Court Opinion

ID: 9652539
Source: CourtListenerOpinion
Date Created: 2023-08-23 17:25:35.886145+00
Date Added: 2024-06-11T18:12:52.257383
License: Public Domain

MACK, Associate Judge,
concurring:
I concur fully in the per curiam opinion. I write separately only to discuss issues raised by the alternative ground for affirmance urged by appellee, which we do not reach today, and to express my concerns about the implications of that approach. In particular, I suggest that as a mandatory rule of statutory construction, D.C.Code § 29-399.1 (1981) requires us to afford ap-pellee all the rights and privileges of a domestic corporation, including those rights afforded a District of Columbia resident under D.C.Code § 35-1903(2) (1988 Repl.). I am troubled, however, that this result would necessarily permit claimants with minimal contacts with this jurisdiction to lodge successful claims with our Insurance Guaranty Association.
I
Appellant denies claimant-appellee’s District of Columbia residency within the meaning of the statute, and therefore contends that claimant-appellee cannot claim residency as a basis for coverage. The statute itself, however, does not define the terms “resident” or “residence,” and the Comment to the Model Act indicates that the term “residence” is to be determined by local law. Model Act § 5(3), Comment. “This is especially true in relation to corporations,” the Comment stresses, “for the subcommittee feels the ‘residence’ of a corporation should not necessarily be equated with its domicile.” Id.
Appellant argues that our local law equates a corporation’s legal residence with its place of incorporation. Indeed, at least in cases involving federal diversity jurisdiction and attachment, there is overwhelming authority that corporations legally reside only in the jurisdictions where they have *570been incorporated. Federal Power Commission v. Texaco, 377 U.S. 33, 38, 84 S.Ct. 1105, 1109, 12 L.Ed.2d 112 (1964); Neirbo Co. v. Bethlehem Corp., 308 U.S. 165, 169, 60 S.Ct. 153, 155, 84 L.Ed. 167 (1939); Shaw v. Quincy Mining Co., 145 U.S. 444, 450, 12 S.Ct. 935, 937, 36 L.Ed. 768 (1892); Ex parte Schollenberger, 96 U.S. 369, 377, 24 L.Ed. 853 (1878); Hazen v. National Rifle Association of America, Inc., 69 U.S. App.D.C. 339, 344, 101 F.2d 432, 437 (1938); Barbour v. Paige Hotel Co., 2 App.D.C. 174, 179 (1894). It is also well settled in this jurisdiction that “the words ‘inhabitant’ and ‘resident in’ ... mean neither more nor less than legal domicile.” King v. Wall & Beaver Street Corp., 79 U.S. App.D.C. 234, 236, 145 F.2d 377, 379 (1944). This is so because a corporation is an artificial being that exists only in the contemplation of the laws of the chartering state, and thus enjoys legal existence only as far as that state’s boundaries. Barbour, supra, 2 App.D.C. at 179. It must dwell at the place of its creation, and cannot “migrate” from state to state. Neirbo, supra, 308 U.S. at 169, 60 S.Ct. at 155; Schollenberger, supra, 96 U.S. at 376. It is usually irrelevant, therefore, that a corporation does all its business in one state, if its legal domicile is in another; only the latter is its “residence.” Barbour, supra, 2 App.D.C. at 178.
Notwithstanding this rule, however, other statutory and common-law indicia of corporate presence are not uncommon.1 Recognizing the economic and social advantages of attracting and regulating the business of foreign corporations, states have typically enacted legislation making the rights and privileges of local incorporation available to them upon the fulfillment of certain conditions, such as the filing of papers and the designation of a local agent for service of process. See FLETCHER CYC. CORP. § 8446 (Perm. Ed.1983). The purposes of such conditions include the placement of foreign corporations on an equal footing with domestic corporations, their subjection to inspection, the protection of state residents by making foreign corporations subject to local suit, and the collection of taxes and fees. Id. Such purposes are not uniformly served by treating foreign corporations as if they have no presence within the jurisdiction.2
