Opinion ID: 1975413
Heading Depth: 2
Heading Rank: 1

Heading: The Dismissal of Plaintiff's Action

Text: It is undisputed that World-Wide was a Massachusetts corporation. This fact was set forth in its complaint, which was filed November 24, 1986. It is further undisputed that Springer, on behalf of World-Wide, was engaged in the conduct of business at the premises of the Kaufman companies located in the State of Rhode Island. The statute, § 7-1.1-117, upon which the Kaufman companies relied in their defense to the action, reads as follows in pertinent part: Transacting business without certificate of authority.  (a) No foreign corporation transacting business in this state without a certificate of authority shall be permitted to maintain any action, suit or proceeding in any court of this state, until such corporation shall have obtained a certificate of authority. Nor shall any action, suit or proceeding be maintained in any court of this state by any successor or assignee of such corporation on any right, claim or demand arising out of the transaction of business by such corporation in this state, until a certificate of authority shall have been obtained by such corporation or by a corporation which has acquired all or substantially all of its assets. (b) The failure of a foreign corporation to obtain a certificate [of] authority to transact business in this state shall not impair the validity of any contract or act of such corporation, and shall not prevent such corporation from defending any action, suit or proceeding in any court of this state. The Supreme Court of Rhode Island has interpreted this statute to require that an out-of-state corporation that brings action against a Rhode Island defendant based upon a contract performed within this state must obtain a certificate of authority before proceeding to final judgment. Tiffany Agency of Modeling, Inc. v. Butler, 110 R.I. 568, 295 A.2d 47 (1972); New England Dye Co. v. General Products Co., 92 R.I. 292, 168 A.2d 150 (1961). The court in Tiffany went on to observe that if a defendant desired to raise such an issue, it would be required to file a responsive pleading challenging the plaintiff corporation's capacity to maintain the action. 110 R.I. at 573, 295 A.2d at 50. In the event that a defendant should prevail on the issue of alleged incapacity, the out-of-state corporation would be entitled to acquire standing by obtaining a certificate of authority during the course of the trial. Good Will Home Ass'n v. Drayton, 108 R.I. 277, 274 A.2d 750 (1971); see 1 Kent, R.I. Civ. Prac. § 17.5 at 167 (1969). In the case at bar, this issue was raised for the first time during the month of July 1991 after the case had been pending for more than four years. We have held that the failure to raise an affirmative defense in a timely manner constitutes a waiver of that defense. See LaBounty v. LaBounty, 497 A.2d 302, 305 (R.I. 1985); Duquette v. Godbout, 416 A.2d 669, 670 (R.I. 1980). We further observed that the special pleading of an affirmative defense protects the complaining party from unfair surprise at trial. This doctrine in interpretation of Rule 8(c) of the Superior Court Rules of Civil Procedure may be in apparent conflict with Rule 15, which permits a party to amend pleadings. It must be noted that we have also held that amendments to pleadings are to be allowed with great liberality absent a showing of extreme prejudice. Mikaelian v. Drug Abuse Unit, 501 A.2d 721, 722 (R.I. 1985); Kuczer v. City of Woonsocket, 472 A.2d 300, 301 (R.I. 1984). In resolving such a conflict, we must necessarily take into account such elements as the extent of prejudice, as well as the question of a defendant's knowledge of circumstances that should have alerted him or her to the existence of such a defense. On the issue of prejudice, this plaintiff was placed in a most difficult situation when this defense was raised for the first time in the course of trial. Had the defense been raised in the answer immediately following the filing of the complaint, when World-Wide was a validly existing corporation in the Commonwealth of Massachusetts, it could have obtained a certificate of authority with very little difficulty in the State of Rhode Island well before trial had commenced. However, when this defense was raised, World-Wide was no longer a validly existing corporation in Massachusetts and therefore could not readily obtain a certificate of authority in Rhode Island, without reestablishing its existence in Massachusetts. The efforts to revitalize the corporation and obtain a certificate of authority could not reasonably be accomplished within the time remaining for the trial of the case. [1] On the issue of the defendants' knowledge of facts that should have alerted them to the raising of this defense, there is no question that defendants knew from the beginning that World-Wide was a Massachusetts corporation. Although the pleadings did not alert the Kaufman companies to World-Wide's failure to obtain a certificate of authority, a call to the office of the Secretary of State would have disclosed this fact promptly and without difficulty. Thus we can see no reason why defendants should have been allowed to raise this defense during the course of the trial to the extreme prejudice of plaintiff when it could have been raised seasonably many years before. Consequently we are of the opinion that the trial justice erred in allowing defendants to amend their answer during the trial of the case to raise lack of capacity to maintain the action.