Dairy Equipment Co. of Utah v. Boehme

• Decision Date: 24 June 1968
• Docket Number: No. 10135,10135
• Parties: DAIRY EQUIPMENT CO. OF UTAH, a corporation, Plaintiff-Respondent, v. Junior BOEHME and Sara Jane Boehme, husband and wife, Defendants-Appellants.
• Court: Idaho Supreme Court

Page 437

442 P.2d 437

92 Idaho 301

DAIRY EQUIPMENT CO. OF UTAH, a corporation, Plaintiff-Respondent, v. Junior BOEHME and Sara Jane Boehme, husband and wife, Defendants-Appellants.

No. 10135.

Supreme Court of Idaho.

June 24, 1968.

Whittier & McDougall, Pocatello, for appellants.

Racine, Huntley, Herzog, Olson & Zener, Pocatello, for appellee.

McFADDEN, Justice.

This action was instituted by Dairy Equipment Company of Utah, a Utah corporation, engaged in the sale of dairy equipment. Respondent corporation has done some business in Idaho since 1959. Defendants-appellants, husband and wife, operate a dairy farm in southeast Idaho.

Respondent brought this action to foreclose a conditional sales agreement with appellants on certain dairy equipment and to foreclose a chattel mortgage on a number of dairy cows mortagaged to it by appellants.

Respondent and appellants entered into an agreement in February of 1962 whereby appellants were to purchase certain articles of dairy equipment from respondent. Respondent's agents had contacted appellants at their home in Idaho and after some negotiations it was agreed that appellants would purchase the dairy equipment from respondents. Appellants, at the time, however, had certain dairy cows mortgaged to First Security Bank in Idaho to whom they were making monthly payments; they were desirous of having the mortgage to the bank paid so that they could keep all their monthly payments for the equiment and cattle less than $130 per month. Respondent agreed to pay off the prior mortgage to the bank, and then included the dairy cows on the conditional sales contract at appellants' request. At the time of the transaction, there was due to the bank the sum of $2,208.04, secured by a mortgage to the bank. The cattle were not owned by the bank and respondent did not have title to the cattle, but even so, the conditional sales contract reflected them as being a part of the property sold by respondent to appellants. The particular conditional sales contract was signed by appellants with certain blanks in the contract not filled in. The contract was taken back to Utah and was submitted to a Utah bank for the purpose of selling the contract to the bank at which time the blanks were filled in. The bank required that the chattel mortgage also be executed on the dairy cows, and a form was forwarded to appellants for their execution. Appellants executed the chattel mortgage, which was subsequently recorded and a copy submitted to the bank. Unpon purchase of the conditional sales contract, which included the sum due on the loan on the dairy cattle and the purchase price of the equipment, the Utah bank paid respondent for the price of the equipment, paid the Idaho bank on its loan, and also paid the premiums for credit life insurance and health and accident insurance. The contract listed these sums, as well as 'time price differential,' which the bank retained. The balance due under the terms of the contract, after all credits and charges, was $7,336.80. This sum was agreed to be paid by appellants at the rate of $122.28 per month for the contract term of 60 months.

The interest under this contract was figured under what was designated as a '6% discount rate,' which was the lowest rate the Utah bank would accept. Appellants had previously attempted to secure financing in Idaho to keep their monthly payments under this mortgage and for purchase of the equipment at less than $125-50 per month, but without success.

Appellants made payments on the contract for a period of time, but subsequently defaulted, and respondent instituted this action. The trial court found in favor of respondent and entered judgment for the balance due under the contract together with attorneys fees. It is from this judgment that this appeal was perfected.

Appellants' assignments of error bring into issue the rulings of the trial court in regard to certain of appellants' pleadings. Respondent filed its complaint in February 1966, to which appellants presented their motion to dismiss. This motion was denied by the court the next month. In June 1966, appellants filed their answer which generally denied the allegations of respondent's complaint, and alleged as a counterclaim that the transaction was usurious; the answer prayed for judgment for the penalth under the Idaho usury laws (I.C. § 28-22-107). The case was set for trial before the court on February 2, 1967. On January 19, 1967, respondent moved to amend its answer to appellants' counterclaim, alleging as a defense, the running of the statute of limitations as to appellants' claim of usury. On Friday, January 27, 1967, five week-days before trial, appellants moved to amend their answer to assert as an affirmative defense to respondent's complaint, the lack of capacity of respondent to bring the action because of respondent's failure to comply with the requirements of Ch. 5, Title 30, Foreign Corporations. Respondent's prior motion to allege the defense of the statute of limitations and also appellants' motion to amend their answer were noticed for hearing before the court on February 2, 1967, the morning of the trial. No objections were presented to respondent's motion to amend its answer, but the respondent objected to appellants' motion to amend their answer to allege the defense of lack of respondent's capacity to sue. The court took the objections under advisement, reserving its ruling on appellants' motion to amend. At the close of respondent's case-in-chief, appellants moved to dismiss the action on the grounds set forth in their amended answer-lack of capacity of respondent to maintain the action. Also at the conclusion of all the testimony, motions were made for amendment of appellants' pleadings to conform to the proof established at the trial (I.R.C.P. 15(a)) and to dismiss. The court reserved its ruling on these motins, but ultimately denied all of appellants' motions when it entered its memorandum opinion, and subsequently entered its finings of fact and conclusions of law and the judgment.

