Reese v. Harper Surface Finishing Systems

129 A.D.2d 159, 517 N.Y.S.2d 522, 1987 N.Y. App. Div. LEXIS 43956
CourtAppellate Division of the Supreme Court of the State of New York
DecidedJune 29, 1987
StatusPublished
Cited by4 cases

This text of 129 A.D.2d 159 (Reese v. Harper Surface Finishing Systems) is published on Counsel Stack Legal Research, covering Appellate Division of the Supreme Court of the State of New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Reese v. Harper Surface Finishing Systems, 129 A.D.2d 159, 517 N.Y.S.2d 522, 1987 N.Y. App. Div. LEXIS 43956 (N.Y. Ct. App. 1987).

Opinion

OPINION OF THE COURT

Lawrence, J. P.

On this appeal, we are asked to determine whether the defendant third-party plaintiff Harper Surface Finishing Systems, doing business as The Harper Company (hereinafter Harper), a Connecticut corporation, must obtain authority to do business in this State and pay any required fees, penalties and franchise taxes, pursuant to Business Corporation Law § 1312, before it may continue to prosecute its third-party suit. We conclude that under the circumstances, Harper should not be precluded by the requirements of Business Corporation Law § 1312 from maintaining its claim against the third-party defendant Baldwin Buffing Corporation (hereinafter Baldwin).

I

We begin with the procedural history of this case. The infant plaintiff Charles Reese and his mother, the plaintiff Sarah Reese, seek to recover money damages based upon the injuries allegedly sustained by the infant plaintiff while he was employed by Baldwin. It was specifically contended that the infant plaintiff had been injured by a buffing machine manufactured and supplied to Baldwin by Harper.

Harper served upon Baldwin a third-party complaint wherein it was averred, in pertinent part, that if Charles Reese had been injured in the manner alleged, his injuries were caused by "[t]he negligence, and/or violation of statute” by Baldwin. Therefore, Harper claimed that "if the plaintiff [161]*161[sic] recovered] any sums against [it], [it would] be entitled to indemnification and/or contribution from and to have judgment over and against [Baldwin] for all such sums or a part thereof’. Baldwin, in its third affirmative defense asserted in its answer to the third-party complaint, contended, in relevant part, that Harper lacked the capacity to prosecute its third-party action, because it was a foreign corporation doing business in New York without authority, in contravention of Business Corporation Law § 1312 (a).

Harper subsequently moved, in pertinent part, to strike the third affirmative defense in Baldwin’s answer on the grounds that (1) its third-party action was not barred by Business Corporation Law § 1312 (a) because its suit was a defensive procedure permitted pursuant to Business Corporation Law § 1312 (b); and (2) since it was not doing business in this State, it was not required to comply with the provisions of Business Corporation Law § 1312 (a). In opposition, Baldwin cross-moved to dismiss the third-party complaint on the basis of its third affirmative defense or in the alternative, to stay the third-party action until Harper met the requirements of Business Corporation Law § 1312.

By an order dated April 24, 1985, the Supreme Court, Nassau County (Becker, J.), in pertinent part, rejected Harper’s contention that Business Corporation Law § 1312 was not applicable to a third-party claim but ordered a hearing to determine whether Harper was doing business in New York within the meaning of that statute. After the hearing, the Supreme Court, Nassau County (Kelly, J.), concurred with the earlier determination that Business Corporation Law § 1312 was applicable to the third-party action, and further concluded that since 1976 Harper had been doing business in this State within the meaning of the statute. The court, by its order entered May 15, 1986, in effect, denied that branch of Harper’s motion which was to dismiss the third affirmative defense in Baldwin’s answer and granted that branch of Baldwin’s cross motion which sought to stay the third-party action until Harper complied with the provisions of Business Corporation Law § 1312. We reverse.

II

Harper first contends that Business Corporation Law § 1312 is not applicable to its third-party action. With respect to this issue, we are presented with an apparent case of first impres[162]*162sion in that neither we nor the parties have discovered any New York cases which have specifically determined whether Business Corporation Law § 1312 bars a foreign corporation doing business in New York without authorization from maintaining a third-party action.

Business Corporation Law § 1312 provides, in pertinent part, that:

"(a) A foreign corporation doing business in this state without authority shall not maintain any action or special proceeding in this state unless and until such corporation has been authorized to do business in this state and it has paid to the state all fees, penalties and franchise taxes for the years or parts thereof during which it did business in this state without authority * * *
"(b) The failure of a foreign corporation to obtain authority to do business in this state shall not * * * prevent the foreign corporation from defending any action or special proceeding in this state”.

The purpose of this statute (and its predecessors) is to regulate foreign corporations which are conducting business in New York so that they will not be on a more advantageous footing than domestic corporations (see, Von Arx, AG. v Breitenstein, 52 AD2d 1049, 1050, affd 41 NY2d 958). Specifically, the statute is designed to encourage foreign corporations to qualify to conduct intrastate business and to pay the State taxes levied on that intrastate business (see, Comment, A Proposed Minimum Threshold Analysis for the Imposition of State Door-Closing Statutes, 51 Fordham L Rev 1360, 1361 [1983]). The statute was not enacted to deny foreign corporations access to the courts of New York (see, International Text Book Co. v Tone, 220 NY 313; Tinterorias Ibericas De Peleteria v Gafco, Inc., 114 AD2d 329; Von Arx, AG. v Breitenstein, supra).

As noted, while there are no decisions specifically construing the current statute with regard to third-party complaints,1 [163]*163decisions by the courts of this State under the predecessor laws warrant the conclusion that a foreign corporation doing business in New York without authorization may serve a third-party complaint under the circumstances herein.

In Alsing Co. v New England Quartz & Spar Co. (66 App Div 473, affd 174 NY 536), involving an action to recover upon a promissory note given by the defendant, a foreign corporation doing business in New York without authorization, the courts upheld a judgment in favor of the defendant upon its counterclaim. The Appellate Division, First Department, specifically stated that former General Corporation Law § 15 (L 1892, ch 687)2 did not prevent the defendant from recovering upon a counterclaim which sought to recover moneys already paid upon the note. "Under the act of 1892 it is clear, we think, that a foreign corporation which has been made a party in ,an action in our courts has a right, in addition to contesting the claim made against it, to recover upon a counterclaim based upon the same transaction. The defendant, having been brought into court and thus made to defend, should be allowed, unless there is a distinct provision to the contrary, not only to defend but also to litigate any question arising out of the transaction that has been made the basis of the plaintiff's complaint. There is no such prohibitive provision in this statute, and, therefore, the obtaining of the certificate would not be a prerequisite to a recovery upon the counterclaim in question” (Alsing Co. v New England Quartz & Spar Co., supra, at 476; emphasis supplied).

In the subsequent case of Howden & Co.

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129 A.D.2d 159, 517 N.Y.S.2d 522, 1987 N.Y. App. Div. LEXIS 43956, Counsel Stack Legal Research, https://law.counselstack.com/opinion/reese-v-harper-surface-finishing-systems-nyappdiv-1987.