Opinion
Civil Action No. 92-0996-BH-C.
February 18, 1994
FINDINGS OF FACT; CONCLUSIONS OF LAW AND ORDER
This action is before the Court on motion for summary judgment (Tab # 15) filed by the defendant, The Bank of Brewton. Plaintiff Akers Group International, Inc. filed this action seeking payments under, and damages for breach of, a construction contract which is attached as Exhibit A to the complaint as well as damages relative to the Bank of Brewton's making a claim against a performance and payment bond supplied by Akers Group International, Inc. as a condition of the aforementioned construction contract. Upon consideration of the motion, the parties' respective arguments in support of and opposition thereto and the record as a whole, the Court concludes that there exists no material issue of fact and that the Bank of Brewton's motion for summary judgment is due to be granted.
I. FINDINGS OF FACT
After consideration of the Bank of Brewton's motion for summary judgment and based upon the pleadings, affidavits and other evidence of record, the Court makes the following findings of fact:
1. Plaintiff, Akers Group International, Inc. (Akers), is a corporation organized and existing under the laws of the State of Mississippi and maintains its principal place of business in Mississippi.
2. According to paragraph 6 of Akers' complaint, "[o]n December 17, 1991, AKERS and [The Bank of Brewton (Bank)] entered into a contract whereby AKERS agreed, inter alia, to provide design and construction services to alter, add to, furnish and equip and otherwise remodel [the Bank's] main office located at 103 Belleville Avenue, Brewton, Alabama."
Subsequent to the filing of the Bank's motion for summary judgment and without seeking leave to amend its complaint, Akers contends that the contract was not executed on December 17, 1991, when Herb Akers, the president and major shareholder of Akers, signed the documents together with Jerry Kelly, Sr., the President and Chairman of the Bank. According to Akers' new theory, the contract prepared by Akers was not fully executed until signed in Mississippi by Mark P. Akers, Vice-President of Akers, and Johnny Wynn, the proposed architect, "within a few days of the December 17, 1991 Board meeting." (Akers' Brief in Opposition at Tab # 40, p. 8). Akers' new theory is specious and contrary to every premise of basic contract law. The construction contract at issue in this litigation was to renovate a building located in Alabama and it is Akers who seeks to enforce this contract. Akers cannot now seek to circumvent the Alabama qualifications statutes by contending that the signature of its President and major shareholder was insufficient to bind Akers to that contract on December 17, 1991, when presented to the Bank for its acceptance.
3. The construction contract at issue provided that Akers would "[f]urnish labor, materials, tools, equipment and services required for the Project." (Exhibit A to the complaint at Article 2, ¶ C.3.f.). Although Akers contends that "[m]ost of the [design and administration of design services portion of the contract] . . . did not have to be performed in Brewton" (Akers' Response to the Bank's Suggested Determinations of Undisputed Fact at Tab # 41, pp. 3-4, ¶ 3(b)), no provision of the construction contract required Akers to perform any activity or work at other than the project site and the only location referred to in the contract is the project site. If Akers ordered materials from, or did any design work, outside of Alabama, it was for the purpose of modifying and renovating the Bank's building in Brewton. The "Project" is expressly defined in the contract as being "to alter, add to, furnish and equip and otherwise remodel the present main office located a [sic] 103 Belleville Avenue, Brewton, AL." (Id. at p. 1, emphasis added). The contract also provided that Akers "will arrange for architectural services which will be performed under the supervision of an Architect who will be an Officer or employee of [Akers] and licensed to practice architecture in the jurisdiction of the Project site." (Id. at Article 1, emphasis added).
4. In connection with the renovations performed under the construction contract, Akers employed several Alabama subcontractors, maintained an office trailer in Brewton and conducted all of the project management meetings in Alabama. (Kelly Affidavit of April 30, 1993, at ¶ 2).
5. Akers admits that it did not obtain a certificate of authority to transact business under Ala. Code § 10-2A-226 and did not comply with Ala. Code §§ 40-14-1 through 40-14-3 until December 29, 1992, over a year following the execution of the construction contract at issue in this litigation.
6. In connection with the construction contract, Akers provided the Bank with a performance bond issued by International Fidelity Insurance Company (IFIC), as surety, which bound both contractor and surety "to the owner for the performance of the construction contract, which is incorporated herein by reference." (Kelly Affidavit of February 1, 1993, at ¶ 2; Akers' Response to the Bank's Suggested Determinations of Undisputed Fact at Tab # 41, p. 3, ¶ 5). Akers admits that "[t]he obligations of the surety under the bond are tied directly to the performance of the construction contract, in accordance with normal performance bond procedures." (Akers' Brief in Opposition at Tab # 40, p. 15).
