What Constitutes Doing Business

KNOWLEDGE SHARE

WHAT CONSTITUTES DOING BUSINESS

2016 | EDITION CT

By a corporation in States Foreign to the state of its incorporation

2016 Edition

CONTENTS

INTRODUCTION 1 THREE KINDS OF DOING BUSINESS 3 PENALTIES FOR FAILURE TO QUALIFY 7 Suits By Unqualified Foreign Corporations 7 Effect of Subsequent Qualification 14 Defense of Suits 17 Validity of Corporate Acts 19 Counterclaims 20 Suits By Assignees and Successors 22 Personal Liability 26 Monetary Penalties 28 Statutory Citations 31

STATUTORY “DOING BUSINESS” DEFINITIONS APPLICABLE TO ORDINARY BUSINESS CORPORATIONS 35 The Model Act Provision 35 The Revised Model Act Provision 36 Alabama 37 Alaska 37 Arizona 38 Arkansas 38 California 38 Colorado 39 Connecticut 39 Delaware 39 District of Columbia 40 Florida 41 Georgia 41 Hawaii 42 Idaho 42 Illinois 43 Indiana 43

iii iv Contents

Iowa 44 Kansas 44 Kentucky 45 Louisiana 45 Maine 45 Maryland 46 Massachusetts 46 Michigan 47 Minnesota 47 Mississippi 48 Missouri 48 Montana 49 Nebraska 49 Nevada 50 New Hampshire 51 New Jersey 51 New Mexico 51 New York 52 North Carolina 52 North Dakota 53 Ohio 53 Oklahoma 54 Oregon 55 Pennsylvania 55 Rhode Island 55 South Carolina 56 South Dakota 56 Tennessee 56 Texas 57 Utah 58 Vermont 59 Virginia 60 Washington 60 West Virginia 62 Wisconsin 63 Wyoming 63 Puerto Rico 64 Virgin Islands 64 Alberta 65

Contents v

British Columbia 65 Manitoba 66 New Brunswick 66 Newfoundland 67 Northwest Territories 68 Nova Scotia 68 Nunavut 68 Ontario 68 Prince Edward Island 69 Quebec 69 Saskatchewan 70 Yukon Territory 70

STATUTORY “DOING BUSINESS” PROVISIONS LIMITED TO LENDING MONEY ON SECURITY 73

SPECIFIC DOING BUSINESS ACTIVITIES 75 Introduction 75 Interstate and Foreign Commerce 76 Isolated Transactions 82 Corporate Secondary Activities 87 In General 87 Advertising 88 Bank Accounts 91 Books And Records 91 Maintaining an Office 92 Maintaining and Defending Suits 94 Meetings in State 96 Preliminary Acts 96 Holding Interests in Resident Businesses 98 Franchise Operations 99 Holding Companies 101 Parent And Subsidiary Corporations 102 Partnerships, LLCs, and Joint Ventures 105 Contracting 108 Federal Contracts 111 Subcontracting 113 Submitting Bids 114

vi Contents

Credit 115 Collecting Debts 115 Extending Credit 117 Lending Money On Security 118 Entertainment 124 Broadcasting 124 Exhibition of Films 125 Professional Sporting Exhibitions And Games 125 Production of Films and Shows 126 Leasing 127 Leasing Personal Property 127 Leasing Real Property 131 Oil and Gas Leases 133 Manufacturing 135 Performing Services 135 In General 135 Correspondence Schools 139 Field Warehousing 140 Installation of Machinery and Equipment 140 Research Work 144 Transportation Companies 145 Property Ownership 146 Personal Property Ownership 146 Processing 149 Purchasing 150 Real Property Ownership 151 Sales 154 Commission Merchants and Brokers 154 Conditional Sales 155 Sales from Trucks 156 Sales of Repossessed Goods 156 Sales of Samples 158 Sales of Securities 160 Sales Through Brokers 161 Shipments on Consignment 162 Show Rooms 166 Solicitation 166

Contents vii

Specialty Salesmen 171 Subscription Sales 173 Selling Over the Internet 174

DOING BUSINESS IN 175 Canada 175 Guam 176 Puerto Rico 176 The Virgin Islands 177

PERSONAL JURISDICTION 179

LIMITED LIABILITY COMPANIES 185

INTRODUCTION

When a corporation does busi- sion is reached as to whether or not ness outside of the state in which it qualification is required. was organized, it may be required Most states have adopted either to “qualify”—i.e., to obtain a cer- the Model Business Corporation tificate of authority and to appoint Act or the Revised Model Business a resident agent upon whom pro- Corporation Act. Therefore, the cess may be served. Although the provisions of both of these Model corporation laws of every state Acts dealing with activities requir- require foreign corporations doing ing qualification and penalties for business in the state to qualify, no not qualifying are set forth and law contains a comprehensive def- discussed in the following chap- inition of the term “doing busi- ters. ness.” What constitutes doing In addition to what constitutes business within the meaning of doing business within the United qualification requirements is the States, this book contains chapters question which this book attempts on doing business in Canada, to answer. Guam, Puerto Rico and the Virgin The risks of failure to qualify Islands. The statutes defining cer- are great. In all states, unqualified tain activities that do or do not re- foreign corporations doing intra- quire qualification for Canada, the state business are denied access to Canadian provinces, and terri- state courts. An unqualified foreign tories, Puerto Rico and the Virgin corporation is also subject to fines, Islands are reproduced. and, in several states, its directors, To a very large extent, the an- officers or agents may be fined. swers to doing business questions These sanctions are discussed un- are found in court decisions. These der the heading “Penalties for Fail- decisions have been accumulated ure to Qualify.” and analyzed and form the basis The statutes of most states list for the articles in the section enti- certain activities in which a corpo- tled, “Specific Doing Business ration may engage without qualify- Activities.” ing. Some states also define There are three kinds of doing activities which will require quali- business questions. One question is fication. These statutory provisions whether a foreign corporation do- are reproduced in this book and ing business in a state will be sub- should be examined before a deci- ject to service of process in that

1 2 Introduction state. The second is whether a for- others that are subject to a qualifi- eign corporation will be subject to cation requirement. The chapter taxation. The third is whether it entitled “Limited Liability Compa- will be subject to the state’s quali- nies” addresses some doing busi- fication requirements. The first ness issues related to that type of chapter, “Three Kinds of Doing business entity. However, this Business,” looks at the differences book deals mainly with foreign between these three types. The business corporations. When deal- final chapter takes a more in-depth ing with any other business entity look at a state’s power to subject a the statutes and case law dealing foreign corporation to the in with the issue of what constitutes personam jurisdiction of its courts. doing business and the penalties Members of the Bar may feel for failure to qualify for that spe- free to call upon the nearest office cific business entity type must be of CT Corporation System for ad- consulted. ditional information on doing WHAT CONSTITUTES DOING business or for statutory changes BUSINESS is presented as a service enacted after the publication of this to the Bar. The information it con- book. tains has been gathered together to It may be noted that business provide a convenient reference in corporations are not the only type a difficult area. It is hoped that it of business entity that are required will prove helpful both to the at- to qualify before doing business in torney familiar with the field and a foreign state. Nonprofit corpora- to the attorney who is only occa- tions, limited liability companies, sionally concerned with corporate limited partnerships and limited work. liability partnerships are among

THREE KINDS OF DOING BUSINESS

When a corporation does busi- Some corporation laws specifi- ness outside of its state of incorpo- cally state that their doing business ration, it may find itself: (1) subject definitions should not be used in to taxation by the state, (2) subject determining if a corporation is do- to service of process and suit in the ing business for any other purpose. state, or (3) required to qualify to Georgia, Kentucky, Michigan, Ne- do business in the state. The level braska, New Jersey, North Dakota, of business activity that will con- Oklahoma, and Vermont provide stitute doing business is dif- that their doing business definition ferent for each category. In sections do not apply in determin- Filmakers Releasing Organ. v. ing the contacts or activities that Realart Pictures, 1 the court noted may subject a foreign corporation that “This much seems to be to service of process or taxation in clear. . .the greatest amount of the state. 3 Colorado, Delaware, business activity is required to sub- Florida and Utah state that their ject a corporation to the state’s doing business definitions do not statutory qualification require- apply to the question of whether a ments.” 2 Therefore, where a corpo- foreign corporation is subject to ration’s activities in a state are service of process and suit. 4 Neva- sufficient to require qualification, it da and Virginia exclude personal follows that the corporation will jurisdiction from their definition. 5 also be amenable to service of pro- Minnesota and New Hampshire cess and to being taxed by the state.

3. Code of Georgia Annotated, Sec. 14-2- 1. 374 S.W. 2d 535 (Mo. App. 1964). 1501; Kentucky Revised Statutes, Sec. 14A.9- 2. See also: Wagner and Wagner Auto 010; Michigan Compiled Laws, Sec. Sales, Inc. v. Tarro, 889 A.2d 875 (Conn. 450.2012; Revised Statutes of Nebraska, Sec. App. 2006), Sinewellan Corp. v. Farmers 21-20,105; New Jersey Statutes Annotated, Bank of Delaware , 345 A. 2d 430 (Del. Super. Sec. 14A:13-3; North Dakota Century Code 1975); Alliance Steel, Inc. v. Piland , 134 P.3d Annotated, Sec. 10-19.1-143; Oklahoma 669 (Kan. App. 2006); Marco Leather Co. v. Statutes Annotated, Title 18, Sec. 1132; Ver- Argentinas , 617 N.Y.S. 2d 617 (Sup. 1994); mont Statutes Annotated, Title 11A, Sec. Ronson Art Metal Works, Inc. v. Brown & 15.01. Bigelow, Inc. , 104 F. Supp. 716 (S.D.N.Y. 4. Colorado Revised Statutes, Sec. 7-90- 1952); State v. Ford Motor Co. , 38 S.E. 2d 801; Delaware Code, Title 8, Sec. 373; Florida 242 (S.C. 1946); Questech, Inc. v. Liteco , AG, Statutes Annotated, Sec. 607.1501; Utah Code 735 F.Supp. 187 (E.D. Va. 1990); contra; Annotated, 1953, Sec. 16-10a-1501. Marcus v. J.R. Watkins Co. , 188 So. 2d 543 5. Nevada Revised Statutes, Sec. 80.015; (Ala. 1966). Code of Virginia, 1950, Sec. 13.1-757.

3 4 Three Kinds of Doing Business

exclude taxation. 6 The District of Northwestern States Portland Ce- Columbia, Idaho, Kansas, Penn- ment Co. v. Minnesota, 9 the Su- sylvania, and Washington exclude preme Court sustained Minnesota’s service of process, taxation or reg- right to impose properly appor- ulation under state law and New tioned nondiscriminatory net in- York excludes service of process. 7 come tax on an unlicensed foreign Tennessee simply states that its corporation operating exclusively doing business definition applies in interstate commerce, where the only for purposes of its qualifica- corporation had a sufficient nexus tion requirement, “and for no other or connection with the state. With- purpose.” 8 out “some definite link, some min- A state’s power to tax or to as- imum connection” between the sert jurisdiction over a nonresident state and the corporation’s activi- corporation is limited by the Con- ties therein, the imposition of such stitution. Generally, it can be stated a tax would violate the due process that the question of service of pro- clause of the 14th Amendment. cess on an unqualified foreign cor- Since that decision, local activities, poration turns on “traditional such as the maintenance of an of- notions of fair play and substantial fice, have been relied upon by the justice.” The power of a state to courts as constituting the necessary subject a foreign corporation to the nexus. in personam jurisdiction of its In Complete Auto Transit, Inc. v. courts is discussed in the chapter Brady, 10 the Supreme Court held entitled “Personal Jurisdiction.” that the Commerce Clause will not Whether a state may tax an un- prevent a state from taxing inter- qualified foreign corporation en- state commerce if the tax is applied gaged in interstate commerce to an activity with a substantial generally depends on the corpora- nexus to the state, and the tax is tion’s “nexus” with the state. In fairly apportioned, nondiscriminatory, and related to services provided by the State. 6. Minnesota Statutes Annotated, Sec. The purpose of the nexus re- 303.03; New Hampshire Revised Statutes Annotated, Sec. 293-A:15.01. quirement is to ensure that the tax 7. District of Columbia Code, Sec. 29- burden is not placed upon persons 105.05; Idaho Code, Sec. 30-21-505; Kansas who do not benefit from services Statutes Sec. 17-7932; Pennsylvania Statutes Title 15, Sec. 403; Washington Revised Code, provided by the state. In National Sec 23.50.370; New York Business Corpora- tion Law, Sec. 1301. 8. Tennessee Code Annotated, Sec. 48-25- 9. 358 U.S. 450 (1959). 101. 10. 430 U.S. 274 (1977).

Three Kinds of Doing Business 5

Bellas Hess, Inc. v. Dep’t of Reve- Collector of Revenue, 14 and Inter- nue of Illinois, 11 the Court held that national Shoe Co. v. Fontenot, 15 Illinois could not compel an out- Congress enacted the Federal In- of-state mail order company to terstate Income Law, 16 which plac- collect a use tax when the compa- es a limitation on the states’ power ny’s only nexus to Illinois was to tax purely interstate commerce. sending catalogues and orders by It specifically prohibits states and mail to Illinois residents. But, in political subdivisions thereof from D.H. Holmes Co. Ltd. v. McNama- imposing a net income tax on in- ra, 12 the Court held that Louisiana come derived within the state from could impose a use tax on the mail interstate commerce where the order sales of a corporation that activities of the taxpayer in the also operated 13 department stores state were limited to the solicita- in the state. And in Quill Corpora- tion of orders. tion v. North Dakota, 13 the Court The general rule concerning held that North Dakota could not what constitutes doing business so impose a use tax on a mail order as to require a foreign corporation company whose only contact with to qualify has been stated as fol- the state was soliciting residents lows: “It is established by well through the mail and telephone. considered general authorities that The Court stated that the company, a foreign corporation is doing, by engaging in continuous and transacting, carrying on, or engag- widespread solicitation of North ing in business within a state when Dakota residents, had established it transacts some substantial part of minimum contacts under the Due its ordinary business therein.” 17 Process Clause, even though it had Doing business is really not subject no physical presence. However, to definition and each case must the tax was still unconstitutional be considered and decided in the because the company did not have light of its distinctive factual situa- sufficient nexus to the state under tion. the Commerce Clause. The first step to determining if a As a result of the Court’s deci- corporation must qualify in a state sion in the Northwestern case cited above, and its denial of certiorari in Brown-Forman Distillers Corp. v. 14. 101 So. 2d 70 (La. 1958), cert. den. (mem.) 359 U.S. 28, 79 S. Ct. 602 (1959). 15. 107 So. 2d 640 (La. 1958), cert. den. (mem.) 359 U.S. 984, 79 S. Ct. 943 (1959). 11. 386 U.S. 753 (1967). 16. P.L. 86-272, 15 U.S.C. 381 et seq. 12. 486 U.S. 24 (1988). 17. Royal Insurance Co. v. All States Thea- 13. 504 U.S. 298 (1992). tres , 6 So. 2d 494 (Ala. 1942).

6 Three Kinds of Doing Business

is to examine the state’s corpora- court when the corporation brings tion law. Most state laws list cer- an action in the state’s courts. tain intrastate activities, such as Because unqualified foreign maintaining bank accounts or hold- corporations transacting intrastate ing board meetings, that a foreign business may be barred from corporation may engage in without maintaining an action in a state’s having to qualify. When there is a courts, the defendant will assert the statutory statement covering the plaintiff’s unqualified status as a corporation’s particular situation, defense. The court must then de- the statute will hold. Otherwise, the termine if the plaintiff’s activities issue is for judicial determination. in the state constituted “doing The issue of whether a foreign business” so that the corporation corporation is required to qualify would have been required to quali- in a state usually comes before a fy under the corporation law.

PENALTIES FOR FAILURE TO QUALIFY

Suits By Unqualified Every state has enacted a statute Foreign Corporations denying unqualified foreign corporations access to state courts. Some Few corporations confine their states have provisions similar to activities to their home states. In Sec. 124 of the Model Business order to protect their interests in Corporation Act, which states that foreign states, corporations must “No foreign corporation transact- have access to those states’ courts. ing business in this State without a However, an unqualified foreign certificate of authority shall be corporation may be prevented from permitted to maintain any action, bringing or maintaining an action suit or proceeding in any court of in the courts of a state in which it this State, until such corporation 1 does intrastate business. Because shall have obtained a certificate of of the Constitution’s Commerce authority.” The states that have Clause, a state may not prevent an adopted similar provisions are unqualified corporation from using Alaska, Colorado, Illinois, Minne- its courts if the corporation is en- sota, New Jersey, New Mexico, gaged exclusively in interstate North Carolina, North Dakota, and 2 commerce. Rhode Island. Other states have adopted a pro-

1. Proof that an unlicensed foreign corpo- vision similar to Sec. 15.02 of the ration had been doing business in the state as Revised Model Business Corpora- to other transactions has been held not to tion Act which provides that “A prevent the corporation from maintaining an action arising out of a transaction or series of transactions in interstate commerce. Brown Equipment Limited v. Computer Atlanta, Inc. , Broadcast, Inc. v. Pepper Sound Studios, Inc. , 715 F. Supp. 371 (N.D. Ga. 1989); Mass 242 Ark. 701 416 S.W. 2d 284 (1967); News- Transfer Inc. v. Vincent Const. Co. , 585 paper Publishers, Inc. v. St. Charles Journal, N.E.2d 1286 (Ill. App. 5 Dist. 1992); Goodwin Inc. , 406 S.W. 2d 801 (St. Louis (Mo.) Ct. of Bros. Leasing, Inc. v. Nousis , 373 Mass. 169, App. 1966). 366 N.E. 2d 38 (1977); Shulton, Inc. v. Con- 2. SGB Construction Services Inc. v. Ray sumer Value Stores, Inc. , 352 Mass. 605, 227 Sumlin Construction Co., Inc. , 644 So. 2d 892 N.E. 2d 482 (1967); Simplified Tax Records, (Ala. 1994); Johnson v. MPL Leasing Corp. , Inc. v. Gantz , 333 S.W. 2d 328 (St. Louis 441 So. 2d 904 (Ala. 1983); Camaro Trading (Mo.) Ct. of App. 1960); Invacare Corp. v. Co., Ltd. v. Nissei Sangyo America, Ltd. , 628 John Nageldinger & Son, Inc. , 576 F. Supp. So. 2d 463 (Ala. 1993); Joison Limited v. 1542 (E.D.N.Y. 1984); SCS/Compute, Inc. v. Taylor , 567 So.2d 862 (Ala. 1990); Inland Meredith , 864 P.2d 1292 (Okl. App. 1993); Casino Corp. v. Superior Court , 10 Cal. Rptr. Statler Hotels v. Herbert Rosenthal Jewelry 2d 497 (Cal. App. 4 Dist. 1992); Imex Interna- Corp. , 351 S.W. 2d 579 (Tex. Civ. App. tional, Inc. v. Wires Engineering, 583 S.E. 2d 1961); L.B. Foster Co. v. Nelson Bros. Const. 117 (Ga. App. 2003); International Capital Co. , 424 P.2d 881 (Utah 1967).

7 8 Suits By Unqualified Foreign Corporations

foreign corporation transacting corporation doing intrastate busi- business in this state without a cer- ness may be permitted to enforce a tificate of authority may not main- contract in a state court if the contain a proceeding in any court in tract was entered into outside of this state until it obtains a certifi- that state. 4 However, in an Ala- cate of authority.” The states that adopted similar provisions are Ari- 4. Holder v. Aultman, Miller & Co. , 169 zona, Arkansas, Florida, Georgia, U.S. 81, 18 S.Ct. 269 (1898); Shook and Fletcher Insulation Co. v. Panel Systems , 784 Hawaii, Indiana, Iowa, Kentucky, F.2d 1566 (11th Cir. 1986); Genesco Employ- Maine, Michigan, Mississippi, ees’ Credit Ass’n v. Cobb , 411 So.2d 151 Missouri, Montana, Nebraska, (Ala. Civ. App. 1982); Nelms v. Morgan New Hampshire, Oregon, South Portable Bldg. Corp. , 808 S.W. 2d 314 (Ark. 1991); Moore v. Luxor (North America) Carolina, South Dakota, Tennes- Corp. , 742 S.W. 2d 916 (Ark. 1988); Rose’s see, Utah, Vermont, Virginia, West Mobile Homes, Inc. v. Rex Financial Corp. , Virginia, Wisconsin, and Wyo- 383 F. Supp. 937 (W.D. Ark. 1974); United Press International Inc. v. Hernreich , 241 ming. Ark. 33, 406 S.W. 2d 317 (1966); United The statutes of Alabama, Cali- Press International, Inc. v. Hernreich , 241 fornia, Delaware, District of Co- Ark. 33, 406 S.W. 2d 322 (1966); Roberts v. American Machine Co. , 347 P.2d 75 9 (Idaho lumbia, Idaho, Kansas, Louisiana, 959); Land Development Corp. v. Canaday , Maryland, Massachusetts, Nevada, 74 Idaho 233, 258 P.2d 976 (1953); Bonham New York, Ohio, Oklahoma, National Bank v. Grimes Pass Placer Mining Pennsylvania,Texas and Wash- Co. , 18 Idaho 629, 111 pac. 1078 (1910); Furst-McNess Co. v. Kielly , 233 Iowa 77, 8 ington, also provide that unquali- N.W. 2d 730 (1943); Burch Mfg. Co. v. fied foreign corporations doing McKee , 231 Iowa 730, 2 N.W. 2d 98 (1942); business in their states may not Richards-Wilcox Mfg. v. Talbot & Meier , 252 Mich. 622, 233 N.W. 437 (1930); Show Coun- use their courts. However, their selors, Ltd. v. American Motors Corp. , 211 statutes are not based on either the N.W. 2d 111 (Mich. Ct. App. 1973); Behlen Model Act or Revised Model Act Manufacturing Co. v. Andries-Butler, Inc. , 52 Mich. App. 317, 217 N.W. 2d 125 (1974); provisions. Taylor & Martin, Inc. v. Hiland Dairy, Inc. , Because an unqualified corpora- 676 S.W. 2d 859 (Mo. App. 1984); Merrimack tion is denied access to state courts, Paving Corporation v. Southwick , 207 A.2d it cannot enforce contracts it made 438 (N.H. 1965); Manhattan Overseas Co. v. 3 Camden County Beverage Co. , 125 N.J.L. in the state. But an unqualified 239, 15 A.2d 217 (N.J. Supreme 1940); Don J. Cummings Co., Inc. v. Aluminum Manufactur- ing Corp. , 371 F. 2d 118 (10th Cir. [N.M.] 3. The Maryland statute prohibits suit by a 1967); Trans-radio Press Service, Inc. v. foreign corporation which “is doing or has Whitmore , 47 N.M. 95, 137 P.2d 309 (1943); done any intrastate, interstate, or foreign busi- Kosson & Sons v. Carleton , 272 N.Y.S. 2d 81 ness in this State without [qualifying].” Anno- (A.D. 2 Dept. 1966); Max Factor & Co. v. tated Code of Maryland, Corporations and Janel Sales Corp. , 298 F.2d 511 (2d Cir. Associations, Sec. 7-301. [N.Y.] 1963); Bertolf Bros., Inc. v. Leuthardt ,

Suits By Unqualified Foreign Corporations 9 bama case, the plaintiff contracted Texas court held that a defendant to provide advertisements to be had waived the issue of the plain- broadcast in Alabama. The court tiff foreign corporation’s capacity held that where the primary pur- to sue by first raising the issue in a pose of a contract between the motion to set aside judgment plaintiff and defendant was for which was filed 20 days after the services that had to be performed judgment was signed. 8 And, where in Alabama, the unqualified corpo- an unqualified foreign corporation rate plaintiff could not use Ala- filed a counterclaim against the bama’s courts even though the plaintiff, and the plaintiff did not contract was entered into out of raise the issue of the corporation’s state. 5 A contract made in the fo- failure to obtain a certificate of rum state which would not be en- authority until 14 months after the forceable because of the disabling counterclaim was filed, and one statute is not made enforceable by week after the trail began, an Illi- a provision in the contract stating nois court held that the plaintiff that it shall be deemed to have had waived the right to raise that been made outside that state. 6 issue. 9 However, in a New York Many states have held that a de- case, a California corporation fense asserting that an unqualified foreign corporation is barred from 233 P.2d 406 (Idaho, 1951); Amerco Field maintaining an action must be Office v. Onoforio , 317 N.E. 2d 596 (Ill. App. 1974); West Publishing Co. v. Intrastate Pipe- timely interposed or it will be line Corp. , 254 So. 2d 643 (La. App. 1971), 7 deemed waived. For example, a writ den. (mem.) 256 So. 2d 290 (La. 1972); Mid-Continent Refrigerator Co. v. Hurst , 205 So. 2d 734 (La. App. 1967); Iowa-Mo Enter- 261 App. Div. 981, 26 N.Y.S. 2d 114 (2d prises, Inc. v. Avren , 639 F.2d 443 (8th Cir. Dept. 1941); Shoenterprise Corporation v. [Mo.] 1981); Poston Springfield Brick Co. v. Butler , 329 S.W. 2d 361 (Tenn. App. 1959); Brockett , 183 S.W. 2d 404 (Mo. App. 1944); New England Road Machinery Co. v. Calkins , Hot Roll Mfg. Co. v. Cerone Equipment Co., 149 A.2d 734 (Vt. 1959). Inc. , 38 A.D. 2d 339, 329 N.Y.S. 2d 466 (3rd 5. Competitive Edge, Inc. v. Tony Moore Dept. 1972); P.K. Springfield, Inc. v. Hogan , Buick-GMC, Inc. , 490 So.2d 1242 (Ala. Civ. 621 N.E.2d 1253 (Ohio App. 2 Dist. 1993); App. 1986). See also, Pembroke Steel Co. v. Steele v. The Maccabees , 53 P.2d 232 (Okla., Energy Resources Imports & Exports, Inc. , 1935); Chet Adams Co. v. James F. Pedersenn 477 So.2d 355 (Ala. 1985). Co. , 413 S.E. 2d 827 (S.C. 1992); Gosch v. B 6. Allen Industries, Inc. v. Exquisite Form & D Shrimp, Inc. , 822 S.W. 2d 802 (Tex. Brassiere, Inc. , 221 N.Y.S. 2d 619 (Sup. Ct. App.-Houston [1st Dist.] 1992); Continental 1961), aff’d 15 A.D. 2d 760, 224 N.Y.S. 2d Supply Co. v. Hoffman , 144 S.W. 2d 253 (Tex. 579 (1st Dept. 1962). Comm’n App. 1940). 7. King v. Petroleum Services Corp. , 536 8. Gosch v. B & D Shrimp, Inc. , 830 S.W. P.2d 116 (Alaska, 1975); Safwat v. U.S. Leas- 2d 652 (Tex. App.-Houston [1st Dist] 1992). ing Corp. , 268 S.E.2d 395 (Ga. App. 1980); 9. Cox v. Doctor’s Associates, Inc. , 613 Exchange Lumber and Mfg. Co. v. Thomas , N.E.2d 1306 (Ill. App. 5 Dist. 1993).

10 Suits By Unqualified Foreign Corporations

cross-claimed against a third-party ing a motion for summary judg- defendant. The defendant was un- ment, had waived the defense. aware that the California corpora- Some courts have also held that tion was doing business in New a defense asserting that the plaintiff York without having qualified un- is an unqualified foreign corpora- til hearing testimony to that effect tion is an affirmative defense and at an examination before trial. The must be pleaded as such or it will defendant was permitted to amend be waived. In a New York case, its answer to plead the failure of the defendant stated in an affidavit the corporation to qualify as an in support of his motion to dismiss affirmative defense. The court that the plaintiff may not have found that the defendant could not complied with the state’s qualifica- have known the extent of the cor- tion requirements. The court held poration’s intrastate activities be- that this statement was insufficient fore the pretrial examination. 10 to raise the affirmative defense of Nebraska’s courts have held that failure to qualify and therefore the an objection to the maintenance of defense was waived. 14 A Maine a lawsuit by an unauthorized cor- court held that a foreign corpora- poration may be raised at any time tion is presumed to have complied during the litigation. 11 with the qualification statute and it Where the defendant raised the is therefore incumbent on the de- issue of the plaintiff’s failure to fendant to raise by affirmative de- qualify for the first time in its mo- fense that the plaintiff was doing tion to vacate, a New Mexico court business without authority. The held that it waived the issue.12 In a court thus rejected the argument Minnesota case, 13 the court held that the plaintiff had an affirmative that a defendant that failed to chal- duty to present evidence of its au- lenge a foreign corporation’s ca- thority in order to maintain its pacity to sue in its answer, and suit.15 A Kansas court held that instead challenged it when oppos-

14. RCA Records, Div. of RCA Corp. v. 10. Tynon v. D.R. McClain & Son , 499 Weiner , 564 N.Y.S.2d 89 (A.D. 1 Dept. 1990). N.Y.S.2d 354 (Sup. 1986). See also Bank of America , N.A. v Ebro 11. Christian Services, Inc. v. Northfield Foods, Inc., 948 N.E.2d 685 (Ill. App. 1 Dist. Villa, Inc. , 385 N.W.2d 904 (Neb. 1986); 2011); Rigid Component Systems v. Nebraska Com- Career Concepts, Inc. v. Synergy , 865 ponent Systems, Inc. , 276 N.W. 2d 659 (1979). N.E.2d 385 (Ill. App. 1 Dist. 2007); Cadle 12. Capco Acquisub, Inc. v. Greka Energy Company v. Hoffman , 655 N.Y.S.2d 635 Corp., 198 P.3d 354 (N.M. App. 2008). (A.D. 2 Dept. 1997). 13. Fin AG, Inc. v. Hufnagle, Inc., 700 15. Clearwater Artesian Well v. N.W.2d 510 (Minn. App. 2005). LaGrandeur , 912 A.2d 1252 (Me. 2007).

Suits By Unqualified Foreign Corporations 11 the plaintiff company’s lack of fendant to question the corpora- capacity to sue had to be raised by tion’s witness on whether it was a specific denial and rejected the transacting intrastate business. The defendant’s argument that it was appellate court held that the trial raised by consent when his attor- court erred in refusing to allow the ney asked questions about the defendant to develop evidence re- company’s lack of registration. lating to whether the foreign cor- The questions did not mention the poration was barred from bringing closed door statute and no reason- suit. This refusal, according to the able person would be aware the appellate court, gave res judicata to defendant was contesting the the pretrial order, and materially plaintiff’s capacity to sue. 16 affected the defendant’s ability to However, in a federal court de- establish a possible defense. cision, the court noted that the de- Where a corporation is duly fendant had failed to raise the qualified in a state while it trans- plaintiff’s failure to qualify as an acts business there, and then gives affirmative defense. Nevertheless, up its qualification after ceasing to the court granted the defendant operate in that state, the penalty of leave to amend his pleading, noting losing access to the state’s courts is that the federal rules of civil pro- inapplicable. It is intended to pun- cedure discourage the sacrifice of ish a foreign corporation for doing potentially meritorious claims, that business without authority — if no the motion to amend was made in business is done, no authority is good faith, and that the plaintiff needed. 19 A Missouri court stated would not be prejudiced. 17 that the penalty provision “has no In an Oklahoma case, 18 the de- purpose to exclude foreign corpo- fendant moved for summary judg- rations generally from access to ment on the grounds that the Missouri courts but is applicable in plaintiff was a foreign corporation only those situations where a for- transacting business in Oklahoma eign corporation seeks to conduct without having qualified. The trial business intrastate in Missouri court denied the motion and then, at trial, refused to allow the de- 19. Wild Turkey Ranch, Inc. v. Wilhelm Nursing Home, Inc. , 677 S.W. 2d 871 (Ark. 16. Douglas Landscape and Design, LLC App. 1984); Gorham Jewelers Inc. v. A. Co- v. Miles , 355 P.3d 700 (Kan. App. 2015). hen & Sons Corp. , 299 S.E.2d 156 (Ga. 17. Posadas De Mexico, S.A. de C.V. v. App.1983); Ceres Fertilizer, Inc. v. Beekman , Dukes , 757 F.Supp. 297 (S.D.N.Y. 1991). 290 N.W.2d 199 (Neb. 1980); Custom Metals 18. SCS/Compute, Inc. v. Meredith , 864 Systems, Ltd. v. Tocci Building Corp., 57 A.3d P.2d 1292 (Okl. App. 1993). 674 (R.I. 2013)..

12 Suits By Unqualified Foreign Corporations

without complying with certifica- years later, defendants moved for tion requirements of the statute.” 20 summary judgment on the ground An Alabama court rejected a that plaintiff was doing business in foreign corporation’s argument the state without authority, and was that equity barred the defendant thus barred from maintaining the from asserting the door closing suit. Plaintiff declined to comply statute, noting that while the result with the qualification requirement, was harsh the statute provided that claiming that it was no longer do- the foreign corporation could not ing business in Florida and should assert any theory sounding in con- no longer be barred. The court re- tract, whether equitable or legal.21 jected this argument and dismissed A foreign corporation was held the complaint. to be unable to maintain a suit in In a case where jurisdiction is Pennsylvania courts where it was based on diversity of citizenship, doing business without a certificate federal courts are required to apply of authority, even though its appli- the applicable state law, and a for- cation for such a certificate had eign corporation barred by state been denied by the state. 22 law from suing in the state courts In a Florida case, 23 an unquali- would find itself barred from the fied foreign corporation made the federal courts as well. 24 However, novel argument that its inability to if the unqualified foreign corpora- sue on a cause of action arising out tion is attempting to enforce a fed- of the intrastate business it conducted in Florida should have end- 24. Woods v. Interstate Realty Co. , 337 ed when it stopped doing business U.S. 535, 69 S.Ct. 1235 (1949); S&H Con- tractors, Inc. v. A.J. Taft Coal Co., Inc. , 906 there. The case began when a F.2d 1507 (11th Cir. 1990); Pellerin Laundry Rhode Island corporation brought Machine Sales Company v. Hogue , 219 suit contesting the tax assessment F.Supp. 629 (W.D. Ark. 1963); ILC Corp. v. Latino Newspaper Inc. , 747 F.Supp. 85 on an apartment complex it owned (D.D.C. 1990); Lawson Products, Inc. v. Tifco and operated in Florida. Three Industries, Inc. , 660 F.Supp. 892 (M.D. Fla. 1987); Hinden/Owen/Engelke, Inc. v. Wailea Kai Charters , 949 F. Supp. 775 (D.Hawaii 20. Benham v. Cox , 677 S.W.2d 429, 431 1996); Woodmont Corp. v. Rockwood Center (Mo. App. 1984). Partnership , 852 F.Supp. 948 (D. Kan. 1994); 21. Tradewinds Environmental Restora- Storwal Intern., Inc. v. Thom Rock Realty Co., tion, Inc. v. Brown Bros. Constr., LLC, 999 L.P. , 784 F.Supp. 1141 (S.D.N.Y. 1992); So.2d 875 (Ala. 2008). Expense Reduction Services, Inc. v. Jonathan 22. University of Dominica v. Pennsylva- Woodner Co., Inc. , 720 F.Supp. 262 nia College of Podiatric Medicine , 301 Pa. (S.D.N.Y. 1989); Williams Erectors of Suffolk Super. 68, 446 A.2d 1339 (1982). County v. Mulach Steel Corp. , 684 F.Supp. 23. Industrial National Mortgage Co. v. 357 (E.D.N.Y. 1988); Azuma N.V. v. Sinks , Blake , 406 So.2d 103 (Fla. App. 1981). 646 F.Supp. 122 (S.D.N.Y. 1986).

Suits By Unqualified Foreign Corporations 13 eral statutory or constitutional In another transfer situation, the right, so that jurisdiction is based plaintiff moved to transfer a diver- on the existence of a federal ques- sity suit from New York to Geor- tion, the federal court may enter- gia after Georgia defendants tain the action. 25 A Florida case moved to dismiss for lack of per- allowed an unqualified foreign sonal jurisdiction. The transfer was corporation to sue in state court granted despite defendants’ oppo- where a federal constitutional right sition. Defendants then successful- was involved. 26 A district court in ly moved to dismiss on the ground Wyoming held that a corporation’s that plaintiff was doing business in failure to comply with state quali- Georgia without authority. The fication requirements did not bar a federal court dismissed the case federal copyright infringement without prejudice, even though action. 27 Some courts have held plaintiff had by that time obtained that a national bank cannot be a certificate of authority, because required by a state to qualify.28 Georgia law, at that time, required a foreign corporation to have a certificate when commencing an 25. Harms, Inc. v. Tops Music Enterprises, 29 Inc. , 160 F.Supp. 77 (S.D. Cal., 1958); action. Hoeppner Construction Co. v. United States Under Nevada law, an unquali- for Use of Magnum , 287 F.2d 108 (10th Cir. fied foreign corporation may bring [Colo.] 1960); Public Citizen, Inc. v. Miller , an action for an “extraordinary 813 F.Supp. 821 (N.D. Ga. 1993); Interna- tional Society for Krishna Consciousness, Inc. remedy,” such as attachment or v. Lake County Agric. Society , 521 F.Supp. 8 garnishment. However, the corpo- (N.D. Ind. 1980); Lisle Mills, Inc. v. Arkay ration must qualify within 45 days Infants Wear, Inc. , 90 F.Supp. 676 (E.D.N.Y. 1950); Aetna Casualty and Surety Company v. of commencing the action or it will 30 United States , 365 F.2d 997 (8th Cir. [S.D.] be dismissed without prejudice. 1966); Embassy Pictures Corporation v. Hud- An Alabama court held that an son , 226 F.Supp. 421 (W.D. Tenn. 1964); United States for Use of James F. O’Neil unqualified foreign corporation Company v. Malan Construction Corporation, could sue in detinue in an Alabama 168 F.Supp. 255 (E.D. Tenn. 1958); United court as long as the corporation States of American for Use and Benefit of was not relying on a contract that Bernadat v. Golden West Construction Com- pany , 194 F.Supp. 371 (D. Utah 1961). 26. Overstreet v. Fredrick B. Cooper Co. , 134 So.2d 225 (Fla., 1961). 2012); Sylver v. Regents Bank, N.A., 300 27. Ocasek v. Hegglund, 673 F.Supp. 1084 P.3d 718 (Nev. 2013). (D. Wyo. 1987). 29. Durkan Enterprises, Inc. v. Cohutta 28. JPMorgan Chase Bank, N.A. v. John- Banking Co. , 501 F.Supp. 350 (N.D. Ga. son , 2012 U.S. Dist. LEXIS 66149 (Bankr. 1980). E.D. Ark. 2012); Williams v. Chase Bank 30. Nevada Revised Statutes, Sec. USA, N.A., 390 S.W.3d 824 (Ky. App. 80.055.

14 Suits By Unqualified Foreign Corporations

was made or had to be performed 31 in Alabama. N.W.2d 659 (1979); Menley & James Labora- tories Ltd. v. Vornado, Inc. , 217 A.2d 889 (N.J. Super., Ch. Div. 1966); see also York & York Construction Co. v. Alexander , 296 A.2d Effect of Subsequent 710 (D.C. App. 1972); Williamson-Dickie Apparel Mfg. Co. v. Hanger, Inc. , 422 So.2d Qualification 602 (La. App. 1982); Marchman v. NCNB Texas National Bank , 898 P.2d 709 (N.M. When a foreign corporation is 1995); Maro Leather Co. v. Argentinas , 617 barred from bringing a lawsuit N.Y.S. 2d 617 (Sup. 1994); In the Matter of because it transacted business Knoll North America, Inc. , 601 N.Y.S.2d 224 (Sup. 1993); Caspian Investments, Ltd. v. without a certificate of authority, Vicom Holdings, Ltd., 770 F.Supp. 880 the next question is whether subse- (S.D.N.Y. 1991); Pergament Home Centers, quent qualification will cure the Inc. v. Net Realty Holding Trust , 567 disability and enable it to bring N.Y.S.2d 292 (A.D. 2 Dept. 1991); Beer v. F.W. Meyers & Co., Inc. , 552 N.Y.S.2d 796 suit. (A.D. 4 Dept. 1990); Fine Arts Enterprises, In most cases, a foreign corpora- N.V. v. Levy , 539 N.Y.S.2d 827 (A.D. 3 Dept. tion can remove the bar by qualify- 1989); Intermar Overseas, Inc. v. Argocean S.A., 503 N.Y.S.2d 736 (A.D. 1 Dept. 1986); ing at any time before suit and in Tinterorias Ibericas De Peleteria, S.A. v. many states, even during the suit Gafco, Inc. , 494 N.Y.S.2d 318 (A.D. 2 Dept. itself. 1 1985); Oxfor Paper Co. v. S.M. Liquidation Co., Inc. , N.Y.S.2d 395 (Sup. Ct. 1965); P.K. Springfield, Inc. v. Hogan , 621 N.E.2d 1253 31. Crowe v. Interstate Safety Systems, (Ohio App. 2 Dist. 1993); Step Plan Services, Inc., 853 So.2d 255 (Ala. Civ. App. 2002). Inc. v. Koresko , 12 A.3d 401 (Pa. Super. 1. Capin v. S & H Packing Co., Inc. , 130 2010); International Inventors, Inc., East v. Ariz. 441, 636 P.2d 1223 (1981); Johnny’s Berger , 363 A.2d 1262 (Pa. Super. 1976); Pizza House, Inc. v. Huntsman , 844 S.W.2d Empire Excavating Co. v. Maret Development 320 (Ark. 1992); Jack Tar of Ark., Inc. v. Corp. , 370 F.Supp. 824 (W.D. Pa. 1974); Cost National Wells Television, Inc. , 351 S.W.2d of Wisconsin, Inc. v. Shaw , 357 S.E.2d 20 848 (Ark. 1961); Noldan Corp. v. District (S.C. 1987); Video Engineering Co. v. Foto- Court , 716 P.2d 120 (Colo. 1986); Stauffer Video Electronics, Inc. , 154 S.E.2d 7 (Va. Chemical Co. v. Keysor-Century Corp. , 541 1967); Dieter Engineering Services, Inc. v. F.Supp. 239 (D. Del. 1982); Hudson Farms, Parkland Development, Inc., 483 S.E.2d 48 Inc. v. McGrellis , 620 A.2d 215 (Del. 1993); (W.Va. 1996). There is, however, some au- Charles W. Smith & Sons Excavating, Inc. v. thority for the proposition that the statute of Lichtefeld-Massaro, Inc. , 477 N.E.2d 308 limitations will continue to run until the corpo- (Ind. App. 1985); Inn Operations, Inc. v. River ration has qualified. See Kitchen v. Himelfarb , Hill Motor Inn Company , 152 N.W.2d 808 254 A.2d 694 (Md. App. 1969), in which a (Iowa 1967); J.R. Watkins Co. v. Floyd , 119 mechanic’s lien filed by an unqualified foreign So.2d 164 (La. App. 1960); Shannon Sales corporation was regarded as null and void, and Co., Inc. v. Williams , 490 N.W.2d 436 (Minn. the filing of an amended lien was held to App. 1992); Christian Services, Inc. v. North- constitute a new action which was barred field Villa, Inc. , 385 N.W.2d 404 (Neb. 1986); because the statutory time for filing a lien had Rigid Component Systems v. Nebraska Com- expired. In Gratrix v. Pine Tree, Inc. , 677 P.2d ponent Systems, Inc., 202 Neb. 658, 276 1264 (Alaska 1984), the court permitted a

Effect of Subsequent Qualification 15

The Michigan statute specifical- There are many examples of ly provides: “An action com- foreign corporations being allowed menced by a foreign corporation to maintain an action once they having no certificate of authority qualified. In one case, a Washing- shall not be dismissed if a certifi- ton corporation filed a breach of cate of authority has been obtained contract action in California. The before the order of dismissal.” 2 defendant raised as a defense that Sec. 15.02(c) of the Revised the plaintiff was not qualified in Model Business Corporation Act California. Plaintiff contended it states that “A court may stay a was not transacting intrastate busi- proceeding commenced by a for- ness. All issues were tried in a sin- eign corporation, its successor or gle trial and the court ruled in favor assignee until it determines wheth- of plaintiff on the breach of con- er the foreign corporation or its tract claim. The court also found successor requires a certificate of that plaintiff was required to quali- authority. If it so determines, fy. Following the issuance of the the court may further stay the pro- memorandum of decision, plaintiff ceeding until the foreign corpora- qualified and was able to recover. 3 tion or its successor obtains the However, in Wisconsin, a suit certificate of authority”. This pro- brought by an unqualified foreign vision, or a substantially similar corporation was dismissed where one, has been adopted by Arizona, the corporation paid for and filed Arkansas, Colorado, Florida, Ha- the required certificate of authority waii, Indiana, Iowa, Kentucky, before the trial court rendered its Maine, Massachusetts, Mississippi, decision, but the Secretary of Montana, Nebraska, New Hamp- State’s office did not issue the cer- shire, Oregon, South Carolina, tificate of registration until after South Dakota, Tennessee, Utah, the court’s decision and after other Vermont, Virginia, Washington, parties filed appeals. 4 West Virginia, Wisconsin and In many of the states in which Wyoming. the disability may be removed by subsequent qualification, there are foreign corporation to amend its complaint to statutory provisions for the pay- allege compliance with qualification and tax requirements, since a dismissal would have been without prejudice, the statute of limita- 3. American Retail Management, Inc. v. tions had not expired, and plaintiff had cured Bakersfield Food City, Inc. , 247 Cal. Rptr. 689 its failure to qualify, so that it would simply (Cal. App. 5 Dist. 1988). have refiled its action if the court had denied 4. South Carolina Equipment, Inc. v. permission to amend and dismissed the case. Sheedy , 120 Wis.2d 119, 353 N.W.2d 63 2. Michigan Comp. Laws, Sec. 450.2051. (1984).

16 Effects of Subsequent Qualification

ment of specific penalties in con- tificate of authority where one and nection with a belated qualifica- one half years had passed between tion. These penalties may be the filing of the motion to dismiss exacted in addition to penalties for and the court’s dismissal of the failure to file reports and pay taxes suit. 8 due under various statutes. 5 The Nevada Supreme Court Many courts have held that held that the concern that without when a foreign corporation brings the penalty of dismissal there a suit that is subject to dismissal would be no incentive for un- because the corporation is not qualified foreign corporations to qualified, the corporation will be qualify, did not justify the extraor- given a reasonable amount of time dinarily harsh penalty of dismissal. to comply with the qualification First, the court explained, staying provision before dismissal. 6 A an action that has been commenced Georgia court held that a foreign by an unqualified foreign corpora- corporation that qualified ten tion will provide sufficient incen- months after filing suit could main- tive to encourage compliance. Se- tain the suit as any reason for dis- cond, the corporation law sets forth missal ceased to exist when it its own penalties and the judiciary qualified. 7 However, a North Caro- need not impose penalties beyond lina court held that it did not have those. Third, the determination of to continue a suit to permit a whether a foreign corporation is foreign corporation to obtain a cer- actually doing business involves a fact-intensive and often nebulous inquiry and the failure to qualify

5. Transportation Insurance Co. v. El can be the result of a bona fide Chico Restaurants, 524 S.E. 2nd 486 (Ga. disagreement regarding the scope 1999). of the qualification requirements. 6. Nasso v. Seagal, 263 F.Supp.2d 596 (E.D.N.Y. 2003); Showcase Limousine, Inc. v. Finally, the fact that the Secretary Carey, 703 N.Y.S. 2d 22 (A.D. 1 Dept. 2000); of State will forgive the fault and Transportation Insurance Co. V. El Chico allow the corporation to qualify Restaurants, 524 S.E.2nd 486 (Ga. 1999); indicates that the failure to qualify Uribe v. Merchants Bank of New York, 697 N.Y.S.2d. 279 (A.D. 1 Dept. 1999); Associat- is not so egregious that it warrants ed Comm. &Research Services, Inc. v. Kansas dismissal with prejudice. 9 Personal Comm. Services, Ltd., 31 F.Supp.2d 949 (D. Kan.1998); Corco, Inc. v. Ledar Transport, Inc., 946 P.2d 1009 (Kan. App. 1997). 8. Harold Lang Jewelers, Inc. v. Johnson, 7. Health Horizons, Inc. v. State Farm 576 S.E.2d 360 (N.C. App. 2003). Mut. Auto Ins. Co., 521 S.E.2d 383 (Ga.App. 9. Executive Management, Ltd. v. Ticor Ti- 1999). tle Insurance Co. , 38 P.3d 872 (Nev. 2002).

Defense of Suits 17

A Colorado court held that a authority to transact business in corporation that was not qualified this State. . .shall not prevent such when it obtained a mechanics lien, corporation from defending any could maintain a proceeding to action, suit or proceeding in any enforce the lien once it qualified, court of this State.” Section as the failure to qualify did not im- 15.02(e) of the Revised Model Act pair the validity of corporate acts.10 is substantially similar. A Texas court denied a foreign The following states have entity’s petition for a writ of man- adopted a provision permitting the damus to set aside an order abat- defense of an action: Alabama, ing its lawsuit until it qualified, Alaska, Arizona, Arkansas, Colo- holding that mandamus was not rado, Connecticut, Delaware, Dis- appropriate because the entity had trict of Columbia, Florida, control over whether it qualified, Georgia, Hawaii, Idaho, Illinois, had chosen not to, and thus had not demonstrated that it did not Indiana, Iowa, Kansas, Kentucky, have an adequate remedy by ap- Louisiana, Maine, Michigan, Min- peal. 11 nesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Defense of Suits Mexico, New York, North Caroli- na, North Dakota, Oklahoma, Ore- Although unqualified foreign gon, Pennsylvania, Rhode Island, corporations doing intrastate busi- South Carolina, South Dakota, ness are denied the right to sue in Tennessee, Texas, Utah, Virginia, state courts, these corporations are Washington, West Virginia, Wis- permitted to defend themselves. 1 consin and Wyoming. Section 24 of the Model Busi- Vermont’s statute provides that ness Corporation Act provides a foreign corporation transacting that: “The failure of a foreign cor- business without a certificate of poration to obtain a certificate of authority may not raise an affirmative defense. Otherwise, its failure 10. Bob Blake Builders, Inc. v Gramling, to qualify will not prevent it from 18 P.3d 859 (Colo. App. 2001). defending a proceeding. 11. In re Immobiliere Jeuness Establisse- ment, 2014 Tex. App. LEXIS 1336. The statutes that make no men- 1. Carson v. McNeal, 375 F.Supp.2d 509 tion of the right to defend suits (S.D. Miss. 2005); Southern Christian Lead- grant the right by implication. It ership Conference v. Shannon, 613 S.E.2d596 (Va. 2005); Buddy Gregg Motor has been held that in the absence of Home Inc. v. Motor Vehicle Board , 179 a specific statutory denial, an unli- S.W.3d 589 (Tex. App. – Austin 2005). censed foreign corporation does

18 Defense of Suits

have the right to defend suits assert a defense which is inherent brought against it. 2 In a federal in the nature of the issues to be court decision holding that an unli- resolved.” In a Texas case, 5 a cor- censed foreign corporation had the poration was allowed to intervene capacity to defend suits against it in a garnishment proceeding and where the statute was silent, the move to dissolve or modify the writ court observed: “Indeed, there obtained by the garnishor, even would be some doubt as to the va- though the corporation was not lidity of such a closing of the qualified in Texas. The court found courts of this state to a corporation that the intervention was not in the defendant of another state if the nature of a plaintiff’s petition and statute attempted it.” 3 was therefore not barred. In an Illinois case, 4 an unquali- In another Texas case 6 an un- fied foreign corporation was qualified foreign corporation was brought into an action in state court allowed to appeal an order issued through impleader. The court held against it by a state board on the that the corporation could “defend” grounds that it was not prohibited itself in the case, even though it from defending itself. was awarded the sum being held In a Washington case, 7 a foreign by the court. The court maintained corporation unsuccessfully defend- that “If the [foreign corporation] is ed an action in which it was to be bound by the court’s adjudi- claimed that the corporation con- cation it should have the right to verted shareholders’ stock. The court held that the corporation could appeal the decision even though it was not qualified in 2. American DeForest Wireless Telegraph Washington. In Florida, a foreign Co. v. Superior Court of City and County of corporation whose certificate of San Francisco , 96 Pac. 15 (Cal. 1908); Brecht v. Bur-Ne Co. , 91 Fla. 345, 108 So. 173 authority had been revoked was (1926); Carolina Mfg. Corp. v. George S. held to have standing to set aside a May, Inc. , 312 Mich. 487, 20 N.W.2d 283 default judgment since such a cor- (1945), cited in Gill v. S.H.B. Corp. , 34 N.W.2d 526 (Mich., 1948); Colegrove v. Handler , 517 N.E.2d 979 (Ohio App. 1988). 3. Marquette Bailey Lumber Co. v. Dexter 5. A. Wolfson’s Sons, Inc. v. First State Lumber & Flooring Co. , 2 F.Supp. 3 (D. N.J. Bank of Bank of Corpus Christi , 697 S.W.2d 1933), affirmed sub nom. Chase Nat. Bank of 753 (Texas App. 1985). City of New York v. Gannon , 66 F2d 937 (3rd 6. Buddy Gregg Motor Home Inc. v. Mo- Cir. 1933). But see: Vornado, Inc. v. Corning tor Vehicle Board , 179 S.W.3d 589 (Tex. Glass Works , 255 F.Supp. 216 (D. N.J. 1966). App. – Austin 2005). 4. McLaughlin v. Rainville Co. , 316 7. Frisch v. Victor Industries, Inc. , 753 N.E.2d 819 (Ill., 1974). P.2d 1000 (Wash. App. 1988).

Validity of Corporate Acts 19 poration is allowed to defend it- A North Dakota court held that self. 8 an unregistered foreign corporation The New York appellate divi- could not only defend itself, but sion has held that an unqualified was entitled to attorneys fees and corporate defendant may maintain costs when the underlying action a third-party action for indemnifi- was found to be frivolous. 12 cation or contribution. The court stated that in the absence of an express statutory provision to the Validity of Corporate contrary, a corporation forced to Acts defend itself in a state court may not only defend the suit but also Section 15.02(e) of the Revised litigate any question arising out of Model Act states “the failure of a the transaction that was the basis of foreign corporation to obtain a cer- the plaintiff’s suit. 9 The New York tificate of authority does not impair appellate division also held that a the validity of its corporate acts”. nonqualified corporation being The following states have adopted sued in a plenary action could that, or a similar provision: Arizo- move to compel arbitration be- na, Colorado, Georgia, Hawaii, cause by so moving the corpora- Indiana, Iowa, Kentucky, Missis- tion was exercising its right to de- sippi, Missouri, Montana, Nebras- fend against the action. 10 ka, New Hampshire, North The Fifth Circuit Court of Ap- Carolina, Oregon, South Carolina, peals has stated that the failure to South Dakota, Tennessee, Utah, qualify does not prevent a defend- Vermont, Virginia, West Virginia, ant from requesting a stay of a Wisconsin and Wyoming. lawsuit, because such request is in The statutes of Maryland and the nature of a defensive maneu- Ohio provide that the failure to ver. 11 qualify does not impair the validity of a foreign corporation’s con- 8. New England Rare Coin Galleries Inc. tracts. v. Robertson , 506 So.2d 1161 (Fla. App. The statutes of Alabama, Alas- 1987). 9. Reese v. Harper Surface Finishing Sys- ka, Delaware, District of Columbia, tems , 517 N.Y.S.2d 522 (App. Div. 1987); See Florida, Idaho, Illinois, Kansas, also, Williams Erectors of Suffolk County v. Louisiana, Maine, Massachusetts, Mulach Steel Corp. , 684 F.Supp. 357 (E.D.N.Y. 1988). Michigan, Minnesota, Nevada, 10. Ruti v. Knapp , 598 N.Y.S.2d 50 (A.D. 2 Dept. 1993). 11. Ommani v. Doctor’s Associates, Inc. , 12. Jensen v. Zuern , 523 N.W.2d 388 789 F.2d 298 (5th Cir. 1986). (N.D. 1994).

20 Validity of Corporate Acts

New Jersey, New Mexico, New terclaims. Vermont’s statute pro- York, North Dakota, Oklahoma, vides that “A foreign corporation Pennsylvania, Rhode Island and transacting business in this state Washington provide that the without a certificate of authority failure to qualify does not impair may not maintain. . .a counter- the validity of the foreign corpo- claim . . . until it obtains a certifi- ration’s contracts or corporate cate of authority.” 1 However, in acts. the other states this question has A federal court in Mississippi been left for judicial determination. stated that the failure of a foreign Generally, courts examine this corporation to obtain a certificate question on a case-by-case basis. If of authority before lending money a counterclaim is equivalent to a to homeowners would not render defense to the action, and arises the loan invalid pursuant to the out of the same transaction as the provision of the corporation law main claim, a court will allow it. 2 stating that the failure to qualify does not impair the validity of a 1. Vermont Statutes Annotated, Title 11A, foreign corporation’s acts. 1 Sec. 15.02. 2. Alaska Mines and Minerals, Inc. v. In a suit against foreign corpora- Alaska Ind. Bod. , 354 P.2d 376 (Alaska 1960); tions based on disputed trade and Stauffer Chemical Co. v. Keysor-Century service marks, the court held that Corp. , 541 F.Supp. 239 (D. Del. 1982); Clay- the fact that the corporations were ton Carpet Mills, Inc. v. Martin Processing, Inc. , 563 F.Supp. 288 (N.D. Ga. 1983); Burley doing business without authority Newspapers, Inc. v. Mist Publishing Co. , 90 did not abrogate their common law Idaho 515, 414 P.2d 460 (1966); Cox v. Doc- rights to the marks. 2 tor’s Associates, Inc. , 613 N.E.2d 1306 (Ill. App. 5 Dist. 1993); Finch v. Hughes Aircraft Co. , 57 Md. App. 190, 469 A.2d 867 (1984); Johnson & Anderson, Inc. v. Barlow Assoc. Counterclaims Mgt. Consultants, Ltd. , 528 F.Supp. 417 (E.D. Mich. 1981); Flakne v. Metropolitan Life Ins. Although the statutes of nearly Co. , 270 N.W. 566 (Minn., 1936); Smith v. every state permit unqualified cor- Kincade , 232 F.2d 306 (5th Cir. [Miss.] 1956); porations to defend themselves in Doll v. Major Muffler Centers, Inc. , 687 P.2d 48 (Mont. 1984); American Ink Co. v. Riegel state courts, the statutes are gen- Sack Co. , 79 Misc. 421, 140 N.Y.S. 107 (Sup. erally silent as to whether the Ct., App. Term, 1st Dept. 1913); James corporations may also bring coun- Howden & Co. of America v. American C. & E. Corp. , 194 App. Div. 164, 185 N.Y.S. 159 (1st Dept. 1920), aff’d (mem.) 231 N.Y. 627, 1. Carson v. McNeal, 375 F.Supp.2d 509 132 N.E. 915 (1921); J.R. Alsing Co. v. New (S.D. Miss 2005). England Quartz & Spar Co. , 66 App. Div. 2. Southern Christian Leadership Confer- 473, 73 N.Y.S. 347 (1st Dept. 1901), aff’d ence v. Shannon, 613 S.E.2d596 (Va. (mem.) 174 N.Y. 536, 66 N.E. 1110 (1903); E 2005). & S Industries Inc. v. Crown Textiles, Inc. ,

Counterclaims 21

If, however, the counterclaim is plaintiff. 5 A Texas court relied on entirely independent of the main the New York cases, noting the claim, so that bringing it amounts similarity between the Texas and to maintaining a separate action, a New York statutory provisions. 6 court will usually refuse to allow In contrast, in another New it. 3 York case, 7 a New Jersey corpora- New York has long followed tion sued its tenant in New York. this general rule. In Jones v. Wells Defendant interposed a counter- Fargo Co. Express, 4 the New York claim and then moved to dismiss Supreme Court held that when a because plaintiff was doing busi- defendant is “brought into court ness in New York without authori- and thus made to defend, it should ty. The trial court granted be allowed. . .not only to defend, dismissal, but then also granted the but also to litigate any question New Jersey corporation leave to arising out of the transaction that assert its original causes of action has been made the basis of the as counterclaims to the tenant’s plaintiff’s complaint.” In a later severed counterclaim, which had case, a landlord suing an unquali- succeeded to the status of a com- fied foreign corporation discontin- plaint when the original complaint ued his suit. The court nevertheless was dismissed. On appeal, in dicta, allowed the defendant to maintain the court observed that the New its counterclaim which arose out of Jersey corporation should not have the landlord-tenant relationship, been allowed to counterclaim be- holding that the discontinuance did cause a foreign corporation should not change its status to that of not be allowed to circumvent the

342 S.E.2d 397 (N.C. App. 1986); Aberle 5. Bellak v. Bon Specialty Co., Inc. , 80 Hosiery Co. v. American Arbitration Ass’n. , N.Y.S.2d 248 (Sup. Ct. App. Term, 1st Dept. 337 F.Supp. 90 (E.D. Pa., 1972); Arcata 1948); see also Williams Erectors of Suffolk Graphics Co. v. Hiedelberg Harris, Inc. , 874 County v. Mulach Steel Corp. , 684 F.Supp. S.W.2d 15 (Tenn. App. 1993). Contra, see: 357 (E.D.N.Y. 1988); James Howden & Co. Hightower Petroleum Corp. v. Story , 236 of Amer. v. American Condenser and S.W.2d 679 (Tex. Civ. App. 1951); Kutka v. Enginieering Corp. , 194 App. Div. 164, 185 Temporaries, Inc. , 568 F.Supp. 1527 (S.D. N.Y.S. 159 (1st Dept. 1920) aff’d (mem.) 231 Tex. 1983). N.Y. 627, 132 N.E. 915 (1921). 3. Levitt Multihousing Corp. v. District Ct. 6. State v. Cook United, Inc. , 463 S.W.2d of El Paso County , 534 P.2d 1207 (Colo. 509 (Tex. Civ. App. 1971). 1975). 7. Tri-Terminal Corp. v. CITC Industries, 4. 83 Misc. 508, 145 N.Y.S. 601 (Sup. Ct. Inc. , 78 A.D.2d 609, 432 N.Y.S.2d 184 (1st 1914). Dept. 1980).