In this instance, Congress has made its intention evident, not only with respect to the proper interpretation of the Insurance Guaranty Association Act, but with respect to other laws using similar language, by enacting a statutory rule of construction, D.C.Code § 29-399.1 (1981). Under section 29-399.1,
A foreign corporation which shall have received a certificate of authority under this chapter shall, until a certificate of revocation or of withdrawal shall have been issued as provided in this chapter, enjoy the same rights and privileges as, but no greater rights and privileges than, *571a domestic corporation ... and, except as in this chapter otherwise provided, shall be subject to the same duties, restrictions, penalties, and liabilities now or hereafter imposed upon a domestic corporation of like character.
Thus, except to the extent specially treated by statute, foreign corporations qualified to transact business within the District of Columbia must enjoy the same status as domestic corporations, at least inasmuch as they are subject to the same rights, privileges, duties, restrictions and liabilities, as domestic corporations. Indian Lakes Estates, Inc. v. Ten Individual Defendants, 121 U.S. App.D.C. 305, 309-10, 350 F.2d 435, 439-40, cert. denied, 383 U.S. 947, 86 S.Ct. 1199, 16 L.Ed.2d 209 (1966). While this does not necessarily mean that the term “domestic corporation,” wherever it is used in a statute, includes qualified foreign corporations, it does mean that any statute granting a right to, or imposing a restriction or liability upon, a domestic corporation, necessarily, and in like manner, qualifies the status of a foreign corporation authorized to transact business in the District of Columbia. Thus, even if application of the term “resident” is restricted to corporations chartered in the District of Columbia, foreign corporations authorized to do business here are entitled to the rights of residency to the same extent as domestic corporations, except where the statute granting these rights explicitly withholds them from authorized foreign corporations. Nothing in the Insurance Guaranty Association Act restricts its scope in this way.
Nevertheless, citing Jennings v. Idaho Railway, Light and Power Co., 146 P. 101, 103, 26 Idaho 703, 705 (1915), appellant contends that a statute conferring the rights, privileges, liabilities and restrictions of domestic incorporation on a foreign entity does not thereby confer residency upon it, but merely the enumerated incidents of residency.3 Id. To the extent, therefore, that the Insurance Guaranty Association Act predicates the granting of legal status on residency, it is argued that claimant-ap-pellee’s failure to establish residency is fatal to its claim. I think that this argument falls short, however, because it confuses the logic of appellee’s claim. The claim is perhaps best understood as an argument about the order of reasoning required in interpreting the applicable statutes. Appellant’s argument is, in effect, that because appellee is not a resident of the District, it is unentitled to benefits predicated on District residency under section 35-1903(2)(A). Most cogently stated, however, appellee’s position is that section 29-399.1, applied after the determination of rights appellee would have if it were a District resident under section 35-1903(2)(A), grants appellee exactly the same rights. Moreover, inasmuch as nothing in section 29-399.1 purports to transform appellee into a District resident, but only to grant it rights identical to those of a District resident, section 29-399.1 is properly applied only after a resident’s rights are determined under section 35-1903(2). Appellant cannot circumvent the effect of section 29-399.1 by arguing as if that section were to be applied prior to the application of section 35-1903(2)(A).
Thus, consistent with the court’s holding-in Indian Lakes, supra, the statute does not confer residency upon claimant-appel-lee, but it does confer the legal status of a resident upon it. As this implies, the issue is not whether claimant-appellee failed to establish residency as a predicate to its enjoyment of rights granted by the Insurance Guaranty Association Act, but whether its compliance with section 29-399.1 enti-*572tied it to enjoy rights otherwise granted only to domestic corporations under that Act. Since the right to recover under the Insurance Guaranty Association is vouchsafed to domestic corporations, and no provision expressly excludes foreign corporations from this right, it follows that such compliance did entitle claimant-appellee to enjoy those rights under section 29-399.1.4
