Oahu Plumbing and Sheet Metal, Ltd. v. Kona Const., Inc., 6823

• Decision Date: 08 February 1979
• Docket Number: No. 6823,6823
• Citation: 590 P.2d 570,60 Haw. 372
• Parties: OAHU PLUMBING AND SHEET METAL, LTD., a Hawaii Corporation, Plaintiff-Appellee, v. KONA CONSTRUCTION, INC., a Hawaii Corporation, Defendant-Appellant.
• Court: Hawaii Supreme Court

Page 570

590 P.2d 570

60 Haw. 372

OAHU PLUMBING AND SHEET METAL, LTD., a Hawaii Corporation, Plaintiff-Appellee, v. KONA CONSTRUCTION, INC., a Hawaii Corporation, Defendant-Appellant.

No. 6823.

Supreme Court of Hawai'i.

Feb. 8, 1979.

Syllabus by the Court

1. Generally, a corporation cannot appear and represent itself either in proper person or by its officers, but can do so only by an attorney admitted to practice law.

2. Default judgments are not favored because they do not afford parties an opportunity to litigate claims or defenses on the merits.

David A. Walters, defendant-appellant, pro se.

Michael A. Lilly, Deputy Atty. Gen., Honolulu, amicus curiae for appellee.

Before RICHARDSON, C. J., and OGATA, MENOR and KIDWELL, JJ. ^*

OGATA, Justice.

The dispositive question in this appeal is whether a corporation may be represented in court by a person other than an attorney. We hold that, but for certain very limited exceptions, a corporation may be represented only by an attorney.

Defendant Kona Construction, Inc. (Kona Construction), through its Vice President, David A. Walters, brings this appeal from the denial of a motion brought by Walters in the court below to set aside entry of default. ¹ Judgment by default was entered ² against Kona Construction on September 19, 1977, on a complaint brought by plaintiff Oahu Plumbing and Sheet Metal, Ltd. (Oahu Plumbing), for the recovery of $488.53 representing the cost of labor and materials furnished by Oahu Plumbing to Kona Construction.

The complaint was filed by Oahu Plumbing on June 27, 1977, and Kona Construction was duly served with process through Walters, its Vice President. ³ Thereafter, Walters appeared before the court below and proceeded, with the court's permission, to enter a general denial to the complaint on behalf of Kona Construction. Walters is not licensed to practice as an attorney in this or in any other jurisdiction.

Subsequent to Walters' initial appearance before the court below, trial was set for September 12, 1977. Kona Construction failed to appear at that trial and judgment by default was thus entered in favor of Oahu Plumbing.

Walters thereafter moved to set aside entry of default. ⁴ The motion was based upon Walter's allegation that Kona Construction was not notified of a change in the time and place of trial, resulting in its failure to appear and defend at trial. A hearing on the motion was held before the court below on October 6, 1977.

At the hearing, Walters again purported to act on behalf of his corporation, and Oahu Plumbing, through its attorney, objected for the first time to Walters' attempt to represent Kona Construction. Walters nevertheless continued in his attempts to represent his corporation. The court below then informed Walters that it was initially inclined to withhold action on the motion if an attorney was obtained to represent Kona Construction. After continued discourse, Walters informed the court that Kona Construction did not intend to find an attorney to represent it. The court thereafter ruled that since, in its opinion, corporations could not be represented by their non-attorney officers, and in view of the fact that Kona Construction did not intend to obtain an attorney, the motion could not be granted and that Kona Construction would remain in default.

We affirm.

The prevailing rule is that a corporation cannot appear and represent itself either in proper person or by its officers, but can do so only by an attorney admitted to practice law. Osborn v. Bank of United States, 22 U.S. 738, 830, 9 Wheat. 738, 6 L.Ed. 204 (1824); In re Victor Publishers, Inc., 545 F.2d 285, 286 (1st Cir. 1976); Strong Delivery Ministry Association v. Board of Appeals, 543 F.2d 32, 33 (7th Cir. 1976); Securities and Exchange Commission v. Research Automation Corp., 521 F.2d 585, 589 (2d Cir. 1975); In re Highley, 459 F.2d 554, 555 (9th Cir. 1972); Siegel v. William E. Bookhultz & Sons, Inc., 136 U.S.App.D.C. 138, 139, 419 F.2d 720, 721 (1969); United States v. 9.19 Acres of Land, 416 F.2d 1244, 1245 (6th Cir. 1969); Simbraw, Inc. v. United States, 367 F.2d 373 (3d Cir. 1966); DeVilliers v. Atlas Corp., 360 F.2d 292, 294 (10th Cir. 1966); Acme Poultry Corp. v. United States, 146 F.2d 738, 740 (4th Cir. 1944), Cert. denied, 324 U.S. 860, 65 S.Ct. 865, 89 L.Ed. 1417 (1945); In re Holliday's Tax Services, Inc., 417 F.Supp. 182, 183 (E.D.N.Y. 1976); James v. Daley and Lewis, 406 F.Supp. 645, 648 (D.Del.1976); Mercu-Ray, Industries, Inc. v. Bristol-Myers Co., 392 F.Supp. 16, 18 (S.D.N.Y.), Aff'd mem., 508 F.2d 837 (2d Cir. 1974); Land Management, Inc. v. Department of Environmental Protection, 368 A.2d 602, 603-04 (Me.1977); American Express Co. v. Monfort Food Distributing Co., 545 S.W.2d 49, 52 (Tex.Civ.App.1976); Austrian, Lance & Stewart, P. C. v. Hastings Properties, Inc., 87 Misc.2d 25, 26, 385 N.Y.S.2d 466, 467 (Sup.Ct.1976); Linde v. Bentley, 482 P.2d 121, 122-23 (Wyo.1971); Union Savings Association v. Home Owners Aid, Inc., 23 Ohio St.2d 60, 61, 262 N.E.2d 558, 560 (1970); Ramada Inns, Inc. v. Lane and Bird Advertising, Inc., 102 Ariz. 127, 128, 426 P.2d 395, 396 (1967); Remole Soil Service, Inc. v. Benson, 68 Ill.App.2d 234, 235, 215 N.E.2d 678, 680-81 (1966); Nicholson Supply Co. v. First Federal Savings & Loan Association, 184 So.2d 438, 440-42 (Fla.App.1966); Tuttle v. Hi-Land Dairyman's Association, 10 Utah 2d 195, 196, 350 P.2d 616, 617-18 (1960); Niklaus v. Abel Construction Co., 164 Neb. 842, 846, 83 N.W.2d 904, 910 (1957); Oliner v. Mid-Town Promoters, Inc., 2 N.Y.2d 63, 156 N.Y.S.2d 833, 138 N.E.2d 217 (1956); 9 W. Fletcher, Cyclopedia of the Law of Private Corporations § 4463 (rev. perm. ed. 1976); Annot., 19 A.L.R.3d 1073, 1076-77 (1968).

