Drake Manufacturing Co. v. Polyflow, Inc.

J-S01028-15
2015 Pa. Super. 16
DRAKE MANUFACTURING COMPANY, IN THE SUPERIOR COURT OF
INC. PENNSYLVANIA
Appellee
v.
POLYFLOW, INC.
Appellant No. 959 WDA 2014
Appeal from the Judgment Entered June 11, 2014
In the Court of Common Pleas of Warren County
Civil Division at No(s): 406 OF 2009
BEFORE: GANTMAN, P.J., JENKINS, J., and MUSMANNO, J.
OPINION BY JENKINS, J.: FILED JANUARY 23, 2015
Polyflow, Inc. (“Polyflow”) appeals from a money judgment entered in
favor of Drake Manufacturing Company, Inc. (“Drake”) in Drake’s action for
breach of contract. Polyflow argues that the trial court erroneously denied
Polyflow’s motion for judgment n.o.v., because at the time of trial, Drake
lacked capacity to sue Polyflow due to Drake’s failure to register in
Pennsylvania as a foreign business corporation.
Polyflow timely raised Drake’s lack of capacity to sue as an affirmative
defense to Drake’s action. At trial, Polyflow demonstrated that Drake failed
to obtain a certificate of authority to do business in Pennsylvania as a
foreign corporation, thus prohibiting Drake from prosecuting this lawsuit. 1
____________________________________________
1
See 15 Pa.C.S. § 4141 (entitled “Penalty For Doing Business Without
Certificate Of Authority”) (“a nonqualified foreign business corporation doing
business in this Commonwealth within the meaning of Subchapter B
(Footnote Continued Next Page)
J-S01028-15
Based on this defense, the trial court should have granted Polyflow’s motion
for compulsory nonsuit at the close of Drake’s case-in-chief. Instead, it
entered a verdict in Drake’s favor.
Polyflow filed timely post-trial motions seeking judgment n.o.v. In
response to Polyflow’s post-trial motions, Drake submitted a certificate of
authority to the trial court almost two months after the verdict. The trial
court relied on this certificate as justification for denying Polyflow’s post-trial
motions. We construe our Supreme Court’s decision in Claudio v. Dean
Machine Co., 831 A.2d 140 (Pa.2003), to prohibit Drake from submitting
evidence in post-trial proceedings that it failed to submit during trial due to
its own lack of reasonable diligence. The trial court thus erred in denying
Polyflow’s post-trial motion for judgment n.o.v. We reverse and remand for
entry of judgment in favor of Polyflow.
I.
In late 2007, Drake, a Delaware corporation, entered an agreement to
sell “couplings” to Polyflow, which the agreement defined as “products
designed by Polyflex for use as termination fittings in Polyflex’s Thermoflex
_______________________
(Footnote Continued)
(relating to qualification) shall not be permitted to maintain any action or
proceeding in any court of this Commonwealth until the corporation has
obtained a certificate of authority”).
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Tubing.”2 The agreement provided that Drake would ship the couplings from
Drake’s plant in Sheffield, Pennsylvania to Polyflow.3 The record includes
approximately 75 bills from Drake to Polyflow for couplings between August
2008 and April 2009.4 These bills indicate that Drake shipped most of the
couplings from its plant in Sheffield, Pennsylvania to Polyflow’s business
establishment in Oaks, Pennsylvania.5 Other bills during the same time
period indicate that Drake shipped equipment known as “portable swaging
machines” to Polyflow.6 On occasion, Polyflow directed Drake to ship
couplings to out-of-state destinations such as California, Holland and
Canada.7
On June 10, 2009, Drake filed a civil complaint for breach of contract
alleging Polyflow’s failure to pay Drake for the couplings and portable
swaging machines.8 Polyflow did not file preliminary objections to the
____________________________________________
2
Trial Transcript, 2/25/14 (“Tr.”), plaintiff’s exhibit A, ¶¶ 1.5, 6.1
(agreement between Drake and Polyflow).
3
Plaintiff’s exhibit A, ¶ 7.
4
Plaintiff’s exhibit G.
5
Plaintiff’s exhibit G.
6
Plaintiff’s exhibit D.
7
Plaintiff’s exhibit G.
8
See Complaint, June 10, 2009.
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complaint. On August 27, 2010, Polyflow filed an answer to the complaint
which alleged in a new matter that “plaintiff is not registered and authorized
to maintain suit in Pennsylvania.”9
On July 29, 2013, Polyflow filed a pretrial statement which
incorporated its new matter by reference and which listed as an exhibit
“Pennsylvania Corporations Bureau information on [Drake].”10
The court held a short non-jury trial on the morning of February 25,
2014. Drake presented evidence of Polyflow’s failure to pay for machinery
that Drake provided.11 Polyflow did not dispute its failure to pay Drake or
contend that Drake failed to perform its duties under the 2007 agreement.
