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06/17/97 AMERICAN HOUSING TRUST v. CAROLINE JONES

June 17, 1997

AMERICAN HOUSING TRUST, III C/O GE CAPITAL ASSET MANAGEMENT CORPORATION, APPELLANT
v.
CAROLINE JONES, APPELLEE



Appeal from the Order of the Superior Court entered on January 31, 1996 at 1128PHL95 affirming the Order of the Court of Common Pleas, Delaware County, Civil Division entered on February 28, 1995 at 94-13690. JUDGE(S) BELOW: CCP - Honorable Joseph F. Battle / SUPERIOR - CIRILLO, HOFFMAN, OLSZEWSKI, JJ.

Before: Flaherty, C.j., And Zappala, Cappy, Castille, Nigro And Newman, JJ. Opinion BY Mr. Justice Cappy

The opinion of the court was delivered by: Cappy

OPINION OF THE COURT

JUSTICE CAPPY:

DECIDED: June 17, 1997

The question presented in this appeal is whether the failure of Appellant, American Housing Trust, III, C/O GE Capital Corporation, to obtain the certificate of authority mandated by section 4121(a) of the Foreign Business Corporations Law (the Law), 15 Pa.C.S. § 4121(a), *fn1 results in suspension of Appellant's right to bring actions in this Commonwealth pursuant to section 4141 of the Foreign Business Corporations Law, 15 Pa.C.S. § 4141. *fn2 In order to rule on this question, we must address whether Appellant's activities in this Commonwealth are excluded from "doing business" pursuant to section 4122(a)(7) and (a)(8), 15 Pa.C.S. § 4122(a)(7) and (a)(8).

The factual and procedural background of this appeal is as follows. Appellee Caroline Jones entered into an installment land sale contract with the Administrator of Veteran's Affairs (VA) on June 28, 1984, for the sale of property owned by the VA in Chester, Pennsylvania, to her. The VA retained legal title to the property, with the promise to transfer the deed to Appellee upon her final installment payment. Appellee took immediate possession of the property and received equitable title. Appellant, a business trust organized pursuant to the laws of New York, took legal title to the property on February 23, 1989, by means of a recorded deed conveyance of the VA to Appellant of all of its interests and ownership rights. Thenceforth, Appellee made her installment contract payments to Appellant until she allegedly defaulted on her payments under the installment contract on November 1, 1991.

Appellant notified Appellee of its intention to terminate the installment contract because of her alleged default, and filed a complaint for ejectment in Chester County, Pennsylvania seeking immediate possession of the property. Appellee filed preliminary objections to this complaint raising Appellant's lack of capacity to sue, see Pa.R.C.P. 1028 (a)(5), and sought dismissal of Appellee's complaint on this basis. Specifically, Appellee asserted that Appellant is prohibited from bringing an action in Pennsylvania by way of a penalty imposed by section 4141 because of Appellant's failure to obtain a certificate of authority to conduct business in Pennsylvania pursuant to 15 Pa.C.S. § 4121(a).

Appellant, in its answer to Appellee's preliminary objections, denied that it is doing business in this Commonwealth, and thus, that it was required to procure a certificate of authority pursuant to section 4121(a) of the Foreign Business Corporations Law, 15 Pa.C.S. § 4121(a). Appellant's answer to Appellee's preliminary objections simply averred that Appellant "falls" within the statutory exclusions to the requirement for a foreign business corporation to obtain a certificate of authority set forth at section 4122(a)(7) and (8) of the Law, 15 Pa.C.S. § 4122(a)(7) and (a)(8). *fn3 Appellant's answer to Appellee's preliminary objections did not set forth with any detail the nature and extent of Appellant's activities in Pennsylvania. *fn4

The trial court sustained Appellee's preliminary objections, finding that Appellant lacks the capacity to sue in this Commonwealth because of the penalty provision in section 4141. The trial court accordingly dismissed Appellant's action. A panel of the Superior Court affirmed the trial court's order in a memorandum opinion. *fn5

This court granted allowance of appeal in order to address the question of whether Appellee's preliminary objections to Appellant's action were properly sustained because of Appellant's alleged lack of capacity to sue, based on Appellant's failure to obtain a certificate of authority to conduct business in Pennsylvania pursuant to section 4121(a) of the Foreign Business Corporation Law.

In order to determine whether the trial court properly sustained Appellee's preliminary objections, this court must consider as true all of the well-pleaded material facts set forth in the complaint and all reasonable inferences that may be drawn from those facts. Werner v. Zazyczny, 545 Pa. 570, 681 A.2d 1331 (1996). Pa.R.C.P. 1028(c) provides that if an issue of fact is raised in preliminary objections, the trial court shall consider evidence "by depositions or otherwise". In conducting our appellate review, we observe that preliminary objections, the end result of which would be dismissal of the action, may be properly sustained by the trial court only if the case is free and clear of doubt. Greenberg v. Aetna Insurance Co., 427 Pa. 511, 235 A.2d 576 (1967).

The trial court, in ruling on Appellee's preliminary objections and motion to dismiss, factually examined only that there was an installment contract for sale of land between Appellee and Appellant's predecessor in title which Appellant has acquired. As the matter was before the court on preliminary objections and no discovery had been taken nor had an evidentiary hearing been held, the trial court did not have before it the full nature and extent of Appellant's activities in this Commonwealth. The trial court looked only to the legal issue of whether Appellant's seeking to enforce the land sale installment contract it acquired from the VA was qualitatively the type of activity described in section 4122(a)(7) and (a)(8), and thus would qualify Appellant for an exclusion from the requirement to obtain a certificate of authority. The trial court concluded that Appellant's activity in Pennsylvania with regard to Appellee did not fall within the exclusions of section 4122(a)(7) and (a)(8).

In order to properly rule on Appellee's preliminary objections, the trial court had to determine whether Appellant's activities in Pennsylvania are such that Appellant is required to obtain a certificate of authority from this Commonwealth pursuant to section 4121, 15 Pa.C.S. ยง 4121, i.e, whether Appellant is "doing business" in Pennsylvania. It is well-established that the test for whether a corporation is "doing business" in this Commonwealth is a question ...


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