Case Title: Wallace Const. Co. v. Industrial Boiler Co.

Citation: 470 So. 2d 1151

Docket Number: 

State: alabama

Court: Alabama Supreme Court

Date: 1985-03-22T00:00:00Z

Document:
470 So. 2d 1151 (1985)
WALLACE CONSTRUCTION CO., INC. and Hartford Accident & Indemnity Co., Inc.
v.
INDUSTRIAL BOILER CO., INC.
83-1232.

Supreme Court of Alabama.
March 22, 1985.
Rehearing Denied May 10, 1985.
John T. Robertson IV of Henslee and Bradley, Gadsden, for appellants.
Michael L. Roberts of Floyd, Keener & Cusimano, Gadsden, for appellee.
SHORES, Justice.
We granted permission for the defendants, Wallace Construction Company, Inc., and Hartford Accident and Indemnity Company, Inc., to appeal from the trial court's denial of their motion for summary judgment in this action brought by Industrial Boiler Company, Inc., to recover damages for breach of contract. We affirm.
Industrial Boiler Company, Inc. (Industrial Boiler), a Georgia corporation, filed suit against Wallace Construction Company, Inc. (Wallace), and Hartford Accident and Indemnity Company, Inc. (Hartford), seeking damages for breach of contract. Wallace was the successful bidder for a contract with the University of Montevallo for, among other things, the installation of a heating system at the school. Hartford *1152 was the surety on Wallace's bond for that project. By virtue of a subcontract with Wallace, dated August 18, 1981, Industrial Boiler agreed to manufacture and install the boiler system. This it did. On June 16, 1983, Industrial Boiler filed a complaint, naming Wallace and Hartford as defendants, alleging Wallace's failure to pay under this contract and Hartford's liability thereon as surety.
Wallace and Hartford contend that Industrial Boiler's activities concerning the assembly and installation of the boiler constituted doing business in Alabama. They further argue that Industrial Boiler failed to qualify to do business in Alabama until after the execution of the contract in question and that it is, therefore, precluded, as a matter of law, from enforcing the contract under § 10-2A-247 and § 40-14-4, Ala.Code 1975, and Article XII, § 232, of the Alabama Constitution of 1901.
Industrial Boiler does not dispute its failure to timely qualify to do business in Alabama, but insists that its activities within Alabama were necessary and incidental to the interstate sale of the boiler and, therefore, did not constitute "doing business" within the meaning of the provisions relied upon by Wallace and Hartford. We agree.
Section 232 of the Alabama Constitution, § 10-2A-247, and § 40-14-4, supra, bar a foreign corporation not qualified to do business in Alabama from enforcing its contracts in the courts of this state. These laws apply, however, only when the business conducted in this state by the non-qualified corporation is intrastate in nature. Johnson v. MPL Leasing Corp., 441 So. 2d 904 (Ala.1983). A non-qualified foreign corporation is not barred from enforcing its contracts in Alabama when its activities within this state are incidental to the transaction of interstate business. Johnson v. MPL Leasing Corp.; Cobb v. York Ice Mach. Corp., 230 Ala. 95, 159 So. 811 (1935); York Mfg. Co. v. Colley, 247 U.S. 21, 38 S. Ct. 430, 62 L. Ed. 963 (1918); Article I, § 8, cl. 3, United States Constitution.
Summary judgment is proper where there is no genuine issue of material fact, and the moving party is entitled to a judgment as a matter of law. Rule 56(c), A.R. Civ.P. The undisputed facts in this case show that Industrial Boiler contracted with Wallace on August 18, 1981, to manufacture and install a wood fuel boiler system, but failed to qualify to do business in Alabama until September 13, 1982. The boiler was manufactured by Industrial Boiler in Georgia and shipped to the jobsite in 300 to 400 separate parts, where Industrial Boiler personnel assembled and installed it. Assembled, the boiler was approximately 40 feet wide, 60 feet long, and 25 feet high. The number of full-time Industrial Boiler personnel on the jobsite varied from time to time and included one to five employees who were skilled in the assembly and installation of boilers. When required, these employees stayed overnight at local motels. Industrial Boiler also hired three to five local residents to perform temporary manual labor. Industrial Boiler never maintained an office on the jobsite and had no telephone, gas, water, or electrical service connected. Industrial Boiler contracted with a local crane service for the use of a crane and operator and also leased a forklift and a portable air