Walter E. Heller & Co. of Cal. v. Stephens

• Decision Date: 04 March 1968
• Docket Number: No. 8393,8393
• Citation: 439 P.2d 723,79 N.M. 74,1968 NMSC 36
• Parties: WALTER E. HELLER & COMPANY OF CALIFORNIA, a corporation, Plaintiff- Appellant and Cross-Appellee, v. James R. STEPHENS and Guy A. Swartz, a Partnership, and Guy A. Swartz, as an Individual, Defendants-Appellees, and James R. Stephens, as an Individual, Defendant-Appellee and Cross-Appellant.
• Court: New Mexico Supreme Court

Page 723

439 P.2d 723

79 N.M. 74

WALTER E. HELLER & COMPANY OF CALIFORNIA, a corporation Plaintiff- Appellant and Cross-Appellee, v. James R. STEPHENS and Guy A. Swartz, a Partnership, and Guy A. Swartz, as an Individual, Defendants-Appellees and James R. Stephens, as an Individual, Defendant-Appellee and Cross-Appellant.

No. 8393.

Supreme Court of New Mexico.

March 4, 1968.

Rehearing Denied April 24, 1968.

Oscar L. Donisthorpe, Farmington, David A. Grammer, Jr., Albuquerque, for appellant.

Marvin Baggett, Jr., Farmington, for Swartz, as an individual.

Burr & Cooley, Farmington, for appellee Stephens.

OPINION

MOISE, Justice.

Plaintiff-appellant, hereinafter referred to as 'Heller,' is a California corporation. It brought this action to recover amounts claimed to be due from defendants-appellees, hereinafter referred to as defendants, citizens of New Mexico, on a 'lease' agreement executed by them with Tri-County Leasing Corporation, hereinafter referred to as 'Tri-County,' a California corporation, and by Tri-County assigned to Heller.

The record discloses that defendants contracted with Dynamics Research, Inc., in Arizona, for the manufacture of a custom-built mill for use at a mine operated by defendants near Seligman, Arizona. Negotiations were then entered into in Arizona between defendants and Tri-County which culminated in the purchase by Tri-County of the mill ordered by defendants, and its lease by Tri-County. When acquired by Tri-County the mill had been installed at the mine by the manufacturer. The actual signing of the lease took place in the office of Tri-County in California.

Upon completion of the mill defendants accepted delivery, signed a certificate of satisfactory installation, and thereafter made no complaint concerning the equipment for a considerable period of time, during which Dynamics Research, Inc. became insolvent. During this period defendants made one payment of $9,900.00 under the terms of the lease to Tri-County, and three payments totaling $3,915.00 to Heller after its assignment, leaving a balance of $43,065.00 unpaid.

It appears that Tri-County, either in its own name or in the name of Federal Leasing Company, had been engaged for some time in acquiring personal property and leasing it for use in Arizona, but never had been authorized to do business in Arizona.

The trial court concluded that Tri-County was engaged in transacting business in Arizona in connection with the lease agreement sued on, without having qualified as provided in § 10--481, Ariz.Rev.Stats.Ann.1956, and that under § 10--482, Ariz.Rev.Stats.Ann.1956, the lease contract was void and unenforceable in Arizona and, accordingly, unenforceable in New Mexico; further, that this defense could be asserted against Heller, Tri-County's assignee. Based thereon, Heller's action was dismissed and this appeal followed. Also, the trial court determined that defendants were not entitled to judgment on their counterclaim for amounts paid by them to Heller as rental. Defendant Stephens has perfected a cross-appeal from this holding.

The only issue presented for determination on the appeal is whether the trial court erred in concluding that acts leading up to the execution of the lease agreement and the subsequent performance of some of its obligations constituted 'transaction of business' so as to make the agreement void. In this connection, it is Heller's position that the lease agreement was either a California transaction or a transaction in interstate commerce.

There is no question that Tri-County had not complied with § 10--481, supra. Neither can there by any question that if the acts of Tri-County amounted to the transaction of business in Arizona, such acts were void under § 10--482, supra, which reads:

'No foreign corporation shall transact business in this state until it has complied with requirements of § 10--481, and every act done prior thereto is void.'

Appellant's principal claim of error is predicated upon the argument that the transaction in question was in interstate commerce and accordingly could not be controlled by § 10--482, supra, which applies only to intrastate dealings or business done in Arizona.