22 Counterclaims

New York qualification statute resulting in an injustice to it which because of the fortuitous circum- the court is powerless to avoid.” 10 stance that a defendant chose to Federal courts in Mississippi assert a counterclaim. have permitted unqualified foreign The Minnesota Supreme Court corporations doing business in the has held “. . .a statute such as ours state to bring compulsory counter- does not prevent a foreign corpora- claims and third-party complaints tion which has not complied with because such claims were defen- the statute from defending a suit sive in nature. 11 And a Montana brought against it, interposing and court allowed an unlicensed for- recovering upon a counterclaim eign corporation to bring a coun- arising out of the transaction in terclaim, stating that “The counter- suit, or prosecuting an appeal or counterclaim is just one aspect of writ of error from a judgment re- the defense which they are entitled covered against it.” 8 to raise and can therefore be Some courts have not allowed brought.” 12 unqualified foreign corporations to interpose counterclaims in reliance on a strict construction of statutory language. 9 The Supreme Court of Suits By Assignees and Utah refused to allow a defendant Successors to interpose a counterclaim not Generally, if a state denies the arising out of the same transaction use of its courts to unqualified for- as the plaintiff’s claim, stating that eign corporations doing business the language of the qualification within its borders, it will also deny statute was “so broad and so rigid the use of its courts to the corpora- as to close against this appellant tions’ assignees and successors. every possible avenue of escape, Section 124 of the Model Busi- ness Corporation Act provides:

8. Flakne v. Metropolitan Life Ins. Co. , 270 N. 566 (Minn. 1936). 10. Dunn v. Utah Serum Co. , 65 Utah 527, 9. Roberts v. Cat-Nak Mfg. Co. , 216 Ill. 238 P. 245 (1925). App. 245 (1919); Gibraltar Const. & E. v. 11. Environmental Coatings, Inc. v. Balti- State National Bank of Bethesda , 265 Md. more Paint and Chemical Co. , 617 F.2d 110 530, 290 A.2d 79 (Md. App. 1972); Luna v. (5th Cir. [Miss.] 1980); Park v. Cannco Con- Iowa-Mo Enterprises, Inc. , 597 S.W.2d (Mo. tractors, Inc. , 446 F.Supp. 24 (N.D. Miss. App. 1980); Bozzuto’s Inc. v. Kantrowitz and 1977). Sons, Inc. , 283 A.2d 907 (N.J. Super., App. 12. Wortman v. Griff , 651 P.2d 998, 1000 Div. 1971). (Mont. 1982).

Suits By Assignees and Successors 23

“Nor shall any action, suit or pro- Kentucky, Maine, Mississippi, ceeding be maintained in any court Missouri, Montana, Nebraska, of this State by any successor or New Hampshire, Oregon, South assignee of such [unqualified] cor- Carolina, South Dakota, Tennes- poration on any right, claim or de- see, Utah, Virginia, Washington, mand arising out of the transaction West Virginia, Wisconsin and of business by such corporation in Wyoming have adopted provisions this State, until a certificate of au- based on, or with a similar effect to thority shall have been obtained by Sec. 15.02. such corporation which has ac- Georgia’s law provides that suc- quired all or substantially all of its cessor corporations and assignees assets.” may not maintain a proceeding in The statutory provisions in any state court “unless before Alaska, District of Columbia, Illi- commencement of the proceeding, nois, Minnesota, 1 New Mexico, the foreign corporation or its suc- North Carolina, and Rhode Island cessor obtains a certificate of au- are substantially the same as the thority.” 2 Model Act. A Georgia court held that an as- Sec. 15.02 of the Revised Model signment by an unqualified foreign Business Corporation Act pro- corporation to a resident individual vides: “The successor to a foreign did not avoid the requirement that corporation that transacted busi- the corporation obtain a certificate ness in this state without a certifi- of authority before suit was filed, cate of authority and the assignee even though the statute by its terms of a cause of action arising out of applied only to corporate assign- that business may not maintain a ees. The court noted that an as- proceeding based on that cause of signee can acquire no greater rights action in any court in this state than his assignor had, and is sub- until the foreign corporation or its ject to any defenses existing be- successor obtains a certificate of tween the assignor and the debtor. 3 authority.” In a North Carolina case, a for- Arizona, Arkansas, Connecticut, eign corporation that was qualified Florida, Hawaii, Indiana, Iowa, in North Carolina could not enforce a judgment based on a lease agreement where the lease agree- 1. The Minnesota statute adds that “If such assignee shall be a purchaser without actual notice of such violation by the corporation, 2. Code of Georgia Annotated, Sec. 14-2- recovery may be had to an amount not greater 1502. than the purchase price.” (Minnesota Statutes 3. Healey v. Morgan , 219 S.E.2d 628 (Ga. Annotated, Sec. 303.20) Ct. App. 1975).

24 Suits By Assignees and Successors

ment was assigned to it by a for- requirement could not be recon- eign corporation that was not qual- ciled with the mandates of the ified in North Carolina. 4 remedial statute.6 In an Iowa case, 5 it was held that Vermont’s statute provides that an assignee of an out-of-state successors and assignees “may not judgment against an Iowa corpora- maintain a proceeding or raise a tion could maintain a suit on the counterclaim, crossclaim or af- judgment in Iowa even though the firmative defense” until a certifi- assignor was an unqualified for- cate of authority has been obtained, eign corporation allegedly doing while in New York, the prohibition business in Iowa. The Iowa Su- applies to “any successor in inter- preme Court found that the suit est of such [unqualified] foreign was not on a “right, claim or de- corporation.” 7 mand” arising out of the foreign Maryland’s statute provides that corporation’s transaction of intra- a foreign corporation may not state business, but was merely a maintain a suit unless “the foreign suit on a judgment of a sister state. corporation or a foreign corpora- As such, it was entitled to full faith tion’s successor to it has complied and credit, and could not be barred. with the [qualification] require- In a Connecticut case a foreign ments. . .” 8 Under Colorado law, corporation brought a breach of no foreign corporation “nor anyone contract action. Instead of obtain- on its behalf” may maintain pro- ing a certificate of authority it ceeding until qualifying. 9 assigned its contractual rights to a In Delaware, Kansas and Okla- newly formed Connecticut corpo- homa the statutes specifically ex- ration. The trial court denied the clude from the prohibition “any defendant’s motion to compel the successor in interest of such for- foreign corporation to qualify. eign corporation.” 10 However, the appellate court reversed, holding that the trial 6. Trevek Enterprises, Inc. v. Victory court’s apparent assumption that Contracting Corporation, 945 A.2d 1056 the assignee’s status as a Connect- (Conn. App. 2008). 7. Vermont Statutes Annotated, Title 11A, icut corporation exempted it from Sec. 15.02; New York Business Corporation compliance with the qualification Law, Sec. 1312. 8. Annotated Code of Maryland, Corpora- tions and Associations, Sec. 7-301. 4. Leasecomm Corp. v. Renaissance Auto 9. Colorado Revised Statutes, Sec. 7-90- Care, Inc. , 468 S.E.2d 562 (N.C. App. 1996). 802. 5. The American Title Insurance Co. v. 10. Delaware Code, Title 8, Sec. 383; Kan- Stoller Fisheries, Inc. , 227 N.W.2d 374 (Iowa sas Statutes Annotated, Sec. 17-7307(a); Okla- 1975). homa Statutes Annotated, Title 18, Sec. 1137.

Suits By Assignees and Successors 25

In New Jersey, it is provided that the court, and suit by the trustee the statutory prohibition applies to was not barred. 14 “(a) any successor in interest of Many other cases of interest in such [unqualified] foreign corpora- this area have been decided. 15 tion, except any receiver, trustee in bankruptcy or other representative of creditors of such corporation; 14. Okin v. A.D. Gosman, Inc. , 174 A.2d and (b) an assignee of the foreign 650 (N.J. Super. Ct., Law Div. 1961). 15. Casa Investments Co. v. Boles, (Ala corporation, except an assignee for Civ. App. 2005); Leasing Service Corporation value who accepts an assignment v. Hobbs Equipment Company , 707 F.Supp. without knowledge that the foreign 1276 (N.D. Ala. 1989); Dews v. Halliburton corporation should have but has Industries, Inc. , 708 S.W.2d 67 (Ark. 1986); B&P., Inc. v. Norment , 411 S.W.2d 506 (Ark. not obtained a certificate of author- 1967); Widmer v. J.I. Case Credit Corpora- ity in this State.” 11 In Michigan a tion , 419 S.W.2d 617 (Ark. 1967); Thorner v. substantially similar provision has Selective Cam Transmission Co. , 180 12 Cal.App.2d 89, 4 Cal.Rptr. 409 (1960); Poly- been adopted. Pak Corp. of America v. Barrett , 468 A.2d Texas law provides that a for- 1260 (Conn. 1983); Carrier411 Services, eign corporation’s legal representa- Inc. v. Insight Technology, Inc., 744 S.E.2d 356 (Ga. App. 2013); Mfrs. Nat. tive may not maintain an action, Bank of Detroit v. Tri-State , 410 S.E.2d 808 suit or proceeding. However, it (Ga. App. 1991); Credit Industrial Company also provides that this prohibition v. Happel, Inc. , 106 N.W.2d 667 (Iowa 1960); “does not affect the rights of an State ex. rel. Carlund Corp. v. Mauer , 550 S.W.2d 357 (Mo.App.W.D. 1993); Flinn v. assignee as the holder in due Gillen, 10 S.W.2d 923 (Mo. 1928); Cadle Co. course of a negotiable instrument; v. Proulx, 725 A.2d 670 (N.H. 1999); Ensign or the bona fide purchaser for val- v. Christiansen , 109 A. 857 (N.H. 1920); Franklin Enterprises Corporation v. Moore , ue of a warehouse receipt, security 34 Misc.2d 594, 226 N.Y.S.2d 527 (Sup. Ct. or other instrument made negotia- 1962); New York Factors, Inc. v. Seid , 28 ble by law.” 13 Misc.2d 753, 213 N.Y.S.2d 294 (Sup.Ct. 1961); Crites v. Associated Frozen Food A trustee in bankruptcy of an Packers, Inc. , 227 P.2d 821 (Ore. 1951); unqualified foreign corporation has Information System Services v. Platt, 920 A.2d been held not to be an assignee of 846 (Pa. Super. 2006); A Fast Photo Express, the bankrupt but a representative of Inc. v. First Nat. Bank of Chicago , 630 S.E.2d 285 (S.C. App. 2006); Washington-Dean Co., Inc. v. Crow Bros. , 1 S.W.2d 914 (Tex. Civ. App. 1928); Thorp Finance Corporation v. Wright , 399 P.2d 206 (Utah 1965); Chase 11. Revised Statutes of New Jersey, Sec. Commercial Corp. v. Barton , 571 A.2d 682 14A:13-11. (Vt. 1990); Zimmerman v. Kyte , 765 P.2d 905 12. Michigan Compiled Laws Annotated, (Wash.App. 1988); Association Collectors, Sec. 450.2051. Inc. v. Hardman , 98 P.2d 318 (Wash. 1940); 13. Texas Business Organizations Code, Technical Tape Corp. v. Slusher , 358 P.2d 304 Sec. 9.051. (Wash. 1961).

26 Personal Liability Personal Liability or advertise to transact business in this Commonwealth as a corpora- Most states impose monetary tion unless the alleged corporation penalties on foreign corporations is. . .a foreign corporation author- that do business without qualify- ized to transact business in this ing. In a number of states, howev- Commonwealth.” 3 Fines are also er, liability is not limited to the imposed on each officer, director corporate entity, but is imposed on and employee who transacts busi- individuals acting on behalf of the ness for an unqualified corporation corporation. in Virginia, knowing that qualifica- California, Delaware, Louisiana, tion was required. Maryland, North Dakota, Ohio, Delaware, Nevada and Oklaho- Oklahoma, Utah, Virginia and ma provide for the liability of Washington have statutory provi- agents wrongfully doing business. 4 sions imposing fines on individuals It is by no means clear that the acting for noncomplying foreign term “agent” is sufficient to estab- corporations. lish the liability of all those who Upon whom the sanctions fall act for a corporation. In some varies from state to state. Califor- states, a distinction has grown up nia penalizes any person who does between officers, who manage the unauthorized intrastate business in corporate affairs, and agents. 5 California “on behalf of a foreign 1 There is also law to the effect that corporation.” This provision a director may be considered a would seem to prescribe penalties special corporate individual pos- regardless of the position held by sessing certain characteristics of the individual. Utah penalizes both officers and agents. 6 “[e]ach officer. . . who authorizes, In Washington, “every person directs, or participates in the trans- representing or pretending to action of business. . . and each represent such corporation as an agent of [an authorized] foreign officer, agent or employee there- corporation who transacts business of. . .” shall be guilty of a gross in this state on behalf of a foreign corporation. . .” 2 In Virginia it is a 3. Code of Virginia, 1950, Secs. 13.1-613 misdemeanor “for any person to and 13.1-758. transact business in this Common- 4. Delaware Code Annotated, Title 8, Sec. wealth as a corporation or to offer 378; Nevada Revised Statutes, Sec. 80.210; Oklahoma Statutes Annotated, Title 18, Sec. 1134. 1. California Corporations Code, Sec. 5. 2 Fletcher Cyclopedia Corporations 10, 2259. Sec. 266, (perm. ed.). 2. Utah Code, Sec. 16-10a-1502. 6. Id. , n.2.

Personal Liability 27 misdemeanor. 7 Louisiana authoriz- to $500 “for each offense.” 14 es penalties against “each officer Maryland and Utah impose fines of and director.” 8 Ohio imposes pen- up to $1,000. 15 Offenders in Vir- alties against officers. 9 In Mary- ginia may be subject to fines rang- land, a fine may be imposed on ing from $500 to $5,000. 16 “each officer. . .and each agent.” 10 In the enforcement of these pen- In North Dakota, “each director alties, jurisdictional problems may and each officer or agent who au- arise. In a case decided before the thorizes, directs, or participates in enactment of the 1989 Kentucky the transaction of business” on corporation law, suit was instituted behalf of an unqualified corpora- against the corporation and officers tion is subject to a civil penalty. 11 in the Franklin County Circuit The penalties these individuals Court for doing business without a may incur can be quite severe. license. The jurisdictional basis of Louisiana makes provision for a the action was challenged, since fine of $25 to $500 and, in the neither the corporation nor its event of failure to pay, the offender officers were active in Franklin may be imprisoned from three days County. The Court of Appeals of to four months. 12 Kentucky held that exclusive juris- The monetary penalties can also diction rested in Bell County, the be harsh. California imposes a only county where the corporation fine of from $50 to $600 but and its officers operated their busi- the individual must have guilty ness. 17 knowledge. 13 In Delaware and Ok- When a corporation is doing lahoma, the fine ranges from $100 business in more than one county of a state, are the individuals acting on behalf of that corporation subject to separate actions and

7. Revised Code of Washington, Sec. separate penalties with respect to 9.24.040. 8. Louisiana Statutes Annotated, Sec. 12:315(B). 14. Delaware Code Annotated, Title 8, 9. Page’s Ohio Revised Code Annotated, Sec. 378; Oklahoma Statutes Annotated, Title Secs. 1703.30 and 1703.99. 18, Sec. 1134. 10. Annotated Code of Maryland, Cor- 15. Annotated Code of Maryland, Corpo- porations and Associations, Sec. 7-302. rations and Associations, Sec. 7-302; Utah 11. North Dakota Century Code, Sec. 10- Code Annotated, 1953, Sec. 16-10a-1502. 19.1-142. 16. Code of Virginia, 1950, Sec. 13.1-613 12. Louisiana Statutes Annotated, Sec. and 13.1-758(D). 12:315(B). 17. Kentucky Strict Creek Coal Co. et al. v. 13. California Corporations Code, Sec. Commonwealth , 200 S.W.2d 470 (Ky. App. 2259. 1947).

28 Personal Liability

each county in which the corpora- of unqualified foreign corporations tion did business? In an Arkansas as well. 20 Supreme Court case, decided prior A Florida court has held that “in to the enactment of the Arkansas the absence of statutory sanction, Business Corporation Act of 1987, the officers and shareholders of a the court held that where the cor- foreign corporation cannot be held poration had qualified after the first personally liable for corporate penalty was imposed, it was not debts incurred within the state by subject to the statutory penalty reason of the failure to qualify to with respect to the unauthorized do business in Florida.” 21 Similar- business in which it had engaged ly, a Missouri court held that “The in other counties. 18 The case in- sole fact that a foreign corporation volved a corporation’s liability, not has not complied with Missouri that of individuals. Nevertheless, law [by qualifying to do business] the rationale of the decision would is not sufficient of itself to author- seem to apply at least as forcefully ize judgment against the stock- to individuals acting for the corpo- holders of the corporation under ration, and they would probably contracts executed in the name of not be subject to greater liability the corporation.” 22 than the corporation. Section 146 of the Model Busi- ness Corporation Act provides: Monetary Penalties “All persons who assume to act as a corporation without authority to In addition to closing their do so shall be jointly and severally courts to unqualified foreign cor- liable for all debts and liabilities porations doing intrastate business, incurred or arising as a result most states subject such corpora- thereof.” While the aim of this sections to fines. tion is “to negate the possibility of Several states have statutory 19 a de facto corporation” it has provisions based on Section 124 of been construed to apply to agents the Model Business Corporation Act which states: 18. Alexander Film Co. et al. v. State , for use of Phillips County, 201 Ark. 1052, 147 20. Kessler Distributing Co. v. Neill , 317 S.W.2d 1011 (1941). N.W.2d 519, 522 (Iowa App. 1982). 19. Model Bus. Corp. Act Ann. 2d §146 21. Mysels v. Barry , 332 So.2d 38 (Fla. Par. 2. See National Ass’n of Credit Manage- App. 1976), citing A. Tasker, Inc. v. Amsellem , ment v. Burke , 645 P.2d 1323 (Colo. App. 315 A.2d 178 (D.C. App. 1974). 1982), and Cargill, Inc. v. American Pork 22. Service Drywall Supply, Inc. v. Sharp , Producers, Inc. , 415 F.Supp. 876 (D.S.D. 842 S.W.2d 564 (Mo.App. W.D. 1992). 1976).

Monetary Penalties 29

“A foreign corporation which except that these states impose lia- transacts business in this State bility based on fees only, rather without a certificate of authority than on fees and franchise taxes. shall be liable to this State, for the Alaska, Arizona, Colorado, years or parts thereof during which Connecticut, it transacted business in this State Florida, Illinois, Louisiana, New without a certificate of authority, in Mexico, North Carolina, North an amount equal to all fees and Dakota, Ohio, Vermont, Wisconsin franchise taxes which would have and Wyoming use the Model Act been imposed by this Act upon approach but also impose an addi- such corporation had it duly ap- tional monetary penalty. plied for and received a certificate The fines for failure to qualify of authority to transact business in vary substantially from state to this State as required by this Act state. Fines may be based on the and thereafter filed all reports re- number of years, months, or even quired by this Act, plus all penal- days, during which the foreign ties imposed by this Act for failure corporation transacted business in to pay such fees and franchise tax- the state without a certificate of es. The Attorney General shall authority. Alaska imposes a fine of bring proceedings to recover all up to $10,000 per year; Califor- amounts due this State under the nia’s equals $20 per day and the provisions of this Section.” corporation is guilty of a misde- This provision, or a similar one, meanor, which is punishable by a has been adopted by Alaska, Con- fine of not less than $500 nor more necticut, District of Columbia, than $1,000; Florida, $500 to Florida, Illinois, Louisiana, New $1,000 per year; Illinois, $200 plus Hampshire, New Mexico, North $5 per month or fraction thereof, or Carolina, Ohio, Oklahoma, Rhode 10% of the filing fees, license fees Island, Texas, West Virginia, Wis- and franchise taxes that would consin and Wyoming. The provi- have been due, whichever is great- sion of Tennessee is similar to the er; Massachusetts, up to $500 per Model Act section, except that it year; Michigan, $100 to $1,000 per requires payment of three times the month, but not over $10,000; Min- required fees, penalties and taxes, nesota, to $1,000 plus $100 per plus interest. month; Montana, $5 per day, up to The Model Act provision has al- $1,000; New Jersey, $200 up to so been adopted by Arizona, Colo- $1,000 per year for not more than rado, Hawaii, North Dakota, five years; North Dakota, not ex- Oregon, Vermont and Washington ceeding $5,000; and Vermont, $50

30 Monetary Penalties per day, but not over $1,000 per of all fees and charges that would year. have been imposed or $5,000, In some states, the amount of whichever is less) and Wyoming the fine is based on the number of ($5,000). transactions of the unqualified for- In a case that arose in Maine 1 eign corporation in the state, or on the defendant asserted that the the number of offenses. (Delaware, plaintiff foreign corporation had $200 to $500 per offense; Louisi- not paid the statutory penalties for ana, not more than $1,000 per vio- having done business in the state lation; New Mexico, $200 for each without authority. It therefore offense; and Oklahoma, $200 to claimed that plaintiff could not $500 per offense.) maintain the action, even though it Other jurisdictions that impose had qualified in Maine after bring- fines for failure to qualify include ing the suit. The court pointed out Arizona (up to $1,000), Arkansas that the state had not assessed any (not to exceed $5,000 per year), penalty against plaintiff, and stated Colorado (not to exceed $100 per that the statute plainly contem- year plus a civil penalty not to ex- plates a preliminary determination ceed $5,000), Connecticut ($300 that the foreign corporation’s activ- per month), Georgia ($500), Indi- ities in the state required qualifica- ana (not exceeding $10,000), Iowa tion. Thus, the fact that no (not exceeding $1,000 per year), penalties had been assessed meant Kentucky ($2 per day), Maine that none were due. To hold oth- ($500 per year or portion thereof), erwise would be to presume that Maryland ($200), Mississippi ($10 the Attorney General had failed to per day up to a maximum of $1,000 do his statutory duty to pursue re- per year), Missouri (not less than covery of amounts due the state. $1,000), Nebraska ($500 per day, Further, the court expressed doubt not to exceed $10,000 per year), that the legislature intended that Nevada (not less than $1,000 nor the adversary of a foreign corpora- more than $10,000), North Caroli- tion be permitted to demand pay- na ($10 per day up to a maximum ment of penalties never demanded of $1,000 per year), Ohio ($250 to by the state. The court denied the $10,000), South Carolina ($10 per motion to dismiss, but noted that if day up to a maximum of $1,000 per penalties were later assessed and year), South Dakota ($100 per day, not to exceed $1,000 per year),Utah 1. Jerold Panas & Partners, Inc. v. Port- ($100 per day up to a maximum of land Society of Art, 535 F.Supp. 650 (D. $5,000 per year), Wisconsin (50% Maine 1982).

Statutory Citations 31 not paid, and if plaintiff’s authority Florida . Sec. 607.1502, Florida were therefore to be revoked, the Statutes Annotated. action could then be dismissed. Georgia . Secs. 14-2-122 and

14-2-1502, Code of Georgia An- Statutory Citations notated. The following is a list of the Hawaii . Sec. 414-432, Hawaii statutory provisions discussed in Revised Statutes. the preceding sections, relating to Idaho . Sec. 30-21-502, Idaho the penalties imposed upon un- Code. qualified corporations which are doing business in the state: Illinois . Ch. 805, Sec. 5/13.70, Illinois Compiled Statutes Anno- Alabama . Sec. 10A-1-7.21, tated. Code of Alabama. Indiana . Sec. 23-1-49-2, Burns Alaska . Secs. 10.06.710 and Indiana Statutes Annotated. 10.06.713, Alaska Statutes. Iowa . Sec. 490.1502, Iowa Arizona . Sec. 10-1502, Arizona Code Annotated. Revised Statutes. Kansas . Secs. 17-7307, Kansas Arkansas . Sec. 4-27-1502, Ar- Statutes Annotated. kansas Code of 1987 Annotated. Kentucky . Sec. 14A.9-020. California . Secs. 2203, 2258 Louisiana . Secs. 12:314, and 2259, California Corporations 12:314.1 and 12:315, Louisiana Code. Statutes Annotated. Colorado . Sec. 7-90-802, Colo- Maine . Title 13-C, Sec. 1502, rado Revised Statutes. Maine Revised Statutes An- Connecticut . Sec. 33-921, Con- notated. necticut General Statutes Annotat- Maryland . Secs. 7-301, 7-302 ed. and 7-305, Annotated Code of Delaware. Title 8, Secs. 378, Maryland, Corporations and Asso- 383 and 384, Delaware Code. ciations. District of Columbia . Secs. 29- Massachusetts . Ch. 156D, Sec. 105.02, 29-101.06, District of Co- 15.02, Massachusetts General lumbia Code. Laws Annotated.

32 Statutory Citations

Michigan . Secs. 450.2051 and Ohio . Secs. 1703.28, 1703.29, 450.2055, Michigan Compiled 1703.30 and 1703.99, Page’s Ohio Laws Annotated. Revised Code Annotated. Minnesota . Sec. 303.20, Min- Oklahoma . Title 18, Secs. 1134 nesota Statutes Annotated. and 1137, Oklahoma Statutes An- notated. Mississippi . Sec. 79-4-15.02, Mississippi Code 1972 Annotated. Oregon . Sec. 60.704, Oregon Revised Statutes. Missouri . Sec. 351.574, Mis- souri Revised Statutes Annotated. Pennsylvania . Title 15, Sec. Montana . Sec. 35-1-1027, 411, Purdon’s Pennsylvania Con- Montana Code Annotated. solidated Statutes Annotated. Nebraska . Sec. 21-20,169, Re- Rhode Island . Sec. 7-1.2-1418, vised Statutes of Nebraska (effec- General Laws of Rhode Island. tive until January 1, 2017); Sec. South Carolina . Sec. 33-15- 21-2,204, Revised Statutes of Ne- 102, Code of Laws of South Caro- braska (effective January 1, 2017). lina. Nevada . Secs. 80.055, Nevada South Dakota . Secs. 47-1A- Revised Statutes. 1502, 47-1A-1502.1 and 47-1A- New Hampshire . Sec. 293- 1502.2, South Dakota Codified A:15.02, New Hampshire Revised Laws. Statutes Annotated. Tennessee . Sec. 48-25-102, New Jersey . Sec. 14A:13-11, Tennessee Code Annotated. New Jersey Statutes Annotated. Texas . Secs. 9.051 and 9.052, New Mexico . Sec. 53-17-20, Texas Business Organizations New Mexico Statutes Annotated. Code. New York . Sec. 1312, Business Utah . Sec. 16-10a-1502, Utah Corporation Law. Code Annotated. North Carolina . Sec. 55-15-02, Vermont . Title 11A, Sec. 15.02, General Statutes of North Carolina. Vermont Statutes Annotated. North Dakota . Sec. 10-19.1- Virginia . Secs. 13.1-613 and 142, North Dakota Century Code. 13.1-758, Code of Virginia.

Statutory Citations 33

Washington . Secs. 9.24.040 Wisconsin . Sec. 180.1502, Wis- and 23.50.370, Revised Code of consin Statutes Annotated. Washington Annotated. Wyoming . Sec. 17-16-1502, West Virginia . Sec. 31D-15- Wyoming Statutes Annotated. 1502, West Virginia Code Anno- tated.

STATUTORY “DOING BUSINESS” DEFINITIONS APPLICABLE TO ORDINARY BUSINESS CORPORATIONS

Every state requires foreign cor- quoted below, of Alaska, Georgia, porations doing business in the Louisiana, Maryland, Minnesota, state to qualify. Every state has North Carolina, Pennsylvania, enacted a statute dealing with the Texas, and Washington. question of what activities will be “Without excluding other activi- considered doing intrastate busi- ties which may not constitute ness. These statutory provisions transacting business in this State, a usually include a list of specific foreign corporation shall not be activities which, separately or to- considered to be transacting busi- gether, will not require qualifica- ness in this State, for the purposes tion. In a few instances, there are of this Act, by reason of carrying positive statements to the ef- on in this State any one or more of fect that certain activities will re- the following activities: quire qualification. “(a) Maintaining or defending These statutory definitions, as any action or suit or any adminis- well as the definitions contained in trative or arbitration proceeding, or the Model Business Corporation effecting the settlement thereof or Act and the Revised Model Busi- the settlement of claims or dis- ness Corporation Act and the rele- putes. vant provisions of the Provinces “(b) Holding meetings of its di- and Territories of Canada, Puerto rectors or shareholders or carrying Rico and the Virgin Islands, are set on other activities concerning its forth below. internal affairs. “(c) Maintaining bank accounts. “(d) Maintaining offices or agencies for the transfer, exchange and registration of its securities, or The Model Act Provision appointing and maintaining trus- The following provision has tees or depositaries with relation to been adopted in California, New its securities. Mexico, Rhode Island and South “(e) Effecting sales through in- Dakota. A substantial portion of dependent contractors. the Model Act provision has also “(f) Soliciting or procuring or- been incorporated into the statutes, ders, whether by mail or through

35 36 The Model Act Provision

employees or agents or otherwise, South Carolina and Wyoming. A where such orders require ac- substantial portion of the Revised ceptance without this State before Model Act has also been incorpo- becoming binding contracts. rated into the statutes of Arizona, “(g) Creating evidences of debt, Colorado, Florida, Illinois, Maine, mortgages or liens on real or per- Missouri, Montana, Nevada, North sonal property. 1 Dakota, Utah, Vermont, Virginia, “(h) Securing or collecting debts West Virginia and Wisconsin. or enforcing any rights in property The Revised Model Act pro- securing the same. vides: “(i) Transacting any business in “(b) the following activities, interstate commerce. among others, do not constitute “(j) Conducting an isolated transacting business within the transaction completed within a meaning of subsection (a): period of thirty days and not in the “(1) maintaining, defending, or course of a number of repeated settling any proceeding; transactions of like nature.” (Mod- “(2) holding meetings of the el Business Corporation Act, Sec. board of directors or shareholders 106) or carrying on other activities concerning internal corporate affairs; The Revised Model Act “(3) maintaining bank accounts; Provision “(4) maintaining offices or agencies for the transfer, exchange, The Model Act was revised in and registration of the corpora- 1984. The Revised Model Act’s tion’s own securities or maintain- “doing business” definition is ing trustees or depositaries with slightly different from that of the respect to those securities; earlier Model Act. The Revised “(5) selling through independent Model Act definition has been contractors; adopted by Arkansas, Connecticut, “(6) soliciting or obtaining or- Hawaii, Idaho, Indiana, Iowa, Ken- ders, whether by mail or through tucky, Michigan, Mississippi, Ne- employees or agents or otherwise, braska, New Hampshire, Oregon, if the orders require acceptance outside this state before they be- 1. Subsection (g) was revised in 1973 to come contracts; read: “Creating as borrower or lender, or “(7) creating or acquiring in- acquiring, indebtedness or mortgages or other security interests in real or personal property”. debtedness, mortgages, and securi- States which have adopted this revision are ty interests in real or personal noted below. property;

Alaska 37

“(8) securing or collecting debts quire and maintain trust offices or or enforcing mortgages and securi- representative trust offices, or both, ty interests in property securing the under the provisions of Chapter debts; 11A of Title 5.” (Code of Ala- “(9) owning, without more, real bama, 1975, Sec. 10A-2-15.43) or personal property; “(10) conducting an isolated Alaska transaction that is completed within 30 days and that is not one in the “Without excluding other activi- course of repeated transactions of a ties that may not constitute trans- like nature; acting business in this state, a “(11) transacting business in in- foreign corporation is not consid- terstate commerce. ered to be transacting business in “(c) The list of activities in sub- this state, for the purposes of this section (b) is not exhaustive.” (Re- chapter, by reason of carrying on vised Model Business Corporation in this state any one or more of the Act, Sec. 15.01) following activities: “(1) maintaining, defending, or Alabama settling an action, suit, or administrative or arbitration proceeding, or “A foreign corporation, insofar the settlement of claims or dis- as it acts in a fiduciary capacity in putes; this state pursuant to the provisions “(2) holding meetings of direc- of this division, shall not be tors or shareholders of the corpora- deemed to be transacting business tion, or carrying on other activities in this state, but no foreign corpo- concerning the internal affairs of ration acting in a fiduciary capacity the corporation; in this state pursuant to the provi- “(3) maintaining bank accounts; sions of this division without quali- “(4) maintaining an office or fying to do business in this state agency for the transfer, exchange, pursuant to this article or other and registration of securities of the applicable provisions of law shall corporation, or appointing and establish or maintain in this state a maintaining a trustee or depositary place of business, branch office or for the securities of the corpora- agency for the conduct of business tion; as a fiduciary. Nothing contained “(5) making sales through inde- in this division shall diminish the pendent contractors; authority of out-of-state banks and “(6) soliciting or procuring or- trust companies to establish or ac- ders by mail, through employees,

38 Alaska

agents, or otherwise, if the orders 2100), “transact intrastate busi- require acceptance outside the state ness” means entering into repeat- before becoming binding contracts; ed and successive transactions of “(7) creating, as borrower or its business in this state, other lender, or acquiring indebtedness than interstate or foreign com- or mortgages or other security in- merce. terests in real or personal property; “(b) A foreign corporation shall “(8) securing or collecting debts, not be considered to be transacting or enforcing rights in property se- intrastate business merely because curing debts; its subsidiary transacts intrastate “(9) transacting business in in- business or merely because of its terstate commerce; status as any one or more of the “(10) conducting an isolated following: transaction completed within a “(1) A shareholder of a domestic period of 30 days not in the course corporation. of a number of repeated transac- “(2) A shareholder of a foreign tions of like nature.” (Alaska Stat- corporation transacting intrastate utes, Sec. 10.06.718) business. “(3) A limited partner of a do- Arizona mestic limited partnership. Arizona has adopted the Re- “(4) A limited partner of a for- vised Model Act provision and has eign limited partnership transacting added the following subsection: intrastate business. “12. Being a limited partner of a “(5) A member or manager of a limited partnership or a member of domestic limited liability compa- a limited liability company.” (Ari- ny. zona Revised Statutes, Sec. 10- “(6) A member or manager of a 1501) foreign limited liability company transacting intrastate business. Arkansas (California Corporations Code, Sec. 191(a) and (b)) Arkansas has adopted the Re- In addition, California has vised Model Act provision. (Ar- adopted the Model Act provision, kansas Code of 1987 Annotated, except that subsections (h) and (i) Sec. 4-27-1501) have been omitted and the time period for an isolated transaction California has been increased to 180 days. “(a) For the purposes of Chapter (California Corporations Code, 21 (commencing with Section Sec. 191(c))

Delaware 39

Colorado “(i) Securing or collecting debts in its own behalf or enforcing “(2) A foreign entity shall not mortgages or security interests in be considered to be transacting property securing such debts; business or conducting activities “(j) Owning, without more, real in this state within the meaning of or personal property; subsection (1) of this section by “(k) Conducting an isolated reason of carrying on in this state transaction that is completed with- any one or more of the following in thirty days and that is not one activities: in the course of repeated transac- “(a) Maintaining, defending, or tions of a like nature; settling in its own behalf any pro- “(l) Transacting business or ceeding or dispute; conducting activities in interstate “(b) Holding meetings of its commerce.” (Colorado Revised owners or managers or carrying Statutes, Sec. 7-90-801) on other activities concerning its internal affairs; Connecticut “(c) Maintaining bank accounts; “(d) Maintaining offices or Connecticut has adopted the agencies for the transfer, ex- Revised Model Act provision. change, and registration of its own (Connecticut General Statutes An- securities or owner's interests, or notated, Sec. 33-920) maintaining trustees or depositories with respect to those securi- Delaware ties or owner's interests; “Exceptions to requirements. (a) “(e) Selling through independ- No foreign corporation shall be ent contractors; required to comply with the provi- “(f) Soliciting or obtaining or- sions of §§371 and 372 of this title, ders, whether by mail or through under any of the following condi- employees or agents or otherwise, tions: if the orders require acceptance “(1) If it is in the mail order or a outside this state before they be- similar business, merely receiving come contracts; orders by mail or otherwise in “(g) Creating, as borrower or pursuance of letters, circulars, cata- lender, or acquiring, indebtedness; logs, or other forms of adver- “(h) Creating, as borrower or tising, or solicitation, accepting the lender, or acquiring, mortgages or orders outside this State, and filling other security interests in real or them with goods shipped into this personal property; State;

40 Delaware

“(2) If it employs salesmen, ei- theless wholly interstate in charac- ther resident or traveling, to solicit ter; orders in this State, either by dis- “(5) If it is an insurance compa- play of samples or otherwise ny doing business in this State; (whether or not maintaining sales “(6) If it creates, as borrower or offices in this State), all orders lender, or acquires, evidences of being subject to approval at the debt, mortgages or liens on real or offices of the corporation without personal property; this State, and all goods applicable “(7) If it secures or collects to the orders being shipped in pur- debts or enforces any rights in suance thereof from without this property securing the same.” (Del- State to the vendee or to the seller aware Code, Tit. 8, Sec. 373) or his agent for delivery to the vendee, and if any samples kept District of Columbia within this State are for display or advertising purposes only, and no “(a) Without excluding other ac- sales, repairs, or replacements are tivities that do not have the intra- made from stock on hand in this District presence necessary to con- State; stitute doing business in the Dis- “(3) If it sells, by contract con- trict under this title, a foreign filing summated outside this State, and entity or foreign limited liability agrees by the contract, to deliver partnership shall not be considered into this State, machinery, plants, to be doing business in the District or equipment, the construction, under this title solely by reason of erection or installation of which carrying on in the District any one within this State requires the su- or more of the following activities: pervision of technical engineers or “(1) Maintaining, defending, skilled employees performing ser- mediating, arbitrating, or settling a vices not generally available, and proceeding; as a part of the contract of sale “(2) Carrying on any activity agrees to furnish such services, and concerning its internal affairs, in- such services only, to the vendee at cluding holding meetings of its the time of construction, erection interest holders or governors; or installation; “(3) Maintaining accounts in fi- “(4) If its business operations nancial institutions; within this State, although not “(4) Maintaining offices or falling within the terms of para- agencies for the transfer, exchange, graphs (1), (2) and (3) of this and registration of interests in the section, or any of them, are never- entity or maintaining trustees or

Georgia 41

depositories with respect to those of any corporation which it has interests; lawfully acquired. “(5) Selling through independ- “(l) Owning a limited partner- ent contractors; ship interest in a limited partner- “(6) Soliciting or obtaining or- ship that is doing business within ders by any means if the orders this state, unless such limited part- require acceptance outside the Dis- ner manages or controls the part- trict before they become contracts; nership or exercises the powers “(7) Creating or acquiring in- and duties of a general partner.” debtedness, mortgages, or security (Florida Statutes Annotated, Sec. interests in property; 607.1501) “(8) Securing or collecting debts or enforcing mortgages or other Georgia security interests in property secur- “(b) The following activities, ing the debts and holding, protect- among others, do not constitute ing, or maintaining property so transacting business within the acquired; meaning of subsection (a) of this “(9) Conducting an isolated Code section: transaction that is not in the course “(1) Maintaining or defending of similar transactions; and any action or suit or any adminis- “(10) Doing business in inter- trative or arbitration proceeding, or state commerce. “ effecting the settlement thereof or “(c) A person does not do busi- the settlement of claims or dis- ness in the District solely by being putes; an interest holder or governor of a “(2) Holding meetings of its di- foreign entity that does business in rectors or shareholders or carrying the District.” on other activities concerning its (District of Columbia Code, internal affairs; Sec. 29-105.05) “(3) Maintaining bank accounts, share accounts in savings and loan Florida associations, custodian or agency Florida has adopted the Revised arrangements with a bank or trust Model Act provision, and added to company, or stock or bond broker- it sections (k) and (l) as follows: age accounts; “(k) Owning and controlling a “(4) Maintaining offices or subsidiary corporation incorpo- agencies for the transfer, exchange rated in or transacting business and registration of its securities, or within this state or voting the stock appointing and maintaining trus-

42 Georgia

tees or depositories with respect to “(14) Serving as a manager of a its securities; limited liability company orga- “(5) Effecting sales through in- nized under the laws of, or trans- dependent contractors; acting business, within this state.” “(6) Soliciting or procuring or- (Code of Georgia Annotated, Sec. ders, whether by mail or through 14-2-1501) employees or agents or otherwise, where the orders require ac- Hawaii ceptance without this State before Hawaii has adopted the Revised becoming binding contracts and Model Act provision. (Hawaii Re- where the contracts do not involve vised Statutes, Sec. 414-431). any local performance other than delivery and installation; Idaho “(7) Making loans or creating or acquiring evidences of debt, mort- “(a) Activities of a foreign fil- gages, or liens on real or personal ing entity or foreign limited liabil- property, or recording same; ity partnership that do not “(8) Securing or collecting debts constitute doing business in this or enforcing any rights in property state under this chapter include: securing the same; “(1) Maintaining, defending, “(9) Owning, without more, real mediating, arbitrating, or settling or personal property; an action or proceeding; “(10) Conducting an isolated “(2) Carrying on any activity transaction not in the course of a concerning its internal affairs, number of repeated transactions of including holding meetings of its a like nature; interest holders or governors; “(11) Effecting transactions in “(3) Maintaining accounts in interstate or foreign commerce; financial institutions; “(12) Serving as trustee, execu- “(4) Maintaining offices or tor, administrator, or guardian, or agencies for the transfer, ex- in like fiduciary capacity, where change and registration of securi- permitted so to serve by the laws ties of the entity or maintaining of this State; trustees or depositories with re- “(13) Owning (directly or indi- spect to those securities; rectly) an interest in or controlling “(5) Selling through independ- (directly or indirectly) another enti- ent contractors; ty organized under the laws of, or “(6) Soliciting or obtaining or- transacting business within, this ders by any means if the orders state; or require acceptance outside this

Indiana 43

state before they become con- or carrying on other activities contracts; cerning internal corporate affairs; “(7) Creating or acquiring in- “(3) maintaining bank accounts; debtedness, mortgages or security “(4) maintaining offices or interests in property; agencies for the transfer, exchange, “(8) Securing or collecting debts and registration of the corporation's or enforcing mortgages or security own securities or maintaining trus- interests in property securing the tees or depositaries with respect to debts, and holding, protecting or those securities; maintaining property so acquired; “(5) selling through independent “(9) Conducting an isolated contractors; transaction that is not in the “(6) soliciting or obtaining or- course of similar transactions; ders, whether by mail or through “(10) Owning, without more, employees or agents or otherwise, property; and if orders require acceptance outside “(11) Doing business in inter- this State before they become con- state commerce. tracts; “(b) A person does not do busi- “(7) (blank) ness in this state solely by being “(8) (blank) an interest holder or governor of a “(9) owning, without more, real foreign entity that does business or personal property; in this state. (Idaho Code, Sec. 30- “(10) conducting an isolated 21-505) transaction that is completed within 120 days and that is not one in Illinois the course of repeated transactions of a like nature; or “Without excluding other activi- “(11) having a corporate officer ties that may not constitute doing or director who is a resident of business in this State, a foreign this State.” (Illinois Compiled corporation shall not be considered Statutes Annotated, Ch. 805, Sec. to be transacting business in this 5/13.75) State, for purposes of this Article 13, by reason of carrying on in this Indiana State any one or more of the following activities: Indiana has adopted the Revised “(1) maintaining, defending, or Model Act provision except for settling any proceeding; subsection (7) which reads as fol- “(2) holding meetings of the lows: “Making loans or otherwise board of directors or shareholders creating or acquiring indebtedness,

44 Indiana

mortgages, and security interests in sas, and agreeing, by the contract, real or personal property.” (Burns to deliver into the state of Kansas Indiana Statutes Annotated, Sec. machinery, plants or equipment, 23-1-49-1) the construction, erection or installation of which within the state Iowa requires the supervision of technical engineers or skilled employ- Iowa has adopted the Revised ees performing services not Model Act provision. (Iowa Code generally available, and as part of Annotated, Sec. 490.1501) the contract of sale agreeing to furnish such services, and such Kansas services only, to the vendee at the “(a) Activities of a foreign cov- time of construction, erection or ered entity which do not constitute installation; doing business within the meaning “(8) creating, as borrower or of K.S.A. 2014 Supp. 17-7931, and lender, or acquiring indebtedness amendments thereto, include: with or without a mortgage or oth- “(1) Maintaining, defending or er security interest in property; settling an action or proceeding; “(9) securing or collecting debts “(2) holding meetings or carry- or foreclosing mortgages or other ing on any other activity concern- security interests in property securing its internal affairs; ing the debts, and holding, protect- “(3) maintaining bank accounts; ing and maintaining property so “(4) maintaining offices or acquired; agencies for the transfer, exchange “(10) conducting an isolated or registration of the covered enti- transaction that is completed with- ty’s own securities or maintaining in 30 days and is not one in the trustees or depositories with re- course of similar transactions of spect to those securities; like nature; and “(5) selling through independent “(11) transacting business in in- contractors; terstate commerce. “(6) soliciting or obtaining or- “A person shall not be deemed ders, whether by mail or through to be doing business in the state of employees or agents or otherwise, Kansas solely by reason of being a if the orders require acceptance member, stockholder, limited part- outside this state before they be- ner or governor of a domestic cov- come contracts; ered entity or a foreign covered “(7) selling, by contract con- entity.” (Kansas Statutes Annotat- summated outside the state of Kan- ed, Sec. 17-7932)

Maine 45

Kentucky “C. Maintaining bank accounts. “D. Maintaining offices or agen- Kentucky has adopted the Re- cies for the transfer, exchange and vised Model Act provision except registration of its securities, or ap- that the term “entity” is used in- pointing and maintaining trustees stead of “corporation” and Sec. (2) or depositaries with relation to its reads as follows: “Holding meet- securities. ings of the board of directors, “E. Soliciting or procuring or- shareholders, partners, members, ders, whether by mail or through managers, beneficial owners, or employees or agents or otherwise, trustees or carrying on any other if such orders require acceptance activity concerning the internal outside this State before becoming affairs of the foreign entity” (Ken- binding contracts, including all tucky Revised Statutes, Sec. preliminary incidents thereto. 14A.9-010). “F. Creating evidences of debt, Louisiana mortgages or liens. “G. Securing or collecting debts “Acts not considered transacting or enforcing any rights in property business. Without excluding other securing the same. activities which may not constitute “H. Transacting any business in transacting business in this state, a interstate or foreign commerce. foreign corporation or a business “I. Conducting an isolated trans- association shall not be considered action completed within a period of to be transacting business in this thirty days, and not in the course of state, for the purpose of being re- repeated transactions of like nature. quired to procure a certificate of “J. Acquiring and disposing of authority pursuant to R.S. 12:301, property or a property interest, not by reason of carrying on in this as a part of any regular business state any one or more of the fol- activity.” (Louisiana Statutes An- lowing activities: notated, Sec. 12:302) “A. Maintaining or defending any action or suit, or any adminis- Maine trative or arbitration proceeding, or Maine has adopted the Revised effecting the settlement thereof or Model Act provision except for the settlement of claims or disputes. subsection (9) which reads as fol- “B. Holding meetings of its di- lows: “I. Owning, without more, rectors or shareholders, or carrying real or personal property other than on other activities concerning its agricultural real estate”, and Maine internal affairs. adds the following:

46 Maine

“L. Engaging as a trustee in “(7) Conducting an isolated those actions defined by Title 18- transaction not in the course of a A, Sec. 7-105 as not in themselves number of similar transactions.” requiring local qualification of a (Annotated Code of Maryland, foreign corporate trustee; or Corporations and Associations, “M. Owning and controlling a Sec. 7-103) subsidiary corporation incorporated in or transacting business within Massachusetts this State.” (Maine Revised Statutes Annotated, Title 13-C, Sec. 1501) “(b) The following activities, among others, do constitute transacting business within the mean- Maryland ing of subsection (a): “In addition to any other activi- “(1) the ownership or leasing ties which may not constitute do- of real estate in the common- ing intrastate business in this state, wealth; for the purposes of this article, “(2) engaging in the construc- the following activities of a foreign tion, alteration or repair of any corporation do not constitute structure, railway or road; or doing intrastate business in this “(3) engaging in any other ac- state: tivity requiring the performance of “(1) Maintaining, defending, or labor. settling an action, suit, claim, dis- “(c) The following activities, pute, or administrative or arbitra- among others, without more, do not tion proceeding; constitute transacting business “(2) Holding meetings of its di- within the meaning of subsection (a): rectors or stockholders or carrying “(1) maintaining, defending, or on other activities which concern settling any proceeding; its internal affairs; “(2) holding meetings of the “(3) Maintaining bank accounts; board of directors or shareholders “(4) Maintaining offices or or carrying on other activities con- agencies for the transfer, exchange, cerning internal corporate affairs; and registration of its securities; “(3) maintaining bank accounts; “(5) Appointing and maintaining “(4) maintaining offices or trustees or depositaries with re- agencies for the transfer, exchange, spect to its securities; and registration of the corporations “(6) Transacting business exclu- own securities or maintaining trus- sively in interstate or foreign tees or depositories with respect to commerce; and those securities;

Minnesota 47

“(5) selling through independ- to be transacting business in this ent contractors; state for the purposes of this chap- “(6) soliciting or obtaining or- ter solely by reason of carrying on ders, whether by mail or through in this state any one or more of the employees or agents or otherwise, following activities: if the orders require acceptance “(a) Maintaining or defending outside the commonwealth before any action or suit or any adminis- they become contracts; trative or arbitration proceeding, or “(7) [Stricken] effecting the settlement thereof or “(8) [Stricken] the settlement of claims or dis- “(9) conducting an isolated putes; transaction that is not one in the “(b) Holding meetings of its di- course of repeated transactions of rectors or shareholders or carrying a like nature; on other activities concerning its “(10) transacting business in in- internal affairs; terstate commerce; or “(c) Maintaining bank accounts; “(11) performing activities sub- “(d) Maintaining offices or ject to regulation under chapter agencies for the transfer, exchange 167 (banks) or chapter 175 (insur- and registration of its securities, or ance companies), if the foreign appointing and maintaining trus- corporation has complied with the tees or depositaries with relation to applicable chapter.” (Massachu- its securities; setts General Laws Annotated, Ch. “(e) Holding title to and manag- 156D, Sec. 15.01) ing real or personal property, or any interest therein, situated in this Michigan state, as executor of the will or Michigan has adopted the Re- administrator of the estate of any vised Model Act provision. (Michi- decedent, as trustee of any trust, or gan Compiled Laws Annotated, as guardian of any person or con- Sec. 450.2012) servator of any person’s estate; “(f) Making, participating in, or investing in loans or creating, as Minnesota borrower or lender, or otherwise “. . .Without excluding other ac- acquiring indebtedness or mort- tivities which may not constitute gages or other security interests in transacting business in this state, real or personal property; and subject to the provisions of “(g) Securing or collecting its sections 5.25 and 543.19, a foreign debts or enforcing any rights in corporation shall not be considered property securing them; or

48 Minnesota

“(h) Conducting an isolated “(8) Securing or collecting debts transaction completed within a pe- or enforcing mortgages and securi- riod of 30 days and not in the ty interests in property securing the course of a number of repeated debts; transactions of like nature.” (Min- “(9) Owning, without more, real nesota Statutes Annotated, Sec. or personal property; 303.03) “(10) Conducting an isolated transaction that is completed within Mississippi thirty (30) days and that is not one (b) The following activities, in the course of repeated transac- among others, do not constitute tions of a like nature; transacting business within the “(11) Transacting business in in- meaning of subsection (a): terstate commerce; “(1) Maintaining, defending or “(12) Being a shareholder in a settling any proceeding; corporation or a foreign corporation “(2) Holding meetings of the that transacts business in this state; board of directors or shareholders “(13) Being a limited partner of or carrying on other activities con- a limited partnership or foreign cerning internal corporate affairs; limited partnership that is transact- “(3) Maintaining bank accounts; ing business in this state; “(4) Maintaining offices or “(14) Being a member or man- agencies for the transfer, exchange ager of a limited liability company and registration of the corporation’s or foreign limited liability company own securities or maintaining trus- that is transacting business in this tees or depositories with respect to state.” those securities; “(d) A foreign corporation which “(5) Selling through independent is general partner of any general or contractors; limited partnership, which partner- “(6) Soliciting or obtaining or- ship is transacting business in this ders, whether by mail or through state, is hereby declared to be employees or agents or otherwise, transacting business in this state.” if the orders require acceptance (Mississippi Code 1972 Annotated, outside this state before they be- Sec. 79-4-15.01) come contracts; Missouri “(7) Creating or acquiring indebtedness, mortgages and security “The following activities, interests in real or personal proper- among others, do not constitute ty; transacting business within the

Nebraska 49

meaning of subsection 1 of this vides as follows: “(i) owning section: real or personal property that is “(1) Maintaining, defending, or acquired incident to activities settling any proceeding; described in subsection (2)(h) [se- “(2) Holding meetings of the curing or collecting debts or en- board of directors or shareholders forcing mortgages and security or carrying on other activities interests in property securing the concerning internal corporate af- debts] if the property is disposed fairs; of within 5 years after the date of “(3) Maintaining bank accounts; acquisition does not produce in- “(4) Maintaining offices or come, or is not used in the per- agencies for the transfer, exchange, formance of a corporate function.” and registration of the corpora- (Montana Code Annotated, Sec. tion’s own securities or maintain- 35-1-1026) ing trustees or depositories with Montana’s law also provides: respect to those securities; “. . . . a foreign corporation is “(5) Creating or acquiring in- transacting business within the debtedness, mortgages, and securi- meaning of subsection (1) if it en- ty interests in real or personal ters into a contract, including a property; contract entered into pursuant to “(6) Securing or collecting debts Title 18 (Public Contracts), with or enforcing mortgages and securi- the state of Montana, an agency of ty interests in property securing the the state, or a political subdivision debts; of the state . . . This subsection “(7) Conducting an isolated does not apply to goods or services transaction that is completed with- prepared out of state for delivery or in thirty days and that is not one in use in this state. (Montana Code the course of repeated transactions Annotated, Sec. 35-1-1026) of a like nature; “(8) Transacting business in in- Nebraska terstate commerce.” (Missouri Re- Nebraska has adopted the Re- vised Statutes Annotated, Sec. vised Model Act, and has added a 351.572) subsection (1): “Acting as a foreign corporate trustee to the extent Montana authorized under Section 30- Montana has adopted the Re- 3820.” (Revised Statutes of Ne- vised Model Act provision except braska, Sec. 21-20,168, effective instead of subsection (9), it pro- until January 1, 2017)

50 Nebraska

“(b) The following activities, the course of repeated transactions among others, do not constitute of a like nature; transacting business within the “(11) Transacting business in in- meaning of subsection (a) of this terstate commerce; or section: “(12) Acting as a foreign corpo- “(1) Maintaining, defending, or rate trustee to the extent authorized settling any proceeding; under section 30-3820. (Revised “(2) Holding meetings of the Statutes of Nebraska, Sec. 21- board of directors or shareholders 2,203, effective January 1, 2017) or carrying on other activities concerning internal corporate affairs; Nevada “(3) Maintaining bank accounts; “(4) Maintaining offices or “For the purposes of this chap- agencies for the transfer, exchange, ter, the following activities do not and registration of the corporation's constitute doing business in this own securities or maintaining trus- state: tees or depositaries with respect to “(a) Maintaining, defending or those securities; settling any proceeding; “(5) Selling through independ- “(b) Holding meetings of the ent contractors; board of directors or stockholders “(6) Soliciting or obtaining or- or carrying on other activities ders, whether by mail or through concerning internal corporate af- employees or agents or otherwise, fairs; if the orders require acceptance “(c) Maintaining bank accounts; outside this state before they be- “(d) Maintaining offices or come contracts; agencies for the transfer, exchange “(7) Creating or acquiring in- and registration of the corpora- debtedness, mortgages, and securi- tion’s own securities or maintain- ty interests in real or personal ing trustees or depositaries with property; respect to those securities; “(8) Securing or collecting debts “(e) Making sales through inde- or enforcing mortgages and securi- pendent contractors; ty interests in property securing the “(f) Soliciting or receiving or- debts; ders outside of this state through “(9) Owning, without more, real or in response to letters, circulars, or personal property; catalogs or other forms of adver- “(10) Conducting an isolated tising, accepting those orders out- transaction that is completed with- side of this state and filling them in thirty days and that is not one in by shipping goods into this state;

New Mexico 51

“(g) Creating or acquiring in- of this act, by reason of carrying on debtedness, mortgages and securi- in this State any one or more of the ty interests in real or personal following activities: property; “(a) maintaining, defending or “(h) Securing or collecting debts otherwise participating in any ac- or enforcing mortgages and securi- tion or proceeding, whether judi- ty interests in property securing the cial, administrative, arbitrative or debts; otherwise, or effecting the settle- “(i) Owning, without more, real ment thereof or the settlement of or personal property; claims or disputes; “(j) Isolated transactions com- “(b) holding meetings of its di- pleted within 30 days and not a rectors or shareholders; part of a series of similar transac- “(c) maintaining bank accounts tions; or borrowing money, with or with- “(k) The production of motion out security, even if such borrow- pictures as defined in NRS ings are repeated and continuous 231.020; transactions and even if such secu- “(l) Transacting business as an rity has a situs in this State; out-of-state depository institution “(d) maintaining offices or pursuant to the provisions of Title agencies for the transfer, exchange 55 of NRS; and and registration of its securities, or “(m) Transacting business in in- appointing and maintaining trus- terstate commerce.” (Nevada Re- tees or depositaries with relation to vised Statutes, Sec. 80.015) its securities.” (Sec. 14A:13-3, New Jersey Statutes Annotated) New Hampshire New Hampshire has adopted the New Mexico Revised Model Act provision. New Mexico has adopted the (New Hampshire Revised Statutes Model Act provision with the 1973 Annotated, Sec. 293-A:15.01) revision to subsection (g) and has added a subsection (K): “investing New Jersey in or acquiring, in transactions out- “(2) Without excluding other ac- side New Mexico, royalties and tivities which may not constitute other non-operating mineral inter- transacting business in this State, a ests and the execution of division foreign corporation shall not be orders, contracts of sale and other considered to be transacting busi- instruments incidental to the own- ness in this State, for the purpose ership of the non-operating mineral

