Trestle & Tower Engineering, Inc. v. Star Ins. Co., 97-4070-RDR.

CourtUnited States District Courts. 10th Circuit. United States District Courts. 10th Circuit. District of Kansas
Citation13 F.Supp.2d 1166
Docket NumberNo. 97-4070-RDR.,97-4070-RDR.
PartiesTRESTLE & TOWER ENGINEERING, INC., Plaintiff, v. STAR INSURANCE COMPANY, Defendant.
Decision Date06 July 1998

Charles D. McAtee, Schroer, Rice, P.A., Topeka, KS, for Trestle and Tower Engineering, Inc., plaintiff.

Thomas J. Koehler, Michael J Blake, Levy & Craig, P.C., Kansas City, MO, for Star Insurance Company, defendant.

MEMORANDUM AND ORDER

ROGERS, District Judge.

This is an action to recover on a bond issued for the Kansas Avenue bridge project in Topeka, Kansas. Plaintiff supplied materials and equipment for that project. Defendant issued the bond for the project. Western Bridge Corporation was the general contractor for the project. Following the completion of the project, Western Bridge filed for bankruptcy. This matter is presently before the court upon defendant's motion to dismiss or, in the alternative, for summary judgment.1

I.

The defendant argues that this action should be dismissed because plaintiff, a foreign corporation, has not registered to do business in Kansas as required by K.S.A. 17-7307. This statute states in pertinent part:

A foreign corporation which is required to comply with the provisions of K.S.A. 17-7301 and 17-7302 and which has done business in this state without authority shall not maintain any action or special proceeding in this state, unless and until such corporation has been authorized to do business in this state and has paid to the state all taxes, fees and penalties which would have been due for the years or parts thereof during which it did business in this state without authority.

A foreign corporation barred from maintaining an action in the Kansas courts by virtue of this statute is also precluded from maintaining an action in the federal courts of the state. Wilson v. Williams, 222 F.2d 692, 697 (10th Cir.1955).

The parties are at odds over whether plaintiff "did business" in Kansas. The definition of "doing business" in Kansas is set forth in K.S.A. 17-7303 as follows:

Every foreign corporation that has an office or place of business within this state, or a distributing point herein, or that delivers its wares or products to resident agents in this state for sale, delivery or distribution, shall be held to be doing business in this state within the meaning of this act.

Plaintiff has acknowledged that it was not registered pursuant to K.S.A. 17-7301. Plaintiff, however, contends that it was not doing business in Kansas as defined in K.S.A. 17-7303. Plaintiff asserts that it did not have an "office," "place of business" or "distributing point" in Kansas. It further asserts that it did not deliver any "wares or products to resident agents in [Kansas] for sale, delivery or distribution." Finally, plaintiff argues that K.S.A. 17-7307(a) is not applicable to foreign corporations that provide only "services." In the alternative, plaintiff contends that it should be given reasonable time to comply with K.S.A. 17-7301 if it is found that it was doing business in Kansas.

The defendant contends that plaintiff cannot bring this action because it has never been authorized to do business in Kansas. The defendant argues that plaintiff was doing business in Kansas when it supplied equipment, materials and supplies for the Kansas Avenue bridge project and, therefore, was required to comply with K.S.A. 17-7301.

The determination of whether a foreign corporation is doing business in Kansas requires an evaluation of the particular facts of each situation. Toedman v. Nooter Corp., 180 Kan. 703, 308 P.2d 138, 142 (1957). Fixed, definite or precise rules cannot be applied. Id. "Doing business" in Kansas means that a foreign corporation must (1) establish an office, place of business or distribution point in Kansas, or (2) deliver its wares or products to agents in Kansas for sale, delivery or distribution. Panhandle Agri-Service, Inc. v. Becker, 231 Kan. 291, 644 P.2d 413, 417 (1982).

Many of the facts pertinent to this motion are not in dispute. Plaintiff is a Wisconsin corporation. It has not been authorized to do business in Kansas. Plaintiff supplied goods and services for Western Bridge and AHL, Inc. in connection with the Kansas Avenue bridge project. AHL, Inc. was a subcontractor on the project. Plaintiff moved some of Western Bridge's equipment to the site from Michigan. It also supplied 40 tons of grit to Western Bridge for the project. Plaintiff had a rental agreement with Western Bridge for the use of a lowboy trailer for transportation of some of the equipment and the grit. Plaintiff entered into a lease agreement with AHL for supplies and equipment. Plaintiff provided an equipment trailer to AHL for its use on the project. Plaintiff also supplied other equipment to AHL for the project. Lawrence G. Brienen, Executive Vice-President of plaintiff, made two trips to the project to inspect the project site. Other employees made several trips to the project from February through the middle of May.

