National Union Indemnity Co. v. Bruce Bros., Inc., Civil 3307

• Decision Date: 07 December 1934
• Docket Number: Civil 3307
• Citation: 44 Ariz. 454,38 P.2d 648
• Parties: NATIONAL UNION INDEMNITY COMPANY, a Corporation, Appellant, v. BRUCE BROS., INC., a Corporation, Appellee
• Court: Arizona Supreme Court

38 P.2d 648

44 Ariz. 454

NATIONAL UNION INDEMNITY COMPANY, a Corporation, Appellant, v. BRUCE BROS., INC., a Corporation, Appellee

Civil No. 3307

Supreme Court of Arizona

December 7, 1934

APPEAL from a judgment of the Superior Court of the County of Maricopa. J. C. Niles, Judge. Judgment reversed, with instructions to enter judgment in favor of defendant.

Messrs Armstrong, Kramer, Morrison & Roche, for Appellant.

Mr Henderson Stockton, Mr. Emmet M. Barry and Mr. Eli Gorodezky for Appellee.

OPINION

LOCKWOOD, J.

This is an appeal from a judgment against H. L. Scott and National Union Indemnity Company, the latter hereinafter called the company, and in favor of Bruce Bros., Inc., hereinafter called the plaintiff.

The circumstances out of which the action arose may be briefly stated as follows: On the 31st of May, 1930, plaintiff, which was a corporation incorporated under the laws of the state of Nevada, entered into a contract with the state of Arizona, whereby it obligated itself to furnish all the labor and material for the construction of a portion of the state highway system designated as Federal Aid Project 94C, Schedule 1, which lay between Coolidge and Picacho Junction on the Florence-Tucson highway, and a suitable bond covering the contract was given by plaintiff to the state. Shortly thereafter plaintiff and defendant H. L. Scott entered into a written contract by which Scott agreed to deliver to plaintiff certain gravel required in the completion of the aforesaid job. This contract, however, instead of referring to the work as to be performed on Federal Aid Project 64C, Schedule 1, stated that it was to be done on Federal Aid Project No. 7, which was an entirely different and distinct project located a number of miles from the one plaintiff was building, and in the construction of which neither plaintiff nor defendant Scott had any interest whatever. To guarantee the performance of his contract, defendant Scott obtained a bond from the company. This bond on its face covered Federal Aid Project No. 7 from Coolidge to Apache Junction, but the original application therefor made by Scott and delivered to the company's general agent in Phoenix refers to the location of the work as "highway between Coolidge and Picacho Junction, Arizona," which was the location of Federal Aid Project 94C, Schedule 1. Some time thereafter Scott formed a corporation known as the H.L. Scott Construction Company, the stockholders of which consisted of Scott, his wife, and two men named Butler and Hamilton, and the actual work of delivery of gravel was, to the knowledge of plaintiff, done by it. Much of the gravel provided for by the contract was delivered during the months of August and September, 1930, but on the 19th of September plaintiff took over the work on the ground that Scott had defaulted in various provisions of his contract, and carried it on to completion, notifying the company in October of the default. Thereafter and on the 19th day of March, 1931, plaintiff instituted this action against Scott and the company, seeking to recover from Scott the amount which it claimed it had been obliged to expend in excess of the contract price in finishing the work, and from the company the principal sum of its bond.

Various pleadings were filed which we need not consider, but on the 21st day of May a third amended complaint was filed upon which the case eventually went to trial. In this latter for the first time it was set up that there had been a mutual mistake in the Scott contract and the bond of the company for the performance thereof in that the project on which the work was to be done was incorrectly described therein, and it was asked that the contract and bond be reformed in accordance with the true intent of the parties, and for judgment along the general lines above set forth. To his third amended complaint he company filed (a) a general demurrer; (b) a plea in abatement; (c) a motion to strike; (d) a plea in bar; (e) a special demurrer; and finally (f) an answer. The court overruled all the special pleadings except the plea in abatement and the plea in bar. The Answer to the plea in abatement disposed of that matter, and it was agreed that the plea in bar should be heard at the same time as the trial on the merits. This plea in bar filed by the company alleged that plaintiff was a foreign corporation which had for a long time been conducting business as a general construction company in Arizona; that it had never complied with any of the requirements of the laws of Arizona and was not authorized to do business therein, and therefore was not entitled to bring the action. The answer to the plea in bar alleged that the company had answered to the merits on the original and the various amended complaints and filed many special pleadings thereto, and had by so doing estopped itself from setting up the matters alleged in the plea in bar.