Cerain evidence was admitted conditionally during the course of the trial, which evidence pertained to the qualifications of the respondent to do business in the State of Idaho. The evidence conditionally admitted established that the respondent had qualified to do business in the State of Idaho, but that its designated agent had removed from the State and it had not appointed a new agent upon whom service could be made as required by I.C. § 30-502. The record disclosed that while Articles of Incorporation had been filed with the Secretary of State, copies of the Articles of Incorporation had not been filed in Ada County or in Minidoka County, the purported residences of the designated agent. Appellants assert that the trial court erred in not dismissing the complaint, under the provisions of I.C § 30-501 et seq. and particularly I.C. § 30-504, which provides:

'No contract or agreement made in the name of, or for the use or benefit of, such corporation prior to the making of such filings as provided in sections 30-501 and 30-502 can be sued upon or enforced in any court of this state by such corporation.'

This court has held that I.C. § 30-504, which gives a defense to an action on the contract, does not invalidate the contract, but merely goes to the capacity of the foreign corporation to maintain an action thereon. Shaw Supply Co. v. Morgan, 48 Idaho 412, 282 P. 492 (1929); Moody v. Morris-Roberts Co., 38 Idaho 414, 226 P. 278 (1923); Marshall-Field & Co. v. Houghton, 35 Idaho 653, 208 P. 851 (1922); Valley Lumber Etc. Co. v. Nickerson, 13 Idaho 682, 93 P. 24 (1907); Valley Lumber Etc. Co. v. Driessel, 13 Idaho 662, 93 P. 765 (1907). I.R.C.P. 9(a) provides as follows:

'When a party desires to raise an issue as to the legal existence of any party or the capacity of any party to sue or be sued * * *, he shall do so by specific negative averment, which shall include such supporting particulars as are peculiarly within the pleader's knowledge.'

This rule thus requires that the lack of capacity to sue must be specially pleaded. See Young v. Pattridge, 40 F.R.D. 376 (N.D. Miss. 1966). I.R.C.P. 12(h) provides that all defenses (except those specifically enumerated and not pertinent here) are waived by the failure to raise these defenses by either motion or answer. This rule is in accord with the prior holdings of this court that the failure to demur or allege in an answer the lack of capacity to sue waives such defense. See Jolley v. Idaho Securities, Inc., 90 Idaho 373, 414 P.2d 879 (1966), applying I.R.C.P. 12(b, h). See also Exchange Lumber & Mfg. Co. v. Thomas, 71 Idaho 391, 233 P.2d 406 (1951); Shaw Supply Co. v. Morgan, supra; Gallafent v. Tucker, 48 Idaho 240, 281 P. 375 (1929); Farmers Etc. Bank v. Gallaher Inv. Co., 43 Idaho 496, 253 P. 383 (1927); Marshall-Field & Co. v. Houghtion, supra; Anthes v. Anthes, 21 Idaho 305, 121 P. 553 (1912); Valley Lumber Etc. Co. v. Nickerson, supra; Valley Lumber Etc. Co. v. Driessel, supra. 1A Barron & Holtzoff, Federal Practice and Procedure, § 301, at 212, § 370, at 529 (1960).

After appellants answered respondent's complaint, in which answer they did not raise the issue as to respondent's capacity to maintain the action, they could have pleaded the respondent's lack of capacity only by way of an amendment pursuant to I.R.C.P. 15(a), or 15(b). The requirement of I.R.C.P. 15(a), that leave of court must be first obtained in order to amend when the cause has been placed on the trial calendar, was not complied with; nor did the trial court consider that the issues raised by the proposed amendment of appellants' answer were tried by express or implied consent (I.R.C.P. 15(b)), because any evidence submitted in support thereof was conditionally admitted, subjuct to subsequent ruling of the court. The court subsequently denied the admission of this evidence. The action of a trial court in granting or denying a ...