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Drake Manufacturing Co., Inc. v. Polyflow, Inc.

Superior Court of Pennsylvania

January 23, 2015

DRAKE MANUFACTURING COMPANY, INC., Appellee
v.
POLYFLOW, INC., Appellant

Submitted: January 5, 2015.

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Appeal from the Judgment of the Court of Common Pleas, Warren County, Civil Division, No(s): 406 OF 2009. Before SKERDA, J.

Henry F. McHugh, Media, for appellant.

Andrea L. Stapleford, Warren, for appellee.

BEFORE: GANTMAN, P.J., JENKINS, J., and MUSMANNO, J. OPINION BY JENKINS, J.

OPINION

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JENKINS, J.:

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] Based on this defense, the

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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., 574 Pa. 359, 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 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 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

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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 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 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

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response to [Polyflow]'s post-trial motion?
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 ...

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