J. I. Case Credit Corp. v. Insley

Rodowsky, J., delivered the opinion of the Court. In this appeal we shall hold that a foreign corporation whose qualification to do intrastate business in Maryland was forfeited in 1972 for failure to file a personal property return, but whose activities thereafter are conceded not to have required qualification or registration in Maryland, is not barred from maintaining the instant suit by the door closing statute, Md. Code (1975), § 7-301 of the Corporations and Associations Article (CA). Appellees and defendants below, Russell Insley and Lottie Mae Insley, his wife, are residents of Cambridge, Dorchester County, Maryland. On May 18,1977, the lnsleys purchased, under an installment sales agreement, four pieces of construction equipment from Carey Equipment, Inc. in Seaford, Delaware.

Included were two Case bulldozers, Model 1450B, each at a cash price of $62,500. Carey Equipment, Inc. retained a security interest under the installment contract. There is no contention that this Delaware dealer was required to register or qualify in Maryland. That contract was assigned by the seller to the appellant, J. I. Case Credit Corporation (Credit Co.), which accepted the assignment in New York.

Financing statements were recorded in Maryland by Credit Co. Alleging default by the lnsleys, Credit Co. on February 23, 1979 instituted this replevin action in the District Court of Maryland in Dorchester County in order to seize the two bulldozers. After the show cause hearing required by Maryland District Rules BQ43 and BQ44, the writ was issued. Thereupon the lnsleys filed an election for jury trial and the action was transferred to the Circuit Court for ⁴⁸⁶ Dorchester County. Based on § 7-301, the Insleys then moved to strike Credit Co.’s pleadings.

At the conclusion of an evidentiary hearing, the circuit court held that Credit Co. was doing business in Maryland and dismissed the action. Credit Co. appealed. Prior to the consideration of the appeal by the Court of Special Appeals, Credit Co.’s petition for certiorari was granted. Credit Co. is a Wisconsin corporation and is a wholly owned subsidiary of J. I. Case Co. (Case).

Each company has its principal business office in Racine, Wisconsin. Case is an equipment manufacturer. Credit Co. is its "captive” sales finance company, in that Credit Co. finances only purchases by independent Case dealers from Case, and finances purchases or leases by retail customers from Case dealers or from Case owned and operated retail outlets. Credit Co. owns no real property or inventory in Maryland.

It pays no taxes to Maryland. It maintains no office, employees, telephone listing or bank account in this State. It does not advertise. Credit Co. has finance offices throughout North America.

The office responsible for the 11 state area which includes Maryland is in Syracuse, New York. That finance office had been located in Baltimore but was moved to Syracuse in late 1969 when the Baltimore office was closed. During the period when Credit Co. maintained an office in Baltimore, the corporation qualified to do intrastate business in Maryland. After the move to Syracuse, Credit Co. ceased filing personal property tax returns with Maryland, and its authority to do business here was cancelled on May 8, 1972.

Credit Co. has not thereafter registered or qualified in Maryland. Credit Co. contends that, following the move of its regional office to Syracuse, it was not required to be registered under CA § 7-202, as doing interstate business in Maryland, or to be qualified under CA § 7-203, as doing intrastate business here. Appellees at oral argument before this Court conceded that, if Credit Co. had never previously been qualified in Maryland, it would "under these circum ⁴⁸⁷ stances [have] a perfect right to come into this State and pursue whatever rights it [might] have against our residents.” The "only point” appellees make to support the bar of § 7-301 is that Credit Co. lost its previous qualification for failure to file tax returns and not that Credit Co. has been required to be registered or qualified in Maryland based on activity here after the prior qualification was forfeited. Appellees expressly stated at argument that, without the prior qualification of Credit Co., appellees would "have no case.” In light of this express concession, we are not required to review the evidence, which principally relates to the servicing of Maryland accounts by Credit Co. territorial credit representatives who enter this State from time to time.