Polyflow’s only defense was that Drake lacked capacity to sue Polyflow due
to Drake’s failure to obtain a certificate of authority from the Department of
State authorizing Drake to do business in Pennsylvania as a foreign
corporation.12 Drake did not possess a certificate of authority at the time of
____________________________________________
9
Answer to Complaint with New Matter, August 30, 2010, ¶ 36.
10
Polyflow’s Pretrial Statement, July 29, 2013, p. 2.
11
Tr., pp. 8-11, 17-30.
12
Tr., pp. 12-16 & exhibit D-4 (certification from Department of State that
examination of its records failed to disclose Drake’s registration as a foreign
corporation).
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trial.13 Indeed, Drake did not even apply for a certificate of authority until
the day of trial.14
At the close of Drake’s case-in-chief, Polyflow moved for a compulsory
nonsuit due to Drake’s lack of capacity to sue, i.e., its failure to submit a
certificate of authority from the Department of State into evidence.15 The
court denied Polyflow’s motion for nonsuit.16 Polyflow did not present any
further evidence, and the court announced its verdict in favor of Drake in the
amount of $291,766.61.17
On March 5, 2014, Polyflow filed timely post-trial motions seeking
judgment n.o.v. due to Drake’s failure to submit a certificate of authority
into evidence.18 On March 17, 2014, the Department of State issued Drake
a certificate of authority to do business in Pennsylvania as a foreign
____________________________________________
13
Trial Exhibit D-4 (Department of State record indicating Drake did not
possess certificate of authority); Tr., pp. 13-14 (testimony by Drake’s officer
that “at this moment in time, I don’t have [a certificate of authority] on me,
no. I’m not saying that we don’t have anything, I just don’t have it with
me”).
14
See Plaintiff’s Response in Opposition to Defendant’s Motion for Post-Trial
Relief, exhibit A (filed April 17, 2014) (signature line of application for
certificate of authority dated February 25, 2014).
15
Tr., pp. 30-33.
16
Id.
17
Tr., p. 36.
18
Defendant’s Motion for Post-Trial Relief, ¶ 1 (filed March 5, 2014).
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corporation.19 On April 17, 2014, almost two months after the verdict,
Drake submitted its certificate of authority as an exhibit to its response to
Polyflow’s post-trial motions.20 On May 23, 2014, relying on the delinquent
certificate of authority, the trial court denied Polyflow’s post-trial motions.21
Polyflow thereupon entered judgment on the verdict and filed a timely notice
of appeal.22 Both Polyflow and the trial court complied with Pa.R.A.P. 1925.
Polyflow raises the following issues on appeal:
1. Did the Court commit an error of law and/or abuse
its discretion when it entered an award in favor of
[Drake], and failed to enter nonsuit and/or dismiss
[Drake]’s claims, where the evidence and pleadings
demonstrated that [Drake] was a foreign business
corporation that had not registered and obtained
authority to maintain suit in Pennsylvania, pursuant
to 15 Pa.C.S.A. § 4141(a)?
2. Did the Court commit an error of law and/or abuse
its discretion when it based its decision on
documents not in evidence, such as the corporate
registration documents attached to [Drake]’s
unverified response to [Polyflow]’s post-trial motion?
____________________________________________
19
Plaintiff’s Response in Opposition to Defendant’s Motion for Post-Trial
Relief, exhibit A (filed April 17, 2014).
20
Id.
21
Memorandum Opinion, May 23, 2014 (“Memorandum Opinion”), pp. 2, 5-
6.
22
Praecipe for Entry of Judgment and Notice of Appeal (filed June 11, 2014).
See also Pa.R.Civ.P. 227.4(1) (upon praecipe of any party, prothonotary
shall enter judgment on the decision of a judge following a non-jury trial).
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3. Did the Court commit an error of law and/or abuse
its discretion when it failed to determine that the
statute of limitations prevents [Drake] from
obtaining judgment in this case?
4. Did the Court commit an error of law and/or abuse
its discretion when it failed to determine that [Drake]
was first required to register and obtain authority
from the Department of State before it could lawfully
initiate legal proceedings in the Commonwealth?
5. Did the Court commit an error of law and/or abuse
its discretion in determining that [Drake] was not
required to respond to [Polyflow]’s Answer and New
Matter allegation about [Drake] not being registered
or authorized to maintain suit in Pennsylvania, and in
failing to determine that [Drake] was required to
answer [Polyflow]'s Request for Admissions including
an acknowledgment that [Drake] is not a registered
corporation in Pennsylvania?
