Bunbury Co. v. Windham Sports

NOTICE:  This opinion is subject to motions for reargument under V.R.A.P. 4
as well as formal revision before publication in the Vermont Reports.
Readers are requested to notify the Reporter of Decisions, Vermont Supreme
Court, 111 State Street, Montpelier, Vermont 05602 of any errors in order
that corrections may be made before this opinion goes to press.


                                No. 89-067


The Bunbury Company, Inc.                    Supreme Court

           v.                                On Appeal from
                                             Windham Superior Court
Windham Sports, Inc., and
Sasaki Associates, Inc.                      November Term, 1989


Alden T. Bryan, J.

Heather Briggs and Andre D. Bouffard of Downs Rachlin & Martin, Burlington,
  and David F. Buckley (Of Counsel), Bellows Falls, for plaintiff-appellee

Timothy U. Martin of Carroll, George & Pratt, Rutland, for defendant-
  appellant


PRESENT:  Allen, C.J., Dooley and Morse, JJ., and Springer, D.J. (Ret.),
          Specially Assigned


     MORSE, J.   Defendant Windham Sports appeals from a judgment of
foreclosure claiming that plaintiff Bunbury Company was barred from
foreclosing its mortgage because it was a foreign corporation that had not
registered to do business in Vermont.  11 V.S.A. {{ 2651, 2668(c).  Summary
judgment was granted in favor of plaintiff, citing Redd Distributing Co.,
Inc. v. Bruckner, 128 Vt. 635, 270 A.2d 580 (1970), as authority for the
proposition that the Legislature did not intend to prevent a mortgagee not
registered to do business in Vermont from foreclosing a mortgage made in
Vermont.  We affirm the trial court, but on a different ground.
     Bunbury, a New York nonprofit corporation, awards grants to worthy
causes.  At the time of the sale of property located in Andover, Vermont, to
defendant in 1981 and execution of the mortgage in dispute, plaintiff was
actively granting money to Vermont organizations, but it was not registered
to do business in Vermont.
     This State requires:

            No foreign corporation shall have the right to
          transact business in this state until it shall have
          procured a certificate of authority so to do from the
          secretary of state, and shall have complied with any
          other requirements of law respecting corporations
          subject to regulation of the public service board, the
          commissioner of banking and insurance, or other agencies
          of the state. . . .
11 V.S.A. { 2651(a).  Failure to obtain the certificate of authority
subjects the corporation to the restriction of 11 V.S.A. { 2668(c):

            A foreign corporation shall not maintain an action in
          this state upon a contract made by it in this state if,
          at the time of making such contract, it was doing
          business in this state without lawful authority. . . .
"Doing business" is defined broadly:

            Except as otherwise provided, "doing business" shall
          mean and include each and every act, power or privilege
          exercised or enjoyed in this state by a foreign
          corporation except the mere ownership of real property
          which is not producing any income, or which is not used
          in the performance of a corporate function.
11 V.S.A. { 2651(b).  See Penconn Enterprises, Ltd. v. Huntington, 148 Vt.
603, 606, 538 A.2d 673, 675 (1987).
     Section 2668(c) prohibits the commencement of contract actions by a
corporation doing business in this State without a certificate of
authority.  Other kinds of actions are not precluded.  This statute has a
potentially great impact on nonqualifying foreign corporations because
Vermont is among the few jurisdictions in which a corporation may not cure
such a defect by qualifying under state law prior to the commencement of the
action.  Most states merely suspend access to the courts until the
corporation complies.  See Note, Sanctions for Failure to Comply With
Corporate Qualification Statutes:  An Evaluation, 63 Col. L. Rev. 117, 126-
131 (1963); 4 Model Bus. Corp. Act Ann. { 15.02 (3d ed. Supp. 1989).
     We hold that the present action does not come within the proscription
of { 2668(c) because a foreclosure action is not a suit upon a contract.
This Court has always delineated a mortgage from the underlying debt.
Briggs v. Fish, 2 D. Chip. 100, 101 (1824) (mortgage is nothing other than
pledge of real estate as security for note).  A "decree of foreclosure
operates only as to the property secured by the mortgage.  Neither the
mortgage nor the judgment impose any personal liability on defendants."
LaFarr v. Scribner, 150 Vt. 159, 160-161, 549 A.2d 651, 652 (1988).
Moreover, "[i]f foreclosure of the mortgaged premises is insufficient to
satisfy a debt secured by such mortgage, then the creditor's recourse is
through an action on the note, which is an action in personam."  Id. at 161,
549 A.2d  at 652-53.
     Defendant gleans from Siwooganock Guar. Savings Bank v. Cushman, 109
Vt. 221, 195 A. 260 (1937), a legislative intent to extend the provisions of
{ 2668(c) to foreclosure actions.  It relies on that Court's statement that
"while the Legislature intended to prohibit foreign savings banks from
doing business in this State, it did not intend to prevent the enforcement
of the contracts of such banks other than those made in this State."  109
Vt. at 247, 195 A.  at 272.  Siwooganock, however, held that a loan made
outside of the State, even though secured by property within the State, did
not constitute "doing business" in the State, id., and, therefore, never
faced the question we decide today, whether a foreclosure action is an
action upon a contract under { 2668(c).
     Insofar as the present action is solely predicated upon mortgage
foreclosure, the trial court was correct to hear it.  Its judgment was
without error.
     Affirmed.
                                        FOR THE COURT:




                                        Associate Justice