7. During the course of the performance by Akers of the alterations and modifications to the Bank, disputes arose between Akers and the Bank concerning both parties' performance of their obligations under the contract. The Bank gave notice to IFIC of what it contended was Akers' default under the construction contract.
8. Akers commenced the instant action November 25, 1992. It was only in response to Brewton's answer to Akers' complaint that Akers "investigated . . . and learned, for the first time, of the requirements of [Ala. Code §§ 40-14-1 through 40-14-4]." (Akers Brief in Opposition at Tab # 40, p. 16).
II. CONCLUSIONS OF LAW
1. The circumstances under which a foreign corporation may do business within the state of Alabama is expressly addressed in the Alabama Constitution as follows: No foreign corporation shall do business in this state without having at least one known place of business and an authorized agent or agents therein, and without filing with the secretary of state a certified copy of its articles of incorporation or association. Any foreign corporation, whether or not such corporation has qualified to do business in this state by filing with the secretary of state a certified copy of its articles of incorporation or association, may be sued only in those counties where such suit would be allowed if the said foreign corporation were a domestic corporation. The legislature shall, by general law, provide for the payment to the state of Alabama of a franchise tax by such corporation, but such franchise tax shall be based on the actual amount of capital employed in this state. Strictly benevolent, educational, or religious corporations shall not be required to pay such a tax.
Ala. Const. art. XII, § 232, as amended.
2. In addition to the constitutional restraints on a foreign corporation's doing business in Alabama, there exists statutory restrictions on the enforceability of contracts by foreign corporations not qualified to do business in Alabama. A foreign corporation transacting business in Alabama is required under Ala. Code § 10-2A-226 to obtain a Certificate of Authority from the Alabama Secretary of State. Such a foreign corporation is also required, pursuant to Ala. Code §§ 40-14-1 through 40-1403, to pay a one-time "admissions tax" to, and to file a statement indicating certain information about the corporation with, the Alabama Department of Revenue. Failure to comply with these statutes subjects the foreign corporation to an inability to enforce its contracts in the courts of Alabama under Ala. Code § 10-2A-247, which provides in pertinent part:
(a) All contracts or agreements made or entered into in this state by foreign corporations which have not obtained a certificate of authority to transact business in this state shall be held void at the action of such foreign corporation or any person claiming through or under such foreign corporation by virtue of said void contract or agreement; but nothing in this section shall abrogate the equitable rule that he who seeks equity must do equity. . . .
Ala. Code § 10-2A-247 (1975).
3. The equity exception of Ala. Code § 10-2A-247 has been interpreted by the Supreme Court of Alabama to apply only to the enforcement of property rights within the state. In First Bank of Russell County v. Wells, 358 So.2d 435, 437 (Ala. 1978), the Supreme Court of Alabama held:
As this Court said in Jones v. Americar, Inc., 283 Ala. 638, 643, 219 So.2d 893, 896 (1969):
'We think that which is prohibited in the Alabama statutes are suits on contracts by unqualified corporations . . .'
We would add — and only such suits. This Court has consistently held that foreign, nonqualified corporations are not denied enforcement of property rights by our statutes. Jones v. Kendrick Realty Co., 287 Ala. 402, 252 So.2d 61 (1971).358 So.2d at 437 (emphasis added). In Jones, the Supreme Court of Alabama specifically held:
Section 232, Constitution 1901, and the statutes relied on by respondent do not expressly declare that a noncomplying foreign corporation cannot maintain a suit to protect its property in this state. The instant suit is a suit to protect complainant's property rights, it is not a suit to enforce a mortgage or other contract. We hold that, as against the objections raised by respondent, complainant may maintain the suit to enjoin respondent from trespassing on complainant's property . . .287 Ala. at 406.
