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finding that a foreign corporation which loses its certificate of authority due to a lapse in its corporate status cannot cure the lapse by later obtaining a renewed certificate, and thus "may not file suit to enforce claims arising from the business transacted during the period of its lapse"
Summary of this case from Clyde Assocs. v. Mckesson Corp.Opinion
DOCKET NO. A-4747-12T2
09-11-2014
SEVEN CAESARS, INC., Plaintiff-Respondent/Cross-Appellant, v. DOOLEY HOUSE, Defendant, and THE CITY OF CAMDEN; DANA REDD, in her individual and official capacity as Mayor of Camden; and GLYNN JONES, in his individual and official capacity as City of Camden, Director of Finance, Defendants-Appellants/Cross-Respondents.
John C. Eastlack, Jr., argued the cause for for appellants/cross-respondents (Weir & Partners, LLP, attorneys; Wesley Fenza, on the briefs). William A. Riback argued the cause for respondent/cross-appellant.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Lihotz, Maven and Hoffman. On appeal from the Superior Court of New Jersey, Law Division, Camden County, Docket No. L-1290-13. John C. Eastlack, Jr., argued the cause for for appellants/cross-respondents (Weir & Partners, LLP, attorneys; Wesley Fenza, on the briefs). William A. Riback argued the cause for respondent/cross-appellant. PER CURIAM
Among the questions presented in this matter is the interpretation of the requirements of the Business Corporation Act (the Act), N.J.S.A. 14A:13-1 to -13, and specifically whether a foreign corporation whose certificate of authority to conduct business in New Jersey had expired, N.J.S.A. 14A:13-11(1), can cure that lapse, and whether, upon receiving a newly issued certificate of authority retroactively, the foreign corporation can retroactively validate a complaint filed when it had lost authority to do business. We also examined the right of a subcontractor to file the action for payment directly against the municipality funding the project, under a third party beneficiary theory.
The City of Camden (City) and Dooley House (DH) entered into a contract, whereby DH would rehabilitate the Hogan House and operate the renovated structure (the project). The parties' agreement provided the City would compensate DH using funds obtained through a grant issued by the United States Department of Housing and Urban Development (HUD), under a program with the Housing Opportunities for Persons with AIDS (HOPWA). DH contracted with plaintiff Seven Caesars, Inc. (Seven Caesars) to perform the renovation work. After the project was underway, the City maintained DH was not complying with the terms of their agreement. The agreement incorporated by reference federal regulations establishing procedures for the maintenance of financial records to verify payments made with HOPWA grant funds. Seven Caesars could not produce receipts to support the expenditure of funds issued. Consequently, the City declined to release further installment payments to DH.
Seven Caesars filed this action directly against the City. The Law Division rejected legal challenges presented by the City, including: Seven Caesars could not sue in New Jersey because its corporate charter had been revoked; Seven Caesars had no contract with the City; and Seven Caesars could not supply documentation for $190,000 in expenses paid with funds already provided. The City challenges the judge's order to release an additional $153,000 to DH.
Following our review, we reverse. We conclude a foreign corporation which loses its certificate of authority to transact business in New Jersey may not file suit to enforce claims arising from the business transacted during the period of its lapse. Moreover, curing the defect and obtaining a reissued certificate to conduct business will not retroactively validate the prior action. Further, Seven Caesars has no legal standing to initiate an action as a third party beneficiary of the agreement between DH and the City.
I.
On July 24, 2012, the City signed an agreement with DH for the project. Funding for the project was obtained through a $608,451 HOPWA HUD grant awarded to the City to provide transitional housing and support services for eligible individuals suffering from HIV and AIDS.
In its agreement, the City required DH to comply with the requirements and standards established under the HOPWA program. See 24 C.F.R. § 574 (2014). Further, the agreement included procedures for payments to be issued "based upon information submitted by [DH] and consistent with any approved budget and City policy concerning payments." A qualification stated, "[w]ith the exception of certain advances, payments will be made for eligible expenses actually incurred by [DH], and not to exceed actual cash requirements."
Under the agreement with the City, DH was required to "cause all of the provisions of [the agreement] in its entirety to be included and made a part of any subcontract executed in the performance of t[he] agreement." Although the agreement directed DH could not enter into subcontracts without the City's approval, it nevertheless provided DH was to "monitor all subcontracted services on a regular basis to assure contract compliance" and that DH was solely responsible to pay any subcontractors.
