J.W. Hartlein Construction Co. v. Seacrest Associates, L.L.C.
Docket: 2980105
Court: Court of Civil Appeals of Alabama; March 18, 1999; Alabama; State Appellate Court
J.W. Hartlein Construction Company, Inc. and Inverness Construction Company filed a complaint against Seacrest Associates, L.L.C. and Henry Norris, Associates, Inc., claiming breach of contract, breach of implied warranties, negligence, and tortious conduct warranting punitive damages. Their claims stem from Seacrest's alleged breach of a contract with Hartlein for the construction of condominiums, and its refusal to acknowledge the work as complete. Seacrest counterclaimed, asserting that Hartlein did not complete the construction timely or satisfactorily.
Seacrest moved for summary judgment, contending that Inverness lacked a certificate of authority to conduct business in Alabama, which rendered it unable to enforce contractual rights in the state, as per Ala. Code 1975, § 10-2B-15.02. The trial court granted summary judgment in favor of Seacrest on all claims from Inverness and certified the judgment as final under Rule 54(b), Ala. R. Civ. P. Inverness subsequently appealed to the Supreme Court of Alabama, which transferred the appeal to a lower court.
The facts indicate that Hartlein entered a contract with Seacrest in February 1995 and completed substantial work by April 10, 1996. Hartlein merged with Inverness in July 1996, filing its articles of merger in Mississippi. At the time of the merger, Hartlein had a valid certificate to do business in Alabama, whereas Inverness’s authority had been revoked in 1995, only to be reinstated in 1997.
Hartlein submitted a payment request to Seacrest in July 1996, which was paid. Later, Hartlein filed a lien against the Seacrest Condominiums, which Inverness recorded as the successor. Seacrest argued that the action could not proceed under Hartlein's name post-merger and that Inverness could not claim damages for periods when it lacked a certificate of authority. The trial court upheld Seacrest's motion, emphasizing that a foreign corporation must have a certificate of authority to conduct business and maintain legal actions in Alabama.
Contracts made by foreign corporations in Alabama before obtaining a certificate of authority are void, as stated in 10-2B-15.02, Ala. Code 1975. Inverness contends that its contract with Seacrest is valid because Hartlein had a certificate at the time of contracting, and Inverness secured its certificate for the year it filed its complaint. Alabama law prohibits nonqualified foreign corporations from enforcing contracts in state courts unless their activities are deemed 'interstate,' which would exempt them under the Commerce Clause. The case acknowledges that the construction work performed was 'intrastate.' The interpretation of 10-2B-15.02 is crucial; it must be strictly construed as it is penal and derogatory to common law. The statute specifies that an unqualified corporation cannot maintain legal actions without a certificate of authority, and any contracts made by such corporations are void. However, it allows previously nonqualified corporations to pursue actions once they obtain the necessary certificate. Inverness and Hartlein possessed the appropriate certificates at relevant times, allowing Inverness to maintain its legal action. The trial court's summary judgment favoring Seacrest was erroneous and has been reversed and remanded.