6. Did the Court commit an error of law and/or abuse
its discretion, to the extent that it based its decision
on a determination that the defenses raised in
[Polyflow]'s New Matter were required to be raised
by way of Preliminary Objections, Motion for
Judgment on the Pleadings or Motion for Summary
Judgment?23
We distill these questions into three issues: (1) whether Polyflow preserved
the issue of Drake’s lack of capacity to sue24; (2) whether the trial court
should have granted Polyflow’s post-trial motion for judgment n.o.v. due to
____________________________________________
23
Brief For Appellant, p. 6.
24
Issue 6 in Polyflow’s brief.
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Drake’s failure to present a certificate of authority prior to the verdict25; and
(3) whether the trial court erroneously denied Polyflow’s post-trial motions
by accepting into evidence a certificate of authority that Drake obtained after
the verdict.26 Resolution of these issues eliminates the need to review the
two remaining issues in Polyflow’s brief.27
II.
We find that Polyflow preserved for appeal the issue of Drake’s lack of
capacity to sue.
We begin by analyzing whether Polyflow timely raised this issue in its
pleadings. A defendant timely objects to a plaintiff’s lack of capacity to sue
if the defendant raises this issue in preliminary objections or in its answer to
the complaint. See Pa.R.Civ.P. 1028(a)(5) (defendant may raise lack of
capacity to sue as preliminary objection); Erie Indemnity Co. v. Coal
Operators Casualty Co., 272 A.2d 465, 467 (Pa.1971) (“the issue of
incapacity to sue is waived unless it is specifically raised in the form of a
preliminary objection or in the answer to the complaint”) (emphasis added);
Huddleston v. Infertility Center of America, 700 A.2d 453, 457
(Pa.Super.1997) (citing Erie Indemnity) (“challenges to a litigant's capacity
____________________________________________
25
Issues 1 and 4 of Polyflow’s brief.
26
Issue 2 of Polyflow’s brief.
27
Issues 3 and 5 of Polyflow’s brief.
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to sue must be raised by way of preliminary objections or answer”); In re
Estate of Alexander, 758 A.2d 182, 189 (Pa.Super.2000) (citing
Huddleston).
It bears emphasis that lack of capacity to sue is treated differently
than other issues listed in Rule 1028. Multiple issues listed in Rule 1028 are
waived if the defendant fails to raise them in preliminary objections, e.g.,
improper service of process or lack of personal jurisdiction. 28 Other issues,
such as lack of subject matter jurisdiction or failure to join an indispensable
party, are never waived.29 Lack of capacity to sue falls between these two
extremes: it is waived not merely through omission from preliminary
objections, but through omission from both preliminary objections and the
answer to the complaint. Erie Indemnity, supra.
Although Polyflow did not file preliminary objections alleging Drake’s
lack of capacity to sue, it did raise Drake’s lack of capacity in paragraph 36
____________________________________________
28
See Crown Const. Co. v. Newfoundland Am. Ins. Co., 239 A.2d 452,
454 (Pa.1968) (defendant waived objection to defective service by failing to
raise issue in preliminary objections and opting instead to file answer to
complaint); Yentzer v. Taylor Wine Co., 186 A.2d 396, 398 (Pa.1962)
(objection to personal jurisdiction is waived through failure to raise this issue
in preliminary objections).
29
See Cobbs v. SEPTA, 985 A.2d 249, 255 (Pa.Super.2009) (subject
matter jurisdiction is never waived and may be raised at any time by parties
or by court sua sponte); Hart v. O'Malley, 647 A.2d 542, 549 (1994) (issue
of failure to join indispensable party is never waived).
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of its answer with new matter. Therefore, Polyflow properly raised this issue
in the pleadings.
Next, Polyflow preserved this issue by requesting a compulsory nonsuit
at the close of Drake’s case-in-chief on the ground that Drake lacked
capacity to sue due to its failure to submit a certificate of authority into
evidence. Youst v. Keck’s Food Service, Inc., 94 A.3d 1057, 1071
(Pa.Super.2014) (party preserves right to request judgment n.o.v. post-trial
by moving either for directed verdict or compulsory non-suit at trial).
Finally, Polyflow preserved this issue for appeal by filing timely post-
trial motions seeking judgment n.o.v. on the ground that Drake failed to
submit a certificate of authority. Pa.R.Civ.P. 227.1(a)(2), (c)(2) (within ten
days after verdict in non-jury trial, party may file post-trial motions
requesting court to direct entry of judgment in its favor).
III.
