Watson & Associates, Inc. v. Green, MacDonald & Kirscher

No. 92-042
IN THE SUPREME COURT OF THE STATE OF MONTANA
1992
WATSON & ASSOCIATES, INC.,
an Arizona corporation,
Plaintiff and Respondent,
-vs-
GREEN, MacDONALD & KIRSCHER, a Montana
partnership; JACK L. GREEN, 11, P.C.,
a Montana professional corporation;
JACK L. GREEN, 11; and RALPH B. KIRSCHER,
APPEAL FROM: District Court of the Twentieth Judicial District,
In and for the County of Lake,
The Honorable Leif B. Erickson, Judge presiding.
COUNSEL OF RECORD:
For Appellants:
Sherman V. Lohn and Susan P. Roy; Garlington, Lohn
& Robinson, Missoula, Montana
For Respondent:
Michael J. McKeon, McKeon &Anderson, Butte, Montana
C. Kathleen McBride and Greg J. Skakles; Johnson,
Skakles & Kebe, Anaconda, Montana
Submitted on Briefs: April 23, 1992
Decided: June 23, 1992
Filed:
f"
Y
Justice Terry N, Trieweiler delivered the opinion of the Court.
This is an appeal from the order of the ~istrictCourt of the
Twentieth ~udicial District, Lake County, denying defendants'
motion to dismiss plaintiff Is complaint. We affirm the ~istrict
Court.
The sole issue is whether the District Court erred in its
determination that filing of the complaint tolled the statute of
limitations until the plaintiff was subsequently certified as a
foreign corporation authorized to do business in Montana, pursuant
to § 35-2-1004, MCA.
Watson & Associates, Tnc., an Arizona corporation, filed an
action alleging professional negligence, breach of fiduciary duty,
and breach of the covenant of good faith by the defendants. The
complaint was filed on January 13, 1988, and defendants were served
with the summons in January 1989. On April 17, 1989, defendants
moved to dismiss the complaint on the grounds that plaintiff was
not a foreign corporation qualified to do business in Montana under
5 35-1-1004, MCA (1989). Plaintiff received its certificate of
authority to do business in Montana on March 21, 1983, but allowed
the certificate to lapse on November 2, 1987. It contends that it
did so because it was no longer transacting business in Montana.
Plaintiff reobtained its certificate on May 2, 1989. The
motion to dismiss was argued on May 9, 1989. At that hearing,
defendants stated additional grounds for their motion. They
alleged that the statute of limitations had run prior to the time
that plaintiff reobtained its certificate of authority. On
August 9, the District Court issued order denying
defendants1 motion to dismiss. The order was certified for appeal
pursuant to Rule 54 (b), M. R. C ~ VP.
. Defendants appeal that
certified order.
Defendants contend that the District Court erred in its
conclusion that the statute of limitation for legal malpractice
contained in 5 27-2-206, MCA, was tolled when plaintifffscomplaint
was filed on January 13, 1988. Defendants assert that plaintiff
had no authority to commence an action in Montana until it
reacquired its certificate of authority to conduct business,
pursuant to § 35-1-1004(1), MCA (1989). That statute states:
(1) 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 in 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.
(2) 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. [Emphasis added.
It is significant that 5 35-1-1004(1), MCA, uses the term
%aintainl' in reference to actions or suits. The majority of
courts having addressed the issue of the meaning of tfmaintainlt
have
determined the term to be distinguishable from the terms lfcommencew
or institute.
If These courts have concluded that "maintainu means
to continue an action that has already begun, and not to prohibit
an action from being initiated.
In Charles W Smith and Sons Excavatiitg, Inc. v. Liclttefeld-Massaro, I ~ K .
.
(Ind. 1985), 477 N.E.2d 308, the Indiana Court of Appeals, faced
with a statute similar to 5 35-1-1004(1), MCA, stated:
A fundamental rule of statutory interpretation is
that words and phrases should be given their plain,
ordinary, and usual meaning. [Citation omitted.]
Blackts Law Dictionary, 5th Ed. 1979 provides:
To "maintainn an action is to uphold, continue
on foot, and keep from collapse a suit already
begun, or to prosecute a suit with effect.