52 New Mexico

interests.” (Sec. 53-17-1, New of this Chapter, by reason of carry- Mexico Statutes Annotated) ing on in this State any one or more of the following activities: New York “(1) Maintaining or defending any action or suit or any adminis- “(b) Without excluding other ac- trative or arbitration proceeding, or tivities which may not constitute effecting the settlement thereof or doing business in this state, a for- the settlement of claims or dis- eign corporation shall not be con- putes. sidered to be doing business in this “(2) Holding meetings of its di- state, for the purposes of this chap- rectors or shareholders or carrying ter, by reason of carrying on in this on other activities concerning its state any one or more of the fol- internal affairs. lowing activities: “(3) Maintaining bank accounts “(1) Maintaining or defending or borrowing money in this State, any action or proceeding, whether with or without security, even if judicial, administrative, arbitrative such borrowings are repeated and or otherwise, or effecting settle- continuous transactions. ment thereof or the settlement of “(4) Maintaining offices or claims or disputes. agencies for the transfer, exchange, “(2) Holding meetings of its di- and registration of its securities, or rectors or its shareholders. appointing and maintaining trus- “(3) Maintaining bank accounts. tees or depositaries with relation to “(4) Maintaining offices or its securities. agencies only for the transfer, “(5) Soliciting or procuring or- exchange and registration of its ders, whether by mail or through securities, or appointing and main- employees or agents or otherwise, taining trustees or depositaries with where such orders require ac- relation to its securities.” (Sec. ceptance without this State before 1301(b), New York Business Cor- becoming binding contracts. poration Law) “(6) Making or investing in loans with or without security in- North Carolina cluding servicing of mortgages or “(b) Without excluding other ac- deeds of trust through independent tivities which may not constitute agencies within the State, the con- transacting business in this State, a ducting of foreclosure proceedings foreign corporation shall not be and sale, the acquiring of property considered to be transacting busi- at foreclosure sale and the man- ness in this State, for the purposes agement and rental of such proper-

Ohio 53

ty for a reasonable time while liq- tion’s own securities or maintain- uidating its investment, provided ing trustees or depositaries with no office or agency therefor is respect to those securities; maintained in this State. “e. Selling through independent “(7) Taking security for or col- contractors; lecting debts due to it or enforcing “f. Soliciting or obtaining or- any rights in property securing the ders, whether by mail or through same. employees or agents or otherwise, “(8) Transacting business in in- if the orders require acceptance terstate commerce. outside this state before they be- “(9) Conducting an isolated come contracts; transaction completed within a “g. Creating or acquiring in- period of six months and not in the debtedness, mortgages, and securi- course of a number of repeated ty interests in real or personal transactions of like nature. property; “(10) Selling through independ- “h. Securing or collecting debts ent contractors. or enforcing mortgages and securi- “(11) Owning, without more, ty interests in property securing the real or personal property.” (Gen- debts; or eral Statutes of North Carolina, “i. Conducting an isolated trans- Sec. 55-15-01) action that is completed within thirty days and that is not one in North Dakota the course of repeated transactions of a like manner. “1. The following activities of a *** foreign corporation, among others, “3. For purposes of this section, do not constitute transacting busi- any foreign corporation that owns ness within the meaning of this income-producing real or tangible chapter: personal property in this state, oth- “a. Maintaining, defending, or er than property exempted under settling any proceeding; subsection 1, will be considered “b. Holding meetings of its transacting business in this state.” shareholders or carrying on other (North Dakota Century Code An- activities concerning internal af- notated, Sec. 10-19.1-143) fairs; “c. Maintaining bank accounts; Ohio “d. Maintaining offices or agencies for the transfer, exchange, and The pertinent statute provides registration of the foreign corpora- that the qualification requirement

54 Ohio

will not apply to “corporations fices of the corporation without engaged in this state solely in in- this state, and all goods applicable terstate commerce, including the to the orders being shipped in pur- installation, demonstration, or re- suance thereof from without this pair of machinery or equipment state to the vendee or to the seller sold by them in interstate com- or his agent for delivery to the merce, by engineers, or by em- vendee, and if any samples kept ployees especially experienced as within this state are for display or to such machinery or equipment, advertising purposes only, and no as part thereof; to credit unions, sales, repairs, or replacements are title guarantee and trust companies, made from stock on hand in this bond investment companies, and state; or insurance companies; or to public “3. it sells, by contract consum- utility companies engaged in this mated outside this state, and agrees state in interstate commerce.” by the contract, to deliver into this (Page’s Ohio Revised Code Anno- state, machinery, plants or equip- tated, Sec. 1703.02) ment, the construction, erection or installation of which within this Oklahoma state requires the supervision of technical engineers or skilled em- “No foreign corporation shall be ployees performing services not required to comply with the provi- generally available, and as a part of sions of . . . this act, if: the contract of sale agrees to fur- “1. it is in the mail order or a nish such services, and such ser- similar business, merely receiving vices only, to the vendee at the orders by mail or otherwise in pur- time of construction, erection or in- suance of letters, circulars, cata- stallation; or logs, or other forms of advertising, “4. its business operations with- or solicitation, accepting the orders in this state are wholly interstate in outside this state, and filling them character; or with goods shipped into this state; “5. it is an insurance company or doing business in this state; “2. it employs salesmen, either or resident or traveling, to solicit “6. it creates, as borrower or orders in this state, either by dis- lender, or acquires, evidences of play of samples or otherwise, debt, mortgages or liens on real or whether or not maintaining sales personal property; or offices in this state, all orders be- “7. it secures or collects debts or ing subject to approval at the of- enforces any rights in property

Rhode Island 55

securing the same.” (Oklahoma “(7) Creating or acquiring in- Statutes Annotated, Title 18, Sec. debtedness, mortgages or security 1132) interests in property. “(8) Securing or collecting debts Oregon or enforcing mortgages or security Oregon has adopted the Revised interests in property securing the Model Act provision. (Oregon Re- debts and holding, protecting or vised Statutes, Sec. 60.701) maintaining property so acquired. “(9) Conducting an isolated Pennsylvania transaction that is not in the course of similar transactions. “Activities of a foreign filing as- “(10) Owning, without more, sociation or foreign limited liabil- property. ity partnership that do not “(11) Doing business in inter- constitute doing business in this state or foreign commerce. Commonwealth under this chapter “(b) Participation in other asso- shall include the following: ciations. “(1) Maintaining, defending, “Being an interest holder or mediating, arbitrating or settling an governor of a foreign association action or proceeding. that does business in this Com- “(2) Carrying on any activity monwealth shall not by itself con- concerning its internal affairs, institute doing business in this cluding holding meetings of its Commonwealth.” (Purdon’s Penn- interest holders or governors. sylvania Consolidated Statutes “(3) Maintaining accounts in fi- Annotated, Title 15, Sec. 403) nancial institutions. “(4) Maintaining offices or Rhode Island agencies for the transfer, exchange and registration of securities of the “(b) Without excluding other ac- association or maintaining trustees tivities which may not constitute or depositories with respect to the transacting business in this state, a securities. foreign corporation is not consid- “(5) Selling through independ- ered to be transacting business in ent contractors. this state, for the purposes of this “(6) Soliciting or obtaining or- chapter, because of carrying on in ders by any means if the orders this state any one or more of the require acceptance outside of this following activities: Commonwealth before the orders “(1) Maintaining or defending become contracts. any action or suit or any adminis-

56 Rhode Island

trative or arbitration proceeding, or filed a certificate of limited part- effecting the settlement of the suit nership as provided in § 7-13-8 or or the settlement of claims or dis- has registered with the secretary of putes. state as provided in § 7-13-49. “(2) Holding meetings of its di- “(12) Acting as a member of a rectors or shareholders or carrying limited liability company which on other activities concerning its has registered with the secretary of internal affairs. state as provided in § 7-16-49.” “(3) Maintaining bank accounts. (General Laws of Rhode Island, “(4) Maintaining offices or Sec. 7-1.2-1401) agencies for the transfer, exchange, and registration of its securities, or South Carolina appointing and maintaining trustees or depositaries with relation to South Carolina has adopted the its securities. Revised Model Act provision and “(5) Effecting sales through in- has added a subsection (12) which dependent contractors. reads as follows: “owning and con- “(6) Soliciting or procuring or- trolling a subsidiary corporation ders, whether by mail or through incorporated in or transacting busi- employees or agents or otherwise, ness within this State” and a sub- where the orders require ac- section (13) which reads as ceptance outside of this state be- follows: “owning, without more, an fore becoming binding contracts. interest in a limited liability com- “(7) Creating, as borrower or pany organized or transacting busi- lender, or acquiring indebtedness ness in this State.” (Code of Laws or mortgages or other security in- of South Carolina, Sec. 33-15-101) terests in real or personal property. “(8) Securing or collecting debts South Dakota or enforcing any rights in property South Dakota has adopted the securing the debts. Revised Model Act provision. “(9) Transacting any business in (South Dakota Codified Laws, Sec. interstate commerce. 47-1A-1501) “(10) Conducting an isolated transaction completed within a Tennessee period of thirty (30) days and not in the course of a number of re- “The following activities, peated transactions of like nature. among others, do not constitute “(11) Acting as a general partner transacting business within the of a limited partnership which has meaning of subsection (a):

Texas 57

“(1) Maintaining, defending or attempting to liquidate his invest- settling any proceeding, claim, or ment and if no office or other dispute; agency therefor, other than an in- “(2) Holding meetings of the dependent agency, is maintained in board of directors or shareholders this state; or carrying on other activities “(10) Conducting an isolated concerning internal corporate af- transaction that is completed with- fairs; in one (1) month and that is not “(3) Maintaining bank accounts; one in the course of repeated trans- “(4) Maintaining offices or actions of a like nature; agencies for the transfer, exchange, “(11) Transacting business in in- and registration of the corporation’s terstate commerce.” (Tennessee own securities or appointing and Code Annotated, Sec. 48-25-101) maintaining trustees or depositories with respect to those securities; Texas “(5) Selling through independent contractors; “For purposes of this chapter, “(6) Soliciting or obtaining or- activities that do not constitute ders, whether by mail or through transaction of business in this state employees or agents or otherwise, include: if the orders require acceptance “(1) maintaining or defending an outside this state before they be- action or suit or an administrative come contracts; or arbitration proceeding, or ef- “(7) Creating or acquiring in- fecting the settlement of: debtedness, deeds of trust, mort- “(A) such an action, suit, or pro- gages, and security interests in real ceeding; or or personal property; “(B) a claim or dispute to which “(8) Securing or collecting debts the entity is a party; or enforcing mortgages, deeds of “(2) holding a meeting of the en- trust, and security interests in tity’s managerial officials, owners, property securing the debts; or members or carrying on another “(9) Owning, without more, real activity concerning the entity’s or personal property; provided, internal affairs; however, that for a reasonable time “(3) maintaining a bank account; the management and rental of real “(4) maintaining an office or property acquired in connection agency for: with enforcing a mortgage or deed “(A) transferring, exchanging, of trust shall also not be considered or registering securities the entity transacting business if the owner is issues; or

58 Texas

“(B) appointing or maintaining a ated by one or more nonresidents trustee or depositary related to the of this state, or by one or more entity’s securities; foreign entities; “(5) voting the interest of an en- “(12) regarding a debt secured tity the foreign entity has acquired; by a mortgage or lien on real or “(6) effecting a sale through an personal property in this state: independent contractor; “(A) acquiring the debt in a “(7) creating, as borrower or transaction outside this state or in lender, or acquiring indebtedness interstate commerce; or a mortgage or other security “(B) collecting or adjusting a interest in real or personal proper- principal or interest payment on ty; the debt; “(8) securing or collecting a “(C) enforcing or adjusting a debt due the entity or enforcing a right or property securing the debt; right in property that secures a debt “(D) taking an action necessary due the entity; to preserve and protect the interest “(9) transacting business in in- of the mortgagee in the security; or terstate commerce; “(E) engaging in any combina- “(10) conducting an isolated tion of transactions described by transaction that: this subdivision; “(A) is completed within a peri- “(13) investing in or acquiring, od of 30 days; and in a transaction outside of this “(B) is not in the course of a state, a royalty or other nonoperat- number of repeated, similar trans- ing mineral interest; actions; “(14) executing a division order, “(11) in a case that does not in- contract of sale, or other instrument volve an activity that would consti- incidental to ownership of a non- tute the transaction of business in operating mineral interest; or this state if the activity were one of “(15) Owning, without more, a foreign entity acting in its own real or personal property in this right: state.” (Texas Business Organiza- “(A) exercising a power of ex- tions Code, Sec. 9.251) ecutor or administrator of the estate of a nonresident decedent Utah under ancillary letters issued by a “(2) The following, nonex- court of this state; or haustive list of activities does not “(B) exercising a power of a constitute ‘transacting business’ trustee under the will of a nonresi- within the meaning of Subsection dent decedent, or under a trust cre- (1):

Vermont 59

“(a) maintaining, defending, or “(k) transacting business in in- settling in its own behalf any legal terstate commerce; proceeding; “(l) acquiring, in transactions “(b) holding meetings of the outside this state or in interstate board of directors, shareholders, or commerce, of conditional sales otherwise carrying on activities contracts or of debts secured by concerning internal corporate af- mortgages or liens on real or per- fairs; sonal property in this state, collect- “(c) maintaining bank accounts; ing or adjusting of principal or “(d) maintaining offices or interest payments on the contracts, agencies for the transfer, exchange, mortgages, or liens, enforcing or and registration of its own securi- adjusting any rights provided for in ties or maintaining trustees or de- conditional sales contracts or se- positories with respect to those curing the described debts, taking securities; any actions necessary to preserve “(e) selling through independent and protect the interest of the con- contractors; ditional vendor in the property “(f) soliciting or obtaining or- covered by a conditional sales con- ders, whether by mail or through tract or the interest of the mortga- employees or agents or otherwise, gee or holder of the lien in such if the orders require acceptance security, or any combination of outside this state before they be- such transactions; and come contracts; “(m) any other activities not “(g) creating as borrower or considered to constitute transacting lender or acquiring indebtedness, business in this state in the discre- mortgages or security interests in tion of the division.” (Utah Code property securing such debts; Annotated, 1953, Sec. 16-10a- “(h) securing or collecting 1501) debts in its own behalf or enforcing mortgages or security inter- Vermont ests in property securing such debts; Vermont has adopted the Re- “(i) owning, without more, real vised Model Act provision except or personal property; that sections (8), (10), and (11) “(j) conducting an isolated read as follows: transaction that is completed with- “(8) without limiting the gener- in 30 days and that is not one in the ality of the other provisions of this course of repeated transactions of a section, making, purchasing and like nature; servicing loans if the corporation is

60 Vermont

a foreign savings bank or a foreign “7. Creating or acquiring incorporation doing a banking busi- debtedness, deeds of trust, and se- ness and it participates with a curity interests in real or personal banking corporation or a trust property; company of this state; “8. Securing or collecting debts “(10) owning real or personal or enforcing deeds of trust and property; security interests in property secur- “(11) conducting an isolated ing the debts; transaction that is not one in the “9. Owning, without more, real course of repeated transactions of a or personal property; like nature.” (Vermont Statutes “10. Conducting an isolated Annotated, Title 11A, Sec. 15.01) transaction that is completed within 30 days and that is not one in the Virginia course of repeated transactions of a “The following activities, like nature; among others, do not constitute “11. For a period of less than 90 transacting business within the consecutive days, producing, di- meaning of subsection A: recting, filming, crewing or acting “1. Maintaining, defending, or in motion picture feature films, settling any proceeding; television series or commercials, or “2. Holding meetings of the promotional films which are sent board of directors or shareholders outside of the Commonwealth for or carrying on other activities con- processing, editing, marketing and cerning internal corporate affairs; distribution; or “3. Maintaining bank accounts; “12. Serving, without more, as a “4. Maintaining offices or agen- general partner of, or as partner in cies for the transfer, exchange, and a partnership which is a general registration of the corporation’s partner of, a domestic or foreign own securities or maintaining trus- limited partnership that does not tees or depositories with respect to otherwise transact business in the those securities; Commonwealth.” (Code of Virgin- “5. Selling through independent ia, 1950, Sec. 13.1-757) contractors; “6. Soliciting or obtaining or- Washington ders, whether by mail or through employees or agents or otherwise, “(1) Activities of a foreign entity if the orders require acceptance that do not constitute doing busi- outside this Commonwealth before ness in this state under this chapter they become contracts; include, but are not limited to:

Washington 61

“(a) Maintaining, defending, “(k) Doing business in interstate mediating, arbitrating, or settling commerce; and an action or proceeding, or settling “(l) Operating an approved claims or disputes; branch campus of a foreign degree- “(b) Carrying on any activity granting institution in compliance concerning its internal affairs, in- with chapter 28B.90 RCW and in cluding holding meetings of its accordance with subsection (2) of interest holders or governors; this section. “(c) Maintaining accounts in fi- “(2) In addition to those acts that nancial institutions; are specified in subsection (1) of “(d) Maintaining offices or this section, a foreign degree- agencies for the transfer, exchange, granting institution that establishes and registration of securities of the an approved branch campus in the entity or maintaining trustees or state under chapter 28B.90 RCW depositories with respect to those shall not be deemed to transact securities; business in the state solely because “(e) Selling through independent it: contractors; “(a) Owns and controls an in- “(f) Soliciting or obtaining or- corporated branch campus in this ders by any means if the orders state; require acceptance outside this state “(b) Pays the expenses of tuition before they become binding con- or room and board charged by the tracts and where the contracts do incorporated branch campus for its not involve any local performance students enrolled at the branch other than delivery and installation; campus or contributes to the capi- “(g) Creating or acquiring in- tal thereof; or debtedness, mortgages, or security “(c) Provides personnel who interests in property; furnish assistance and counsel to its “(h) Securing or collecting debts students while in the state but who or enforcing mortgages or security have no authority to enter into any interests in property securing the transactions for or on behalf of the debts; foreign degree-granting institution. “(i) Conducting an isolated “(3) A person does not do busi- transaction that is completed with- ness in this state solely by being an in thirty days and that is not in the interest holder or governor of a course of repeated transactions of a domestic entity or foreign entity like nature; that does business in this state.” “(j) Owning, without more, (Revised Code of Washington An- property; notated, Sec. 23.50.400.)

62 West Virginia

West Virginia in thirty days and that is not one in the course of repeated transactions “(b) The following activities, of a like nature; among others, do not constitute “(10) Conducting affairs in in- conducting affairs within the terstate commerce; meaning of subsection (a) of this “(11) Granting funds or other section: gifts; “(1) Maintaining, defending or “(12) Distributing information settling any proceeding; to its shareholders or members; “(2) Holding meetings of the “(13) Effecting sales through in- board of directors or shareholders dependent contractors; or carrying on other activities con- “(14) The acquisition by pur- cerning internal corporate affairs; chase of lands secured by mort- “(3) Maintaining bank accounts; gage or deeds; “(4) Selling through independ- “(15) Physical inspection and ent contractors; appraisal of property in West Vir- “(5) Soliciting or obtaining or- ginia as security for deeds of trust, ders, whether by mail or through or mortgages and negotiations for employees or agents or otherwise, the purchase of loans secured by if the orders require acceptance property in West Virginia; outside this State before they be- “(16) The management, rental, come contracts; maintenance and sale or the operat- “(6) Creating or acquiring in- ing, maintaining, renting or other- debtedness, mortgages and security wise dealing with selling or dis- interests in real or personal proper- posing of property acquired under ty; foreclosure sale or by agreement in “(7) Securing or collecting debts lieu of foreclosure sale; or enforcing mortgages and securi- “(17) Applying for withholding ty interests in property securing the tax on an employee residing in the debts: Provided, That this exemp- State of West Virginia who works tion does not include debts collect- for the foreign corporation in an- ed by collection agencies as other state; and defined in subdivision (b), section “(18) Holding all, or a portion two [§ 47-16-2], article sixteen, thereof, of the outstanding stock of chapter forty-seven of this code; another corporation authorized to “(8) Owning, without more, real transact business in the State of or personal property; West Virginia. Provided, That the “(9) Conducting an isolated foreign corporation does not pro- transaction that is completed with- duce goods, services or otherwise

Wyoming 63

conduct business in the State of “(c) Maintaining bank accounts. West Virginia. “(d) Maintaining offices or “(c) The list of activities in sub- agencies for the transfer, exchange section (b) of this section is not and registration of the foreign cor- exhaustive. poration’s securities or maintaining “(d) A foreign corporation is trustees or depositaries with re- deemed to be transacting business spect to those securities. in this State if: “(e) Selling through independent “(1) The corporation makes a contractors. contract to be performed, in whole “(f) Soliciting or obtaining or- or in part, by any party thereto in ders, whether by mail or through this State; employees or agents or otherwise, “(2) The corporation commits a if the orders require acceptance tort, in whole or in part, in this outside this state before they be- State; or come contracts. “(3) The corporation manufac- “(g) Lending money or creating tures, sells, offers for sale or sup- or acquiring indebtedness, mort- plies any product in a defective gages and security interests in condition and that product causes property. injury to any person or property “(h) Securing or collecting debts within this State notwithstanding or enforcing mortgages and securi- the fact that the corporation had no ty interests in property securing the agents, servants or employees or debts. contacts within this State at the “(i) Owning, without more, time of the injury.” (31D-15-1501) property. “(j) Conducting an isolated Wisconsin transaction that is completed with- “(2) Activities that for purposes in 30 days and that is not one in the of sub. (1) do not constitute trans- course of repeated transactions of a acting business in this state include like nature. but are not limited to: “(k) Transacting business in in- “(a) Maintaining, defending or terstate commerce.” (Wisconsin settling any civil, criminal, admin- Statutes Annotated, Sec. 180.1501) istrative or investigatory proceeding. Wyoming “(b) Holding meetings of the Wyoming has adopted the Re- board of directors or shareholders vised Model Act provision. (Wy- or carrying on other activities con- oming Statutes Annotated, Sec. 17- cerning internal corporate affairs. 16-1501(b))

64 Wyoming

Wyoming also provides that: “A “(8) Guaranty or collect debts or foreign corporation. . .which is foreclose on mortgages, or securi- either an organizer, a manager or ties on the properties which guar- member of a [limited liability] anty such debts. company is not required to obtain a “(9) Own title to real or personal certificate of authority to undertake property. its duties in these capacities.” “(10) Conduct an isolated trans- (Wyoming Statutes Annotated, action which is completed within a Sec. 17-16-1501(d)) thirty (30)-day period, which is not part of a series similar in nature. Puerto Rico (Laws of Puerto Rico Annotated, “(a) The following activities, Title 14, Sec. 3805) without this list being thorough, shall not constitute doing business Virgin Islands transactions in the Commonwealth: “Exceptions to requirements. No “(1) Initiate, defend or settle any corporation created by the laws judicial process. of any foreign country or any State “(2) Conduct meetings of the of the United States, or the laws of board of directors, or shareholders, the United States shall be deemed or other activities related to the to be doing business in the Virgin internal corporate affairs. Islands, nor shall the corporation “(3) Have bank accounts. be required to comply with the pro- “(4) Keep offices and agencies visions of sections 401 and 402 of for the transfer, exchange, and reg- this title under the following condi- istration of the corporation's own tions, or any of them, namely if— securities or keep trustees or de- “(1) it is in the mail order or a positories with respect to such se- similar business, merely receiving curities. orders by mail or otherwise in pur- “(5) Sell through independent suance of letters, circulars, cata- contractors. logs, or other forms of advertising, “(6) Request or obtain orders, or solicitation, accepting the orders whether by mail or by employees outside the Virgin Islands and fill- or agents or otherwise, if such or- ing them with goods shipped into ders are to be accepted outside of the Virgin Islands from without the Commonwealth before the con- same; tractual obligation arises. “(2) it sells, by contract con- “(7) Create or acquire debts, summated outside the Virgin Is- mortgages, or real property securi- lands, and agrees, by the contract, ties. to deliver into from without the

British Columbia 65

Virgin Islands, machinery, tered under any Act of Alberta plants or equipment, the construc- entitling it to do business, tion, erection or installation of (g) it is, in respect of a commer- which within the Virgin Islands cial vehicle as defined in the Traf- requires the supervision of tech- fic Safety Act, unless it neither nical engineers or skilled employ- picks up nor delivers goods or pas- ees performing services not sengers in Alberta, generally available, and as a part of (h) it is the holder of a certifi- the contract of sale agrees to fur- cate as defined in section 130 of nish such services, and such ser- the Traffic Safety Act, unless it vices only, to the vendee at the neither picks up nor delivers goods time of construction, erection or or passengers in Alberta, or installation.” (Virgin Islands Code “(i) it otherwise carries on busi- Annotated, Title 13, Sec. 403) ness in Alberta. “(2) The Registrar may exempt Alberta an extra-provincial corporation “(1) For the purposes of this from the payment of fees under Part, an extra-provincial corpora- this Part if he is satisfied that it tion carries on business in Alberta does not carry on business for the if: purpose of gain.” (Business Corpo- “(a) its name, or any name under rations Act, Revised Statutes of which it carries on business, is Alberta, Ch. B-9, Sec. 277) listed in a telephone directory for any part of Alberta, British Columbia “(b) its name, or any name un- “(2) For the purposes of this Act der which it carries on business, and subject to subsection (3), a appears or is announced in any foreign entity is deemed to carry advertisement in which an address on business in British Columbia if in Alberta is given for the extra- “(a) its name, or any name under provincial corporation, which it carries on business, is “(c) it has a resident agent or listed in a telephone directory representative or a warehouse, of- “(i) for any part of British Co- fice or place of business in Alberta, lumbia, and “(d) it solicits business in Alber- “(ii) in which an address or tele- ta, phone number in British Columbia “(e) it is the owner of any estate is given for the foreign entity, or interest in land in Alberta, “(b) its name, or any name un- “(f) it is licensed or registered or der which it carries on business, required to be licensed or regis- appears or is announced in any

66 British Columbia

advertisement in which an address Manitoba or telephone number in British “(2) Carrying on business. For Columbia is given for the foreign the purposes of this Part, a body entity, corporate is deemed to be carrying “(c) it has, in British Columbia, on its business or undertaking in “(i) a resident agent, or Manitoba if “(ii) a warehouse, office or place “(a) it has a resident agent or of business, or representative, or a warehouse, “(d) it otherwise carries on busi- office or place of business in Mani- ness in British Columbia. toba; or “(3) A foreign entity does not “(b) its name or any name under carry on business in British Co- which it carries on business, to- lumbia gether with an address for the body “(a) if it is a bank, corporate in Manitoba, is listed in a “(b) if its only business in Brit- Manitoba telephone directory; or ish Columbia is constructing and “(c) its name or any name under operating a railway, or which it carries on business, to- “(c) merely because it has an gether with an address for the body interest as a limited partner in a corporate in Manitoba, is included limited partnership carrying on in any advertisement advertising business in British Columbia. the business or any product of the “(4) A foreign entity need not be body corporate; or registered under this Act or comply “(d) it is the registered owner of with this Part other than subsection real property situate in Manitoba; (5) of this section, and may carry or on business in British Columbia as “(e) it otherwise carries on its if it were registered under this Act, business or undertaking in Manito- if ba.” (The Corporations Act, Con- “(a) the principal business of the solidated Statutes of Manitoba, Ch. foreign entity consists of the opera- C-225, Sec. 187) tion of one or more ships, and “(b) the foreign entity does not maintain in British Columbia a New Brunswick warehouse, office or place of busi- “(1) For the purposes of this ness under its own control or under Part, an extra-provincial corpora- the control of a person on behalf of tion carries on business in New the foreign entity.” (Business Cor- Brunswick if poration Act, Statutes of British “(a) its name, or any name under Columbia, 2002, Ch. 57, Sec. 375) which it carries on business,

Newfoundland 67

appears or is announced in any or an extra-provincial limited advertisement in which an address partnership that has filed a declara- in New Brunswick is given for the tion under the Limited Partner- extra-provincial corporation; ship Act.” (Business Corporations “(b) it has a resident agent or Act, Revised Statutes of New representative or a warehouse, of- Brunswick, 1980, Ch. B-9.1, Sec. fice or place of business in New 194) Brunswick; “(c) it solicits business in New Newfoundland Brunswick; “(d) it is the owner of any estate “(2) For the purposes of this or interest in land in New Bruns- Part, an extra-provincial company wick; is carrying on an undertaking in the “(e) it is licensed or registered or province where required to be licensed or Regis- “(a) it holds title to land in the tered under any Act of New Bruns- province or has an interest other wick entitling it to do business; than by way of security in land; “(f) it is the holder of a certifi- “(b) it maintains an office, cate of registration under the Mo- warehouse or place of business in tor Vehicle Act; the province; “(g) it is the holder of a license “(c) it is licensed or registered or issued under the Motor Carrier required to be licensed or regis- Act; or tered under a law of the province “(h) it otherwise carries on busi- that entitles it to do business or to ness in New Brunswick. sell securities of its own issue; “(2) Where an extra-provincial “(d) it is the holder of a certifi- corporation has its name or any cate of registration issued under name under which it caries on The Highway Traffic Act respect- business listed in a telephone di- ing a public service vehicle; or rectory for any part of New “(e) in another manner it car- Brunswick, that corporation shall ries on an undertaking in the prov- be deemed, in the absence of evi- ince. dence to the contrary, to be carry- “(3) For the purposes of subsec- ing on business in New Brunswick. tion (2), where an extra-provincial “(2.1) An extra-provincial cor- company is listed with a number poration is not carrying on busi- under the name of the extra- ness in New Brunswick by reason provincial company in a telephone only that it is a general or limited directory published by a telephone partner in a limited partnership company for use in this province,

68 Newfoundland

that extra-provincial company is “(g) it otherwise carries on busi- presumed, in the absence of proof ness or operation in the Northwest to the contrary, to be carrying on Territories.” (Business Corpora- an undertaking in this province.” tions Act, Statutes of the North- (Corporations Act, Revised Stat- west Territories, 1996, Ch. 19, Sec. utes of Newfoundland, 1990, Ch. 279) C-36, Sec. 431) Nova Scotia Northwest Territories “In this Act . . . (b) ‘carry on “(1) For the purpose of this Part, business’ means the transaction of an extra-territorial corporation car- any of the ordinary business of a ries on business in the Northwest corporation, whether by means of Territories if an employee or an agent and “(a) its name, or any name under whether or not the corporation has which it carries on business or op- a resident agent or representative erations, is listed in a telephone or a warehouse, office or place of directory for any part of the business in the Province.” (Corpo- Northwest Territories; rations Registration Act, Revised “(b) its name, or any name un- Statutes of Nova Scotia, 1989, Ch. der which it carries on business or 101, Sec. 2) operations, appears or is announced in any advertisement in Nunavut which an address in the Northwest Territories is given for the extra- Nunavut has adopted the Busi- territorial corporation; ness Corporation Act of the “(c) it has a resident agent or Northwest Territories. representative or a warehouse, of- Ontario fice or place of business or operations in the Northwest Territories; “(2) For the purposes of this “(d) it solicits business in the Act, an extra-provincial corpora- Northwest Territories; tion carries on its business in On- “(e) it is the owner of any estate tario, if, or interest in land in the Northwest “(a) it has a resident agent, rep- Territories; resentative, warehouse, office or “(f) it is licensed or registered or place where it carries on its busi- required to be licensed or regis- ness in Ontario; tered under any Act of the North- “(b) it holds an interest, other- west Territories entitling it to do wise than by way of security, in business or carry on operations; or real property situate in Ontario; or

Quebec 69

“(c) it otherwise carries on its “(b) its name, or any name un- business in Ontario. der which it carries on business, “(3) An extra-provincial corpo- appears or is announced in any ration does not carry on its busi- advertisement in which an address ness in Ontario by reason only that, in the province is given for the “(a) it takes orders for or buys or extra-provincial corporation; sells goods, wares and merchan- “(c) it has a resident agent or dise; or representative or a warehouse, of- “(b) offers or sells services of fice or place of business in the any type, by use of travellers or province; through advertising or correspond- “(d) it solicits business in the ence.” (Extra-Provincial Corpora- province.” tions Act, Statutes of Ontario, “(e) it is licensed or registered or 1990, c. E.27, Sec. 1) required to be licensed or regis- “(1) Subject to this act, the Cor- tered under any Act of the Legisla- porations Information Act and ture entitling it to do business; or any other Act, an extra-provincial “(f) it otherwise carries on busi- corporation within class 1 [corpo- ness in the province.” rations formed in other provinces] (Extra-Provincial Corporations or 2 [corporations formed under an Registration Act, Revised Statutes act of Parliament or under an ordi- of Prince Edward Island Ch. E-14, nance of the Yukon or Northwest 2002, Sec. 2) Territories] may carry on any of its business in Ontario without obtain- Quebec ing a license under this Act.” (Ex- tra-Provincial Corporations Act, “For the purposes of section 21, Statutes of Ontario, 1990, c. E.27, [registration requirements] a per- Sec. 4) son or partnership who has an address in Québec or, either directly or through a representative acting Prince Edward Island under a general mandate, has an “2. For the purposes of this Act, establishment, a post office box or an extra-provincial corporation the use of a telephone line in Qué- carries on business in the province bec or performs any act for profit if in Québec is presumed to be carry- “(a) its name, or any name under ing on an activity or operating an which it carries on business, is enterprise in Québec.” listed in a telephone directory for (An Act Respecting the Legal any part of the province; Publicity of Enterprises, Compila-

70 Quebec

tion of Quebec Laws and Regu- Yukon Territory lations, 2010, Ch. P-44.1, Sec. “(1) For the purposes of this 25) Part, an extra-territorial corporate body carries on business in the Saskatchewan Yukon if “(2) For the purposes of this “(a) its name, or any name it us- Act, a corporation is deemed to be es or by which it identifies itself, is carrying on business if it: listed in a telephone directory for “(a) holds any title, estate or in- any part of the Yukon and gives an terest in land registered in the address or telephone number in the name of the corporation under The Yukon; Land Titles Act; “(b) its name, or any name it “(b) has a resident agent or rep- uses or by which it identifies it- resentative or maintains an office, self, appears or is announced in warehouse or place of business in any advertisement and gives an Saskatchewan; address or telephone number in “(c) is licensed or registered or the Yukon; required to be licensed or regis- “(c) it has a resident agent, tered under any statute of Sas- warehouse, office or place of busi- katchewan entitling it to do ness in the Yukon; business or to sell securities of its “(d) it acts as a director of a cor- own issue; poration; “(d) Repealed; “(e) subject to subsection (2), it “(e) Repealed; is a partner in a partnership in re- “(f) otherwise carries on busi- spect of which a declaration or ness in Saskatchewan. certificate is filed or required to be “(3) Where the number of a tel- filed under the Partnership and ephone located in Saskatchewan is Business Names Act; listed in a telephone directory is- “(f) it is the owner or holder of sued by Saskatchewan Telecom- any estate or interest in real proper- munications under the name of a ty in the Yukon, including any corporation, that corporation is claim or lease under the Placer deemed in absence of evidence to Mining Act or the Quartz Mining the contrary, to be carrying on Act and any disposition, lease, li- business in Saskatchewan.” (Busi- cense, permit or other interest un- ness Corporations Act, Revised der the Oil and Gas Act; Statutes of Saskatchewan, Ch. B- “(g) it is authorized by license or 10, Sec. 262) permit or required to be so author-

Yukon Territory 71

ized under any enactment entitling (Business Corporations Act, it to carry on any profession, busi- Revised Statutes of the Yukon Ter- ness, occupation or calling in the ritory, 2002, Ch. 20, Sec. 275) Yukon; or “(h) it otherwise transacts or carries on business in the Yukon.”

STATUTORY “DOING BUSINESS” PROVISIONS LIMITED TO LENDING MONEY ON SECURITY

Most of the statutory “doing California—Sec. 191(d), Cali- business” provisions set forth fornia Corporations Code. above included references to lend- Illinois—Ch. 815, Sec. 125/1, ing money on security. In addition Illinois Compiled Statutes Anno- to those statutes, some states have tated. enacted laws permitting foreign Louisiana—Sec. 12:302(K), corporations to lend money to resi- West’s Louisiana Statutes Anno- dents without qualifying. These tated. statutes are designed to encourage Maryland—Sec. 7-104, Anno- investment in the state by foreign tated Code of Maryland, Corpora- financial institutions. They usually tions and Associations. exempt from qualification corporations lending money to residents, Michigan—Sec. 450.2013, taking security for such loans in Michigan Compiled Laws Anno- the form of mortgages on real tated. property located in the state, en- Mississippi—Sec. 81-5-41, forcing the security and servicing Mississippi Code 1972 Annotated. the mortgages. The statutory provi- Nevada – Sec. 80.015 (3) (c), sions vary greatly, however, and (d), Nevada Revised Statutes. the statutes in the particular states New Mexico—Sec. 38-1-18, concerned should be examined to New Mexico Statutes 1978 Anno- determine the activities exempted. tated. These statutes are too extensive Washington—Secs. 23B.18.010 to print here in full. The citations to 23B.18.030, Revised Code of to those in force at the time of writ- Washington Annotated. ing are set forth below. Wyoming—Sec. 13-1-202, Wyoming Statutes Annotated.

SPECIFIC DOING BUSINESS ACTIVITIES

Introduction appears, the citation and statute are set forth above, under the head- The answers to many doing ing “Statutory ‘Doing Business’ business questions can be found in Definitions Applicable to Ordinary judicial decisions. These decisions Business Corporations.”) It should often involve attempts by unquali- be emphasized that, in analyzing fied foreign corporations to enforce doing business problems, all of the their contracts in state courts. relevant facts must be considered. When the defendant contends that Thus, although a particular act of a the action is prohibited because the corporation may not constitute plaintiff has no certificate of au- doing business by itself, it is the thority, the court must determine cumulative effect of all of its whether the foreign corporation activities which determines the was transacting intrastate business. necessity of qualification. For ex- It is not possible to encompass ample, a Pennsylvania corporation in one definition all of the activi- contracted to supply materials to a ties which do or do not constitute company building a house in Mar- doing business. Perhaps the best yland. The corporation did not general description is that: have any property, bank accounts “It is established by well con- or employees in Maryland. How- sidered general authorities that a ever, the corporation did approxi- foreign corporation is doing, trans- mately $500,000 worth of sales in acting, carrying on, or engaging in Maryland, which was more than business within a state when it 2% of its total business. It paid transacts some substantial part of 1 sales tax on Maryland deliveries. its ordinary business therein.” The corporation’s own trucks de- The following discussions of livered its products in Maryland. whether certain specific business The trucks were registered in Mar- activities constitute doing business yland and were sometimes rented are based on the accumulated case to Maryland corporations. Fur- law and on the current applicable thermore, the corporation’s repre- statutory provisions. (Where state sentatives visited potential laws are referred to but no citation customers in Maryland, accepted orders and visited job sites. The Maryland Court of Appeals found 1. Royal Insurance Co. v. All States Thea- that these activities were sufficient tres , 242 Ala. 417, 6 So.2d 494 (1942).

75 76 Introduction

to require the corporation to quali- nois campuses, holding confer- fy to do business in the state. 2 ences in Illinois and meeting with The discussions which follow donors, that a Tennessee nonprofit should be read in light of the gen- corporation formed to work with eral definition of “doing business” students to promote conservative set forth above, since the purpose ideas was engaging in the activities for which a corporation is orga- or functions for which it was nized—i.e., its “ordinary business” formed and thus required to regis- —may be a decisive factor in re- ter. 5 solving a qualification question. For example, in two similar Ala- Interstate and Foreign bama cases, unqualified foreign Commerce corporations leased equipment to Alabama residents. In one case, 3 A state’s power to require a cor- leasing the machine was found to poration to qualify is limited by the be incidental to the corporation’s Commerce Clause of the United interstate activities and the plaintiff States Constitution. Qualification was allowed to enforce its contract. statutes are regulatory and cannot But in the other, later case, 4 the be imposed on corporations en- court noted that the plaintiff corpo- gaged exclusively in interstate ration was engaged in the business commerce. 1 of owning and leasing machines. Unlike the plaintiff in the earlier 5. Young America’s Foundation v. Doris case, owning and leasing property A. Pistole Revocable Living Trust, 998 N.E. was an indispensable part of the 2d 94 (Ill. App. 2013). 1. Eli Lilly & Co. v. Sav-on Drugs, Inc. , plaintiff’s primary business activi- 366 U.S. 276, 81 S.Ct. 1316 (1961); Allenberg ty—not incidental to another ac- Cotton Co., Inc. v. Pittman , 419 U.S. 20, 95 tivity. Therefore the plaintiff in the S.Ct. 260 (1974); Nippert v. City of Richmond , 327 U.S. 416, 66 S.Ct. 586 (1946); Best & Co. second case was unable to enforce v. Maxwell , 311 U.S. 454, 61 S.Ct. 334 the lease. (1940); Anglo-Chilean Nitrate Corporation v. An Illinois court stated there Alabama , 288 U.S. 218, 53 S.Ct. 373 (1933); was no doubt that in working ac- Furst & Thomas v. Brewster , 282 U.S. 493, 51 S.Ct. 295 (1931); Ozark Pipe Line Corp. v. tively with student groups on Illi- Monier , 266 U.S. 555, 45 S.Ct. 184 (1925); Real Silk Hosiery Mills v. City of Portland , 268 U.S. 325, 45 S.Ct. 525 (1925); Alpha 2. J.C. Snavely & Sons, Inc. v. Wheeler , Portland Cement Co. v. Massachusetts , 268 538 A.2d 324 (Md. App. 1988). U.S. 203, 45 S.Ct. 477 (1925); Dahnke- 3. Johnson v. MPL Leasing Corporation , Walker Milling Co. v. Bondurant , 257 U.S. 441 So.2d 904 (Ala. 1983). 282, 42 S.Ct. 106 (1921); York Mfg. Co. v. 4. Allstate Leasing Corporation v. Scrog- Colley , 247 U.S. 21, 38 S.Ct. 430 (1918); gins , 541 So.2d 17 (Ala. Civ. App. 1989). Western Oil Refining Co. v. Lipscomb , 244

Interstate and Foreign Commerce 77

In recognition of this, Model Idaho, Indiana, Iowa, Kansas, Ken- Act §106(1) and Revised Model tucky, Maine, Massachusetts, Act §15.01(b)(ii) state that “Trans- Michigan, Mississippi, Missouri, acting any business in interstate Montana, Nebraska, Nevada, New commerce” does not constitute Hampshire, New Mexico, North doing business so as to require Carolina, Ohio, Oklahoma, Ore- qualification. This or a similar pro- gon, Rhode Island, South Carolina, vision appears in the statutes of South Dakota, Tennessee, Texas, Alaska, Arizona, Arkansas, Colo- Utah, Vermont, Washington, West rado, Connecticut, Delaware, Dis- Virginia, Wisconsin and Wyo- trict of Columbia Florida, Hawaii, ming. In addition, California, Georgia, Louisiana, Maryland and Pennsylvania provide that transacting business in interstate or foreign U.S. 346, 37 S.Ct. 623 (1917); Davis v. Com- commerce does not require qualifi- monwealth of Virginia , 236 U.S. 697, 35 S.Ct. 479 (1915); Sioux Remedy Co. v. Cope , 235 cation. U.S. 197, 35 S.Ct. 57 (1914); International Even though corporations en- Text Book Co. v. Peterson , 218 U.S. 664, 31 gaging solely in interstate com- S.Ct. 225 (1910); Dozier v. Alabama , 218 U.S. 124, 30 S.Ct. 649 (1910); International Text merce are not subject to qualifica- Book Co. v. Pigg , 217 U.S. 91, 30 S.Ct. 481 tion statutes, some states have (1910); Rearick v. Pennsylvania , 203 U.S. placed other, less burdensome re- 507, 27 S.Ct. 159 (1906); Norfolk & Western strictions on them. Maryland, for Ry. Co. v. Sims , 191 U.S. 441, 24 S.Ct. 151 (1903); Caldwell v. North Carolina , 187 U.S. example, requires an unqualified 622, 23 S.Ct. 229 (1903); Brennan v. Ti- foreign corporation to register tusville , 53 U.S. 289, 14 S.Ct. 829 (1894); “. . . before doing any interstate or Corson v. Maryland , 120 U.S. 502, 7 S.Ct. 2 655 (1887); Butler Bros. Shoe Co. v. U.S. foreign business in this state.” To Rubber Co. , 156 Fed. 1 (8th Cir. [Colo.] register the corporation must certi- 1907), cert. den. (mem.) 212 U.S. 577, 29 fy its address and the name and S.Ct. 686 (1908); Tradewinds Environmental Restoration, Inc. v. Brown Bros. Construction, address of its resident agent in LLC , 999 So.2d 875 (Ala. 2008); Camaro Maryland and proof of good stand- Trading Company, Ltd. v. Nissei Sangyo ing in its home jurisdiction. In ad- America, Ltd. , 628 So.2d 463 (Ala. 1993); dition, Maryland law provides that Wise v. Grumman Credit Corporation , 603 So.2d 952 (Ala. 1992); Browning, Ektelon with certain exceptions, any “for- Division v. Williams , 628 N.E.2d 878 (Ill. eign corporation that owns income App. 1 Dist. 1993); Corporate Recruiters Ltd. producing real or tangible personal v. Norwest Financial, Inc. , 489 N.W.2d 729 (Iowa 1992); Harbin Yinhai Tech. Dev. Co. Ltd. v. Greentree Financial Group, Inc., 677 S.E. 2d 854 (N.C. App. 2009); SCS/Compute, Inc. v. Meredith , 864 P.2d 1292 (Okl. App. 2. Ann. Code of Maryland, Corps. & 1993). Ass’ns, Sec. 7-202.

78 Interstate and Foreign Commerce property in Maryland shall regis- norance of the requirement and if ter . . . to do interstate business. 1 all state taxes, interest and penal- Another example is New Jersey. ties have been paid. 4 This statute is In New Jersey, “Every foreign neither a taxing nor a qualification corporation which during any cal- provision. It was designed to ena- endar or fiscal accounting year . . . ble New Jersey tax officials to de- carried on any activity or owned or termine if corporations carrying on maintained any property in this activities in the state are subject to State . . . shall be required to file a any state taxes. 5 notice of business activities report” Minnesota requires unqualified unless it was qualified or filed a corporations that “obtained any Corporation Business Tax or cor- business from within this state” poration Income Tax return for the and have not filed an income tax period of such activity. 2 The statute return or claimed exempt status, to specifies some activities that will file an annual notice of business require the filing of the report, in- activities report. 6 cluding: maintenance of a place of A state cannot deny an unquali- business or personnel, even if they fied foreign corporation the right to are independent contractors, or not sue on a transaction or contract regularly stationed in the state; involving interstate commerce. 7 ownership of real or tangible personal property directly used by the 4. See Moyglare Stud Farm, Ltd. v. Due corporation; receiving payments Process Stable, Inc. , 569 F.Supp. 1565 from New Jersey residents totaling (S.D.N.Y. 1983). over $25,000; or the derivation of 5. American Bank & Trust Co. of Pennsyl- vania v. Lott , 490 A.2d 308 (N.J. 1985); Asso- income from any source within the ciates Consumer Discount Co. v. Bozzarello , state. Failure to file a report bars 149 N.J. Super. 358, 373 A.2d 1016 (App. the corporation from maintaining Div. 1977). 6. Minnesota Statutes Annotated, Sec. any action in New Jersey courts 290.371. until it files the report and pays all 7. Ex Parte Intern. Travel Service, Inc. , 68 taxes and penalties due. 3 The So.3d 823 (Ala. 2011); Ex Parte Cohen , 988 courts may excuse such a failure if So.2d 661 (Ala. 2008); SGB Construction Services, Inc. v. Ray Sumlin Construction Co., it was caused by “reasonable” ig- Inc. , 644 So.2d 892 (Ala. 1994); Wise v. Grumman Credit Corporation , 603 So.2d 952 (Ala. 1992); Joison Limited v. Taylor , 567 1. Ann. Code of Maryland, Corps. & So.2d 862 (Ala. 1990); Casa Investments Co. Ass’ns, Sec. 7-202.1. v. Boles, (Ala Civ. App. 2005); S&H Contrac- 2. New Jersey Statutes Annotated, Secs. tors, Inc. v. A.J. Taft Coal Co., Inc. , 906 F.2d 14A:13-14 et seq. 1507 (11th Cir. 1990); Leasing Service Cor- 3. First Family Mortgage Corp. of Florida poration v. Hobbs Equipment Co. , 707 v. Durham , 528 A.2d 1288 (N.J. 1987). F.Supp. 1276 (N.D. Ala. 1989); Green Tree

Interstate and Foreign Commerce 79

Whether an activity is local or in- intrastate business if the contract terstate in nature is a question of was accepted outside the state. 8 fact that must be determined on a Whether a foreign corporation is case-by-case basis. A great many doing interstate or intrastate busi- decisions have been handed down ness may turn on whether the cor- weighing the significance, alone poration has localized its business and cumulatively, of innumerable in the forum state. 9 To determine if activities. Some activities have a corporation has localized its been universally held to constitute business, a court will look at such “doing intrastate business.” These factors as the quantity of business include maintaining a stock of and permanence and number of goods in a state from which deliv- employees and officers. For exam- eries are regularly made to cus- ple, in a Nevada case, 10 an Oregon tomers in that state. Other corporation sold windows in 30 activities, standing alone, have states. Of its total of $20 million in been held to fall short of doing business, e.g., the mere solicitation of orders, or the maintenance of an 8. North Alabama Marine, Inc. v. Sea Ray Boats, Inc. , 533 So.2d 598 (Ala. 1988); Shook office in furtherance of the corpo- & Fletcher Insulation Co. v. Panel Systems , ration’s interstate activities. Con- 784 F.2d 1566 (11th Cir. 1986); Nelms v. tracting with a party located in the Morgan Portable Bldg. Corp. , 808 S.W.2d forum state is not considered doing 314 (Ark. 1991); Moore v. Luxor (North America) Corporation , 742 S.W.2d 916 (Ark. 1988); Budget Premium Co. v. Motor Ways, Inc. , 400 N.W.2d 60 (Iowa App. 1986); Mas- sey-Ferguson Credit Corp. v. Black , 764 Acceptance, Inc. v. Blalock , 525 So.2d 1366 S.W.2d 137 (Mo. App. 1989); Durish v. (Ala. 1988); Building Maintenance Personnel, Panan Intern. , N.V., 808 S.W.2d 175 Inc. v. International Shipbuildings, Inc. , 621 (Tex.App.-Houston [14th Dist.] 1991); Chase So.2d 1303 (Fla. 1993); Lawson Products, Inc. Commercial Corp. v. Barton , 571 A.2d 682 v. Tifco Industries, Inc. , 660 F.Supp. 892 (Vt. 1990). (M.D. Fla. 1987); Bank of America , N.A. 9. Union Brokerage Co. v. Jensen , 322 v Ebro Foods, Inc., 948 N.E.2d 685 (Ill. U.S. 202 (1944); Allenberg Cotton Co. v. App. 1 Dist. 2011); Alliance Steel, Inc. v. Pittman , 419 U.S. 20 (1974); Camaro Trading Piland , 134 P.3d 669 (Kan. App. 2006); Company, Ltd. v. Nissei Sangyo America, Ltd. , Kayser Roth Co. v. Holmes , 693 S.W.2d 907 628 So.2d 463 (Ala. 1993); Hinden/Owen/ (Mo. App. 1985); Taylor & Martin, Inc. v. Engelke, Inc. v. Wailea Kai Charters , 949 F. Hiland Dairy, Inc ., 676 S.W.2d 859 (Mo. Supp. 775 (D. Hawaii); Tiller Construction App. 1984); Bayonne Block Co. Inc. v. Porco , Corporation v. Nadler , 637 A.2d 1183 (Md. 654 N.Y.S.2d 961 (N.Y. City Civ. Ct. 1996); 1994); Shannon Sales Co., Inc. v. Williams , Contel Credit Corp. v. Tiger Inc. , 520 N.E.2d 490 N.W.2d (Minn. App. 1992); Tetra Tech- 1385 (Ohio App. 1987); L.V. Appleby, Inc. v. nologies, Inc. v. Harter , 823 F.Supp. 1116 Griffes , 648 A.2d 808 (Vt. 1993); Green (S.D.N.Y. 1993). Thumb, Inc. v. Tiegs , 726 P.2d 1024 (Wash. 10. Sierra Glass & Mirror v. Viking Indus., App. 1986). Inc. 808 P.2d 512 (Nev. 1991).

80 Interstate and Foreign Commerce

sales, $3 million came from Neva- In the District of Columbia, it da. The court held that such a high has been held that contacts with the volume of sales from Nevada Federal Government which are of would ordinarily subject a corpora- uniquely governmental, rather than tion to the qualification require- commercial, nature “do not as such ments. However, because the satisfy the ‘doing business’ criteri- company had only one salesperson on of the local jurisdictional stat- and no business office in Nevada, utes,” 13 and hence would not the court found that it had not lo- require qualification, either. This calized its activities in Nevada to “government contacts” exception the extent that the activities took is necessary because of the unique on an intrastate quality. Therefore, character of the District of Colum- the corporation was permitted to bia as the seat of the national gov- bring suit without qualifying in ernment and the need to facilitate Nevada. access to federal agencies. A New York court, holding that A foreign corporation is also the defendant did not meet its bur- permitted to maintain an action on den of showing that the plaintiff, an intrastate activity if the activity an unlicensed foreign corporation, was merely a necessary and inci- had conducted systematic and reg- dental part of an interstate transac- ular business activities, stated that tion. In Alabama it was held that a “the defendant failed to ascertain foreign corporation did not have to such pivotal factors as the volume qualify in order to employ an agent of plaintiff’s sales within New in the state to check inventory and York, both in number and dollar receive payments on a contract amounts.” 11 Another New York made in interstate commerce. 14 court held that a foreign corporation was engaged in interstate 13. Environmental Research International, commerce where its business was Inc. v. Lockwood Greene Engineers, Inc. , 355 limited to taking orders from and A.2d 808 (D.C. App. 1976); Siam Kraft Paper delivering goods to buyers in New Co., Ltd. v. Parsons & Whittemore, Inc. , 400 York State, where it had no offices F.Supp. 810 (D.D.C. 1975); Traher v. De Havilland Aircraft of Canada, Ltd. , 294 F.2d in New York, and did not advertise 229 (D.C. Cir. 1961), cert. den. 368 U.S. 954, or regularly induce the purchase of 82 S.Ct. 397 (1962); Mueller Brass Co. v. its products by New York users. 12 Alexander Milburn Co. , 152 F.2d 142 (D.C. 1945); compare Frene v. Louisville Cement Co. , 134 F.2d 511 (D.C. Cir. 1943). 11. Maro Leather Co. v. Argentinas , 617 14. North Alabama Marine, Inc. v. Sea Ray N.Y.S. 2d 617 (Sup. 1994). Boats, Inc. , 533 So.2d 598 (Ala. 1988). See 12. Bayonne Block Co. Inc. v. Porco , 654 also Andrews v. Central Petroleum, Inc. , 63 N.Y.S.2d 961 (N.Y. City Civ. Ct. 1996). So.3d 650 (Ala. Civ. App. 2010).

Interstate and Foreign Commerce 81

Another Alabama case held that a The Constitution also grants foreign corporation whose only Congress the power to regulate intrastate activities consisted of commerce with foreign nations. In delivery, set up, and repair work, determining whether a corporation incidental to a contract entered into engaged in foreign commerce must in Tennessee, was not required to qualify, the same rules will apply qualify. 15 An Ohio court held a as in the case of any other corpora- company did not have to qualify in tion. If the corporation is engaged order to repair machinery sold in exclusively in foreign commerce interstate commerce. 16 In a Mary- with respect to the state, it cannot land case, a Taiwanese corporation be forced to qualify. If the corpora- was in the business of transporting tion does intrastate business in the goods between the Far East and the state, the fact that it is also engaged United States. The corporation in foreign commerce will not pro- advertised its shipping business tect it from the qualification re- and maintained a shipping agent in quirements. Maryland, paid docking fees and For example, a French corpora- bought fuel and provisions in Mar- tion which sold works of art in the yland. The court held that it was United States brought an action in not required to qualify because the Southern District of New York. these activities were necessary and The defendants claimed that be- essential to its activities in foreign cause the art market in the United commerce. 17 And in an Iowa case, States is centered in New York, it the court held that a Nebraska cor- must be presumed that the French poration that conducted business in corporation was conducting regular Iowa via telephone communication business in and from New York. and facsimile transmission from its The district court rejected this pre- Nebraska office, was conducting sumption and found that defend- interstate business and not required ants failed to supply any evidence to qualify. 18 that the corporation had localized its business in New York. Because it was engaged solely in foreign 15. Billions v. White & Stafford Furniture and interstate commerce, the Co. , 529 So.2d 878 (Ala. Civ. App. 1988). French corporation could bring suit 16. Saeilo Machinery, Inc. v. Myers , 489 without qualifying. 19 N.E.2d 1083 (Ohio Com. Pl. 1985). 17. Yangming Marine Transport Corp. v. Revon Products U.S.A., Inc. , 536 A.2d 633 (Md. 1988). 18. Corporate Recruiters Ltd. v. Norwest 19. Galerie Furstenberg v. Coffaro , 697 Financial Inc. , 489 N.W.2d 729 (Iowa 1992). F.Supp. 1282 (S.D.N.Y. 1988).

82 Interstate and Foreign Commerce

The United States Supreme eign commerce and did not require Court held that a corporation qualification in New York. 24 which cleared goods through cus- And where a Bermuda corpora- toms and paid tariffs was doing tion sought to collect on a guaranty intrastate business and required to executed by New York residents in qualify. 20 However, the New York the course of financing the pur- Supreme Court has held that a for- chase of a ship in foreign com- eign corporation which shipped merce, the New York court held goods on consignment from a for- that the guaranty was not separable eign country to its resident agent in from the underlying financial New York was not required to transaction. Even if it could have qualify, 21 and a corporation which been considered separately, it entered into a contract in New would have been an isolated trans- York for the transportation of pas- action. In either case, the foreign sengers from New York to Canada corporation did not have to qualify was not required to qualify. 22 in order to sue on the guaranty. 25 Where a French publisher had an Several other cases involving for- agent in New York, but orders eign commerce are cited below. 26 were accepted in Paris, the publisher was not required to qualify Isolated Transactions before enforcing its contracts in New York. 23 Where a foreign cor- Section 106(j) of the Model poration that owned and operated Business Corporation Act provides hotels in Mexico, contracted with that “. . .a foreign corporation shall New York corporations to handle reservations and hotel deposits on 24. Posadas De Mexico, S.A. de C.V. v. its behalf, the court found that the Dukes , 757 F.Supp. 297 (S.D.N.Y. 1991). foreign corporation’s efforts to 25. Netherlands Ship-Mortgage Corp., Ltd. v. Madias , 717 F.2d 731 (2d Cir. [N.Y.] market its Mexican hotel services 1983), rev’g 554 F.Supp. 375 (S.D.N.Y. were purely in furtherance of for- 1983). 26. Dant & Russell, Inc. v. Board of Su- pervisors of Los Angeles County , 128 P.2d 20. Union Brokerage Co. v. Jensen , 322 389 (Cal. App. 1942); Commodity Ocean U.S. 202, 64 S.Ct. 967 (1944). Transport Corp. v. Royce , 633 N.Y.S.2d 541 21. Badische Lederwerke v. Capitelli , 92 (A.D. 2 Dept. 1995); Storwal Intern., Inc. v. Misc. 260, 155 N.Y.S. 651 (Sup. Ct. 1915). Thom Rock Realty Co., L.P. , 784 F.Supp 1141 22. Erie Beach Amusements, Ltd. v. (S.D.N.Y. 1992); Alicanto, S.A. v. Woolverton , Spirella Co., Inc. , 173 N.Y.S. 626 (Niagara 514 N.Y.S.2d 96 (1987); National Mercantile Co. Ct. 1918). Co., Ltd. v. Watson , 215 Fed. 929 (D. Ore. 23. Librairie Hachette, S.A. v. Paris Book 1914); United Fruit Co. v. Department of Center, Inc. , 309 N.Y.S.2d 701 (Sup. Ct. Labor and Industry , 344 Pa. 172, 25 A.2d 171 1970). (1942).