We turn to whether Polyflow was entitled to judgment n.o.v. due to
Drake’s failure to submit a certificate of authority. A motion for judgment
n.o.v. is a post-trial motion which requests the court to enter judgment in
favor of the moving party. There are two bases on which the court can
grant judgment n.o.v.:
[O]ne, the movant is entitled to judgment as a
matter of law and/or two, the evidence is such that
no two reasonable minds could disagree that the
outcome should have been rendered in favor of the
movant. With the first, the court reviews the record
and concludes that even with all factual inferences
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decided adverse to the movant the law nonetheless
requires a verdict in his favor, whereas with the
second, the court reviews the evidentiary record and
concludes that the evidence was such that a verdict
for the movant was beyond peradventure.
Polett v. Public Communications, Inc., 83 A.3d 205, 212
(Pa.Super.2013). In an appeal from the trial court’s decision to deny
judgment n.o.v.,
we must consider the evidence, together with all
favorable inferences drawn therefrom, in a light most
favorable to the verdict winner. Our standard of
review when considering motions for a directed
verdict and judgment notwithstanding the verdict are
identical. We will reverse a trial court's grant or
denial of a judgment notwithstanding the verdict
only when we find an abuse of discretion or an error
of law that controlled the outcome of the case.
Further, the standard of review for an appellate court
is the same as that for a trial court.
Id. at 211.
Three statutes within Chapter 41, Subchapter B of the Corporations
and Unincorporated Associations Code (“Code”), 15 Pa.C.S. § 101 et seq.,
define when a foreign business corporation must obtain a certificate of
authority and the penalties for failure to obtain a certificate. See 15 Pa.C.S.
§§ 4121, 4122 and 4141.
Section 4121 provides: “A foreign business corporation, before doing
business in this Commonwealth, shall procure a certificate of authority to do
so from the Department of State, in the manner provided in this
subchapter...” 15 Pa.C.S. § 4121(a).
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While the Code does not expressly define “doing business”, section
4122(a) identifies activities which do not constitute “doing business”, either
individually or collectively. Section 4122(a) provides:
Without excluding other activities that may not
constitute doing business in this Commonwealth, a
foreign business corporation shall not be considered
to be doing business in this Commonwealth for the
purposes of this subchapter by reason of carrying on
in this Commonwealth any one or more of the
following acts:
(1) Maintaining or defending any action or
administrative or arbitration proceeding or effecting
the settlement thereof or the settlement of claims or
disputes.
(2) Holding meetings of its directors or shareholders
or carrying on other activities concerning its internal
affairs.
(3) Maintaining bank accounts.
(4) Maintaining offices or agencies for the transfer,
exchange and registration of its securities or
appointing and maintaining trustees or depositaries
with relation to its securities.
(5) Effecting sales through independent contractors.
(6) Soliciting or procuring orders, whether by mail or
through employees or agents or otherwise, and
maintaining offices therefor, where the orders
require acceptance without this Commonwealth
before becoming binding contracts.
(7) Creating as borrower or lender, acquiring or
incurring, obligations or mortgages or other security
interests in real or personal property.
(8) Securing or collecting debts or enforcing any
rights in property securing them.
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(9) Transacting any business in interstate or foreign
commerce.
(10) Conducting an isolated transaction completed
within a period of 30 days and not in the course of a
number of repeated transactions of like nature.
(11) Inspecting, appraising and acquiring real estate
and mortgages and other liens thereon and personal
property and security interests therein, and holding,
leasing, conveying and transferring them, as
fiduciary or otherwise.
Id. (emphasis added). The Committee Comment to section 4122 explains:
[Section 4122] does not attempt to formulate an
inclusive definition of what constitutes the
transaction of business. Rather, the concept is
defined in a negative fashion by subsection (a),
which states that certain activities do not constitute
the transaction of business. In general terms, any
conduct more regular, systematic, or extensive than
that described in subsection (a) constitutes the
transaction of business and requires the corporation
to obtain a certificate of authority. Typical conduct
requiring a certificate of authority includes
maintaining an office to conduct local intrastate
business, selling personal property not in interstate
commerce, entering into contracts relating to local
business or sales, and owning or using real estate for
general corporate purposes
...
A corporation is not ‘doing business’ solely because it
resorts to the courts of this Commonwealth to
recover an indebtedness, enforce an obligation,
recover possession of personal property, obtain the
appointment of a receiver, intervene in a pending
proceeding, bring a petition to compel arbitration,
file an appeal bond, or pursue appellate remedies
...