When the trial opened defendant Scott, who had theretofore filed a cross-complaint against plaintiff, dismissed his cross-complaint and attempted to file a plea in bar raising the same issues as that of the company. Upon an avowal of surprise on the part of the plaintiff, the court refused to allow such plea to be filed unless and until all the costs incurred to date by plaintiff were paid by Scott. This he declined to do and the plea was not filed. The case then proceeded to trial, and, on the plea in bar, which was heard first, the court ruled that the company had not sustained the burden of proof imposed by law upon it and overruled the plea. On he merits of the case, the court held the evidence showed that there had been a mutual mistake and ordered the contract reformed to show that it and the bond applied to Federal Aid Project 94C, Schedule 1. A very great mass of evidence was then offered and introduced in regard to what work had been done under the contract, what was still to be done when plaintiff took it over, and the cost of completing it. At the conclusion of plaintiff's case, a motion for an instructed verdict was made by defendant which was denied, and the same motion was renewed and denied at the end of defendant's case. After the court instructed the jury, a verdict was returned in favor of plaintiff, and, judgment being entered thereon, after the usual motion for new trial was made and overruled, this appeal was taken.

There are forty-four assignments of error, raising a number of very interesting legal questions. The first six deal with the question of whether or not plaintiff was authorized to maintain this action, and we consider them together. Section 657, Revised Code of 1928, provides, in substance, that any foreign corporation before entering upon any business in Arizona shall do certain things, and section 658 reads as follows:

"658. Acts Void Unless Statutes Complied With. No foreign corporation shall transact any business in this state until it has complied with the requirements of the preceding section, and every act done by said corporation prior thereto shall be void."

It is urged that since plaintiff admittedly had not complied with the provisions of section 657, supra, before entering into or completing the contract with the state above referred to, the bond sued on by the terms of section 658 is void, and plaintiff therefore cannot maintain this suit against either Scott or the company.

The first question which we have to consider is whether or not plaintiff was, within the meaning of section 658, supra, transacting any business in the state of Arizona. This provision is found, in substance, in all of our Codes since and including the Code of1887, and while the exact language has changed from time to time, we have held the meaning has remained the same. McKee v. Stewart Land & Livestock Co., 28 Ariz. 511, 238 P. 326, 327.

There have been many cases before us involving a construction and application of the section. The first is Babbitt v. Field, 6 Ariz. 6, 52 P. 775, 776. Therein it appeared that a foreign corporation, not qualified to do business in Arizona under the statute, loaned certain money to a resident of Arizona and took as security therefor a trust deed covering certain realty within the state, and at some time thereafter entered into an agreement with the owner of the land that it would release the trust deed in consideration of the owner erecting certain buildings thereon. So far as the record shows, the corporation had never attempted to do any other business within the state of Arizona, and we said:

"... The doing of a single act of business in the territory by a foreign corporation does not constitute the carrying on of business, within the reasonable construction of the provisions of the chapter relied upon...."

The same question was again before us in Martin v. Bankers' Trust Co., 18 Ariz. 55, 156 P. 87, 90, Ann. Cas. 1918E 1240. Therein the foreign corporation accepted a trust deed on real property in Arizona for the benefit of certain bondholders, such deed being accepted, executed, and acknowledged by it in the state of New York and thereafter acknowledged and recorded by the other party in Arizona, and all acts performed by the trustee in connection with it were performed in New York, except the bringing of a suit of foreclosure. We said in reference thereto:

"Even if the prosecution of this suit could be considered as an act of business, it has been held by the Supreme Court of the territory that a single act does not constitute a transaction of business in Arizona within the meaning of the statute...."

A similar question arose in Nicolai v. Sugarman Iron & Metal Co., 23 Ariz. 230, 202 P. 1075. Therein a party agreed to sell to the foreign corporation certain scrap iron, to be shipped from Arizona to California,...