Sanjay, Inc. v. Duncan Const. Co., Inc.

• Decision Date: 09 December 1983
• Citation: 445 So.2d 876
• Parties: SANJAY, INC., a corporation v. DUNCAN CONSTRUCTION CO., INC., an Alabama corporation, et al. 82-707.
• Court: Alabama Supreme Court

Page 876

445 So.2d 876

SANJAY, INC., a corporation v. DUNCAN CONSTRUCTION CO., INC., an Alabama corporation, et al.

82-707.

Supreme Court of Alabama.

Dec. 9, 1983.

Rehearing Denied Jan. 27, 1984.

Rodney A. Max and Douglas J. Centeno of Denaburg, Schoel, Meyerson, Ogle, Zarzaur & Max, Birmingham, for appellants.

J.A. Keller of Keller, Cochran & Pitts, Florence, for appellee Duncan Const. Co., Inc.

Donald H. Patterson of Patterson, Weathers & Jester, Florence, for appellee Sheffield Motel Enterprises, Inc.

MADDOX, Justice.

This is an appeal from a summary judgment in favor of the plaintiff. The issue in this case is whether a foreign corporation can recover damages upon a cause of action based on contract if the foreign corporation was not qualified to do business in Alabama at the time the contract was made, but qualified before the performance of the contract was complete. The trial court held the foreign corporation could not recover damages. We affirm.

The trial court's findings are pertinent here:

"(a) Duncan Construction Co., Inc., as Contractor, and City of Sheffield, Alabama (defined for the purposes of such contract as Sheffield Motel Enterprises, Inc.), as Owner, made and entered into an agreement dated December 3, 1980, for the construction of a motel in Sheffield, Colbert County, Alabama.

"(b) Under the terms of the contract dated December 3, 1980, (referred to in (a) above), Duncan Construction Co., Inc. agreed to engage Sanjay, Inc. for project manager for the construction of a motel in Sheffield, Alabama (Holiday Inn)--"the project."

"(c) Thereafter on January 16, 1981, Duncan Construction Co., Inc. made and entered into a contract with Sanjay, Inc. for the furnishing of certain work, labor and materials in and about the construction of said motel in Sheffield, Alabama. In such contract Duncan Construction Co., Inc. is described as 'Contractor' and Sanjay, Inc. is described as 'Subcontractor.'

"(d) All work and labor contemplated in both of said contracts mentioned above was for the construction of a motel in Sheffield, Alabama, i.e. such contracts were to be wholly performed within the State of Alabama.

"(e) At all times hereinabove mentioned, Sanjay, Inc. was a foreign corporation not qualified to do business in the State of Alabama. Sanjay, Inc. was a foreign corporation not qualified to do business in the State of Alabama at the time it commenced furnishing work, labor and materials in and about the construction of said motel in Sheffield, Alabama. Sanjay, Inc. did not qualify to do business in the State of Alabama until September 18, 1981, more than eight (8) months after it commenced furnishing work, labor and materials in and about the construction of such motel. [We would only add the contract continued to be performed until February of 1982, as shown by affidavits of the appellant.]

"The Court makes no findings of fact as to the following:

"(i) whether or not Sanjay, Inc. has any standing to sue under that contract dated December 3, 1980; and

"(ii) whether or not either of said contracts was executed within or without the State of Alabama;

for that it affirmatively appears that the subject matter of both contracts and the work contemplated thereunder were to be wholly performed within the State of Alabama and Sanjay, Inc. was a foreign corporation not qualified to do business in the State of Alabama on the date of the execution of said contracts and was not so qualified to do business in the State of Alabama when it commenced furnishing work, labor and materials in and about the construction of said motel in Sheffield, Alabama.

"Sanjay, Inc. has argued orally and in brief that the prefabricating of materials outside the State of Alabama for the sole purpose of ultimately being used in the construction of a motel in Alabama and the performance of accounting and engineering functions outside the State of Alabama necessitated by the performance of a contract to build a motel in the State of Alabama take this case outside the rule of law hereinafter set forth. The Court does not agree. If such were the case, the public policy of this state as expressed in our Constitution and statutes could be flaunted by virtually any foreign corporation in the construction business. The Court takes judicial notice that many component parts of any structure to be erected in the State of Alabama are often fabricated outside the State of Alabama and any foreign corporation doing construction business in the State of Alabama will perform accounting and engineering functions outside the state. If such prefabricating and performance of ministerial functions outside the State of Alabama had the effect argued by Sanjay, Inc., the public policy of this state would be frustrated and defeated.