Although HRS § 605-2 (1976) does provide that "any person" may appear "before any court" to prosecute or defend "his own cause, without the aid of legal counsel", ⁵ that provision does not work to alter the general common law prohibition against corporate appearance except by attorney. The federal courts have consistently construed a federal statute similar to HRS § 605-2 (1976) as applying only to "natural persons" and not to "artificial persons" such as corporations. Strong Delivery Ministry Association v. Board of Appeals, supra; Simbraw, Inc. v. United States, supra; see In re Victor Publishers, Inc., supra; United States v. 9.19 Acres of Land, supra (all cases construing 28 U.S.C. § 1654 (as amended 1949) ⁶). The reasoning is that a corporation, being an artificial entity, can act only through its agents. In re Holliday's Tax Services, Inc.,supra, Brandstein v. White Lamps, Inc., 20 F.Supp. 369, 370 (S.D.N.Y.1937). Courts thus require that persons trained in the law and familiar with court procedure act as the agents of corporations in litigation in order to protect the courts and to further the efficient administration of justice. In re Holliday's Tax Services, Inc., supra; American Express Co. v. Monfort Food Distributing Co., supra. As stated in Strong Delivery Ministry Association v. Board of Appeals, supra, regarding the underlying rationale for this rule:

The rule in these respects is neither arbitrary nor unreasonable. It arises out of the necessity, in the proper administration of justice, of having legal proceedings carried on according to the rules of law and the practice of courts and by those charged with the responsibility of legal knowledge and professional duty.

543 F.2d at 33, Quoting Heiskell v. Mozie, 65 App.D.C. 258, 82 F.2d 861, 863 (1936).

It is true, of course, that natural persons who may be unfamiliar with rules of law and the practice of courts are permitted by HRS § 605-2 (1976) to appear Pro se in our courts. It is equally true, nevertheless, that such natural persons are not permitted to act as "attorneys" and represent other natural persons in Their causes. HRS § 605-14 (1976); ⁷ See HRS § 605-2 (1976). By the same token, non-attorney agents are not allowed to represent corporations in litigation, for a wholly unintended exception to the rules against unauthorized practice of law would otherwise result. ⁸

In Austrian, Lance & Stewart, P. C. v. Hastings Properties, Inc., supra, the court stated that:

The reason corporations are required to act through attorneys is that a corporation is a hydra-headed entity and its shareholders are insulated from personal responsibility. There must therefore be a designated spokesman accountable to the Court.

87 Misc.2d at 27, 385 N.Y.S.2d at 467. Unlike lay agents of corporations, attorneys are subject to professional rules of conduct and are amenable to disciplinary action by the courts for violations of ethical standards. Merco Construction Engineers, Inc. v. Municipal Court, 21 Cal.3d 724, 727, 581 P.2d 636, 641, 147 Cal.Rptr. 631, 636 (1978) (in bank). Therefore, attorneys, being fully accountable to the courts, are properly designated to act as the representatives of corporations.

We further reject the constitutional arguments raised by Walters, for "they rest upon the faulty premise that a corporation is in all respects equal to a natural person." Union Savings Association v. Home Owners Aid, Inc., supra, 23 Ohio St.2d at 61, 262 N.E.2d at 560. The court in Union Savings, supra, stated the matter succinctly:

(W)henever the law operates alike on all persons and property, similarly situated, equal protection cannot be said to be denied. Since natural persons and corporations are not Similarly situated, the law need not operate identically upon them.

Due process of law requires only that the court system be open to use by those aggrieved. . . . The procedure requiring a corporation to appear through an attorney in no way deprives the appellant of its substantive right of due process.

Id. (citations omitted). "Viewed in this light, (Walters') constitutional due-process and equal-protection arguments are totally without merit." Id.; See also In re Ellis, 53 Haw. 23, 30, ...