One week after executing the agreement with the City, DH awarded Seven Caesars the subcontract for the project. The parties executed a "Final Construction Management Agreement" (construction agreement), which set forth DH's consent to pay Seven Caesars $360,229.02 to complete the project, "[p]rovided that Seven Caesars strictly, completely and timely perform[ed] all of the [s]ervices specified and all other obligations set forth in this [construction a]greement . . . ." The construction agreement set forth a schedule, along with the procedures necessary to obtain payment, stating:
Seven Caesars shall submit to [DH] an application for payment itemizing charges for work done to be performed in the current pay period, including adjustments to the [c]ontract [p]rice resulting from approved [c]hange [o]rders or other changes required by [DH]. Within a reasonable time after receipt of a request for payment, [DH] will inform [Seven Caesars] that a [c]ertification of [p]ayment has been issued covering all, part, or none of the payment request. If any portion of an application for payment is not approved, Seven Caesars shall be entitled to payment on the portion approved.
Seven Caesars performed demolition work, commencing phase one of the project. The City released to DH and DH paid to Seven Caesars approximately $94,000 for completion of phase one. That same month, Seven Caesars was paid approximately $99,000 after it completed phase two of the project. DH maintained it inspected and approved the work in November 2012. Seven Caesars suggests the City inspected and approved phases one and two, which appears disputed. Seven Caesars then submitted a draw request and invoice for $153,000, representing payment of phase three.
In December 2012, Glynn E. Jones, the City's Director of Finance, advised DH receipts for materials purchased and used in phases one and two of the project must be produced before disbursement of phase three funds. DH's counsel spoke to Jones, followed up by a letter, regarding what he characterized as a "fairly recent" "[c]ity[-]wide change in procedure for processing contractor requests for payment[] of draws for construction projects" and seeking more information regarding the documentation requested. Counsel also stated:
There have already been two break-ins at the property, with $7,000 of copper tubing being stolen the first time and a stove being stolen the second time. The contractor and [DH] have no funds to pay a security person to watch over the premises, which remains vacant due to lack of funds to employ the workers who will finish the project. Another break-in may doom the project and end up requiring the City to pay all of this money back to the federal government.
By letter dated December 27, 2012, Jones informed DH through its attorney that the "very simple request" to produce documentation remained outstanding and stated "[i]t would not be wise for the City to advance an additional $153,000 if the requests for documentation for the advances of $94,000 and $99,000 have not been honored." Jones's letter also noted no one had obtained requisite construction permits (this included the permits necessary for the initial demolition), or produced required liability insurance.
Noel Ruiz, on behalf of Seven Caesars, provided DH with a project breakdown of the $193,805 phase one and two expenses (breakdown). The breakdown listed the following:
| Direct Material | $37,852 |
| First Tier Subs | $43,573 |
| General & Administration | $13,566 |
| Subs & Material Handling Expenses | $ 5,814 |
| Overhead | $74,171 |
| Profit | $18,829 |
Also attached was (1) a list of "vendors who are participating in the [DH] project"; (2) checks to three of the listed contractors and to two payees not listed on the sheet of vendors, totaling $37,4 00; (3) nine pages of entries, listing transactions issued by Seven Caesars to various payees for fuel, appliances, tools, and other materials totaling $37,852; (4) an un-totaled sheet of entries representing expenses, which included two $1000 disbursements with no payee information and a payment of $22.60 to Crescent Liquor Store.
These expenses total $5,699.63. We note, one $1,000 check matches the date and amount of one of the two disbursements missing a payee.
In a subsequent submission, DH provided the City with copies of the receipts for thirty-five of the ninety-seven material and gasoline transactions reflected in the entry sheets; these receipts totaled $14,862.92. No documentation was provided for payroll, wages, trust fund taxes, or the overhead expenses listed as "General & Administration" or items included in the category "First Tier Subs." The City noted supporting documentation for more than $175,000 in funds paid to DH for phases one and two was not provided.
Four transactions at Home Depot reflect "cash back" withdrawals totaling $190 without further explanation.
Counsel for DH again wrote to the City in an effort to secure payment for the third phase. He reminded the City that "[i]f this project cannot be completed, the City will have to pay ALL of this money back to the federal government, not just what remains to be paid to the contractor." By letter dated January 14, 2013, City Attorney Marc A. Riondino informed DH the City "deem[ed] necessary an audit and inspection of all financial records and property code inspections [regarding the project] before any additional funds [were to be] dispersed."