4. The purpose of the aforementioned qualification statutes and constitutional provision "is to provide some power for the State to protect Alabama residents from possible abuse by uncontrolled foreign corporations." Green Tree Acceptance, Inc. v. Blalock, 525 So.2d 1366, 1370 (Ala. 1988). The effect of the foreign corporation's failure to qualify is that it cannot use an Alabama Court to enforce a contract entered into in Alabama.Id. See also, Stewart Machine and Engineering Co. v. Checkers Drive-In Restaurants of North America, Inc., 575 So.2d 1072, 1075 (Ala. 1991) ("Although we are mindful of the harshness of the rule, we conclude . . . that [plaintiff], as a nonqualified foreign corporation, should not be allowed to proceed in the Alabama court system to recover under any theory sounding in contract."); CC Products, Inc. v. Premier Industrial Corp., 275 So.2d 124, 131 (Ala. 1972) (same);Calvert Iron Works, Inc. v. Algernon Blair, Inc., 227 So.2d 424, 426 (Ala. 1969) (Construction contract to renovate a stadium held unenforceable by nonqualified foreign corporation despite the corporations full performance under the contract); Allstate Leasing Corp. v. Scroggins, 541 So.2d 17, 18 (Ala.Civ.App. 1989) ("Failure of a corporation to qualify means any contracts it makes or enters into in this state are void and unenforceable").
5. In Sanjay, Inc. v. Duncan Construction Co., Inc., 445 So.2d 876 (Ala. 1983), r'hrg denied (1984), the Supreme Court of Alabama again addressed § 232 of the Alabama Constitution and Ala. Code § 10-2A-247 and their application to facts similar to the case at bar. Sanjay, Inc. was a foreign corporation which was not qualified to do business in Alabama at the time it entered into a contract with Duncan Construction Co., Inc. to manage the construction of a motel in Alabama, although it became so qualified eight months after beginning work on the construction project. The Supreme Court of Alabama sustained a summary judgment against the foreign corporation on the ground that:
A foreign corporation cannot enforce a contract which is to be performed in Alabama if the foreign corporation has failed to qualify to do business in Alabama on or before the date the contract is made.445 So.2d at 879. The Supreme Court emphasized:
The law of this state is that a foreign corporation which has not qualified to do business in Alabama at the time of the contract cannot use Alabama courts to enforce that contract. In Sea Scaping Const. Co., Inc. v. McAtee, 402 So.2d 919 (Ala. 1981), this Court stated the rule as follows:
"The bar created by the Constitution and statutes has been upheld when the pleadings and evidence showed that the foreign corporation had failed to comply with this state's laws of qualification 'before and at the date of contract. . . .' Cable Piano Co. v. Estes, 206 Ala. 95, 89 So. 372 (1921). This position has been affirmed repeatedly. See, e.g., Calvert Iron Works, Inc. v. Algernon Blair, Inc., 284 Ala. 655, 227 So.2d 424 (1969); Computaflor Company, Inc. v. N.L. Blaum Const. Co., 289 Ala. 65, 265 So.2d 850 (1972); Birmingham Terminal Associates, Inc. v. United Produce and Products Equipment Co., Inc., 289 Ala. 80, 265 So.2d 863 (1972); C C Products, Inc. v. Premier Industrial Corp., 290 Ala. 179, 275 So.2d 124 (1973) (such a contract does not give rise to any implied legal duty). See also Foxco Ind., Ltd. v. Fabric World, Inc., 595 F.2d 976 (5th Cir. 1979).445 So.2d at 880. The Supreme Court rejected Sanjay's argument "that the conduct of the appellee, Duncan, brings this case within the equity exception [of § 10-2A-247]" based upon its prior interpretation of the equity exception in Wells, supra (Conclusion # 2) and because: This provision in the statute does not alter the law that an unqualified foreign corporation cannot recover on contract. As was said of the action in C.C. Products, Inc. v. Premier Industrial Corp., 290 Ala. 179, 275 So.2d 124 (1972), any way you slice it, the action in this suit was ex contractu. 445 So.2d at 879 (emphasis in original).
6. In his dissent in Sanjay, Chief Justice Torbert recognized:
Alabama harshly deals with foreign corporations which fail to qualify to do business before entering into contracts here. Alabama is one of four states which permit a party to elect to hold void a contract with a non-qualified foreign corporation. This is the case even where the contract has been fully performed by the non-qualified foreign corporation. Calvert Iron Works, Inc. v. Algernon Blair, Inc., 284 Ala. 655, 227 So.2d 424 (1969). . . .
We have long recognized that a private party cannot waive, through equitable estoppel or other means, the public policy of the state. See, American Amusement Co. v. East Lake Chutes Co., 174 Ala. 526, 56 So. 961 (1911).445 So.2d at 881 (footnotes omitted).