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The concept of ‘doing business’ involves regular,
repeated, and continuing business contacts of a local
nature. A single agreement or isolated transaction
does not constitute the doing of business if there is
no intention to repeat the transaction or engage in
similar transactions. Since the question is entirely
one of fact, subsection (a)(10) uses the partially
objective test that a transaction completed within 30
days does not constitute ‘doing business’ if it is not
one in the course of ‘repeated transactions of a like
nature.’
Id. (emphasis added).
Lastly, section 4141(a) provides in relevant part that “[a] nonqualified
foreign business corporation doing business in this Commonwealth within the
meaning of Subchapter B (relating to qualification) shall not be permitted to
maintain any action or proceeding in any court of this Commonwealth until
the corporation has obtained a certificate of authority.” 15 Pa.C.S. §
4141(a). A foreign corporation may comply with this requirement by
obtaining a certificate of authority “during the course of a lawsuit.”
International Inventors Inc., East v. Berger, 363 A.2d 1262, 1264
(Pa.Super.1976).30
Applying section 4141(a), this Court has held that a foreign
corporation that failed to obtain a certificate of authority could not bring suit
____________________________________________
30
As this case demonstrates, however, “during the course of a lawsuit” does
not mean that the corporation can wait until the post-trial stage to submit a
certificate of authority. The corporation leaves itself vulnerable to a
compulsory nonsuit if it fails to submit a certificate of authority into evidence
before the close of its case-in-chief. See pp. 16-25, infra.
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in Pennsylvania, because its entry into a contract with the defendant, a
Pennsylvania corporation, and its shipment of lighting fixtures to
Pennsylvania on six occasions over approximately six months constituted
“doing business in this Commonwealth”. Leswat Lighting Systems, Inc.
v. Lehigh Valley Restaurant Group, Inc., 663 A.2d 783, 785
(Pa.Super.1995).
With these statutes as backdrop, we construe the evidence adduced
during trial in the light most favorable to Drake, the verdict winner. Even
under this deferential standard of review, the evidence demonstrates that
Drake failed to submit a certificate of authority into evidence prior to the
verdict in violation of 15 Pa.C.S. § 4121(a). Therefore, the trial court should
not have permitted Drake to prosecute its action. 15 Pa.C.S. § 4141(a).
The trial court contends that Drake is exempt from the certificate of
authority requirement because it merely commenced suit in Pennsylvania to
collect a debt, conduct that does not constitute “doing business” under
section 4122(a)(1) and (8).31 Drake did much more, however, than file suit
or attempt to collect a debt. Drake maintains an office in Pennsylvania to
conduct local business, conduct which “[typically] require[s] a certificate of
authority.” 15 Pa.C.S. § 4122, Committee Comment. Drake also entered
into a contract with Polyflow, and, on dozens of occasions over an eight
____________________________________________
31
Pa.R.A.P. 1925(a) Opinion, p. 5 (filed August 6, 2014) (“Pa.R.A.P. 1925(a)
Opinion”).
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month period, shipped couplings and portable swaging machines to
Polyflow’s place of business in Pennsylvania -- far more than the “isolated
transaction” exempted under section 4122(a)(10) or the six shipments over
a six-month period that we previously held constituted “doing business”.
See Leswat Lighting Systems, supra. In short, Drake’s conduct was
“more regular, systematic, [and] extensive than that described in [section
4122(a), [thus] constitut[ing] the transaction of business and requir[ing]
[Drake] to obtain a certificate of authority.” See 15 Pa.C.S. § 4122,
Committee Comment.
We also hold that Drake needed a certificate of authority to sue
Polyflow in Pennsylvania for Polyflow’s failure to pay for out-of-state
shipments in California, Canada and Holland. A foreign corporation that
“does business” in Pennsylvania within the meaning of section 4122 must
obtain a certificate in order to prosecute a lawsuit in this Commonwealth,
regardless of whether the lawsuit itself concerns in-state conduct or out-of-
state conduct.
The trial court thus erred by denying Polyflow’s motion for judgment
n.o.v.
IV.
Three weeks after the verdict, Drake obtained a certificate of authority
from the Department of State. Almost two months after the verdict, Drake
submitted this certificate in response to Polyflow’s post-trial motion seeking
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judgment n.o.v. The trial court relied on this certificate of authority as its
basis for denying Polyflow’s post-trial motions.32 This was error.
A party cannot use the post-trial motion stage as a vehicle for
introducing new evidence that it could have submitted prior to the verdict
through the exercise of reasonable diligence. Claudio v. Dean Machine
Co., supra. Therefore, Drake had no right to submit the certificate of
authority into the record in the post-trial motion stage.