The absence of required permits remained an issue. By letter dated January 11, 2013, the City issued notice to DH that it failed to obtain the required construction permits, in violation of N.J.A.C. 5:23-2.14(a). On January 15, 2013, the Department of Code Enforcement informed the City "[DH] continued to operate without permits, that every day . . . [DH] operated without permits was a code violation, and that a stop work order was placed at the jobsite." Follow-up letters dated January 18 and 30, 2013, reflect permits were not obtained. By letter dated March 4, 2013, Riondino informed DH's counsel "[t]he funds in [the agreement] [were] frozen" in light of DH's failure to provide the requested documentation and obtain construction permits.
The City also learned that Seven Caesars's corporate status lapsed in its home state of Delaware. On March 1, 2013, its corporate charter became void because of its failure to file an annual report and pay the annual franchise tax.
On March 18, 2013, Seven Caesars filed an order to show cause and complaint against DH and the City, as well as the City's Mayor and Jones, alleging breach of contract (count one); asserting status as an intended third party beneficiary (count two); violation of the New Jersey Law Against Discrimination, N.J.S.A. 10:5-1 to -49 (LAD), asserting a disparate impact theory as the City's actions affected persons with AIDS (count three); and violation of the New Jersey Civil Rights Act, N.J.S.A. 10:6-1 to -2 (CRA) (count four). Seven Caesars sought: (1) declaratory judgment finding the City breached the agreement with DH by refusing to release the third phase payment; (2) an award of monetary relief and compensatory damages; (3) award of declaratory, actual and nominal damages, including claims for emotional distress and embarrassment; (4) attorney's fees, costs, expenses, pre- and post-judgment interest and delay damages; (5) equitable and injunctive relief; (6) punitive damages; and (7) "such further relief as the [c]ourt deem[ed] appropriate."
The City responded to the request for emergent relief, refuting the claim of irreparable harm. More important, the City asserted Seven Caesars had no contractual relationship with the City; no provision for advance payments was in its agreement with DH; DH materially breached the agreement by failing to maintain and provide proper accounting records in accordance with applicable federal regulations; and the LAD and CRA claims were unsupported. The City also maintained Seven Caesars was "not properly registered to do business in New Jersey."
Seven Caesars challenged this last point maintaining it was a valid, existing corporation "filed in accordance with New Jersey state law on August 30, 2012" and attached a certificate of authority (certificate) reflecting incorporation under the laws of Delaware on March 1, 2011 and registration with the New Jersey Department of Treasury Division of Revenue and Enterprise Services on August 30, 2012.
On the return date of the order to show cause, the motion judge determined he would treat the matter as a final hearing on an action in lieu of prerogative writs. See Rule 4:69-1. As to Seven Caesars's corporate status, the judge concluded the August 30, 2012 authorization satisfactorily supported its right to sue. The judge dismissed the LAD, and presumably the CRA claims, because Seven Caesars lacked standing. Finally, regarding the release of the funds, the judge agreed Seven Caesars was a third party beneficiary to the contract between the City and DH, allowing it to seek direct relief against the City.
The judge ordered the City to release the phase three payment of $153,000. He determined payment for phase three was not contingent upon compliance with the City's "after the fact" requests for documentation of expenses incurred to complete phases one and two, which he noted had been inspected and approved. He concluded the City was estopped from withholding the phase three payment in light of the course of performance and the lack of express contractual provisions conditioning disbursement on the provision of invoices detailing expenditures. The judge, however, ordered the documents be provided to the City within thirty days.
The City moved for reconsideration of the April 23, 2013 order. Counsel's supporting certification included an April 23, 2013 business entity status report from the Business Entity Information and Records Service of the New Jersey Division of Revenue and Enterprise Services, which stated Seven Caesars's August 30, 2012 registration request was rejected and Seven Caesars's had "no legal existence" because its corporate status was "expunged" due to "failure to provide home state good standing." A status report from Delaware's Division of Corporations listed Seven Caesars's corporate status as "void," as of March 1, 2013. The City requested reconsideration of the order to release the funds because Seven Caesars was not legally permitted to do business in New Jersey and was not a third party beneficiary to its agreement with DH based on the express language of the agreement.