compressor. When necessary, Industrial Boiler personnel purchased certain parts from local merchants. The boiler was installed within a building built especially for that purpose and consisted of a steel structure resting on a concrete foundation. Industrial Boiler did not build any part of this building and did no work on the jobsite other than the assembly and installation of the boiler. The assembly and installation of the boiler was not within the capability of most general contractors, including Wallace, but required skilled personnel with a background in boiler machinery. Industrial Boiler makes installation services available to its purchasers, who usually desire it, and while it has certain competitors capable of providing these services, Industrial Boiler was awarded the contract with Wallace on the basis of its low bid. The assembly and installation of the boiler was to be completed within 250 days, but took approximately *1153 45 days longer. The contract also required Industrial Boiler to provide 5 days of adjustment, start up, and training upon completion of the installation.
In Puffer Mfg. Co. v. Kelly, 198 Ala. 131, 73 So. 403 (1916), the Court reversed the trial court's decision barring suit by a non-qualified foreign corporation which had sold and installed a soda fountain and appurtenances in Alabama. The Court wrote as follows:
198 Ala. at 133, 135-136, 73 So.  at 404-405.
In York Mfg. Co. v. Colley, supra, the United States Supreme Court directly addressed the commerce-clause implications of interstate sale and installation contracts. In that case, the non-qualified foreign corporation contracted to sell an ice plant consisting of various items of machinery which were shipped to Texas, where they were assembled, installed, and tested under the supervision of an engineer employed by the seller. The installation of the ice plant took approximately three weeks, and the testing took an additional week. After a demonstration of its successful operation, it was accepted by the purchasers. The Court held that the installation and testing of the ice plant did not constitute local commerce and stated:
247 U.S.  at 24-26, 38 S. Ct.  at 431-432.
In the case of In re Delta Molded Products, Inc., 416 F. Supp. 938 (N.D.Ala.1976), affirmed, 571 F.2d 957 (5th Cir.1978), the district court, applying Alabama law, held that the non-qualified foreign corporation (IMPCO) was not barred from enforcing its contracts for the sale of complex machinery used in the plastics industry. The court, emphasizing the complex and sophisticated nature of the equipment and the expertise necessary in assembling the machinery, stated as follows:
In this case the agreement to perform the services by IMPCO was a prime inducement for the signing of the contract. This activity did not destroy the interstate character of the contract....
416 F. Supp.  at 943-944.
Applying the law to the undisputed facts in this case, we hold that the combined local activities of Industrial Boiler in Alabama concerning the assembly and installation of the boiler did not constitute intrastate business, but were necessary and incidental to the interstate sale of the boiler itself. Industrial Boiler was able to provide assembly, installation, adjustment, start-up, and training in conjunction with the sale of the boiler and still remain the low bidder on the contract. Wallace, lacking the expertise required to assemble and install the boiler, contracted with Industrial Boiler for this service. Wallace and Hartford argue that the contract in question was for construction with the sale of the boiler incidental thereto. They erroneously rely upon a line of cases which stand for the proposition that activities inherently intrastate, such as construction, do not lose *1156 their essential nature because they form a part of an interstate commerce contract to which they have no necessary relation. That argument does not fit these facts. It is undisputed that Industrial Boiler did no work on the jobsite other than assemble and install the boiler. Furthermore, the contract was for the manufacture and sale of a complex piece of machinery, and the agreement to install it was not only a valuable trade inducement but a reasonable and appropriate incident of the sale itself. Therefore, Industrial Boiler is not barred from litigating its claims in the courts of this state, despite its failure to be qualified to do business here at the time of the transaction.
Accordingly, because Wallace and Hartford were not entitled to a judgment as a matter of law, summary judgment was properly denied.