"Our appellate courts have consistently ruled that foreign corporations doing business in this state without lawful qualification cannot use our courts to enforce [their] contracts. Such interpretation applies whether the contract is void because made in this state under Section 10-2A-247 or whether made outside the state. Where the contract is to be performed in this state, as in the case sub judice, regardless of where entered into, and in the performance the non-resident corporation must engage in business in this state, although the contract is valid, the public policy of this state, as evidenced by the Constitution (Ala. Const., Art. XII, § 232), and statutes, compels the courts of this state to refuse their aid to such offending corporation in the enforcement of such contract or recovering benefits accruing thereunder. This Court need not consider whether or not any contract was void under § 10-2A-247 to reach the result herein set forth."

Sanjay, Inc., the appellant, filed a mechanic's lien in the probate court of Colbert County against Duncan Construction Company, the appellee, for $270,000. After this action was filed, Duncan filed a declaratory judgment action in the circuit court of Colbert County naming Sanjay, the City of Sheffield, and Sheffield Motel Enterprises, Inc. as defendants. Duncan sought to quash the mechanic's lien and to recover $130,000 allegedly paid by Duncan to Sanjay mistakenly, and sought a declaration that the contract between Duncan and Sanjay was unenforceable and void.

Sanjay answered, asserted a counterclaim seeking enforcement of the lien, filed a cross-claim against the City of Sheffield, and joined Aetna Insurance Co. (the mortgagee) and Sheffield Motel Enterprises, Inc. as third-party defendants. Duncan and Sanjay each filed motions for summary judgment. After a hearing on August 20, 1982, the trial court granted Duncan's motion and dismissed Sanjay's counterclaim as based upon a void and unenforceable contract. On January 18, 1983, the City of Sheffield filed a motion for summary judgment. The trial court entered a summary judgment in favor of all parties and against Sanjay on the original complaint on March 24, 1983. Sanjay appealed from the summary judgment in favor of Duncan.

In its brief here, as at the hearing below, Sanjay candidly concedes that it was not qualified to do business in Alabama before and at the time the contracts were made. Sanjay did not qualify to do business in Alabama until eight months after work began on the motel, but did qualify approximately five months before the dispute arose.

First, we point out the standard of review in summary judgment cases: there must not be a genuine issue as to any material fact and the moving party must be entitled to summary judgment as a matter of law. Trust Company Bank v. State of Alabama, 420 So.2d 10 (Ala.1982); Reed v. Ray, 409 So.2d 814 (Ala.1982); Isbell v. City of Huntsville, 295 Ala. 380, 330 So.2d 607 (1976); Ala.R.Civ.P. 56(c). This is the same standard which the trial court must apply. Long v. Banker's Life and Casualty Co., 294 Ala. 67, 311 So.2d 328 (1975).

Sanjay argues that issues of fact were in dispute. It claims that the situs of the making of the contract was in dispute and that there were some questions about the place of performance. Of course, material issues of fact must not be in dispute, Trust Company Bank, supra, but as the trial court correctly pointed out, it was not necessary to determine where the contract was executed, Boles v. Midland Guardian Co., 410 So.2d 82 (Ala.Civ.App.1982); Citizens National Bank v. Bucheit, 14 Ala.App. 511, 71 So. 82 (1916); see also Lee v. Great Northern Nekoosa Corp., 465 F.2d 1132 (5th Cir.1972); the only issue was the enforceability of the subcontract agreement. As the Bucheit court stated:

"Where the contract is to be performed in this state, although not entered into here, and in the performance the non-resident corporation must engage in business in this state, although the contract is valid, the policy of the state, as evidenced by the Constitution and statutes, compels the courts of the state to refuse their aid to such offending corporation in the enforcement of such contract or recovering the benefits accruing thereunder."

Bucheit, supra, 14 Ala.App. at 514, 71 So. at 86 (1916).

The Bucheit court cited Alabama Western Railroad Company v. Talley-Bates Construction Co., 162 Ala. 396, 50 So. 341 (1909). In Talley-Bates, the Court opined:

"The statute requires that an instrument in writing shall be filed with the Secretary of State before engaging in or transacting any business in this state. Its purpose has been stated. That purpose is not to be accomplished by a filing at the pleasure of the corporation, or when it may be to its interest to appeal to the courts of this state. We may safely affirm that nothing short of a compliance before any business is engaged in or transacted in this state satisfies either the literal requirement of the statute and Constitution or their policy." (Emphasis added.)

Talley-Bates, supra, 162 Ala. at 408, 50 So. at 344 (1909).

A foreign corporation cannot enforce a contract which is to be performed...