Stewart Mach. and Engineering Co., Inc. v. Checkers Drive In Restaurants of North America, Inc.

• Decision Date: 15 February 1991
• Parties: STEWART MACHINE AND ENGINEERING COMPANY, INC. v. CHECKERS DRIVE IN RESTAURANTS OF NORTH AMERICA, INC., and Maidee G. Youngblood. 89-1000.
• Court: Alabama Supreme Court

Page 1072

575 So.2d 1072

STEWART MACHINE AND ENGINEERING COMPANY, INC. v. CHECKERS DRIVE IN RESTAURANTS OF NORTH AMERICA, INC., and Maidee G. Youngblood.

89-1000.

Supreme Court of Alabama.

Feb. 15, 1991.

James L. O'Kelley of Arendall & O'Kelley, Birmingham, for appellant.

Richard L. Vincent of Vincent, Hasty, Arnold & Whaley, Birmingham, for appellees.

STEAGALL, Justice.

The plaintiff appeals from a summary judgment in favor of defendants Checkers Drive In Restaurants of North America, Inc., and Maidee G. Youngblood (hereinafter together referred to as "Checkers"). The only issue raised on appeal is whether the plaintiff, Stewart Machine and Engineering Company, Inc. (hereinafter "Stewart"), a foreign corporation, can bring suit and recover damages for an alleged breach of contract when, as a foreign corporation, it had failed to qualify to do business in Alabama. The trial court held that because Stewart was an unqualified foreign corporation, it could not use the courts of Alabama to recover damages. We agree.

Stewart is a Mississippi corporation with its principal place of business in Picayune, Mississippi. It is engaged in the business of constructing prefabricated buildings and/or parts of buildings to be transported to designated locations throughout the United States and assembled according to prescribed specifications.

Checkers is a Nevada corporation qualified to do business in Alabama. It is a franchisor engaged in the business of operating and licensing third parties to utilize a fast-food restaurant system of operation under the trademark and tradename of "Checkers."

In Mississippi, on February 3, 1988, after months of negotiation, Checkers and Stewart entered into a "Building Purchase Agreement," whereby Stewart was to manufacture the parts to construct two buildings pursuant to plans and specifications provided by Checkers. The agreement also required Stewart to deliver and construct a building at a designated site in Tuscaloosa, Alabama, and another building at a site in Birmingham, Alabama. The entire contract price reflected in the agreement is $95,261 for the two buildings.

After the buildings were completed, an inspection of the Birmingham site led to a dispute between the parties. The dispute involved Checkers's refusal to pay the balance of the contract price. Stewart sought a declaration of a materialman's lien from the judge of probate of Jefferson County against Checkers for $18,783.71. ¹

Stewart later sued Checkers to enforce the lien, as well as to recover damages for the alleged breach of contract by Checkers. In response, Checkers moved to dismiss, claiming that Stewart was a foreign corporation not qualified to do business in Alabama. The trial court ordered that the motion to dismiss be heard as a motion for summary judgment. Both parties then filed the appropriate affidavits with the trial court. On October 31, 1989, the trial court entered a summary judgment in favor of Checkers, citing Sanwa Business Credit Corp. v. G.B. (Boots) Smith Corp., 548 So.2d 1336 (Ala.1989), as authority. Stewart appeals.

Stewart concedes that it was not qualified to do business in Alabama either at the time the contract was made or at the time performance of the contract was completed. However, Stewart claims it is immune from the effect of Alabama's "door closing" statutes because, it says, it was engaging only in interstate commerce and was therefore protected by the commerce clause in the United States Constitution.

First, we note the standard of review in summary judgment cases. For a summary judgment to be proper, there must be no genuine issue as to any material fact and the moving party must be entitled to a summary judgment as a matter of law. Rule 56(c), Ala.R.Civ.P.; Sanjay, Inc. v. Duncan Construction Co., 445 So.2d 876 (Ala.1983).

Second, because Stewart concedes that it was not qualified to do business in Alabama at the time the contract was entered into or at the time of performance, a discussion of Alabama's "door closing" statutes is not necessary. Ala.Code 1975, § 10-2A-247(a); Art. XII, § 232, of the Alabama Constitution; and Ala.Code 1975, § 40-14-4, all bar foreign corporations not qualified to do business in Alabama from enforcing their contracts in the courts of this state. See Sanwa Business Credit Corp., supra; Green Tree Acceptance, Inc. v. Blalock, 525 So.2d 1366 (Ala.1988); Wallace Construction Co. v. Industrial Boiler Co., 470 So.2d 1151 (Ala.1985); and Sanjay Inc., supra. However, businesses engaged in interstate commerce are protected by the commerce clause in the United States Constitution, U.S. Const., Art. 1, § 8, cl. 3, and are therefore immune from the effects of the "door closing" statutes. Wallace Construction Co., supra, and Johnson v. MPL Leasing Corp., 441 So.2d 904 (Ala.1983). Additionally, we note a second exception for foreign corporations whose activities in Alabama are merely incidental to a transaction of interstate business. Wallace Construction Co., supra, and Johnson, supra.

Therefore, the focus of this case is on whether Stewart was engaged in interstate or in intrastate commerce; this issue is ultimately decided on a case-by-case basis. Green Tree Acceptance, Inc., supra, and Wallace Construction Co., supra. However, this Court has in the past held that "[a] construction contract supplying both material and labor is an example of the type of contract that is considered intrastate." Green Tree Acceptance, Inc., 525 So.2d at 1371, citing Sanjay, Inc., 445 So.2d at 879. This point was reiterated by this Court in Sanwa Business Credit Corp.,...