Country Cupboard, Inc. v. Texstar Corp.

• Decision Date: 10 July 1978
• Docket Number: No. 19550,19550
• Citation: 570 S.W.2d 70
• Parties: COUNTRY CUPBOARD, INC., Appellant, v. The TEXSTAR CORPORATION, Appellee.
• Court: Texas Court of Appeals

Page 70

570 S.W.2d 70

COUNTRY CUPBOARD, INC., Appellant, v. The TEXSTAR CORPORATION, Appellee.

No. 19550.

Court of Civil Appeals of Texas, Dallas.

July 10, 1978.

Rehearing Denied Aug. 21, 1978.

James A. Knox, Vial, Hamilton, Koch, Tubb, Knox & Stradley, Dallas, for appellant.

Marshall M. Searcy, Jr., Rain, Harrell, Emery, Young & Doke, Dallas, for appellee.

ROBERTSON, Justice.

Country Cupboard, Inc., a dissolved Nevada corporation acting through its liquidating trustees, sued The Texstar Corporation, seeking rescission of a written agreement executed in settlement of a claim pressed by Texstar. Country Cupboard asserted that the claim was made in bad faith and that the settlement agreement was procured through duress and business compulsion. Texstar moved to dismiss the suit on the grounds that Country Cupboard did not possess a valid certificate of authority to do business in Texas, and thus could not sue in this state. Alternatively, Texstar argued that Country Cupboard's suit was barred by the statute of limitations. The trial court granted the motion to dismiss, and Country Cupboard now appeals. We reverse and remand.

The primary question on this appeal is whether the dissolved Nevada corporation has legal capacity to sue in the courts of this state. If we conclude that it does, we must then decide whether the present suit is barred by the statute of limitations.

Capacity to Sue

Country Cupboard first argues that the trial court erred in concluding that, as a dissolved foreign corporation, it has no capacity to sue in the courts of Texas. It asserts that its capacity is to be determined by the law of Nevada, the state of its incorporation, and that under Nevada law, its liquidating trustees are empowered to sue for and recover the debts and property of the corporation after dissolution. We agree. The question of whether a foreign corporation continues in existence after dissolution for the purpose of prosecuting and defending suits is determined by the laws of the state in which the corporation was created. See Miller Management Co., Inc. v. State, 140 Tex. 370, 167 S.W.2d 728 (1943); Ferguson-McKinney Dry Goods Co. v. Garrett, 252 S.W. 738 (Tex.Com.App. 1923, jdgmt. adopted); 3 Hildebrand, Texas Corporations 403 (1942). In the present case, Nevada law allows the corporate entity to continue after dissolution for litigation purposes. Section 78.585 of the Nevada Revised Statutes provides, in part:

All corporations, whether they expire by their own limitation, or are otherwise dissolved, or whose charter has been forfeited, shall nevertheless be continued as bodies corporate for the purpose of prosecuting and defending suits, actions, proceedings, and claims of any kind or character by or against them . . . (Emphasis added)

Section 78.595 of the Nevada Revised Statutes specifically grants the liquidating trustees of the dissolved corporation "authority to sue for and recover" debts owed to the corporation. Thus, under Nevada law, a dissolved corporation has the legal capacity to sue, and since the question of capacity to sue in Texas is controlled by Nevada law, we conclude that Country Cupboard also has capacity to sue here.

Although no formal motion to take judicial notice of Nevada law was made under Rule 184a of the Texas Rules of Civil Procedure, we conclude that by pleading the Nevada law in both its original and amended petitions, Country Cupboard sufficiently directed the attention of both the trial court and opposing counsel to the applicability of Nevada law. Formal motions to take judicial notice of foreign law are not necessary if the foreign law has been distinctly pleaded by the party asserting its applicability. ¹ See Gevinson v. Manhattan Construction Co. of Oklahoma, 449 S.W.2d 458 (Tex.1969); Utica Mutual Insurance Co. v. Bennett, 492 S.W.2d 659 (Tex.Civ.App. Houston (1st Dist.) 1973, no writ); Milner v. Schaefer, 211 S.W.2d 600 (Tex.Civ.App. San Antonio 1948, writ ref'd).