Isolated Transactions 83

not be considered to be transacting transaction is less than a “substan- business in this State, for the pur- tial part,” it will not require quali- poses of [qualification], by reason fication. 1 The difficulty arises in of. . .[c]onducting an isolated determining what an isolated trans- transaction completed within a action is. period of thirty days and not in the In a New York Supreme Court course of a number of repeated case, 2 an unqualified foreign cor- transactions of like nature.” Sec- poration entered into a contract tion 15.01(b)(10) of the Revised with the defendant in New York Model Act is substantially the for the sale of a freezer. Although same. This provision has been this was one of only two contracts adopted in the following states: made by the corporation in the Alaska, Arizona, Arkansas, Colo- state, the corporation had adver- rado, Connecticut, Florida, Hawaii, tised in New York papers and had Idaho, Indiana, Iowa, Kansas, Ken- tucky, Louisiana, Maine, Massa- chusetts, Michigan, Minnesota, 1. Winston Corporation v. Park Electric Company , 126 Ga. App. 489, 191 S.E.2d 340 Mississippi, Missouri, Montana, (1972); Aero Service Corp. (Western) v. Ben- Nebraska, New Hampshire, New son , 374 P.2d 277 (Id. 1962); Bank of Ameri- Mexico, Nevada, North Dakota, ca , N.A. v Ebro Foods, Inc., 948 N.E.2d 685 (Ill. App. 1 Dist. 2011); Long Manufacturing Oregon, Rhode Island, South Caro- Co., Inc. v. Wright-Way Farm Service, Inc. , lina, South Dakota, Texas, Utah, 214 N.W.2d 816 (Mich. 1974); Behlen Manu- Virginia, Washington, West Vir- facturing Co. v. Andries-Butler, Inc. , 217 N.W.2d 125 (Mich. App. 1974); United Mer- ginia, Wisconsin and Wyoming. cantile Agencies v. Jackson , 173 S.W.2d 881 The District of Columbia, Geor- (Mo. 1943); Reynolds Offset Co. v. Summer , gia, Idaho, Maryland, Pennsylva- 156 A.2d 737 (N.J. Super. App. Div. 1959); nia, and Vermont statutes contain Reese v. Harper Surface Finishing Systems , 517 N.Y.S. 2d 522 (1987); Peter Matthews, similar provisions, except there is Ltd. v. Robert Mabey, Inc. , 499 N.Y.S.2d 256 no requirement that the transaction (1986); Netherlands Ship-Mortgage Corp., be completed within thirty days. Ltd. v. Madias , 717 F.731 (2d Cir. [N.Y.] 1983); Walden v. Automobile Brokers, Inc. , Tennessee and North Carolina ex- 160 P.2d 400 (Okla. 1945); American Housing tend the period to six months, Illi- Trust, III v. Jones , 696 A.2d 1181 (Pa. 1997); nois to 120 days, and California Hoffman Const. Co. v. Erwin , 331 Pa. 384, 200 A.579 (1938); Thorp Finance Corpora- extends it to 180 days. tion v. Wright , 399 P.2d 206 (Utah 1965). Transacting some substantial 2. Franklin Enterprises Corp. v. Moore , 34 part of its ordinary business in a Misc.2d 594, 226 N.Y.S.2d 527 (Sup. Ct. state is generally considered suffi- 1962), quoting Mahar v. Harrington Park Villa Sites , 146 App. Div. 756, 131 N.Y.S. cient to require a foreign corpora- 514 (1st Dept. 1911); rev’d on other grounds, tion to qualify. Because an isolated 204 N.Y. 231, 97 N.E. 587 (1912).

84 Isolated Transactions

employed an answering service in indicates a general plan to continue the state. The Court found it “hard doing business in the state. 4 to believe” that the unlicensed for- Generally, a single contract is eign corporation would have so considered an isolated transaction. 5 acted in connection with a plan to In a case involving a franchise make only one or two sales and agreement, a Michigan court held concluded that the corporation was that the agreement was an isolated doing business in New York. In transaction and, where the only another case, an unqualified for- services rendered by the foreign eign corporation brought an action corporation were “essential to this in New York to enforce a purchase isolated agreement,” qualification option on an apartment it rented in was not required. 6 New York City. In the absence of A different situation can be contrary evidence, the court pre- found in cases decided in Ala- sumed “that plaintiff maintains the

apartment in question for use by its 4. Tiller Construction Corporation v. officers and employees while they Nadler , 637 A.2d 1183 (Md. 1994); General are in New York to transact the Highways Systems, Inc. v. Dennis , 230 N.W. 906 (Mich. 1930); Palm Vacuum Cleaner Co. corporation’s business, and that the v. Bjornstad , 136 Minn. 38, 161 N.W. 215 corporation would not maintain a (1917); Peterman Const. and Supply Co. v. permanent apartment here unless Blumenfeld , 125 So. 548 (Miss. 1930); State such business consisted of more ex rel. Lay v. Arthur Greenfield, Inc. , 205 S.W. 619 (Mo. 1918); Franklin Enterprises than a casual, isolated or occasion- Corporation v. Moore , 34 Misc.2d 594, 226 3 al transaction.” The court dis- N.Y.S.2d 527 (Sup. Ct. 1962); National Sign missed the suit, but granted Corp. v. Maccar Cleveland Sales Corp. , 33 Ohio App. 89, 168 N.E. 758 (1929); Hoffman plaintiff leave to renew if it wished Const. Co. v. Erwin , 331 Pa. 384, 200 A.579 to rebut the court’s presumption (1938); Mandel Bros., Inc. v. Henry A. O’Neil, that it was doing business in New Inc. , 69 F.2d 452 (8th Cir. [S.D.] 1934); Inter- state Const. Co. v. Lakeview Canal Co. , 31 York. Wyo. 191, 224 Pac. 850 (1924); Gosch v. Generally, a foreign corporation B&D Shrimp, Inc. , 822 S.W.2d 802 (Tex. will not be exempt from qualifica- App. Houston [1st Dist.] 1992). tion, even though only one or two 5. Mfrs. Nat. Bank of Detroit v. Tri-State , 410 S.E.2d 808 (Ga. App. 1991); Hinden/ contracts are involved, if the trans- Owen/Engelke, Inc. v. Wailea Kai Charters , action is of long duration or if it 949 F. Supp. 775 (D. Hawaii); Interline Furni- ture, Inc. v. Hodor Industries Corp. , 527 N.Y.S.2d 544 (1988); Gosch v. B&D Shrimp, Inc. , 830 S.W.2d 652 (Tex. App.-Houston [1st Dist.] 1992). 3. Girod Trust Co. v. Kingsdown Corp. 6. Dur-Ram Packaging Devices v. Self- N.V. , 108 Misc.2d 759, 760, 438 N.Y.S.2d Seal Containers , 170 N.W.2d 473 (Mich. App. 894, 895 (Sup. Ct. 1981). 1969).

Isolated Transactions 85 bama. There, it has been held that rental period extended beyond the any isolated transaction which is thirty-day statutory period. 10 An- part of the ordinary business of the other Texas court held that a sale corporation will constitute doing of a boat was not an isolated trans- business, even without any repeti- action where it was implicit in the tion or intent to continue doing agreement that transfer of title business. 7 would not occur within 30 days. 11 The Alabama courts have stated But where a foreign corporation that “the general rule. . .is that a entered into an earnest money con- single act of business is sufficient tract, and where the contract was to bring a foreign corporation with- executed on November 3, the in the purview of doing business in money and the contract were re- Alabama.” 8 Where a corporation, ceived by the seller on November formed for the purpose of acquir- 7, and the closing date was set for ing other corporations, engaged in December 5, a Texas court held an “isolated” transaction in which that the corporation did not have to it negotiated in Alabama a contract qualify to sue the seller because the to purchase shares in an Alabama transaction was an isolated transac- corporation, it was held to be doing tion that could have been complet- business and the contract was held ed within 30 days. 12 The fact that unenforceable. 9 the contract was executed more A Texas court held that the rent- than 30 days before the clos- al of equipment in Texas was not ing date did not matter because the an isolated transaction where the contract was not binding until the money and contract were received.

7. Royal Insurance Co. Ltd. v. All States A Georgia court ruled that the Theatres, Inc. , 242 Ala. 417, 6 So.2d 494 sale and delivery of a carillon bell (1942); Geo W. Muller Mfg. Co. v. First Na- by a foreign corporation was not an tional Bank of Dothan , 57 So.762 (Ala. 1912); Alabama Western R. Co. v. Talley-Bates isolated transaction where the cor- Const. Co. , 162 Ala. 396, 50 So. 341 (1909); poration had made at least four State v. Bristol Savings Bank , 18 So. 533 (Ala. other sales in Georgia and where 1895); Farrior v. New England Mortgage Security Co. , 88 Ala. 275, 7 So. 200 (1890). 8. Vines v. Romar Beach, Inc. , 670 So.2d 10. Jay-Lor Textiles, Inc. v. Pacific Com- 901 (Ala. 1995); Allstate Leasing Corp. v. press Warehouse Co. , 547 S.W.2d 738 (Tex. Scroggins , 541 So.2d 17 (Ala. Civ. App. Civ. App. 1977). 1989); Green Tree Acceptance, Inc. v. 11. Gosch v. B&D Shrimp, Inc. , 830 Blalock , 525 So.2d 1366 (Ala. 1988). S.W.2d 652 (Tex. App.-Houston [1st Dist.] 9. Continental Telephone Co. v. M.G. 1992). Weaver, et al. , Civil Action No. 67-180, N.D. 12. Durish v. Panan Intern., N.V. , 808 Ala., May 17, 1968, aff’d 410 F.2d 1196 (5th S.W.2d 175 (Tex. App.-Houston [14th Dist.] Cir. 1969). 1991).

86 Isolated Transactions

the corporation’s letterhead listed action which did not require quali- “General offices” within the fication. 16 state. 13 Where a Pennsylvania real es- In another case, 14 a Georgia tate corporation took part in only court held that a foreign corpora- one sale in Delaware, it was an tion’s activities in designing, sur- isolated transaction, and the corpo- veying and planning the construc- ration did not have to qualify in tion of an alpine slide ride order to bring suit. 17 indicated that it was proposing to A Missouri court held that, conduct a continuous business in where a mortuary corporation’s the state and did not constitute an only contact with the state was the isolated transaction. However, in a transportation of a body to and third Georgia case, 15 the court held from Missouri for visitation pur- that an Arizona professional corpo- poses, it was an isolated transac- ration that represented a client in tion and the corporation was not Georgia did not have to qualify, required to qualify. 18 A foreign even though it had two previous corporation in the business of find- Georgia clients, because the earlier ing sources of financing was found cases had not been connected to not to be doing business in Hawaii the one in question. Thus, the cor- under the isolated transaction ex- poration had not extended its busi- ception where it entered into a sin- ness into the state on a continuous gle contract associated with Hawaii basis, and its representation had and where the contract did not constituted an isolated transaction. form a long term relationship be- And, where a corporation whose tween the parties or require any business was primarily in interstate performance in Hawaii. 19 commerce warehoused products in In an Alabama case, a foreign Georgia during one Christmas corporation leased an ice cream sales season and made sales from machine to Alabama residents. In that warehouse, the court held that finding that the corporation was this activity was an isolated trans-

16. Al & Dick, Inc. v. Cuisinarts, Inc. , 528 13. Van Bergen Belfoundries, Inc. v. Exec- F.Supp. 633 (N.D. Ga. 1981). utive Equities, Inc. , 228 S.E.2d 356 (Ga. Ct. 17. Coyle v. Peoples , 349 A.2d 870 (Del. App. 1976). Super. 1975). 14. Barker v. County of Forsyth , 248 Ga. 18. Marks Mortuary v. Estate of Koeppel , 73, 281 S.E.2d 549 (1981). 740 S.W.2d 397 (Mo. App. 1987). 15. Reisman v. Martori, Meyer, Hendricks 19. Hinden/Owen/Engelke, Inc. v. Wailea & Victor , 155 Ga. App. 551, 271 S.E.2d 685 Kai Charters , 949 F. Supp. 775 (D. Hawaii (1980). 1996).

Corporate Secondary Activities 87

doing business and could not en- tion and production activities that force the lease in Alabama’s exceeded 30 days. 23 courts, the court stated, “this is not an isolated transaction; there have, since 1984, been 31 transactions involving about $350,000.” 20 In an Corporate Secondary Illinois case, evidence that a for- Activities eign employee placement company worked with an unknown number In General of individuals in Illinois was insuf- Generally, activities incidental ficient to show that the company to the foreign corporation’s main did business on a regular basis as business do not require qualifica- opposed to engaging in occasional tion. It is difficult, however, to find and isolated transactions in the 21 cases directly on point, since most state. A Georgia court held that a of the decisions have turned on sets foreign corporation was not doing of facts which included more than business in Georgia under the iso- one activity. Innumerable decisions lated transaction exception where have held qualification necessary its sole activity was a single sale of 22 because of the sum total of the goods to the plaintiff. corporation’s activities in the state, In a case involving an LLC the even though the “secondary” activ- court dismissed claims brought by ities involved might not have re- the foreign LLC arising out of a quired qualification by themselves. joint venture to put on a concert in Where a foreign corporation’s Nebraska. The court held that the intrastate business was limited to LLC was not exempt from quali- one secondary activity, qualifica- fication under the isolated transaction has not been required. For tions exception. Although the example, a Nevada court held that concert itself may have been an sending representatives to a con- isolated transaction the LLC also vention did not constitute doing engaged in negotiations, promo- business in the state. 1 It has been held that trips into a state to nego-

20. Allstate Leasing Corp. v. Scroggins , 541 So.2d 17 (Ala. Civ. App. 1989). 23. Blue Events, LLC v. Lincoln Profes- 21. Career Concepts, Inc. v. Synergy , 865 sional Baseball, Inc., 2014 U.S.LEXIS 11518. N.E.2d 385 (Ill. App. 1 Dist. 2007). 1. In the Matter of the Las Vegas Hilton 22. Hall v. Sencore, Inc. , 691 S.E.2d 266 Hotel Fire Litigation , 706 P.2d 137 (Nev. (Ga. 2010) 1985).

88 Corporate Secondary Activities

tiate contracts and troubleshoot tion’s attempts to execute a reverse were not doing business. 2 merger to reorganize as a publicly Qualification may not be re- traded company in the United quired even though a corporation States were excluded by the quali- engaged in several secondary ac- fication provision as “carrying on tivities. A New York court held other activities concerning its in- that an Argentine corporation that ternal affairs”. 7 maintained an office and two bank Other typical secondary activi- accounts in New York and em- ties include: preliminary acts per- ployed a New York attorney as formed by the corporation to authorized signatory of the bank determine whether or not it should accounts was not engaged in the begin business in the state, main- type of activities that would retaining bank accounts holding quire qualification. 3 directors’ meetings, collecting A foreign corporation is general- accounts maintaining books and ly not required to qualify to carry- records, and bringing suit. These ing on activities concerning its and other activities are covered internal affairs. 4 A Florida court more fully in the following sec- held that a foreign corporation in tions. For a discussion of sales by a the process of dissolving and wind- corporation of its own securities, ing up its affairs was not required see the section “Sales of Securi- to qualify to prosecute a suit to ties.” recover assets. 5 A New Hampshire court held that a foreign corpora- Advertising tion was not required to register to It is specifically provided by engage in activities related to its statute in Delaware and Oklahoma dissolution and passing its assets to 6 that certain methods of advertising its shareholders. A North Carolina by a company in the mail order or court held that a Chinese corpora- similar business shall not constitute doing business for qualification 2. Shook & Fletcher Insulation Co. v. Pan- 1 el Systems, Inc. , 784 F.Supp. 1566 (11th Cir. purposes. 1986). It has been held that a foreign 3. Alicanto, S.A. v. Woolverton , 514 corporation may enter a state with- N.Y.S.2d 96 (1987). 4. Model Business Corporation Act, Sec. out qualifying for the purpose of 106(b); Revised Model Corporation Act, Sec. 15.01(b)(2). 7. Harbin Yinhai Tech. Dev. Co. Ltd. v. 5. Selepro, Inc. v. Church, 17 So.2d 1267 Greentree Financial Group, Inc., 677 S.E. 2d (Fla. App. 2009). 854 (N.C. App. 2009). 6. Brentwood Voluntary Fireman’s Assoc. 1. Delaware Code, Title 8, Sec. 373; Okla- v. Musso , 986 A.2d 580 (N.H. 2009). homa Statutes Annotated, Title 18, Sec. 1132.

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soliciting orders for advertisements However, when the foreign cor- to appear in a publication printed poration enters a state to effect the in another state if the orders are actual advertising itself, the courts accepted outside the state where have reached a different result. For they are solicited. 2 A similar con- instance, a foreign corporation has clusion was reached where the been considered doing business material to be published outside when it agrees to set up signs in a the state was a trade catalog pre- state, brings the signs into the state, pared for a company in the state in puts them in place and maintains which the foreign corporation was them. 5 not authorized to do business. 3 Entering into contracts with The furnishing by a foreign cor- merchants in a state in which a poration of advertising material, foreign corporation is not author- such as type, cuts, mats and dis- ized to do business, followed by plays, from without the state, to be the exhibition of films advertising used by the purchaser locally, has the merchants’ wares in local thea- been held to constitute interstate ters, had been ruled to constitute commerce not requiring qualifica- intrastate business requiring quali- tion on the part of the foreign cor- fication, even though the films are poration. 4 produced outside the state. 6 In a New Mexico case, a corporation involved in financing the 2. Alfred M. Best Co., Inc. v. Goldstein , 1 A.2d 140 (Sup. Ct. Errors, Conn . 1938); United Newspapers Magazine Corp. v. United Elec. Co. , 34 N.E.2d 284 (Ohio App. 1940); Advertising Companies, Inc. , 297 Ill. App. Altheimer & Baer, Inc. v. Vergal Bourland 637, 17 N.E.2d 345 (1983); Stevens-Davis Co. Home Appliances , 369 S.W.2d 478 (Tex. Civ. v. Peerless Service Laundry , 170 At. 619 (N.J. App. 1963); Bogata Mercantile Co. v. 1934); Bell Telephone Co. of Philadelphia v. Outcault Advertising Co. , 184 S.W. 333 (Tex. Galen Hall Co. , 72 Atl. 47 (N.J. 1909); Amer- Civ. App. 1916). ican Contractor Publishing Co. v. Michael 5. Imperial Curtain Co. v. Jacob , 127 Nocenti Co. , 139 N.Y.S. 853 (Sup. Ct. App. N.W. 772 (Mich. 1910); Western Outdoor Term 1st Dept. 1913); American Contractor Advertising Co. v. Berbigilia, Inc. , 263 S.W.2d Publishing Co. v. Bagge , 91 N.Y.S. 73 (Sup. 205 (K.C. (Mo.) App. 1953); National Sign Ct., App. Term 1904). Corp. v. Maccar Cleveland Sales Corp. , 33 3. Blackwell-Wielandy Co. v. Sabine Sup- Ohio App. 89, 168 N.E. 758 (1929); Motor ply Co. , 38 S.W.2d 654 (Tex. Civ. App. 1931). Supply Co. v. General Outdoor Advertising 4. Norm Advertising, Inc. v. Parker , 172 Co. , 44 S.W.2d 507 (Tex. Civ. App. 1931); So. 586 (La. App. 1937); Outcault Advertising North American Service Co. v. A.T. Vick Co. , Co. v. Citizens’ State Bank of Roseau , 180 243 S.W. 549 (Tex. Civ. App. 1922); Street N.W. 705 (Minn. 1920); In re Dennin’s Will, Railway Advertising Co. v. Lavo Co. of Amer- 37 N.Y.S.2d 725 (Supr. Ct. 1942); Local ica , 198 N.W. 595 (Wis. 1924). Trademarks, Inc. v. Derrow Motor Sales Inc. , 6. State, for use of Independence County v. 201 N.E.2d 222 (Ohio App. 1963) (but see, Tad Screen Advertising Co. , 133 S.W.2d 1 contra, Clare & Foster, Inc. v. Diamond S. (Ark. 1939).

90 Corporate Secondary Activities purchase of airplanes was not re- actual production was done in New quired to qualify because of an Mexico. 10 In New Jersey it has exemption for lending money and been held that the process of solic- collecting debts. The court found iting advertising business from a that certain related activities, in- New Jersey corporation and then cluding advertising in form letters, placing ads in New Jersey newspa- leasing an advertising sign, having pers constitutes doing intrastate an employee who made trips to the business. 11 In Maryland, a foreign state to solicit business and holding corporation that solicited business two seminars for dealers in the through ads in national magazines state, did not constitute doing busi- and had no other contacts with ness because they were incidental Maryland was not doing intrastate to and directly related to the per- business. 12 mitted activity. 7 There are other cases in this area A manufacturer was held not to which support the general proposi- be transacting business in Wiscon- tions stated above, and which may sin for purposes of qualification by be of interest. 13 reason of placing 25 advertisements in national magazines wide- 8 10. The Competitive Edge, Inc. v. Tony ly distributed in the state. A Moore Buick-GMS, Inc. , 490 So.2d 1242 (Ala. wholesaler whose business was Civ. App. 1986). primarily interstate in nature was 11. Davis & Dorand, Inc. v. Patient Care Medical Services, Inc. , 506 A.2d 70 (N.J. found not to be transacting intra- Super. L. 1985). state business in Georgia despite 12. Yangming Marine Transport Corp. v. advertising its product in local me- Revon Products U.S.A., Inc. , 536 A.2d 633 (Md. 1988). dia and in national magazines sold 13. Union Interchange, Inc. v. Mortensen , 9 in Georgia. 366 P.2d 333 (Ariz. 1961); Alexander Film A foreign corporation that pro- Co. v. State , 201 Ark. 1052, 147 S.W.2d 1011 (1941) (manufacture and exhibition of films); vided advertising and marketing Dean v. Caldwell , 141 Ark. 38, 216 S.W. 31 services to automobile dealers was (1919) (trade campaign); The Journal Co. of held to be doing business in Ala- Troy v. F.A.L. Motor Co. , 181 Ill. App. 530 bama because the ads were broad- (1913) (space advertising); International Transportation Ass’n v. Des Moines Morris cast in Alabama, even though the Plan Co. , 215 Iowa 268, 245 N.W. 244 (1932) (preparation of trade catalog); George H. Cox Co. v. Phonograph Co. , 208 Ky. 398, 270 7. Cessna Finance Corp. v. Mesilla Valley S.W. 811 (Ky. Ct. App. 1925) (promotional Flying Serv., Inc. , 462 P.2d 144 (N.M. 1969). exhibition); Standard Fashion Co. v. Cum- 8. Fields v. Peyer , 250 N.W.2d 311 (Wis. mings , 187 Mich. 196, 153 N.W. 814 (1915) 1977). (advertisement catalog); Union Interchange, 9. Al & Dick, Inc. v. Cuisinarts, Inc. , 528 Inc. v. Parker , 357 P.2d 339 (Mont. 1960); F.Supp. 633 (N.D. Ga. 1981). Brooks Packing Co., Inc. v. Eastman Labora-

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Bank Accounts account, the best authority is the cases holding that various activi- Section 106(c) of the Model ties, including the maintenance of Business Corporation Act and Sec- bank accounts, do not require qual- tion 15.01(b)(3) of the Revised ification. 1 For example, in a New Model Act provide that “maintain- York case, the only evidence pre- ing bank accounts” will not consti- sented to show that the foreign tute doing business for the purpose corporation was doing business in of qualification. States which have New York was that the contract adopted this provision or one simi- was executed and performed in lar to it include Alaska, Arizona, New York and that the corporation Arkansas, California, Colorado, had a New York address and a Connecticut, District of Columbia, New York bank account. The court Florida, Georgia, Hawaii, Idaho, held that this evidence was insuffi- Illinois, Indiana, Iowa, Kansas, cient to support the allegation that Kentucky, Louisiana, Maine, Mar- the corporation was doing intra- yland, Massachusetts, Michigan, state business. 2 Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Books And Records Hampshire, New Jersey, New Mexico, New York, North Caroli- Keeping corporate books and na, North Dakota, Oregon, Penn- records in a state will not in and of sylvania, Rhode Island, South itself require qualification. 1 How- Carolina, South Dakota, Tennes- ever, maintaining records concern- see, Texas, Utah, Vermont, Virgin- ing the corporation’s business ia, Washington, West Virginia, Wisconsin and Wyoming. 1. United Newspapers Magazine Corp. v. United Advertising Companies, Inc. , 297 Ill. Even in those states without a App. 637, 17 N.E.2d 345 (1938); Posadas De statutory provision, it appears that Mexico, S.A. de C.V. v. Dukes , 757 F.Supp. maintaining a bank account does 297 (S.D.N.Y. 1991); Netherlands Ship- not constitute transacting business. Mortgage Corp., Ltd. v. Madias , 717 F.2d 731 (2d Cir. [N.Y.] 1983); Badische Lederwerke v. Because it is rare to find a case in Capitelli , 92 Misc. 260, 155 N.Y.S. 651 (Sup. which a foreign corporation’s only Ct. 1915); Fruit Dispatch Co. v. Wood , 42 activity was maintaining a bank Okla. 79, 140 Pac. 1138 (1914). 2. Fine Arts Enterprises, N.V. v. Levy , 539 N.Y.S.2d 827 (A.D. 3 Dept. 1989). tories, Inc. , 187 Okla. 344, 103 P.2d 93 1. Booth v. Scott , 276 Mo. 1, 205 S.W. 633 (1940); Blackwell-Wielandy Co. v. Sabine (1918), App. dismissed 253 U.S. 475, 40 S.Ct. Supply Co. , 38 S.W.2d 654 (Tex. Civ. App. 484 (1919); Chasan v. Cruso Spaghetti Place, 1931) (trade catalog); Ligon v. Alexander Film Inc. , 55 F.Supp. 831 (S.D.N.Y. 1943), aff’d Co. , 55 S.W.2d 1030 (Tex. Comm’n App. per curiam (mem.) 143 F.2d 660 (2d Cir. 1932) (manufacture & exhibition of films). 1944); 1941 OAG (Ohio) No. 4493.

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usually indicates that the corpora- vada, New Hampshire, New Mexi- tion is doing business locally. co, North Carolina, North Dakota When a corporation engages in (except the statute provides for local activities in addition to main- holding meetings of shareholders taining records, it may be required only), Oregon, Pennsylvania, to qualify. 2 Rhode Island, South Carolina, The Model Acts contain several South Dakota, Tennessee, Texas, provisions which may be relevant Utah, Vermont, Virginia, Wash- here. These provisions exclude as a ington, West Virginia, Wisconsin basis for requiring qualification and Wyoming. Only the second of “Holding meetings of its directors these provisions has been adopted or shareholders, or carrying on in New Jersey and New York. other activities concerning its internal affairs” 3 and “Maintaining Maintaining an Office offices or agencies for the transfer, Whether or not a corporation exchange and registration of its may maintain an office in a state securities, or appointing and main- without being qualified depends taining trustees or depositaries with 4 upon the function the office serves. relation to its securities.” It is clearly established that main- Similar provisions have been taining an office merely to further adopted by Alaska, Arizona, Ar- interstate commerce does not sub- kansas, California, Colorado, Con- ject a foreign corporation to quali- necticut, District of Columbia, fication. 1 Thus, it was held that a Florida, Georgia, Hawaii, Idaho, foreign corporation maintaining a Illinois, Iowa, Kansas, Kentucky,

Louisiana, Maryland, Maine, Mas- 1. Leasing Service Corporation v. Hobbs sachusetts, Michigan, Mississippi, Equipment Co. , 707 F.Supp. 1276 (N.D. Ala. Missouri, Montana, Nebraska, Ne- 1989); United Newspapers Magazine Corp. v. United Advertising Companies , 297 Ill. App. 637, 17 N.E.2d 345 (1938); Federal Schools, 2. Critchfield & Co. v. Armour , 228 Ill. Inc. v. Sidden , 14 N.J. Misc. 892, 188 A. 446 App. 28 (1923); Erie & Michigan Ry. & N. (Supr. Ct. 1937); Posadas De Mexico, S.A. de Co. v. Central Ry. Equipment Co. , 152 Ill. C.V. v. Dukes , 757 F.Supp. 297 (S.D.N.Y. App. 278 (1909); Hayes Wheel Co. v. Ameri- 1991); International Text-Book Co. v. Tone, can Distributing Co. , 257 F. 881 (6th Cir. 220 N.Y. 313 (1917); Fruit Dispatch Co. v. [Mich.] 1919), cert. denied (mem.) 250 U.S. Wood , 42 Okla. 79, 140 Pac. 1138 (1914). In 672, 40 S.Ct. 13 (1919). Kansas, an apparent exception to the general 3. Model Business Corporation Act, Sec. rule, it is specifically provided by statute that a 106(b); Revised Model Corporation Act, Sec. foreign corporation having “an office or place 15.01(b)(2). of business within this state, or a distributing 4. Model Business Corporation Act, Sec. point herein, . . . shall be held to be doing 106(d); Revised Model Business Corporation business in this state.” (Kansas Statutes Anno- Act, Sec. 15.01(b)(4). tated, Sec. 17-7303).

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local office for the purpose of carries out the very purposes and demonstrating equipment sold in objects for which it was created, 4 interstate commerce was not re- the corporation is doing business quired to qualify. 1 It is also clear within the state and will be re- that an office may be maintained quired to qualify. for the convenience of salesmen It has generally been held that who solicit contracts subject to qualification is not required when a approval in another state, without foreign corporation routes ship- subjecting the foreign corporation ments to customers in the state to qualification. 2 through its local office for conven- But, if a foreign corporation ience in handling and inspection opens an office in a state and car- purposes, 5 or when it ships com- ries on all or most of its business bined orders through its local of- activities within that state, 3 or it fice to be broken down for delivery to separate customers. 6

1. Saeilo Machinery, Inc. v. Myers , 489 N.E.2d 1083 (Ohio Com. Pl. 1985). 4. Republic Acceptance Corporation v. 2. Alfred M. Best Company, Inc. v. Gold- Bennett , 189 N.W. 901 (Mich. 1922); Finance stein , 1 A.2d 140 (Conn. Sup. Ct. Errors Corporation of America v. Stone , 54 S.W.2d 1938); Roberts v. Chancellor Fleet Corp. , 354 254 (Tex. Civ. App. 1932); Bankers’ Holding S.E.2d 628 (Ga. App. 1987); United Newspa- Corporation v. Maybury , 297 Pac. 740 (Wash. pers Magazine Corp. v. United Advertising 1932); Dalton Adding Machine Sales Co. v. Companies, Inc. , 297 Ill. App. 637, 17 N.E.2d Lindquist , 137 Wash. 375, 242 Pac. 643 345 (1938); United Merchants and Manufac- (1926); Kimball v. Sundstrom & Stratton Co. , turers, Inc. v. David & Dash, Inc. , 439 80 W. Va. 522, 92 S.E. 737 (1917). F.Supp. 1078 (D. Md. 1977); Stafford-Higgins 5. Camaro Trading Company, Ltd. v. Industries v. Gaytone Fabrics, Inc. , 300 Nissei Sangyo America Ltd. , 628 So.2d 463 F.Supp. 65 (S.D.N.Y., 1969); James Talcott, (Ala. 1993); Crawford v. Louisville Silo & Inc. v. J.J. Delaney Carpet Co. , 28 Misc. 2d Tank Co. , 166 Ark. 88, 265 S.W. 355 (1924); 600, 213 N.Y.S.2d 312 (1st Dept. 1961); Belle City Mfg. Co. v. Frizzell , 11 Ida. 1, 81 P. Hovey v. DeLong Hook & Eye Co. , 211 N.Y. 58 (1905); Thomas Mfg. Co. v. Knapp , 101 420, 105 N.E. 667 (1914); The House of Stain- Minn. 432, 112 N.W. 989 (1907); Schwarz v. less, Inc. v. Marshall & Ilsley Bank , 75 Wis.2d Sargent , 197 N.Y.S. 216 (Sup. Ct., App. 264, 249 N.W.2d 561 (1977). But see Show Term, 1st Dept. 1922); Crisp v. Christian Counselors, Ltd. v. American Motors Corp. , Moerlein Brewing Co. , 212 S.W. 531 (Tex. 211 N.W.2d 111 (Mich. App. 1973). Civ. App. 1919); Cruncleton v. Chicago Por- 3. Brown v. Sprague , 229 Ill. App. 338 trait Co. , 16 S.W.2d 851 (Tex. Civ. App. (1923); Tiller Construction Corporation v. 1929); John A. Dickson Pub. Co. v. Bryan , 5 Nadler , 637 A.2d 1183 (Md. 1994); Shannon S.W.2d 980 (Tex. Comm’n App. 1928); Sales Co., Inc. v. Williams , 490 N.W.2d 436 Brandtjen & Kluge, Inc. v. Nanson , 9 Wash. (Minn. App. 1992); Talbot Mills, Inc. v. 2d 362, 115 P.2d 731 (1941); Greek-American Benezra , 35 Misc. 2d 924, 231 N.Y.S.2d 229 Sponge Co. v. Richardson Drug Co. , 124 Wis. (Sup. Ct. 1962); Colonial Trust Co. v. Montel- 469, 102 N.W. 888 (1905). lo Brick Works , 172 Fed. 310 (3rd Cir. [Pa.] 6. Alliston Hill Trust Co. v. Sarandrea 134 1909); In re Bell Lumber Co., 149 F.2d 980 Misc. 566, 236 N.Y.S. 265 (Sup. Ct. 1929), (7th Cir. [Wisc.]1945). aff’d in part 236 App. Div. 189, 258 N.Y.S.

94 Corporate Secondary Activities

Collection of the purchase price sized that a loan production office by the local office upon delivery of is not a branch office and may not the goods will not require qualifi- approve loans or disburse funds. cation, 7 but the acceptance and Instead, a loan production office is forwarding of installment pay- limited to such activities as solicit- ments may require qualification. 9 ing loans, assembling credit infor- A New York court 10 held that an mation, and preparing applications. unlicensed foreign corporation was Another court held that a foreign not doing business in the state by corporation was not doing business virtue of maintaining a loan pro- in Kansas by infrequently using an duction office. The court empha- office in Kansas, where the office was not the focal point of the cor- 299 (3rd Dept. 1932); Crisp v. Christian poration’s activities, and where its Moerlein Brewing Co. , 212 S.W. 531 (Tex. employees had to inquire about the Civ. App. 1919); Cruncleton v. Chicago Por- availability of the office before trait Co. , 16 S.W.2d 851 (Tex. Civ. App. 11 1929). using it. 7. A.D. Dickerson, Inc. v. Levine , 98 N.J.L. 313, 119 A. 783 (Supr. Ct. 1923); Peterson v. Maintaining and Defending Hoftiezer , 35 S.D. 101, 150 N.W. 934 (1915); Suits Crisp v. Christian Moerlein Brewing Co. , 212 S.W. 531 (Tex. Civ. App. 1919); Cruncleton Section 106(a) of the Model v. Chicago Portrait Co. , 16 S.W.2d 851 (Tex. Business Corporation Act excludes Civ. App. 1929); Dr. Koch Vegetable Tea Co. v. Malone , 163 S.W. 662 (Tex. Civ. App. from activities constituting doing 1914); McCaskey Register Co. v. Mann , 273 business for purposes of qualifica- S.W. 1113 (Tex. Civ. App. 1923); Internation- tion: “Maintaining or defending al Text-Book Co. v. Lynch, 81 Vt. 101, 69 A. 541 (1908), affirmed per curiam 218 U.S. 664, any action or suit or any adminis- 31 S.Ct. 225 (1910); Catlin & Powell v. trative or arbitration proceeding, or Schuppert , 130 Wis. 642, 110 N.W. 818 (1907). effecting the settlement thereof or 9. Plibrico Jointless Firebrick Co. v. Wal- the settlement of claims or dis- tham Bleachery and Dye Works , 274 Mass. 281, 174 N.E. 487 (1931); International Text- putes.” This provision appears in book Co. v. Connelly , 67 Misc. 49, 124 N.Y.S. the statutes of California, Georgia, 603 (Monroe Count Ct. 1910), affirmed 206 Louisiana, Minnesota, New Mexi- N.Y. 188, 99 N.E. 722 (1912); Pittsburgh Elecric Specialties Co., Inc. v. Rosenbaum , co, North Carolina, and Rhode 102 Misc. 520, 169 N.Y.S. 157 (Sup. Ct. App. Island. Term, 1st Dept. 1918); Woodbridge Heights Similar provisions appear in the Const. Co. v. Gippert , 92 Misc. 204, 155 N.Y.S. 363 (Sup. Ct., App. Term, 1st Dept. statutes of Alaska, District of Co- 1915); National Cash Register Co. v. lumbia, Maryland, New Jersey, Ondrusek , 271 S.W. 640 (Tex. Civ. App. 1925). 10. Integra Bank North v. Gordon , 624 11. Woodmont Corp. v. Rockwood Center N.Y.S.2d 344 (Sup. 1995). Partnership , 852 F. Supp. 948 (D.Kan. 1994).

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New York, Pennsylvania, Texas, Washington and Wisconsin. ern Loan and Building Co. v. Elias Morris & Section 15.01(b)(1) of the Re- Sons Co. , 43 Ariz. 88, 29 P.2d 137 (1934); vised Model Act states that “main- McKee v. Stewart Land & Live Stock Co., 28 taining, defending, or settling any Ariz. 511, 238 P. 326 (1925); Chicago Title & Trust Co. v. Hagler Special School District , proceeding” will not constitute 178 Ark. 443, 12 S.W.2d 881 (1928); Repub- transacting business. This or a lic Bank, Inc. v. Ethos Environmental, Inc., similar provision has been adopted 2013 U.S. Dist. LEXIS (S.D. Cal. 2013); Indian Refining Co. v. Royal Oil Co., Inc. , 102 by Arizona, Arkansas, Colorado, Cal. A. 710, 283 P. 856 (1929); Loe v. Connecticut, Florida, Hawaii, Ida- Normalair, Limited , 222 A.2d 643 (D.C. App. ho, Illinois, Indiana, Iowa, Kansas, 1966); Overstreet v. Frederick B. Cooper Co., Kentucky, Maine, Massachusetts, Inc. 134 So.2d 225 (Fla. 1961); Kay-Lex Co. v. Essex Insurance Co., 649 S.E.2d 602 (Ga. Michigan, Mississippi, Missouri, App. 2007); Bonham National Bank of Fair- Montana, Nebraska , Nevada, New bury v. Grimes Pass Placer Mining Co., Ltd. , Hampshire, North Dakota, Oregon, 18 Idaho 629, 111 Pac. 1078 (1910); Hall v. Sencore, Inc. , 691 S.E.2d 266 (Ga. 2010); South Carolina, South Dakota, Frank Simpson Fruit Co. v. A.T. & S.F. Ry. Utah, Vermont, Virginia, West Co. , 245 Ill. 596, 92 N.E. 524 (1910); Kytenn Virginia, and Wyoming. Tennessee Oil & Gas Co. v. Parks , 227 Ill. App. 95 (1922); The Journal Co. of Troy v. F.A.L. is similar except it states “any pro- Motor Co. , 181 Ill. App. 530 (1913); Tri-State ceeding, claim or dispute.” Refining & Investment Co. v. Opdahl , 481 In addition to these provisions, N.W.2d 710 (Iowa App. 1991); Borderland some state statutes exclude from Coal Sales Co. v. Walker , 270 S.W. 717 (Ky. Ct. App. 1925); Edward Sales Co. v. Harris doing business the maintaining or Structural Steel Co., Inc. , 17 F.2d 155 (D. Me. defending of suits relating to debts 1927); Turner v. Smalis, Inc. , 622 F.Supp. 248 secured by mortgages. In this con- (D. Md. 1985); Katz v. Simcha Company , 251 Md. 227, 246 A.2d 555 (1968); Hieston v. nection, the statutes cited under the National City Bank of Chicago , 132 Md. 389, heading “Statutory ‘Doing Busi- 104 Atl. 281 (1918); Mississippi Insurance ness’ Provisions Limited To Lend- Guaranty Ass’n. v. Harkins & Co., 652 So.2d 732 (Miss. 1995); Swing v. B.E. Brister & Co. , ing Money On Security” should be 87 Miss. 516, 40 So. 146 (1906); Massey- examined in the particular states Ferguson Credit Corp. v. Black , 764 S.W.2d involved. 137 (Mo. App. 1989); Marks Mortuary v. Numerous decisions may be cit- Estate of Koeppel , 740 S.W.2d 397 (Mo. App. 1987); United Shoe Machinery Co. v. ed to support the principle that the Ramlose , 231 Mo. 508, 132 S.W. 1133 mere bringing of a suit is not an (1910); Cadle Co., Inc. v. Wallach Concrete, activity that will require a foreign Inc. , 855 P.2d 130 (N.M. 1993); Denver City 1 Waterworks Co. v. American Water Works corporation to be qualified. Co. , 81 N.J. Eq. 139, 85 A. 826 (N.J. Chan- cery 1913); DeRan Landscaping Service, Inc. v. DeRan Industries, Inc. , 487 N.Y.S.2d 160 1. Royal Insurance Co. v. All States Thea- (1985); General Knitting Mills, Inc. v. Rudd tres , 242 Ala. 417, 6 So.2d 494 (1942); West- Plastic Fabrics Corp. , 212 N.Y.S.2d 783

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Meetings in State Oregon, Pennsylvania, Rhode Is- land, South Carolina, South Dako- The Model Business Corpora- ta, Tennessee, Texas, Utah, tion Act and the Revised Model Vermont, Virginia, Washington, Act both provide that holding West Virginia, Wisconsin and Wy- meetings of its directors or share- oming. holders will not require a foreign In the absence of statute, it has corporation to qualify. Similar been held that holding directors’ or statutory provisions have been en- stockholders’ meetings in a state acted in Alaska, Arizona, Arkan- will not, by itself, require qualifica- sas, California, Colorado, Connect- tion. 1 icut, District of Columbia, Florida, Ordinarily, however, when such Georgia, Hawaii, Idaho, Indiana, meetings are held in a state where Iowa, Kansas, Kentucky, Louisi- the corporation is not authorized to ana, Maine, Maryland, Massachu- do business, additional activities setts, Michigan, Minnesota, on the part of the corporation take Missouri, Montana, Nebraska, Ne- place. In these cases, qualification vada, New Hampshire, New Jer- may be required if the additional sey, New Mexico, New York, activities constitute doing business North Carolina, North Dakota in the state. 2 (meetings of shareholders only), Preliminary Acts (Sup. Ct. 1961); Harbin Yinhai Tech. Dev. Co. Ltd. v. Greentree Financial Group, Inc., 677 Purely preliminary acts, those S.E. 2d 854 (N.C. App. 2009); Westarc Leas- which amount to mere preparation ing Corp. v. Capital Sign Service, Inc. , 268 N.C. 601, 151 S.E.2d 204 (1966); Quantum for doing business, will not require Corporate Funding, Ltd. v. Bryan Building qualification. If, however, the par- Co., Inc. , 623 S.E.2d 793 (N.C. App. 2006); Jensen v. Zuern , 523 N.W.2d 388 (N.D. 1994); Freeman-Sipes Co. v. Corticelli Silk 1. State v. Anniston Rolling Mills , 125 Ala. Co. , 34 Okla. 229, 124 P. 972 (1912); First 121, 27 So. 921 (1900); Equitable Mut. Fire Resolution Inv. Corp. v.Avery , 246 P.3d 1136 Ins. Co. v. McCrea , 156 Ill. App. 467 (1910); (Or. App. 2010); Major Creek Lumber Co. v. Scrivner v. Twin Americas Agricultural and Johnson , 99 Ore. 172, 195 P. 177 (1921); Industrial Developers, Inc. , 573 P.2d 614 Putney Shoe Co. v. Edwards , 60 Pa. Super. (Kan. App., 1977); Meir v. Crossley , 305 Mo. 338 (1915); Elliott Addressing Machine Co. v. 206, 264 S.W. 882 (1924); Major Creek Lum- Campbell , 159 S.W.2d 967 (Tex. Civ. App. ber Co. v. Johnson , 99 Ore. 172, 195 Pac. 177 1942); Home Brewing Co. v. American Chem- (1921); Wildwood Pavilion Co. v. Hamilton , ical & Ozokerite Co. , 58 Utah 219, 198 P. 170 15 Pa. Super. 389 (1900). (1921); Prudential F.S. & L. Assn. v. Hartford 2. Erie & Michigan Ry. & N. Co. v. Cen- A. & I. Co. , 7 Utah 2d 366, 325 P.2d 899 tral Ry. Equipment Co. , 152 Ill. App. 278 (1958); Anglo-California Trust Co. v. Hall , 61 (1909); Flint v. Le Heup , 199 Mich. 41 Utah 223, 211 P. 991 (1922); Taylor v. State , (1917); Colonial Trust Co. v. Montello Brick 188 P.2d 671 (Wash. 1948). Works , 172 Fed. 310 (3rd Cr. [Pa.] 1909.)

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ticular preliminary act is part of a tion of contracts, 6 promotion of a regular course of conduct, qualifi- corporation, 7 collection of data,8 cation will be required. leasing of a building, 9 and holding For example, it has been held meetings with state agencies. 10 In that a foreign corporation which Virginia, it was held that signing a entered into a contract, made loans, purchase agreement for land, hir- assembled demonstrators and ap- ing an architect and negotiating pointed a local agent, all before it with a contractor to build a manu- finally determined that it would facturing plant were acts pre- engage in business under the con- liminary to doing the foreign tract, was not required to qualify. 1 corporation’s usual and customary Similarly, sending an agent into a business and therefore did not re- state to furnish contract forms to quire qualification. 11 A corporation prospective customers, and to in- operating out of an office in Ohio vestigate their credit status, has was not required to qualify in Ala- been held not to require qualifica- bama in order to find a purchaser tion. 2 for equipment located in Alabama. Numerous activities have been The court held that looking for held by the courts to be preliminary potential customers did not consti- to engaging in business and not to require qualification. Cited below are cases involving mine develop- 6. Hogan v. City of St. Louis , 176 Mo. 149, 3 75 S.W. 604 (1903); Fine Arts Enterprises, ment contracts, appointment of N.V. v. Levy , 539 N.Y.S.2d 827 (A.D. 3 Dept. 4 5 agents, inspection of sites, execu- 1989); Azuma, N.V. v. Sinks , 646 F.Supp. 122 (S.D.N.Y. 1986); International Fuel & Iron Corp. v. Donner Steel Co., Inc. , 242 N.Y. 224, 1. Automotive Material Co. v. American 151 N.E. 214 (1926); Odell v. City of New Standard Metal Products Corp. , 327 Ill. 367, York , 206 App. Div. 68, 20 N.Y.S. 705 (1st 158 N.E. 698 (1927). Dept. 1923), affirmed 238 N.Y. 623, 144 N.E. 2. J.R. Watkins Co. v. Hamilton , 26 So.2d 917 (1924); Stoner v. Phillippi , 41 Pa. Super. 207 (Ala. App. 1946). 118 (1909). 3. Empire Milling & Mining Co. v. Tomb- 7. Bellefield Co. v. Carlton Investing Co ., stone M. & M. Co. , 100 F. 910 (D. Conn. 228 F. 621 (3rd Cir. [Pa.] 1916). 1900). 8. Blackwell-Wielandy Co. v. Sabine Sup- 4. North Alabama Marine, Inc. v. Sea Ray ply Co. , 38 S.W.2d 654 (Tex. Civ. App. Boats, Inc. , 533 So.2d 598 (Ala. 1988); State 1931); Ford, Bacon and Davis, Inc. v. Termi- v. American Book Co. , 69 Kan. 1, 76 P. 411 nal Warehouse Co. , 207 Wis. 467, 240 N.W. (1904); Commonwealth v. Chattanooga Im- 796 (1932). plement & Mfg. Co. , 126 Ky. 636, 104 S.W. 9. Friedlander Bros., Inc. v. Deal , 218 Ala. 389 (1907); Alicanto, S.A. v. Woolverton , 514 245, 118 So. 508 (1928). N.Y.S.2d 96 (1987). 10. Tetra Technologies, Inc. v. Harter , 823 5. Louisville Trust Co. v. Bayer Steam Soot F.Supp. 1116 (S.D.N.Y. 1993). Blower Co. , 166 Ky. 744, 179 S.W. 1034 (Ky. 11. Continental Properties, Inc. v. The Ct. App. 1915). Ullman Co. , 436 F.Supp. 538 (E.D. Va. 1977).

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tute doing business. 12 In Kansas, a prior to engaging in the business of court held that a foreign corpora- contracting or construction. In this tion in the cable and telephone respect it is discussed under the business, could seek required fran- heading “Contracting—Submit- chises from the cities in which it ting Bids.” sought to operate, before register- The West Virginia statute pro- ing to do business in the state. 13 vides that “Applying for withhold- However, in Georgia, designing, ing tax on an employee residing in surveying, and planning the con- the State of West Virginia who struction of an alpine slide ride was works for the foreign corporation held to indicate an intent to con- in another state” does not consti- duct a continuous business in the tute doing business. 17 state and therefore required quali- Whether preliminary acts consti- fication. 14 In Vermont, a foreign tute doing business has been dealt corporation that entered into a con- with inconsistently in the deci- tract to purchase lands, obtained a sions. A particular activity that is survey, and applied for govern- uniformly held not to constitute ment permits was found to be do- doing business may be described ing business in the state. 15 An by different courts as an isolated Alabama court would not allow a transaction, a preliminary act, a newly incorporated foreign real secondary activity, etc. This should estate development company to en- be borne in mind when researching force its rights to redeem property this question, and all possible de- because it was exercising the busi- scriptions should be scrutinized. ness it was organized to do and not taking merely incidental steps to- wards doing business. 16 The submission of a bid is usu- Holding Interests in ally regarded as a preliminary act Resident Businesses The following sections deal with 12. Carbon Processing Co. v. Lapeyrouse whether a foreign corporation will Grain Corp. , 779 F.2d 1541 (11 Cir. 1986). be required to qualify in a state due 13. Classic Communications, Inc. v. Rural Telephone Services Co., Inc. , 956 F. Supp. to its relationship with another 910 (D. Kan. 1997). corporation or firm that is doing 14. Barker v. County of Forsyth , 248 Ga. business in the state. 73, 281 S.E.2d 549 (1981). 15. Pennconn Enterprises, Ltd. v. Hunting- ton , 538 A.2d 673 (Vt. 1987). 16. Vines v. Romar Beach, Inc. , 670 So.2d 17. West Virginia Code, Sec. 31D-15- 901 (Ala. 1995). 1501.

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Specifically dealt with are the tion to a state’s qualification re- consequences of: (1) acting as a quirements. 1 franchisor to a resident franchisee, Similarly, the temporary owner- (2) being formed to hold stock in a ship of shares in a retail store to domestic corporation, (3) having which the out-of-state wholesaler subsidiary corporations operating sold goods was held not to be in the state, and (4) acting as a doing business for qualification partner, member, manager, or joint purposes. 2 However, in a Missouri venturer in a partnership, limited case, a distributorship agreement liability company or joint venture gave the out-of-state seller control doing business in the state. over the price at which its products were sold by a Missouri distribu- Franchise Operations tor, as well as how they were displayed, advertised, serviced and The large number of companies stored. The seller also authorized operating through franchised deal- its representatives to inspect the ers has raised questions of a for- distributor’s financial records. The eign corporation’s need to qualify court found that the seller was do- in those states where its franchised ing business in Missouri through dealers are located. the distributor. 3 The degree of control exercised A foreign corporation that by a foreign corporation over its authorized and established a fran- franchised dealers, and not the chise in Texas was held to be doing mere existence of the franchise business in Texas. The corporation agreement, will determine whether received franchise fees and re- or not the corporation must qualify. quired the franchisee to use the The agreement itself will be franchisor’s forms, name, methods, evidence of the extent of such and advertising materials.4 control, but the courts can be In a Michigan case, a franchise expected to look beyond the agreement gave a foreign corpora- mere agreement for actual evi- tion the right to use the licensee’s dence of control. A clause in an agreement between a foreign manufacturer and 1. Ranch House Supply Corp. v. Van Slyke , 91 Ariz. 177, 370 P.2d 661 (1962). an independent dealer restricting 2. Golden Dawn Foods, Inc. v. Cekuta , 1 the dealer from purchasing from Ohio App.2d 464, 205 N.E.2d 121 (1964). other manufacturers has been held 3. American Trailers, Inc. v. Curry , 480 F.Supp. 663 (E.D. Mo. 1979). insufficient, without other evidence 4. Kutka v. Temporaries, Inc. , 568 F.Supp. of control, to subject the corpora- 1527 (S.D. Tex. 1983).

100 Holding Interests In Resident Businesses

machinery and equipment for the agent to approve sales. The demonstrations. Because these court found that an employer- rights were never exercised, the employee relationship existed by court held that qualification was virtue of the extensive control as- not required. The franchise agree- serted over the so-called “inde- ment was an “isolated transaction,” pendent contractor.” 6 A contrary according to the court, and the only opinion was handed down in favor services rendered by the foreign of an unlicensed foreign insurance corporation were “essential to this agency which collected accounts isolated agreement.”5 and selected, supervised and re- In contrast to franchising, the moved agents for licensed insur- typical wholesaler-dealer relation- ance companies. 7 In a case ship does not require qualification involving a franchised employment because the element of control is agency, a split court held that the absent. Generally, the foreign cor- franchisee was an independent poration ships goods to the dealer contractor. 8 —an independent agent—who However, in another case in- takes title and sells them in his volving the same employment own right. In some cases the dealer agency and virtually identical merely solicits orders and forwards facts, a North Carolina court held them to the foreign corporation, that the agency’s actions in selling which ships the goods directly to franchises, business forms and the purchaser. However, it may promotional materials, periodically constitute doing business if the inspecting the franchisees’ premis- corporation steps in and becomes es, files, and financial records, involved in a part of the opera- training franchisees and exercising tions, or exercises supervision over control over the franchisees’ busi- some of the dealer’s activities. ness methods, all took place in Where a foreign corporation interstate commerce, and thus did hired an “independent contractor” not require qualification. 9 Similar- to sell its product in Ohio, the cor- ly, a foreign corporation which poration was held to be doing entered into franchise agreements business when it paid for the operating costs of its agent’s office, 6. L.C. Dortch, Inc. v. Goldstein , 200 appointed employees and allowed N.E.2d 828 (Mun. Ct. Bedford, Ohio 1964). 7. J.H. Silversmith, Inc. v. Keeter , 72 N.M. 246, 382 P.2d 720 (1963). 8. T.E. McCutcheon Ent. Inc. v. Snelling & 5. Dur-Ram Packaging Devices, Ltd. v. Snelling Inc., 212 S.E.2d 319 (Ga. 1974). Self-Seal Containers, Inc. , 18 Mich. App. 81, 9. Snelling & Snelling, Inc. v. Watson , 254 170 N.W.2d 473 (1969). S.E.2d 785 (N.C. Ct. App. 1979).

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for growing and selling Christmas Holding Companies trees in Alabama was not required A holding company is incorpo- to qualify on the ground that its rated for the purpose of owning activities, including furnishing stock in other corporations. Some equipment and advice to its fran- courts have held that a foreign chisees, were merely incidental to holding company will have to the interstate sale and delivery of qualify in the state in which it tree seedlings. 10 votes the stock, holds meetings, In Mississippi, a foreign corpo- directs its subsidiaries’ affairs and ration was held to be doing busi- does any other acts necessary to its ness in the state by virtue of its acts function. 1 A Washington decision, under a franchise agreement. upholding a penalty for failure to Among other things, it approved qualify, stated: “Where a foreign the design of the store, specified corporation is formed for a particu- what fixtures were needed and lar purpose, to wit, acquiring, own- where they would be procured, ing, and voting a majority of the supplied the store’s merchandise corporate stock of other banking and hired and trained personnel institutions, and comes into this under a contract which gave it con- state and carries out the very pur- trol of virtually the entire operation poses and objects for which it was of the store. The court ruled that created, it is ‘doing business’ with- the interstate aspects of the transac- in this state.” 2 tions could not obviate the need for An Iowa utility holding compa- qualification where other aspects ny which provided its Wisconsin were purely intrastate. 11 subsidiary with accounting, mana- When the method of doing busi- gerial, financial and legal services, ness was concededly interstate, but was held to be doing business and the foreign corporation establish- was required to qualify under the ing a distributorship became inti- Business Corporation Law before mately involved in local recruiting activities, the corporation was subject to penalties for failure to quali- 12 1. Central Life Securities Co. v. Smith , 236 fy. F. 170 (7th Cir. [Ill.] 1916); State ex rel. City of St. Louis v. Public Service Commission , 331 Mo. 1098, 56 S.W.2d 398 (1932); Common- 10. First Investment Co. v. McLeod , 363 wealth of Pennsylvania v. American Gas Co. , So.2d 774 (Ala. Ct. Civ. App. 1978). 352 Pa. 113, 42 A.2d 161 (1945); Colonial 11. Barbee v. United Dollar Stores, Inc. , Trust Co. v. Montello Brick Works , 172 F. 310 337 So.2d 1277 (Miss. 1976). (3rd Cir. [Pa.] 1909). 12. Thaxton v. Commonwealth , 211 Va. 2. Bankers’ Holding Corporation v. 38, 175 S.E.2d 264 (1970). Maybury , 161 Wash. 681, 297 P. 740 (1931).

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it could enforce a contract in the doing business for the purposes of state. 3 qualification merely because its A holding company negotiating transfer agent was located there. In a contract in Alabama to purchase response to the argument that a shares of an Alabama corporation holding company’s transfer agent was held to be transacting busi- has a more significant role than a ness, and the foreign corporation business corporation’s because a was barred from enforcing the pur- holding company’s business is the chase agreement. 4 buying, holding and selling of cor- But a California court has held porate stock, the court pointed out that in the absence of a statutory that the transfer agent deals only in prohibition, a foreign corporation transfers in the holding company need not qualify in order to vote itself, and not in transactions in the the stock it holds in a California stock of other corporations which corporation. 5 And a federal court in the holding company may own. 8 Mississippi held that ownership of stock by a holding company was Parent And Subsidiary not significantly different from Corporations ownership by an ordinary business A foreign parent corporation corporation, and qualification was 6 will not be required to qualify in a not required. Similarly, a federal state merely because its subsidiary court in Ohio held that qualifica- is doing business in the state. 1 tion statutes will not prevent a corporation “from exercising the right of a stockholder to vote stock or to 7 8. Scrivner v. Twin Americas Agricultural assent to change in regulations.” and Industrial Developers, Inc. , 573 P.2d 614 A Kansas court ruled that a for- (Kan. App. 1977). eign holding company was not 1. Washburn v. Sardi’s Restaurants , 381 S.E.2d 750 (Ga. App. 1989); Big Four Mills, Ltd. v. Commercial Credit Co., Inc. , 307 Ky. 3. Telephone Systems, Inc. v. Keating , 309 612, 211 S.W.2d 831 (1948); United Mer- F.Supp. 933 (E.D. Wis. 1970). chants and Manufacturers, Inc. v. David & 4. Continental Telephone Co. v. M.G. Dash, Inc. , 439 F.Supp. 1078 (D.Md. 1977); Weaver, et al. , Civil Action No. 67-180, N.D. Aro Manufacturing Co., Inc. v. Automobile Ala., May 17, 1968, aff’d 410 F.2d 1196 (5th Body Research Corp. , 352 F.2d 400 (1st Cir. Cir. 1969). [Mass.] 1965); cert. den. 383 U.S. 947, 86 5. Farbstein v. Pacific Oil Tool Co. , 15 S.Ct. 1199 (1966); Bunge Corp. v. St. Louis P.2d 766 (Cal. App. 1932). Terminal Field Warehouse Co. , 295 F.Supp. 6. Mid-Continent Telephone Corp. v. 1231 (N.D. Miss., 1969); Compania Mexicana Home Telephone Co. , 307 F.Supp. 1014 (N.D. Refinadora Island S.A. v. Compania Miss. 1969). Metropolitana de Oleoductos, S.A . 250 N.Y. 7. Toledo Traction, Light & Power Co. v. 203, 164 N.E. 907 (1928); State v. Swift & Smith , 205 F. 643 (N.D. Ohio 1913). Co. , 187 S.W.2d 127 (Tex. Civ. App. 1945).