Recently, this court considered this issue in a related case, A.H.L., Inc. v. Star Insurance Co., 10 F.Supp.2d 1216 (D.Kan.1998). There, the court determined that AHL was doing business in Kansas during its work on the Kansas Avenue bridge project. AHL was a subcontractor on the project and performed substantial work during the period of construction in 1996. This case, however, differs substantially from AHL. The actions of Trestle & Tower are not as direct, substantial and continuous as those of AHL.

The determination of whether the actions of a lessor constitute doing business within statutes prescribing conditions of right to do business in a state are far from clear. See Brazener, "Foreign Corporation's Leasing of Personal Property as Doing Business Within Statutes Prescribing Conditions of Right to Do Business," 50 A.L.R.3d 1020 (1973 & Supp.1997). There is no Kansas case law on the issue. In cases involving foreign suppliers and lessors, courts in other states have focused upon whether the activities are interstate or intrastate in nature. Id. at 1025; see also Sierra Glass & Mirror v. Viking Industries, Inc., 107 Nev. 119, 808 P.2d 512, 513-14 (1991). If the leasing transaction is essentially interstate in character, it does not constitute "doing business" within the state by the lessor. Whether the act of entering into the lease constitutes interstate or intrastate commerce can depend upon several factors, including where the contract was negotiated, where it was executed, and whether it requires an interstate shipment of goods. 50 A.L.R.3d at 1025.

One Kansas case does provide some guidance here. In Panhandle Agri-Service, the Kansas Supreme Court considered whether a company who contracted to purchase hay from an individual in Kansas was doing business in Kansas. The company, a Texas corporation, had reached an agreement with a Kansas resident to purchase hay to be sold in Texas. The agreement provided that Panhandle Agri-Service would transport the hay from Kansas to Texas. Under these circumstances the Kansas Supreme Court concluded that Panhandle Agri-Service was not doing business in Kansas under K.S.A. 17-7303. The Court noted that Panhandle Agri-Service had no office, place of business or distributing point in Kansas and did not deliver wares or products to resident agents in the state for sale, delivery, or distribution.

After considering all of the circumstances, we are not persuaded that Trestle & Tower was doing business in Kansas during the Kansas Avenue bridge project. Trestle & Tower supplied equipment, materials and manpower to both AHL and Western Bridge during the project. These various activities, however, were interstate in character. Trestle & Tower shipped and transported various goods and supplies to Kansas but did not maintain a presence in the state during the project. Accordingly, we do not find that plaintiff did business in Kansas as defined in K.S.A. 17-7303.

II.

The defendant has also argued that plaintiff did not sufficiently comply with K.S.A. 68-410 prior to bringing this action. The defendant asserts that, contrary to this statute, plaintiff (1) failed to submit an itemized statement of its claimed indebtedness, (2) dated its statement prior to the acceptance of the project instead of six months after its completion, and (3) did not properly submit its statement to the Kansas Department of Transportation (KDOT).

The arguments made by the defendant allege violations of K.S.A. 68-410 which provide in pertinent part as follows:

That any person to whom there is due any sum for labor or material for any item covered by this act or his or her assigns, may bring an action on said bond for the recovery of said indebtedness and said suit may be brought in any county of the state where any part of the contract has been performed: Provided further, That no such action shall be brought on said bond unless within six (6) months after the completion date of said contract, according to the records of the secretary of transportation, there be filed with the secretary an itemized statement of the amount of such indebtedness. ...

A.

The defendant initially suggests that the plaintiff failed to properly itemize the statement sent to KDOT. The defendant asserts that the statement (1) contains only lump sum amounts, and (2) does not specifically set forth the amounts for labor, supplies, materials, tools and equipment.

In the letter sent to KDOT, plaintiff itemized its claim as follows:

                      1. Western Bridge Corp. took possession of 40 tons of
                steel grit for use in blasting and has never returned it
                Western Bridge Corp. has acknowledged that steel grit
                has a value of $300.00 per ton
                                                         $20,000.00
                      2. Western Bridge Corp. rented a Rogers LoBoy trailer
                to be used to move into Project No. 89-U-1458-01 and to
                use on the project. Rent due
                                                           7,200.00
                      3. Supplies, small tools and
...

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