Seven Caesars opposed the City's motion and moved to enforce litigant's rights. It conceded the loss of its corporate status in Delaware for failure to pay taxes and admitted its charter became void on March 1, 2013. However, Seven Caesars suggested these were technicalities and produced a certificate of authority showing New Jersey restored its corporate registration on May 8, 2013. Seven Caesars urged the court to accept its now valid status, arguing its subsequent restoration to good standing applied retroactively.
During oral argument held on May 29, 2013, the trial court found Seven Caesars had earlier misrepresented it was properly registered to do business in New Jersey and that its Delaware corporate status was in good standing. The judge was aware that N.J.S.A. 14A:13-11(1) precluded an unregistered corporation from filing an action. However, relying on the Bank of New York v. Raftogianis, 418 N.J. Super. 323, 355-56 (Ch. Div. 2010), the judge maintained he had discretion to determine whether the suit should be dismissed, stating:
If they file a new [c]omplaint today I would be inclined to still rule the same way I did before because of what [has] happened with [p]hase [one] and [p]hase [two] which were paid and we went through that and I [do not] want to repeat all those arguments . . . . But that [is] my concern, that if I made [Seven Caesars] go downstairs and do [its] job properly and file the [c]omplaint when [it] should have and maintain [its] corporate status as [it] should have, the fact of the matter is that by the time it came before me and I rule that it may be tooThe judge also explained he was concerned with what he called "the time essence," suggesting if the project was not completed by June 30, 3013 the HOPWA grant money would be recaptured by HUD. For these reasons, the judge denied the motion for reconsideration and the cross-motion for enforcement of litigant's rights. The City filed this appeal. Seven Caesars also filed a cross-appeal.
late, so [that is] why [I am] not persuaded by the [City's] argument.
On May 31, 2013, the City filed an emergent motion for stay pending appeal, which was denied.
By letter dated June 6, 2013, the City informed DH it was invoking the agreement's termination clause based on DH's alleged breach. After a telephone conference held on June 6, 2013, the judge ordered the City to "produce a check for [p]hase [three of] construction in the amount of $153,000 no later than . . . June 10, 2013, to the businesses of [DH] made payable to [DH]." The City complied. In its June 10, 2013 letter enclosing the $153,000 check, the City reaffirmed it had cancelled the contract reiterating the reasons for doing so were DH's failure to comply with the HUD regulations, adhere to specified accounting standards, properly maintain records, provide access to records, and provide "proof of insurance, workers compensation coverage, certified payrolls, proof of prevailing wage and compliance with other federal labor standards." Finally, the City reserved all rights to recover any monies previously paid. Despite Seven Caesars's additional emergent applications, no further relief was ordered.
II.
The City's appeal challenges the April 23, 2013 order directing it to pay DH all funds earmarked for phase three of the project. Prior to addressing the issues presented, we consider the finality of the trial court's action.
It is well-settled that to be appealable, as of right, a final order must resolve all issues as to all parties. Pressler & Verniero, Current N.J. Court Rules, comment 2.2.2 on R. 2:2-3 (2014); see also Grow Co. v. Chokshi, 403 N.J. Super. 443, 457-58 (App. Div. 2008); Mango v. Pierce-Coombs, 370 N.J. Super. 239, 245 n.1 (App. Div. 2004); Caggiano v. Fontoura, 354 N.J. Super. 111, 123 (App. Div. 2002).
Under R[ule] 2:2-3(a)(1), an appeal as of right may be taken to the Appellate Division only from a final judgment. To be a final judgment, an order generally must dispose of all claims against all parties. This rule, commonly referred to as the final judgment rule, reflects the view that piecemeal reviews, ordinarily, are [an] anathema to our practice.
[Janicky v. Point Bay Fuel, Inc., 396 N.J. Super. 545, 549-50 (App. Div. 2007) (internal quotation marks and citations omitted).]
Seven Caesars's complaint sought damages alleging breach of contract, LAD and CRA violations, and its order to show cause requested immediate release of the third phase funds. The orders entered clearly disposed of this last issue, which is the subject of this appeal. However, it is not clear whether the remaining requests for relief were granted, denied or dismissed.
