Lake States Engineering Corp. v. Lawrence Seaway Corp.

• Decision Date: 31 January 1969
• Docket Number: 850,No. 1,Docket No. 849,1
• Citation: 15 Mich.App. 637,167 N.W.2d 320
• Parties: LAKE STATES ENGINEERING CORPORATION, Plaintiff-Appellant, Cross-Appellee, v. LAWRENCE SEAWAY CORPORATION, Defendant-Appellee, Cross-Appellant, and United States Fidelity & Guaranty Co., Additional Defendant-Appellant, Cross-Appellee
• Court: Court of Appeal of Michigan — District of US

Page 320

167 N.W.2d 320

15 Mich.App. 637

LAKE STATES ENGINEERING CORPORATION, Plaintiff-Appellant Cross-Appellee, v. LAWRENCE SEAWAY CORPORATION, Defendant-Appellee, Cross-Appellant and United States Fidelity & Guaranty Co., Additional Defendant-Appellant, Cross-Appellee.

Docket No. 849, 850.

Court of Appeals of Michigan, Division No. 1.

Jan. 31, 1969.

Released for Publication May 7, 1969.

Merle R. Jenkins, Ward, Plunkett, Cooney, Rutt & Peacock, Detroit, for Lake States, and additional defendant United States Fidelity & Guaranty Co.

Arthur J. Hass, Detroit, for Lawrence Seaway Corp.

Shapero & Shapero, Detroit, for Ace Iron & Metal Co.

McCabe, Middleton & Kennedy, Detroit, for Baker's Gas & Supplies and LaBarge Pipe & Steel Co.

Henry A. Schieffer, Ferndale, for Joseph P. Carnaghi & Son, Inc.

Henry Earle, III, Clark Clein, Winter, Parsons & Prewitt, Detroit, for H. D. Edwards Co.

Glenn Coulter, Detroit, for The Prepakt Concrete Co.

Charles Clippert, Dickinson, Wright, McKean & Cudlip, Detroit, for Harris Concrete & Supply Co. and Hugh B. Williams Mfg. Co.

George H. Kretzschmar, Detroit, for Wm. G. Kretzschmar Co.

Lewis Slater, Dyer, Meek, Ruegsegger & Bullard, Detroit, for McGregor-Michigan Corp.

Grossman, Hyman & Grossman, Detroit, for A Tool & Gauge Co. Warner, Norcross & Judd, Grand Rapids, for Associated Truck Lines, inc.

Schmier & Schmier, Detroit, for The Boomer Co. and Construction Equipment Co.

Max M. Marston, Detroit, for Dix Equipment Co. and Artheur Maxfield Co.

Thomas Rosender, Detroit, for Electra Copy, Inc.

John Cannon, Dykema, Wheat, Spencer, Goodnow & Trigg, Detroit, for Goodall Mich. Mech. Rubber Co.

Campbell, O'Brien & Heath, Detroit, for Kelly Coal & Oil Co.

Hand, Kiefer, Allen & Ryan, Detroit, for Michigan Drilling Co.

Bizer & Sommers, Detroit, for Mushovitz & Pershin & Sons, Inc.

Monaghan & Monaghan & Crawmer, Detroit, for Ohio Rubber Supply Co.

Alfred Pagoto, Detroit, for C. E. Phillips & Co.

Dell & Shantz, Royal Oak, for Morris G. Laramie & Son, Inc.

Robert Page, Detroit, for Michigan Bell Telephone.

Webb, Leitz & Coulter, Garden City, for Mid-West Supply Co. and Post Electric Co.

David M. Miro, Detroit, for Nestor's Office Supply Co.

Before LESINKSI, C.J., and J. H. GILLIS and LEVIN, JJ.

LEVIN, Judge.

Lake States Engineering Corporation, an Illinois corporation, brought this action against Lawrence Seaway Corporation to recover damages for alleged breach of a building construction contract between Lake States, as subcontractor, and Lawrence, as general contractor. Lawrence counterclaimed for Lake State's alleged breach of the same contract. United States Fidelity & Guaranty Company was surety on Lake States' performance and payment bonds in favor of Lawrence.

The questions presented are:

1) Is Lake States precluded from maintaining this action because of failure to have qualified to do business in Michigan?

2) Even if Lake States cannot recover from Lawrence, may Lake States' surety, USF&G, recover from Lawrence the amounts USF&G pays labor and material claimants?

3) Is Lawrence barred by its failure to have obtained a residential builder's license from recovering on its counterclaim against Lake States?

The trial judge granted motions for accelerated and summary judgment dismissing the claims of all parties except that judgments totaling $92,217.67 were entered against Lake States and USF&G in favor of labor and material suppliers who were additional defendants. Lake States and USF&G appealed generally. Lawrence cross appealed the dismissal of its claims against Lake States and USF&G. Neither Lake States nor USF&G have prosecuted their appeals against the labor and material suppliers.

We affirm the judgment dismissing the claims of Lake States and USF&G and remand for trial on Lawrence's counterclaim.

I.

The contract, entered into in June or July, 1962, provided that Lake States would construct the foundation caissons for the Jeffersonian Apartments in Detroit. Lake States commenced performance. Before the dispute arose Lawrence had paid Lake States $252,810 of the $450,000 contract price.