The order appealed from is affirmed.
AFFIRMED.
TORBERT, C.J., and MADDOX, JONES, ALMON, EMBRY and ADAMS, JJ., concur.
FAULKNER and BEATTY, JJ., dissent.
BEATTY, Justice (dissenting):
The case authority on which the majority relies for the proposition that the assembly and installation of the boiler system at the University of Montevallo were incident and necessary to the interstate sales contract is distinguishable on some important bases.
The first case the majority discusses is Puffer Manufacturing Co. v. Kelly, 198 Ala. 131, 73 So. 403 (1916). While the Court in Puffer concluded that the assembly and installation of a soda fountain was incident to the sale, the Court added:
Furthermore, the fact that Industrial Boiler's contracts with local merchants were "reasonable and incidental" to the performance of its contract with Wallace does not make Industrial Boiler's installment contract with Wallace any less intrastate in character. In fact, based on the considerations outlined in Puffer, supra, set out above, the necessity for such local contracts, as well as the length of time the assembly and installation required, and the permanent nature of the boiler system further support the conclusion that the contract was intrastate in character.
The majority also relies on and quotes extensively from York Manufacturing Co. v. Colley, 247 U.S. 21, 38 S. Ct. 430, 62 L. Ed. 963 (1918). Given the common meaning of the terms "relevant" and "appropriate," I do not dispute that the contract for the assembly and installation of the boiler system was "relevant" and "appropriate" to its sale, especially in view of Industrial Boiler's low bid; however, being "relevant" and "appropriate" in an ordinary sense does not make the contract "necessary" and "incidental" to the sale, nor does it nullify the other considerations that point up the intrastate character of the contract and its performance. It seems to me that the following language taken from York Manufacturing Co., supra, which attaches a narrower definition of "relevant" *1157 and "appropriate" in the context of these cases, nevertheless indicates a recognition by that Court of the "necessity" that the manufacturer /seller perform the assembly and installation of the machinery and test its efficiency where the machinery is complex and assembly is required to be performed with the expertise it is assumed only the manufacturer/seller would have:
Thus, as I interpret this passage, it is the requirement that the contract for installation, etc., be necessary that makes it relevant and appropriate.
It is precisely this line of reasoning that was applied by the court in In re Delta Molded Products, Inc., 416 F. Supp. 938 (N.D. Ala.1976), affirmed, 571 F.2d 957 (5th Cir.1978), on which the majority relies. In Delta, the court emphasized the fact that, in that case, no one else in Alabama was available to assemble and install the machinery in question:
These factors are not present here, nor is there an allegation that only Industrial Boiler possessed the required "mechanical skill and precision" necessary to make the boiler system operative. In fact, the contrary is true. In its opinion, the majority points out that Industrial Boiler "has certain competitors capable of providing these services," but that "Industrial Boiler was awarded the contract with Wallace on the basis of its low bid." (Emphasis added.) This hardly meets the "necessity" test set forth in In re Delta Molded Products, supra, and implied by the Court in York Manufacturing Co., supra. Moreover, it appears that the assembly and installation work was a "separate distinct undertaking" *1158 by Industrial Boiler, and not "merely a part of the interstate agreement."
The majority gives no other reasons to substantiate its conclusion that Industrial Boiler's assembly and installation services were "necessary and incidental to the interstate sale of the boiler [system]." In fact, there being others available to perform these services, Industrial Boiler's activities were not necessary nor merely incidental. Since the facts of this case do not fit the exceptions carved out by those authorities upon which the majority relies, I would hold that Industrial Boiler's assembly and installation contract, and the performance of it, were intrastate in character. Accordingly, Industrial Boiler should have qualified to do business in Alabama in order to enforce its contracts in the courts of this state. For these reasons, Wallace and Hartford's motion for summary judgment was improperly denied.
FAULKNER, J., concurs.