I believe appellant’s contention that this reading of section 29-399.1 gives a domestically insured foreign corporation preferred status vis-a-vis domestic corporations lacks merit. Of course, section 29-399.1 purports to give authorized foreign corporations “the same rights and privileges as, but no greater rights and privileges than, a domestic corporation....” Id. Appellant argues that since the Insurance Guaranty Association Act was passed to benefit’policyholding District residents, who must ultimately absorb the expenses and claims paid by DCIGA, a foreign corporation would enjoy preferred status if deemed (or given rights equivalent to those of) a “resident” for purposes of section 35-1903(2)(A). However, as an insured under the Eastern indemnity policy, appellee was, like any domestic claimant, a participant in the Insurance Guaranty Association funding scheme, and thus enjoyed no “free ride,” as appellant suggests.5 Indeed, having undertaken the costs and obligations of obtaining legal rights and privileges equivalent to those of a domestic corporation under 29-399.1, and having paid premiums to Eastern (and thus, indirectly, to DCIGA) for the benefit of indemnity coverage, ap-pellee would be placed at a distinct disadvantage if its premiums did not entitle it to the same protections afforded domestic claimants. It would indeed be unfair to an authorized foreign corporation to compel it to pay indirect DCIGA premiums but withhold the benefit of DCIGA coverage. To the extent that appellee has supported our insurance guaranty system, we should not countenance its exclusion from the benefits of that system.
*573II
For these reasons, I believe that section 29-339.1 compels the granting to authorized foreign corporations of the rights afforded domestic corporations under section 35-1903(2). Regardless of the policies or interests involved, that is the plain reading of the mandatory import of these laws. I am nonetheless troubled by an extreme case that such a reading might fail to preclude, for it appears possible for an authorized foreign corporation to obtain insurance of an out-of-state risk from a foreign insurer with DCIGA membership, and successfully lodge a claim with DCIGA upon the failure of the foreign insurer, despite the District’s obvious indifference to the claim involved.
While section 35-1903(2) must be read together with section 29-399.1, a plain reading of the former makes it evident that the legislature intended to guaranty claims with a stronger nexus to the District than that presented by the foreign insured interest of a foreign corporation. The legislature apparently intended to protect claims by domestic corporations or involving domestic property. But because the District grants authorized foreign corporations the same rights as domestic corporations, an enterprising lawyer for a foreign corporation doing all of its business outside the District, chartered in a state that lacks provision for the guaranty of insurance policies, could advise her client to obtain a District of Columbia certificate of authority and insurance from a DCIGA member in order to obtain a DCIGA guaranty. DCI-GA would find itself guarantying many transactions having no connection with the District of Columbia, at the expense of DCIGA members and their customers.
I emphasize, of course, that this is not the case before us, for the District retains a strong interest in contracts, like appel-lee’s, that are to be performed within its jurisdiction. See supra note 4. This court would indeed be overreaching if, in a holding, it addressed problems unnecessary to reach, and the per curiam opinion properly limits itself to all that is necessary to decide this case. Because I am concerned, however, that the “residency” argument may open an opportunity for abuse, and that nothing in the statutes limits its applications in such a way as to preclude such abuse, I take this opportunity to suggest a legislative response.
Having expressed my concerns, I am happy to join the per curiam opinion.