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“Voting the interest of an entity” will not constitute transacting the foreign corporation acquired is business,West Virginia provides excluded by statute from what con- that “Holding all, or a portion stitutes doing business in Texas. 2 thereof, of the outstanding stock of The California qualification statute another corporation authorized to provides that “A foreign corpora- transact business in the State of tion shall not be considered to be West Virginia. Provided, that the transacting intrastate business foreign corporation does not pro- merely because its subsidiary duce goods, services or otherwise transacts intrastate business or conduct business in the State of merely because of its status as any West Virginia”.5 Mississippi law one or more of the following: provides that “Being a shareholder (1) A shareholder of a domestic in a corporation or a foreign corpo- corporation, ration that transacts business in this (2) A shareholder of a foreign state” does not constitute transact- corporation transacting intrastate ing business and Kansas provides business...” 3 Florida, Maine, and that a person shall not be deemed South Carolina have provisions to be doing business solely by rea- which exempt from qualification son of being a member, stockhold- “Owning and controlling a subsid- er, limited partner or governor of a iary corporation incorporated in or domestic or foreign entity.6 transacting business within this The District of Columbia and state.”4 Florida extends the exemp- Idaho provide that a person does tion to “voting the stock of any not do business in the state solely corporation which [the foreign by being an interest holder or gov- corporation] has lawfully ac- ernor of a foreign entity that does quired.” Georgia provides that business in the state while Wash- “Owning (directly or indirectly) an ington provides that a person does interest in or controlling (directly not do business in the state solely or indirectly) another person orga- by being an interest holder or gov- nized under the laws of, or trans- ernor of a domestic or foreign enti- acting business within, this state” ty that does business in the state, and Pennsylvania provides that being an interest holder or gover- 2. Texas Business Organizations Code, nor of a foreign association that Sec.9.251. 3. California Corporations Code, Sec. 191. 4. Florida Statutes Annotated, Sec. 5. Code of Georgia Annotated, Sec. 14-2- 607.1501; Maine Revised Statutes Annotated, 1501, West Virginia Code, Sec. 31D-15-1501. title 13-C, Sec. 1501; Code of Laws of South 6. Miss. Code Ann. Sec. 79-4-15.01; Kan. Carolina 1976, Sec. 33-15-101. Stat. Sec. 17-7932

104 Holding Interests In Resident Businesses

does business in the state shall not The U.S. Supreme Court has constitute by itself doing business stated that: “The fact that the com- in the state.7 pany owned stock in the local sub- In one case, an unqualified for- sidiary companies did not bring it eign corporation financed homes into the State in the sense of trans- built by a qualified foreign corpo- acting its own business there.” 10 ration, and had the same officers, The U.S. Supreme Court also re- directors and address. The unquali- jected a Circuit Court’s agency fied lender was not barred from theory which subjected foreign bringing a foreclosure suit by corporations to general jurisdiction virtue of its relation to the other corporation and its activities in the U.S. 364, 27 S.Ct. 513 (1907); Conley v. state. The court held the lender was Mathieson Alkali Works , 190 U.S. 406, 23 not doing business for the purposes S.Ct. 728 (1903); Calvert v. Huckins , 875 of qualification since the two cor- F.Supp. 674 (E.D. Cal. 1995); In re MDC 8 Holdings Securities Litigation , 754 F.Supp. porations were separate entities. 785 (S.D. Cal. 1990); Sears, Roebuck and Co. There are few decisions on v. Sears PLC , 752 F.Supp. 1223 (D. Del. whether a corporation must qualify 1990); Milligan Elec. Co. v. Hudson Const. Co. , 886 F.Supp. 845 (N.D. fla. 1995); Akari because of its subsidiary’s activi- Imeji Co. v. Qume Corp. , 748 F.Supp. 588 ties. However, decisions on the (N.D. Ill. 1990); Aquila Steel Corp. v. Fon- state’s right to subject the foreign tana , 585 So. 2d 426 (Fla. App. 3 Dist. 1991); parent to suit are pertinent. Since Idaho v. M.A. Hanna Co. , 819 F.Supp. 1464 (D. Idaho 1993); Jasper v. National Medical ordinarily less activity is required Enterprises, Inc. , 657 So.2d 604 (La. App. 1 to subject a foreign corporation to Cir. 1995); U.S. v. M/V Mandan , 744 F.Supp. suit than to state qualification re- 410 (E.D. La. 1991); Velandra v. Regie Nationale Des Usines Renault , 336 F.2d 292 quirements, such decisions are (6th Cir. [Mich.] 1964); Hoffman v. Carter , extremely persuasive. The general- 187 A. 576 (N.J. Supreme 1936), aff’d 118 ly rule is that merely owning the N.J. Law 379, 192 A. 825 (N.J. Ct. Errors and Appeals 1937); Escude Cruz v. Ortho Phar- controlling stock of a subsidiary is maceutical Corp. , 619 F.2d 902 (1st Cir. not a sufficient basis for asserting 1980); Jemez Agency, Inc. v. Cigna Corp. , 866 jurisdiction over the parent. 9 F.Supp. 1340 (D.N.M. 1994); Huxley Barter Corp. v. Considar, Inc. , N.Y.S. 2d 639 627 (A.D. 1 Dept. 1995); Technograph Printed 7. D.C. Code Sec. 29-105.05 ; Idaho Code Circuits, Ltd. v. Epsco, Incorporated , 224 Sec. 30-21-505; Revised Code of Washington F.Supp. 260 (E.D. Pa. 1963); Steiner v. Dau- Annotated, Sec. 23B.50.400; Pennsylvania phin Corporation , 208 F.Supp. 104 (E.D. Pa. Consolidated. Stat. Title 15, Sec. 403. 1962); State v. Humble Oil & Refining Co. , 8. Mid-State Homes, Inc. v. Knight , 376 263 S.W. 319 (Tex. Civ. App. 1924); Norfolk S.W.2d 556 (Ark. 1964). Southern Ry. Co. v. Maynard , 437 9. Cannon Mfg. Co. v. Cudahy Co. , 267 10. People’s Tobacco Co., Ltd. v. Ameri- U.S. 333, 45 S.Ct. 250 (1925); Peterson v. can Tobacco Co. , 246 U.S. 79, 38 S.Ct. 233 Chicago, Rock Island & Pacific Ry. Co. , 205 (1918).

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whenever they have an in-state that “Owning a limited partnership subsidiary or affiliate, calling it “an interest in a limited partnership that outcome that would sweep beyond is doing business within this state, even the sprawling view of general unless such limited partner manag- jurisdiction” that the Court had es or controls the partnership or previously rejected. 11 exercises the powers and duties of It has also been held that a for- a general partner,” shall not consti- eign corporation is not doing busi- tute doing business in the state, ness in a state for purposes of Kansas provides that a person shall jurisdiction merely because it is a not be deemed to be doing busi- wholly owned subsidiary of a do- ness solely by reason of being a mestic corporation. 12 member, stockholder, limited partner or governor of a domestic or Partnerships, LLCs, and Joint foreign entity, the District of Co- Ventures lumbia and Idaho provide that a Corporations are authorized by person does not do business in the the corporation laws to enter into state solely by being an interest partnerships and joint ventures. holder or governor of a foreign Corporations can also own mem- entity that does business in the bership interests in limited liability state, Washington provides that a companies (LLCs). However, most person does not do business in the of the statutes are silent as to state solely by being an interest whether acting as a partner, joint holder or governor of a domestic or venturer or LLC member consti- foreign entity that does business in tutes doing business in the states in the state, and Pennsylvania pro- which the partnership, joint ven- vides that being an interest holder ture or limited liability company is or governor of a foreign associa- doing business. tion that does business in the state shall not constitute by itself doing Some statutes address this issue 1 directly. Florida’s statute provides business in the state. Mississippi law provides that “Being a limited partner of a lim- 11. Daimler AG v. Bauman, 134 S. Ct. ited partnership or foreign limited 746 (2014). 12. Cannon Mfg. Co. v. Cudahy Packing Co., 267 U.S. 333, 45 S.Ct. 250 (1925); 1. Florida Statutes Annotated, Sec. Schenk v. Walt Disney Co., 742 F.Supp. 838 607.1501; Kansas Stat., Sec. 17-7932;D.C. (S.D.N.Y. 1990); Osborne v. City of Spo- Code, Sec. 29-105.05; Idaho Code, Sec. 30- kane, 738 P.2d 1072 (Wash. App. 1987); 21-505; Revised Code of Washington Anno- Williams v. Canadian Fishing Co., 509 P.2d tated, Sec. 23B.50.400; Pennsylvania Consoli- 64 (Wash.App. 1973). dated. Stat. Title 15, Sec. 403.

106 Holding Interests In Resident Businesses partnership that is transacting busi- that “Being a limited partner of a ness in this state” and “Being a limited partnership or a member of member or manager of a limited a limited liability company” is an liability company or foreign lim- activity that does not constitute ited liability company that is trans- doing business in Arizona. 5 acting business in this state” does Furthermore, in Wyoming it is not constitute transacting business. provided that “A foreign corpora- However, Mississippi also pro- tion. . .which is either an organiz- vides that “A foreign corporation er, a manager or member of a which is general partner of any [limited liability] company is not general or limited partnership, required to obtain a certificate of which partnership is transacting authority to undertake its duties in business in this state, is hereby these capacities.” 6 Georgia’s law declared to be transacting business states that "serving as a manager in this state.” 2 Rhode Island’s of a limited liability company or- statute provides that “Acting as a ganized under the laws of, or general partner of a limited part- transacting business within, this nership which has filed a certifi- state" is not doing business, while cate of limited partnership . . . or California law states “A foreign has registered with the secretary of corporation shall not be consid- state . . .” and “Acting as a mem- ered to be transacting intrastate ber of a limited liability company business merely because its sub- which has registered with the sec- sidiary transacts intrastate busi- retary of state shall not be consid- ness or merely because of its ered doing business”. 3 Virginia status as any one or more of the provides that it shall not be consid- following: … (3) A limited part- ered doing business to be “Serving, ner of a domestic limited partner- without more, as a general partner ship, (4) A limited partner of a of, or as a partner in a partnership foreign limited partnership trans- which is a general partner of, a acting intrastate business, (5) A domestic or foreign limited part- member or manager of a domestic nership which does not otherwise limited liability company, (6) A transact business in this Common- member or manager of a foreign wealth.” 4 Arizona’s statute states

2. Mississippi Code of 1972 Annotated, Sec.79-4-15.01. 3. General Laws of Rhode Island, Sec. 7- 5. Arizona Revised Statutes, Sec. 10-1501. 1.2-1401. 6. Wyoming Statutes Annotated, Sec. 17- 4. Code of Virginia, 1950, Sec. 13.1-757. 16-1501.

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limited liability company transact- ness. 10 South Carolina’s law states ing intrastate business”.7 that “owning, without more, an The Missouri Limited Liability interest in a limited liability com- Company Act states that “A for- pany organized or transacting eign corporation shall not be business in this state” is not doing deemed to be transacting business business. 11 in this state for the purposes of Both general partnerships and section 351.572 [the qualification joint ventures are contractual rela- section] solely by reason that it is tionships which do not create sepa- a member of a limited liability rate legal entities, and it has long company.” 8 The Delaware Re- been settled that they are generally vised Uniform Partnership Act treated the same under the law. 12 states that a foreign corporation The primary difference between “shall not be deemed to be doing the two is that a joint venture is business in the state of Delaware generally formed to carry out a solely by reason of its being a single transaction or series of partner in a domestic partner- transactions, but a partnership is ship.”9 usually a more permanent and con- The Ohio Attorney General stat- tinuing arrangement. ed that a foreign corporation that It has been held that where a acts as a general partner in a gen- foreign corporation is a member of eral or limited partnership that is a partnership doing intrastate busi- transacting business in Ohio is also ness, none of the partners can bring considered transacting business in suit in a partnership cause of action Ohio and required to qualify. if a corporate partner is not However, a foreign corporation qualified. Otherwise, a foreign that acts as a limited partner in a corporation could do business in limited partnership that is transact- partnership with individuals and ing business in Ohio would not be considered transacting business as long as it is not also a general 10. Ohio Attorney General Opinion No. partner and does not take part in 89-081, October 16, 1989. 11. Code of Laws of South Carolina, Sec. controlling the partnership’s busi- 33-15-01. 12. Ross v. Willett , 27 N.Y.S. 785 (Sup. Ct. 1894). But see Elting Center Corp. v. Diversi- fied Title Corp. , 306 So. 2d 542 (Fla. App. 7. Code of Georgia Annotated, Sec. 14-2- 1974), in which service of process on one joint 1501, California Corporations Code, Sec. 191. venturer was held not to confer jurisdiction on 8. Missouri Statutes Annotated, Sec. another, and a joint venture was held not to be 347.163. a legal entity in the same sense as a partner- 9. Delaware Code, Title 6, Sec. 15-115. ship.

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avoid qualification without fear of Since a joint venture generally is penalties. 13 formed for a single transaction or A foreign corporate partner was series of transactions, it may well required to qualify where contracts be exempt from qualification re- to sell and install hotel equipment quirements as an isolated transac- were entered into by a partnership tion. composed of the same individuals There have been other decisions as the foreign corporation. 14 In that involving one or more facets of a case, the court felt that the partner- joint venture which may be of in- ship, which lent its name to the terest to counsel. 16 deal but did not actually participate in the business transaction, was being used as a device to circum- Contracting vent the qualification requirements. In a Mississippi decision, it was Corporations engaged in the held that “every member of a joint business of constructing, altering, venture is transacting business in remodeling or repairing structures this State when one of the joint are ordinarily required to qualify to carry on such work in a foreign venturers is transacting in this State 1 the business for which the joint state. It is clear that, in these cir- venture was created.” 15 In that case, three foreign corporations 16. Memphis Natural Gas Co. v. Beeler , 315 U.S. 649, 62 S.Ct. 857 (1942); L.M. White formed a joint venture to do work Contracting Co. v. St. Joseph Structural Steel in Mississippi, and the one that Co. , 15 Ariz. App. 260, 488 P.2d 196 (1971); failed to qualify was merely fur- Drdlik v. Ulrich , 21 Cal. Rptr. 642 (Cal. App. 1962); 1629 Joint Venture v. Dahlquist , 770 nishing some of the capital. Be- P.2d 1352 (Colo. App. 1989); Jackson v. cause all members of a joint Hooper , 76 N.J. Eq. 592, 75 A.568 (Ct. of venture must join in a suit, the ina- Errors and Appeals 1910); Manacher v. Cen- tral Coal Co., Inc. , 284 A.D. 380, 131 N.Y.S. bility of the unqualified corpora- 2d 671 (1st Dept. 1954); Pierce v. Pierce , 253 tion to do so barred the joint A.D. 445, 2 N.Y.S. 2d 641 (2d Dept. 1938), venture from bringing a negligence affirmed (mem.) 280 N.Y. 562, 20 N.E.2d 15 action. (1939); Boag v. Thompson , 208 A.D. 132, 203 N.Y.S. 395 (2d Dept. 1924); Brady v. Erlang- er , 165 A.D. 29, 149 N.Y.S. 929 (1st Dept. 13. Harris v. Columbia Water & Light Co. , 1914); Marston v. Gould , 69 N.Y. 220 (1877). 108 Tenn. 245, 67 S.W. 811 (1901); Ashland 1. J.W. Hartlein Construction Co., Inc. v. Lumber Co. v. Detroit Salt Co., 114 Wis. 66, Seacrest Assoc., L.L.C., 749 So. 2d 459 (Ala. 89 N.W. 904 (1902). Civ. App. 1999). Gray-Knox Marble Co. v. 14. Mandel Bros., Inc. v. Henry A. O’Neil, Times Building Co. , 225 Ala. 554, 144 So. 29 Inc. 69 F.2d 452 (8th Cir. [S.D] 1934). (1932); Computaflor Company v. N.L. Blaum 15. Scott Co. of California v. Enco Con- Construction Co. , 265 So. 2d 850 (Ala. 1972); struction Co. , 264 So. 2d 409 (Miss., 1972). National Union Indemnity Co. v. Bruce Bros.,

Contracting 109

cumstances, the corporation is car- the same services are available rying on some substantial part of within the state from competing its ordinary business in the state. In local contractors may also indicate addition, the nature of the activity the corporation is required to quali- makes it difficult to find the ele- fy. 4 The length of time over which ments of an interstate transaction. 2 a construction contract extends In deciding whether or not such may also be considered. 5 For ex- corporations are doing business, ample, a New York construction the courts give weight to several company that built two movie factors that may indicate that quali- theaters in Maryland was found to fication is required. For example, have conducted business in Mary- the fact that the foreign corporation land based upon the fact that it employs local labor has been con- paid local taxes, it rented a motel sidered an additional reason to re- room in Maryland for five months, quire qualification. 3 The fact that it maintained a back account, it engaged in pervasive management functions over the projects, and the Inc. , 44 Ariz. 454, 39 P.2d 648 (1934); projects accounted for more than Brogdon v. Exterior Design , 781 F.Supp. 1396 50% of its income during that peri- (W.D.Ark. 1992); Associated Comm. & Re- 6 search Services, Inc. v. Kansas Personal od of time. Comm. Services, Ltd., 31 F.Supp.2d 949 (D. Generally, the courts are reluc- Kan. 1998); Lewis v. Club Realty Co. , 264 tant to find that a corporation Mass. 588, 163 N.E. 172 (1928); Haughton Elevator & Machine Co. v. Detroit Candy Co., involved in contracting is not re- Ltd. , 156 Mich. 25, 120 N.W. 18 (1909); Flinn quired to qualify because the pro- v. Gillen , 320 Mo. 1047, 10 S.W.2d 923 ject involves interstate commerce. (1928); Berkshire Engineering Corp. v.Scott- Paine , 217 N.Y.S. 2d 919 (Columbia County Even where the actual construction Ct. 1961); Dot Systems, Inc. v. Adams Robin- work involves the installation of son Ent. Inc. , 587 N.E.2d 844 (Ohio App. 4 materials sold by the foreign con- Dist. 1990); Hoffman Construction Co. v. Erwin , 331 Pa. 384, 200 A. 579 (1938); Cost tractor in interstate commerce, the of Wisconsin, Inc. v. Shaw , 357 S.E.2d 20 courts appear to require qualifica- (S.C. 1987); Anthony Miller, Inc. v. Taylor- tion. 7 Apparently, the theory be- Fichter Steel Const. Co. , Inc., 139 S.W.2d 657 (Tex. Civ. App. 1940); Interstate Const. Co. v. Lakeview Canal Co. , 31 Wyo. 191, 224 P. 850 4. Buhler v. E.T. Burrowes Co. , 171 S.W. (1924). 791 (Tex. Civ. App. 1914). 2. Computaflor Company, Inc. v. N.L. 5. Berkshire Engineering Corp. v. Scott- Blaum Construction Co. , 265 So.2d 850 (Ala. Paine , 217 N.Y.S. 2d 919 (Columbia County 1972). Ct. 1961). 3. Decorators’ Supply Co. v. Chaussee , 6. Tiller Construction Corporation v. 211 Mich. 302, 178 N.W. 665 (1920); Hoff- Nadler , 637 A.2d 1183 (Md. 1994). man Construction Co. v. Erwin , 331 Pa. 384, 7. Brown v. Pool Depot, Inc., 853 So. 2d 200 A. 579 (1938). 187 (Ala. 2002); S&H Contractors, Inc. v. A.J.

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hind these holdings is that the in- tracted to provide structural drying stallation is not so highly technical services, labor and materials to as to be a necessary part of the buildings in Alabama was held to interstate sale. be doing intrastate business in Al- A Missouri court held that the abama.10 In another Alabama case, performance of construction work the court held that in contracting to is not in interstate commerce, even sell, deliver, assemble and install a if the materials or labor are brought pool at a residence in Alabama, a in from outside the state. 8 An Ala- foreign corporation was engaged in bama court also rejected the argu- intrastate business. 11 ment that the use of materials However in another case, a Ten- prefabricated outside the state and nessee corporation entered into a the out-of-state performance of ac- construction management con- counting and engineering func- tract to develop an office com- tions, rendered the construction job plex in Mississippi. A suit was a part of interstate commerce. 9 The brought before any construction court stated, “If such were the case, work had begun. The corporation the public policy of this state . . . had devoted 1400 hours of work to could be flaunted by virtually any the project, reviewing designs, foreign corporation in the construc- coordinating procedures and de- tion business.” An environmental veloping bid analyses. Only 100 remediation company that con- hours of work had been performed in Mississippi. The court held that Taft Coal Co., Inc. , 906 F.2d 1507 (11th Cir. the corporation was not required to 1990); Sanwa Business Credit Corp. v. G.B. qualify to bring suit in Mississippi “Boots” Smith Corp. , 548 So. 2d 1336 (Ala. 1989); Times Building Co. for the use of Gray- because it was transacting business 13 Knox Marble Co. v. Cline , 233 Ala. 600, 173 in interstate commerce. A court So. 42 (1937); State v. Arthur Greenfield, Inc. , in Kansas held that a foreign cor- 205 S.W. 619 (Mo. 1918); St. Louis Expanded Metal Fireproofing Co. v. Beilharz , 88 S.W. poration that supplied goods and 512 (Tex. Civ. App. 1905); Kinnear & Gager services to subcontractors in con- Mfg. Co. v. Miner , 89 Vt. 572, 96 A. 333 (1916). See, however: Webb v. Knoxville Glass Co. , 217 Ky. 225, 289 S.W. 260 (1926); 10. Tradewinds Environmental Restora- Davis & Rankin Building and Mfg. Co. v. Dix , tion, Inc. v. Brown Bros. Construction, LLC , 64 Fed. 406 (W.D. Mo. 1894); and DeWitt v. 999 So.2d 875 (Ala. 2008). Berger Mfg. Co. , 81 S.W. 334 (Tex. Civ. App. 11. Brown v. Pool Depot, Inc., 853 So. 2d 1904). 187 (Ala. 2002). See also New Concept Indus- 8. Whalen Construction and Equipment tries, Inc. v. Green , 646 F.Supp. 1077 (M.D. Co., Inc. v. Grandview Bank and Trust Co. , Ala. 1986). 578 S.W.2d 69 (Mo. Ct. App. 1979). 13. Murray, East & Jennings, Inc. v. J & S 9. Sanjay, Inc. v. Duncan Const. Co., Inc. , Construction Co., Inc. , 607 F.Supp. 45 (S.D. 445 So.2d 876, 877 (Ala. 1983). Miss. 1985).

Contracting 111

nection with a bridge project in subdivision of the state, provided Kansas, that moved equipment to however, that this does not apply the construction site, and whose where goods or services were pre- president and employees visited pared out of state for delivery or the site, was not doing business in use within the state. 16 Kansas as its activities wee inter- Kansas law states that selling, state in character. 14 by contract consummated outside Although the interstate com- the state of Kansas, and agreeing, merce exception can generally not by the contract, to deliver into the be used to avoid qualifying, con- state of Kansas machinery, plants tractors may sometimes be able to or equipment, the construction, use the isolated transaction excep- erection or installation of which tion. This exception is discussed in within the state requires the super- the section entitled “Isolated vision of technical engineers or Transactions.” skilled employees performing ser- One further comment should be vices not generally available, and made on contractors generally. as part of the contract of sale Many states require contractors, agreeing to furnish such services, corporate and otherwise, to obtain and such services only, to the ven- contractors’ licenses before engag- dee at the time of construction, ing in this activity in the state, and erection or installation, is not doing in some states a valid license can- business. 17 not be obtained until the corporation has qualified. 15 Federal Contracts In addition, Montana law states Whether or not a foreign con- that a foreign corporation is tracting corporation is required to deemed to be transacting business qualify in order to work under a in the state if it enters into a con- contract with the federal govern- tract with the state of Montana, an ment will be determined by the agency of the state, or a political same rules applicable to contractors generally. It is well settled that such a “federal” contract gives rise 14. Trestle &Tower Engineering, Inc. v. Star Ins. Co., 13 F. Supp.2d 1166 (D.Kan. to no immunity from compliance 1998) with qualification requirements. 1 15. Haskew v. Green , 571 So. 2d 1029 (Ala. 1990); ADC Construction Co. v. Hall , 381 S.E.2d 76 (Ga. App. 1989); Rehco Corp. 16. Montana Code, Sec. 35-1-1026. v. California Pizza Kitchen, Inc. , 383 S.E.2d 17.Kansas Statutes, Sec. 17-7932. 643 (Ga.App. 1989); Bilt-More Homes Inc. v. 1. Rainier National Park Co. v. Henneford , French , 373 Mich. 693, 130 N.W.2d 907 182 Wash. 159, 45 P. 2d 617 (1935), cert. den. (1964). (mem.) 296 U.S. 647, 56 S.Ct. 307 (1935);

112 Contracting

The United States Supreme in North Carolina under a govern- Court has stated that: “It seems to ment contract and then leasing us extravagant to say that an inde- them to the government, the corpo- pendent private corporation for ration was required to secure a gain, created by a State, is exempt Certificate of Authority to do busi- from state taxation either in its ness in North Carolina. 5 corporate person, or its property, An entirely different situation is because it is employed by the presented in the case of a foreign United States, even if the work for corporation which performs work which it is employed is important under a contract with the federal and takes much of its time.” 2 government in a federal area. The Similar reasoning led Arkansas’ Constitution provides that Con- Supreme Court to hold that a for- gress shall have power: “To exer- eign corporation operating in that cise exclusive legislation in all state under a contract with the fed- cases whatsoever. . .over all places eral government was required to purchased by the consent of the qualify. 3 legislature of the State in which the An opinion of North Carolina’s same shall be, for the erection of Attorney General stated that the forts, magazines, arsenals, dock- mere fact that a foreign corporation yards, and other needful build- performed work under a contract ings.” 6 with the federal government would Nevertheless, the question of not exempt the corporation from whether or not a foreign corpora- the state’s qualification or domes- tion must qualify to perform work tication requirements. 4 Thus, under a federal contract in a federal where a foreign corporation was area will turn on the extent to building government Post Offices which the state has ceded its authority to require such qualification. Rainier National Park Co. v. Martin , 18 In some decisions, the mere ex- F.Supp. 481 (W.D. Wash. 1937), aff. per istence of state legislation ceding curiam (mem.) 302 U.S. 661, 58 S.Ct. 478 the area to the United States has (1938). 2. Baltimore Shipbuilding and Dry Dock been held sufficient to divest the Company v. Baltimore , 195 U.S. 375, 25 S.Ct. 50 (1904). 3. E.E. Morgan Co., Inc. v. State of Arkan- sas , 150 S.W.2d 736 (Ark. 1941), App. dis. 314 U.S. 571, 62 S.Ct. 77 (1941), rehearsing 5. Opinion of the Attorney General of den. 314 U.S. 711, 62 S.Ct. 174 (1941). North Carolina, January 18, 1966. 4. Opinion of the Attorney General of 6. Art. 1, Sec. 8, Clause 17, U.S. Constitu- North Carolina, April 9, 1942. tion.

Contracting 113

state of all authority. 7 Other deci- work, the question is frequently sions have held that a law merely raised as to whether or not the for- consenting to the purchase of the eign prime contractor is required to area by the United States is not qualify under these circumstances. sufficient to divest the state of all The general rule is that the prime control, and that the federal gov- contractor will be required to qual- ernment may indicate by its subse- ify, both because the prime con- quent acts that it does not consider tractor is ordinarily obliged to all state sovereignty to have been exercise a certain degree of super- ceded. 8 vision, and because the ultimate In one decision, it was held that responsibility under the construc- state laws enacted prior to the ces- tion contract rests with the prime sion would remain in force until contractor. abrogated by the federal govern- Thus, a contracting company ment, while those enacted subse- which sublet all of the actual work quent to the cession would have no under a contract to install an auto- application to the area ceded. 9 matic fire sprinkler system was required to qualify even though the Subcontracting subcontractor furnished the labor and materials and the necessary Since it is common practice for 1 a contracting corporation to sub- supervision. contract part or all of the actual Similarly, the Alabama Supreme Court held that a foreign corporation, which engaged subcontractors 7. Surplus Trading Co. v. Cook , 281 U.S. to perform all of the work in the 647, 50 S.Ct. 455 (1930) [Camp Pike, Ark.]; Standard Oil Co. of Cal. v. California , 291 state under the contract, was “en- U.S. 242, 54 S.Ct. 381 (1934) [The Presidio of gaged in the exercise of its corpo- San Francisco, Cal.]; Murray v. Joe Gerrick & rate functions in this state Co. , 291 U.S. 315, 54 S.Ct. 432 (1934) [Puget Sound Navy Yard, Wash.]; State v. Blair , 191 notwithstanding [the fact that] it So. 237 (Ala. 1939) [Maxwell Field, Ala.]; employed independent subcontrac- Webb v. J.G. White Engineering Corp. , 85 So. tors to do the actual work.” 2 The 729 (Ala. 1920) [Muscle Shoals, Ala.]. See also Leslie Miller, Inc. v. Arkansas , 352 U.S. 187, 77 S.Ct. 257 (1956). 1. Phillips Co. v. Everett , 262 Fed. 341 8. Atkinson v. State Tax Commission , 303 (6th Cir. [Mich.] 1919), cert. den 252 U.S. U.S. 20, 58 S.Ct. 419 (1938) [Bonneville 579, 40 S.Ct. 344 (1920). But see Richards- project, Ore.]; Motor Transport Co. v. Wilcox Mfg. Co. v. Talbot & Meier , 252 Mich. McCanless , 189 S.W.2d 200 (Tenn. 1945) 622, 233 N.W. 437 (1930), in which the prime [Camp Tyson and Wolfe Creek Ordinance contractor was not required to qualify. Plant]. 2. Alabama Western R. Co. v. Talley-Bates 9. Pound v. Gaulding , 187 So. 468 (Ala. Construction Co. , 162 Ala. 396, 50 So. 341 1939) [Fort McClellan]. (1909).

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court continued: “Does not a cor- Submitting Bids poration engage in the perfor- Generally, contractors must sub- mance of its corporate functions mit a bid before obtaining a con- when it secures the doing of the tract to do construction work. thing it was chartered to do Thus, the question may arise as through the employment of con- to whether or not the mere sub- tractors; and, if so, does it not mission of a bid requires qualifica- transact business at the place tion. where the work was done? We In an Alabama case, a Tennes- think so.” see subcontractor sought to obtain Where the foreign prime con- a subcontract on an Alabama pro- tractor performs some part of the ject. The company traveled to Ala- contract itself, the fact that the rest bama on several occasions to of the work was subcontracted will discuss and solicit the contract and be of no significance, and it will submitted a written bid. The court have to qualify, assuming that its held the company’s presence in activity cannot be considered an Alabama never rose to the level of isolated transaction. Thus, a for- transacting business in the state eign corporation which contracted and therefore it could maintain its to erect a bridge in Arkansas, and breach of contract action. 1 The fact subcontracted all of the work ex- that a foreign corporation’s name cept the erection of the steel super- appears on a vendors’ list as a pos- structure, was required to qualify. 3 sible supplier of commodities to a The question of whether or not state institution does not amount to the subcontractor itself must quali- doing business, according to an fy is determined by the same rules opinion of the Florida Attorney applicable to contractors generally. General, and qualification is not Thus, if a foreign subcontractor required. However, if the furnish- engages in construction work in a state, it will ordinarily be required to qualify. 4 App. 4 Dist. 1990); Mandel Bros. Inc. v. Hen- ry A. O’Neil, Inc. , 69 F.2d 452 (8th Cir. [S.D.] 1934). But see Richmond Screw Anchor Co. v. 3. Kansas City Structural Steel Co. v. State E.W. Minter Co., Inc. 156 Tenn. 19, 300 S.W. of Arkansas , 269 U.S. 148, 46 S.Ct. 59 (1925). 574 (1927); Consolidated Indemnity & Ins. 4. Gray-Knox Marble Co. v. Times Bldg. Co. v. Salmon & Cowin, Inc. 64 F.2d 756 (5th Co. , 225 Ala. 554, 144 So. 29 (1932); Loomis Cir. [Ala. (Tenn. law)] 1933); John Williams, v. People’s Construction Co. , 211 Fed. 453 Inc. v. Golden & Crick , 247 Pa. 397, 93 Atl. (6th Cir. [Mich. (Wis. law)] 1914; Greene 505 (1915). Plumbing & Heating Co. v. Morris , 395 P.2d 1. Shook & Fletcher Insulation Co. v. Pan- 252 (Mont. 1964); Dot Systems, Inc. v. Adams el Systems, Inc. , 784 F.2d 1566 (11th Cir. Robinson Ent., Inc. , 587 N.E.2d 844 (Ohio 1986).

Credit 115

ing of the commodities upon a Credit proper bid results in the awarding of a contract for that purpose, the Collecting Debts corporation will be required to Section 106(h) of the Model Act 2 qualify. A Florida court later ruled declares that “Securing or collect- that submitting a bid did not re- ing debts or enforcing any rights in quire qualification under the corpo- property securing the same” by a 3 ration law in effect at the time. A foreign corporation does not by California court held that simply itself require qualification. The submitting a bid for a contract with Model Act provision has been a state agency did not constitute adopted by Alaska, Louisiana, 4 transacting intrastate business. Minnesota, New Mexico, and Even though submitting a bid Rhode Island. The provisions in may not constitute doing business Delaware, Georgia, North Caroli- so as to require qualification under na, Oklahoma, and Texas are sub- the state’s corporation law, it stantially similar. Maryland should be noted that some states provides that “foreclosing mort- require qualification before a con- gages and deeds of trust on proper- tractor’s license will be issued. ty in this State” does not require And because a contractor’s license qualification. The Revised Model is required before a bid may be Act, Section 15.01(b)(8) states that submitted, in these states qualifica- “securing or collecting debts or tion would be required in order to enforcing mortgages and security submit a bid. interests in property securing the Several cases of interest in this debts” does not constitute doing 5 field appear below. business. This provision, or a substantially similar one, has been adopted by Arizona, Arkansas, 2. Opinion of the Attorney General of Flor- ida, No. 066-93, October 12, 1966. Colorado, Connecticut, Florida, 3. Marinair Freight Forward, Inc. v. Flor- Hawaii, Indiana, Iowa, Kansas, ida Dept. of Commerce , 419 So.2d 1136 (Fla. Kentucky, Maine, Michigan, Mis- App. 1982). 4. United System of Arkansas v. Stamison, sissippi, Missouri, Montana, Ne- 74 Cal.Rptr.2d 407 (Cal. App. 3 Dist. 1998) braska, New Hampshire, Nevada, 5. Ebinger v. Breese , 240 Ill. App. 80 North Dakota, Oregon, South Car- (1926); State v. American Book Co. , 69 Kan. 1, 76 P. 411 (1904); Hogan v. City of St. Lou- olina, South Dakota, Tennessee, is , 176 Mo. 149, 75 S.W. 604 (1903); Odell v. Utah, Vermont, Virginia, Wash- City of New York , 206 App. Div. 68, 200 N.Y.S. 705 (1st Dept. 1923), affirmed 238 N.Y. 623, 144 N.E. 917 (1924); Will v. City of Hoffman Construction Co. v. Erwin , 331 Pa. Bismarck , 36 N.D. 570, 163 N.W. 550 (1917); 384, 200 A. 579 (1938).

116 Credit

ington, West Virginia, Wisconsin, enforce the guarantee clearly con- and Wyoming. The District of Co- stituted debt collection—which is lumbia, Idaho, and Pennsylvania exempted from the definition of statutes add “and holding, protect- transacting business. 3 ing, or maintaining property so A Georgia court held that a for- acquired.” eign corporation was not required In an Alabama case, a foreign to qualify to bring a garnishment corporation engaged in the financ- action to satisfy a $1.4 million ing of inventories for boat dealers judgment.4 In a case involving an in Alabama. The corporation was LLC a court held that the LLC did permitted to maintain an action not have to qualify to apply for although it employed an agent in entry of a sister state’s judgment.5 Alabama to receive monthly inven- A Hawaii court ruled a foreign tory payments. The court held that corporation was not required to this activity “was relevant and ap- obtain a certificate of authority to propriate to the providing of fi- take assignment of a loan and nancing for interstate purchases.” 1 mortgage or enforce its rights In a Missouri case, the court held under the loan and mortgage. 6 that an unqualified foreign corpo- In addition, several states have ration could bring an action for enacted statutes specifically ex- conversion of a machine in which cluding from “doing business” the it had a security interest, as a for- transaction of a mortgage business, eign corporation need not obtain a including in most cases the en- certificate of authority to secure or forcement of the mortgage. See collect debts or enforce security “Statutory ‘Doing Business’ Provi- interests in property securing the sions Limited To Lending Money debt. 2 And, in a New Mexico case, On Security.” an Ohio corporation that was in the The mere collection of debt business of buying distressed bank within a state by an ordinary busi- loans, was not required to qualify in New Mexico to sue to recover 3. Cadle Co., Inc. v. Wallach Concrete, on a New Mexico resident’s guar- Inc. , 855 P.2d 130 (N.M. 1993). See a lso First Resolution Inv. Corp. v.Avery , 246 P.3d antee of a promissory note owned 1136 (Or. App. 2010); by the corporation. According to 4. Carrier411 Services, Inc. v. Insight the court, the corporation’s suit to Technology, Inc., 744 S.E.2d 356 (Ga. App. 2013). 5. Conseco Marketing, LLC v. IFA and 1. North Alabama Marine, Inc. v. Sea Ray Insurance Services, Inc., 2013 Cal.App. Boats, Inc. , 533 So.2d 598 (Ala. 1988). LEXIS 946. 2. Alpine Paper Co. v. Lontz , 856 S.W.2d 6. La Salle Bank National Association v. 940 (Mo. App. E.D. 1993). Roth, 323 P.3d 162 (Hawaii App. 2014).

Credit 117

ness corporation has been held not ration was permitted to maintain an to require qualification. 7 In con- action to enforce its security inter- nection with the collection of ac- est in the defendant’s crops. 10 counts arising out of interstate The collection of insurance shipments, the U.S. Supreme Court premiums for insurance written by has said: “Where a corporation licensed insurance companies has goes into a state other than that of been held not to require qualifica- its origin to collect, according to tion by a foreign insurance agen- the usual or prevailing methods, cy. 11 Where, however the foreign the amount which has become due corporation is in the business of in transaction in interstate com- collecting debts, as in the case of a merce, the State cannot, consistent- collection agency, such activity ly with the limitation arising from will ordinarily require qualifica- the commerce clause, obstruct the tion. 12 An exception was made in attainment of that purpose.” 8 the case of a New York credit cor- Where a foreign corporation’s sole poration, not qualified in Louisi- activity in Pennsylvania was suing ana, which sent representatives borrowers who failed to repay into the state to collect on the ac- loans, the court held it would not counts out of which the cause of be considered doing business in action arose. The corporation was Pennsylvania. 9 Where the defend- held not to be doing business so as ant could not refute the assertion to bar it from maintaining the ac- that a foreign corporation’s activi- tion. 13 ties were limited to making and collecting loans, the foreign corpo- Extending Credit If a sale possesses all of the elements of an interstate trans- 7. Sioux Remedy Co. v. Cope , 235 U.S. 197, 35 S. Ct. 57 (1914); Matter of Delta action, the fact that the foreign Molded Products, Inc., 416 F.Supp. 938 (N.D. corporation’s local representatives Ala. 1976), aff’d sub nom; Sterne v. Improved Machinery, Inc. , 571 F.2d 957 (5th Cir. 1978); Moran v. Union Savings Bank & Trust Co. , 97 10. Fin Ag, Inc. v. Hufnagle, Inc. , 700 S.W.2d 638 (Ark., 1936); North American S.W.2d 510 (Minn. App. 2005). Mortgage Co. v. Hudson , 168 So. 79 (Miss. 11. J.H. Silversmith, Inc. v. Keeter , 72 1936); American Housing Trust, III v. Jones , N.M. 246, 382 P.2d 720 (1963). 696 A.2d 1181 (Pa. 1997); Goss v. Bobby D. 12. Crites v. Associated Frozen Food Associates , 94 S.W.3d 65 (Tex-App-Tyler Packers, Inc. , 190 Ore. 585, 227 P.2d 821 2002). (1951); Horton v. Richards , 594 P.2d 891 8. Furst and Thomas v. Brewster , 282 U.S. (Utah 1979). 493, 51 S.Ct. 295 (1931). 13. Equitable Discount Corporation v. Jef- 9. Education Resources Institute, Inc. v. ferson Television Sales and Service , 169 So.2d Cole, 827 A.2d 493 (Pa. Super. 2003). 567 (La. Ct. App. 1964).

118 Credit

accept notes or mortgages in par- the equipment for $1. The Ohio tial or full payment of the purchase court held that this transaction was price will not of itself require qual- actually a financed sale and the ification. 1 The extension of credit foreign corporation was actually a is considered part of the interstate finance company. Because the transaction. This appears to be the loaning of money by a corporation rule whether or not the note is ap- engaged in that type of business proved outside the state. constitutes transacting intrastate A Washington corporation business, the corporation could not shipped equipment to its Arkansas maintain a suit. 3 distributor on credit. The corpora- An Alabama court held that an tion was permitted to maintain an unqualified foreign corporation action against the distributor in whose only relation to Alabama Arkansas without qualifying be- was financing an Alabama resi- cause all of its contracts were made dent’s purchase of an airplane, in interstate commerce. 2 could utilize the state’s courts, as In another case, a foreign corpo- the contact between the corpora- ration leased telephone equipment tion and Alabama was minimal at to an Ohio corporation for five best and did not amount to intra- years. At the end of the lease, the state business. 4 However, where Ohio corporation could purchase lenders financed the purchase of 13 vehicles at an auction in New 1. Linograph Co. v. Logan , 175 Ark. 194, York, they were unable to maintain 299 S.W. 609 (1927); George H. Cox Co. v. a suit in New York on the grounds Phonograph Co. , 208 Ky. 398, 270 S.W. 811 that they were foreign corporations (1925); Refrigeration Discount Corp. v. Turley , 189 Miss. 880, 198 So. 731 (1940); doing business in New York with- 5 General Excavator Co. v. Emory , 40 S.W.2d out authority. 490 (Mo. App. 1931); Abner Mfg. Co. of Wapakoneta, Ohio v. McLaughlin , 41 N.M. 97, 64 P.2d 387 (1937); William L. Bonnell Lending Money On Security Co., Inc. v Katz , 196 N.Y.S.2d 763 (Sup. Ct. 1960); Dahl Implement & Lumber Co. v. Section 106(g) of the Model Act Campbell , 45 N.D. 239, 178 N.W. 197 (1920); provides that “Creating as borrow- Mergenthaler Linotype Co. v. Spokesman Pub. Co. , 127 Ore. 196, 270 P. 519 (1928); Mt. er or lender, or acquiring, indebt- Arbor Nurseries v. Gurnsey Seed & Nursey Co. , 46 S.D. 234, 191 N.W. 835 (1923); Mil- ler Brewing Co. v. Capitol Distributing Co. , 3. Contel Credit Corp. v. Tiger, Inc. , 520 72 P.2d 1056 (Utah, 1937); American Timber N.E.2d 1385 (Ohio App. 1987). Holding Co. v. Christensen , 206 Wis. 205, 238 4. Wise v. Grumman Credit Corporation , N.W. 897 (1931). 603 So.2d 952 (Ala. 1992). 2. Moore v. Luxor (North America) Corpo- 5. Northway Exchange, Inc. v. Dufrane , ration , 742 S.W.2d 916 (Ark. 1988). 685 N.Y.S.2d 848 (A.D. 3 Dept. 1999).

Credit 119

edness or mortgages or other secu- “Statutory ‘Doing Business’ Provi- rity interests in real or personal sions Limited To Lending Money property” 1 will not constitute doing On Security.” These provisions business so as to require qualifica- vary greatly from state to state, and tion. Section 15.01(b)(7) of the must be examined to determine the Revised Model Act is substantially activities exempted and the extent the same. States which have en- of the exemption. acted similar provisions include If an unqualified foreign corpo- Alaska, Arizona, Arkansas, Cali- ration is carrying on the business fornia, Colorado, Connecticut, of lending money and taking mort- Delaware, District of Columbia, gages on real property as security, Florida, Georgia, Hawaii, Idaho, and engages in repeated local Indiana, Iowa, Kansas, Kentucky, transactions of this nature, the cor- Louisiana, Maine, Michigan, Min- poration, in the absence of statute, nesota, Mississippi, Missouri, would probably be required to Montana, Nebraska, Nevada, New qualify. 2 However, a foreign cor- Hampshire, New Mexico, North poration was not required to quali- Carolina, North Dakota, Oklaho- fy in Georgia even though it had ma, Oregon, Pennsylvania, Rhode acquired a portfolio of real estate Island, South Carolina, South Da- loans from a corporate predecessor kota, Tennessee, Texas, Utah, and owned several subdivisions in Vermont, Virginia, Washington, the state, which it endeavored to West Virginia, Wisconsin, and develop and sell. 3 Of course, if the Wyoming. foreign corporation is also engaged In order to encourage invest- in local business apart from its ment in the state by foreign finan- mortgage dealings, it will be re- cial institutions, some states have quired to qualify. enacted separate statutory provisions exempting such corporations 2. Chattanooga National Building & Loan from the qualification require- Assn. v. Denson , 189 U.S. 408, 23 S.Ct. 630 ments. Citations to these statutes (1903); Sullivan v. Vernon , 121 Ala. 393 are set forth under the heading (1898); John Hancock Mutual Life Ins. Co. v. Girard , 64 P.2d 254 (Idaho 1936); People’s Building, Loan & Savings Assn. v. Markley , 1. Prior to 1973, this subsection read: 27 Ind. App. 128, 60 N.E. 1013 (1901); Na- “Creating evidences of debt, mortgages or tional Mercantile Co., Ltd. v. Watson , 215 liens on real or personal property.” A few Fed. 929 (D. Ore. 1914); British-American states that adopted the Model Act before 1973 Mortgage Co. v. Jones , 58 S.E. 417 (S.C. have not enacted the new language. For de- 1907); Dunn v. Utah Serum Co. , 65 Utah 527, tails, see “Statutory ‘Doing Business’ Defini- 238 Pac. 245 (1925). tions Applicable to Ordinary Business 3. Homac Inc. v. Fort Wayne Mortgage Corporation,” supra. Co. , 577 F.Supp. 1065 (N.D. Ga. 1983).

120 Credit

Where the foreign corporation is an interstate transaction, that the not engaged locally in the general loan was payable outside the state, business of lending money, the and that the mortgage was merely particular transaction involved be- incidental to the loan. ing single or isolated, qualification Vermont’s Attorney General will not ordinarily be required. 4 stated that the taking and foreclos- Factors which courts have consid- ing of a mortgage on Vermont ered to negate the need for qualifi- property by a foreign savings bank cation are that the debt arose out of would not constitute “doing business” in Vermont for purposes of 4. Worth v. Knickerbocker Trust Co. , 171 qualification if the mortgage was Ala. 621, 55 So. 144 (1911); National Bank of executed outside Vermont. 5 Wichita v. Spot Cash Coal Co. , 98 Ark. 597, 136 S.W. 953 (1911); Moran v. Union Sav. These general rules are equally Bank & Trust Co. , 97 S.W.2d 638 (Ark., applicable to ordinary foreign 1936); Ockenfels v. Boyd , 297 Fed. 614 (8th business corporations and to fi- Cir. [Ark.] 1924); Equitable Trust Co. of N.Y. v. Western Land & Power Co. , 176 Pac. 876 nance companies. A foreign fi- (Cal. App. 1918); Roseberry v. Valley Build- nance company which maintained ing & Loan Assn. , 35 Colo. 132, 83 P.637 a permanent local agent who car- (1905); Continental Assurance Co. v. Ihler , 25 P2d 792 (Idaho 1933); City Ice Co. of Kansas ried on business in the company’s City v. Quivira Development Co. , 30 P.2d 140 name and consummated transac- (Kan., 1934); Hughes v. R.O. Campbell Coal tions without first obtaining ap- Co. , 258 S.W. 671 (Ky. Ct. App. 1924); Amer- proval from the company’s home ican Freehold Land-Mortgage Co. of London, 6 Ltd. v. Pierce , 21 So. 972 (La. 1897); Maxwell office was required to qualify. v. Hammond , 234 Mich. 461, 208 N.W. 443 Similarly, where such a local agent (1926); Manhattan & Suburban Savings & obtained approval from the home Loan Assn. v. Massarelli , 42 Atl. 284 (N.J. Ct. Chancery 1899); Netherlands Ship-Mortgage office, but the transactions were Corp., Ltd. v. Madias , 717 F.2d 731 (2d Cir. completed in the state where the 1983), rev’g 554 F.Supp. 375 (S.D.N.Y. agent was located, qualification 1983); U.S. Savings & Loan Co. v. Shain , 8 7 N.D. 136, 77 N.W. 1006 (1898); Dime Sav- was required. ings & Trust Co. v. Humphreys , 53 P.2d 665 A contrary finding ordinarily re- (Okla. 1936); American Housing Trust, III v. sults where a finance company Jones , 696 A.2d 1181 (Pa. 1997); People’s maintains neither an office, agent Building, Loan & Savings Assn. v. Berlin , 201 Pa. 1, 50 A. 308 (1901); Erwin National Bank v. Riddle , 79 S.W.2d 1032 (Tenn. App. 1934); Security Co. v. Panhandle National Bank , 93 5. OAG, Vermont, 1958, No. 149. Tex. 575, 57 S.W. 22 (1900); Keene Guaranty 6. National Mercantile Co., Ltd. v. Watson , Savings Bank v. Lawrence , 32 Wash. 572, 73 215 Fed. 929 (D. Ore. 1914); Finance Corpo- P.680 (1903). See, however, an Alabama case ration of America v. Stone , 54 S.W.2d 254 in which a single act was held “doing busi- (Tex. Civ. App. 1932). ness.” Farrior v. New England Mortgage 7. Republic Acceptance Corporation v. Security Co. , 88 Ala. 275, 7 So. 200 (1890).) Bennett , 189 N.W. 901 (Mich. 1922).

Credit 121

nor representative within the state, Supreme Court in Davis & Warrell but merely has agents who enter v. General Motors Acceptance the state to solicit business which Corporation .9 must be approved outside the state. “. . .we do not mean to say that a Such companies ordinarily are not foreign corporation must have an required to qualify, and the courts agency established in this state to stress such facts as the necessity of bring it within the operation of our out-of-state approval and the place statute regulating foreign corpora- of payment. 8 tions doing business in this state; The courts’ approach under the- but we do hold that in a case like se circumstances is well illustrated this, where the foreign corporation in the language of the Arkansas had its place of domicile in another state and discounted commercial 8. Burr v. Renewal Guaranty Corporation , paper of parties with money paid 105 Ariz. 549, 468 P.2d 576 (1970); Davis & out in such other state on applica- Worrell v. General Motors Acceptance Cor- poration , 241 S.W. 44 (Ark. 1922); Equitable tions made to it there through deal- Credit Co., Inc. v. Rogers , 299 S.W. 747 ers in this state, such transactions (Ark., 1927); Industrial Acceptance Corp. v. do not constitute doing business in Haering , 253 Ill. App. 97 (1929); Jones v. General Motors Acceptance Corporation , 265 this state by such foreign corpora- S.W. 620 (Ky. Ct. App. 1924); Big Four Mills, tion.” Ltd. v. Commercial Credit Co., Inc. , 307 Ky. The volume of business done by 612, 211 S.W.2d 831 (1948); C.I.T. Corp. v. a finance company may be the de- Stuart , 187 So. 204 (Miss. 1939); Refrigera- tion Discount Corp. v. Turley , 189 Miss. 880, ciding factor in whether such a 198 So. 731 (1940); Ross Construction Co., corporation will be required to Inc. v. U.M.&M. Credit Corp. , 214 So.2d 822 qualify. This was the case where a (Miss., 1968); Yellow Manufacturing Ac- ceptance Corp. v. American Oil Co. , 2 So.2d corporation was soliciting small 834 (Miss., 1941); Snipes v. Commercial & loan business by mail. The loan Industrial Bank , 83 So.2d 179 (Miss. 1955); applications were executed by the Minnehoma Fin. Co. v. Van Oosten , 198 F.Supp. 200 (D.Mont. 1961); New York Bank- borrowers and returned by mail, an ers, Inc. v . Bosworth , 138 Atl. 509 (N.J. Su- independent contractor was en- preme 1927); Samuels v. Mott , 29 Misc.2d gaged to conduct local credit in- 705, 211 N.Y.S.2D 242 (Sup. Ct. 1960); Re- vestigations and the loans were frigeration Discount Corp. v. Metzger , 10 F.Supp. 748 (M.D. Pa. 1935); Com. v. Ameri- approved and checks mailed from can Sugar Refining Co. , 47 Pa. D.&C. 276 the company’s office outside the (1942); General Motors Acceptance Corp. v. state. The volume of business done Huron Finance Corp. , 262 N.W. 195 (S.D. 1935); Leake v. Equitable Discount Corpora- was substantial enough to subject tion , 234 S.W.2d 114 (Tex. Civ. App. 1950); General Motors Acceptance Corporation v. Shadyside Coal Co. , 135 S.E. 272 (W.Va. Sup. Ct. App. 1926). 9. 241 S.W. 44, 47 (Ark. 1922).

122 Credit

the company to the licensing and eign corporations; 14 where the regulatory powers of the state. 10 chattel mortgage was executed and In Louisiana, under a statute ex- payable in another state and its empting from the qualification foreclosure could not be regarded requirements certain foreign corpo- as doing business; 15 where the con- rations lending money on security, tract by which the foreign corpora- the Attorney General issued an tion acquired rights to notes and a opinion stating that the exemption chattel mortgage was entered into did not extend to a federal savings another state; 16 and where the chat- and loan association that purchased tel mortgage was taken to secure a only loans previously made by previously existing debt contracted Louisiana insurers or other lending outside the state. 17 institutions. He further indicated Where a chattel mortgage was that such a company did not come executed in the state in which the within the exemption for banking property was located, the foreign institutions. 11 corporation was held to be doing Foreign corporations holding business, and the instrument was chattel mortgages on personal void and unenforceable by the cor- property located in a state have not poration under the Alabama stat- been required to qualify: where the ute. 18 Where a foreign corporation transaction was an isolated, inde- organized for the purpose of fi- pendent transaction incidental to its nancing the sale of mobile homes business; 12 where the sale which did substantial business with deal- resulted in the execution of the ers in Alabama (at least two of chattel mortgage was a transaction which were its wholly owned sub- in interstate commerce; 13 where the sidiaries), had a representative who foreclosure of the mortgage was traveled to Alabama servicing the not an “action” of the type prohib- accounts it financed and writing to ited by statute to unlicensed for- 14. Herald & Globe Assn. v. Clere Cloth- 10. People v. Fairfax Family Fund, Inc. , ing Co. , 84 A.23 (Vt., 1912). 235 Cal. App.2d 881, 47 Cal. Rptr. 812 15. Largilliere Co. v. McConkie , 210 Pac. (1964). 207 (Ida. 1922); Land Development Corp. v. 11. Opinion of the Attorney General of Canaday , 258 P.2d 976 (Ida., 1953). Louisiana, April 20, 1965. 16. Muldowney v. McCoy Hotel Co. , 269 12. Western Loan & Bldg. Co. v. Elias N.W. 655 (Wis., 1936); Chickering-Chase Morris & Sons Co. , 29 P.2d 137 (Ariz. 1934); Brothers Co. v. L.J. White & Co. , 127 Wis. 83, Sigel-Campion Live Stock Commission Co. v. 106 N.W. 797 (1906). Haston , 75 P. 1028 (Kan. 1904). 17. Sunny South Lumber Co. v. Neimeyer 13. Mergenthaler Linotype Co. v. Spokes- Lumber Co. , 38 S.W. 902 (Ark., 1896). man Pub. Co. , 127 Ore. 196, 270 Pac. 519 18. Peters v. Brunswick-Balke-Collender (1928). Co. , 60 So. 431 (Ala. App. 1912).

Credit 123

and visiting delinquent debtors, A Texas court held that the and repossessed mobile homes and phrase “evidences of debt” includ- resold them through its dealers, it ed all contractual obligations to was doing business in Alabama pay in the future for consideration without being qualified and could presently received. Thus, a ten- not enforce its contracts there. 19 year lease agreement on farm However, where a foreign corpora- equipment was an evidence of tion merely purchased chattel pa- debt, and the lessor did not have to per secured by personal property, qualify in Texas. 22 Where a foreign some of which was located in Ala- corporation’s contract to buy real bama, and its contacts with Ala- estate included incurring a debt in bama residents were almost exclu- the form of a promissory note for sively by mail and telephone from part of the purchase price and a outside the state, it was not doing deed of trust securing the note, the business for purposes of qualifica- corporation was not required to tion. 20 qualify to bring a suit based on Where a corporation’s principal the contract. The court found that activity, financing the purchase of the corporation was exempt under airplanes, did not require qualifica- the provision of Texas law exempt- tion because of the exemption for ing transactions creating evidence lending money and collecting of debt. 23 debts, certain other activities in the A New York court held that an state were held to be incidental to unlicensed foreign banking corpo- and directly related to the permit- ration was not doing business in ted activity and not to require qual- the state by virtue of its maintain- ification. These “related activities” ing a loan production office—i.e., included advertising in form let- an office limited to the soliciting of ters, leasing an advertising sign, loans on behalf of the corporation, having an employee who made the assembly of credit information, trips to the state to solicit business the making of inspections, securing and holding two seminars for dealers in the state. 21 22. Killian v. Trans Union Leasing Corp. , 657 S.W.2d 189 (Tex. App. 4 Dist. 1983). At the time, Texas’ Business Corporation Act, 19. Boles v. Midland Guardian Co. , 410 Art. 8.01(B)(7), provided that “Creating evi- So.2d 82 (Ala. Civ. App. 1982). dences of debt, mortgages, or liens on real or 20. Associates Capital Services Corp. v. personal property” did not constitute transact- Loftin’s Transfer & Storage Co., Inc. , 554 ing business in the state. F.2d 188 (5th Cir. [Ala.] 1977). 23. Durish v. Panan Intern., N.V. , 808 21. Cesna Finance Corp. v. Mesilla Valley S.W.2d 175 (Tex. App.-Houston [14th Dist.] Flying Serv., Inc. , 462 P.2d 144 (N.M., 1969). 1991).

