Paper Mfrs. Co. v. Ris Paper Co., Inc.

• Decision Date: 19 March 1976
• Citation: 86 Misc.2d 95,381 N.Y.S.2d 959
• Parties: PAPER MANUFACTURERS CO. v. RIS PAPER CO., INC.
• Court: New York City Court

Page 959

381 N.Y.S.2d 959

86 Misc.2d 95

PAPER MANUFACTURERS CO. v. RIS PAPER CO., INC.

Civil Court of the City of New York, New York County Special Term, Part I.

March 19, 1976.

Milton S. Zeiberg, New York City, for defendant.

Samuels & Roth (Allan Charles Samuels, New York City, of counsel), in plaintiff.

RICHARD S. LANE, Judge.

If a foreign corporation does business in New York without a certificate of authority it is precluded from access to our Courts unless and until it obtains such certificate and pays all arrears in fees, penalties and taxes; Section #1312 Business Corporation Law.

On the eve of trial herein defendant, relying on this statute, moves to dismiss plaintiff's cause of action. Plaintiff opposes claiming waiver under CPLR Rule #3211(a)(3) and (e).

This is an action for goods sold and delivered. Plaintiff is a Pennsylvania paper manufacturer who sold to several New York paper distributors including defendant. During the period in question plaintiff's Mr. Nolan was regularly in New York with the title 'Manager, New York District' and there was an office and telephone listing here in Plaintiff's name. In addition to selling and servicing accounts Mr. Nolan also regularly called upon major ultimate users of papers to promote specification of plaintiff's products when they ordered labels for their merchandise. Plaintiff never obtained a certificate of authority from the Secretary of State.

No real dispute of fact exists except that plaintiff claims that the office and telephone listing here were maintained not by it but by Mr. Nolan for his individual convenience.

Turning first to the procedural point, there is no waiver worked by the provisions of Rule #3211 CPLR, nor by defendant's interposition of a counterclaim, Ac-Tin-O-Lyte Roofing Co. v. Werner, 209 App.Div. 742, 204 N.Y.S. 562; American Can Co. v. Grassi contracting Co., 102 Misc. 230, 168 N.Y.S. 689, but see Angldile Computing Scale Co. v. Gladstone, 164 App.Div. 370, 375, 149 N.Y.S. 807, 811. The Ac-Tin-O-Lyte case supra arose before the CPLR but the pertinent provisions of Rule #3211 were carried over from Section #278 CPA then in effect.

The apparent inconsistency between the Ac-Tin-O-Lyte result and the procedural statutes has been defended on public policy grounds; Yager v. Yager, 214 App.Div. 671, 212 N.Y.S. 707, see Bonnell Co. v. Katz, 23 Misc.2d 1028, 1031, 196 N.Y.S.2d 763, 768, see Penn Collieries v. McKeever, 183 N.Y. 98, 102, 75 N.E. 935, 936.

A better view of the Ac-Tin-O-Lyte result, however, is that Section #1312 Business Corporation Law and its predecessors in the General Corporation and Stock Corporation Laws do not create any disability inherent in the character of the foreign corporation. Hence there is no true legal incapacity to sue; Hooton Chocolate Co. v. Star Chocolate Novelties Inc., 63 Misc.2d 482, 311 N.Y.S.2d 698; Ascher Corp. v. Horvath, 35 Misc.2d 375, 231 N.Y.S.2d 676. The foreign corporation is not precluded from commencing an action. Once the action is started the foreign corporation is entitled to a presumption that it is doing business in the state of its organization and not here. If that presumption is rebutted, the foreign corporation's right to 'maintain' the action is merely suspended until compliance. Proof of compliance then becomes part of the prima facie case, and the Ac-Tin-O-Lyte result stands for the simple proposition that failure to thus prove a prima facie case can be raised at any time prior to judgment. On the other side of the coin, lack of compliance with Section #1312 Business Corporation Law can be cured at any time prior to judgment; Hot Roll Mfg. Co. v. Cerone Equipment Co., 38 A.D.2d 339, 329 N.Y.S.2d 466; Dixie Dinettes v. Schaller's Furniture, Inc., 71 Misc.2d 102, 104--5, 335 N.Y.S.2d 632, 635--6; Oxford Paper Co. v. S.M. Liquidation Co., Inc., 45 Misc.2d 612, 257 N.Y.S.2d 395; Bonnell Co. v. Katz, 23 Misc.2d 1028, 1030, 196 N.Y.S.2d 763, 767; Globe Knitwear Co., Inc. v. Screen Modes, Inc., NYLJ July 15, 1971, p. 10, col. 1.

Turning now to the substance of the motion, the test of doing business in New York for the purpose of Section #1312 Business Corporation Law and its predecessors is not the same as doing business here for jurisdictional purposes. They both raise constitutional questions, but the latter involves the due process clause while the former involves the interstate commerce clause. Judge Cardozo himself emphasized this distinction in the seminal Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 266--67, 115 N.E. 915, 917, and its companion International Text Book Co. v. Tone, 220 N.Y. 313, 318, 115 N.E. 914, 915.

It is often asserted that more is necessary for Section #1312 Business Corporation Law purposes than for jurisdiction; International Text Book Co. v. Tone, supra; Hachette S.A. v. Paris Book Center, 62 Misc.2d 873, 309 N.Y.S.2d 701; Marion Laboratories Inc. v. Wolins Pharmacal Corp., NYLJ November 24, 1969, p. 17, col. 7, aff'd 34 A.D.2d 895, 313 N.Y.S.2d 340, aff'd 28 N.Y.2d 884, 322 N.Y.S.2d 720, 271 N.E.2d 554. Lending support thereto and even more frequent are the cases which articulate the test in terms of corporate continuity of conduct here; Penn Collieries Co. v. McKeever, 183 N.Y. 98, 103, 75 N.E. 935, 936; International Fuel & Iron Corp. v. Donner, 242 N.Y. 224, 229, 151 N.E. 214, 215; Conklin Limestone Co. v. Linden, 22 A.D.2d 63, 253 N.Y.S.2d 578; Laurence University v. State of N.Y. 68 Misc.2d 408, 326 N.Y.S.2d 617, rev'd other grounds 41 A.D.2d 463, 344 N.Y.S.2d 183; Dixie Dinettes v. Schaller's Furniture, Inc., 71 Misc.2d 102, 103, 335 N.Y.S.2d 632, 634; Bonnell Co. v. Katz, 23 Misc.2d 1028, 1030--31, 196 N.Y.S.2d 763, 767--68.

Such articulation even though emanating from most respected sources tends to confuse. The 'more' that is required for Section #1312 Business Corporation Law cases lies not in the quantum but rather in the nature of the business in New York. If the foreign corporation's contacts here, no matter how extensive, are merely for the purpose of soliciting business and activities incidental to the sale and delivery of merchandise into the state, then the foreign corporation is engaged in interstate commerce and is constitutionally beyond the reach of Section #1312 Business Corporation Law. If, on the other hand, the foreign corporation is engaged in local business on more than an isolated or accidental basis, it must comply with the statute; International Fuel & Iron Corp....