Opinion
No. 79-259
Substituted opinion on denial of rehearing delivered January 14, 1980 [Rehearing denied December 10, 1979.]
1. CORPORATIONS — FOREIGN CORPORATIONS — FAILURE TO REGISTER WITH SECRETARY OF STATE. — The Arkansas Wingo Act requires foreign companies to register with the Secretary of State to do business in Arkansas, failure of which subjects the foreign corporation to the possibility of a fine and makes its contracts not only unenforceable but void ab initio. 2. CORPORATIONS — FILING OF LIEN BY FOREIGN CORPORATION NOT REGISTERED TO DO BUSINESS IN ARKANSAS — COUNTERCLAIM BY ARKANSAS RESIDENT NOT WAIVER OF REMEDY UNDER WINGO ACT. — Where a foreign corporation, not registered to do business in Arkansas, contracts to do some work on a residence in Arkansas and, when not paid for its work, files an action to impose a lien against the property, the owner does not waive her remedy under the Wingo Act by filing a counterclaim. 3. CORPORATIONS — FAILURE OF FOREIGN CORPORATION TO COMPLY WITH WINGO ACT — NO RIGHTS UNDER ARKANSAS CONTRACT. — Where a foreign corporation fails to comply with the Wingo Act which requires registration with the Arkansas Secretary of State, it can enjoy no rights under a contract it makes in Arkansas, and this disability extends to a priority contest between the non-complying foreign corporation and creditors of an Arkansas resident with whom a contract was made, even though they are not in privity of contract with the debtor.
Appeal from Chicot Chancery Court, Donald A. Clarke, Chancellor; affirmed.
Gibson Gibson, P.A., by: R. Bynum Gibson, Jr., for appellant.
Gill Johnson, by: B. Kenneth Johnson, for appellees.
The only issue before us is the application of the Arkansas `Wingo Act. That law essentially provides that foreign companies must register with the Secretary of State to do business in Arkansas. Failure to register subjects the foreign corporation to the possibility of a fine and makes its contracts unenforceable. Ark. Stat. Ann. 64-1201, 1202 (Repl. 1966). See Note, 25 Ark. La. Rev. 578 (1972).
The chancellor held that the appellant, a Mississippi corporation not authorized to do business in Arkansas, could not recover for work done in Arkansas for an Arkansas resident.
We affirm that decision.
The facts are essentially undisputed. The appellant does virtually all its business in Mississippi and less than 1% of its business in Arkansas. It is not registered to do business in the State of Arkansas as required by law; the company's officers did not know of the requirement. Its agents came to Arkansas and entered into a contract in Arkansas to do some work on a residence near Lake Village.
The appellant was not paid for its work and filed an action to impose a lien against the Arkansas residence. The owners, J. D. Vickers and Susan Smith Vickers, as well as several mortgage holders were joined as parties. The Vickers were later divorced and Susan Vickers was deeded the residence. Relying on the Wingo Act, she denied that the appellant could impose a lien and recover on it.
In several decisions we have discussed the Wingo Act. In Pacific National Bank v. Hernreich, 240 Ark. 114, 398 S.W.2d 221 (1966), we held that a contract between a noncomplying foreign corporation and an Arkansas resident was not merely unenforceable but void ab initio. In Worthen Bank Trust Co. v. United Underwriters, 251 Ark. 454, 474 S.W.2d 899 (1971), we said:
The purpose of the statute is not to permit such corporations to avoid liability under such contracts, but the assignment or otherwise, and to put prospective purchasers or assignees on notice that such contracts, even when negotiable or valid on their face, are void and unenforceable even in the hands of what would otherwise appear to be a bona fide purchaser for value.
The chancellor was correct. This was not an interstate commerce transaction that would make the Wingo Act inapplicable.
There are two other questions raised. Susan Vickers filed a counterclaim against the appellant seeking $2,000.00 damages for alleged negligent workmanship by the appellant. Counterclaims or setoffs are mandatory in Arkansas. Ark. Stat. Ann. 27-1121 (Repl. 1979); Arkansas Rules of Civil Procedure, Rule 13.
The appellant argues that the appellee, Susan Vickers, waived her remedy under the Wingo Act by filing a counterclaim. It was later dismissed by the chancellor. We hold that appellee did not waive her remedy under the Wingo Act when she filed a counterclaim.
The Colonial Bank of New Orleans, claiming to hold a mortgage on the residence, joined the Vickers' move to have the complaint dismissed. The appellant argues that the bank, because it was not in privity of contract with appellant, had no standing to claim such relief. The bank, however, had a mortgage of record to land on which the appellant sought to impose a lien. The validity of the Bank's mortgage is contested by appellant. Whether the mortgage is enforceable would be relevant to establishing priority between the bank and appellant only if the appellant had a valid claim to a lien. We hold that because of appellant's failure to obey the Wingo Act, it can enjoy no rights under the contract it made in Arkansas and that this disability extends to a priority contest between the non-complying foreign corporations and creditors of the Arkansas resident even though they are not in privity of contract with the debtor.
This is no greater an expansion of the Wingo Act than allowed in Pacific National Bank v. Hernrich, supra, and Union Planter's Bank v. Moore, 250 Ark. 272, 464 S.W.2d 786 (1971), where we held that the Wingo Act voided the claims on a negotiable instrument of a party who would otherwise have been a holder in due course.
Affirmed.
STROUD and MAYS, JJ., not participating.