At the outset of the April 23, 2013 hearing, the judge announced he was considering the matter as a final hearing on an action in lieu of prerogative writs. Although Rule 4:69-2 allows summary treatment of a complaint demanding performance of a ministerial act or duty, it requires the movant to file a summary judgment motion, which was absent here. Seven Caesars's emergent application sought release of the third phase funds. It is not clear that this alone encompassed its breach of contract claims set forth in count one of the complaint. The issue in count two was reached and the judge concluded Seven Caesars was a third party beneficiary of the City's contract with DH. The judge's comments at the initial hearing also seem to dismiss the LAD and possibly the CRA claims, set forth in counts three and four; however no order memorializing such a determination was entered. To further cloud the question of whether the order is final, the judge on April 23, 2013 insisted the order was final and captioned the order "final order," yet his comments during the June 26, 2013 telephone conference repeatedly advise "[we] haven't had a final ruling on anything."
After considering this question, and relying on the position presented by Seven Caesars in its responsive brief, we conclude Seven Caesars had no intention of pursuing relief beyond obtaining the funds earmarked for phase three. Also, except for the demand for documentation, addressed in the court's order, neither the City nor DH filed a counter- or cross-claim, such that no further issues arose regarding the rights between these parties. In light of the treatment of the matter by all parties, we conclude the issues should be deemed final.
The City advances several arguments in support of its request for reversal of the April 23, 2013 order. It contends (1) Seven Caesars lacked corporate standing to bring the action on March 18, 2013; (2) Seven Caesars was not an intended third party beneficiary of the City's agreement with DH; (3) that the agreement did not require advance payments be made; and (4) in any event, DH materially breached the agreement allowing the City to withhold further payments.
Seven Caesars counters, arguing standing existed because the agreement implicates the public interest and Seven Caesars had a financial interest in the outcome. Further, it argues its corporation status questions were resolved under Delaware and New Jersey law. Moreover, Seven Caesars argues the City was obligated to release the advance for phase three pursuant to N.J.S.A. 2A:30A-2, or, alternatively, it was estopped from withholding payment because of the course of performance. We consider these arguments.
These issues, requiring statutory and contract interpretation, are legal and subject to our plenary review. We do not accord deference to a "[a] trial court's interpretation of the law and the legal consequences that flow from established facts." Manalapan Realty v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 ( 1995). See also Kieffer v. Best Buy, 205 N.J. 213, 223 (2011) (noting an appellate court "pay[s] no special deference to the trial court's interpretation and look[s] at the contract with fresh eyes.").
A.
Initially, the City maintains the judge erroneously ordered the third phase payment even though Seven Caesars lacked the ability to initiate suit under the Act. The City argues Seven Caesars was not a registered corporation in New Jersey because it lost its corporate status in Delaware prior to filing the complaint. The City contends because Seven Caesars "had no valid corporate existence[,]" the court should have dismissed its suit. Seven Caesars does not dispute the Act's provision bar prevents an unregistered corporation's ability to file suit, rather specific to its status, it maintains subsequent events to reinstate its corporate status retroactively cured any lapse.
Seven Caesars failed to file and pay the corporate franchise tax. Delaware corporations annually must provide a franchise tax report to the Sectary of State and pay franchise taxes. Del. Code Ann. tit. 8, § 502 (2014). Under Del. Code Ann. tit. 8, § 510, upon a corporation's failure to pay the franchise tax or provide franchise tax reports, the corporation's charter is "void, and all powers conferred by law upon the corporation are declared inoperative," unless further time is granted by the Secretary of State upon showing of good cause.
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Under N.J.S.A. 14A:13-11(1), "[n]o foreign corporation transacting business in this State without a certificate of authority shall maintain any action or proceeding in any court of this State, until such corporation shall have obtained a certificate of authority." The statute unequivocally provides a foreign corporation which fails to procure the required certificate of authority is prohibited from maintaining any action in any court of this State. Bonnier Corp. v. Jersey Cape Yacht Sales, Inc., 416 N.J. Super. 436, 440 (App. Div. 2010) (analyzing whether a foreign corporation was conducting business in New Jersey and failed to obtain the required certificate of authority to transact business in New Jersey, which would bar its suit).
The apparent objective of this statute [N.J.S.A. 14A:13-11(1)] is to encourage foreign corporations that conduct business in this State to make their presence formally known, through the Secretary of State, to State regulators and taxing authorities, and further to assure, among other things, that such companies designate a registered agent in New Jersey upon whom they may be served with process.
[Id. at 440-41.].
