Stoneleigh Homes, Inc. v. Jerome Bldg. Co., Docket No. 8572

• Citation: 31 Mich.App. 542,188 N.W.2d 152
• Decision Date: 23 March 1971
• Docket Number: No. 3,Docket No. 8572,3
• Parties: STONELEIGH HOMES, INC., a Michigan corporation, Plaintiff-Appellant, v. JEROME BUILDING CO., a Michigan corporation, Defendant-Appellee
• Court: Court of Appeal of Michigan (US)

Page 152

188 N.W.2d 152

31 Mich.App. 542

STONELEIGH HOMES, INC., a Michigan corporation, Plaintiff-Appellant, v. JEROME BUILDING CO., a Michigan corporation, Defendant-Appellee.

Docket No. 8572.

Court of Appeals of Michigan, Division No. 3.

March 23, 1971.

Leave to Appeal Denied June 3, 1971.

Released for Publication June 30, 1971.

John M. Jereck, Battle Creek, for plaintiff-appellant.

Allen, Worth & Calderone, Battle Creek, for defendant-appellee.

Before HOLBROOK, P.J., and R. B. BURNS and KELLEY ^*, JJ.

HOLBROOK, Presiding Judge.

This is an appeal by plaintiff Stoneleigh Homes, Inc., of Battle Creek, Michigan, from grant of motions for accelerated judgment in favor of defendant, Jerome Building Company, of Southfield, Michigan.

Plaintiff brought suit on February 7, 1968, in Calhoun county circuit court for breach of contract by defendant arising out of an agreement between the parties dated July 20, 1967, pursuant to which plaintiff, as sub contractor, was to furnish labor, material, equipment, and tools for the undertaking of foundation, masonry, and concrete flat work on and around a building to be constructed by defendant in Battle Creek, Michigan. In addition to the original agreement, four Addenda thereto were executed by the parties, the last of which was dated September 25, 1967.

Plaintiff alleged in its pleadings that it was not allowed to complete its work and plaintiff further alleged, and defendant denied, that, at the time of its dismissal, plaintiff was performing its work in accordance with the agreement and Addenda thereto. Defendant, in its amended answer filed April 10, 1968, raised as an affirmative defense the following:

'The contract between Plaintiff and Defendant described in Plaintiff's Complaint was entered into on July 20, 1967. Plaintiff's Annual Report to the Michigan Department of Treasury for the year 1967 required by Section 450.82 of Michigan Compiled Laws of 1948 (M.S.A. 21.82) and due not later than May 15, 1967, was not filed until August 16, 1967, on which date the filing fee and annual privilege fee required by law were also submitted to said Department. By virtue of its failure to timely file its 1967 Annual Report and the provisions of Section 450.87 of Michigan Compiled Laws of 1948 (M.S.A. 21.87) relating thereto, Plaintiff's corporate powers were suspended at the time said contract was entered into between Plaintiff and Defendant and Plaintiff is barred from maintaining this action upon such contract.'

In answer to defendant's requests for admissions, plaintiff admitted that it did not file its 1967 annual corporate report nor pay its privilege fee until August 16, 1967.

On September 23, 1968, defendant filed a motion for accelerated judgment for the reason that plaintiff's annual report was not timely filed nor its privilege fee timely paid and that, therefore, the contract in question, dated July 20, 1967, was entered into while plaintiff was in default and while its corporate powers were suspended. M.C.L.A. § 450.87 (Stat.Ann.1963 Rev. § 21.87). The trial court granted defendant's motion for accelerated judgment by a finding entered and filed January 21, 1969, subject to plaintiff's right to file an amended complaint within twenty days from date of judgment for recovery of damages for work and labor performed, setting up defendant's liability to pay such damages, or any waiver or estoppel which would allow recovery against defendant. An order to that effect was entered and filed January 27, 1969.

On February 12, 1969, plaintiff filed an amended complaint alleging in count I thereof in part as follows:

'* * * plaintiff and defendant entered into a series of supplemental agreements, two of which are also dated July 20, 1967, one having no date thereon, and the fourth being dated September 25, 1967, copies of which are attached to plaintiff's original complaint, marked Exhibits 'B', 'C', 'D', and 'E', respectively, and made a part hereof by reference.

'(5) That said last agreement (Exhibit 'E') was entered into on the 25th day of September, 1967; that plaintiff had both filed its annual report and paid its annual privilege fee on August 16, 1967.

