A.H.L. Inc. of Delaware v. Star Ins. Co.

• Decision Date: 24 June 1998
• Docket Number: No. 97-4069-RDR.,97-4069-RDR.
• Citation: 10 F.Supp.2d 1216
• Parties: A.H.L. INCORPORATED OF DELAWARE, Plaintiff, v. STAR INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — District of Kansas

10 F.Supp.2d 1216

A.H.L. INCORPORATED OF DELAWARE, Plaintiff, v. STAR INSURANCE COMPANY, Defendant.

No. 97-4069-RDR.

United States District Court, D. Kansas.

June 24, 1998.

Charles D. McAtee, Schroer, Rice, P.A., Topeka, KS, for Plaintiff.

Thomas J. Koehler, Michael J. Blake, Levy & Craig, P.C., Kansas City, MO, for Defendant.

MEMORANDUM AND ORDER

ROGERS, District Judge.

This is an action to recover on a bond issued for the Kansas Avenue bridge project in Topeka, Kansas. Plaintiff was a subcontractor on that project. Defendant issued the bond for the project. Western Bridge Corporation was the general contractor for the project. Following the completion of the project, Western Bridge filed for bankruptcy. This matter is presently before the court upon defendant's motion to dismiss or, in the alternative, for summary judgment.¹

In the instant motion, the defendant raises a number of arguments. In the course of filing several briefs on these issues, the parties have withdrawn certain claims and certain arguments.² The court shall focus only on the issues that remain for decision in this memorandum and order.

I.

The defendant argues that this action should be dismissed because plaintiff, a foreign corporation, has not registered to do business in Kansas as required by K.S.A. 17-7307. This statute states in pertinent part:

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.

A foreign corporation barred from maintaining an action in the Kansas courts by virtue of this statute is also precluded from maintaining an action in the federal courts of the state. Wilson v. Williams, 222 F.2d 692, 697 (10th Cir.1955).

The parties are at odds over whether plaintiff "did business" in Kansas. The definition of "doing business" in Kansas is set forth in K.S.A. 17-7303 as follows:

Every foreign corporation that has an office or place of business within this state, or a distributing point herein, or that delivers its wares or products to resident agents in this state for sale, delivery or distribution, shall be held to be doing business in this state within the meaning of this act.

Plaintiff has acknowledged that it was not registered pursuant to K.S.A. 17-7301. Plaintiff, however, contends that it was not doing business in Kansas as defined in K.S.A. 17-7303. Plaintiff asserts that it did not have an "office," "place of business" or "distributing point" in Kansas. It further asserts that it did not deliver any "wares or products to resident agents in [Kansas] for sale, delivery or distribution." Finally, plaintiff argues that K.S.A. 17-7307(a) is not applicable to foreign corporations that provide only "services." In the alternative, plaintiff contends that it should be given reasonable time to comply with K.S.A. 17-7301 if it is found that it was doing business in Kansas during its performance of the subcontract for the Kansas Avenue bridge job.

The defendant contends that plaintiff cannot bring this action because it has never been authorized to do business in Kansas. The defendant argues that plaintiff was doing business in Kansas when it performed work on the Kansas Avenue bridge as a subcontractor and, therefore, was required to comply with K.S.A. 17-7301. The defendant asserts that plaintiff did business in Kansas pursuant to K.S.A. 17-7303 because it (1) had an office in Kansas, (2) had a place of business in Kansas, (3) had a distributing point in Kansas, and (4) delivered its products, equipment and supplies to its employees on the job.

The determination of whether a foreign corporation is doing business in Kansas requires an evaluation of the particular facts of each situation. Toedman v. Nooter Corp., 180 Kan. 703, 308 P.2d 138, 142 (1957). Fixed, definite or precise rules cannot be applied. Id. "Doing business" in Kansas means that a foreign corporation must (1) establish an office, place of business or distribution point in Kansas, or (2) deliver its wares or products to agents in Kansas for sale, delivery or distribution. Panhandle Agri-Service. Inc. v. Becker, 231 Kan. 291, 644 P.2d 413, 417 (1982).

