Title: Brown v. Pool Depot, Inc.

State: alabama

Issuer: Alabama Supreme Court

Document:

853 So. 2d 181 (2002)
David BROWN
v.
The POOL DEPOT, INC.
1011032.

Supreme Court of Alabama.
December 20, 2002.
Stan Brobston of Brobston & Brobston, P.C., Bessemer, for appellant.
James A. Kee, Jr., Angela C. Shields, and Olivia S. Matuszak of Kee & Selby, L.L.P., Birmingham, for appellee.
JOHNSTONE, Justice.
The plaintiff David Brown appeals the order of the trial court compelling him to arbitrate his tort claims against the defendant The Pool Depot, Inc. Brown argues that, because Pool Depot, a foreign corporation, was not qualified to do business in Alabama at the time Pool Depot contracted to sell and to install an aboveground pool at Brown's Alabama residence, Alabama's door-closing statute, § 10-2B-15.02, Ala.Code 1975, voids the pool contract and bars Pool Depot from enforcing *182 the pool contract and its arbitration provision. We agree.
On February 29, 2000, a representative of Pool Depot, a Georgia corporation, approached Brown, an Alabama resident, to solicit Brown's purchase of an aboveground pool to be installed by Pool Depot at Brown's Alabama residence. On that day Brown executed a contract for the purchase and installation of the aboveground pool. The contract reads in part:
The contract also includes an arbitration provision. The contract states further that the purchaser can cancel the contract within three days of execution.
On March 16, 2002, Brown telephoned Pool Depot to cancel the contract. Thereafter, Pool Depot sent Brown a document entitled "Official Document, Lien Notice, Illegal Cancellation," which reads, in part:
"Sincerely,
"Mr. Clark
Attached to the "Illegal Cancellation" document was another document purporting to be a lien by Pool Depot against Brown's home for $9,295, the purchase price for the pool minus the $200 deposit Brown had already paid.
After receiving the "Illegal Cancellation" document and the purported lien, Brown sued Pool Depot for fraudulent inducement and "tortious attempt to collect a debt by the threat of criminal prosecution." (Complaint, p. 3, C. 4.) The complaint alleges that "Defendant does not have a Certificate of Authority to do business in Alabama and is not license[d] to do business in this State ... [, and,] [t]herefore, the contract signed by the parties is void." (Id.) Brown attached to his complaint a copy of the pool contract.
Pool Depot moved to compel Brown to arbitrate his claims pursuant to the arbitration provision in the pool contract. Brown opposed the motion on the ground that the contract and its arbitration provision were void under Alabama's door-closing statute because Pool Depot had not qualified to do business in Alabama until some months after the execution of the Brown pool contract.
Pool Depot responded that, although it was not qualified to do business in Alabama when it entered the Brown pool contract, Pool Depot, as a business engaged in interstate commerce, was protected by the Commerce Clause of the United States Constitution from the operation of Alabama's door-closing statute to void the Brown pool contract. Pool Depot submitted as evidentiary support for this argument an affidavit from Pool Depot vice president Frank Loureire stating that the components of the aboveground pools are manufactured in other states, are shipped to Georgia for assembly, and are shipped to their final destination for installation. Loureire stated that Pool Depot "is a national company which does business nationwide." Loureire stated further that all monies paid to Pool Depot were deposited in an account in Atlanta, Georgia. While Loureire expressly denied that Pool Depot had ever had any offices in Alabama, he did not deny that it had agents in Alabama.
This appeal requires us to decide whether the business Pool Depot contracted to do in Alabama was localized in Alabama so as to constitute intrastate activity that incurred the governance of Alabama's door-closing statute, which would, in that case, void the Brown pool contract and bar Pool Depot from enforcing the contract and its arbitration provision. Alabama's door-closing statute, § 10-2B-15.02(a), Ala.Code 1975, provides:
Addressing whether a nonqualified foreign corporation may enforce its Alabama contracts, Alabama courts have said:
Competitive Edge, Inc. v. Tony Moore Buick-GMC, Inc., 490 So. 2d 1242, 1244-45 (Ala.Civ.App.1986) (emphasis added). A "foreign corporation [may] not compel arbitration pursuant to an arbitration clause in a contract [if] the entire contract [is] unenforceable and invalid as a result of the foreign corporation's failure to qualify to do business in Alabama." Alabama Catalog Sales v. Harris, 794 So. 2d 312, 315 (Ala.2000).
While Pool Depot argues that its performance of the Brown pool contract involved interstate commerce and that this involvement saved Pool Depot from the operation of Alabama's door-closing statute to void the contract and its arbitration provision, this Court recently said in Community Care of America of Alabama, Inc. v. Davis, 850 So. 2d 283, 287 (Ala.2002):
A nonqualified foreign corporation's "`establish[ing] a continuing presence in the state over and above the mere shipping of commodities between the states' is intrastate activity." Community Care, 850 So. 2d  at 287 (quoting Wise v. Grumman Credit Corp., 603 So. 2d 952, 953 (Ala. 1992)). The United States Supreme Court has held that "a state's forum closing statute does not unduly burden interstate commerce when the foreign corporation has `"localized its business"' in the state and when it is not entering the state `"to contribute to or to conclude a unitary interstate transaction."'" S & H Contractors, Inc. v. A.J. Taft Coal Co., 906 F.2d 1507, 1511 (11th Cir.1990) (quoting Allenberg Cotton Co. v. Pittman, 419 U.S. 20, 32-33, 95 S. Ct. 260, 42 L. Ed. 2d 195 (1974) (quoting in turn Union Brokerage Co. v. Jensen, 322 U.S. 202, 210, 64 S. Ct. 967, 88 L. Ed. 1227 (1944))) (emphasis added).