In Claudio, our Supreme Court addressed “whether a trial court can,
pursuant to [Pa.R.Civ.P.] 227.1, conduct a post-trial evidentiary hearing and
grant post-trial relief to correct an error when the error alleged is
attributable. . .to the party seeking relief.” Claudio, 831 A.2d at 141. The
Court held that Rule 227.1 “is not a vehicle by which a trial court can correct
an error of a party.” Id. Rule 227.1 is only a vehicle for the court “to
correct its own error.” Id. at 145 (collecting cases).
The two plaintiffs in Claudio filed a personal injury complaint against
Dean Machine Company (“DMC”). Id. Dean Machine, Inc. (“DMI”) filed an
answer to the complaint averring that the complaint incorrectly designated
DMI as “Dean Machine Company”. Id. at 141-42. Shortly before trial, DMI
filed a motion in limine to preclude the Claudios from presenting any
evidence against DMI on the ground that the plaintiffs had signed a
____________________________________________
32
Pa.R.A.P. 1925(a) Opinion, p. 5.
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stipulation to dismiss DMI from the case. Id. at 142. The trial court denied
this motion. Id. In addition, the plaintiffs filed a motion to amend the
caption to substitute DMI for DMC. Id. The trial court denied this motion as
well. Id.
The jury entered two verdicts against DMC: a verdict for $2.5 million
in favor of one plaintiff and a verdict of $150,000 in favor of the other
plaintiff. Id. at 142-43. The plaintiffs filed a post-trial motion under Rule
227.1 to amend the caption and mold the verdict to enter judgment against
DMI. Id. at 143. The court permitted the plaintiffs to present evidence on
the issue of whether DMI was the successor corporation to DMC. Id.
Following receipt of evidence, the court granted the plaintiffs’ motion to
substitute DMI for DMC and enter judgment against DMI. Id. The Superior
Court vacated the judgment of the trial court and remanded for a new trial.
Id. The Superior Court determined that the trial court acted properly when
it amended the caption and molded the verdict to substitute DMI as the
proper defendant, but it reasoned that the proper course of action following
substitution was to remand for a new trial. Id. at 143-44.
Our Supreme Court reversed the Superior Court and remanded the
case with instructions to enter judgment solely against DMC. Id. at 147.
The Court reasoned that the purpose of Rule 227.1 is to permit the trial
court to correct its own error prior to entry of judgment, not the error of a
party. Id. at 145. The plaintiffs failed to present evidence prior to the
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verdict that DMI was the successor to DMC. “The failure of a party to
present sufficient evidence before or during trial to support a decision in that
party's favor,” the Court held, “cannot be cured by a motion filed pursuant
to Rule 227.1.” Id.
One exception to this principle, the Court acknowledged, is the party’s
right to seek a new trial under Rule 227.1 based on evidence discovered
after trial. Id. at 146. This exception is quite narrow:
[A]fter-discovered evidence, to justify a new trial,
must have been discovered after the trial, be such
that it could not have been obtained at the trial by
reasonable diligence, must not be cumulative or
merely impeach credibility, and must be such as
would likely compel a different result. . .A court
should not grant a new trial based on after-
discovered evidence unless the proponent can
convincingly show that he was unable to obtain such
testimony for the trial by use of reasonable diligence.
Id. (citations omitted). The Court determined that the after-discovered
evidence exception did not apply, because the plaintiffs “[failed to]
establish[] that the evidence they presented to the trial court after trial
could not have been presented to the trial court in their pre-trial motion to
amend the caption.” Id.
In sum, the trial court in Claudio, based on the information available
to it at the time, properly rejected the plaintiffs’ pre-trial motion to amend
the caption. Id. The trial court erred, however, “in granting an evidentiary
hearing under the guise of Rule 227.1(a)(5)” to allow the plaintiffs to
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accomplish post-trial what they could have accomplished during trial, viz.,
adding evidence to the record that DMI was the successor to DMC. Id.
Here, as in Claudio, the trial court erred by admitting evidence during
the post-trial stage that Drake could easily have submitted during trial.
Drake filed suit in June 2009, and Polyflow filed an answer to the complaint
in August 2010 which raised the defense that Drake was not registered or
authorized to do business in Pennsylvania. The case did not go to trial until
February 2014, 3½ years later. During this lengthy interim, Drake failed to
obtain a certificate of authority from the Department of State. It waited
almost two months after the verdict before submitting the certificate to the
court.33 It provided no explanation for its failure to present a certificate
during trial.
Claudio prohibits a party from using post-trial proceedings to plug
evidentiary holes that it could have filled before the verdict through the
exercise of reasonable diligence. Id. at 146. Here, Drake had no valid
reason for failing to submit the certificate of authority during trial and
therefore could not use post-trial proceedings to correct its own error. Id.
at 145.
