Ranch House Supply Corp. v. Van Slyke, 6544

• Decision Date: 11 April 1962
• Docket Number: No. 6544,6544
• Citation: 91 Ariz. 177,370 P.2d 661
• Parties: RANCH HOUSE SUPPLY CORPORATION, a California Corporation, Appellant, v. Clague VAN SLYKE and Sally B. Van Slyke, his wife, and Lloyd Fuller and H. F. Voight, co-partners dba Lloyd Fuller Building Company, Appellees. RANCH HOUSE SUPPLY CORPORATION, a California Corporation, Appellant, v. Clague VAN SLYKE and Sally B. Van Slyke, his wife, Appellees.
• Court: Arizona Supreme Court

Page 661

370 P.2d 661

91 Ariz. 177

RANCH HOUSE SUPPLY CORPORATION, a California Corporation, Appellant, v. Clague VAN SLYKE and Sally B. Van Slyke, his wife, and Lloyd Fuller and H. F. Voight, co-partners dba Lloyd Fuller Building Company, Appellees.

RANCH HOUSE SUPPLY CORPORATION, a California Corporation, Appellant, v. Clague VAN SLYKE and Sally B. Van Slyke, his wife, Appellees.

No. 6544.

Supreme Court of Arizona, In Division.

April 11, 1962.

Minne & Sorenson, Scott, Cavness & Yankee, Phoenix, for appellant.

Wright, Goddard & Barry, Tucson, for appellees.

DON T. UDALL, Superior Court Judge.

This cause is a consolidated appeal of two actions between the same parties. In each case a judgment was entered in the court below against the Ranch House Supply Corporation, plaintiff therein, and in favor of Clague Van Slyke and Sally B. Van Slyke, defendants. The first action rested upon a claim of a materialmen's lien for $2,594.70 and the second upon the sale of certain goods to defendants. The plaintiff will hereafter be referred to as appellant and the defendants as appellees.

Appellant is a California Corporation engaged in business in that state where it maintains a sales office and certain storage facilities. It fabricates and assembles 'do-it-yourself' package kits which are sold along with and in accordance with plans and specifications to construct residential houses known as 'Cliff May Homes'. Appellant markets these package units in parts of Arizona through franchise dealer agreements with one Lloyd Fuller, dba Lloyd Fuller Building Company, a licensed contractor doing business in Tucson, Arizona.

The dealer's contract with Fuller gave him the right to purchase the prefabricated parts from appellant for construction of houses in Tucson, Wilcox, Benson, Safford and Nogales for a period of three years for a consideration of $1,500, with the provision that if the agreement was terminated by either party according to the terms of the contract, Fuller was to receive a prorata refund of the consideration paid. The contract provides certain restrictions upon the dealer concerning his use of the prefabricated material sold to him and if appellant sold such material to anyone in the area granted to Fuller it would be at a price 20% higher than the prices currently charged to a dealer. It also required Fuller to purchase all of his parts and material from appellant for the construction of the 'Cliff May Homes,' which Fuller agreed to build. There were a number of other restrictive terms in the agreement which do not appear to be material and therefore, we will not burden this decision with a recitation of them.

The Materialmen's Lien

The first point raised concerns the status of appellant as doing business in this state without being licensed as required by A.R.S. § 10-481. If the appellant was doing business in the state within the meaning of the statute, its acts were void, A.R.S. § 10-482, but we are of the view that such is not the case. The burden was on the appellees to show that appellant was engaged in 'a reasonably substantial course of business' in Arizona. Monaghan & Murphy Bank v. Davis, 27 Ariz. 532, 537, 234 P. 818 (1925); Martin v. Bankers' Trust Co., 18 Ariz. 55, 156 P. 87 (1916); and Nicolai v. Sugarman Iron & Metal Co., 23 Ariz. 230, 202 P. 1077 (1922). However, the appellees failed with their proof in this particular.

An examination of the evidence in the case convinces us that appellant cannot be said to have been doing business in Arizona. Its contract with Fuller was executed in California. The purchase price of the prefabricated material was fixed at the f. o. b. price in California and payment was to be made in California. The material was ordered by Fuller to be used in the construction of the Van Slyke home at their request. Therefore, Fuller as the contractor for the Van Slykes was their agent, so as to procure the attachment of a materialmen's lien. Lilley v. J. D. Halstead Lumber Co., 42 Ariz. 546, 28 P.2d 616 (1934); Watson v. Murphey, 36 Ariz. 377, 285 P. 1037 (1930).

One of the leading cases respecting doing of business by a foreign corporation so as to subject it to A.R.S. § 10-481 is Reed v. Real Detective Pub. Co., 63 Ariz. 294, 162 P.2d 133 (1945). There this Court announced the rather broad proposition that:

'Sales on consignment, factorage agreements, or sales on commission, by a foreign corporation to a dealer within the state, of products from without the state, do not constitute doing business within the state, where the local merchant or factor acts entirely in his own behalf in making sales or contracts for the sale of such goods.' 63 Ariz. 294, 308, 162 P.2d 133, 140.

Cf. State Tax Commission v. Murray Co. of Texas, Inc., 87 Ariz. 268, 350 P.2d 674 (1960).

The fact that appellant in its agreement with Fuller stated it would sell him prefabricated material to build 'Cliff May Homes' in Tucson, Wilcox, Benson, Safford and Nogales did not have the effect of converting its activities to the status of doing business in this state. It agreed in effect, not to sell prefabricated material to anyone else in those communities, except to individuals, Fuller did not want to service, and then at a price 20% higher if the appellant sold prefabricated material to an individual owner of lots or to builders engaged in multiple construction in tracts and subdivisions. It did not undertake to control Fuller in the manner in which he did his work, when he did it, or where he did it. Fuller was not its agent in contracting to build houses in Arizona. It dealt at arms length with Fuller in executing the dealer's agreement with him and either could terminate the contract by giving 60 days notice.

The next issue directs our attention to the question of whether appellant is within the Materialmen's Lien Statute (A.R.S. In the recent case of Kerr-McGee Oil Industries, Inc. v. McCray, 89 Ariz. 307, 361 P.2d 734 (1961), this Court stated:

'The Arizona Lien Statutes are remedial and to be liberally construed. Leeson v. Bartol, 55 Ariz. 160, 99 P.2d 485. Their purpose is that laborers and materialmen enhancing the value of another's property should be protected.' 361 P.2d 734, 736.

The materialman, of course, does not have to deal with the owner directly, A.R.S. § 33-981, subd. B reads in pertinent part as follows: 'Every contractor * * *...