124 Credit

of title information, and preparing In a U.S. Court of Appeals case, of loan applications. 24 A Pennsyl- an Alabama corporation operated a vania court held that it could not radio station that broadcast in Mis- determine whether a foreign corpo- sissippi. The corporation regularly ration that acquired an installment conducted remote promotional contract for the sale of land and broadcasts from Mississippi, held sought to eject the buyer for failing sales meetings there, leased cars to pay, was subject to the excep- and purchased supplies in Missis- tion for acquiring and/or enforcing sippi and hired Mississippi resi- security interests in real property dents. The Fifth Circuit Court of without evidence as to whether the Appeals found that the remote property was held strictly for in- broadcasts were inseparable from vestment or fiduciary purposes, the underlying interstate sale of air and whether the corporation had, time and that the corporation’s or intended to engage in similar sales activities were insufficient to transactions. 25 A federal court in establish a localized business func- Mississippi held that a foreign tion since it was promoting inter- corporation lending money to state sales. Thus, the corporation homeowners to refinance their could not be denied access to Mis- mortgages did not need to quali- sissippi’s courts because it was not fy.26 qualified. 1 The Ohio Attorney General rendered an opinion in 1935 to the Entertainment effect that “a foreign corporation engaged in the business of broad- Broadcasting casting radio programs in this state Due to the nature of the business is engaged solely in interstate transacted by most broadcasting commerce and exempt from” qual- 2 companies, in general it would ification. There, an Ohio corpora- appear that such companies would tion, wholly owned by the foreign be exempt from qualifying because broadcasting corporation, leased they are engaged in interstate the facilities of its Ohio station to commerce. the parent. This station was one of 20 located in 14 states which made

24. Integra Bank North v. Gordon , 624 N.Y.S.2d 344 (Sup. 1995). 25. American Housing Trust, III v. Jones , 696 A.2d 1181 (Pa. 1997). 1. Radio WHKW, Inc. v. Yarber , 838 F.2d 26. Carson v. McNeal, 375 F.Supp.2d 1439 (5th Cir. 1988). 509 (S.D. Miss. 2005). 2. Ohio OAG, 1935, p. 818.

Entertainment 125

up the network of the foreign distributed and shown in the state. 2 broadcasting corporation. Where the foreign corporation In a tax case, 3 the United States merely manufactured and leased Supreme Court stated that “by its the film, the exhibition itself being very nature broadcasting trans- handled by others, it was held that cends state lines and is national in qualification was not required. 3 its scope and importance—charac- Other decisions in this area teristics which bring it within the which may be of interest are set scope and protection, and subject it forth below. 4 to the control of the commerce clause.” Professional Sporting Exhibitions And Games Exhibition of Films In a 1965 Attorney General’s The shipment of films into a opinion, California’s qualification state by a foreign corporation may provision was held applicable to require qualification, depending on professional baseball corporations the extent of the corporation’s “entering California for the specif- activities. It has been held that a ic purpose of engaging in baseball foreign corporation which con- games.” 1 The Attorney General tracts with local merchants for the stated that such a corporation was manufacture and exhibition of ad- performing “repeated and succes- vertising films in local theaters is sive transactions of its business in required to qualify, even though this State. . .” The determination the films are manufactured outside was based on the substantial num- 1 the state. ber of games played within the Similarly, a film distributing corporation was held to be doing 2. United Artists Corp. v. Board of Cen- business when it sent a film into a sors , 189 Tenn. 397, 225 S.W.2d 550 (1949), state to be shown to a local censor- cert. den. per curiam (mem.) 339 U.S. 952, 70 S.Ct. 839 (1950). ship board and local distributors 3. Alexander Film Co. v. Lazeres & preliminary to the film’s being Morfesy , 7 S.W.2d 599 (Tex. Civ. App. 1928). 4. Alexander Film Co. v. State , 201 Ark. 1052, 147 S.W.2d 1011 (1941); Rex Beach Pictures Co., Inc. v. I. Garson Productions , 3. Fisher’s Blend Station, Inc. v. The Tax 209 Mich. 692, 177 N.W. 254 (1920); Alexan- Commission , 297 U.S. 650, 56 S. Ct. 608 der Film Co. v. Pierce , 46 N.M. 110, 121 P.2d (1936). 940 (1942); Short Films Syndicate Co., Inc. v. 1. State v. Tad Screen Advertising Co. , 199 Standard Film Service Co. , 39 Ohio App. 79, Ark. 205, 133 S.W.2d 1 (1939); Ligon v. 176 N.E. 893 (1931). Alexander Film Co. , 55 S.W.2d 1030 (Tex. 1. 45 Ops. Atty. Gen. (Cal.) II, January 20, Comm’n App. 1932). 1965.

126 Entertainment

state and the revenue derived secutive days, producing, directing, therefrom. filming, crewing or acting in mo- Although foreign baseball cor- tion picture feature films, televi- porations are engaged in interstate sion series or commercials, or commerce, their “exhibition re- promotional films which are sent mains purely a local affair” and, outside of the Commonwealth for therefore, not exclusively in inter- processing, editing, marketing and state commerce. The Attorney distribution” does not constitute General also implied that, in his doing business. 1 In Nevada, “the opinion, the professional baseball production of motion pictures” corporations’ other activities, such does not constitute doing business as scouting, might also require in the state. 2 “Motion pictures” is qualification. defined to include films to be However, it should be noted that shown in theaters and on television the basis for the Attorney Gen- and video discs and tapes. 3 eral’s opinion was Toolson v. New Although the rule is not clear, it York Yankees ,2 in which the Su- appears that a foreign corporation preme Court upheld its earlier de- engaged in the business of staging cision in Federal Club v. The shows, theatrical performances, National League ,3 maintaining that sporting events, etc., is required to “Congress had no intention of in- qualify in order to perform this cluding the business of baseball activity. 4 This apparently is true within the scope of the Federal because the corporation is doing a Anti-Trust laws.” The Attorney substantial part of its ordinary General reasoned that if such activ- business in the state and because ities are outside of interstate com- the elements of an interstate trans- merce for anti-trust purposes, they action are absent. The exemption are intrastate and subject to a from qualification usually afforded state’s provisions for intrastate isolated transactions may not be business, including its qualification available here if there is evidence requirements. of an intent to return or if the activity is one of long duration. Production of Films and Shows 1. Code of Virginia, 1950, Sec. 13.1-757. Virginia law provides that “For 2. Nevada Revised Statutes, Sec. 80.015. a period of less than ninety con- 3. Nevada Revised Statutes, Sec. 231.020. 4. Interstate Amusement Co. v. Albert , 239 U.S. 560, 36 S.Ct. 168 (1916); Wichita Film & 2. 346 U.S. 356, 74 S.Ct. 78 (1953). Supply Co. v. Yale , 194 Mo. App. 60, 184 3. 259 U.S. 200, 42 S.Ct. 465 (1922). S.W. 119 (1916).

Leasing 127

A foreign corporation which had Leasing provided riding devices, shows and concessions at fairgrounds in New Leasing Personal Property York for many years was held to Leasing personal property be doing business in the state for across state lines is a common 5 purposes of qualification. business practice. Generally, a for- A foreign corporation that eign lessor corporation will not be filmed a movie in Alabama entered required to qualify in order to lease into a contract with an Alabama its property to others in a foreign resident who agreed to provide a state, if the lease is executed out- dining etiquette lesson, which was side the state. For example, in a filmed. The court held that the Vermont case, 1 an unqualified for- main purpose of the contract was eign corporation entered into lease for the resident to be filmed – agreements with the defendant. which was an interstate activity - The court held that because the and not for her to provide the eti- agreements required the defendants quette lesson - and that the corpo- to send the leases to New Jersey ration was not required to qualify for acceptance and execution, the 6 before entering into the contract. leases were made in New Jersey Other cases of interest in this ar- and not Vermont and the corpora- 7 ea are set forth below. tion’s assignee was permitted to maintain its action. Generally, the question of 5. Continental Shows, Inc. v. Essex County whether a foreign lessor must qual- Agricultural Society Inc. , 62 A.D.2d 1103, ify does not turn on the existence 404 N.Y.S.2d 418 (3rd Dept. 1978). 6. Ex Parte Cohen , 988 So.2d 661 (Ala. of the lease but on the activities the 2008). foreign lessor actually performed 7. Federal Baseball Club v. National in the state in connection with the League of Professional Baseball Clubs , 259 U.S. 200, 42 S.Ct. 465 (1922); Metropolitan lease. Opera Association, Inc. v. Metropolitan Opera For example, a California corpo- Association of Chicago, Inc. , 81 F.Supp. 217 ration leased motion pictures in (N.D. Ill. 1948); Tri-State Amusement Co. v. Forest Park Highlands Amusement Co., 192 Missouri. The corporation inserted Mo. 404, 90 S.W. 1020 (1905); Nasso v. a stipulation in its leasing agree- Seagal, 263 F.Supp.2d 596 (E.D.N.Y. 2003); ment that it had to be advised of Gardella v. Chandler , 172 F.2d 402 (2d Cir. [N.Y.] 1949); United Artists Corp. v. Board of the exact whereabouts of all movie Censors , 189 Tenn. 397, 225 S.W.2d 550 prints, that the lessee could not (1949), cert. denied per curiam (mem.) 339 U.S. 952, 70 S.Ct. 839 (1950); Eastman v. Tiger Vehicle Co. , 195 S.W. 336 (Tex. Civ. 1. Chase Commercial Corp. v. Barton , 571 App. 1917). A.2d 682 (Vt. 1990).

128 Leasing

change, revise or alter any of the cally of a fixed amount of money. prints without consent, and that the This investment was comparable to lessor’s name must be conspicu- the holding of a promissory note of ously displayed on the lessee’s a Tennessee citizen to a nonresi- office window or door. However, dent payee.” 3 there was no evidence to show that Where a New York corporation the lessor ever enforced any of not qualified in Texas leased these provisions. No acts required equipment in Texas, it was not under the agreement other than doing business because there was delivery of the film were actually no evidence that lessor had per- performed. In holding that registra- formed any acts in the state. 4 In tion to do business in the state was another case, a foreign corporation not a prerequisite to lessor’s bring- entered into a ship leasing ar- ing suit, the court stated: “. . . we rangement in New York. The cor- are more concerned with what was poration’s activities in New York done actually under a contract. were limited to maintaining bank What it ‘could have done’ is not accounts, negotiating and execut- sufficient to establish ‘doing busi- ing agreements and sending default ness’ in the state of Missouri.” 2 notices. The corporation was not In a Tennessee case, a New required to qualify in New York to York corporation (lessor) was in maintain its actions. 5 the business of buying property Depending upon the facts of the from sellers, who would deliver the case, when a corporation leases merchandise directly to lessees. A property in another state, the trans- Florida seller entered into such an action may be considered to take arrangement, selling postage stamp place in interstate commerce, vending machines to lessor and thereby not requiring qualification. delivering them to lessee. In up- Thus, a federal court in Alabama holding the nonqualified lessor’s permitted the assignee of a Georgia right to sue in Tennessee, the court corporation that leased cranes in noted that the lessor was “a mere property owner and investor; it invested in a lease contract provid- 3. Rochester Capital Leasing Corp. v. ing for the payment to it periodi- Schilling , 448 S.W.2d 64 (Tenn. 1969). 4. Squyres Construction Co., Inc. v. Chem- ical Bank , 596 S.W.2d (Tex. App. 1 Dist. 2. Filmakers Releasing Organization v. 1980). See also Killian v. Trans Union Leas- Realart Pictures of St. Louis, Inc. , 374 S.W.2d ing Corp. 657 S.W.2d 189 (Tex. App. 4 Dist. 535 (Mo. App. 1964). See also Western Out- 1983). door Advertising Co. of Nebraska v. Berbiglia, 5. Intermar Overseas, Inc. v. Argocean Inc. , 263 S.W.2d 205 (Mo. App. 1953). S.A. , 503 N.Y.S.2d 736 (A.D. 1 Dept. 1986).

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Alabama to maintain an action intrastate commerce and not re- because its business was transacted quired to qualify. 9 in interstate commerce. 6 An Alaska However, even if a corporation court held that a Michigan corpora- leases property in interstate com- tion was not doing intrastate busi- merce, if the lessor does further ness in Alaska where its only acts in the state in connection with activities there consisted of two the leased property, it may be con- brief visits by its president and the sidered to have done intrastate presence of its mechanics on two business. For example, a foreign occasions, all of which were inci- corporation that based its shipping dental to its interstate leasing of an container leasing business in Flori- airplane. 7 In an Ohio case, a for- da, and maintained a full-time of- eign corporation leased equipment fice, depot and staff there, was not in Ohio and entered into a preven- thereby doing business because tative maintenance and repair con- these activities were in interstate tract with its Ohio agent to keep and foreign commerce. However, the equipment at a functioning it also conducted in Florida “the level. The court held that the leas- servicing, handling, storage, repair, ing was in interstate commerce and and maintenance” of shipping con- the repair contracts did not pre- tainers not then being leased. This clude the corporation from bring- was found to be intrastate business, ing suit in Ohio. 8 An Alabama and since the corporation had not court held that an unlicensed for- qualified, it could not maintain an eign corporation that leased and action challenging its property tax shipped equipment to be used in assessment. 10 the construction of a parking deck The lessor of an electric sign in Alabama, but that was not in- was held to be doing business in volved in the construction of the Alabama, where it installed the parking deck, was not engaged in electric sign in Alabama and agreed to inspect, repair and maintain it. The court implied that the act of leasing and installing the 6. Leasing Service Corporation v. Hobbs Equipment Company , 701 F.Supp. 1276 (N.D. sign, without more, would have Ala. 1989). See also XYOQUIP, Inc. v. Mims , been in interstate commerce, and 413 F.Supp. 962 (N.D. Miss. 1976). 7. Kachemak Seafoods, Inc. v. Century Air- lines, Inc. , 641 P.2d 213 (Alaska 1982). 9. SGB Construction Services, Inc. v. Ray 8. Saeilo Machinery, Inc. v. Myers , 489 Sumlin Construction Co., Inc. , 644 So.2d 892 N.E.2d 1083 (Ohio Com. Pl. 1985). See also (Ala. 1994). Houston Canning Co. et al. v. Virginia Can 10. Integrated Container Services, Inc. v. Co. , 100 So. 104 (Ala. 1924). Overstreet , 375 So.2d 1146 (Fla. App. 1979).

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would have enabled the lessor to extended for several months. maintain the action. The additional Therefore, the corporation should services of maintaining and repair- have qualified in Texas and was ing the sign were in intrastate not permitted to maintain the suit. 13 commerce and established the les- In a Maryland case, a foreign sor as doing business. 11 In another corporation rented its trucks to Alabama case, a foreign corpora- Maryland corporations. The corpo- tion could not enforce an agree- ration was held to be doing intra- ment to lease an MRI machine to state business in Maryland. 14 In an Alabama lessee where the for- addition to renting its trucks it also eign corporation moved an em- delivered and sold goods in Mary- ployee to Alabama to service the land. However, a Massachusetts machine and train the lessee’s em- corporation that leased 24 truck ployees to operate it and retained tractors to a Georgia corporation the right to collect unpaid bills was not doing business in Georgia generated by the machine and re- because the lease contracts were move employees who operated the solicited and accepted outside of machines unsatisfactorily. 12 Georgia. 15 In a Texas case, a California The length of time of the lease corporation not qualified in Texas seems to be of little significance in but whose main office was located determining whether qualification there shipped equipment from out is necessary. In several of the cases of state to a Texas customer. After cited above, the lease periods were the customer went bankrupt, the three years or more. Yet each deci- corporation regained possession of sion was based on the extent of the equipment and rented it to an- services actually rendered under other company on an informal ba- the lease rather than the length of sis. When the lessor brought suit the term. Even a lease of ten years’ for the rental payment, the court duration made no difference. ruled that the transaction was an The number of leasing arrange- intrastate one, notwithstanding the ments the foreign corporation en- previous interstate shipment of the ters into presents another question. goods, and that it was not an isolated transaction because the rental 13. Jay-Lor Textiles, Inc. v. Pacific Com- press Warehouse Co. , 547 S.W.2d 738 (Tex. 11. Cadden-Allen, Inc. v. Trans-Lux News Ct. Civ. App. 1977). Sign Corp. , 48 So.2d 428 (Ala. 1950). 14. Snavely Inc. v. Wheeler , 538 A.2d 324 12. Phoenix City-Cobb Hospital Authority, (Md. App. 1988). Inc. v. Sun Pointe Property, Inc. , 689 So.2d 15. Roberts v. Chancellor Fleet Corpora- 797 (Ala. 1997). tion , 354 S.E.2d 682 (Ga. App. 1987).

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In a Missouri case, a nonqualified of the scaffolding and accessories foreign lessor had leased during a was doing business in New York. 18 period exceeding ten years some 300 machines to various customers Leasing Real Property in Missouri. Lessor’s employees and agents installed, inspected, and Connecticut’s statute, at one repaired the machines. The court, time, provided that leasing real noting the number and extent of property did not constitute doing lessor’s activities in Missouri, de- business for purposes of qualifica- 1 nied its right to maintain the action. A federal court ruled that tion. 16 But the court also discussed under the Connecticut statute a the lessor’s continued inspection foreign corporation was not doing and repair of the property after it business in the state so as to re- reached Missouri, and it is possible quire qualification by reason of its it would not have reached the same assumption by assignment of lease result in the absence of those ser- rights to retail space in a shopping vices. In an Alabama case, an un- center. This result was not affected qualified Virginia corporation by the fact that the foreign corpora- leased equipment to Alabama resi- tion leased and in turn subleased dents. In finding that the corpora- three other facilities in Connecti- tion was doing intrastate business cut, and conducted certain business and therefore could not maintain activities there in connection with its action for breach of the lease, those transactions. The court stated the court noted that in the previous that “The standard for transacting five years the corporation had been business is qualitative, not quanti- 2 involved in 34 leasing transactions tative.” The Massachusetts statute involving about $350,000. 17 A provides that leasing real estate in New York Court held that a corpo- the commonwealth does constitute 3 ration that rented scaffolding to transacting business. contractors at eight construction projects in New York for storage 18. Scaffold-Russ Dilworth, Ltd. v. Shared Management Group, Ltd. 682 N.Y.S.2d 765 (A.D. 4 Dept. 1998). 1. Connecticut General Statutes Annotated, Sec. 33-397(a) (repealed, effective January 1, 16. State ex rel. Hays v. Robertson , 271 1997). Mo. 475, 196 S.W. 1132 (1917). 2. Wards Co., Inc. v. Connecticut Post 17. Allstate Leasing Corp. v. Scroggins , Limited Partnership , 579 F.Supp. 282, 285 (D. 541 So.2d 17 (Ala. Civ. App. 1989). See also Conn. 1984). All-state Leasing Corp. v. Trojan Restaurant , 3. Massachusetts General Laws Annotated, 545 So.2d 810 (Ala. Civ. App. 1989). Chap. 156D, Sec. 15.01.

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In the absence of a statute, a for- for holding that qualification was eign corporation will not ordinarily not required for leasing real prop- be required to qualify because it erty to or from others include the owns real property in the state fact that the leasing transaction which it leases to others, or be- was isolated and that the leasing cause it leases real property in the was incidental or preliminary to state from others. 4 However, a doing business. 6 A federal court in New York court presumed that an New York held that a foreign cor- unqualified foreign corporation poration was not doing business in that rented an apartment in New New York by entering into a single York City was doing business contract for the leasing of show- there, because “the corporation room and office space, where all would not maintain a permanent orders were sent out of New York apartment here unless [its] business for acceptance, its products were consisted of more than a casual, manufactured out of New York, isolated or occasional transac- and there were no employees in tion.” 5 Reasons given by the courts New York who could bind the corporation. 7 A court in Illinois held

4. Friedlander Bros. Inc. v. Deal , 218 Ala. that an unqualified corporation that 245, 118 So. 508 (1928); Worcester Felt Pad sublet premises to franchisees of a Corp. v. Tucson Airport Authority , 233 F.2d restaurant chain, and that had ten 44 (9th Cir. [Ariz.] 1956); Linton v. Erie leasing transactions in Illinois, Ozark Mining Co. , 147 Ark. 331, 227 S.W. 411 (1921); 3M Distributing Corporation v. could sue for breach of lease there Rugby Corporation , 209 A.2d 790 (D.C. App. as it did not conduct a substantial 1965); Perry v. Reynolds , 63 Idaho 457, 122 amount of business in Illinois and P.2d 508 (1942); Ferkel v. Columbia Clay 8 Works , 192 F. 119 (7th Cir. [Ill.] 1911); was not required to qualify. Blodgett v. Lanyon Zinc Co. , 120 F.893 (8th A different situation is presented Cir. [Kan.] 1903); North American Mortgage where a foreign real estate corpora- Co. v. Hudson , 176 Miss. 266, 168 So. 79 (1936); Broadway Bond St. Co. v. Fidelity tion leases real property to or from Printing Co. , 182 Mo. App. 309, 170 S.W. others. Such a corporation is doing 394 (1914); Dold Packing Co. v. Doermann , a part of its ordinary business, the 293 F. 315 (8th Cir. [Neb.] 1923); Reynolds business it was organized to do, Offset Co., Inc. v. Summer , 58 N.J. Super. 542 (1959); Singer Mfg. Co. v. Granite Springs Water Co. , 66 Misc. 595, 123 N.Y.S. 1088 (Sup. Ct. 1910); Wm. G. Roe & Co. v. State , 6. Niederhiser v. Henry’s Drive-In, Inc. , 96 43 Misc.2d 417, 251 N.Y.S.2d 151 (Ct. Ariz. 305, 394 P.2d 420 (1964). Claims 1964); Wilson v. Peace , 38 Tex. Civ. 7. Storwal Intern., Inc. v. Thom Rock Real- App. 234, 85 S.W. 31 (1905). ty Co. , L.P., 784 F.Supp. 1141 (S.D.N.Y. 5. Girod Trust Co. v. Kingsdown Corp. 1992). N.V. , 108 Misc.2d 759, 760, 438 N.Y.S.2d 8. Subway Restaurants, Inc. v. Riggs, 696 894, 895 (Sup. Ct. 1981). N.E. 2d 733 (III. App. 1 Dist. 1998).

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and would likely be required to Oklahoma case that a foreign cor- qualify. Thus, a corporation that poration that leased space in an owned and leased property upon Oklahoma store to operate a shoe which sat a hotel owned and department was “doing business,” operated by an affiliate, was doing requiring qualification. 12 An un- business under the qualification qualified foreign corporation that statute. Leasing the property was leased space at an Alabama grey- a continuing transaction conducted hound race track to keep its grey- in the ordinary course of its busi- hounds and that housed and bred ness. 9 greyhounds at its Alabama farm, Where the foreign corporation had localized its operations and carries on activities in the state in could not assert a claim for breach addition to the leasing, or where it of contract. 13 makes a number of leases, qualification will probably be required. 10 Thus, the leasing of a building by Oil and Gas Leases a foreign corporation, which sub- There are few decisions on let it to others, was held to be do- 11 whether acquiring, owning, dealing ing business. It was held in an in or selling oil and gas leases constitutes doing business so as to 9. Moore v. McKibbon Bros., Inc., 41 F. Supp.2d 1350 (N.D. Ga. 1998). require qualification. It would ap- 10. Woodward v. Fox West Coast Thea- pear that a corporation organized tres, 284 P. 350 (Ariz., 1930); Truly Warner for one or more of these purposes, Co., Inc. v. Kaufman Hats, Inc. , 352 Ill. 541, 186 N.E. 167 (1933); Burroughs v. Southern and regularly engaged in such ac- Colonization Co. , 96 Ind. App. 93, 173 N.E. tivities, would be required to quali- 716 (1930); Proctor Trust Co. v. Pope , 12 fy to carry on such business in a So.2d 724 (La. App. 1943); E. & G. Theatre foreign state. Co. v. Greene , 216 mass. 171, 103 N.E. 301 (1913); Amalgamated Zinc & Lead Co. v. Bay The purchase in Arkansas by a State Zinc Mining Co. , 120 S.W. 31 (Mo. foreign corporation of a fractional 1909); Foreman & Clark Mfg. Co. v. Bartle , undivided interest in Arkansas oil 125 Misc. 759, 211 N.Y.S. 602 (Sup. Ct. 1925); Johnson v. Seaborg , 69 Ore. 27, 137 P. and gas leases has been held to 191 (1913). 11. Cassidy’s Ltd. v. Rowan , 99 Misc. 274, 163 N.Y.S. 1079 (Sup. Ct., App. Term, 1st Dept. 1917). See also Republic Power & the leasing of mining claims and equipment Service Co. v. Gus Blass Co. , 263 S.W. 785 constitutes doing business and necessitates (Ark. 1924), in which the purchase of a frac- qualifying. tional undivided interest in oil and gas leases 12. Seidenbach’s v. E.A. Little Co. , 146 was held to constitute an intrastate transaction Okla. 247, 294 Pac. 126 (1930). requiring qualification; Bachman v. Doerrie , 13. Ex Parte Dial Kennels of Alabama, 70 N.M. 277, 372 P.2d 951 (1962), holding Inc., 771 So.2d 419 (Ala. 1999).

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constitute doing business. 1 Similar- not required. Thus, the assignment ly, it was held that a foreign bro- of an oil lease on Kentucky land kerage corporation which engaged which was made in Illinois was in the business of dealing in miner- held not to require qualification. 6 al leases, and which sent its repre- And in a suit brought by the state sentatives to Texas to negotiate the of Arkansas to recover a monetary sale of an oil lease on Texas land, penalty from an Oklahoma corpo- was required to qualify. 2 This rul- ration for doing business without ing was followed in a later decision qualifying, it was shown that the involving the ownership and as- foreign corporation had supplied signment of mineral leases in Tex- 1,500 feet of casing for an Arkan- as. 3 It should be pointed out, sas well under a rental agreement however, that the Texas statute made in Oklahoma, that it had pre- specifically excludes from doing served the right to reclaim the cas- business: “Investing in or acquiring if the well did not produce oil, ing, in transactions outside of this and that the foreign corporation state, royalties and other non- took an assignment of the potential operating mineral interests” and royalty interests. The Arkansas “the execution of a division order, Supreme Court, in finding that the contract of sale and other instru- corporation could not be penalized, ment incidental to the ownership of stated that: “At most the Oklahoma a non-operating mineral interest.” 4 corporation was only looking after New Mexico’s “doing business” development of property in which provisions also exclude this activ- it had an interest in expectancy, ity from the qualification require- and the activities. . .were nothing ment. 5 more than precautionary supervi- It would appear that where ne- sion in respect of personal property gotiations for a lease take place let. . . . . It was a speculative ven- outside the state, qualification is ture carried out pursuant to an Ok- lahoma contract.” 7 1. Republic Power & Service Co. v. Gus A foreign corporation engaged Blass Co. , 263 S.W. 785 (Ark., 1924). in the business of trading in oil and 2. Normandie Oil Corp. v. Oil Tranding Co., Inc. , 163 S.W.2d 179 (Tex. 1942). gas leases was doing business in 3. Glo Co. v. Murchison , 208 F.2d 714 (5th interstate commerce when it sent a Cir. [Tex.] 1954), rehearing den. 210 F.2d 372 95th Cir. [Tex.] 1954), cert. den. 348 U.S. 817, 75 S.Ct. 27 (1954). 6. Great Western Petroleum Corp. v. Sam- 4. Texas Business Organizations Code, Sec son , 192 Ky. 814, 234 S.W. 727 (1921). 9.251. 7. Murray Tool & Supply Co. v. State ex 5. New Mexico Statutes 1978 Annotated, rel. Crawford County , 159 S.W.2d 71 (Ark. Sec. 53-17-1 (K). 1942).

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letter to Alabama residents offering In a Georgia case, 1 a New York to buy their mineral royalty inter- corporation which manufactured ests, buying those interests, and carpets in Georgia claimed that this executing the deeds in Alabama. 8 was a part of its business in inter state commerce. The court rejected Manufacturing this argument and, since the corporation had not obtained a Georgia A manufacturing corporation certificate of authority, dismissed will be required to qualify in order the complaint. to carry on its manufacturing activ- It is difficult to imagine a better ities in a foreign state. application of the classic definition Operating a manufacturing plant of doing business in a state, i.e., in a state involves presence of engaging in some substantial part sufficient duration to eliminate any of its ordinary business therein, possibility of the activity being than in the case of a manufacturing considered an isolated transaction. corporation engaging in manufac- Furthermore, although the man- turing. ufactured product may ultimately be sold in interstate commerce, the manufacturing itself is by its nature Performing Services clearly an intrastate activity. The fact that the corporation is or will In General be engaged in interstate commerce A corporation in the business of will not exempt it from having to rendering services may be required qualify. It seems clear that even if to qualify in order to engage in all contracts for the purchase of such business in a foreign state. 1 raw materials, for the leasing of the plant itself, for the employment of personnel, payment of salaries, and 1. Durkan Enterprises, Inc. v. Cohutta for the sale of the finished product, Banking Co. , 501 F.Supp. 350 (N.D. Ga. 1980). are entered into in another state 1. Union Brokerage Co. v. Jensen , 322 where the corporation has its prin- U.S. 202, 64 S.Ct. 967 (1944); Interstate cipal place of business, the corpo- Amusement Co. v. Albert , 239 U.S. 560, 36 S.Ct. 168 (1916); Tradewinds Environmental ration would nevertheless be Restoration, Inc. v. Brown Bros. Construction, required to qualify by reason of the LLC , 999 So.2d 875 (Ala. 2008); Ex Parte manufacturing alone. Cohen, 988 So.2d 661 (Ala. 2008); Vaccinol Products Corp. v. State , 156 S.W.2d 250 (Ark. 1941); Columbus Services Inc. v. Preferred Building Maintenance, Inc. , 270 F.Supp. 875 8. Andrews v. Central Petroleum, Inc. , (D. Mich. 1965); Campaign Works, Ltd. v. 63 So.3d 650 (Ala. Civ. App. 2010). Hughes , 779 S.W.2d 305 (Mo. App. 1989);

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The fact that the foreign corpora- the defendant at a valuation hear- tion’s agents cross state lines in ing in Ohio, was doing business in order to perform the services is not Ohio and should have obtained a sufficient to render the activity one license. 4 However, a New York in interstate commerce. 2 For ex- court held that a foreign corpora- ample, a Missouri court held that a tion that entered into a contract in foreign corporation that provided New York to analyze a New York advice on campaign matters to a company’s utility bills and deter- candidate in Missouri was doing mine if it was entitled to a refund intrastate business where the was not doing business in New corporation’s president came to York where the foreign corpora- Missouri to provide personal con- tion had no New York office and sultation and advice and where the where all of its analytical work was contract provided that services done outside of New York. 5 were to be rendered in Missouri. 3 In another case, a foreign corpo- An Ohio court held that a foreign ration that engaged in the business corporation that contracted to proof making detailed analyses of vide property tax consulting ser- supermarket operations, contracted vices in Ohio and that represented to install its system in California supermarkets. A California court State ex rel. Lay v. Arthur Greenfield, Inc., found that the corporation, which 205 S.W. 619 (Mo., 1918); Applied Technolo- visited the California stores, assist- gies Associates, Inc. v. Schmidt , 362 F.Supp. 1103 (D. N.M. 1973); Cocon, Inc. v. Botnick ed in training their personnel, made Bldg. Co. , 570 N.E.2d 303 (Ohio App. 1989); recommendations and installed a Elliot Electric Co. v. Clevenger , 300 S.W. 91 computer program, was transacting (Tex. Civ. App. 1927); Knights of Ku Klux 6 Klan v. Commonwealth , 138 Va. 500, 122 S.E. intrastate business. 122 (1924); Matter of Bell Lumber Co., 149 A Hong Kong corporation that F.2d 980 (7th Cir. [Wis.] 1945); MacDonald agreed to act as the exclusive sales Bros., Inc. v. Quality Aluminum Casting Co. , 251 Wis. 27, 27 N.W.2d 769 (1947). agent in Alabama, in order to sell 2. Federal Baseball Club of Baltimore, the manufacturer’s product to a Inc. v. National League of Professional Base- plant located in Alabama, was ball Clubs , 259 U.S. 200, 42 S.Ct. 465 (1922); found to be transacting business in S & H Contractors, Inc. v. A.J. Taft Coal Co., Inc. 906 F.2d 1507 (11th Cir. 1990); Sanwa Business Credit Corp. v. G.B. “Boots” Smith 4. Cocon, Inc. v. Botnick Bldg. Co. , 570 Corp. , 548 So.2d 1336 (Ala. 1989); The Com- N.E.2d 303 (Ohio App. 1989). petitive Edge, Inc. v. Tony Moore Buick-GMC, 5. Expense Reduction Services, Inc. v. Jon- Inc. , 490 So.2d 1242 (Ala. Civ. App. 1986); athan Woodner Co., Inc. 720 F.Supp. 262 Gardella v. Chandler , 173 F.2d 402 (2d Cir. (S.D.N.Y. 1989). [N.Y.] 1949). 6. American Retail Management, Inc. v. 3. Campaign Works, Ltd. v. Hughes , 779 Bakersfield Food City, Inc. 247 Cal.Rptr. 689 S.W.2d 305 (Mo. App. 1989). (Cal.App. 5 Dist. 1988).

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Alabama. 7 A Louisiana corpora- On the other hand, a foreign tion that supplied temporary con- corporation hired to recruit execu- tract workers to an employer in tives for a Nevada employer was Alabama was also found to be do- not required to qualify in Nevada ing business in Alabama and re- because the executives were required to qualify. 8 An Arkansas cruited outside of Nevada, the for- court held that an Arizona corpora- eign corporation had no offices in tion had to obtain a certificate of Nevada and did not solicit Nevada authority before maintaining an employers. 12 A mortuary corpora- action where the corporation was tion, not qualified in Missouri, was engaged in the business of feeding not required to qualify in order to and caring for cattle in Arkansas. 9 transport a body from Illinois to A Georgia corporation that per- Missouri. 13 A corporation in the formed consulting and accounting business of providing travel and services for insolvent insurers pur- touring services to customers suant to a contract with the Ala- throughout the United States was bama Insurance Department could not required to qualify in Alabama not recover payments due under as its business was interstate in the contract because it was not nature.14 An Arkansas corporation qualified to do business in Ala- that contracted to recruit Phil- bama. 10 A foreign corporation that ippine workers for a company in owned and operated a nursing California, through a Missouri re- home in Alabama was held to be cruiting agent, was not doing busi- doing intrastate business, as the ness in Missouri. The contract was essence of its transactions was the not to be performed in Missouri, providing of labor for the patients, therefore the corporation’s activi- which was an intrastate activity. 11 ties were incidental to interstate commerce. 15

7. Camaro Trading Company, Ltd. v. Nissei Sangyo America, Ltd. , 628 So.2d 463 12. RTTC Communications, LLC v. Sara- (Ala. 1993). toga Flier, Inc. , 110 P.3d 24 (Nev. 2005). See 8. Building Maintenance Personnel Inc. v. also Peccole v. Fresno Air Service, Inc. , 469 International Shipbuildings, Inc. , 621 So.2d P.2d 397 (Nev. 1970). 1303 (Ala. 1993). 13. Marks Mortuary v. Estate of Koeppel , 9. Centennial Valley Ranch Mgt., Inc. v. 740 S.W.2d 397 (Mo. App. 1987). See also Agri-Tech L.P. , 832 S.W.2d 259 (Ark. App. VBM Corp. v. Marvel Enterprises, Inc ., 842 1992). S.W.2d 176 (Mo. App. W.D. 1992) 10. Burnett v. National Stonehenge Corp. , 14. Ex Parte Intern. Travel Services, Inc., 694 So.2d 1276 (Ala. 1997). 68 So.3d 823 (Ala. 2011). 11. Community Care of America of Ala- 15. Ozark Employment Specialists, Inc. v. bama, Inc. v. Davis , 2002 WL 31045217 (Ala. Beeman, 80 S.W.3d 882 (Mo. App. W.D. 2002). 2002).

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The Supreme Court of Connect- merce and performs services relat- icut ruled that a New York ac- ed to the sales, such as installation counting firm was not doing and repairs, may be required to business in Connecticut even qualify because of the services though it prepared Connecticut tax performed.19 returns for a Connecticut resident Where a foreign corporation where the firm derived minimal entered into a contract in Tennes- income from Connecticut, did not see to sell furniture in Alabama solicit business there and per- and its only activities in Alabama 16 formed its services in New York. consisted of delivery, set-up, re- In an Iowa case, the court held that pair work and making requests for a Nebraska corporation that assist- payment, the court found that the- ed an Iowa corporation in hiring se activities were incidental to the workers was not required to quali- interstate sales contract and did fy where the transaction was con- not constitute the transaction of ducted from Nebraska to Iowa via intrastate business. 20 In another telephone communication and fac- Alabama case the court stated that simile transmission of resumes, “simply overseeing the perfor- because the corporation was con- mance of contracts inside the state ducting interstate business. 17 A will not preclude a corporation federal court in New York held engaged in interstate commerce that the defendant’s showing that a from enforcing such contracts in Florida corporation monitored and our courts.” 21 However, in another chaperoned students in New York Alabama case, the court held that and entered into three or four contracts in New York was not suffi- in contracting to sell, deliver, as- cient to meet the burden of proving semble and install a pool at a resi- that the corporation’s activities dence in Alabama, a foreign were so systematic and regular as to constitute doing business. 18 A foreign corporation which 19. Green Tree Acceptance, Inc. v. Blalock , 525 So.2d 1366 (Ala. 1988); Case v. sells its products in interstate com- Mills Novelty Co. 193 So. 625 (Miss. 1940); Conklin Limestone Co. v. Linden , 22 A.D.2d 16. Ryan v. Cerullo , 918 A.2d 867 (Conn. 63, 253 N.Y.S.2d 578 (3rd Dept. 1964); 2007). Wolforth v. A.J. Deer Co., Inc. , 293 S.W. 590 17. Corporate Recruiters Ltd. v. Norwest (Tex.Civ.App. 1927); Penberthy Electromelt Financial, Inc. , 489 N.W.2d 729 (Iowa 1992). Co. v. Star City Glass Co. , 135 S.E.2d 289 See also Buchhop v. General Growth Proper- (W.Va. 1964). ties and General Growth Management Corp. , 20. Billions v. White & Stafford Furniture 235 N.W.2d 301 (Iowa 1975) Co. , 528 So.2d 878 (Ala.Civ.App. 1988). 18. SD Protection, Inc. v. Del Rio , 498 21. North Alabama Marine, Inc. v. Sea Ray (F.Supp.2d 576 (E.D.N.Y. 2007). Boats, Inc. , 533 So.2d 598 (Ala. 1988).

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corporation was engaged in intra- Kansas law states that selling, state business. 22 by contract consummated outside A Massachusetts statute provides the state of Kansas, and agreeing, that “engaging in any other activity by the contract, to deliver into the requiring the performance of labor” state of Kansas machinery, plants is doing business in the state. 23 or equipment, the construction, On the other hand, an Ohio stat- erection or installation of which ute provides that qualification is within the state requires the super- not required of “corporations en- vision of technical engineers or gaged in this state solely in inter- skilled employees performing ser- state commerce, including the vices not generally available, and installation, demonstration, or re- as part of the contract of sale pair of machinery or equipment agreeing to furnish such services, sold by them in interstate com- and such services only, to the ven- merce, by engineers, or by em- dee at the time of construction, ployees especially experienced as erection or installation, is not doing to such machinery or equipment, business. 27 as part thereof. . .” 24 Thus a foreign corporation that entered into a pre- Correspondence Schools ventative maintenance and repair Where a foreign corporation op- contract with an Ohio agent to erating a correspondence school keep equipment sold at a function- limits its intrastate activities to the ing level, did no more than engage solicitation of students, the for- in interstate commerce under the 25 warding of the educational materi- terms of the Ohio statute. al, and the collection and for- Where the foreign corporation merely collects data within a state to be analyzed in another state, 1981); Utility Ecomony Co., Inc. v. Luders qualification will not ordinarily be Marine Const. Co. , 15 Conn.Supp. 213 26 (Ct.Com.Pleas, Fairfield Co. 1947); Survey- required. ors, Inc. v. Berger Bros. Co. , 9 Conn.Supp. 175 (Super. Ct., New Haven Co. 1941); Aero Service Corp. (Western) v. Benson , 84 Idaho 22. Brown v. Pool Depot, Inc., 853 So. 2d 416, 374 P.2d 277 (1962); Expense Reduction 187 (Ala. 2002). Services, Inc. v. Jonathan Woodner Co., Inc. , 23. Massachusetts General Laws Annotat- 720 F.Supp. 262 (S.D.N.Y. 1989); Alan Por- ed, Ch. 156D, Sec. 15.01. ter Lee, Inc. v. DuRite Prod. Co., Inc. , 43 24. Ohio Revised Code Annotated, Sec. Berks Co. L.J. 49 (Ct. Com. Pleas 1948), 1703.02. reversed on other grounds 366 Pa. 548, 79 25. Saeilo Machinery, Inc. v. Myers , 489 A.2d 218 (1951); Ford, Bacon & Davis, Inc. N.E.2d 1083 (Ohio Com. Pl. 1985). v. Terminal Warehouse Co. , 207 Wis. 467, 26. Linton & Co., Inc. v. Robert Reid En- 240 N.W. 796 (1932). gineers, Inc ., 504 F.Supp. 1169 (M.D. Ala. 27. Kansas Statutes Sec. 17-7932.

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warding of the fees, the corporation owner upon the guaranty of the will not be required to qualify.1 warehouse company that the vol- However, if the corporation per- ume and value of the merchandise forms additional activities in this will be maintained at an agreed state, such as the sale of books, level. 2 The warehouse company qualification probably will be re- maintains legal custody of the quired. 2 goods and receives a fee for its services. Field Warehousing There can be little doubt that Field warehousing is a financial when a warehouse company car- technique developed to aid manu- ries on such activities in a foreign facturers in securing working capi- state, it is regarded as doing busi- tal from banks. It was defined in ness there. It does so through those a decision as “warehousing the employees or agents who act for it owner’s goods on the premises of and through its custody of the the owner or of the former owner.” 1 goods of others, for which it as- The scope of warehousing activi- sumes responsibility and thus re- ties frequently includes the issu- ceives remuneration for activity ance of “warehousing receipts” to carried on within the state. banks which effect loans to the Installation of Machinery and Equipment

1. International Textbook Co. v. Pigg , 217 A foreign corporation selling U.S. 91, 30 S.Ct. 481 (1910); International machinery or equipment in inter- Textbook Co. v. Lynch , 218 U.S. 664, 31 S.Ct. 225 (1910), reversing per curiam 81 Vt. 101, 69 A. 541 (1908); International Textbook Co. 2. “There are many cases upholding the v. Peterson , 218 U.S. 664, 31 S.Ct. 225 validity of the so-called ‘field storage’ system (1910), reversing per curiam 133 Wis. 302, for the warehousing of heavy or bulky 113 N.W. 730 (1907); Air Conditioning Train- material, the actual moving of which is inex- ing Corp. v. Majer , 324 Ill. App. 387, 58 pedient. In such cases it has been held that if N.E.2d 294 (1944); International Text-Book the warehousman fully discharges his duty to Co. v. Gillespie , 229 Mo. 397, 129 S.W. 922 negative ostensible ownership by the pledgor, (1910); Federal Schools, Inc. v. Sidden , 13 withdrawal and substitution will not destroy N.J. Misc. 892, 188 A. 446 (N.J. Supreme Ct. the lien. Philadelphia Warehouse Co. v. Win- 1937). chester (C.C.) 156 F. 600, 614 [D. Del. 1907]; 2. Refrigeration & Air Conditioning Insti- First National Bank v. Pennsylvania Trust tute, Inc. v. Hilyard , 18 N.W.2d 548 (Neb. Co. , 124 F. 968 (C.C.A. 3) [3rd Cir. [Pa.] 1945); International Textbook Co. v. Connelly , 1903]; Bush v. Export Storage Co. , 136 F. 918 67 Misc. 49, 124 N.Y.S. 603 (Monroe Co.Ct. (C.C.) [E.D. Tenn. 1904]; Fidelity Ins., Trust 1910), affirmed 206 N.Y. 188, 99 N.E. 722 & Safe-Deposit Co. v. Roanoke Iron Co. , 81 F. (1912). 439 (C.C.) [W.D. Va. 1896].” Manufacturers 1. American Can Co. v. Erie Preserving Acceptance Corp. v. Hale , 65 F.2d 76, 78 (6th Co. , 183 Fed. 96 (2d Cir. [N.Y.] 1910). Cir. [Tenn.] 1933).

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state commerce to a purchaser in a ware, Kansas, Ohio and Oklahoma foreign state may be required to specifically provide that such tech- qualify if it installs the machinery or equipment. 1 The principal de- terminant is whether the installa- Col.App. 341, 43 P. 667 (1896); Black- Clawson Co. v. Carlyle Paper Co. , 133 tion was of a technical or non- Ill.App. 322 (1914); Vilter Mfg. Co. v. Evans , technical nature. 86 Ind.App. 144, 154 N.E. 677 (1927); Palm- If the installation is highly tech- er v. Aeolian Co. , 46 F.2d 746 (8th Cir. [Iowa] 1931); Kaw Boiler Works Co. v. Interstate nical and requires special skill, Refineries Inc. , 118 Kan. 693, 236 P. 654 qualification will generally not be (1925), petition for cert. dismissed, 269 U.S. required. 2 The statutes of Dela- 595, 46 S.Ct. 104 (1925); United Iron Works Co. v. Watterson Hotel Co. , 182 Ky. 113, 206 S.W. 166 (1918); Moline Furniture Works v. 1. Billions v. White & Stafford Furniture Club Holding Co. , 280 Mich. 587, 274 N.W. Co. , 528 So.2d 878 (Ala.Civ.App. 1988); 338 (1937); Richards-Wilcox Mfg. Co. v. Citizens’ Nat. Bank v. Bucheit , 14 Ala.App. Talbot & Meir , 252 Mich. 622, 233 N.W. 437 511, 71 So. 82 (1916); Cobb v. York Ice Ma- (1930); J.C. Boss Engineering Co. v. chinery Corp. , 230 Ala. 95, 159 So. 811 Gundeson Brick & Tile Co. , 168 Minn. 183, (1935); Vest v. Night Commander Lighting 209 N.W. 876 (1926); Fred Hale Machinery, Co. , 24 Ala.App. 549, 139 So. 295 (1931); Inc. v. Laurel Hill Lumber Co., Inc. , 483 F.2d Crawford v. Louisville Silo and Tank Co. , 166 58 (5th Cir. [Miss.] 1973); Hess Warming and Ark. 88, 265 S.W. 355 (1924); American Ventilating Co. v. Burlington Grain Elevator Bridge Co. v. Honstain , 113 Minn. 16, 128 Co. , 280 Mo. 163, 217 S.W. 493 (1919); N.W. 1014 (1910); State, ex rel. Hays v. Rob- General Fire Extinguisher Co. v. Northwest- ertson , 271 Mo. 475, 196 s.W. 1132 (1917), ern Auto Supply Co. , 211 Pac. 308 (Mont. appeal dismissed 251 U.S. 256, 40 S.Ct. 133 1922); Metal Door & Trim Co. v. Hunt , 170 (1920); Abner Mfg. Co. of Wapakoneta, Ohio Okla. 240, 39 Pac.2d 72 (1934); John Wil- v. McLaughlin , 41 N.M. 97, 64 P.2d 387 liams, Inc. v. Golden and Crick , 247 Pa. 418, (1937); Reese v. Harper Surface Finishing 93 A.505 (1915); Flint & Walling Mfg. Co. v. Systems , 517 N.Y.S.2d 522 (A.D. 2 Dept. McDonald , 21 S.D. 526, 114 N.W. 684 1987); International Fuel Service Corp. v. (1908); Davis & Rankin Bldg. & Mfg. Co. v. Stearns , 304 Pa. 157, 155 A. 285 (1931); A. Caigle , 53 S.W. 240 (Tenn. Ct. Chancery Leschen and Sons Rope Co. v. Moser , 159 App. 1899); Friedman v. Georgia Showcase S.W. 1018 (Tex.Civ.App. 1913); Abner Mfg. Co., 27 Tenn.App. 574, 183 S.W.2d 9 (1944); Co. v. Nevels , 118 S.W.2d 607 (Tex.Civ.App. Kimball-Krough Pump Co. v. Judd , 88 S.W.2d 1938); Levy v. National Radiator Corp. 44 579 (Tex.Civ.App. 1935); Wandel Western S.W.2d 999 (Tex.Civ.App. 1931). Inc. v. Caraway , 105 F.Supp. 633 (N.D. Tex. 2. York Mfg. Co. v. Colley , 247 U.S. 21, 38 1952); Advance-Rumely Thresher Co. Inc. v. S.Ct. 430 (1918); Phenix City-Cobb Hospital Stohl , 75 Utah 124, 283 P. 731 (1929); Kinne- Authority, Inc. v. Sun Pointe Property, Inc. , ar & Gager Mfg. Co. v. Miner , 96 A. 333 (Vt., 689 So.2d 797 (Ala. 1997); Cobb v. York Ice 1916); Pfaudler Co. v. Westphal , 190 Wis. Machinery Co. , 30 Ala. 95, 159 So. 811 486, 209 N.W. 700 (1926); S.F. Bowser & Co. (1935); Puffer Mfg. Co. v. Kelly , 198 Ala. 131, v. Schwartz , 152 Wis. 408, 140 N.W. 51 73 So. 403 (1916); Weber Showcase and (1913); Creamery Package Mfg. Co. v. Chey- Fixture Co., Inc. v. Co-Ed Shop , 47 Ariz. 415, enne Ice Cream Co. , 55 Wyo. 277, 100 P.2d 56 P.2d 67 (1936); General Talking Pictures 116 (1940); Penberthy Electromelt Co. v. Star Corp. v. Shea , 185 Ark. 777, 49 S.W.2d 359 City Glass Co. , 135 S.E.2d 289 (W. Va. (1932); Gates Iron Works v. Cohen , 7 1964).

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nical installations will not require pear to reason that, since the instal- qualification. 3 In such cases, the lation is not technical and therefore installation is held to be an integral need not be performed with the part of the interstate transaction seller’s expertise, it is not a neces- since the transaction could not be sary part of the interstate transac- completed without the seller’s in- tion. In these cases the installation stallation. Where the machinery is considered local in nature. was highly complex, the seller was Although the courts have ordi- not required to qualify even though narily given controlling signifi- it assembled the machines, put cance to the technical or non- them into operation, trained opera- technical nature of the installation, tors to run them, and provided con- other factors have been considered. tinuing maintenance and repair For example, where the installation service for them. The court ruled takes place over a long period of that these activities were inci- time, qualification has usually been dental to the interstate sale of the required, sometimes in spite of the machines and, in fact, essential technical nature of the installation. 6 thereto, because these vital services were unavailable from other Adolph Leitelt Ironworks , 196 Mich. 552, 163 sources. Without them, no sale N.W. 13 (1917); Phillips Co. v. Everett , 262 F. would have been consummated. 4 341 (6th Cir. [Mich.] 1919), cert.den. 252 U.S. If the installation is not technical 579, 40 S.Ct. 344 (1919); Power Specialty Co. v. Michigan Power Co. , 190 Mich. 699, 157 and does not require special skill, N.W. 408 (1916); Loomis v. People’s Const. the foreign corporation will be re- Co. , 211 F. 453 (6th Cir. [Mich. (Wis. law)] quired to qualify. 5 The courts ap- 1914); Palm Vacuum Cleaner Co. v. B.F. Bjornstad , 136 Minn. 38, 161 N.W. 215 (1917); National Refrigerator Co. v. South- 3. Delaware Code, Tit. 8, Sec. 373;Kansas west Missouri Light Co. , 288 Mo. 290, 231 Statutes, Sec. 17-7932; Ohio Revised Code S.W. 930 (1921); Mandel Bros., Inc. v. Henry Annotated, Sec. 1703.02; Oklahoma Statutes A. O’Neil, Inc. , 69 F.2d 452 (8th Cir. [S.D.] Annotated, Tit. 18, Sec. 1132. 1934); Lummus Cotton Gin Co. v. Arnold , 151 4. Matter of Delta Molded Products, Inc ., Tenn. 540, 269 S.W. 706 (1925); Peck- 4416 F.Supp. 938 (N.D. Alabama, 1976), Williamson Heating and Ventilating Co. v. aff’d sub. nom. Sterne v. Improved Machin- McKnight & Merz , 140 Tenn. 563, 205 S.W. ery, Inc. , 571 F.2d 957 (5th Cir. 1978). 419 (1918); Bryan v. S.F. Bowser & Co. , 209 5. Browning v. City of Waycross , 233 U.S. S.W. 189 (Tex.Civ.App. 1919); Elliot Electric 16, 34 S.Ct. 578 (1914); Phenix City-Cobb Co. v. Clevenger , 300 S.W. 91 (Tex.Civ.App. Hospital Authority, Inc. v. Sun Pointe Proper- 1927); Western Gas Construction Co. v. ty, Inc. , 689 So.2d 797 (Ala. 1997); Allstate Commonwealth , 147 Va. 235, 136 S.E. 646 Leasing Corp. v. Scroggins , 541 So.2d 17 (1927). (Ala.Civ.App. 1989); Hogan v. Intertype 6. Kansas City Structural Steel Co. v. State Corp. , 136 Ark. 52, 206 S.W. 58 (1918); A.H. of Arkansas , 269 U.S. 148, 46 S.Ct. 59 (1925); Andrews Co. v. Colonial Theatre Co. , 283 F. General Railway Signal Co. v. Common- 471 (D.Mich. 1922); B.F. Sturtevant Co. v. wealth , 246 U.S. 500, 38 S.Ct. 360 (1918);

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If the installation is not incidental However, in another Alabama to a sale but constitutes a substan- case, a foreign corporation sold tial part of the foreign corpora- and installed a complex and so- tion’s business, qualification may phisticated machine in Alabama. be required. For example, where an The machine broke twice. The first unqualified foreign corporation time, the foreign corporation sent a entered into a contract to assemble repairman to Alabama. The second a machine at a site in Alabama and time, the buyer found a technician where the corporation was not in Alabama to do the repairs. The involved in the interstate sale or court ruled that the foreign corpo- delivery of the machine, the Ala- ration’s activities in assembling bama court held that the transac- and installing the machine were tion was intrastate and would not essential to the basic interstate sale allow the foreign corporation to and would not require qualifica- enforce the contract. 7 tion. However, the subsequent repair was not merely incidental to the sale but a separate and distinct Perkins Mfg. Co. v. Clinton Construction Co. undertaking and because other of Cal. , 295 Pac. 1 (Cal. 1930); United States Construction Co. v. Hamilton National Bank sources in Alabama existed for of Ft. Wayne , 73 Ind. App. 149, 126 N.E. 866 these services, the foreign corpora- (1920); Haughton Elevator & Machine Co. v. tion’s activities in repairing the Detroit Candy Co. Ltd. , 156 Mich. 25, 120 machine were intrastate in nature. 8 N.W. 18 (1909), Case v. Mills Novelty Co. , 187 Miss. 673, 193 So. 625 (1940); National Where a corporation’s business Refrigerator Co. v. Southwest Missouri Light is not manufacturing and selling Co., 288 Mo. 290, 231 S.W. 930 (1921); State but rather contracting, engineering, ex rel. Hays v. Robertson, 271 Mo. 475, 196 S.W. 1132 (1917); Ensign v. Christiansen , 79 or performing services, the instal- N.H. 353, 109 Atl. 857 (1920); National Sign lation of machinery and equipment Corp. v. Maccar Cleveland Sales Corp., 33 may require qualification. 9 Ohio App. 89, 168 N.E. 758 (1929); Mandel Bros, Inc. v. Henry A. O’Neil, Inc. , 69 F.2d The use by the foreign corpora- 452 (8th Cir. [S.D.] 1934); Bryan v. S.F. Bow- tion of local labor to assist in the ser and Co. , 209 S.W. 189 (Tex.Civ.App. 1919); North American Service Co. v. A.T. Vick Co. , 243 S.W. 549 (Tex.Civ.App. 1922); 8. TSR, Inc. v. Quincy Compressor Divi- S.R. Smythe Co. v. Ft. Worth Glass and Sand sion of Coltec Indus., Inc., 742 So.2d 792 Co. , 105 Texas 8, 142 S.W. 1157 (1912); (Ala. Civ. App. 1998) Western Gas Construction Co. v. Common- 9. Sanwa Business Credit Corp. v. G.B. wealth , 147 Va. 235, 36 S.E. 646 (1927); “Boots” Smith Corp. , 548 So.2d 1336 (Ala. Interstate Construction Co. v. Lakeview Canal 1989); Buffalo Refrigerator Mach. Co. v. Penn Co. , 31 Wyo. 191, 224 Pac. 850 (1924). Heat & Power Co., 178 Fed. 696 (3rd Cir. 7. S & H Contractors, Inc. v. A.J. Taft [Pa.] 1910). (The cases cited in the discussions Coal Co., Inc. , 906 F.2d 1507 (11th Cir. of “Contracting” may also be of interest in this 1990). area.)

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installation has been given weight sons or organizations capable of by some courts. 10 making the installation. 13 The following have also been regarded by the courts as indica- Research Work tions of doing business: purchasing material locally; 11 obtaining build- A corporation organized for the ing permits and negotiating leases purpose of doing research for oth- in connection with the installa- ers which enters a foreign state to tion; 12 the availability of local per- do such work will be required to qualify under the general rule that 10. United States Const. Co. v. Hamilton a foreign corporation is doing Natl. Bank of Ft. Wayne , 73 Ind.App. 149, 126 business in a state when it transacts N.E. 866 (1920); A.H. Andrews v. Colonial Theatre Co. , 283 F. 471 (D.Mich. 1922); some substantial part of its ordi- General Highways System Inc. v. Dennis , 251 nary business there. For example, Mich. 152, 230 N.W. 906 (1930); Case v. in a Missouri case, 1 a foreign cor- Mills Novelty Co. , 187 Miss. 673, 193 So. 625 (1940); Portland Co. v. Hall & Grant Const. poration contracted to provide Co. , 121 App.Div. 779, 106 N.Y.S. 649 (1st campaign services, including re- Dept. 1907), aff. (mem.) 124 App.Div. 937, search and report preparation, to a 109 N.Y.S. 1142 (1st Dept. 1908). 11. United States Const. Co. v. Hamilton candidate in Missouri. The court Natl. Bank of Ft. Wayne , 73 Ind.App. 149, 126 stated that if the corporation had N.E. 866 (1920); Haughton Elevator and merely given the product of its Machine Co. v. Detroit Candy Co., Ltd. , 156 research to the candidate from its Mich. 25, 120 N.W. 18 (1909); Phillips Co. v. Everett , 262 F. 341 (6th Cir. [Mich.] 1919), out-of-state office, it could have cert. den. 252 U.S. 579, 40 s.Ct. 344 (1919); argued that qualification was not In re Springfield Realty Co., 257 F. 785 (E.D. required. However, because the Mich. 1919); Palm Vacuum Cleaner Co. v. B.F. Bjornstad , 136 Minn. 38, 161 N.W. 215 corporation sent its representatives (1917); Viking Equipment Co. v. Central Hotel into Missouri to consult with and Co., Inc. , 230 Mo.App. 304, 91 S.W.2d 94 advise the candidate, its activities (1936); Portland Co. v. Hall & Grant Const. Co. , 121 App.Div. 779, 106 N.Y.S. 649 (1st were intrastate and it had to qualify. Dept. 1907), aff’d (mem.) 124 App.Div. 937, If the research work consists 109 N.Y.S. 1142 (1st Dept. 1908); Peck- merely of the collection of data in Williamson Heating and Ventilating Co. v. McKnight and Merz , 140 Tenn. 563, 205 S.W. 419 (1918); Bryan v. S.F. Bowser and Co. , 209 S.W. 189 (Tex.Civ.App. 1919); Elliot Mich. 1919); Viking Equipment Co. v. Central Electric Co. v. Clevenger , 300 S.W. 91 Hotel Co., Inc. , 230 Mo.App. 304, 91 S.W.2d (Tex.Civ.App. 1927); Western Gas Construc- 94 (1936); Wolforth v. A.J. Deer Co., Inc. 293 tion Co. v. Commonwealth , 147 Va. 235, 136 S.W. 590 (Tex.Civ.App. 1927). S.E. 646 (1927). 13. Bryan v. S.F. Bowser and Co. , 209 12. General Highways System, Inc. v. S.W. 189 (Tex.Civ.App. 1919). Dennis , 251 Mich. 152, 230 N.W. 906 (1930); 1. Campaign Works, Ltd. v. Hughes , 779 In re Springfield Realty Co., 257 F. 785 (E.D. S.W.2d 305 (Mo.App. 1989).