We see no escape from the conclusion that the transaction of business in Arizona is here present. While fully sympathetic with the rule, oft-stated by us, which dictates against construction of a statute so as to result in voiding of solemn obligations unless there clearly is no alternative, Hogue v. Superior Utilities, 53 N.M 452, 210 P.2d 938 (1949); Transradio Press Service v. Whitmore, 47 N.M. 95, 137 P.2d 309 (1943); Niblack v. Seaberg Hotel Co., 42 N.M. 281, 76 P.2d 1156 (1938), we are convinced that the lease contract covering personal property located in and to remain in Arizona, entered into by Tri-County pursuant to its purposes and charter, and not as an isolated transaction in Arizona, is the doing of intrastate business and under the statute void ab initio. Sandia Development Corp. v. Allen, 86 Ariz. 40, 340 P.2d 193 (1939); Chattanooga National Building and Loan Association v. Denson, 189 U.S. 408, 23 S.Ct. 630, 47 L.Ed. 870 (1903); Thomas v. Birmingham Ry., Light & Power Co., 195 F. 340 (D.C.N.D., Ala., S.D.1912). Compare Ranch House Supply Corp. v. Van Slyke, 91 Ariz. 177, 370 P.2d 661 (1962); Glo Co. v. Murchison, 208 F.2d 714 (5th Cir.1954), cert. den. 348 U.S. 817, 75 S.Ct. 27, 99 L.Ed. 644; Loomis v. People's Const. Co., 211 F. 453 (6th Cir.1914); Butler Bros. Shoe Co. v. United States Rubber Co., 156 F. 1 (8th Cir.1907); Burroughs v. Southern Colonization Co., 96 Ind.App. 93, 173 N.E. 716 (1930); Normandie Oil Corp. v. Oil Trading Co., 139 Tex. 402, 163 S.W.2d 179 (1942).

The lease agreement here sued upon was a California contract. That is where the last act necessary to make it binding and effective was performed. Alexander Film Co. v. Pierce, 46 N.M. 110, 121 P.2d 940 (1942). However, having so determined, the solution of our problem does not automatically follow. As stated in Butler Bros. Shoe Co. v. United States Rubber Co., supra:

'* * * (A)ll interstate commerce is not sales of goods. Importation into one state from another is the indispensable element, the test, of interstate commerce; and every negotiation, contract, trade, and dealing between citizens of different states, which contemplates and causes such importation, whether it be of goods, persons, or information, is a transaction of interstate commerce.'

This language was quoted and approved in International Textbook Co. v. Pigg, 217 U.S. 91, 107, 30 S.Ct. 481, 54 L.Ed. 678 (1910).

The best and most comprehensive review of the cases involving fact situations in any sense comparable to the one here present is to be found in Filmakers Releasing Organization v. Realart Pictures of St. Louis, Inc., 374 S.W.2d 535 (St. Louis, Mo.Ct.App.1964). In that case it was concluded that the plaintiff was not doing business in Missouri. However, the reasoning of the cases cited there, in our opinion, unerringly dictates a conclusion here that Tri-County was doing business in Arizona. United Shoe Machinery Co. v. Ramlose, 210 Mo. 631, 109 S.W. 567 (1908) is probably closest to our situation on its facts. In that case, the interstate aspects of the transaction were not preserved simply because the lease contract which resulted in an importation of goods continued in force. The protection afforded by the commerce clause to interstate commerce does not continue over a long period of time to shelter from state regulation essentially local activities relating to imported property even though these activities incidentally serve to enhance interstate commerce. Union Brokerage Co. v. Jensen, 322 U.S. 202, 64 S.Ct. 967, 88 L.Ed. 1227 (1944). Although Tri-County and Heller did not furnish any service or maintenance in Arizona, neither did the mill ever cross any state lines. All in all, we perceive of nothing in the dealings between the parties excepting only the fact that the lease agreement was executed in California by citizens of New Mexico and California covering Arizona property which can be pointed to in support of an argument that interstate commerce was involved. That these facts are not controlling is made evident by the cases cited above. For a recent discussion of some of the problems, see Eli Lilly & Co. v. Sav-On-Drugs, Inc., 366 U.S. 276, 81 S.Ct. 1316, 6 L.Ed.2d 288 (1961), affirming 57 N.J.Super. 291, 154 A.2d 650 (1959), aff'd 31 N.J. 591, 158 A.2d 528 (1960). Moreover, the burden was on defendants to establish not only the transaction of intrastate business in Arizona by Tri-County, but that Tri-County was engaging in a 'reasonably substantial course of business' in Arizona, Ranch House Supply Corp. v. Van Slyke, supra, or 'in an enterprise of some permanence and durability,' Sandia Development Corp. v. Allen, supra, and that it was conducting 'some substantial part of its business and not merely a single act' within the state. Monaghan & Murphy Bank v. Davis, 27 Ariz. 532, 234 P. 818 (1925). The finding to the effect that defendants had met this burden is amply supported.

We perceive that there is a difference between acquiring property preparatory to going into business or in leasing property owned and not needed in a business, from the situation where, as here, property was acquired for leasing purposes and was leased as an essential part of the business for which the corporation was chartered. See United Shoe Machinery Co. v. Ramlose, supra; State ex rel. Hays v. Robertson, 271 Mo. 475, 196 S.W. 1132 (1917); Clare & Foster, Inc. v. Diamond S. Electric Co., 66 Ohio App. 376, 34 N.E.2d 284 (1940); Davis v. United Shoe Repairing Mach. Co., 92 S.W.2d 1107 (Tex.Civ.App.1936); United Shoe Repairing Mach. Co. v. Carney, 116 W.Va. 224, 179 S.E. 813 (1935). See also Annot., 59 A.L.R.2d 1131 (1958); Annot., 35 A.L.R. 917 (1925); 17 Fletcher, Cyc. of Corps., § 8487 (Perm.Ed.Rev.Vol.1960); 23 Am.Jur.,...