Quint, Judge.

Douglas M. Crotty, of Crotty Law Office, P.A., of Garden City, and Ross A. Plourde, of McAffee & Taft, of Oklahoma City, Oklahoma, for appellant.

William I. Heydman, of Heydman Kliewer, LLP, of Garden City, for appellees Troy Piland and Terrance Piland.

Gerald O. Schultz, of Law Offices of Gerald O. Schultz, of Garden City, for appellee Robert D. Dunlap, d/b/a Dunlap Construction.

No appearance by appellee Douglas Grooms, d/b/a Associated Construction Service and/or Associated Construction Service.

Before GREENE, P.J., PIERRON and CAPLINGER, JJ.

PIERRON, J.

Appellant, Alliance Steel, Inc., (Alliance) appeals the district court's granting of appellees' motion to dismiss this mechanic's lien foreclosure action. The court applied Kansas' closed-door statute, K.S.A. 17-7307(a), and held that a foreign corporation that conducts business in Kansas without authority and has failed to comply with the registration statutes may not maintain an action in Kansas. Appellant contends it is not barred by K.S.A. 17-7307(a) from bringing an action in Kansas courts because its activities are limited to interstate commerce and it is not subject to the registration requirements of Kansas. In other words, appellant believes that although it may be "doing business" in Kansas in one sense, it is "not doing business" as contemplated by K.S.A. 17-7303 and K.S.A. 17-7307(a). We agree.

The facts in this case are fairly straight forward. Appellees Troy Piland and Terrance Piland owned real property in Garden City. They entered into an agreement with appellee Robert D. Dunlap, d/b/a Dunlap Construction for the construction of a preengineered metal building on the property. Dunlap then subcontracted with appellee Douglas Grooms. d/b/a Associated Construction and/or Associated Construction Service, for the purchase and erection of the metal building. Grooms in turn contracted with Alliance to furnish the materials and supplies necessary for construction of the building.

Alliance provided supplies and materials to Grooms pursuant to the contract. Piland paid Dunlap, Dunlap paid Grooms, but Grooms did not pay Alliance. On December 17, 2003, appellant filed a lien on the Pilands' property through the Kansas mechanic's lien statutes in the amount of $54,673.00. On April 29, 2004, appellant filed a petition to foreclose the mechanic's lien. This petition stated that Alliance was an Oklahoma corporation "authorized to and doing business in the State of Kansas." The Pilands filed a motion to dismiss the action, arguing appellant's mechanic's lien was filed out of time and was invalid under Kansas law. Alliance filed a first amended petition on May 27, 2004, and a second amended petition on July 27, 2004. In both amended petitions, Alliance stated it was an Oklahoma corporation "authorized to and doing business in Kansas."

On September 8, 2004, the Pilands filed a motion to dismiss Alliance's foreclosure petition based on K.S.A. 17-7307, arguing that Alliance was an Oklahoma corporation doing business in Kansas that was not authorized to do business in Kansas and did not, therefore, have access to the Kansas courts. Dunlap then also moved for dismissal, incorporating the Pilands' reasons. Alliance filed a response to the motion to dismiss arguing that it was not doing business in Kansas and seeking leave to amend its petition to clarify that it was not doing business in Kansas. Attached to this response was an affidavit by Larry Thomas, president of Alliance, stating that Alliance is an Oklahoma corporation and

"maintains no office, place of business, manufacturing facility or distribution point in Kansas. It has no employees or agents in Kansas and does not deliver any wares or products to any agent in Kansas for sale, delivery or distribution. Rather, it manufactures preengineered steel buildings and steel building components in Oklahoma and sells such buildings and components from its office in Oklahoma City, Oklahoma through interstate commerce."

On September 24, 2004, Alliance filed a motion to amend the petition and a document entitled "Amendment to Petition" requesting the district court to grant leave to amend its petition by deleting the phrase "authorized to and doing business in the State of Kansas." The appellees (collectively the Pilands and Dunlap) contend this motion to amend was never set for a hearing and never heard by the court. Appellant contends it was allowed to amend its petition. The record is not clear whether it was.

On October 15, 2004, the district court entertained oral arguments on the motions to dismiss and appellant's response. The court took the motions under advisement. On February 9, 2005, the court granted the appellees' motions to dismiss, holding that appellant was not authorized to bring a cause of action in Kansas without being registered with the Secretary of State:

"1. That [appellant] is an Oklahoma corporation.