. See, e.g., 28 U.S.C. § 1332(c) (1982 & Supp. V 1987) (for purposes of federal diversity or removal jurisdiction “a corporation shall be deemed a citizen of any State by which it has been incorporated or where it has its principal place of business”); Federal Power Commission v. Texaco, supra 377 U.S. at 37-38, 84 S.Ct. at 1108-1109 (construing statute allowing federal venue based on corporate "location” or "principal place of business”); Schollenberger, supra at 376 (construing statute granting jurisdiction over corporations "found” within state to include foreign corporations consenting to be sued); Bergen Shipping Co., Ltd. v. Japan Marine Services, Ltd., 386 F.Supp. 430, 433-34 (S.D.N.Y.1974) (foreign corporation with principal place of business in state deemed a citizen of the state for purposes of federal diversity jurisdiction).

. As Fletcher’s treatise on corporations remarks:
[Gjenerally speaking, a corporation is regarded as a “citizen,” "resident,” "inhabitant" ... whenever and to the extent that this becomes necessary to give full effect to the purpose and spirit of the statute or constitution and the words thereof will permit such a construction. Consequently, whether a corporation is included within such a provision depends largely upon its object.
Id., § 8300. Thus, for purposes of statutory construction, the terms "foreign corporation” and "nonresidential corporation" are not necessarily synonymous. Id. Further, questions regarding domicile or corporate residence may arise under widely different statutory provisions in connection with such diverse issues as jurisdiction, attachment, taxation, and bankruptcy, and must be treated individually, "in connection with the particular question or phase of law in which they arise.” Id.

. But see Charles Friend & Co. v. Goldsmith & Seidel Co., 138 N.E. 185, 307 Ill. 45 (1923):
While the act does not declare foreign corporations complying with its terms to be domestic corporations nor purport to adopt the foreign corporations, it does clothe foreign corporations with the same powers, rights, and privileges, and imposes upon them the same liabilities and duties, as domestic corporations. There is essentially no difference between the foreign and domestic corporation. The intention was to obliterate any distinction in the treatment of domestic corporations and foreign corporations which had complied with the act. The effect was to give the foreign corporation the same standing in the eye of the law as the domestic corporation, giving it the same rights and subjecting it to the same remedies....

. Nor does an examination of the Act’s underlying purposes suggest that it was intended to exclude foreign corporations authorized to transact business in the District of Columbia. The Comment to the analogous provision of the Model Act states that the purpose of the Act is "to avoid financial loss to claimants or policyholders because of the insolvency of an insurer,” and thus indicates no distinction between domestic and foreign claimants with substantial interests in the locale. While there is perhaps a superficial preference for protecting the interests of domestic corporate and natural persons, this preference is negated by the obvious policy advantages of protecting all enterprises that seek to participate in and thereby enrich the local market. As the per curiam opinion shows, the jurisdiction with the greatest interest in the transaction is the District of Columbia, where the project was undertaken. It is also implausible that Congress intended to exclude foreign corporations from the protection of the Act, where such an exclusion would place domestically licensed insurers at a disadvantage in competing with insurers licensed in a foreign corporation’s home jurisdiction for the opportunity to insure contracts entered in the District of Columbia.

. Under the statutory funding scheme, D.C.Code § 35-1906 (1988 Repl.), DCIGA is supported by assessments charged against member insurers. These assessments are calculated according to a formula representing the ratio of net direct written premiums of a particular insurer (Ni) to net direct written premiums of all member insurers (Na). Id. Net direct written premiums are gross premiums written in the District of Columbia on all policies to which the law applies (G), less return premiums on the same policies (R) and dividends paid to policyholders (D). D.C.Code § 35-1903(5) (1988 Repl.). The assessment formula may be rendered thus:
Assessment = Nj where N¡ = G - (R + D).
Ñ.
As appellant has argued, this formula offers no assurance that any part of the particular premium paid by appellee in fungible dollars ever found its way into the DCIGA fund, since the insurer’s assessment is derived from its net direct written premiums, and not from the premiums paid by any particular policyholder. The same can be said, however, of all policyholders. The premium paid by appellee was presumably no less than that a domestic policyholder would pay for like insurance under the same circumstances, and like the premium paid by that domestic policyholder, was a function of all the premiums collected and expenses incurred by the insurer, including the cost of assessments paid by the insurer to DCIGA. See D.C.Code § 35-1914 (1988 Repl.). Had there been a substantial reduction in those assessments, appel-lee’s premium, like those of all other policyholders, would have been reduced in some measure. Thus, inasmuch as the rate of appellee’s premium depended on the rate of assessment DCIGA imposed on its insurer, appellee can be said to have paid a share of the assessment to DCIGA.