In refusing to apply foreign law in Gevinson, our supreme court stated:

Our attention has not been directed to any Pleading or proof concerning the law of the (foreign) state Or to a motion that the trial court take judicial notice thereof as provided in Rule 184a, T.R.C.P. (449 S.W.2d at 465, n. 2) (emphasis added)

This language recognizes that pleading and motions under Rule 184a are Alternative means of directing the trial court's attention to the applicability of foreign law. We note, however, that even if these pleadings were insufficient to invoke the applicability of foreign law, our decision would be the same. In the absence of proper invocation of foreign law, Texas courts must presume the foreign law to be the same as that of Texas. Gevinson v. Manhattan Construction Co. of Oklahoma, supra. Since art. 7.12 of the Texas Business Corporations Act and art. 1302-2.07 of the Texas Miscellaneous Corporation Act provide that Texas domestic corporations retain legal capacity to sue after dissolution, we would, under Gevinson, presume that Nevada law grants its corporations a similar post-dissolution capacity.

Texstar argues that even if Country Cupboards has capacity to sue under Nevada law, it still cannot sue in Texas without first obtaining a certificate of authority pursuant to art. 8.18(A) of the Texas Business Corporation Act. ² A certificate of authority is a prerequisite to "transacting business" in this state, and the penalty for "transacting business" without such a certificate is the prohibition of suing in Texas courts on any cause of action "arising out of the transaction of business in this State." Tex.Bus.Corp.Act., art. 8.18 (Vernon Supp.1978). Thus, the question before us is whether Country Cupboard's suit "arises out of the transaction of business in this state" so as to preclude the maintenance of the suit without a valid certificate of authority. We conclude that it does not so arise. Article 8.01(B)(1) of the Business Corporation Act expressly states that a foreign corporation is not considered to be "transacting business" by "(m)aintaining or defending any action or suit or any administrative or arbitration proceedings, or effecting the settlement thereof or the settlement of claims or dispute to which it is a party." Since the present suit was filed to rescind an agreement executed in settlement of a claim asserted against Country Cupboard by Texstar, we conclude that this suit does not "arise out of the transaction of business" in Texas. Accordingly, a certificate of authority is not a prerequisite to the prosecution of this particular suit. See State v. Cook United, Inc., 463 S.W.2d 509 (Tex.Civ.App. Fort Worth 1971) Modified, 469 S.W.2d 709 (Tex.1971) (subject matter of suit must fall into category of litigation which foreign corporation is forbidden from bringing, and when suit does not arise from doing business in Texas, suit is not barred.) See generally, Hamilton, Texas Practice Business Organizations § 987 (1973).

Limitations

Texstar next contends that even if Country Cupboard has capacity to sue in Texas courts without a certificate of authority, this suit is merely an action to recover "money had and received" by Texstar, and thus is barred by the two-year statute of limitations. Tex.Rev.Civ.Stat.Ann., art. 5526 (Vernon 1958). Since the transaction sought to be set aside took place on June 22, 1972, and the present suit was not filed until June 17, 1976, the suit is barred if the two-year limitations period applies. Country Cupboard argues, however, that the suit is not one to force the disgorgement of unjust enrichment, but rather is an action to rescind a written agreement, in which case the four-year statute, article 5527 of the Texas Revised Civil Statutes, would apply, and the suit would not be barred. In order to decide this issue, we must determine the true nature of Country Cupboard's cause of action by the facts alleged in its petition, the principal rights asserted therein, and the relief sought. Brown v. Gulf Television Co., 157 Tex. 607, 306 S.W.2d 706 (1957); South Padre Development Co., Inc. v. Texas Commerce Bank National Association, 538 S.W.2d 475, 480 (Tex.Civ.App. Corpus Christi 1976, no writ). In its petition, Country Cupboard alleged that the present suit was filed:

. . . to rescind and cancel that certain written agreement entitled "Release" dated June 22, 1972, by and between Defendant and Plaintiff . . . and for return to the Plaintiff of the $117,000 cash consideration paid by Plaintiff to Defendant for the said agreement.

Traditionally, the right to rescission has depended upon the existence of a transaction which is legally valid but which, in the conscience of equity, must be set aside to avoid unjust enrichment. Dobbs, Remedies at 254-256 (1973). See Southern Methodist University v. Evans, 131 Tex. 333, 115 S.W.2d 622 (1938); World Fire & Marine Ins. Co. v. Puckett, 265 S.W.2d 641 (Tex.Civ.App. 1954, writ ref'd n. r. e.) (right to rescission presupposes the existence of an otherwise binding obligation); Cf. Cheek v. Metzer, 116 Tex. 356, 291 S.W. 860, 863 (1927); Adams v....