Seven Caesars, a Delaware corporation, was "transacting business" as used in the Act because it was engaged in local activity within New Jersey. Materials Research Corp. v. Metron, 64 N.J. 74, 79 (1973); Davis & Dorand v. Patient Care Med. Servs., 208 N.J. Super. 450, 455 (Law Div. 1985). Further, Seven Caesars initiated the instant action when its corporate status in New Jersey was "expunged" because its corporate charter in Delaware was revoked.
During the April 23, 2013 hearing, Seven Caesars insisted it was in good standing in New Jersey. That was false. By the time the misrepresentation was uncovered and the matter again was heard on May 29, 2013, Seven Caesars cured the deficiency and was restored to good standing. The judge clearly understood the requirements of the N.J.S.A. 14A:13-11(1) and also understood active corporate status had been restored. He considered the issues directed to standing. Taking a practical approach, the judge reasoned at that point in time, if the action was dismissed, Seven Caesars would just refile its complaint for and ultimately obtain the same result. Also, motivated by a perceived need for Seven Caesars to meet a June 30, 2013 completion deadline to avoid reclaiming of the grant funds, the judge concluded he had discretion to allow the action to continue. This was error.
N.J.S.A. 14A:13-11(1) is jurisdictional as it defines the right of a foreign corporation to use the state courts. The statute specifically restricts access to those foreign corporations transacting business in New Jersey that fail to comply with the very defined, and not very burdensome provisions of the Act.
"Subject matter jurisdiction refers to 'the power of a court to hear and determine cases of the class to which the proceeding in question belongs.'" N.J. Citizen Action v. Riviera Motel Corp., 296 N.J. Super. 402, 411 (App. Div. 1997) (quoting State v. Osborn, 32 N.J. 117, 122 (1960)). Jurisdiction allows the court the power to act and must exclusively "rest[s] upon the court's having been granted such power by the Constitution or by valid legislation[.]" Ibid. (quoting Osborn, supra, 32 N.J. at 122). Jurisdiction "cannot be vested by agreement of the parties." Ibid. (quoting Osborn, supra, 32 N.J. at 122). Understood in this light, considerations of judicial efficiency and preferences for substance over form cannot justify the court's action when it lacks inherent authority to do so.
The motion judge's reliance on Bank of N.Y. v. Raftogianis, 418 N.J. Super. 323, 355-56 (Ch. Div. 2010) was misplaced. In Raftogianis, the Chancery Division dismissed a foreclosure action for lack of standing because the mortgagee failed to "establish that it had physical possession of the note as of the date the complaint was filed." Id. at 326-27. In the limited context of determining whether the complaint was properly filed in the name of an entity which had authority to enforce the debt, the court observed:
Whether any particular action should in fact be dismissed should be addressed on a case-to-case basis, dependent on all the circumstances. As a general matter, dismissal will probably be appropriate, if only to provide a clear incentive to plaintiffs to see that the issue of standing is properly addressed before any complaint is filed. There may be cases, however, where dismissal would not be appropriate. That may be the case if the defendant fails to raise the issue promptly, or when substantial time and effort may have been devoted to addressing other matters that would then have to be revisited in any new litigation. Those circumstances were not presented here. Defendant did raise the standing issue promptly. The parties were
not required to litigate other issues. Plaintiff's right to proceed turned on plaintiff's ability to establish that it did have possession of the note at the time the original complaint was filed. That issue was ultimately addressed at trial.
[Id. at 356.]
Importantly, there are significant substantive differences between this matter and Raftogianis, making its application inapposite. Raftogianis addressed a party's standing to present an action, not jurisdiction, which precludes the court from acting. This matter involves application of an unambiguous legislative pronouncement, which sets forth minimum requisites for a foreign corporation doing business in New Jersey. The Legislative intent is very clear from the statutory language. See Lipkowitz v. Hamilton Surgery Ctr., LLC, 415 N.J. Super. 29, 35 (App. Div. 2010) (noting "A statute's language 'is the surest indicator of the Legislature's intent'" (quoting Alan J. Cornblatt, P.A. v. Barow, 153 N.J. 218, 231 (1998)).
Here, the lapse in valid corporate status deprived Seven Caesars of its ability to file suit and prevented the court from considering its claims for relief. N.J.S.A. 14A:13-11(1). As a matter of law, Seven Caesars's complaint could not be considered and its suit should have been dismissed.