"Our courts have held that transactions in Alabama by a nonqualified foreign *186 corporation involving no more than a sale, transportation, and delivery of materials into this state are acts of interstate commerce to which the laws of Alabama are not applicable. Loudonville Milling Co. v. Davis, 251 Ala. 459, 37 So. 2d 659 (1948). Mere business solicitations and incidents relative to such solicitations do not constitute transaction of business by a foreign corporation within the state of Alabama for purposes of the statutory and constitutional provisions at issue in this case. Swicegood v. Century Factors, Inc., 280 Ala. 37, 189 So. 2d 776 (1966)."
"`It is evident that, had the transaction in question involved no more than the sale and delivery of the machinery by the plaintiff to the defendant in Alabama, it would have been an act of interstate commerce, to which the laws of Alabama are not and could not be applicable. But the contract was not for the sale of machinery. It was an entire contract for transporting and assembling (that is, building into a structure) certain materials on the defendant's premises. This included, as set forth in the complaint, and replication both labor and materials; and the fruition of the contract was not the delivery of an article of commerce to the defendant, but the erection of an improvement on its premises for a gross consideration. Beard's Case, 71 Ala. 60.'"
Computaflor Co. v. N.L. Blaum Constr. Co., 289 Ala. 65, 68, 265 So. 2d 850, 852 (1972) (quoting American Amusement Co. v. East Lake Chutes Co., 174 Ala. 526, 56 So. 961 (1911)) (emphasis added).
Green Tree Acceptance, Inc. v. Blalock, 525 So. 2d 1366, 1370-71 (Ala. 1988) (emphasis added). An isolated contract by an unqualified foreign corporation to do localized intrastate business within Alabama is subject to Alabama's door-closing statute even though that contract may require the use of materials and equipment shipped into Alabama from out of state. See Green Tree Acceptance, supra; Sanjay, Inc. v. Duncan Constr. Co., 445 So. 2d 876 (Ala.1983); Computerflor, supra; and Calvert Iron Works, Inc. v. Algernon Blair, Inc., 284 Ala. 655, 277 So. 2d 424 (1969).
In the case now before us, the activity by Pool Depot under the Brown pool contract involved more than the mere solicitation of business here and more than *187 the mere delivery of items sold. Pool Depot sent a representative to Alabama to solicit customers like Brown. Pool Depot then contracted to sell, to deliver, to assemble, and to install a 24-foot-diameter round aboveground pool at Brown's Alabama residence for a total cost of $9,495. Pool Depot agreed to supply the materials and to furnish the labor for the assembly and installation of the pool in Alabama. The installation crew would work in Alabama "one or more days." Upon completion of installation of the pool, Pool Depot was to be paid in Alabama. Pool Depot's entire performance under the contract was to occur in Alabama. "`[T]he fruition of the contract was not the delivery of an article of commerce [i.e., pool components] to [Brown], but the erection of an improvement on [his] premises for a gross consideration.' " Computaflor, 289 Ala. at 68, 265 So. 2d  at 852 (citing Beard's Case, 71 Ala. 60). Thus, in contracting to sell, to deliver, to assemble, and to install an aboveground pool at Brown's residence in Alabama, Pool Depot engaged in intrastate activity in Alabama when it was not qualified to do so. Consequently, Alabama's door-closing statute operates against Pool Depot to void the pool contract and its arbitration provision.
Brown's suing Pool Depot for fraud and tortious attempt to collect a debt and opposing arbitration of these claims is not an unlawful attempt to "accept the benefits and avoid the burdens or limitations of a contract," Georgia Power Co. v. Partin, 727 So. 2d 2, 5 (Ala.1998) (quotation marks and citations omitted). Brown does not seek any benefit whatsoever under the contract, which Brown contends is void.
The trial court erred in ordering Brown to arbitrate his claims against Pool Depot. Therefore, we reverse the judgment of the trial court and remand this cause for the trial court to vacate its order for arbitration and to conduct further proceedings in this case.
REVERSED AND REMANDED.
MOORE, C.J., and HOUSTON and WOODALL, JJ., concur.
LYONS, J., concurs specially.
LYONS, Justice, concurring specially.
I concur fully in the majority opinion. I write specially to address Pool Depot's reliance upon Wallace Construction Co. v. Industrial Boiler Co., 470 So. 2d 1151 (Ala. 1985). In Stewart Machine & Engineering Co. v. Checkers Drive In Restaurants of North America, Inc., 575 So. 2d 1072, 1074-75 (Ala. 1991), this Court described Wallace Construction as holding that
Then the Court in Stewart Machine held that the erection of a prefabricated building constituted intrastate activity, noting as follows:
575 So. 2d  at 1075.
Pool Depot argues that "[t]he only difference between the present case, and Wallace Construction, is that the item being sold in Wallace Construction was a boiler; while in this case, it is an aboveground pool." I disagree. This Court has recognized that the sale, delivery, and supply of labor and management to construct a prefabricated building is intrastate activity. See Sanjay, Inc. v. Duncan Constr. Co., 445 So. 2d 876, 879 (Ala.1983). I find the rationale for distinguishing Wallace Construction employed in Stewart Machine persuasive. This case falls under the heading of erection of a prefabricated product, not the installation of a complex piece of machinery, for which the provision of labor to install it became a reasonable and appropriate incident of the sale.