Toedman, a case cited by defendant in support of its position, provides some guidance for the court in this case. Leonard Construction Company entered into a contract to erect a plant as general contractor for a company at Galena, Kansas. Leonard Construction then entered into a contract with the defendant to perform some subcontractor work at the site. The defendant, a Missouri corporation, agreed to fabricate some tanks at its plant in Missouri and then erect them at the site in Kansas. The defendant was responsible for providing all the materials and furnishing all the work for the erection of the tanks at the new facility. The defendant worked in Kansas for approximately six months erecting the tanks. They had a room for their workmen to change clothes at the site. They did not have a telephone listing. They used the general contractor's telephone to handle any phone messages. They usually used a local bank for their banking business, but they may have used a bank in Joplin, Missouri for this job. They used the general contractor's office to examine blueprints. On the basis of these facts, the Kansas Supreme Court concluded that the defendant was doing business in Kansas. The Court concluded: "The facts and circumstances of this operation in Kansas bring the defendant corporation well within the provisions of G.S.1949, 17-506 [the predecessor to K.S.A. 17-7303] in that the defendant corporation had `or place of business within this state.'" 308 P.2d at 142.

Many of the facts pertinent to this motion are not in dispute. Plaintiff is a foreign corporation. It has not been authorized to do business in Kansas. In February 1995, plaintiff entered into a written subcontract with Western Bridge Corporation to work on the Kansas Avenue bridge project. Plaintiff was to blast clean, prime and paint several spans on the Kansas Avenue bridge project. The subcontract required plaintiff to supply the labor, equipment, materials and supplies to perform the work, but plaintiff apparently supplied only the labor for the work. Western Bridge supplied the blast materials and the primer. Noel, the President of plaintiff, arrived at the site on March 1, 1995. Plaintiff proceeded to perform its work. Noel initially had a telephone at the site, but he had it removed. The telephone at Western Bridge's office was used when one was necessary. Noel and another employee of plaintiff had a personal trailer at the site. Plaintiff also used the office at Western Bridge when one was necessary.

A careful review of the facts here reveals, even when viewed in the light most favorable to the plaintiff, that plaintiff was doing business in Kansas when it performed work on the Kansas Avenue bridge project. We cannot agree with the plaintiff that K.S.A. 17-7303 does not apply to corporations that provide only "services." Such a construction of the statute is too narrow. The activities by the plaintiff in Kansas during the Kansas Avenue bridge project show that plaintiff delivered its wares or products to Kansas. The situation presented here is similar to the circumstances in Toedman. The contacts that the defendant corporation there had with Kansas were much like those of the plaintiff in this case. In sum, the court is persuaded that the plaintiff was "doing business" in Kansas during its work on the Kansas Avenue bridge project. In addition, the court believes the facts show that plaintiff established a place of business in Kansas. The facts are unclear as to whether plaintiff had an office in Kansas, but we are persuaded that plaintiff did have a place of business. Although this term is not defined in this statute, the Kansas Supreme Court has determined in another context that "place of business" refers to the place where services are actually performed. See Capital Electric Line Builders, Inc. v. Lennen, 232 Kan. 379, 654 P.2d 464, 469 (1982) (phrase "place of business" within context of statute governing local retailers' sales tax on services refers to place where services are actually performed, not the main office of the retailer).

The conclusion reached by this court is in accord with the decisions of other courts in states with statutes similar to K.S.A. 17-7307. In the context of construction work, the majority rule is that the performance of construction work by a foreign corporation in a state is generally considered "doing business" in the state, requiring that the corporation comply with state requirements before being allowed access to state courts on claims arising from that work. See 90 A.L.R.3d 937 "Construction Work by Foreign Corporation as Doing Business for Purposes of Statute Requiring Foreign Corporation to Qualify as Condition of Access to Local Courts" (1997). Moreover, in cases with facts similar to those in this case, courts have reached the same result as we did here. See, e.g., Anthony Miller, Inc. v. Taylor-Fichter Steel Construction Co., 139 S.W.2d 657 (Tex.Civ.App. 1940) (contract for cleaning of bridge within state was sufficient contact with state to require foreign corporation to comply with laws governing corporate registration).

Having determined that plaintiff cannot bring the instant action at this time, we must consider whether we should dismiss this case or allow plaintiff some time to comply with the requirements of K.S.A. 17-7301. Plaintiff seeks additional time to comply with the state requirements and asks that this action be stayed pending this period. De...