EXECUT. MANAG. LTD. v. Ticor Title Ins. Co.
| Decision Date | 24 January 2002 |
| Docket Number | No. 35122.,35122. |
| Citation | 38 P.3d 872,118 Nev. 46 |
| Parties | EXECUTIVE MANAGEMENT, LTD., a California Corporation, Appellant, v. TICOR TITLE INSURANCE COMPANY, a Foreign Corporation; Barbara Marks, an Individual; the Manley Marks and Barbara Marks 1988 Trust, Barbara Marks, Trustee; Marks Plaza, a Nevada Corporation; Palmall Properties, Inc., a Nevada Corporation; and Arthur H. Shipkey, an Individual, Respondents. |
| Court | Nevada Supreme Court |
George R. Carter, Las Vegas, for Appellant.
Cohen, Johnson, Day, Jones & Royal and Geoffrey A. Potts, Las Vegas, for Respondents Palmall Properties and Shipkey.
Lionel Sawyer & Collins and David N. Frederick and Paul R. Hejmanowski, Las Vegas, for Respondent Ticor Title.
Ralph J. Rohay, Las Vegas, for Respondent Marks.
Before SHEARING, ROSE and BECKER, JJ.
This case, involving alleged negligence, fraud, and breach of contract stemming from a troubled property sale, presents two questions for our review: (1) whether NRS 80.210 requires dismissal of a foreign corporation's action when the corporation has failed to comply with the qualification requirements of NRS 80.010 through 80.040; and (2) whether the right to trial by jury is revived following an appeal and remand when the right previously had been waived.
This case was appealed to this court before, resulting in remand to the district court. A detailed factual statement regarding Executive's claims and the history of this case before the first appeal is found in our previous opinion, Executive Management v. Ticor Title Insurance Co.1
Before the first appeal, the parties consented to withdrawing Executive's previous jury trial request. Following appeal and remand from this court, however, Executive changed its mind and filed another demand for trial by jury. The district court rejected Executive's demand.
Thereafter, with respondent Ticor Title Insurance Company leading the way, the respondents filed motions for summary judgment based on Executive's failure to "qualify" to conduct business in Nevada by complying with the foreign corporation qualification requirements of NRS 80.010 through 80.040. Based on our case law interpreting NRS 80.210, which sets forth penalties for a foreign corporation failing to qualify, Ticor asserted that Executive's action should be dismissed.
When Executive filed this action in May of 1999, it had not complied with the foreign corporation qualification requirements. Although Executive now argues that it was not obligated to do so, in March of 1993 Executive qualified by filing the required documents and paying the fees. Its certificate to do business, however, expired in December of 1994 and remained unrenewed until May of 1999. Spurred by Ticor's motion, in May of 1999 Executive qualified to do business in Nevada by filing the required documents and paying all fees back to 1994. The Secretary of State then issued Executive a certificate of reinstatement confirming that Executive was in good standing for the years 1994-1999.
The trial court granted the respondents' motions for summary judgment, finding that Executive had been doing business in Nevada, had failed to comply with the filing requirements of NRS 80.015, and therefore could not maintain the action. Accordingly, the district court dismissed Executive's action. The dismissal was with prejudice because the statute of limitations had passed on all of Executive's claims. Executive appealed.
NRS 80.210 does not require dismissal of a foreign corporation's action
We review summary judgment orders de novo.2 Summary judgment is only upheld when a review of the record in a light most favorable to the non-moving party reveals that there are no triable issues of material fact and that the moving party is entitled to judgment as a matter of law.3
Before conducting business in Nevada, foreign corporations are required to "qualify" by complying with the foreign corporation requirements of NRS 80.010 through 80.040. The question of whether a foreign corporation is "doing business" and required to qualify, although guided somewhat by NRS 80.015, is often a laborious, fact-intensive inquiry resolved on a case-by-case basis.4 Failure to qualify can result in certain penalties set forth in NRS 80.210. One of those penalties provides that the foreign corporation "may not commence or maintain any action or proceeding in any court of this state until it has fully complied with the provisions of NRS 80.010 to 80.040, inclusive."5 What is meant by the terms "maintain" and "until" is the subject of our discussion.