____________________________________________
33
As stated above, Drake received the certificate three weeks after the
verdict but then waited another month before submitting it to the trial court.
Even if Drake submitted the certificate on the day of receipt from the
Department of State, it still would have been inadmissible under Claudio.
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We acknowledge one factual distinction between Claudio and this
case. In Claudio, the parties who filed post-trial motions wrongfully
submitted evidence during post-trial proceedings in support of their motions.
In this case, Drake, the party responding to post-trial motions, wrongfully
submitted evidence during post-trial proceedings as a rebuttal to Polyflow’s
motion for judgment n.o.v. We do not find this distinction material.
Claudio emphasizes that the purpose of post-trial motions is for the court to
correct its own errors, not for parties to remedy their own mistakes. Id.,
831 A.2d at 141. This principle applies with equal force to parties who file
post-trial motions and parties responding to post-trial motions who, like
Drake, might attempt to use post-trial proceedings as a vehicle for curing
their own trial errors. Allowing respondents such as Drake to submit
evidence during post-trial proceedings propagates the very evils that our
Supreme Court warned against long ago: it transforms trial into a “dress
rehearsal,” “removes the professional necessity for trial counsel to be
prepared to litigate the case fully at trial and to create a record adequate for
appellate review,” indulges an “ill-prepared advocate's hope” that the court
“will come to his aid after the fact and afford him relief” despite his failure to
present his case fully at trial, “[penalizes] the diligent and prepared trial
lawyer and his client” by forcing them to relitigate their case, “denies the
trial court...the opportunity to correct error” during trial, and causes
unnecessary delay of other cases not yet tried for the first time. Dilliplaine
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v. Lehigh Valley Trust Co., 322 A.2d 114, 116 (Pa.1974). The certificate
of authority was inadmissible during post-trial proceedings, and absent its
admission, Polyflow was entitled to judgment n.o.v.34
____________________________________________
34
Although the Supreme Court’s decision in Claudio is the most
important case in this area, we also regard our own decision in Berger,
supra, as instructive. In Berger, a Virginia corporation sued a Pennsylvania
defendant claiming that the defendant had appropriated its business name.
The defendant contended that the corporation lacked standing to prosecute
its action under 15 Pa.C.S. § 2014 due to its failure to obtain a certificate of
authority. The trial court rejected the defendant’s argument and entered a
preliminary injunction prohibiting the defendant from using the plaintiff’s
name. Four months after the preliminary injunction, the plaintiff obtained a
certificate of authority. This Court reversed the order granting the plaintiff a
preliminary injunction due to the corporation’s failure to obtain a certificate
of authority at the time of the injunction hearing. We reasoned:
Had the [corporation] secured a certificate of
authority during the course of the proceedings
below, we would be inclined to reject the
[defendant’s] argument. In fact, however, the
[corporation] did not obtain the certificate of
authority until October 14, 1975, approximately four
months after the June 19, 1975 order enjoining [the
defendant] from using the name ‘International
Inventors’. Under these circumstances, subsequent
compliance cannot be used as a means to negate the
clear mandate of the statute. Section 2014 prohibits
an unregistered foreign corporation from
‘maintaining’ any action until a certificate is
obtained. While ‘maintaining’ a suit requires more
than merely instituting suit, it is obvious that a suit
has been ‘maintained’ when a final determination of
an issue has been reached. In the instant case, the
[corporation] not only instituted and litigated the
preliminary injunction issue, but it also obtained all
the relief it requested: an order enjoining [the
defendant’s] actions. Thus, the [corporation] has
successfully ‘maintained’ an action in the courts of
(Footnote Continued Next Page)
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The trial court rationalizes Drake’s tardy submission of its certificate of
authority by stating that “compliance with [section 4121] during the
pendency of the litigation has been deemed to be sufficient compliance with
the statutory registration requirements.”35 We agree with this concept -- so
long as the corporation submits the certificate of authority into evidence
before the verdict. Indeed, when the defendant objects during trial to the
lack of a certificate of authority, the court may keep the record open and
continue trial pending the submission of the certificate into evidence.
Berger, supra, 363 A.2d at 270. In addition, after the close of evidence,
but before the verdict, the court may reopen the record to receive the
certificate into evidence. In re J.E.F., 409 A.2d 1165, 1166 (Pa.1979) (“the
general rule is that a court may, in its discretion, reopen the case after a
party has closed for the taking of additional testimony, but such matters are
_______________________
(Footnote Continued)
this Commonwealth in direct contravention to
[section] 2014. When the appellant brought the
[section] 2014 violation to the court’s attention at
the June 12, 1975 hearing, the court should have
stayed the hearing pending compliance with
[section] 2001.