Further, that Seven Caesars might easily cure the defect does not defeat the court's inability to act in the first instance. Seven Caesars suggests once it was restored to good standing in Delaware and New Jersey reissued a certificate to conduct business on May 8, 2013, its good standing status applied retroactively. This is not correct.
In advancing this argument, Seven Caesars relies on Del. Code Ann. tit. 8, § 312, which provides for revival where a charter was forfeited for failure to pay franchise taxes. Frederic G. Krapf & Son, Inc. v. Gorson, 243 A.2d 713, 714-15 (Del. 1968). The statute states:
Upon the filing of the certificate in accordance with § 103 of this title the corporation shall be renewed and revived with the same force and effect as if its certificate of incorporation had not been forfeited or void pursuant to this title, or had not expired by limitation. Such reinstatement shall validate all contracts, acts, matters and things made, done and performed within the scope of its certificate of incorporation by the corporation, its officers and agents during the time when its certificate of incorporation was forfeited or void pursuant to this title[.]
[Del. Code Ann. tit. 8, § 312.]
Under Delaware law, corporate action taken during a period of forfeiture can be ratified. The provision is principally designed to shield corporate officers from liability for actions taken when a corporate charter was forfeited. See Fredric G. Krapf & Son, Inc., supra, 243 A.2d at 715 ("We think it clear that in the absence of fraud or bad faith a corporate officer may enter into a contract binding on the corporation, even after forfeiture of the charter, particularly when . . . the forfeiture came about by inadvertence."). The statute does not cure the preclusion to initiate suit in New Jersey. By its terms, N.J.S.A. 14A:13-11(1) unmistakably demands "[i]f the foreign corporation fails to procure the required certificate of authority, then it is prohibited by law from maintaining any action in any court of this State." Davis & Dorand, supra, 208 N.J. Super. at 454-55 (citing N.J.S.A. 14A:13-11). Moreover, N.J.S.A. 14A:13-11(1) does not provide for retroactive validation of a foreign corporate registration.
If Seven Caesars held a valid certificate of authority to do business in New Jersey at the time it filed the complaint, it would have had a sufficient stake and adverseness to meet threshold jurisprudential standing requirements. However, without a valid certificate to do business in this state, its stake in the action is insufficient to overcome the jurisdictional bar to suit imposed by N.J.S.A. 14A:13-11(1). That is precisely the intent of the statute. The Legislature has decided it will not condone foreign corporations transacting business in New Jersey without meeting the requirements of the Act.
In the event a new action is filed when Seven Caesars has fully met its responsibilities under the Act, we consider the question of whether it was a third party beneficiary of the agreement between the City and DH. "It is well settled in New Jersey that contract interpretation must be based on the intent of the parties." M.G.M. Constr. Corp. v. N.J. Educ. Facilities Auth., 220 N.J. Super. 483, 487 (App. Div. 1987). As our Supreme Court has explained,
The determining factor as to the rights of a third party beneficiary is the intention of the parties who actually made the contract. They are the persons who agree upon the promises, the covenants, the guarantees; they are the persons who create the rights and obligations which flow from the contract . . . . Thus, the real test is whether the contracting parties intended that a third party should receive a benefit which might be enforced in the courts; and the fact that such a benefit exists, or that the third party is named, is merely evidence of this intention."The contractual intent to recognize a right to performance in the third person is the key. If that intent does not exist, then the third person is only an incidental beneficiary, having no contractual standing." Ibid. Mindful that the judicial task is simply interpretative, this court should examine the contractual terms to ascertain the parties' intent and in doing so accord contractual terms "their plain and ordinary meaning." M.J. Paquet v. N.J. Dep't of Transp., 171 N.J. 378, 396 (2002).
[Broadway Maint. Corp. v. Rutgers, State Univ., 90 N.J. 253, 259 (1982) (quoting Brooklawn v. Brooklawn Hous. Corp., 124 N.J.L. 73 (E. & A. 1940)).]
The record before us contains only the motion judge's conclusions that Seven Caesars had standing as a third party beneficiary to maintain its direct action against the City. A third party beneficiary analysis is necessarily fact sensitive.