The parties argue at great length regarding whether Executive was "doing business" under either the current or the former versions of NRS 80.015 during the relevant time periods that would require Executive to comply with the foreign corporation qualification statutes. But for purposes of our analysis, we simply assume that Executive was doing business and therefore required to qualify.
This assumed, our holding in League to Save Lake Tahoe v. Tahoe Regional Planning Agency6 indicates that the district court was correct in dismissing Executive's action with prejudice, even in the face of Executive's retroactive compliance:
[B]elated compliance with the foreign corporation qualification statutes does not defeat the applicability of the statute of limitations during the period of time the corporation was in noncompliance. Institution of suit before compliance with filing requirements does not toll the statute of limitations, nor does later compliance operate retroactively to permit continuation of the action if the statute of limitations had run between filing of the suit and such compliance.7
We followed this rule in later cases.8 We now, however, take the opportunity to reconsider League to Save Lake Tahoe and its interpretation of NRS 80.210.
Our objective in construing NRS 80.210 is to give effect to the legislature's intent.9 In so doing, we first look to the plain language of the statute.10 Where the statutory language is ambiguous or otherwise does not speak directly to the issue, however, we construe it according to what "`reason and public policy would indicate the legislature intended.'"11
NRS 80.210 is susceptible to a different construction than the construction that League to Save Lake Tahoe relied on. Construing the statutory term "maintained," the League to Save Lake Tahoe court concluded that an unqualified foreign corporation could only maintain a previously commenced cause of action if the corporation had been qualified at the time it filed the action but "subsequently became unqualified because of failure to comply with continuing statutory requirements."12 On that reasoning, the court determined that the actions of unqualified foreign corporations should be dismissed. But an equally tenable interpretation of the word "maintained" is "carry on" or "continue,"13 implying that the foreign corporation should not be allowed to proceed with its action "until it has fully complied with the" qualification requirements after its failure to comply has been discovered. In this light, refusing to allow a foreign corporation to "maintain" an action does not require its dismissal.
The majority of states follow this more forgiving approach—rather than dismiss an action filed by an unqualified foreign corporation outright, most states with statutes similar to Nevada's simply stay the action until the corporation qualifies.14 The Model Business Corporation Act, parts of which Nevada has adopted by statute,15 explains the purpose of this approach: "to induce corporations that are required to obtain a certificate of authority" but "without imposing harsh or erratic sanctions."16 The Model Act observes that this approach eliminates the temptation to wait until the applicable statutes of limitations have run before raising the failure-to-qualify defense.17
Ticor is concerned that without the penalty of dismissal propounded by League to Save Lake Tahoe, there would be no incentive for unqualified foreign corporations to qualify, and fraud on Nevada citizens could result. Although we too expressed this concern in Bader Enterprises Inc. v. Olsen,18 upon further consideration, we conclude that this concern does not justify the extraordinarily harsh penalty of dismissal. First, staying an action that has been commenced by an unqualified foreign corporation will provide sufficient incentive to encourage compliance. Second, NRS 80.210 sets forth its own penalties and enforcement procedures, utilizing district attorneys and the attorney general under the governor's direction to enforce the qualification requirements—the judiciary need not impose penalties beyond those provided. Third, the determination of whether a foreign corporation is actually "doing business" in this state and therefore required to qualify involves a fact-intensive and often nebulous inquiry, and thus, the failure to qualify can be the result of a "bona fide disagreement" regarding the scope of NRS 80.015, which provides only limited guidance as to the activities that do not constitute doing business.19 Finally, the fact that the Secretary of State is willing, as he was in this case, to reinstate foreign corporations that pay all past due fees, and forgive the fault in every respect, authorizing the corporation to "transact its business in the same manner as if the aforesaid filing fees, licenses, penalties, and costs had been paid when due,"20 indicates that failing to qualify is not so egregious that it warrants dismissal with prejudice, what is perhaps a court's most severe civil penalty.
Thus, we overrule League to Save Lake Tahoe's construction of NRS 80.210. Henceforth, the district court should stay an unqualified foreign corporation's action until the foreign corporation qualifies. Failure to promptly qualify, however, could result in dismissal.21
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