Berger, 363 A.2d at 270. Berger is not identical to the present
circumstances because it concerned a preliminary injunction instead of a
trial, but Berger’s logic still extends to this case. Obtaining a certificate of
authority after the trial court’s decision -- or, as Berger puts it, “subsequent
compliance” with the statute -- does not cure the insufficiency of the hearing
record. Id.
35
Memorandum Opinion, pp. 5-6.
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peculiarly within the sound discretion of the trial court”) (citations omitted).
Upon entry of the verdict, however, the window of opportunity for submitting
the certificate closes unless it is admissible under the after-discovered
evidence exception. This exception did not apply in the present case.
The trial court also asserts that it could take judicial notice of the
certificate of authority as a public document during post-trial motions.36 We
do not agree. It is true that “[t]he court may judicially notice a fact that is
not subject to reasonable dispute because it: (1) is generally known within
the trial court's territorial jurisdiction; or (2) can be accurately and readily
determined from sources whose accuracy cannot reasonably be questioned.”
Pa.R.E. 201(b). It is also true that the court can take judicial notice of public
documents. Bykowski v. Chesed, Co., 625 A.2d 1256, 1258 n.1
(Pa.Super.1993) (court properly took judicial notice of public document in
Recorder of Deeds when ruling on preliminary objections to complaint). In
addition, the court may take judicial notice at any stage of the proceeding.
Pa.R.E. 201(d).
Nevertheless, we will not allow judicial notice to trespass the well-
defined boundary of admissibility articulated in Claudio. A trial court cannot
take judicial notice of a public document which did not even exist during trial
due to the proponent’s lack of reasonable diligence and which the proponent
____________________________________________
36
Pa.R.A.P. 1925(a) Opinion, p. 7.
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fails to obtain or submit until post-trial proceedings. To permit judicial
notice under these circumstances would allow Drake to circumvent
Claudio’s prohibition against parties using post-trial proceedings to correct
their own trial errors.
The trial court also insists that the “equities” entitle Drake to prevail,
because Polyflow should not be permitted to get away with withholding
payment for some $300,000.00 in merchantable goods.37 Although we can
understand the trial court’s reluctance to rule in Polyflow’s favor under these
circumstances, the fact remains that (1) Polyflow timely raised the defense
of Drake’s lack of capacity to sue, (2) Drake failed to cure its lack of a
certificate of authority during the next 3½ years, (3) Drake failed to refute
this defense at trial, and (4) this defense was fatal to Drake’s case. Because
Polyflow presented a meritorious legal defense, the trial court was
dutybound to rule in its favor, regardless of its perception of the equities.
Along the same lines, the trial court suggests that Polyflow engaged in
“gamesmanship” by stating during a pretrial conference that the case was
close to settlement without mentioning Drake’s lack of capacity to sue, but
then raising the lack of capacity defense at trial.38 This position might be
more persuasive had the parties stipulated during the pretrial conference to
____________________________________________
37
Pa.R.A.P. 1925(a) Opinion, p. 6.
38
Pa.R.A.P. 1925(a) Opinion, p. 6.
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limit trial to specific issues other than Drake’s lack of capacity to sue.
Pa.R.Civ.P. 212.3(d) (“the court may make an order reciting the action taken
at the [pretrial] conference and the agreements made by the parties as to
any of the matters considered, and limiting the issues for trial to those not
disposed of by admissions or agreements of the attorneys. Such order when
entered shall control the subsequent course of the action unless modified at
the trial to prevent manifest injustice”). In this case, however, the trial
court did not enter any order stating that the parties agreed to limit trial to
issues unrelated to Drake’s lack of capacity. Moreover, contrary to the trial
court’s suggestion, Polyflow did not conceal the issue of Drake’s lack of
capacity to sue. Polyflow placed Drake on notice of its lack of capacity
defense both in its answer to the complaint with new matter and in its
pretrial statement, which incorporated by reference all defenses in its new
matter and listed as an exhibit “Pennsylvania Corporations Bureau
information on [Drake].” Nothing in the record indicates that Polyflow
agreed at any time during this case to abandon this defense. Since Polyflow
did all that the rules mandated, we do not regard its conduct as
“gamesmanship”.
V.
For the foregoing reasons, we hold that the trial court erred in denying
Polyflow’s motion for judgment n.o.v. We reverse the order denying
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Polyflow’s post-trial motions and remand for entry of judgment n.o.v. in
favor of Polyflow.
Judgment reversed. Case remanded for entry of judgment n.o.v.
Jurisdiction relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 1/23/2015
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