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the foreign state, which data is ana- Transportation Companies lyzed and processed outside the Corporations engaged in the state, the courts have held that transportation of passengers or qualification is not required. 2 Thus, freight are not required to qualify a Texas corporation which entered in a state where their activities are into a contract in New York to exclusively interstate, even though analyze the utility bills of a New they have offices and solicit orders York company and determine how in the state. However, if these cor- it could obtain a refund was held porations also engage in intrastate not to be doing business in New activities, they are required to qual- York where it performed all of its ify. analytical work in Texas. 3 A cor- It is well established that the poration was not doing business in maintenance of an office solely to Ohio when it conducted research further interstate commerce does into the activities of an Ohio uni- not subject a foreign corporation to versity where it had only 2 Ohio qualification requirements. 1 A focused efforts in 20 years, no of- transportation company in this cat- fices or employees in Ohio and egory would therefore not be re- conducted nearly all of its activities quired to qualify. from its Washington DC offices. 4 Carriers using navigable water- ways may be exempt from state regulation by the fact that naviga- 2. Linton & Co. Inc. v. Robert Reid Engi- ble waters are controlled by the neers, Inc. , 504 F.Supp. 1169 (M.D. Ala. 2 1981); Utility Economy Co., Inc. v. Luders federal government. Some state Marine Const. Co. , 15 Conn.Supp. 213 qualification statutes have been (Ct.Comm.Pleas, Fairfield Co. 1947); Survey- held constitutionally inapplicable ors, Inc. v. Berger Bros. Co. , 9 Conn.Supp. 3 175 (Super.Ct., New Haven Co. 1941); Aero to such carriers. Service Corp. (Western) v. Benson , 84 Idaho 416, 374 P.2d 277 (1962); Alan Porter Lee, Inc. v. Du-Rite Prod. Co., Inc. , 43 Berks Co. 1. The Journal Company of Troy v. F.A.L. L.J. 49 (Ct.Com.Pleas. 1948), reversed on Motor Co ., 181 Ill.App. 530 (1913); Federal other grounds 366 Pa. 548, 79 A.2d 218 Schools, Inc. v. Sidden , 14 N.J. Misc. 892, 188 (1951); Ford, Bacon & Davis, Inc. v. Terminal Atl. 446 (N.J. Supreme 1937); International Warehouse Co. , 207 Wis. 467, 240 N.W. 796 Text Book Co. v. Tone , 220 N.Y. 313, 115 (1932). N.E. 914 (1917); Fruit Dispatch Co. v. Wood , 3. Expense Reduction Services, Inc. v. Jon- 42 Okla. 79, 140 Pac. 1138 (1914). athan Woodner Co., Inc. , 720 F.Supp. 262 2. Gibbons v. Ogden , 9 Wheat 1, 6 L.Ed. (S.D.N.Y. 1989). 23 (1824). 4. State ex rel Physicians Committee for 3. Ryman Steamboat Line Co. v. Com- Responsible Medicine v. Board of Trustees of monwealth , 101 S.W. 403 (Ky.Ct.App. 1907); Ohio State Univ. , 843 N.E.2d 174 (Ohio New Orleans & Memphis Packet Co. v. 2006). James , 32 F. 21 (E.D. La. 1887).

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Carriers operating in navigable Property Ownership waters which do not operate outside the boundaries of the state Personal Property Ownership 4 may be required to qualify. A Sec. 15.01(b)(9) of the Revised shipping company whose agent in Model Act provides that “owning, the state arranged for tugs and port without more . . . personal proper- facilities was held not subject to ty” does not constitute transacting qualification requirements since business. This, or a provision with these activities were incidental to a similar effect, has been adopted 5 interstate commerce. by Arizona, Arkansas, Colorado, If a transportation company car- Connecticut, Florida, Georgia, ries persons or property from one Hawaii, Idaho, Illinois, Indiana, point to another within the same Iowa, Kentucky, Maine, Michi- state it is probably doing intrastate gan, Mississippi, Nebraska, business and required to qualify. Nevada, New Hampshire, North The fact that the carrier crosses a Carolina, Oregon, Pennsylvania, second state in reaching its destina- South Carolina, Tennessee, Texas, tion in the state of origin does not Utah, Vermont, Virginia, Wash- transform the activity into inter- ington, Wisconsin, West Virginia, 6 state commerce. and Wyoming. Montana’s law A foreign airline which con- states that owning personal prop- tracted in Nevada with a Nevada erty that is acquired incident to resort to fly its customers between enforcing mortgages and security two points in California was not interests in property securing required to qualify in Nevada be- debts is not doing business “if the cause the contract was in further- property is disposed of within 5 7 ance of interstate commerce. years after the date of acquisition does not produce income, or is not 4. Independent Tug Line v. Lake Superior used in the performance of a cor- Lumber & Box Co. , 146 Wis. 121, 131 N.W. porate function.” North Dakota’s 408 (1911). law states “any foreign corpora- 5. Upper Lakes Shipping, Ltd. v. Seafarers’ Int’l Union of Canada , 18 Wis.2d 646, 119 tion that owns income-producing N.W.2d 426 (1963). . . . tangible personal property in 6. New York ex rel. Cornell Steamboat Co. this state, other than property ex- v. Sohmer , 235 U.S. 549, 35 S.Ct. 162 (1915); Ewing v. City of Leavenworth , 226 U.S. 464, empted under subsection 1, will 33 S.Ct. 157 (1913); Lehigh Valley R.R. Co. v. be considered transacting business Pennsylvania , 145 U.S. 192, 12 S.Ct. 806 in this state.” (1892). Minnesota’s statute provides 7. Peccole v. Fresno Air Service, Inc. , 469 P.2d 397 (Nev. 1970). that “Holding title to and manag-

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ing . . . personal property, or any significant whether the stock is interest therein, situated in this large or small, or whether it is lo- state, as executor of the will or cated in a public warehouse, store- administrator of the estate of any room, office, freight car or any decedent, as trustee of any trust, other place. However, where there or as guardian of any person or was testimony that a foreign corpo- conservator of any person’s es- ration whose business was primari- tate” does not constitute doing business. Dominion Fertilizer Co. v. White , 96 Atl. 1069 When a foreign corporation (Me. 1916); E.A. Lange Medical Co. v. Brace , does more than just hold personal 186 Mich. 453, 152 N.W. 1026 (1915); Thom- property, such as selling or ship- as Mfg. Co. v. Knapp , 101 Minn. 432, 112 N.W. 989 (1907); Singer Mfg. Co. v. Adams , ping the property within the state, 165 Fed. 877 (5th Cir. [Miss.] 1909), appeal qualification may be required. dismissed per curiam, 216 U.S. 617, 39 S. Ct. A foreign corporation which 577 (1910); Wiley Electric Co. of Jackson v. Electric Storage Battery Co. , 147 So. 773 maintains a stock of goods within a (Miss. 1933); M.A. Kelly Broom Co. v. Mo. state, from which it makes delivery Fidelity & Casualty Co. , 191 S.W. 1128 (Mo. to customers in the state, is ordi- App. 1917); Fay Fruit Co. v. McKinney , 77 S.W. 160 (Mo. App. 1903); Seneca Textile narily regarded by the courts as Corp. v. Missouri Flower & Feather Co. , 119 doing business and required to S.W.2d 991 (Mo. app. 1938); Watkins v. Don- qualify. 1 It does not appear to be nell , 179 S.W. 980 (Mo. App. 1915); Ameri- can Can Co. v. Grassi Contracting Co., Inc. 102 Misc. 230, 168 N.Y.S. 689 (Sup. Ct. 1. Sonneborn Bros. v. Cureton , 262 U.S. 1918); Pittsburgh Electric Specialties Co., Inc. 506, 43 S. Ct. 643 (1923); Dalton Adding v. Rosenbaum , 102 Misc. 520, 169 N.Y.S. 157 Machine Co. v. Commonwealth of Virginia , (Sup. Ct. 1918); Bertolf Bros., Inc. v. 246 U.S. 498, 38 S. Ct. 361 (1918); Cheney Leuthardt , 261 App. Div. 981, 26 N.Y.S.2d Bros. v. Commonwealth of Massachusetts , 246 114 (2d Dept. 1941); Manhattan Terrazzo U.S. 147, 38 S. Ct. 295 (1918); Singer Sewing Brass Strip Co., Inc. v. A. Benzing and Sons , Machine Co. v. Brickell , 233 U.S. 304, 34 S. 50 N.E.2d 570 (Ohio App. 1943); Vermont Ct. 493 (1914); Armour Packing Co. v. Lacy , Farm Machinery Co. v. Hall , 156 Pac. 1073 200 U.S. 226, 26 S. Ct. 232 (1906); Kehrer v. (Ore. 1916); The Milson Rendering & Ferti- Stewart , 197 U.S. 60, 25 S. Ct. 403 (1905); lizer Co. v. Kelly , 10 Pa. Super, 565 (1899); Paul v. W.G. Patterson Cigar Co. , 98 So. 787 National Cash Register Co. v. Ondrusek , 271 (Ala. 1924); Miellmier v. Toledo Scales Co. , S.W. 640 (Tex. Civ. App. 1925); Barnhard 193 S.W. 497 (Ark. 1917); Reliance Fertilizer Bros. & Spinder v. Morrison , 87 S.W. 376 Co. v. Davis , 169 So. 579 (Fla. 1936); Adjust- (Tex. Civ. App. 1905); Mud Control Labora- ment Bureau of the Portland Ass’n of Credit tories v. Covery , 2 Utah 2d 85, 269 P.2d 854 Men v. Conley , 255 Pac. 414 (Ida. 1927); (1954); Dalton Adding Machine Co. v. Lind- Union Cloak & Suit Co. v. Carpenter , 102 Ill. quist , 137 Wash. 375, 242 Pac. 643 (1926); App. 339 (1902); Elliott v. Parlin & Orendorff State v. Richards , 32 W. Va. 348, 9 S.E. 245 Co. , 81 Pac. 500 (Kan. 1905); City of Newport (1889); Sprout, Waldron & Co. v. Amery v. French Bros. Bauer Co. , 183 S.W. 532 Mercantile Co. , 162 Wis. 279, 156 N.W. 158 (Ky.Ct. App. 1916); R.J. Brown Co. v. (1916); Duluth Music Co. v. Clancey , 139 Grosjean , 189 La. 778, 180 So. 634 (1938); Wis. 189, 120 N.W 854 (1905).

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ly in interstate commerce had shows” at which they took orders warehoused products in Georgia for costume jewelry for acceptance during one Christmas sales season, out of state was held to be doing and had made sales from that intrastate business for purposes of warehouse the court held that this qualification where the employees was an isolated transaction under regularly sold jewelry on the spot the statute and did not require qual- from their sample kits. The court ification. 2 held that even if the sales were It has also been held that quali- unauthorized and against company fication is required where the for- policy, the corporation ratified eign corporation maintains “spot” them by accepting their benefits. stocks, strategically located so as The corporation was not permitted to furnish customers with quick to bring suit in Oklahoma. 4 delivery. 3 This is true although the There is little difficulty in rec- bulk of the orders are filled from ognizing a stock of goods deposit- outside the state. ed at a fixed location as coming A foreign corporation whose within these general rules. Howev- employees arranged “fashion er, confusion has arisen in connection with “mobile” stocks, brought 2. Al & Dick, Inc. v. Cuisinarts, Inc. , 528 into a state on trucks and sold, F. Supp. 633 (N.D. Ga. 1981). from the trucks, door-to-door. The 3. Dalton Adding Machine Co. v. Com- fact that the goods cross state lines, monwealth of Virginia , 246 U.S. 498, 38 S. Ct. 361 (1918); Union Cloak & Suit Co. v. Car- and that they are not set down at a penter , 102 Ill. App. 399 (1902); Dominion permanent storehouse, should not Fertilizer Co. v. White , 96 Atl. 1069 (Me. properly exclude them from the 1916); E.A. Lange Medical Co. v. Brace , 186 Mich. 453, 152 N.W. 1026 (1915); Cohn-Hall general rule since they constitute a Marx Co. v. Feinberg , 214 Minn. 584, 8 N.W. stock of goods within a state from 2d 825 (1943); Thomas Mfg. Co. v. Knapp , which the foreign corporation 101 Minn. 432, 112 N.W. 989 (1907); Wiley Electric Co. of Jackson v. Electric Storage makes deliveries to customers in Battery Co. , 147 So. 773 (Miss., 1933) M.A. the state; the foreign corporation so Kelly Broom Co. v. Mo. Fidelity & Casualty engaged will be required to quali- Co ., 191 S.W. 1128 (Mo. App. 1917); Pitts- fy. 5 burgh Electric Specialties Co., Inc. v. Rosen- baum , 102 Misc. 520, 169 N.Y.S. 157 (Sup. Ct. 1918); Manhattan Terrazzo Brass Strip Co., Inc. v. A. Benzing & Sons , 50 N.E.2d 570 (Ohio, 1943); Barnhard Bros. & Spindler v. 4. C.H. Stuart, Inc. v. Bennett , 617 P.2d Morrison , 87 S.W. 376 (Tex. Civ. App. 1905); 879 (Okla. 1980). National Cash Register Co. v. Ondrusek , 271 5. J.R. Watkins Co. v. Sanford , 52 So.2d S.W. 640 (Tex. Civ. App. 1925); Mud Control 325 (La App. 1951); Baldwin Music Shop, Inc. Laboratories v. Covey , 2 Utah 2d 85, 269 P.2d v. Watson , 102 S.W.2d 478 (Tex. Civ. App. 845 (1954). 1937).

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A foreign corporation in the to qualify depends upon its activi- business of leasing shipping con- ties in the state. tainers was held doing business in Where a Tennessee corporation Florida, where it serviced, handled, contracted in Tennessee for the stored, repaired and maintained cultivation of certain crops in Mis- those containers it had not leased. 6 sissippi, and sent an independent An Alabama court held that contractor into Mississippi to har- ownership of equipment located in vest the crop and deliver it to Ten- Alabama which was rented to Ala- nessee, the Mississippi court held bama residents was an intrastate that the transactions in Mississippi activity and the foreign lessor cor- were incidental to a contract in poration was not permitted to interstate commerce, and qualifica- maintain its action because it was tion was not required. 2 However, not qualified. 7 where a New York corporation sent materials to New Jersey to be Processing processed, the court held that it When a foreign corporation was transacting business in New Jersey so as to require qualifica- sends raw materials to a processor 3 or manufacturer in another state tion. The court further held that which, after processing, are to be while the corporation was barred returned to the foreign corporation, from maintaining an action in New the question arises as to whether Jersey because it was not qualified, these activities require qualifica- no such disability existed as to the tion. There can be no question that trustee in bankruptcy of the corpo- the processor or manufacturer is ration. doing business in its own state and Where the processor or manu- that the transaction would not be facturer holds the goods for the regarded as interstate commerce as foreign corporation after pro- to it. 1 But whether the corporation cessing, awaiting receipt of orders sending the raw materials for pro- for their sale and shipment, a dif- cessing or manufacturing will have ferent situation is presented. Under such circumstances, the processor or manufacturer could be consid- 6. Integrated Container Services, Inc. v. ered the agent of the foreign corpo- Overstreet , 375 So.2d 1146 (Fla. App. 1979). ration, which might then be 7. Allstate Leasing Corp. v. Scroggins , 541 So.2d 17 (Ala. Civ. App. 1989). 1. Department of Treasury of Indiana v. 2. Humboldt Foods, Inc. v. Massey , 297 Ingram-Richardson Mfg. Co. of Indiana, Inc. , F.Supp. 236 (N.D. Miss. 1968). 313 U.S. 252, 61 S. Ct. 866 (1941), rehearing 3. Okin v. A.D. Gosman, Inc. , 174 A.2d denied, 313 U.S. 600, 61 S. Ct. 1107 (1941). 650 (N.J. Super., Law Div. 1961).

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regarded as doing business and porary storage of the goods before required to qualify. 4 shipment outside the state, qualification is usually required. 4 However, several decisions have Purchasing suggested that merely ordering Purchasing is an essential part of products or supplies in a state is a corporation’s business. A manu- not sufficient to find that a foreign corporation is transacting business facturing corporation cannot oper- 5 ate without purchasing raw in the state. A court in Virginia materials. A retail seller must pur- held that a foreign corporation chase merchandise. Therefore, it whose only in-state activities were has been held that unless the pur- seeking a source of supply for heli- chases fall within one of the excep- copter blades and negotiating ser- tions to doing business, a foreign vice agreements and taking delivery was not doing business in corporation purchasing in a state 6 7 will be required to qualify. 1 Virginia. In a Mississippi case, it Thus, a foreign corporation was held that qualification was not which established an agency for required of a food processing cor- the regular and systematic pur- poration which had entered into chase of goods has been required contracts to purchase green beans to qualify. 2 It is particularly clear from Mississippi planters and that qualification will be required which assumed the additional obli- of a corporation which followed gation of harvesting and shipping the purchase of the goods by sale the beans. The court in this case, and delivery to customers in the after noting that qualification is same state. 3 And if the purchases required when a corporation carries are followed by assembly and tem- on a substantial part of its business

4. American Steel & Wire Co. v. Speed , 4. Sunlight Produce Co. v. State , 183 Ark. 192 U.S. 500, 24 S. Ct. 500 (1904); Union 64, 35 S.W.2d 342 (1931); State ex rel. Mon- Cloak & Suit Co. v. Carpenter , 102 Ill. App. roe County v. Pioneer Creamery Co. , 211 Mo. 339 (1902); Town of Sellersburg v. Stanforth , App. 116, 245 s.W. 361 (1922); State ex rel. 198 N.E. 437 (Ind., 1935); Milburn Wagon Nelson v. S.P. Pond Co. , 135 Mo. App. 81, Co. v. Commonwealth , 139 Ky. 330, 104 S.W. 115 S.W. 505 (1909). 323 (1907); Loverin & Brown Co. v. Tansil , 5. Dickson v. Delhi Seed Co. , 760 S.W.2d 118 Tenn. 717, 102 S.W. 77 (1907). 382 (Ark. App. 1988); Associates Capital 1. E.C. Artman Lumber Co. v. Bogard , 191 Services Corp. v. Loftins Transfer & Storage Ky. 392, 230 S.W. 953 (1921). Co., Inc. , 554 F.2d 188 (5th Cir. 1977). 2. Billingslea Grain Co. v. Howell , 205 6. Questech, Inc. v. Liteco , AG, 735 S.W. 671 (Tex. Civ. App. 1918). F.Supp. 187 (E.D. Va. 1990). 3. R.J. Brown Co. v. Grosjean , 189 La. 7. Humboldt Foods, Inc. v. Massey , 297 778, 180 So. 634 (1938). F.Supp. 236 (N.D. Miss., 1968).

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in the state on a regular basis, said probably not be required. 11 How- that the “main” business of the ever, where a foreign corporation corporation was carried on in an- was formed for the purpose of ac- other state and that the transaction quiring other corporations, it was “as a whole . . . was interstate in held that negotiating in Alabama a nature and was initiated by the contract to purchase shares in an Mississippi residents.” Similarly, a Alabama corporation constituted federal court in New York held doing business, and the contract that the “placement of orders” in was held to be unenforceable. 12 New York did not require qualification even though the merchan- Real Property Ownership dise was delivered to the foreign Sec. 15.01(b)(9) of the Revised corporation’s independent contrac- Model Act provides that “owning, tor in the state. 8 And where a foreign corporation sent trucks and 11. Flanagan v. Federal Coal Co. , 267 U.S. agents into Kansas to pick up hay 222, 45 S.Ct. 233 (1925); Dahnke-Walder it had purchased for delivery out- Milling Co. v. Bondurant , 257 U.S. 282, 42 side the state, it was not required to S.Ct. 106 (1921); Eljam Mason Supply, Inc. v. 9 The Donnelly Brick Co. , 208 A.2d 544 (Conn. qualify. Sup. Ct. Errors 1965); Logan-Pocahontas Fuel Single or occasional purchases Co. v. Camp , 197 Ky. 174, 246 S.W. 433 may fall within the isolated tran- (1922); J. Perez, S.A. v. Louisiana Rice Grow- action exception. 10 And if it can be ers, Inc. , 139 So.2d 247 (La. App. 1962); Michigan Lubricator Co. v. Ontario Cartridge shown that the goods were pur- Co., Ltd. , 275 F. 902 (6th Cir. [Mich.] 1921); chased with the understanding that Union Cotton Oil Co. v. Patterson , 116 Miss. they would immediately be ship- 802, 77 So. 795 (1918); MacNaughton Co. v. McGirl , 20 Mont. 124, 49 P. 651 (1897); Con- ped outside the state, and that they solidated Pipe Line Co. v. British American Oil were so shipped, qualification will Co., Ltd. , 163 Okla. 171, 21 P.2d 762 (1933); Trans-Mississippi Grain Co. v. Spracher , 47 S.D. 262, 197 N.W. 686 (1924); Advance Lumber Co. v. Moore , 126 Tenn. 313, 148 8. Stafford-Higgins Industries v. Gaytone S.W. 212 (1912); Italy Cotton Oil Co. v. Fabrics, Inc. , 300 F.Supp. 65 (S.D.N.Y., Southern Cotton Oil Co. , 13 S.W.2d 438 (Tex. 1969). Civ. App. 1929); Kansas City Wholesale Gro- 9. Panhandle Agri-Service, Inc. v. Becker , cery Co. v. Weber Packing Corp. , 93 Utah 414, 231 Kan. 291, 644 P.2d 413 (1982). 73 P.2d 1272 (1937); Jerome P. Parker-Harris 10. Hunter W. Finch & Co. v. Zenith Fur- Co. v. Kissel Motorcar Co. , 165 Wis. 518, 163 nace Co. , 245 Ill. 586, 92 N.E. 521 (1910); N.W. 141 (1917); Standard Sewing Equipment Schultz v. Long-Island Machinery & Equip- Corp. v. Motor Specialty, Inc. , 263 Wis. 467, ment Co., Inc. , 173 So. 569 (La. App. 1937); 57 N.W.2d 706 (1953). United Mercantile Agencies v. Jackson , 351 12. Continental Telephone Company v. Mo. 709, 173 S.W. 2d 881 (1943); Dover M.G. Weaver, et al. , Civil Action No. 67-180, Lumber Co. v. Whitcomb , 54 Mont. 141, 168 N.D. Ala., May 17, 1968, aff’d 410 F.2d 1196 P. 947 (1917). (5th Cir. 1969).

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without more, real . . . property” Massachusetts provides that “the does not constitute doing business. following activities, among oth- This provision or one with a ers, do constitute transacting busi- similar effect has been adopted by ness . . . (1) the ownership . . . of Arizona, Arkansas, Colorado, real estate in the commonwealth”. Connecticut, Florida, Georgia, In the absence of a statute, the Hawaii, Idaho, Illinois, Indiana, general rule is that an ordinary Iowa, Kentucky, Michigan, Mis- foreign business corporation can sissippi, Nebraska, Nevada, New acquire, hold and dispose of real Hampshire, North Carolina, Ore- property without qualifying. 1 Vari- gon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Vermont, 1. Wallace v. Brewer , 315 F.Supp. 431 Virginia, Washington, West Vir- (M.D. Ala., 1970); Friedlander Bros, Inc. v. ginia, Wisconsin and Wyoming. Deal , 218 Ala. 245, 118 So. 508 (1928); Mar- In Maine, “Owning real proper- tin v. Bankers’ Trust Co. , 18 Ariz. 55, 156 P. 87 (1916); Hooker v. Southwestern Improve- ty, other than agricultural real ment Assoc. , 105 Ark. 99, 150 S.W. 398 estate” does not require qualifica- (1912); Davies v. Mt. Gaines Mining & Mill- tion. Montana provides that a cor- ing Co. , 104 Cal. App. 730, 286 P. 740 (1930); Hogue v. D.N. Morrison Const. Co. poration is not doing business by Inc. of Va. , 115 Fla. 293 156 So. 377 (1933); virtue of its “owning real . . . Perry v. Reynolds , 63 Idaho 457, 122 P.2d 508 property that is acquired incident (1942); North Dakota Realty & Inv. Co. v. to activities [related to enforcing Abel , 85 Ind. App. 563, 155 N.E. 46 (1927); Blodgett v. Lanyon Zinc Co. , 120 F. 893 (8th mortgage and security interests in Cir. [Kan.] 1903); Commonwealth Farm Loan property securing debts] if the Co. v. Caudle , 203 Ky. 761, 263 S.W. 24 property is disposed of within 5 (1924); Lake Superior Piling Co. Inc. v. Ste- vens , 25 So.2d 1120 (La. App. 1946); Electric years after the date Railway Securities Co. v. Hendricks , 251 of acquisition does not produce Mich. 602, 232 N.W. 367 (1930): Sullivan v. income, or is not used in the per- Sheehan , 89 F. 247 (D. Minn. 1898); Long Beach Canning Co. v. Clark , 141 Miss. 177, formance of a corporate function.” 106 So. 646 (1926); Parker v. Wear, 230 S.W. Minnesota’s statute provides 75 (Mo. 1921); Uihlein v. Caplice Commer- that “Holding title to and manag- cial Co. , 39 Mont. 327, 102 P. 564 (1909); ing real . . . property, or any inter- Dold Packing Co. v. Doermann , 293 F. 315 (8th Cir. [Neb.] 1923); Manhattan & Subur- est therein, situated in this state, ban Savings & Loan Ass’n of New York v. as executor of the will or adminis- Massarelli , 42 A. 284 (N.J. Ct. Chancery trator of the estate of any dece- 1899); Goode v. Colorado Inv. Loan Co. , 16 N.M. 461, 117.856 (1911); Singer Mfg. Co. v. dent, as trustee of any trust, or as Granite Spring Water Co. , 66 Misc. 595, 123 guardian of any person or conser- N.Y.S. 1088 (Sup. Ct. 1910); Wm. G. Roe & vator of any person’s estate” does Co. v. State , 43 Misc. 2d 417, 251 N.Y.S.2d 151 (Ct. Claims 1964); Dime Savings & Trust not constitute doing business. Co. v. Humphreys , 175 Okla. 497, 53 P.2d 665

Property Ownership 153

ous reasons have been given in the foreign corporation to maintain an decisions for holding that quali- action seeking an easement where fication is not required, including the only activity alleged was its the fact that the particular real es- ownership of land. 2 tate transaction was isolated, that it Qualification probably will also was preliminary to engaging in be required where the corporation business, and that it was a neces- engages in repeated real estate sary incident to the winding-up of transactions. 3 The statements business. above pertain to the acquiring, If the foreign business corpora- holding or disposing of real prop- tion owning the property engages erty by ordinary business corpora- in other local activities, qualifica- tions. An entirely different tion will probably be required. For situation is presented where the example, a Pennsylvania corpora- foreign corporation is organized tion entered into a contract to pur- for the purpose of, and is actively chase land in Vermont. It obtained engaged in, the real estate busi- a survey and applied for sewer and ness. The acquiring, holding or building permits. Although Ver- disposing of real estate by such mont law provides that doing busi- corporations constitutes doing ness does not include the mere business and requires qualifi- ownership of real property, the Vermont Supreme Court found that the other activities did consti- 2. Pennconn Enterprises, Ltd. v. Hunting- tute doing business. On the other ton , 533 A.2d 673 (Vt. 1987); Capstar Raio hand, an Idaho court allowed a Operating Co. v. Lawrence, 152 P.3d 575 (Idaho 2007). 3. Alabama White Marble Co. v. Eureka White Marble Quarries , 190 Ala. 595, 67 So. 505 (1914); Republic Power & Service Co. v. Gus Blass Co. , 165 Ark. 163, 263 S.W. 785 (1936); Charles Friend & Son, Inc. v. (1924); John Hancock Mutual Life Ins. Co. v. Schmidt , 57 S.D. 477, 233 N.W. 913 (1930); Girard , 57 Idaho 198, 64 P.2d 254 (1936); Bouldin v. Taylor , 152 Tenn. 97, 275 S.W. Pennsylvania Co. for Insurance on Lives & 340 (1925); Glo Co. v. Murchison , 208 F.2d Granting Annuities v. Bauerle , 143 Ill. 459, 33 714 (5th Cir. [Tex.] 1954), cert. den. 348 U.S. N.E. 166 (1892); Greene v. Kentenia Corp. , 817, 75 S.Ct. 27 (1954); Wilson v. Peace , 38 192 S.W. 820 (Ky. Ct. App. 1917); E. & G. Tex. Civ. App. 234, 85 S.W. 31 (1905); Theatre Co. v. Greene , 216 Mass. 171, 103 Goldberry v. Carter , 100 Va. 438, 41 S.E. 858 N.E. 301 (1913); Weiser Land Co. v. Bohrer , (1902); Keene Guaranty Savings Bank v. 78 Ore. 202, 152 P. 869 (1915); American Lawrence , 32 Wash. 572, 73 P. 680 (1903); Housing Trust III v. Jones , 696 A.2d 1181 (Pa. Mortenson v. Morse , 153 Wisc. 389, 141 1997); Dunn v. Utah Serum Co. , 65 Utah 527, N.W. 273 (1913); Chittim v. Belle Fourche 238 P. 245 (1925): Midwest Sportswear Mfg. Bentonite Products Co. , 60 Wyo. 35, 149 P.2d Co. v. Baraboo Chamber of Commerce , 161 142 (1944). F.2d 918 (7th Cir. [Wis.] 1947).

154 Property Ownership

cation. 4 Thus, a Tennessee cor- it is ordinarily required to qualify poration organized to acquire, in the state where it so acts, under syndicate and operate residential the general rule requiring qualifica- and commercial real estate was tion where a corporation performs held to be doing business in Ala- services, 1 and under the generally bama by entering into a contract accepted definition of doing busi- with an Alabama apartment com- ness as transacting “some substan- plex. 5 tial part of its ordinary business” in the state. The United States Supreme Sales Court has indicated that qualification is required of such brokers Commission Merchants and even though performing their part Brokers “in the comprehensive process of 2 Where a foreign corporation foreign commerce.” Thus, foreign performs the service of a broker or real estate brokerage corporations a commission merchant, such as a selling land in other states have real estate or customhouse broker, been held to be doing business and 3 required to qualify. 4. Vines v. Romar Beach, Inc. , 670 So.2d If, however, the foreign corpora- 901 (Ala. 1995); In re Wellings’ Estate, 192 tion’s brokerage activities amount Cal. 506, 221 P. 628 (1923); Hoffstater v. to nothing more than soliciting Jewell , 33 Idaho 439, 196 P. 194 (1921); Greene v. Kentenia Corp. , 194 S.W. 820 (Ky. orders, all other incidents of the Ct. App. 1917); E.C. Vogt, Inc. v. Ganley transactions taking place outside Bros. Co. , 185 Minn. 442, 242 N.W. 338 the state, it will not ordinarily be (1932); S & A Realty Company v. Hilburn , 4 249 So.2d 379 (Miss. 1971); Singer Mfg. Co. required to qualify. v. Granite Spring Water Co. , 66 Misc. 595, 123 N.Y.S. 1088 (Sup. Ct. 1910); see also Laurendi v. Cascade Development Co., Inc. , 5 1. Warren v. Inter State Realty Co. , 192 Ill. Misc. 2d 688, 165 N.Y.S.2d 832 (Niagara Co. App. 438 (1915); J.H. Silversmith, Inc. v. Ct. 1957), aff’d (mem.) 4 A.D.2d 852, 167 Keeter , 72 N.M. 246, 382 P.2d 720 (1963); N.Y.S.2d 240 (4th Dept. 1957); Brown v. John Applied Technologies Associates, Inc. v. P. Smythe & Co. , 98 N.J. Eq. 206, 129 Atl. Schmidt , 362 F.Supp. 1103 (D.N.M., 1973). 871 (Ct. Chancery 1925); Walter E. Heller & 2. Union Brokerage Co. v. Jensen , 322 Company of Cal. v. Stephens , 79 N.M. 74, 439 U.S. 202, 64 S.Ct. 967 (1944). P.2d 723 (1968); Cassidy’s Limited v. Rowan , 3. Woods v. Interstate Realty Co. , 337 U.S. 99 Misc. 274, 163 N.Y.S. 1079 (Sup. Ct., 535, 69 S.Ct. 1235 (1949); Marx & Bensdorf, App. Term, 1st Dept. 1917); Weiser Land Co. Inc., v. First Joint Stock Land Bank of New v. Bohrer , 79 Ore. 202, 152 P. 869 (1915); Orleans, Louisiana , 173 So. 297 (Miss. 1937). Hanna v. Kelsey Realty Co. , 145 Wis. 276, 4. Morrison v. Guaranty Mortgage & 129 N.W. 1080 (1911). Trust Co. , 191 Miss. 207, 199 So. 110 (1940); 5. Freeman Webb Investments, Inc. v. Shemper v. Latter & Blum, Inc. , 214 Miss. Hale , 536 So.2d 30 (Ala. 1988). 113, 58 So.2d 359 (1952).

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Where a Pennsylvania real es- It also appears that sales made tate corporation found a purchaser under conditional sales contracts for property in Delaware, the Del- are entitled to the exemption grant- aware court permitted it to main- ed to transactions in interstate tain an action for its commission commerce to the same extent as even though it was not qualified. outright sales. 1 The court held that the transaction had been an isolated one which did 5 not require qualification. 1. International Textbook Co. v. Pigg , 217 U.S. 91, 30 S.Ct. 481 (1910); Wise v. Grum- Conditional Sales man Credit Corporation , 603 So.2d 952 (Ala. 1992); Smith & Fay v. Montgomery Ward & When a foreign corporation Co. , 96 So. 231 (Ala., 1923); Coblentz & ships goods into a state under a Logsdon v. L.D. Powell Co. , 229 S.W. 25 (Ark. 1921); L.D. Powell Co. v. Rountree , 247 conditional sales contract, retaining S.W. 389 (Ark., 1923); McMillan Process Co. title to the goods until some future v. Brown , 91 P.2d 613 (Cal. App. 1939); time, first consideration should be Merganthaler Linotype Co. v. Gore , 160 So. given to the applicable state quali- 481 (Fla. 1935); Havens & Geddes Co. v. Diamond , 93 Ill. App. 557 (1900); In re Har- fication statute. Utah exempts the mony Theatre Co., 2 F.2d 376 (E.D. Mich. “acquiring, in transactions outside 1924); Lu-Mi-Nus Signs Co. v. Regent Theatre this state or in interstate commerce, Co. , 250 Mich. 535, 231 N.W. 128 (1930); Case v. Mills Novelty Co. , 193 So. 625 (Miss., of conditional sales contracts . . ., 1940); Refrigeration Discount Corp. v. Turley , collecting or adjusting of principal 198 So. 731 (Miss., 1940); Smith v. J.P. or interest payments on the con- Seeburg Corp. , 6 So.2d 591 (Miss., 1942); General Excavator Co. v. Emory , 40 S.W.2d tracts . . ., enforcing or adjusting 490 (Mo. App. 1931); Funk & Wagnalls Co. any rights provided for . . ., and v. Max Stamm , 88 Atl. 1050 (N.J. Ct. Errors taking any actions necessary to and App. 1913); Chase-Hackley Piano Co. v. preserve and protect the interest of Griffen , 149 N.Y.S. 998 (Sup. Ct., App. Term, 1st Dept. 1914); Meisel Tire Co. v. Mar-Bell the conditional vendor in the prop- Trading Co. , 155 Misc. 664, 280 N.Y.S. 335 erty covered by a conditional sales (N.Y.C. Munic. Ct. 1935); Cugley Incubator contract . . .” Louisiana law pro- Co. v. Franklin , 142 P.2d 125 (Okla. 1943); Osgood Co. v. Bland , 141 S.W. 2d 505 (Tenn. vides that “disposing of property or App. 1940); Moore-Hustead Co. v. Joseph W. a property interest, not as a part of Moon Buggy Co. , 221 S.W. 1032 (Tex. Civ. any regular business activity” does App. 1920); Rock-Ola Mfg. Corp. v. Wertz , 249 F.2d 813 (4th Cir. [Va.] 1957); Minneap- not constitute doing business in the olis Securities Corp. v. Silevra , 254 Wis. 129, state. 35 N.W. 2d 322 (1948); Unitype Co. v. Schwittay , 168 Wis. 489, 170 N.W. 651 (1919); Regina Co. v. Toynbee , 163 Wis. 551, 158 N.W. 313 (1916); Creamery Package 5. Coyle v. Peoples , 349 A.2d 870 (Del. Mfg. Co. v. Cheyenne Ice Cream Co. , 55 Wyo. Super. 1975). 277, 100 P.2d 116 (1940).

156 Sales

Sales from Trucks door-to-door sales from vehicles was also required to qualify. 3 A foreign corporation which In Louisiana, a foreign corpora- sends its trucks into a state to make tion may dispose of property, not sales directly from the trucks may as a part of any regular business be required to qualify. Some con- activity. These statutory provisions fusion has arisen from the fact that may well be determinative here. the trucks cross a state line, but this In addition to the qualification is not sufficient, by itself, to bring cases cited above and the pertinent the subsequent sales within the statutory provisions, several cases protection of the interstate Com- have upheld license taxes as ap- merce Clause. plied to sales from trucks and these It has been held that “an inter- may be of some help in this area. 4 state transaction contemplates a consignor without and a consignee Sales of Repossessed Goods within a state.” 1 It is clear that in this situation there is no consignee There are occasions when an at the time the trucks enter that unqualified foreign corporation state, since at that time it is not finds it necessary to repossess known who will buy the goods. goods originally sold in interstate The sale of goods from trucks commerce. It is well settled that under these circumstances is little neither the repossession nor repos- different from the sale of goods to session coupled with a resale to a customers within a state from a customer in the same state will fixed stock of goods, and in the require qualification. 1 The repos- latter case it is well settled that qualification is required. 3. J.R. Watkins Co. v. Stanford , 52 So.2d 325 (La. App. 1951). Thus, a foreign corporation 4. Caskey Baking Co., Inc. v. Common- which sent trucks carrying pianos wealth of Virginia , 313 U.S. 117, 61 S.Ct. 881 to be peddled from door to door in (1941); Wagner v. City of Covington , 251 U.S. Texas was held to be doing busi- 95, 40 S.Ct. 93 (1919); State v. Coca Cola 2 Bottling Works, Inc. , 198 So. 363 (Ala. App. ness and required to qualify. A 1940). corporation which sent its goods to 1. Weaver v. O’Meara Motor Company , its Louisiana agents who make 452 P.2d 87 (Alaska, 1969); Commonwealth v. Chattanooga Implement & Mfg. Co. , 126 Ky. 636, 104 S.W. 389 (1907); Yellow Mfg. Ac- ceptance Corp. v. American Oil Co. , 191 Miss. 757, 2 So.2d 834 (1941); Chase- 1. Hogan v. Intertype Corporation , 136 Hackley Piano Co. v. Griffen , 149 N.Y.S. 998 Ark. 52, 206 S.W. 58 (1918). (Sup. Ct., App. Term 1st Dept. 1914); Sooner 2. Baldwin Music Shop, Inc. v. Watson , Beverage Co. v. G. Heileman Brewing Co. , 102 S.W. 2d 478 (Tex. Civ. App. 1937). 194 Okla. 252, 150 P.2d 72 (1944); American

Sales 157

session and resale are looked upon ferred to successive assignees with as incidental to the original inter- the knowledge of the seller.” 5 state sale. An Arkansas decision held that A shipment of iron in cars to a foreign corporation was not do- one customer, diverted upon arri- ing business where it took over a val to other customers with whom bankrupt’s entire stock and carried the foreign corporation had entered on its retail business for almost two into contracts prior to the ship- months until the business could be ment, was held not to constitute sold. 6 A federal court in Michigan doing business. 2 Similarly, the re- held that a foreign corporation possession and resale of law which leased equipment to a Mich- books, sold originally under a con- igan resident and sold the equip- ditional sale contract, was held not ment to a buyer in the state to constitute doing business. 3 after the lease was forfeited, mov- Such a second sale has been re- ing and repairing it in the process, garded as “an isolated and emer- was not doing business so as to gency transaction thrust upon the require qualification in Michigan. 7 [foreign corporation] by the pecu- The court did not examine the sale liar circumstances of the case.” 4 It by itself, but simply stated that the has been held that “the seller’s lease had been in interstate com- right to enforce the sales contract merce, and that all other acts were remains even though the buyer’s incidental to it. possession and rights be trans- While the general rule is clear, there have been decisions holding that the foreign corporation is re-

Soda Fountain Co. v. Hairston , 69 S.W.2d 546 (Tex. Civ. App. 1934); Harcrow v. W.T. Rawleigh Co. , 145 S.W.2d 925 (Tex. Civ. 5. Mergenthaler Linotype Co. v. Gore , 160 App. 1940); J.R. Watkins Co. v. Beyer , 233 So. 481 (Fla., 1935). See also Phelps v. Jesse N.W. 442 (Wis. 1930); Regina Co. v. Toyn- French & Sons Piano Co. , 65 S.W.2d 374 bee , 163 Wisc. 551, 158 N.W. 313 (1916); (Tex. Civ. App. 1933); Keating Implement & Unitype Co. v. Schwittay , 168 Wis. 489, 170 Machine Co. v. Favorite Carriage Co ., 35 N.W. 651 (1919). S.W. 417 (Tex. Civ. App. 1896); North v. 2. Rogers v. Union Iron & Foundry Co. , Merganthaler Linotype Co. , 77 S.W.2d 580 167 Mo. App. 228, 150 S.W. 100 (1913). (Tex. Civ. App. 1935); Fate-Root Heath Co. v. 3. L.D. Powell Co. v. Rountree , 247 S.W. Howard Kenyon Dredging Co. , 117 S.W.2d 389 (Ark. 1923); see also Smith v. Mer- 547 (Tex. Civ. App. 1938). genthaler Linotype Co. , 58 S.W.2d 686 (Ark., 6. Sillin v. Hessig-Ellis Drug Co. , 26 1933). S.W.2d 122 (Ark. 1930). 4. Rashford Lumber Co. v. Dolan , 260 Pac. 7. Vulcan Steam Shovel Co. v. Flanders , 224 (Ore. 1927). 205 F.102 (E.D. Mich. 1913).

158 Sales

quired to qualify in these circum- A similar situation exists in the stances. 8 case of rejected items. The courts Where a foreign corporation or- have generally held that a foreign ganized for the purpose of financ- corporation may resell the goods ing the sale of mobile homes did without qualifying. 11 substantial business with dealers in Alabama (at least two of which Sales of Samples were its wholly owned subsidiar- It is well established that a for- ies), had a representative who trav- eign corporation which sends eled to Alabama servicing its salesmen equipped with samples accounts and visiting delinquent into a state to secure orders through debtors, and repossessed mobile the exhibition of the samples, is homes and resold them through its not “doing business” and need not dealers, it was doing business in qualify where the orders are filled Alabama without authority and from without the state. 1 The more could not enforce its contracts. 9 Here, the reselling of the repossessed goods was just one part of 11. Kirkeby & Gundestrup Seed Co. v. White , 168 Mo. App. 626, 153 S.W. 279 the foreign corporation’s activities (1913); Meaker Galvanizing Co. v. Charles E. in the state. McInnes & Co., Inc. 272 Pa. 561, 116 A. 400 See also the discussions entitled (1922); Dempster Mill Mfg. Co. v. Humphries , “Lending Money on Security” and 202 S.W. 981 (Tex. Civ. App. 1918). 1. Cannell & Chaffin, Inc. v. C.W.C. “Collecting Debts.” Deering , 26 Hawaiian Reports 74 (1921); Repurchase agreements in Delta Bag Co. v. Kearns , 160 Ill. App. 93 which the foreign corporation buys (1911); Hamilton Machine Tool Co. v. Me- chanics’ Machine Co. , 179 Ill. App. 145 back goods which its dealers have (1912); Havens & Geddes Co. v. Diamond , 93 not sold, ordinarily will not require Ill. App. 557 (1900); Richard Young Co. v. qualification. 10 Meyer-Rudolph Shoe Co. , 261 Ill. App. 327 (1931); City of Rushville v. Heyneman , 186 Ind. 1, 114 N.E. 691 (1917); Commonwealth v. Hogan McMorrow & Tieke Co. , 25 Ky. Law Rep. 41, 74 S.W. 737 (1903); Larkin Co. 8. Cohn-Hall-Marx Co. v. Feinberg , 214 v. Commonwealth , 172 Ky. 106, 189 S.W. 3 Minn. 584, 8 N.W.2d 825 (1943); Sprout, (1916); Eagle Mfg. Co., Inc. v. Arkell & Waldron & Co. v. Amery Mercantile Co. , 162 Douglas, Inc. 197 App.Div. 788, 189 N.Y.S. Wis. 279, 156 N.W. 158 (1916). 140 (1st Dept. 1921); affirmed 234 N.Y. 573, 9. Boles v. Midland Guardian Co. , 410 138 N.E. 451 (1922); Gilmer Bros. Co., Inc. v. So.2d 82 (Ala. Civ. App. 1982). Singer , 149 N.Y.S. 904 (Sup. Ct., App. Term, 10. Three States Buggy & Implement Co. 1st Dept. 1914); L.C. Page & Co. v. Sher- of Cairo, Ill. v. Commonwealth , 32 Ky. Law wood , 146 App. Div. 618, 131 N.Y.S. 322 (1st Rep. 385, 105 S.W. 971 (1907); Watson v. Dept. 1911); Wyman, Partridge Holding Co. J.R. Watkins Co. , 188 Miss. 435, 193 So. 913 v. Lowe , 65 S.D. 139, 272 N.W. 181 (1937); (1940). M.E. Smith & Co. v. Dickinson , 81 Wash. 465,

Sales 159

difficult question is whether the suance thereof from without this sale of the samples themselves will State to the vendee or to the seller require qualification. or his agent for delivery to the It is clear that if the sale of sam- vendee, and if any samples kept ples amounts to regular sales from within this State are for display or a local stock of goods, qualifica- advertising purposes only, and no tion will be required. Thus, where sales, repairs, or replacements are a foreign corporation furnishes its made from stock on hand in this local salesmen with a stock of State. . .” 3 goods to be used not only as sam- Where samples are sold only ples but also to fill orders, the occasionally and not as a regular courts have held that qualification course of business, the courts dif- is necessary. 2 fer. In some decisions, the courts Delaware and Oklahoma do not have held that such occasional require qualification of a foreign sales constitute doing business and corporation “[i]f it employs sales- require qualification, although the men, either resident or traveling, to number of sales may have influ- solicit orders in this State, either by enced the decisions. 4 In others, the display of samples or otherwise courts have ruled that such occa- (whether or not maintaining sales sional sales will not require quali- offices in this State), all orders fication. 5 being subject to approval at the In an Oklahoma case, employ- offices of the corporation without ees of a foreign corporation took this State, and all goods applicable to the orders being shipped in pur- 3. Delaware Code Annotated, Title 8, Sec. 373(a)(2). Oklahoma Statutes Annotated, Title 18, Sec. 1132 (2). 142 Pac. 1133 (1914); Underwood Typewriter 4. Watters v. Michigan , 248 U.S. 65, 39 Co. v. Piggott , 60 W. Va. 532, 55 S.E. 664 S.Ct. 29 (1918); Cohn-Hall-Marx Co. v. Fein- (1906); American Slicing Machine Co. v. berg , 214 Minn. 584, 8 N.W.2d 825 (1943). Jaworski , 179 Wis. 634, 192 N.W. 50 (1923). 5. Hamilton Machine Tool Co. v. Mechan- 2. Dalton Adding Machine Co. v. Com- ics’ Machine Co. , 179 Ill. App. 145 (1912); monwealth , 246 U.S. 498, 38 S.Ct. 361 Richard Young Company v. Meyer-Rudolph (1918); Clark v. J.R. Watkins Medical Co. , Shoe Co. , 261 Ill. App. 327 (1931); Hatties- 115 Ark. 166, 171 S.W. 136 (1914); J.R. burg Mfg. Co. v. Pepe , 140 So.2d 449 (La. Watkins Medical Co. v. Williams , 124 Ark. App. 1962); L.C. Page & Co. v. Sherwood , 539, 187 S.W. 653 (1916); Metropolitan 146 App. Div. 618, 131 N.Y.S. 322 (1st Dept. Discount Co. v. Pitsch , 208 Ill. App. 407 1911); Wyman, Partridge Holding Co. v. (1917); J.R. Watkins Co. v. Stanford , 52 So.2d Lowe , 65 S.D. 139, 272 N.W. 181 (1937); 325 (La. App. 1951); Baldwin Music Shop, Aeronautical Corp. of America v. Gossett , 117 Inc. v. Watson , 102 S.W.2d 478 (Tex. Civ. S.W.2d 893 (Tex. Civ. App. 1938); American App. 1937); Wolforth v. A.J. Deer Co., Inc. , Slicing Machine Co. v. Jaworski , 179 Wis. 293 S.W. 590 (Tex. Civ. App. 1927). 634, 192 N.W. 50 (1923).

160 Sales

orders for costume jewelry subject question been answered in the af- to acceptance out of state at “fash- firmative when an ordinary busi- ion shows” held for that purpose. ness corporation is involved, and The corporation provided demon- only Alabama has gone so far as to stration kits of jewelry samples. hold that a foreign corporation The employees regularly made which is selling its own stock in sales from the samples with the the state is required to qualify permission of their immediate su- when the stock subscription is ac- periors. The court held that these cepted outside the state. sales constituted intrastate business In most states foreign corpora- and the corporation was required to tions are not required to qualify in qualify. 6 order to sell their own capital stock. 5 In one case the Kentucky Sales of Securities Court of Appeals remarked that in Today, the shares of most cor- almost all jurisdictions the word porations are marketed initially “business” in foreign corporation through underwriters, so that a statutes “means the business for corporation does not normally en- which the corporation was orga- counter the question of whether the nized, and not the taking of stock sale of its own securities requires subscriptions to procure the capital 1 2 necessary to carry on the busi- qualification. In Alabama, South 6 Dakota 3 and Wisconsin, 4 has the ness.” The court cited a large number of cases in support of this position. 7

6. C.H. Stuart, Inc. v. Bennett , 617 P.2d 879 (Okla. 1980). 1. This discussion is limited to the question 616, 120 N.W. 408 (1909); Cox v. Hanson , of whether the sale of its stock by a corpora- 200 Wis. 341, 228 N.W. 510 (1930). tion constitutes doing business so as to require 5. Edward v. Ioor , 205 Mich. 617, 172 the corporation to qualify under the state N.W. 620 (1919); First National Bank v. business corporation law. It should be men- Leeper , 97 S.W. 636 (Mo. App. 1906); Meir v. tioned, however, that in practice some states Crossley , 305 Mo. 206, 264 S.W. 882 (1924); may require corporations to state that they are Matter of Scheftel , 274 N.Y. 135, 9 N.E.2d qualified to do business in the state in order to 809 (1937); Denman v. Kaplan , 205 S.W. 739 obtain a permit under the blue sky law. (Tex. Civ. App. 1918); Peerless Fire Insur- 2. Jones v. Martin , 15 Ala. 675, 74 So. 761 ance Co. v. Barcus , 227 S.W. 368 (Tex. Civ. (1917); Langston v. Phillips , 206 Ala. 174, 89 App. 1920); Cumberland Co-op Bakeries, Inc. So. 523 (1921). v. Lawson , 112 S.E. 568 (W. Va., 1922). 3. Trip State Bank v. Jerke , 45 S.D. 448, 6. Hauger v. International Trading Co. , 188 N.W. 314 (1922). 214 S.W. 438, 439 (Ky. Ct. App. 1919). 4. American Timber Holding Co. v. Chris- 7. Cases cited by the court include: Green tensen , 206 Wis. 25, 238 N.W. 897 (1931); v. Chicago, Burlington & Quincy R. Co. , 205 Southwestern Slate Co. v. Stephens , 139 Wis. U.S. 530, 27 S.Ct. 595 (1907); Cockburn v.

Sales 161

Only Alabama explicitly adopts Another question is presented the position that selling its own when investment trusts or mutual stock is one of the purposes for funds sell their own securities. In a which an ordinary business corpo- 1918 Missouri case, the State Su- ration is organized. 8 South Dakota preme Court of Missouri held that and Wisconsin, in the cases cited an investment trust which sold above, did not deal specifically convertible stock in the state was with that question, but rather held required to qualify. 9 generally that the sale of its own stock by a corporation did consti- Sales Through Brokers tute doing business. Sales through brokers differ from sales on consignment through commission merchants or dealers

in that brokers ordinarily do not Kinsley , 25 Colo. App. 89, 135 Pac. 1112 (1913); People v. C.I. & L. Ry. Co. , 223 Ill. have possession of the goods. The 581, 79 N.E. 144 (1906); Bradbury v. The courts have treated sales through Waukegan & Washington Mining & Smelting brokers similarly to sales through Co. , 113 Ill. App. 600 (1903); Mandel v. Swan Land & Cattle Co., Ltd ., 154 Ill. 177, 40 N.E. salesmen, and have held that such 462 (1895); D.S. Morgan & Co. v. White , 101 sales will not require the foreign Ind. 413 (1884); Blodgett v. Lanyon Zinc Co. , corporation to qualify so long as all 120 Fed. 893 (8th Cir. [Kan.] 1903); Board- of the other elements of an inter- man v. S.S. McClure Co. , 123 Fed. 614 (D. 1 Minn. 1903); Clark v. Kansas Petroleum Co. , state transaction are present. 144 Mo. App. 182, 129 S.W. 466 (1910); Hoevel Sand-Blast Mach. Co. v. Hoevel , 167 9. Booth v. Scott , 276 Mo. 1, 205 S.W. 644 App. Div. 548, 153 N.Y.S. 35 (1st Dept. (1918). 1915); Union Trust Co. of Rochester v. 1. Sleepy Eye Milling Co. v. Hartman , 184 Sickels , 125 App. Div. 105, 109 N.Y.S. 262 Ill. App. 308 (1913); Dinuba Farmers’ Union (4th Dept. 1908); Toledo Traction, Light & Packing Co. v. J.M. Anderson Grocer Co. , 193 Power Co. v. Smith , 205 Fed. 654 (N.D. Ohio Mo. App. 236, 182 S.W. 1036 (1916); Rogers 1913); Galena Mining & Smelting Co. v. v. Union Iron & Foundry Co. , 167 Mo. App. Frazier , 20 Pa. Super. 394 (1902); Wildwood 228, 150 S.W. 100 (1912); Yerxa, Andrews & Pavilion Co. v. Hamilton , 15 Pa. Super. 389 Thurston, Inc. v. Randazzo Macaroni Mfg. Co. , (1900); Caesar v. Capell , 83 Fed. 403 (W.D. 315 Mo. 927, 28 S.W. 20 (1926); Eagle Mfg. Tenn. 1897); Brown v. Guarantee Savings Co. Inc. v. Arkell & Douglas, Inc. , 197 App. Loan & Investment Co. , 46 Tex. Civ. App. 295, Div. 788, 189 N.Y.S. 140 (1st Dept. 1921), 102 S.W. 138 (1907); Philip A. Ryan Lumber aff’d 234 N.Y. 573, 138 N.E. 451 (1922); Co. v. Ball , 177 S.W. 226 (Tex. Civ. App. Eatonton Cotton Mills, Inc. v. Goodyear Tire 1915); S.R. Smythe Co. v. Ft. Worth Glass & & Rubber Co. , 124 Misc. 211, 208 N.Y.S. 218 Sand Co. , 105 Tex. 8, 142 S.W. 1157 (1912). (Sup. Ct. 1924), aff’d (mem.) 212 App. Div. 8. International Cotton Seed Oil Co. v. 885, 208 N.Y.S. 857 (2d Dept. 1921); Schwarz Wheelock , 124 Ala. 367, 27 So. 517 (1899); v. Sargent , 197 N.Y.S. 216 (Sup. Ct. App. Sullivan v. Sullivan Timber Co. , 103 Ala. 371, Term, 1st Dept. 1922); Advance-Rumely 15 So. 941 (1893); Beard v. Union American Thresher Co., Inc. v. Stohl , 75 Utah 124, 283 P. Publishing Co. , 71 Ala. 60 (1881). 731 (1929).

162 Sales

For example, an Alabama court required. 1 When the dealer sells held that an unqualified foreign the consigned goods it is viewed insurance company was engaged in as if the sales were made by the interstate activities where it sold independent dealer and not the con- insurance to Alabama customers signing foreign corporation. Sec- through a local broker, mailed its tion 106(e) of the Model Business contracts to the broker across state Corporation Act and Section lines and received payments across 15.01(b)(5) of the Revised Model state lines. 2 Act provide that a foreign corpo- A North Carolina court held that ration does not have to qualify in a foreign corporation was not re- order to make sales “through in- quired to qualify where it contract- dependent contractors.” This pro- ed with a resident company to act vision has been adopted in as its intermediary to sell goods to an out of state wholesaler where 1. Furst & Thomas v. Brewster , 282 U.S. the contracts had to be accepted 493, 51 S.Ct. 295 (1931); Bethlehem Motors without the state by the wholesal- Corp. v. Flynt , 256 U.S. 421, 41 S.Ct. 571 er. 3 (1921); City of Atlanta v. York Mfg. Co. , 155 Ga. 33, 116 S.E. 195 (1923); Great Western The difficulties which arise from Live Stock Commission Co. v. Great Western an attempt to label the various “do- Commission Co. , 187 Ill. App. 196 (1914); ing business” activities are particu- Three States Buggy & Implement Co. of Cai- larly evident here. A slight change ro, Ill v. Commonwealth , 32 Ky. Law Rep. 385, 105 S.W. 971 (1907); Ford Motor Com- in the elements of the relationship pany v. Chroma Graphics, Inc. , 678 F.Supp. between the foreign corporation 169 (E.D. Mich. 1987); In re Monongahela and its representative may be suffi- Distillery Co., 186 Fed. 220 (E.D. Mich. 1910); Kayser Roth Company v. Holmes , 693 cient to require qualification. La- S.W.2d 907 (Mo. App. 1985); Yerxa, Andrews bels, therefore, are not as important & Thurston, Inc. v. Randazzo Macaroni Mfg. as the actual activities carried on Co. , 315 Mo. 927, 288 S.W. 20 (1926); Gen- eral Excavator Co. v. Emory , 40 S.W.2d 490 by the representative. (Mo. App. 1931); Republic Steel Corp. v. Atlas Housewrecking & Lumber Corp. , 113 Shipments on Consignment S.W.2d 115 (Mo. App. 1938); Singer Mfg. Co. v. Hardee , 4 N.M. 676, 16 Pac. 605 (1888); Generally, it can be said that Brookford Mills, Inc. v. Baldwin , 154 App. where a corporation consigns Div. 553, 139 N.Y.S. 195 (1st Dept. 1913); goods to an independent dealer in Badische Lederwerke v. Capitelli , 92 Misc. 260, 155 N.Y.S. 651 (Sup. Ct. 1915); In re a foreign state, qualification is not Columbus Buggy Co., 143 Fed. 859 (8th Cir. [Okla.] 1906); Universal Oil Corp. v. Falls 2. Legion Ins. Co. v. Garner Ins. Agency, Rubber Co. of Akron, Inc. , 110 P.2d 296 Inc. 991 F. Supp. 1326 (M.D. Ala. 1997) (Okla. 1941); Mitchell Wagon Co. v. Poole , 3. Songwooyan Trading Co. v. Sox Elev- 235 Fed. 817 (6th Cir. [Tenn.] 1916); In re en, Inc., 714 S.E.2d 162 (N.C. App. 2011). Minor, 69 Fed. 233 (D. W.Va. 1895).