We have determined that absent contractual language or circumstances to the contrary, subcontractors may not be deemed third party beneficiaries of agreements between general contractors and owners. See, e.g., F. Bender, Inc. v. Jos. L. Muscarelle, Inc., 304 N.J. Super. 282, 284 (App. Div. 1997) (finding no contract existed between a sub-sub-contractor and a general contractor where neither the landowner or the assignee general contractor "t[ook] any action which could be construed as forming any type of contractual relationship with plaintiff"); Insulation Contracting & Supply v. Kravco, Inc., 209 N.J. Super. 367, 369, 375-76 (App. Div. 1986) (finding sub-sub-contractors working on a construction project could not recover from a general contractor which "terminate[d] one of its subcontractors for non-performance"). Thus, under circumstances evincing no intent to designate a plaintiff subcontractor as a third party beneficiary, "[i]f [a] plaintiff has a dispute with the party with whom it contracted, it must resolve this problem without looking to those parties further up the chain[.]" F. Bender, Inc., supra, 304 N.J. Super. at 287.
The agreement presented here includes no provision reflecting an intent that DH's subcontractor was an intended third party beneficiary to its agreement with the City. By its terms, the agreement charged DH with the rehabilitation of the Hogan House and the provision of services for eligible participants once the building was properly renovated. Payments were to be made by the City to DH for the work and were "contingent upon certification of [DH's] financial management system" under applicable federal regulations and in accordance with procedures set forth in section VII. C. 4. a. of the agreement, providing "payments will be made for eligible expenses actually incurred by [DH] and not to exceed actual cash requirements." Although the agreement contemplated a subcontractor would be hired, all payments by the City were to DH, which had sole responsibility "for paying invoices directly to its subcontractors and/or vendors."
The separateness of the obligations between the City and DH and those between DH and Seven Caesars is reinforced by the terms of Seven Caesars's subcontract. Section 56 of the construction agreement between DH and Seven Caesars specifically provides:
Except as expressly provided elsewhere in [the construction agreement] [c]ontract [d]ocuments shall not be construed to create a contractual relationship of any kind: (1) [b]etween [the City] and Seven Caesars; (2) [b]etween [DH] and any [s]ubcontractor or [s]ub-subcontractor; (3) [b]etween [DH] and any consultant to [DH]; or (4) [b]etween any persons or entities other than [DH] and Seven Caesars.
Indeed, ascertaining the parties' intention warrants "consideration of all the surrounding circumstances." James Talcott, Inc. v. H. Corenzwit & Co., 76 N.J. 305, 312 (1978). Here, the course of performance by the City does not alter the relationship between the parties or show Seven Caesars was an intended third party beneficiary. The transactions contemplated under the agreement and under the construction agreement were executed separately. Prior to commencing work on a given phase of the project, Seven Caesars submitted a draw request and invoice to DH. Following its review and approval, DH filed its request to the City. All payments under the agreement were made by the City to DH, which in turn paid Seven Caesars for its completion of the next phase.
Following our detailed review of the record and the applicable law, we conclude the language of the agreement, the express provisions of the construction agreement, and the course of performance by all parties show Seven Caesars was merely an incidental beneficiary of the agreement, and, accordingly, lacked standing to file a direct action against the City seeking enforcement of the agreement between DH and the City.
In summary, Seven Caesars's complaint should have been dismissed once it was determined it was not authorized to transact business in New Jersey. N.J.S.A. 14A:13-11(1). Moreover, Seven Caesars lacked standing to file a direct action against the City to enforce its contract with DH, as there is no evidence to support that Seven Caesars was a contemplated third party beneficiary of the agreement. The April 23, 2013 order and the May 30, 2013 order denying reconsideration are reversed. Consequently we decline to address issues raised regarding the terms of the contract between the City and DH.
We note Seven Caesars filed a cross-appeal regarding the denial of its LAD action. However, it failed to brief the issue, which is deemed waived. See R. 2:6-2; Jefferson Loan Co. v. Session, 397 N.J. Super. 520, 525 n.4 (App. Div. 2008). The cross-appeal is dismissed.
Finally, we decline to address whether DH complied with the provisions of its contract with the City or whether that agreement requires advance payments despite lack of documentation provided for prior payments. These issues raised by the City, addressing the rights and responsibilities of DH, are not necessary to reach determination of the claims advanced by Seven Caesars.
Reversed. Cross-appeal is dismissed. I hereby certify that the foregoing is a true copy of the original on file in my office. CLERK OF THE APPELLATE DIVISION