7. Despite Akers attempts to characterize it differently, the contract at issue in this action is a labor and construction contract involving the renovation of a building located in Brewton, Alabama. Labor and construction contracts, such as that made the subject of this action, have repeatedly been held to constitute the conduct of intrastate business and to subject a foreign corporation to the requirements of the aforementioned qualification statutes. Stewart, supra, 575 So.2d at 1075 (The contract to construct and assemble a prefabricated building constituted intrastate conduct because "[t]he construction and labor required to complete performance of the contract was substantial enough that it was not merely incidental to the sale of the [prefabricated] structure."); Greentree, supra, 525 So.2d at 1371 ("A construction contract supplying both material and labor . . . is considered intrastate."); Sanjay, supra, 445 So.2d at 880-81 (Rejected plaintiff's contention that its contract to construct a motel in Alabama involved interstate commerce because it required plaintiff to supply materials and held that the contract "involved [more] than the mere 'sale and delivery of materials' into Alabama."). As applied to this action, the contract at issue was for labor and materials and involved far more activity than activity considered merely incidental to the interstate sale of goods. The construction contract was thus intrastate as opposed to interstate. Consequently, this construction contract is void under Alabama law because Akers failed to qualify to transact business in Alabama prior to the execution of the contract. Akers cannot therefore enforce any rights under the contract or recover any damages which either arise by virtue of the existence of the contract or for the breach thereof.
8. Akers cannot recover against the Bank on a tort claim derived from a contract which is unenforceable by virtue of Akers' failure to qualify to do business in Alabama. Al Sarena Mines v. SouthTrust Bank, 548 So.2d 1356, 1364 (Ala. 1989) ("In order to withstand the prohibition of § 10-2A-247, [plaintiff's] tort actions must stand independently of the prohibited contract action."); CC Products, supra, 275 So.2d at 130-31 ("The duty created by law which gives rise to an ex delicto action under certain circumstances upon breach of a contract is a duty collateral to the contract."). See also, Eastern Shore Marine, Inc. v. M/V Mistress, 717 F. Supp. 790, 792 (S.D. Ala. 1989) (tort-based counterclaim barred by qualification statute, Ala. Code § 10-2A-247, because "no . . . implied legal duty arises where the underlying contract is unenforceable and unlawful because the party bringing a claim under the contract is a foreign corporation which has failed to qualify to do business in this state."). Neither may an unqualified foreign corporation rephrase what is, in essence, a contract claim as one in tort or equity if recovery is premised on the existence of the contract.Greentree, supra, 525 So.2d at 1372 ("[N]o matter how this particular complaint is phrased, recovery is still premised on the existence of the contract [and] foreign corporations cannot circumvent the penal purpose of the [qualifications] statutes [by seeking recovery under some noncontractual theory]."). Thus, Akers cannot recover on its claim of tortious interference arising out of the Bank's claim on the performance bond because the law of Alabama only "prohibits combinations or conspiracies to injure lawful businesses." CC Products, supra, 275 So.2d at 131.
9. Moreover, Akers' claim of tortious interference arising from the Bank's claim on the performance bond must fail because no cause of action for interference with a contractual or business relationship exists with respect to a relationship to which the Bank is a party. Williams v. A.L. Williams Associates, 555 So.2d 121, 124 (Ala. 1989) ("[A] party to a relation cannot be held liable for interference with that relation."). An obligee under a performance bond is a party to such contract and is justified in making claim on the bond to protect its interest. IBEW Local 124 v. Alpha Electric Co., 759 F.Supp. 1416, 1426 (W.D. Mo. 1991).
10. Finally, the performance bond to which both Akers and the Bank are parties requires the Bank to notify both the contractor and the surety if "the owner is considering declaring a contractor's default," and conditions the owner's right to recovery on the performance bond on the giving of such notice. The Bank's claim on the bond was therefore privileged and not subject to a claim of defamation by Akers. Langston v. A.C.T., 890 F.2d 380, 387 (11th Cir. 1989) ("[A] statement is privileged and cannot be the subject of a defamation action where a party makes the statement pursuant to a duty owed either to the public or to a third party, or where the statement is one in which the speaker and the third party have corresponding interests.").
CONCLUSION AND ORDER
For the reasons set forth above, the Court concludes that there exists no material issues of fact and that the defendant is entitled to judgment as a matter of law. It is therefore ORDERED that defendant's motion for summary judgment be and is hereby GRANTED and that judgment be entered in favor of the defendant, The Bank of Brewton, and against the plaintiff, Akers Group International, Inc., the plaintiff to have and recover nothing of the defendant. Costs are taxed against the plaintiff.