Lake States suspended work in November, 1962, after it failed in its attempts to get Lawrence to agree to pay additional amounts because of certain subsurface conditions allegedly encountered by Lake States. Lake States claimed that Lawrence was obliged under the contract to pay more on that account. This Lawrence denied. Subsequently Lawrence hired another subcontractor to complete the caisson work.

Lake States claims Lawrence owes it approximately $555,000. The amount of Lawrence's counterclaim, as stated in the counterclaim appended to Lawrence's answer, was $300,000.

Section 95 of the Michigan general corporation act (M.C.L.A. § 450.95 (Stat.Ann.1963 Rev. § 21.96)) provides that 'no foreign corporation shall be capable of making a valid contract in this state until it shall have fully complied with the requirements of the laws of this state with respect thereto, and at the time holds an unrevoked certificate to that effect.'

In June, 1962, Lawrence's president mailed the unsigned proposed form of contract from Detroit to Lake States in Chicago, Illinois. Lawrence's covering letter asked Lake States to sign the contract and added: 'When the date of the contract is definitely determined, we will then sign the contracts and supply the dates for these contracts.' Lake States signed in Chicago and later Lawrence signed in Detroit.

Lake States claims the final acceptance of the contract occurred in Chicago, Illinois, when Lake States signed the contract, while Lawrence claims the contract did not become binding until it subsequently signed the contract in Detroit.

The question of when and where the parties became contractually bound depends on their intention as manifested by their verbal statements and conduct in the light of all the circumstances. ¹ The trial judge did not make specific findings on that question. Furthermore, the question could not be decided without a trial hearing ² and, thus, could not be decided on the record so far made. Accordingly, we may not affirm the trial judge on the ground that the contract was invalid under § 95 of the general corporation act. But that does not end our inquiry.

If, as we must now assume for the purpose of reviewing the judgment entered by the trial judge, the contract was made in Illinois, as Lake States claims, it was a lawful contract even though Lake States was not then qualified to do business in Michigan and the contract contemplated that Lake States would do acts in Michigan requiring qualification. Whitehead & Kales Co. v. Taan (1926), 233 Mich. 597, 600, 601, 208 N.W. 148; Westerlin & Campbell Co. v. Detroit Milling Co. (1925), 233 Mich. 384, 386, 206 N.W. 371. ³

Lawrence asserts that Lake States' actions in Michigan pursuant to the contract were nevertheless unlawful because Lake States was not qualified to do business in Michigan when it acted and, thus, even if the contract was valid Lake States may not recover on such unlawful acts.

Section 93 of the general corporation act (M.C.L.A. § 459.93 (Stat.Ann.1963 Rev. § 21.94)) provides that it is 'unlawful' for an unqualified foreign corporation to carry on its business in this State. Lake States conceded that it was doing business in Michigan and that it did not have a certificate authorizing it to do so as required by § 93.

Among other cases, Lawrence cites Imperial Curtain Co. v. Jacob (1910), 163 Mich. 72, 127 N.W. 772. In that case the foreign corporation was not allowed to recover for services rendered in Michigan pursuant to a contract apparently made in Pennsylvania (p. 77, 127 N.W. p. 774):

'Even though it should be held that the contract was accepted in Philadephia, we cannot see how this fact would make any difference in the disposition of the case. The statutes with reference to foreign corporations were not made merely for the purpose of preventing foreign corporations from coming into Michigan and making contracts here, but were passed principally for the purpose of preventing foreign corporations from carrying on their business in this state without subjecting themselves to certain liabilities and obligations. It was the prevention of work within the state that was aimed at, and it was for work and service in this state that this suit was brought, as appears by the record.' (Emphasis supplied.)

Also denying recovery, not because the contract was made in Michigan but because its performance by the unqualified foreign corporation constituted doing business in Michigan, are Nernst Lamp Co. v. Conrad (1966), 165 Mich. 604, 131 N.W. 120; General Highways System v. Dennis (1930), 251 Mich. 152, 230 N.W. 906; Decorators' Supply Co. v. Chaussee (1920), 211 Mich. 302, 178 N.W. 665; Smilansky v. Mandel Bros. (1931), 254 Mich. 575, 236 N.W. 866; Columbus Services, Inc. v. Preferred Building Maintenance, Inc. (W.D.Mich., 1967), 270 F.Supp. 875, 879, 880; A. H. Andrews Co. v. Colonia Theatre Co. (E.D.Mich., 1922), 283 F. 471. See, also, watts Construction Company v. Joint Clutch & Gear Service, Inc. (1949), 325 Mich. 548, 38 N.W.2d 919; Mathews Conveyer Co. v. Palmer-Bee Co. (C.A.6, 1943), 135 F.2d 73.

R.J.A. § 2021 (M.C.L.A. § 600.2021 (Stat.Ann.1962 Rev. § 27A.2021)) provides:

'When, by the laws of this state, any act is forbidden to be done by any corporation, or by any association of individuals, without express authority by law, and such act was done by a foreign corporation, the foreign corporation shall not maintain any action founded upon such act, or upon any liability or obligation, express or implied, arising out of, or made or entered into in consideration of such act.'

In doing business in Michigan without having qualified to do so, Lake States, a foreign corporation, in the words of R.J.A. § 2021, thereby did an 'act * * * forbidden to be done * * * without express authority by law.' Accordingly, it may 'not maintain...