The settled rule is that an appellate court will ordinarily affirm a trial court’s judgment on any ground adequately shown by the record (and even though the ground was not relied on by the trial court). Temoney v. State, 290 Md. 251, 261 , 429 A.2d 1018, 1023 (1981). This principle will apply if the appellee fails in his brief to raise the ground supporting the judgment, and even if the appellee fails to file any brief at all. See, e.g., Union Trust Co. v. Tyndall, 290 Md. 102 , 428 A.2d 428 (1981).

However, we have in at least one prior decision applied an exception to the ordinary rule. Montgomery County Council v. Leizman, 268 Md. 621 , 303 A.2d 374 (1973) was the appeal of a judgment voiding the downzoning of appellees’ property. The trial court based its judgment on three grounds, one of which was that the appellees had acquired vested rights. In this Court the appellees stated unequivocally that this ground was abondoned by them.

We reversed, without undertaking a review of the vested rights aspect of the case. Where the appellee abandons a ground of support for the decision below by making an express concession in this Court, we need not, in our discretion, undertake a review of the matter conceded. We exercise that discretion here. 1 ⁴⁸⁸ Thus the issue, as limited by the concession, is whether the forfeiture of Credit Co.’s qualification, due to the nonfiling of tax reports', triggers the operation of the door closing statute and prevents Credit Co. from maintaining this action without meeting the conditions for lifting the bar of § 7-301. That statute provides: § 7-301.

Failure to register or qualify — Maintenance of suit. 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. The penalty to which § 7-301 (1) refers is specified in CA § 7-302 (a) (1) which reads: (a) Fine of corporation. — (1) If a foreign corporation does any intrastate, interstate, or foreign business in this State without qualifying or registering as required by Subtitle 2 of this title, the Department shall impose a penalty of $200 on the corporation. Section 7-301 applies if Credit Co. "has done any ... business in this State without complying with the requirements ⁴⁸⁹ of Subtitle 2 There is no general requirement in Subtitle 2 that a foreign corporation file any reports in order to maintain its qualification.

However, appellees point to CA § 7-208, in Subtitle 2, as being the "requirement” with which Credit Co. did not comply. Section 7-208 deals with the termination of registration or qualification. At the time Credit Co. moved its office to New York State the provision comparable to present § 7-208 was Md. Code (1957, 1966 Repl. Vol., 1969 Cum.

Supp.), Art. 23, § 90 (h). 2 It read: (h) Termination of registration or qualifícation. — Any foreign corporation, registered or qualified in accordance with the provisions of this section, may terminate such registration or qualification by obtaining from the Department, upon payment of the fee required by law, a certificate of withdrawal. The Department, if satisfied that all reports required by law have been filed and all taxes due and payable by the corporation to the State and to any political subdivision thereof, to the date of filing the application for withdrawal have been paid, shall issue such a certificate upon the filing by the corporation of an application for withdrawal, signed in the name and on behalf of the corporation by its president or a vice-president, and containing the following information: (1) The name of the corporation, and the post-office address of its principal office. (2) The name and post-office address of the resident agent, service of process upon whom shall bind the corporation in any action in which it is subject to suit in this State. (3) A statement that the corporation, (i) in the case of termination of qualification, is no longer transacting any intrastate business in this State; or ⁴⁹⁰ (ii) in the case of termination of registration, is no longer transacting any interstate or foreign business in this State.

(4) A statement that the corporation wishes to terminate its registration or qualification to do such business. (5) A statement that the corporation has filed all reports required by law and has paid all taxes due and payable by the corporation to the State and any political subdivision thereof, to the date of application for withdrawal. The application shall be accompanied by certificates of payment of taxes as required by this article in the case of filing of articles of dissolution. For a number of reasons the filing of an application for, and the obtaining of, a certificate of termination are not "requirements” of Subtitle 2 of Title 7 of the Corporations and Associations Article, within the meaning of § 7-301.

The requirements which § 7-301 addresses are those which are operative while the foreign corporation is currently doing business in Maryland or during the period when it had done intrastate business here. But, in order to apply for a certificate of termination of an existing qualification, the foreign corporation must state that it "no longer transacts any intrastate business in this State.” CA § 7-208 (c) (3) (i), which superseded Md. Code (1957, 1966 Repl. Vol.), Art. 23, § 90 (h) (3) (i). Thus, the