"2. That as of the day of the filing of the Petition and filing of the Motion[s] to Dismiss, [appellant] was not registered in the state of Kansas.

"3. That [appellant] provided materials to Douglas Grooms d/b/a Associated Constructions Services, under a subcontract which Douglas Grooms had with Dunlap Construction.

"4. Under the cases Corco Inc. v. Ledar Transport Inc., 24 Kan.App.2d 377, 946 P.2d 1009 (1997) and Panhandle Agri-Service Inc. v. Becker, 231 Kan. 291, 644 P.2d 413 (1982), `if a foreign corporation had done business in Kansas without authority and has failed to comply with the registration statutes, it may not maintain an action in Kansas.'

"5. The Court further accepts the arguments and authority of [appellees'] briefs and grants the Motion[s] to Dismiss."

The court dismissed Alliance's petition without prejudice.

Appellant argues it is not barred by K.S.A. 17-7307(a) from bringing an action in the Kansas courts because its activities are limited to interstate commerce and it is not subject to the registration requirements of Kansas.

In Halley v. Barnabe, 271 Kan. 652, 656, 24 P.3d 140 (2001), the Kansas Supreme Court explained the standard of review for motions to dismiss. The granting of motions to dismiss has not been favored by our courts. 271 Kan. at 656, 24 P.3d 140. The standard of review as found in Knight v. Neodesha Police Dept., 5 Kan.App.2d 472, Syl. ¶¶ 1-3, 620 P.2d 837 (1980), is as follows:

"When a motion to dismiss under K.S.A. 60-212(b)(6) raises an issue concerning the legal sufficiency of a claim, the question must be decided from the well-pleaded facts of plaintiff's petition. The motion in such case may be treated as the modern equivalent of a demurrer.

"Disputed issues of fact cannot be resolved or determined on a motion to dismiss for failure of the petition to state a claim upon which relief can be granted. The question for determination is whether in the light most favorable to plaintiff and with every doubt resolved in plaintiff's favor, the petition states any valid claim for relief. Dismissal is justified only when the allegations of the petition clearly demonstrate plaintiff does not have a claim.

"In considering a motion to dismiss for failure of the petition to state a claim for relief, a court must accept the plaintiff's description of that which occurred, along with any inferences reasonably be drawn therefrom. However, this does not mean the court is required to accept conclusory allegations on the legal effects of events the plaintiff has set out if these allegations do not reasonably follow from the description of what happened, or if these allegations are contradicted by the description itself."

In Noel v. Pizza Hut, Inc., 15 Kan.App.2d 225, 231, 805 P.2d 1244, rev. denied 248 Kan. 996 (1991), the court further explained the review of a motion to dismiss:

"In essence, we are required to assume that the facts alleged by the plaintiffs are true, and we are required to make any reasonable inferences to be drawn from those facts. In addition, it is our duty to determine whether those pleaded facts and inferences state a claim, not only on the theory which may be espoused by the plaintiffs, but on any possible theory we can divine."

However, the question of whether a corporation is doing business in a particular state is a question of fact or a mixed question of fact and law. See Yeager, Borders and Barriers, Definitions of Authority to do Business as a Foreign Corporation, 102 Com. L.J. 398, 413 (Winter 1997). The function of an appellate court is to determine whether the district court's findings of fact are supported by substantial competent evidence and whether the findings are sufficient to support the district court's conclusions of law. Substantial evidence is such legal and relevant evidence as a reasonable person might accept as sufficient to support a conclusion. U.S.D. No. 233 v. Kansas Ass'n of American Educators, 275 Kan. 313, 318, 64 P.3d 372 (2003).

K.S.A. 17-7307(a) provides:

"A foreign corporation which is required to comply with the provisions of K.S.A. 17-7301 and 17-7302 and which has done business in this state without authority shall not maintain any action or special proceeding in this state, unless and until such corporation has been authorized to do business in this state and has paid to the state all taxes, fees and penalties which would have been due for the years or parts thereof during which it did business in this state without authority. This prohibition shall not apply to any successor in interest of any such foreign corporation."

It is well-established authority that a State cannot require a foreign corporation to qualify...