Geolge Moore Ice Cream Co. v. Rose, Ga., [ 19 3 3 ,1 2 8 9
U.S. 373, 53 S,Ct. 620, 77 L. Ed. 1265. To
maintain an action or suit may mean to
commence or institute it; the term imports the
existence of a cause of action. Maintain,
however, is applied to actions already
brought, but not yet reduced to judgment.
Smallwoodv. Gallardo, ~1929, 2 7 5 U.S. 56, 48 s.c~.
]
23, 72 L. Ed. 152. In this connection it means
to continue or preserve in or with; to carry
on.
... Accordingly, attention must be given to those
in
earlier cases interpreting wmaintainll the context of
"to maintain any suit or action of law or in equity upon
any claim, legal or equitable. . . ."
Our review reveals
that historically the appellate courts have held that the
language of the statute is not to operate as a bar to
action once commenced but merely means to suspend further
legal proceedings until such time as the statutory
provisions have been complied with. [Citations omitted.]
. . . Accordingly, we reverse the trial court's
order dismissing this cause of action. We hold that the
failure of a plaintiff foreign corporation to obtain a
Certificate under I.C. 23-1-11-14 by the date of the
filing of its complaint in Indiana courts merely suspends
rather than bars further legal proceedings until such
time as the Certificate is obtained.
In Oxford Paper Co. v. S. M. Liquidation Co. (196 5 ) , 257 N.Y. 2d 395, the
court contrasted "maintainN and "commence." The court stated:
Section 1312 of the New York Business Corporation Law
does not provide that a foreign corporation doing
business in this state without authority may not
wcommencell an action here, or that such an action, if
instituted, shall be forthwith dismissed. The provision
is that such a plaintiff may not "maintain" an action in
this state, and that is so "unless and until such
corporation has been [so] authorized * * * 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 authority1'. Thus, it
would seem that, upon receipt of such authority and upon
payment of such sums, an action previously commenced may
be maintained.
If I am correct in my view that "maintaino should
not be narrowly construed to mean "commence," it is a
fortiori obvious that, if it be shown, as here, that the
foreign corporation doing business in this state had the
requisite authority before the institution of suit, it
may continue to maintain the action and invoke the
remedies of the law provided for its prosecution or
conclusion.
Oxford, 257 N.Y.S.2d at 399-400.
Section 35-1-1004, MCA, is taken from the Model Business
Corporation Act, as proposed by the American Bar Association in
1960. In the Official Comments to the Act, 3 117 states:
If suit has been instituted prior to qualification, the
corporation may then qualify and continue its litigation
without the necessity of refiling suit after
qualification, which may be important if a statute of
limitations is involved.
The weight of authority, along with comments from the authors
of the section we are interpreting, supports the decision of the
District Court. Section 27-2-206, MCA, prohibits the
tlcornrnencementll
of suit after three years from the date of
occurrence. Had the Montana Legislature wished to prohibit the
commencement of suits by nonauthorized corporations, it would have
expressly declared its intentions by statute. It did not do so.
The District court correctly interpreted the statute to allow the
commencement of suit by Watson & Associates, which it did in a
timely manner. The effect of 5 35-1-1004 (11, MCA, is to suspend
the proceedings once suit has been filed until the statute has been
complied with, and then allow the suit to go forward.
Accordingly, we affirm the District Couft.
We concur:
June 23, 1992
CERTIFICATE OF SERVICE
1 hereby certify that the following order was sent by United States mail, prepaid, to the
following named:
Sherman V. b h n , Esq.
Susan P. Roy, Esq.
GARLINGTON, LOHN & ROBINSON
P.O. Box 7909
Missoula, MT 59807
MICHAEL J. McKEON, Esq.
Attorney at Law
P.O. Box 3329
Butte, MT 59702
C. Kathleen McBride and Greg J. Skakles
Johnson, Skakles & Kebe
P.O. Box 1413
Anaconda, MT 59711
ED SMITH
CLERK OF THE SUPREME COURT
STATE OF MONTANA