Joseph T. Ryerson & Son v. Schraag

• Decision Date: 11 March 1930
• Docket Number: 40104
• Citation: 229 N.W. 733,211 Iowa 558
• Parties: JOSEPH T. RYERSON & SON, INCORPORATED, Appellee, v. WILLIAM L. SCHRAAG et al., Appellants
• Court: Iowa Supreme Court

229 N.W. 733

211 Iowa 558

JOSEPH T. RYERSON & SON, INCORPORATED, Appellee, v. WILLIAM L. SCHRAAG et al., Appellants

No. 40104

Supreme Court of Iowa, Des Moines

March 11, 1930

REHEARING DENIED DECEMBER 13, 1930.

Appeal from Keokuk District Court.--FRANK BECHLY, Judge.

Action in equity to recover from the principal contractor and the surety on his bond the amount due plaintiff for materials furnished by plaintiff to a subcontractor for the principal contractor, which materials were used in the construction of an addition to a school building. The trial court decreed judgment for the plaintiff, and the defendant principal contractor and the surety on his bond appeal. Judgment was rendered against the school district for the balance of funds in its hands belonging to the principal contractor, and the school district does not appeal. For convenience, we shall refer to the first subcontractor as Goldberg & Sons, and to the Independent School District of Keota as the School District.

Affirmed.

Charles C. Heninger, for appellants.

Gillies Daugherty & Oughton, for appellee.

Hamilton & Updegraff, for Independent School District of Keota.

FAVILLE J. MORLING, C. J., and EVANS, KINDIG, and GRIMM, JJ., concur.

OPINION

FAVILLE, J.

On July 24, 1926, the appellant Schraag entered into a written contract with the Independent School District of Keota, Iowa, to furnish the material and perform the work for the construction of an addition to a high school building, for a lump sum of $ 61,977. On the 26th day of July, 1926, said contractor executed his bond to the said Independent School District, as provided by Section 10300 et seq., Code, 1924, the appellant Union Indemnity Company being surety on said bond. On the 24th day of July, 1926, appellant Schraag entered into a written contract with J. Goldberg & Sons, of Kansas City, Missouri, for the purchase of certain steel material, to be used in the construction of said building, the same to be delivered f. o. b. cars Keota, Iowa. On August 4, 1926, said Goldberg & Sons entered into a written contract with the appellee Ryerson & Son, whereby the said appellee agreed to furnish said structural steel for the addition to said high school building for an agreed price f. o. b. Keota, Iowa. The appellee furnished said material, in accordance with its said contract with Goldberg & Sons, and the same was used in the construction of said building. On June 24, 1927, the appellee duly filed its claim for the balance due it upon its said contract, and subsequently brought this action in equity against said principal contractor and the surety on its bond and the said school district. The court decreed judgment against said principal contractor and said surety for the balance due the appellee under its contract, and decreed judgment against the school district for the balance remaining in its hands due to the principal contractor. The school district does not appeal. By its pleadings, the district alleges its willingness to pay said sum in its hands to whomsoever the court shall decree to be entitled thereto. On September 9, 1927, the work under the principal contract was completed, and accepted by the school district.

I. Appellants contend that appellee cannot maintain this action in this state because of the fact that it is a foreign corporation, and has not obtained a permit to "conduct and carry on its business in this state." Chapter 386 of the Code, 1924, provides for the securing of permits by foreign corporations to conduct and carry on their business in this state. Section 8427 is a portion of said chapter, and is as follows:

"No foreign stock corporation doing business in this state shall maintain any action in this state upon any contract made by it in this state unless prior to the making of such contract it shall have procured such permit. This prohibition shall also apply to any assignee of such foreign stock corporation and to any person claiming under such assignee of such foreign corporation or under either of them."

The appellee is a corporation duly organized under the laws of the state of Illinois, and its principal place of business is at Chicago. It did not have a permit to conduct and carry on its business within this state. It is the contention of appellants that the appellee was "doing business" within this state, within the purview of said chapter, and that, by reason of its failure to procure a permit to conduct business in this state as a foreign corporation, it cannot maintain this action, because of the provisions of said Section 8427. A similar statute has been enacted in many of the states of the union, and a very large number of decisions have been announced by the courts of last resort, construing the term "doing business" as used in such statutes. These authorities are largely collected in 3 Words and Phrases (1st Ser.), 2 Words and Phrases (2d Ser.), and 2 Words and Phrases (3d Ser.), under the words "doing business."

It has long been the established rule in this state that, where an order for goods or merchandise is taken in this state and forwarded to another state which is the home office of the corporation or of the principal of the agent who took the order, and such order is subject to acceptance or approval by the principal, the contract is not a contract in this state where the order was taken, but is one in the state where the principal resides, and that an action may be maintained on such a contract by the foreign corporation in this state without securing a permit under the statute. The cases are collected in the recent case of Service System v. Johns, 206 Iowa 1164, 221 N.W. 777. See, also, American Asph. Roof Corp. v. Shankland, 205 Iowa 862, 219 N.W. 28, loc. cit. 866.

The contract involved in the instant case was executed between two parties, one of whom was a resident of the state of Missouri, and the other a resident of the state of Illinois. The principal contractor was also a resident of Missouri. The contract was not "made by it [appellee] in this state," and hence does not come within the provision of the statute. Standard Tile & Marble Co. v. Detroit Fid. & Sur. Co., 207 Iowa 619, 223 N.W. 365. The contract was not only not "made in this state," but it was not to be performed in this state. The contract was to be performed wholly outside the state of Iowa. The only requirement was that delivery of the steel was to be made within this state. Did this constitute "doing business" within this state, within the purview of the statute? A similar question was before this court in the case of Ware Cattle Co. v. Anderson & Co., 107 Iowa 231, 77 N.W. 1026. In that case the defendants were residents and citizens of the state of Nebraska. The contract was executed in that state, and, save as to the delivery of the cattle which were the subject-matter of the contract, it was to be performed in the state of Nebraska. We held that the plaintiff in said action had a right to maintain the suit without complying with said statute. See 14A Corpus Juris 1286, Section 3993, where the authorities are collected.

In this connection, it is also to be noticed that the contract made no provision whatever for the performance of any act of a local character within the state of Iowa, such as the placing of said material in the building. Nothing was to be done in this state by the appellee under said contract except the mere delivery of the material at Keota, Iowa. The cases uniformly hold that, under such circumstances, the foreign corporation does not come within the purview of a statute of the kind under consideration. The portion of the contract to be performed in this state--to wit, delivery of the material--was merely incidental to the business in which the corporation was engaged, and did not constitute the doing or carrying on of business within this state, within the meaning of said statute. This is the uniform holding of the courts, and has been announced in a great number of decisions. 14A Corpus Juris 1276, Section 3892.

Again if the statute included a transaction of this kind merely because the contract called for delivery within the state of Iowa, it would be repugnant to the Commerce Clause of the Constitution of the United States, and could not be upheld. Dahnke-Walker Mill. Co. v. Bondurant, 257 U.S. 282 (66 L.Ed. 239, 42 S.Ct. 106); Crutcher v. Kentucky, 141 U.S. 47 (35 L.Ed. 649, 11...