'(6) That said Exhibit 'E' provides as follows: 'It is mutually agreed and affirmed that Stoneleigh Homes has agreed that the original agreement with Jerome Building Co. included all fill sand necessary to bring the interior and exterior grades up to the height required for the installation of the concrete flat work, and further in order to resolve this question and the question of monies that are due for additional depth of footings, pads, Etc., the Jerome Bldg. Co. agrees to pay Stoneleigh Homes an additional $500 over and above the present contract price, and Jerome Bldg. further agrees that they will advance a sum sufficient to cover the cost of the sand after same has been put in place. The cost of the sand is to be charged against the original contract amount.'

'(7) That said Exhibit 'E' therefore is a ratification and affirmance of the original contract and other supplemental agreements (Exhibits 'A' through 'D'); that therefore the original contract is in existence either by virtue of Exhibit 'E' or by waiver resulting from the execution of Exhibit 'E'.'

Plaintiff further alleged, in count I, that, inasmuch as defendant had made payments to plaintiff pursuant to the contract on or about September 19, 20, and 27, 1967, after plaintiff had filed its annual report and paid its privilege fee on August 16, 1967, and had made payments to suppliers and material men on behalf of plaintiff, thereby causing plaintiff to rely on the contract and continue to provide labor and materials in accordance therewith, there was a waiver of the affirmative defense or a ratification of the contract between the parties and that defendant had waived its right to object to plaintiff's complaint for recovery of services rendered and lost profits. In count II of its amended complaint plaintiff alleged in part as follows:

'(2) That plaintiff was engaged by defendant to furnish certain labor and materials on defendant's behalf in the construction of a United States Post Office building in the City of Battle Creek, Michigan.

'(3) That plaintiff, as a result of defendant's request, did provide considerable labor and materials on behalf of said defendant in said construction; that said labor and materials were substantially in accordance with acceptable workmanship and quality.

'(4) That at the time of furnishing said labor and materials said plaintiff expected to receive compensation for the same, and further, said plaintiff believes that defendant expected to pay plaintiff for said labor and materials.

'(5) That while defendant has paid for a portion of the labor and materials furnished by your plaintiff, there still remains a balance due to your plaintiff, the reasonable value thereof being approximately $20,000.

'(6) That defendant has refused, failed, and neglected to pay your plaintiff the said balance due; that if defendant is not ordered to pay said balance, defendant will become unjustly enriched in said amount.'

Thereafter, on March 7, 1969, the trial court, considering plaintiff's amended complaint, reaffirmed its grant of accelerated judgment for defendant, while recognizing that it had not yet denied plaintiff recovery, for the value of labor and material furnished, on a quasi-contract theory.

Defendant, on June 4, 1969, again moved for accelerated judgment on plaintiff's amended complaint, again alleging that plaintiff was precluded from maintaining its action by virtue of its delayed filing of its annual report and payment of the required privilege fee, as required by M.C.L.A.1967 Cum.Supp. § 450.82 (Stat.Ann.1967 Cum.Supp. § 21.82). On November 12, 1969, the trial court again entered its finding granting defendant's motion for accelerated judgment against both counts of plaintiff's amended complaint.

The issues which are dispositive of this appeal are considered in order:

1. Is a corporation entitled to judicial enforcement of a contract which it made while in default for failure to file its annual report and pay its annual privilege fee required by § 87 of the Michigan general corporation act, M.C.L.A. § 450.87 (Stat.Ann.1963 Rev. § 21.87)?

Defendant, in its motions for accelerated judgment, relied upon § 87 of the General Corporation Act, M.C.L.A. § 450.87 (Stat.Ann.1963 Rev. § 21.87), which provides in part:

'(1) If any corporation neglects or refuses to make and file the reports and/or pay any fees required by this act ¹ within the time herein specified, and shall continue in default for 10 days thereafter, unless the secretary of state shall for good cause shown extend the time for the filing of such report or the payment of such fee, as the case may be, as provided in section 91 of this act, and (2) if such corporation shall continue in default for 10 days after the expiration of such extension, its corporate powers shall be suspended thereafter, until it shall file such report, and it shall not maintain any action or suit in any court of this state upon any contract entered into during the time of such default;'

Plaintiff contends that the foregoing statute is intended to prohibit a defaulting corporation from maintaining an action based on contract only so long as the corporation remains in default, inasmuch as the statute provides specifically that corporate powers are to be suspended only 'until it shall file such report'; that to permit enforcement by the opposite party of a contract entered during the period of default, as provided in the statute, is inconsistent with an interpretation of the statute which would hold the contract void and never enforceable by the defaulting party; that an interpretation of the statute providing for the forfeiture of contract rights by the defaulting corporation is addition to the payment by it of the other fines and penalties provided by the Michigan...