J.C. Snavely & Sons, Inc. v. Wheeler

ROBERT M. BELL, Judge. J.C. Snavely & Sons, Inc. appeals from the judgment of the Circuit Court for Baltimore County, which prohibited appellant’s maintenance of a mechanics’ lien action against J. Wayne Wheeler and Lillian E. Wheeler, his wife. Although the trial judge proffered two reasons in support of his conclusion, our resolution of this appeal requires that we consider only one of them, namely: Was the trial court clearly erroneous in its findings of fact and conclusions of law in ruling that the appellant was required to be registered with the Maryland State Department of Assessments and Taxation as a foreign corporation qualified to do business in the State of Maryland in order to maintain its claim against the appellee[s]? Our answer to that question is no; consequently, we will affirm.

The seed which grew into this appeal was sown when, on January 21, 1986, appellant contracted with Aspenwood Building Corporation to supply building materials for a dwelling which Aspenwood was constructing, pursuant to a contract with appellees, on appellees’ unimproved land in Baltimore County. Although appellant performed its obligations under the contract, making deliveries of material to the job site between February 28, 1986 and July 14, 1986, Aspenwood defaulted; it failed to make payments when due. As a result, appellant caused a Notice of Intention to Claim a Mechanics’ Lien to be sent, by certified mail, to appellees. That notice, although timely mailed, was not ⁴³¹ received by appellees until more than 90 days after appellant had last furnished material for the construction. 1 Appellant thereafter filed a Petition to Establish a Mechanics’ Lien on appellees’ property.

Appellees contested the petition on two bases: (1) appellant failed to give timely notice of its intention to claim a mechanics’ lien and (2) because appellant had neither registered nor qualified to do business in Maryland, it lacked the capacity to maintain an action in the State of Maryland. Both arguments were fully explored at a show cause hearing, at the conclusion of which, the trial judge, having found that appellant did sufficient business in the state of Maryland to require it to register with the State Department of Assessments and Taxation and that it had not done so, ruled that appellant could not maintain the action. The judge also determined that the Notice of Intention to Claim a Mechanics’ Lien was untimely given since appellees did not receive the notice until more than 90 days after appellant last furnished materials for the construction. 2 Before addressing appellant’s contention that the trial judge was clearly erroneous in finding that appellant could not maintain its claim against appellees, it is necessary to ⁴³² set forth the statutes and the legal principles applicable to its resolution. Maryland Corporations and Associations Code Ann. § 7-203, (1985 Repl.Yol.) Qualification to do intrastate business, provides: (a) Qualification required.—Before doing any intrastate business in this State, a foreign corporation shall qualify with the Department.

(b) Manner of qualification.—To qualify the corporation shall: (1) Certify to the Department: (i) the address of the corporation; and (ii) the name and address of its resident agent in this State; (2) File with the Department a certificate which: (i) States that the corporation is in good standing under the laws of the place where it is organized; and (ii) Is executed by the official of that place who has custody of the pertinent records. }jc Sjc >fs % sic * (c) Period for which qualification effective.—Unless terminated by the corporation, the qualification is effective as long as: (1) The corporation has a resident agent in this State; (2) The corporation does not forfeit its right to do intrastate business under the laws of this State; and (3) If the corporation qualifies or changes its name after June 1, 1951, the name of the corporation complies with the requirements of Title 2 of this article relating to corporate names. Section 7-301, on the other hand, “embodies a test for determining whether a foreign corporation is ‘doing business’ in Maryland.” Yangming Marine Transport Corp. v. Revon Products, U.S.A., Inc., 311 Md. 496, 502 , 536 A.2d 633 (1988) citing G.E.M., Inc. v. Plough, Inc., 228 Md. 484, 486 , 180 A.2d 478 (1962). That section, headed “Failure to register or qualify—Maintenance of suit”, provides: ⁴³³ If a foreign corporation is doing or has done any intrastate, interstate, or foreign business in this State without complying with the requirements of Subtitle 2 of this title, neither the corporation nor any person claiming under it may maintain a suit in any court of this State unless it shows to the satisfaction of the court that: (1) The foreign corporation or the person claiming under it has paid the penalty specified in § 7-302 of this subtitle; and (2) Either: (i) The foreign corporation or a foreign corporation successor to it has complied with the requirements of Subtitle 2 of this title; or (ii) The foreign corporation and any foreign corporation successor to it are no longer doing intrastate, interstate, or foreign business in this State. 3 Section 7-103, which details “[activities not considered intrastate business” is also relevant to our inquiry. It provides: In addition to any other activities which may not constitute doing intrastate business in this State, for the purposes of this article, the following activities of a foreign corporation do not constitute doing intrastate business in this State: (1) Maintaining, defending, or settling an action, suit, claim, dispute, or administrative or arbitration proceeding; (2) Holding meetings of its directors or stockholders or carrying on other activities which concern its internal affairs; (3) Maintaining bank accounts; ⁴³⁴ (4) Maintaining offices or agencies for the transfer, exchange, and registration of its securities; (5) Appointing and maintaining trustees or depositaries with respect to its securities; (6) Transacting business exclusively in interstate or foreign commerce; and (7) Conducting an isolated transaction not in the course of a number of similar transactions.

The requirements of §§ 7-203 and 7-301, that a foreign corporation qualify before doing intrastate business in Maryland under pain of being prohibited from maintaining a suit in Maryland, provide the framework for resolution of the issue before us. Whether the facts before the trial judge fit within that framework requires that we consider the principles which have been applied to determine when a foreign corporation is doing intrastate business in Maryland. To do so we necessarily must look at case law and, to the extent applicable, any applicable statutes. The appellate decisions of this State make clear that “a foreign corporation is doing business within a state when it transacts some substantial part of its ordinary business therein.” S.A.S. Personnel Consultants, Inc. v. Pat-Pan, Inc., 286 Md. 335, 339 , 407 A.2d 1139 (1979) quoting Chesapeake Supply and Equipment Corp. v. Manitowoc Eng’r Corp., 232 Md. 555, 562 , 194 A.2d 624 (1963).

See Finch v. Hughes Aircraft Corp., 57 Md.App. 190, 245 , 469 A.2d 867 , cert. denied, 300 Md. 88 , 475 A.2d 1200 (1984), cert. denied, 469 U.S. 1215 , 105 S.Ct. 1190 , 84 L.Ed.2d 336 , reh’g denied, 471 U.S. 1049 , 105 S.Ct. 2043 , 85 L.Ed.2d 341 (1985), G.E.M., Inc., 228 Md. at 488-89 , 180 A.2d 478 . Such a corporation is deemed “present” in the state when it does “a substantial amount of localized business in this State.” Yangming Marine Transport Corp., 311 Md. at 502 , 536 A.2d 633 . Where the corporation does not engage in significant business activity in Maryland, § 7-301 has been interpreted to permit a corporation to maintain an action in the courts of this State even though it has neither registered nor qualified. Id., at 505, 536 A.2d 633 . ⁴³⁵ Mere solicitation, even if accompanied by activities directly related to the solicitation, including interstate delivery of the goods into the state, is not sufficient to constitute “doing business”; however, solicitation, accompanied by the shipment of goods and an extensive set of activities or management functions in the state, is.

S.A.S. Personnel Consultants, 286 Md. at 339 , 407 A.2d 1139 ; Gilliam v. Moog Indus., Inc., 239 Md. 107, 109 , 210 A.2d 390 (1965); White v. Caterpillar