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Alaska, Arizona, Arkansas, Cali- the corporation has relinquished fornia, Colorado, Connecticut, control over the property through District of Columbia, Florida, shipment to an independent deal- Georgia, Hawaii, Idaho, Illinois, er. 3 Indiana, Iowa, Kansas, Kentucky, Shipments on consignment, i.e., Maine, Massachusetts, Michigan, possession without title, may be Mississippi, Montana, Nebraska, made in various ways. The goods Nevada, New Hampshire, New may be consigned to commission Mexico, North Carolina, North merchants, to factors, to purchasers Dakota, Oregon, Pennsylvania, on approval, or to independent Rhode Island, South Carolina, dealers. South Dakota, Tennessee, Texas, “A factor or commission mer- Utah, Virginia, Washington, West chant is one whose business is to Virginia, Wisconsin and Wyo- receive and sell goods for a com- ming. mission, being entrusted with the However, if the consignee is not possession of the goods to be sold, an independent dealer but is the and usually selling in his own foreign corporation’s agent for the name.” 4 A foreign corporation will general disposal of its goods within ordinarily not have to qualify in the state, and under its control as to order to ship goods to factors or his operations, qualification will be commission merchants. 5 2 required. “An interstate transaction con- 3. Hogan v. Intertype Corp. , 136 Ark. 52, templates a consignor without and 206 S.W. 58 (1918). a consignee within a state or vice 4. L.J. Cooper Rubber Co. v. Johnson , 182 S.W. 593 (1916). versa,” and the transaction will be 5. Bartling Tire Co. v. Coxe , 228 F.314 judged according to whether or not (5th Cir. [Ala.] 1923); Tyson v. Jennings Pro- duce Co. 77 So. 986 (Ala. App. 1917); Butler Bros. Shoe Co. v. U.S. Rubber Co. , 156 Fed. 1 2. Kansas City Structural Steel Co. v. State (8th Cir. [Colo.] 1907), cert. den. 212 U.S. of Arkansas ex rel. Ashley County, 269 U.S. 577, 29 S.Ct. 686 (1908); Hessig-Ellis Drug 148, 46 S.Ct. 59 (1925); Reliance Fertilizer Co. v. Sly , 109 P. 770 (Kan., 1910); Dinuba Co. v. Davis , 169 So. 579 (Fla., 1936); Union Farmers’ Union Packing Co. v. J.M. Ander- Cloak & Suit Co. v. Carpenter , 102 Ill. App. son Grocer Co. , 193 Mo. App. 236, 182 S.W. 339 (1902); Town of Sellerburg v. Stanforth , 1036 (1916); Zion Cooperative Mercantile 198 N.E. 437 (Ind., 1935); Milburn Wagon Ass’n v. Mayo , 55 P. 915 (Mont. 1899); Co. v. Commonwealth , 139 Ky. 330, 104 S.W. Eatonton Cotton Mills, Inc. v. Goodyear Tire 323 (1907); Manhattan Terrazzo Brass Strip & Rubber Co. , 124 Misc. 211, 208 N.Y.S. 218 Co., Inc. v. A. Benzing & Sons , 50 N.E.2d 570 (Sup. Ct. 1924), aff’d (mem.) 212 App. Div. (Ohio, 1943); Loverin & Brown Co. v. Tansil , 885, 208 N.Y.S. 857 (2d Dept. 1925); Sucker 102 S.W. 77 (Tenn., 1907); Western Paper State Drill Co. v. Wirtz Bros. , 17 N.D. 313, Bag Co. v. Johnson , 38 S.W. 34 (Tex. Civ. 115 N.W. 844 (1908); International Fuel App. 1896). Service Corp. v. Stearns , 304 Pa. 157, 155 Atl.

164 Sales

The decisions to the contrary maining in the parent until sale, 8 usually involve some additional where the commission merchants intrastate activities. 6 Where it can themselves made conditional sales be shown that the factor or com- to the ultimate customers, 9 and mission merchant served others in where the consignor established the same capacity, there is even the conditions and prices of the less likelihood that qualification ultimate sale. 10 will be required. 7 A shipment on consignment The general rule that qualifica- may be made directly to a custom- tion will not be required has been er in the foreign state on approval, applied where the foreign corpora- title remaining in the foreign cor- tion shipped goods on consignment poration until the sale is complet- to a wholly owned subsidiary un- ed. It would appear from the der a factor’s agreement, title re- decisions that the fact that the shipment was made on approval does not have the effect of remov- ing the sale from interstate com- 285 (1931); Stein Double Cushion Tire Co. v. merce. 11 When qualification is Wm. T. Fulton Co. , 159 S.W. 1013 (Tex. Civ. App. 1913). required, it is because of additional 6. Clark v. J.R. Watkins Medical Co. , 115 considerations which take the Ark. 166, 171 S.W. 136 (1914); J.R. Watkins transaction out of interstate com- Medical Co. v. Williams , 124 Ark. 539, 187 merce. 12 S.W. 653 (1916); Tennessee Packing & Provi- sion Co. v. Fitzgerald , 140 Ill. App. 430 (1908); Elliott v. Parlin & Orendorff Co. , 81 P. 500 (Kan., 1905); Commonwealth v. Parlin & Orendorff Co. , 82 S.W. 791 (Ky. Ct. App. 8. Opinion of the Atty. Gen. of Maryland, 1904); Dominion Fertilizer Co. v. White , 96 1929, 140 A.G. 82. A. 1069 (Me. 1916); E.A. Lange Medical Co. 9. Chase-Hackley Piano Co. v. Griffen , v. Brace , 186 Mich. 453, 152 N.W. 1026 149 N.Y.S. 998 (Sup. Ct., App. Term, 1st (1915); Thomas Mfg. Co. v. Knapp , 101 Minn. Dept. 1914); Opinion of the Atty. Gen. of 432, 112 N.W. 989 (1907); Farrand Co. v. North Carolina, March 26, 1925. Walker , 169 Mo. App. 602, 155 S.W. 68 10. Southwest General Electric Co. v. (1913); Wilson-Moline Buggy Co. v. Priebe , Nunn Electric Co. , 283 S.W. 781 (Tex. 100 S.W. 558 (Mo. App. 1907); Bailey v. Comm’n App.1926). Parry Mfg. Co. , 158 P. 581 (Okla. 1916); Rufo 11. Smith & Fay v. Montgomery Ward & v. Bastian-Blessing Co. , 405 Pa. 123, 173 Co. , 96 So. 231 (Ala., 1923); Wolff Dryer Co. A.2d 123 (Pa., 1961). v. Bigler , 192 Pa. St. 466, 43 A. 1092 (1899); 7. National Pumps Corp. v. Bruning , 1 American Slicing Machine Co. v. Jaworski , So.2d 320 (La. App. 1941); Schwarz v. Sar- 179 Wis. 634, 192 N.W. 50 (1923). gent , 197 N.Y.S. 216 (Sup. Ct., App. Term, 12. Dalton Adding Machine Co. v. Com- 1st Dept. 1914); Eagle Mfg. Co. v. Arkell & monwealth , 88 S.E. 167 (Va., 1916), aff’d 246 Douglas, Inc ., 197 App. Div. 788, 189 N.Y.S. U.S. 498, 38 S.Ct. 361 (1918); Indiana Road 140 (1st Dept. 1921), aff’d 234 N.Y. 573, 138 Machine Co. v. Town of Lake , 149 Wis. 541, N.E. 451 (1922). 136 N.W. 178 (1912).

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Goods may be consigned to an Missouri distributor, the test that independent dealer who purchases controls the fact issue of ‘transact- the goods at that time and later ing business’ is . . . whether the sells them. It is clear that this is a distributor has a ‘bona fide and completed sale to an independent independent status and operation’ dealer with the foreign corporation and is not the ‘alter ego or servant’ exercising no control over the of the foreign supplier.” 14 In one dealer’s subsequent activities and case, an Idaho corporation deliv- qualification is not required. 13 A ered seed on consignment to a Missouri court stated that “In the Washington company. The Wash- context of foreign supplier- ington Court of Appeals noted that, while the corporation had numer- 13. Ranch House Supply Corp. v. Van ous contacts with the Washington Slyke , 91 Ariz. 177, 370 P.2d 661 (1962); company, it neither controlled its Shores-Mueller Co. v. Palmer , 216 S.W. 295 sales nor had any direct contractual (Ark. 1919); Geer Company v. District Court Tenth Judicial Dist ., 469 P.2d 734 (Colo., or common law agency relation- 1970); Lawson Products, Inc. v. Tifco Indus- ship with it. The court noted that tries, Inc. , 660 F.Supp. 892 (M.D. Fla. 1987); the relationship between the con- Budget Premium Co. v. Motor Ways, Inc. , 400 N.W.2d 60 (Iowa App. 1986); J.R. Watkins signor and consignee did not create Co. v. Waldo , 230 P. 1051 (Kan., 1924); Three the type of agency that constitutes States Buggy & Implement Co. of Cairo, Ill. v. doing business for the purposes of Commonwealth , 32 Ky. Law Rep. 385, 105 the qualification requirement. 15 S.W. 971 (1907); J.R. Watkins Co. v. Goudeau , 63 S.2d 161 (La. App. 1953); Bank In another case, a foreign corpo- of America Nat’l Trust & Savings Ass’n v. ration was held not to be doing Lima , 103 F.Supp. 916 (D. Mass. 1952); W.T. intrastate business in Missouri Rawleigh Co. v. Trerice , 224 Mich. 420, 195 N.W. 79 (1923); Defender Auto-Lock Co. v. even though it retained a security W.H. Schmelzel Co. , 157 Minn. 285, 196 interest in the goods after it sold N.W. 263 (1923); J.R. Watkins Co. v. Flynt , them to a Missouri distributor and 220 Miss. 871, 72 So.2d 195 (1954); General Excavator Co. v. Emory , 40 S.W.2d 490 (Mo. retained contractual authority to app. 1931); Minnehoma Financial Company v. control sales terms and prices, Van Oosten , 198 F.Supp. 200 (D. Mont. manner of display, and product 1961); Levine v. Wallitzer , 130 N.Y.S.2d 346 servicing and storage. The corpora- (Sup. Ct. 1953); J.R. Watkins Medical Co. of Winona, Minn. v. Coombes , 166 P. 1072 tion also agreed to advertise the (Okla. 1917); Pharmaceuticals, Inc. v. Hess goods and retained contractual Brothers, Inc. , 24 Pa. Dist. & Co. Repts. 2d 299 (1960); State v. W.T. Rawleigh Co. , 174 S.E. 385 (S.C., 1934); Item Co., Ltd. v. Munn , 14. VBM Corporation v. Marvel Enter- 293 S.W. 670 (Tex. Civ. App. 1927); Stand- prises, Inc. , 842 S.W.2d 176, 181 (Mo. App. ard Sewing Equipment Corp. v. Motor Spe- W.D. 1992). cialty, Inc. , 263 Wis. 467, 57 N.W.2d 706 15. Green Thumb, Inc. v. Tiegs , 726 P.2d (1953). 1024 (Wash. App. 1986).

166 Sales authority to review the distributor’s Show Rooms performance and inspect its finan- A foreign corporation which cial records. The court held that the maintains a show room for exhibit- distributor was not the alter ego or ing its goods in a state in order to servant of the foreign corporation promote orders will not ordinarily and had a bona fide independent be required to qualify if it carries status and operation. Therefore, it on no other intrastate activity. 1 was a commission agent and was The Ohio statute provides that not simply carrying on the suppli- “corporations engaged in this state er’s business in the state. 16 In solely in interstate commerce, in- Georgia, a Connecticut corporation cluding the . . . demonstration of was found not to be doing in- machinery or equipment sold by trastate business where it sold them in interstate commerce . . . products through an independent are not required to qualify.” Thus, dealer, requiring out-of-state ac- an Ohio court held that a foreign ceptance of purchase orders. 17 corporation that leased equip- On the other hand, a Rhode Is- ment in Ohio was not doing busi- land court held that a foreign cor- ness in the state by virtue of having poration that consigned goods to a local office for demonstration an independent dealer was required purposes. 2 to qualify because it sent its em- If, however, additional activities ployees into the state to solicit are carried on in the state, such as orders. 18 Where a foreign corpora- the sale and delivery of the display tion’s sole employee had been goods to local customers, qualifi- coming to North Carolina for over cation may be required. 3 30 years, each time bringing merchandise which he sold or con- Solicitation signed to jewelry stores, and where the sales were finalized in North Several states have adopted Sec- Carolina, the foreign corporation tion 106 (f) of the Model Business was doing business in North Caro- lina. 19 1. Larkin Co. v. Commonwealth , 172 Ky. 106, 189 S.W. 3 (1916); Storwal Intern., Inc. v. Thom Rock Realty Co., L.P. , 784 F.Supp. 16. American Trailers, Inc. v. Curry , 621 1141 (S.D.N.Y. 1992); Eastman v. Tiger F.2d 918 (8th Cir. [Mo.] 1980). Vehicle Co. , 195 S.W. 336 (Tex. Civ. App. 17. Al & Dick, Inc. v. Cuisinarts, Inc. , 528 1917). F.Supp. 633 (N.D. Ga. 1981). 2. Saeilo Machinery, Inc. v. Myers , 489 18. Star Crest Baking Co., Inc. v. Can- N.E.2d 1083 (Ohio Com. Pl. 1985). gemi , 178 A.2d 299 (R.I., 1962). 3. Dalton Adding Machine Co. v. Com- 19. Harold Lang Jewelers, Inc. v. Johnson, monwealth , 246 U.S. 498, 38 S.Ct. 361 576 S.E.2d 360 (N.C. App. 2003). (1918).

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Corporation Act which excludes circulars, catalogs or other forms of from the definition of doing busi- advertising, accepting those orders ness “soliciting or procuring or- outside of this state and filling them ders, whether by mail or through by shipping goods into this state.” employees or agents or otherwise, Delaware and Oklahoma do not where such orders require ac- require qualification of a foreign ceptance without this state before corporation “[i]f it employs sales- becoming binding contracts.” Oth- men, either resident or traveling, to ers have adopted the substantially solicit orders in this State, either by similar Section 15.01(b)(6) of the display of samples or otherwise Revised Model Act), or a similar (whether or not maintaining sales provision. These states include: offices in this State), all orders Alaska, Arizona, Arkansas, Cali- being subject to approval at the fornia, Colorado, Connecticut, Dis- offices of the corporation without trict of Columbia, Florida, Hawaii, this State, and all goods applicable Idaho, Illinois, Indiana, Iowa, Kan- to the orders being shipped in pur- sas, Kentucky, Maine, Massachu- suance thereof from without this setts, Michigan, Mississippi, State to the vendee or to the seller Montana, Nebraska, New Hamp- or his agent for delivery to the shire, New Mexico, North Caroli- vendee, and if any samples kept na, North Dakota, Oregon, within this State are for display or Pennsylvania, Rhode Island, South advertising purposes only, and no Carolina, South Dakota, Tennes- sales, repairs, or replacements are see, Utah, Vermont, Virginia, made from stock on hand in this Washington, West Virginia, Wis- State . . .” consin and Wyoming. Georgia has Courts generally regard solicita- a similar provision except that the tion as a part of interstate sales and words “and where such contracts thus outside the qualification stat- do not involve any local perfor- utes. However, solicitation is often mance other than delivery and in- only a part of the corporation’s stallation” are added. The operations. When soliciting orders Louisiana statute adds “including is mingled with other activities, all preliminary incidents thereto” such as the taking of orders, the to the Model Act provision. shipment of goods, and advertis- In Nevada, a foreign corporation ing, qualification may be required. is not considered doing business by Where a foreign corporation reason of its “Soliciting or receiv- sends salaried salesmen or sales ing orders outside of this state agents on commission into a state through or in response to letters, to solicit orders for acceptance

168 Sales outside the state, shipping and bill- quired, even if the authority is only ing being done from outside the rarely, or never, exercised. 2 state and payment sent outside the The method of sales, the type of state, the courts have consistently sales agent employed in the state held that the activities are in inter- and the amount of control exer- state commerce and qualification is cised over the sales agent are all not required. 1 However, if the local factors that might take a case out agent has authority to bind the cor- of the ordinary solicitation rule and poration, qualification may be re- require qualification. The recruiting of hostesses for parties at which the foreign corporation’s 1. Swicegood v. Century Factors, Inc. , 280 products were displayed and orders Ala. 37, 189 So.2d 776 (1966); Hargrove Displays, Inc. v. Rohe Scientific Corp. , 316 taken was held by a Connecticut A.2d 330 (D.C. App. 1974); Al & Dick, Inc. v. court to be more than mere solici- Cuisinarts, Inc. , 528 F.Supp. 633 (N.D. Ga. tation. Intrastate business was 1981); Ely & Walker v. Dux-Mixture Hard- ware Co., Inc. , 582 F.Supp. 285 (N.D. Ga. transacted there by agents in the 1982), aff’d on basis of District Court’s opin- state who made and accepted a ion 732 F.2d 821 (11th Cir. 1984); Textile large volume of sales and over Fabrics Corp. v. Roundtree , 39 Ill.2d 122, 233 N.E.2d 376 (1968); Charles Pfizer & Co., Inc. whom the corporation exercised v. Tyndall , 287 So.2d 552 (La. Ct. App. 1973); substantial control. The court Hattiesburg Mfg. Co., Inc. v. Pepe , 140 So.2d looked beyond the corporation’s 449 (La. Ct. App. 1962); G.E.M. Inc. v. agreements with the agents, which Plough, Inc. , 228 Md. 484, 180 A.2d 478 (1962); Premier Industrial Corp. v. designated them as independent Nechamkin , 403 F.Supp. 180 (D. Md. 1977); contractors, to the actual arrange- Vulcan Steam Shovel Co. v. Flanders , 205 F. ments between these agents and 102 (E.D. Mich., 1913); Central Woodwork Inc. v. Steele Supply Company , 358 S.W.2d the corporation. The court’s con- 447 (Mo. App. 1962); Vernon Company v. clusion was that such transactions Reed , 78 N.M. 554, 434 P.2d 376 (1967); require qualification. 3 Manhattan Fuel Co., Inc. v. New England Petroleum Corp. , 422 F.Supp. 797 (S.D.N.Y.) A foreign corporation that solic- 1976); Stafford-Higgins Industries v. Gaytone ited potential customers in Mary- Fabrics, Inc. , 300 F.Supp. 65 (S.D.N.Y. land, accepted orders in Maryland, 1969); Invacare Corp. v. John Nageldinger & did 2% of its total business in Sonc, Inc. , 576 F.Supp. 1542 (E.D.N.Y. 1984); Local Trademarks, Inc. v. Derrow Motor Sales Inc. , 201 N.E.2d 222 (Ohio App. 1963); Carolina Components Corp. v. Brown 2. Materials Research Corp. v. Met Inc. , Wholesale Co., Inc. , 250 S.E.2d 332 (S.C. 64 N.J. 74, 312 A.2d 147 (1973); Brown 1978); Lawyers Cooperative Publishing Com- Fintube Co. v. North Star Coal Co. , 28 Beaver pany v. Kuntz , 440 P.2d 813 (Wash., 1968); Co. (Pa.) L.J. 131 (1967); West-Nesbitt, Inc. v. The House of Stainless, Inc. v. Marshall & Randall , 236 A.2d 676 (Vt., 1967). Ilsley Bank , 75 Wis.2d 264, 249 N.W.2d 561 3. Armor Bronze & Silver Co., Inc. v. (1977). Chittick , 221 F.Supp. 505 (D. Conn. 1963).

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Maryland and made deliveries in holding of meetings and product Maryland was held to be doing demonstrations in the state were intrastate business by a Maryland sufficient to constitute doing busi- court. 4 ness and prevented the unqualified An Alabama corporation sold its foreign corporation from enforcing products in Colorado through in- a contract in the Alabama courts. 6 dependent dealers and a company In another case, a foreign corpora- sales representative who main- tion’s sales were solicited in Ala- tained an office in the state. How- bama by a commissioned non- ever, his territory covered other exclusive sales representative and states as well, and he spent only by a salaried employee who trav- 30% of his time in Colorado. He eled to Alabama to meet with the did no collection work on company representative and to solicit orders accounts, all orders were subject to from a few large customers. All acceptance and payment outside orders were accepted outside the the state, and all merchandise was state. The federal court applying shipped f.o.b. out-of-state factories. Alabama law held that the cor- The federal court held that these poration was not doing intrastate activities were in interstate com- business and did not have to quali- merce and did not require qualifi- fy. 7 cation. 5 A Massachusetts corporation In an Alabama decision, an unli- maintained an office in Georgia for censed foreign corporation selling a sales representative who solicited its products through dealers in the orders for equipment leases that state also had full-time salaried had to be accepted in Massachu- employees in the state who super- setts. The corporation contracted to vised its dealers. Some of the lease 24 truck tractors to a Georgia dealers handled the plaintiff’s corporation. The Georgia Court merchandise exclusively; all were of Appeals held that the corpora- required to pay a percentage of tion was exempt from qualifying gross income to the corporation under the statutory exemption for and to make periodic sales reports. soliciting orders that require ac- These activities together with the ceptance outside the state. 8 In a

6. Marcus v. J.R. Watkins Company , 279 4. J.C. Snavely & Sons, Inc. v. Wheeler , Ala. 584, 188 So.2d 543 (1966). 538 A.2d 324 (Md. App. 1988). 7. Foxco Industries, Ltd. v. Fabric World, 5. Cement Asbestos Products Co. v. Hart- Inc. , 595 F.2d 976 (5th Cir. [Ala.] 1979). ford Accident & Indemnity Co. , 592 F.2d 1144 8. Roberts v. Chancellor Fleet Corpora- (10th Cir. [Colo.] 1979). tion , 354 S.E.2d 628 (Ga. App. 1987).

170 Sales

Maryland case, a foreign corpora- to maintain suit in a Pennsylvania tion that solicited business only court.11 through ads in national magazines A New Jersey court stated that and that had no office, property, “the process of soliciting advertis- bank accounts or employees in ing business from a New Jersey Maryland was not doing business corporation and then placing ads in in Maryland. 9 New Jersey newspapers is an intra- A Pennsylvania court held that state process.” 12 the qualification exception for for- A federal court held that a cor- eign corporations soliciting or pro- poration that sent employees into curing orders did not apply to Alabama to discuss and solicit a corporations that were soliciting contract to supply certain goods charitable donations and not orders did not transact intrastate business for goods. The court also found in Alabama. 13 that even if the exception did ap- In a Georgia case, a foreign cor- ply, it would not apply in this case poration brought suit for a breach because the foreign corporations of contract. The defendant argued did their soliciting by making that because an officer of the cor- phone calls to Pennsylvania resi- poration attended yearly trade dents and therefore their agree- shows in Georgia where he dis- ments did not become final outside played goods and obtained orders, of Pennsylvania. 10 Where a corpo- the corporation was required to ration organized in Dominica as an qualify and therefore could not institution of higher education so- maintain the suit. The Georgia licited students in Pennsylvania Court of Appeals disagreed, noting and maintained business relation- that the corporation’s activities fell ships with several hospitals in the within the exemption for soliciting state to allow its students to serve or procuring orders that require clinical rotations, and where the acceptance outside the state. 14 corporation’s pleadings admitted that it was doing business in Penn- sylvania, it had to qualify in order 11. University of Dominica v. Pennsylva- nia College of Podiatric Medicine , 301 Pa. Super. 68, 446 A.2d 1339 (1982). 12. Davis & Dorand, Inc. v. Patient Care Medical , 506 A.2d 70 (N.J. Super. L. 1985). 9. Yangming Marine Transport Corp. v. 13. Shook & Fletcher Insulation Co. v. Revon Products U.S.A., Inc. , 536 A.2d 633 Panel Systems, Inc. , 784 F.2d 1566 (11th Cir. (Md. 1988). 1986). 10. Commonwealth by Preate v. Events In- 14. Work Clothes Outlet, Inc. v. M & S ternational, Inc. , 585 A.2d 1146 (Pa. Cmwlth. Purchasing , Inc., 372 S.E. 2d 509 (Ga. App. 1991). 1988).

Sales 171

The Alabama courts have stated Specialty Salesmen that their general rule is that “a Specialty salesmen, or mission- single act of business is sufficient ary men, differ from other sales- to bring a foreign corporation with- men in that they are not sent into a in the purview of doing business in state to solicit orders directly, but Alabama, though acts such as . . . to promote or induce orders from soliciting business are generally local dealers to the foreign corpo- not enough to constitute doing ration’s local wholesalers. A 1961 business.” 15 United States Supreme Court Several other cases involving decision on qualification, Eli Lilly the solicitation exception are cited & Co. v. Sav-On Drugs, Inc., 1 below. 16 aroused considerable interest in the activities of these specialty sales-

15. Green Tree Acceptance, Inc. v. men. Blalock , 525 So.2d 1366 (Ala. 1988). See also The plaintiff in that case, one of Allstate Leasing Corp. v. Scroggins , 541 So.2d the largest dealers of pharmaceuti- 17 (Ala. Civ. App. 1989). 16. SGB Construction Service, Inc. v. Ray cal products in the country, distrib- Sumlin Construction Co., Inc. , 644 So.2d 892 uted its products throughout the (Ala. 1994); Bassett v. Hobart Corporation , United States and in foreign coun- 732 S.W.2d 133 (Ark. 1987); Lawson Prod- tries. Its office and principal place ucts, Inc. v. Tifco Industries, Inc. , 660 F.Supp. 892 (M.D. Fla. 1987); Kar Products, Inc. v. of business was in Indiana. Plain- Acker , 217 So.2d 595 (Fla. App. 1969); Imex tiff’s products were not sold direct- Intern., Inc. v. Wires Engineering, 583 S.E.2d ly to the retail trade, but to 117 (Ga. App. 2003); Budget Premium Co. v. Motorways, Inc. , 400 N.W.2d 60 (Iowa app. wholesale distributors who, in turn, 1986); Cinder Products Corp. v. Schena sold the products to the retail trade. Constr. Co. Inc. , 492 N.E.2d 744 (Mass. App. Plaintiff owned no real estate and 1986); Bailey v. Georgia Cotton Goods Co. , 543 So.2d 180 (Miss. 1989); Massey- maintained no warehouse in New Ferguson Credit Corporation v. Black , 764 Jersey. It did have an office in New S.W.2d 137 (Mo. App. 1989); Kayser-Roth Jersey with its name on the door Company v. Holmes , 693 S.W.2d 907 (Mo. and on the tenant registry in the App. 1987); Sierra Glass & Mirror v. Viking Industries, Inc. , 808 P.2d 512 (Nev. 1991); lobby of the building, and it was Bayonne Block Co., Inc. v. Porco , 654 listed in the local telephone direc- N.Y.S.2d 961 (N.Y. City Civ. Ct. 1996); Maro tory. The lessee of the office was Leather Co. v. Argentinas , 617 N.Y.S.2d 617 (Sup. 1994); Expense Reduction Services, Inc. plaintiff’s district manager in v. Jonathan Woodner Co., Inc. , 720 F.Supp. charge of its marketing division for 262 (S.D.N.Y. 1989); Commonwealth by the area. There was a secretary in Preate v. Watson & Hughey Co. , 563 A.2d 1276 (Pa. Cmwlth. 1989); Waterworks Indus- tries Inc. v. Aplex Industries Inc. , 802 P.2d 894 (Wyo. 1990). 1. 366 U.S. 276, 81 S.Ct. 1316 (1961).

172 Sales the office, as well as 18 “detail- Lilly was doing intrastate business. men” under the plaintiff’s district “To hold under the facts above manager’s supervision. recited that plaintiff is not doing The detailmen, many of whom business in New Jersey is to com- resided in New Jersey, were paid pletely ignore reality.” The Court on a salary basis, but received no pointed out that the eighteen commissions. Their functions were detailmen, “working out of a big promotional and informational, office in Newark, New Jersey, with including visiting retail pharma- Lilly’s name on the door and in the cists, physicians and hospitals in lobby of the building, and with order to acquaint them with the Lilly’s district manager and secre- products of the plaintiff, examining tary in charge, have been regularly the inventories of retailers and engaged in work for Lilly which making recommendations relating relates directly to the intrastate to supply, and distributing promo- aspects of the sale of Lilly’s prod- tional material. As a service to the ucts. These eighteen ‘detailmen’ retailer, a detailman might receive have been traveling throughout the an order for plaintiff’s products for state of New Jersey promoting the transmittal to a local wholesaler. sales of Lilly’s products, not to the All of plaintiff’s Fair Trade con- wholesalers, Lilly’s interstate cus- tracts, however, and all orders tomers, but to the physicians, hos- from the wholesalers for its prod- pitals and retailers who buy those ucts, were subject to acceptance in products in intrastate commerce Indiana. from wholesalers.” Mr. Justice Black, delivering the The fact that the “inducing” of opinion of the Court, reaffirmed at intrastate sales engaged in by Lilly the outset the immunity of foreign was primarily promotional and not corporations engaged exclusively actual solicitation of orders, the in interstate commerce from state Court concluded, went to the na- qualification requirements: “It is ture of the intrastate business and well established that New Jersey not to the question of whether or cannot require Lilly to get a certifi- not intrastate business was being cate of authority to do business carried on. Thus, a foreign cor- in the State if its participation in poration which engages in promo- this trade is limited to wholly inter- tional activities, “inducing” pur- state sales to New Jersey wholesal- chases of its products indirectly ers.” from its wholesalers, may be re- An examination of the facts, quired to qualify even though all however, convinced the Court that its own sales are interstate.

Sales 173

A Maryland case held that mis- has been held not to subject the sionary men were not doing busi- corporation to the requirements of ness in the state for purposes of qualification. 4 qualification. 2 The court stated that A New Jersey court found that a Lilly “would permit Maryland foreign corporation that sent repre- broader jurisdictional limits had it sentatives into New Jersey and chosen to exercise its constitutional offered its services to a New Jersey right to the maximum, but it was corporation was doing intrastate not required to do so,” and that in business. The court held that the the earlier case “a more restrictive case was analogous to Lilly and view of what constitutes intrastate therefore the foreign corporation business was taken.” A New York could not maintain an action. 5 court refused to allow a Pennsyl- vania corporation to bring suit until it qualified. It sold its products in Subscription Sales New York through independent distributors but also maintained a The fact that merchandise is salesman in the state who sold its sold on a continuing subscription products and serviced accounts, basis would not appear to remove and who “also regularly called the sale from interstate commerce. upon major ultimate users of pa- As long as all of the other elements pers to promote specification of of an interstate sale are present, plaintiff’s products when they or- i.e., solicitation of orders in the dered . . .” Relying on Lilly , the state, acceptance and payment court held that this constituted do- made outside the state, and deliv- ing intrastate business and required ery of the product from without the qualification. 3 The activity of rep- state, the fact that the product is resentatives on commission, sent sold on a continuing subscription into a state merely to estimate the would not require qualification. 1 needs and demands for the foreign corporation’s products within the state, but who made no direct sales, 3. Paper Mfrs. Co. v. Ris Paper Co., Inc. , 86 Misc.2d 95, 381 N.Y.S.2d 959 (N.Y.C. Civ. Ct. 1976). 4. Mays v. Mansaver Industries, Inc. , 196 F.Supp. 467 (E.D. Pa. 1961). 5. Davis & Dorant, Inc. v. Patient Medical 2. Champion Spark Plug Company v. T.G. Care , 506 A.2d 70 (N.J. Super. L. 1985). Stores, Inc. , 356 F.2d 462 (4th Cir. [Md.] 1. L.D. Powell Co. v. Rountree , 247 S.W. 1966),aff’d in part and revs’d in part 239 389 (Ark. 1923); Traphagen v. Lindsay , 95 F.Supp. 941 (D.Md., 1965). Neb. 832, 146 N.W. 1026 (1914).

174 Sales

Selling Over the Internet the state before becoming valid Many corporation s sell their agreements, whether the seller products over the Internet. There installed, inspected, or repaired its is little statutory or case law ad- products in the state after the sale, dressing the issue of whether sell- whether it maintained a stock of ing over the Internet constitutes goods within the state, or main- doing business for qualification tained a bank account, office or purposes. However , the fact that employees in the state. a sale was made over the Internet A physical presence is not re- rather than by telephone, mailed quired to consider a corporation catalogs, or in a brick and mortar doing business. A transaction that store is not determinative, in and would otherwise be considered of itself, of whether the seller was intrastate does not become inter- doing business in a state. “Doing state because the sale was made business” has to do with the over the Internet. Thus, for exam- foreign corporation ’s activities in ple, a foreign corporation entering a state. It asks what the corpora- into a series of contracts with a tion is doing, not how it is doing state citizen that required the cor- it. poration to perform local acts that In determining if an Internet were not merely incidental to the seller was doing business, each interstate nature of the transaction case must be decided on its own could be considered doing busi- facts, merits, and circumstances. ness even though the sales were The totality of the seller’s activi- completed over the Internet. ties must be considered. Courts The statutory exemptions may are likely to look at factors such also come into play. For example, as how many sales were made to a single sale may be exempted as state residents, what percentage of an isolated transaction. The ex- the corporation ’s overall sales or emption for transactions in inter- revenues were derived from the state commerce will also be state, whether contracts had to be relevant. approved by the seller outside of

DOING BUSINESS IN

Canada of this decision, federal companies do not have to be “licensed” before Corporations are required to doing business in any of the prov- “qualify” to do business in the Ca- inces. nadian provinces, although the A federal company, however, procedures for qualification differ may be required to “register” in a somewhat from those used in the province. The Privy Council, in the states. In some provinces, non- Great West Saddlery case, indicat- Canadian corporations are subject ed that a province could properly to different qualification require- require a federal company, within a ments than Canadian foreign cor- reasonable time after commencing porations. to carry on business in the prov- Corporations organized under ince, to register its name and other the Canada Corporation Act or particulars in the provincial regis- Canada Business Corporation Act ter and to pay fees not exceeding (referred to as federal companies), those payable by provincial com- cannot be forced to qualify in a panies, and could impose a penalty province in the ordinary sense. The for failure to comply. This type of Privy Council, the highest court to registration is applied to federal which appeals from Canadian companies in the provinces today. courts were then taken, ruled in In addition, federal companies 1921, in Great West Saddlery Co., entering a province become subject Ltd. v. The King ,1 that the Provinc- to the general laws of the province, es of Ontario, Manitoba and including those relating to mort- Saskatchewan could not, by legis- main, i.e., the holding of real prop- lation, prohibit a federal company erty. 2 from carrying on business without Generally, corporations orga- first obtaining a license. The court nized in one province or territory indicated that such legislation was must qualify before doing business invalid because it encroached upon in another province or territory. the prerogatives of the Canadian However, some provinces do not parliament. The companies in- require corporations organized in volved could not be penalized for certain other provinces to qualify. carrying on business and exercis- For example, under Ontario law, ing their powers in these provinces without being licensed. As a result 2. John Deere Plow Co. v. Wharton , 18 1. 58 Dom. L.R. (1921). Dom. L.R. 353 (1915).

175 176 Canada

corporations organized in the other of the U.S. Supreme Court and of Canadian provinces and territories other federal courts, and particular- are not required to qualify to do ly decisions of the California state business in Ontario. 3 Non- courts. The Codes of Guam were Canadian corporations must quali- patterned after the California fy, however. Codes, and California decisions The statutes enacted by the Ca- interpreting comparable provisions nadian provinces and territories are authoritative in Guam. 1 dealing with doing business are set forth in this book and should be Puerto Rico examined before engaging in any Puerto Rico has a status “inter- activities in Canada. In addition to mediary between the territorial the statutory definitions, the re- status and statehood.” 1 The Gen- ported cases on what constitutes eral Corporation Law of Puerto doing business should be examined Rico requires all foreign corpora- before engaging in activities in tions to qualify before doing busi- Canada. ness.

The statutory doing business Guam “definition” in Puerto Rico is set Guam has the status of an unin- forth under the heading “Statutory corporated territory of the United Doing Business Definitions.” States and is governed under an The decisions of the U.S. state Act of Congress known as the Or- and federal courts are persuasive ganic Act of Guam. Under Sec. with Puerto Rico’s courts. There 407 of the Civil Code of Guam, no appears to be a line of decisions foreign corporation is permitted to indicating that the Commerce “transact business in Guam or Clause does not extend to Puerto maintain by itself or assignee any Rico, 2 and these should be consid- suit for the recovery of any debt, ered as a general background to claim or demand whatever, unless it has obtained a foreign corporation license and certificate of registration . . .” 1. U.S. v. Johnson , 181 F.2d 577 (1950). In deciding what constitutes do- 1. Mora v. Torres , 113 F.Supp. 309, 314, ing business, Guam’s courts will aff’d sub nom. Mora v. Mejias , 206 F.2d 377 give consideration to the decisions (1953). 2. Lugo v. Suazo , 59 F.2d 386 (1932); Buscaglia v. Ballester , 162 F.2d 805; Mora v. 3. Extra Provincial Corporations Act, S.O. Torres , 113 F.Supp. 309, aff’d sub nom. Mora 1990, c. E.27, Sec. 2, 4. v. Mejias , 206 F.2d 377 (1953).

The Virgin Islands 177

doing business questions in Puerto United States District Court and of Rico. an insular possession or territorial court. There are two judicial divi- sions. Appeals from the District Court lie to the United States Court The Virgin Islands of Appeals for the Third Circuit The United States Virgin Islands (Philadelphia) and then to the U.S. has the status of an unorganized Supreme Court. For this reason, but incorporated territory of the Supreme Court decisions relating United States, and is governed un- to “doing business” apply, as far as der an Act of Congress known as pertinent, to doing business ques- the Revised Organic Act of the tions in the Virgin Islands. Virgin Islands. (Public Law No. The Virgin Islands corporation 517, 83rd Congress, 68 Stat. 497) law’s doing business provision is The Virgin Islands District set forth under the heading “Statu- Court has the dual jurisdiction of a tory Doing Business Definitions.”

PERSONAL JURISDICTION

A state may not subject a un- that phrases in brackets are option- qualified foreign corporation to the al or alternative language and that jurisdiction of its courts unless “person” is defined to include cor- there is a statutory basis for assert- porations.) ing jurisdiction and the assertion §1.03. [Personal Jurisdiction satisfies the requirements of due Based Upon Conduct] process. “(a) A court may exercise per- In order to assert jurisdiction sonal jurisdiction over a person, over unqualified foreign corpora- who acts directly or by an agent, as tions, all states and the District of to a [cause of action] [claim for Columbia have passed long arm relief] arising from the person’s: statutes to define the activities “(1) transacting any business in which will support jurisdiction. In this state; every state, a nonresident corpora- “(2) contracting to supply ser- tion will be amenable to suit in a vices or things in this state; state where it is “transacting busi- “(3) causing tortious injury by ness.” Generally, it is easier to an act or omission in this state; prove that a corporation is transact- “(4) causing tortious injury in ing business such that it is subject this state by an act or omission to personal jurisdiction than it is to outside this state if he regularly show that the corporation is trans- does or solicits business, or engag- acting business such that it is re- es in any other persistent course of quired to qualify. Therefore, a conduct, or derives substantial rev- foreign corporation may be re- enue from goods used or con- quired to defend a suit in a state sumed or services rendered, in this where it would not be required to state; [or] qualify to do business. “(5) having an interest in, using, Long arm provisions vary from or possessing real property in this state to state. No single statute can state [; or illustrate their wide variety, but the “(6) contracting to insure any Uniform Interstate and Internation- person, property, or risk located al Procedure Act 1 contains a typi- within this state at the time of con- cal long arm section. (Please note tracting].” Some states have much briefer 1. 13 U.L.A. 355 ( This Act was with- long arm provisions. For example, drawn from recommendation by the Commis- sioners. Nevertheless, some states have California’s states in its entirety adopted this provision.) that: “A court of this state may

179 180 Personal Jurisdiction

exercise jurisdiction on any basis In Hanson v. Denckla ,4 the Su- not inconsistent with the Constitu- preme Court gave some indication tion of this state or of the United of the limits of long arm jurisdic- States.” tion. There, a Pennsylvania resi- Once a court determines that ju- dent established a trust with a risdiction exists under the statute, it Delaware trust company as trustee. will turn to the question of whether She later moved to Florida, and the assertion of jurisdiction would after her death the residuary lega- violate the due process clause of tees sued the trustee in Florida. the Fourteenth Amendment. In the The Delaware trust company had landmark case of International no office or agents in Florida and Shoe Co. v. State of Washington ,2 had no other significant relation- the U.S. Supreme Court ruled that ships with the state. The Court a state court could exercise in ruled that Florida did not have in personam jurisdiction over a for- personam jurisdiction over the eign corporation which had “cer- trust. “The unilateral activity of tain minimum contacts with [the those who claim some relationship forum] such that the maintenance with a nonresident defendant can- of suit does not offend traditional not satisfy the requirement of con- notions of fair play and substantial tact with the forum State . . . [I]t is justice.” essential in each case that there be In Travelers Health Association some act by which the defendant v. Virgi nia, 3 the Supreme Court purposefully avails itself of con- held that Virginia had jurisdiction ducting activities within the forum over a Nebraska corporation that State, thus invoking the benefits sold health insurance contracts to and protection of its laws.” Virginia residents through the The delimiting process contin- mail. The Court emphasized that ued in the 1980 decision in World- 5 forcing the Virginia policyholders Wide Volkswagen v. Woodson . In to bring suit in Nebraska on rela- that case, a car purchased in New tively small claims would have York was involved in an accident been unfair. “The Due Process in Oklahoma, and the owners Clause does not forbid a state to brought a products liability suit in protect its citizens from such injus- Oklahoma against the New York tice . . .” regional distributor and the dealer

2. 326 U.S. 310 (1945). 4. 357 U.S. 235 (1958). 3. 339 U.S. 643 (1950). 5. 444 U.S. 286 (1980).

Personal Jurisdiction 181

from which they had bought the Since World Wide Volkswagen , car. They asserted long arm juris- the Supreme Court has decided a diction in Oklahoma on the ground number of cases where the Court that defendants had allegedly continued attempting to define the caused injury in the state by acts or limits of personal jurisdiction. 6 omissions outside the state, and In Keeton v. Hustler Magazine, that defendants “derive[d] substan- Inc. ,7 a New York resident brought tial revenue from goods used or a suit in New Hampshire against consumed or services rendered, in Hustler Magazine, an Ohio corpo- this state . . .” The Supreme Court ration. Hustler’s only connection rejected the argument that due pro- with New Hampshire was that a cess requirements were satisfied by small proportion of the total num- the foresee-ability that a car sold in ber of its magazines was sold New York would cause injury in there. However, the Court held that Oklahoma, because otherwise Hustler regularly and purposefully “[e]very seller of chattels would in circulated its magazine in New effect appoint the chattel his agent Hampshire, thereby exploiting for service of process.” Rather, the New Hampshire’s market, so that Court held that the foreseeability it must anticipate being haled into relevant to due process was wheth- court there to defend an action er “the defendant’s conduct and based on the magazine’s contents. connection with the forum State In Burger King v. Rudzewicz ,8 are such that he should reasonably the defendant entered into a fran- anticipate being haled into court

there.” The Court found no evi- 6. See Daimler AG v. Bauman , 134 dence that defendants sought to S.Ct. 746 (2014); Goodyear Dunlop Tires serve the Oklahoma market or ex- Operations, S.A. v. Brown, 131 S. Ct. 2846 (2011); J. McIntyre Machinery, Ltd. v. pected their products to be pur- Nicastro, 131 S.Ct. 2780 (2011); Asahi Metal chased by customers there. It stated Indus. Co. v. Superior Ct. , 480 U.S. 102 that neither plaintiffs’ “unilateral (1987); Phillips Petroluem Co. v. Shutts , 472 activity” in driving to Oklahoma U.S. 797 (1985); Burger King Corp. v. Rudzewicz , 471 U.S. 462 (1985); Helicopteros nor the “marginal revenues [de- Nacionales de Colombia, S.A. v. Hall , 466 fendants] may receive, by virtue of U.S. 408 (1984); Calder v. Jones , 465 U.S. the fact that their products are ca- 783 (1984); Keeton v. Hustler Magazine, Inc. , 465 U.S. 770 (1984); Insurance Corp. of pable of use in Oklahoma” could Ireland v. Compagnie de Bauxites de Guinee , satisfy the requirement of contact 456 U.S. 694 (1982); Rush v. Savchuk , 444 between the defendants and the U.S. 320 (1980). 7. 465 U.S. 770 (1984). forum state. 8. 471 U.S. 462 (1985).

182 Personal Jurisdiction

chise agreement with a Florida tire valve assemblies in Japan, its corporation. Although the defend- sales to the Taiwanese company ant was never physically present in took place in Japan, and the Tai- Florida throughout the negotiation wanese company made only 20% period, the Court held that Florida of its total sales in California. could assert jurisdiction over the Therefore, California’s interests in defendant in a suit for breach of the case were slight while the bur- the franchise agreement. The Court den of forcing a Japanese company noted that the defendant created to come to California and defend a the relationship with the forum case in a foreign judicial system state and “where the contacts [with was great. the forum] proximately result from In J. McIntyre Machinery, Ltd. actions by the defendant him- v. Nicastro ,10 a New Jersey court self . . . he manifestly has availed held it could exercise jurisdiction himself of the privilege of doing over a foreign manufacturer so business there.” long as the manufacturer knew or Asahi Metal Industry Co., Ltd. v. reasonably should have known that Superior Court of California 9 be- its products are distributed through gan as a products liability suit a nationwide distribution system brought in California against a that might lead to sales in any of Taiwanese company that manufac- the States. Applying this test, the tured tire tubes. The Taiwanese court concluded that the defendant company filed a cross-complaint corporation was subject to jurisdic- against Asahi, a Japanese corporation in New Jersey, even though at tion that manufactured tire valve no time had it advertised in, sent assemblies and sold them to the goods to, or in any relevant sense Taiwanese company. The products targeted the State. The Supreme liability suit was settled as to all Court reversed, holding that be- parties except for the cross- cause the defendant corporation complaint against Asahi. Asahi never engaged in any activities in claimed that the California court New Jersey that revealed an intent lacked personal jurisdiction. The to invoke or benefit from the pro- Supreme Court found that by bal- tection of that particular State’s ancing the burdens to Asahi and laws, New Jersey was without the interests of the forum state, power to adjudge the company's jurisdiction would be unreasonable rights and liabilities, and its exer- and unfair. Asahi manufactured its

9. 480 U.S. 102 (1987). 10 131 S.Ct. 2780 (2011).

Personal Jurisdiction 183

cise of jurisdiction would violate “continuous and systematic” affili- due process. ation necessary to empower North In Goodyear Dunlop Tires Op- Carolina courts to entertain claims erations, S.A. v. Brown ,11 a suit unrelated to the foreign corpora- was filed in North Carolina arising tion's contacts with the State. out of a bus accident that occurred In Daimler AG v. Bauman,12 the in France. The tire alleged to have Court expanded upon in decision caused the accident was manufac- in Goodyear Dunlop Tires Opera- tured and sold abroad by the for- tions, S.A. v. Brown . In holding eign corporate defendants. Some of that California did not have general their tires, though made abroad, jurisdiction over a Germany com- had reached North Carolina pany, the Court stated that the in- through “the stream of commerce”. quiry is whether the foreign The North Carolina court held that corporation’s affiliations with the this was sufficient to allow North forum State are so continuous and Carolina courts to exercise general systematic as to render it essential- jurisdiction over the foreign corpo- ly at home in the forum state. The rations. The Supreme Court re- Court then stated that it would only versed and held that a connection be in an exceptional case that a so limited between the forum and corporation’s operations in a forum the foreign corporation was an other than its place of incorporation inadequate basis for the exercise of or its principal place of business general jurisdiction. Such a con- would be so substantial as to render nection does not establish the the corporation at home there.

11. 131 S. Ct. 2846 (2011). 12. 134 S.Ct. 746 (2014).

LIMITED LIABILITY COMPANIES DOING BUSINESS — LIMITED LIABILITY COMPANIES

A limited liability company that Doing business definitions —no does business outside of its state statutory provision. of formation may also be required Case law —CS Assets, LLC v. to qualify to do business in that H&H Real Estate Dev., Inc., 353 state. Doing business without au- F.Supp.2d 1187 (N.D. Ala. 2005). thority will subject the LLC to statutory penalties. Most states have statutory provisions requir- Alaska ing qualification before the trans- Penalties —Sec. 10.50.700, action of intrastate business and Alaska Statutes. many have provisions listing ac- Doing business definitions — tivities that do not constitute do- Sec. 10.50.720, Alaska Statutes. ing business. These statutes tend to be similar to those found in the Arizona corporation laws. As with corporation s, the issue Penalties —Sec. 29-809, Arizona of whether an LLC was doing Revised Statutes. business without authority fre- Doing business definitions — quently arises when the LLC at- Sec. 29-809, Arizona Revised tempts to bring or maintain an Statutes. action in the foreign state. These cases have resulted in a growing Arkansas body of case law precedent. Penalties —Sec. 4-32-1007, Ar- Below are the statutory cita- kansas Code of 1987 Annotated. tions for each jurisdiction dealing Doing business definitions — with the penalties for a failure to Sec. 4-32-1008, Arkansas Code comply with the qualification re- of 1987 Annotated. quirement and the doing business definitions, as well as cites to rel- California evant case law where available. Penalties —Sec. 17708.07, Cali- Alabama fornia Corporations Code. Doing business definitions — Penalties —Sec. 10A-1-7.21, Code Sec. 17708.03, California Corpo- of Alabama. rations Code.

185 186 Limited Liability Companies Doing Business

Case law—Hurst v. Buczek En- Doing business definitions— terprises, LLC, 870 F.Supp.2d Sec. 29-105.05, District of Co- 810 (N.D. Cal. 2012); Conseco lumbia Code. Marketing, LLC v. IFA and In- surance Services, Inc., 2013 Florida Cal.App. LEXIS 946. Penalties—Sec. 605.0904, Flor-

ida Statutes Annotated. Colorado Doing business definitions— Penalties—Sec. 7-90-802, Colo- Sec. 605.0905, Florida Statutes rado Revised Statutes. Annotated. Doing business definitions— Sec. 7-90-801, Colorado Revised Georgia Statutes. Penalties—Sec. 14-11-711, Code of Georgia Annotated. Connecticut Doing business definitions— Sec. 14-11-702, Code of Georgia Penalties—Sec. 34-233, Con- Annotated. necticut General Statutes. Doing business definitions— Hawaii Sec. 34-233, Connecticut General Statutes. Penalties—Sec. 428-1008, Ha- Case law—Williamsburg Devel- waii Revised Statutes. opers LLC v. J. Jill LLC, 2010 Doing business definitions— Conn. Super. LEXIS 590; N. Star Sec. 428-1003, Hawaii Revised Capital Acquisition, LLC v. Mu- Statutes. rillo, 2008 Conn. Super. LEXIS Case law—McCarty v. GCP 2878. Management, LLC, 2012 U.S. App. LEXIS 22885

Delaware Idaho Penalties—Title 6, Sec. 18-907, Delaware Code. Penalties—Sec. 30-21-502, Ida- Doing business definitions—Ti- ho Code. tle 6, Sec. 18-912, Delaware Doing business definitions— Code. Sec. 30-21-505, Idaho Code.

Illinois District of Columbia Penalties—Ch. 805, Sec. 180/45- Penalties—Sec. 29-105.02, Dis- 45, Illinois Compiled Statutes trict of Columbia Code. Annotated.

Limited Liability Companies Doing Business 187

Doing business definitions —Ch. Doing business definitions — 805, Sec. 180/45-47, Illinois Sec. 14A.9-010, Kentucky Re- Compiled Statutes Annotated. vised Statutes. Case law —Rice v. Palisades Case law —Modern Motors, LLC Acquisition XVI, LLC, 2008 U.S. v. Yelder , 2010 Ky. App. Unpub. Dist. LEXIS 13951 (N.D. Ill.); LEXIS 96. Highway Traffic Safety Assocs., LLC v. Gomien & Harrop , 857 N.E.2d 877 (Ill. App. Ct. 2006). Louisiana Penalties —Sec. 12:1354, Loui- Indiana siana Statutes Annotated. Doing business definitions — Penalties —Sec. 23-18-11-3. Sec. 12:1343, Louisiana Statutes Doing business definitions — Annotated. Sec. 23-18-11-2.

Maine Iowa Penalties —Title 31, Sec. 1629, Penalties —Sec. 489.808, Iowa Maine Revised Statutes Annotat- Code Annotated. ed. Doing business definitions — Doing business definitions —Ti- Sec. 489.803, Iowa Code Anno- tle 31, Sec. 1623, Maine Revised tated. Statutes Annotated.

Kansas Maryland Penalties —Sec. 17-76,126, Kan- Penalties —Sec. 4A-1007, Anno- sas Statutes Annotated. tated Code of Maryland, Corps. Doing business definitions — & Ass’ns. Sec. 17-7932 Kansas Statutes Doing business definitions — Annotated. Sec. 4A-1009, Annotated Code Case law —Douglas Landscape of Maryland, Corps. & Ass’ns. and Design, LLC v. Miles, 355

P.3d 700 (Kan. App. 2015); Mey- er v. Christie, 2009 U.S. Dist. Massachusetts LEXIS 9891 (D. Kan. 2009). Penalties —Ch. 156C, Sec. 54, Massachusetts General Laws An- Kentucky notated. Doing business definitions —Ch. Penalties —Sec. 14A.9-020, Ken- 156C, Sec. 48, Massachusetts tucky Revised Statutes. General Laws Annotated.

188 Limited Liability Companies Doing Business

Michigan Doing business definitions — Sec. 35-8-1001, Montana Code Penalties —Sec. 450.5007, Annotated. Michigan Compiled Laws Anno- tated. Nebraska Doing business definitions — Sec.450.5008, Michigan Com- Penalties —Sec. 21-162, Nebras- piled Laws Annotated. ka Revised Statutes. Case law —Salom Enters., LLC Doing business definitions — v. TS Trim Indus., Inc. , 464 Sec. 21-157, Nebraska Revised F.Supp.2d 676 (E.D. Mich. Statutes. 2006). Case law —Blues Events, LLC v. Lincoln Professional Baseball, Inc. , 2014 U.S. Dist. LEXIS Minnesota 11518 (D. Neb. 2014). Penalties —Sec. 322C.0808, Min- nesota Statutes Annotated. Nevada Doing business definitions — Sec. 322C.0803, Minnesota Stat- Penalties —Sec. 86.548, Nevada utes Annotated. Revised Statutes. Doing business definitions —

Sec. 86.5483, Nevada Revised Mississippi Statutes. Penalties —Sec. 79-29-1013, Mississippi Code 1972 Annotat- New Hampshire ed. Penalties —Sec. 304-C:180, New Doing business definitions — Hampshire Statutes Annotated. Sec. 79-29-1015, Mississippi Doing business definitions — Code 1972 Annotated. Sec. 304-C:174, New Hampshire Statutes Annotated. Missouri New Jersey Penalties —Sec. 347.163, Mis- souri Statutes Annotated. Penalties —Sec. 42:2C-65, New Doing business definitions — Jersey Statutes Annotated. Sec. 347.163, Missouri Statutes Doing business definitions — Annotated. Sec. 42:2C-59, New Jersey Stat- utes Annotated. Case law —Fahs Rolston Paving Montana Corp. v. Pennington Dev. Corp ., Penalties —Sec. 35-8-1002, 2007 U.S. Dist. LEXIS 59283 (D. Montana Code Annotated. N.J.).

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New Mexico (Ohio App. 11 Dist. 2012); Co- lumbus Steel Castings Co. v. Penalties —Sec.53-19-53, New Transp. & Transit Assocs., LLC, Mexico Statutes Annotated. 2007 Ohio App. LEXIS 5825 Doing business definitions — (Ohio App. 2007); Ferron v. Sec.53-19-54, New Mexico Stat- Search Cactus, LLC, 2007 U.S. utes Annotated. Dist LEXIS 44473 (E.D. Ohio).

New York Oklahoma Penalties —Sec. 808, New York Limited Liability Company Law. Penalties —Title 18, Sec. 2048, Doing business definitions — Oklahoma Statutes Annotated. Sec. 803, New York Limited Li- Doing business definitions — ability Company Law. Title 18, Sec. 2049, Oklahoma Case law —RMS Res. Props. Statutes Annotated. LLC v. Naaze, 903 N.Y.S.2d 729 (Nassau County 2010), Oregon

North Carolina Penalties —Sec. 63.704, Oregon Revised Statutes. Penalties —Sec. 57D-7-02, Gen- Doing business definitions — eral Statutes of North Carolina. Sec. 63.701, Oregon Revised Doing business definitions — Statutes. Sec. 57D-7-01, General Statutes of North Carolina. Pennsylvania North Dakota Penalties —Title 15, Sec. 411, Penalties —Sec.10-32.1-84, North Pennsylvania Consolidated Stat- Dakota Century Code. utes Annotated. Doing business definitions — Doing business definitions —Ti- Sec.10-32.1-82, North Dakota tle 15, Sec. 403, Pennsylvania Century Code. Consolidated Statutes Annotated.

Ohio Rhode Island Penalties —Sec. 1705.58, Page’s Ohio Revised Code Annotated. Penalties —Secs. 7-16-54, Rhode Doing business definitions —no Island General Laws. statutory provision. Doing business definitions — Case law —Premier Capital, Sec. 7-16-54, Rhode Island Gen- LLC v. Baker, 972 N.E.2d 1125 eral Laws.

190 Limited Liability Companies Doing Business

South Carolina Vermont Penalties —Sec. 33-44-1008, Penalties —Title 11, Sec. 4119, Code of Laws of South Carolina. Vermont Statutes Annotated. Doing business definitions — Doing business definitions —Ti- Sec. 33-44-1003, Code of Laws tle 11, Sec. 4113, Vermont Stat- of South Carolina. utes Annotated.

South Dakota Virginia Penalties —Sec. 47-34A-1008, South Dakota Codified Laws. Penalties —Sec. 13.1-1057, Vir- Doing business definitions — ginia Code Annotated. Sec. 47-34A-1002, South Dakota Doing business definitions — Codified Laws. Sec. 13.1-1059, Virginia Code Annotated. Case law —Nolte v. MT Technol- Tennessee ogy Enterprises, LLC, 726 S.E.2d Penalties —Sec. 48-249-913, 339 (Va. 2012). Tennessee Code Annotated. Doing business definitions – Sec. 48-249-902, Tennessee Code Washington Annotated. Penalties —Sec. 23.50.370, Re- vised Code of Washington Anno- Texas tated. Doing business definitions — Penalties —Secs. 9.051, 052, Sec. 23.50.400, Revised Code of Texas Business Organizations Washington Annotated. Code. Case law —Glacier Water Co. Doing business definitions — LLC v. Earl , 2009 U.S. Dist Sec. 9.251, Texas Business Or- LEXIS 22649 (W.D. Wash. 2009). ganizations Code.

Utah West Virginia Penalties —Sec. 48-3a-902, Utah Penalties —Sec. 31B-10-1008, Code Annotated. West Virginia Code Annotated. Doing business definitions — Doing business definitions — Sec. 48-3a-905, Utah Code An- Sec. 31B-10-1003, West Virginia notated. Code Annotated.

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Wisconsin Wyoming Penalties —Sec. 183.1003, Wis- Penalties —Sec. 17-16-1502, consin Statutes Annotated. Wyoming Statutes Annotated. Doing business definitions — Doing business definitions — Sec. 183.1002, Wisconsin Stat- Sec. 17-16-1501, Wyoming Stat- utes Annotated. utes Annotated.

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