TRI-COUNTY UNLIMITED, INC. v. KIDS FIRST SWIM SCHOOL

993 A.2d 146

191 Md. App. 613

TRI-COUNTY UNLIMITED, INC. v. KIDS FIRST SWIM SCHOOL, INC., et al.

No. 0004 September Term, 2009.

Court of Special Appeals of Maryland.

March 31, 2010.

Stanley Alpert, Baltimore, MD, for Appellant.

Lawrence A. Melfa (Samuel Grant, Francomano, Butler, Melfa, on the brief), Towson, MD, for Appellees.

Panel: JAMES P. SALMON,^* WRIGHT and KEHOE, JJ.

WRIGHT, Judge.

Appellant, Tri-County Unlimited, Inc. ("Tri-County"), brought suit in the Circuit Court for Howard County against appellees, Kids First Swim School, Inc. and Gary Roth (collectively, "appellees"), alleging that it was owed for labor and materials expended in fulfilling its contractual obligations to build a swimming pool. Appellees filed an answer and a counterclaim.

On January 20, 2009, the scheduled trial date, appellees filed a motion to dismiss, in which they alleged that Tri-County was legally incapable of filing suit because its corporate charter had been forfeited at the time it filed the lawsuit. On the same day, the court heard argument regarding the motion to dismiss, during which Tri-County argued that its charter had been revived, thus restoring its right to sue retroactively. The court, in entering judgment in favor of appellees, granted the motion and dismissed Tri-County's complaint without prejudice. In so doing, the court found that Tri-County's charter had been forfeited at the time it filed suit and that subsequent revival of the charter did not restore the suit. After the court denied its motion for reconsideration, Tri-County noted this appeal, presenting two questions for our review:

I. Did the Circuit Court err in dismissing Appellant's suit because the Appellant's corporate charter had been forfeited at the time the suit was filed, and holding that the subsequent revival of that charter was of no effect in restoring appellant's right to sue?

II. Did the Circuit Court err in granting Appellees' Motion to Dismiss because it considered evidence outside the pleadings but failed to treat the motion as a motion for summary judgment and afford Appellant the opportunity to properly prepare for a summary judgment motion?

Appellees present two additional questions to this Court, and argue that the circuit court's order could also be affirmed because: 1) three of the counts alleged are "defective as a matter of law"; and 2) there is a "written change order provision" in the contract. We conclude that the circuit court did not err when it granted judgment in favor of appellees on the grounds that Tri-County's charter was forfeited at the time it filed suit and did not err in ruling on the motion to dismiss after the parties supplemented the allegations in the complaint. We shall affirm the judgment of the circuit court.

FACTS AND PROCEEDINGS

This case arises from a dispute regarding two contracts between Tri-County and appellees, wherein the parties agreed that Tri-County would install a 30' x 50' rectangular swimming pool, complete with an interior build-out of the premises leased to appellees. Tri-County alleges that appellees owe money for labor and materials that Tri-County expended in fulfillment of its contractual obligations. On October 5, 2007, Tri-County's corporate charter was forfeited. On November 9, 2007, Tri-County filed a petition for mechanic's lien.¹ On April 3, 2008, Tri-County filed an amended complaint for breach of contract, quantum meruit, unjust enrichment, and promissory estoppel. On January 4, 2008, appellees filed a counterclaim.

The parties appeared before the circuit court for trial on January 20, 2009. On that day, appellees filed a motion to dismiss with the court.² Appellees also filed a motion for summary judgment which incorporated the motion to dismiss by reference. The court suggested that it hear argument on the motion to dismiss first. Appellees argued that Tri-County lacked the capacity to bring suit because its charter had been forfeited at the time the suit was filed. Tri-County countered that its charter was revived on January 15, 2009. The court marked, as joint exhibits, two printouts from the State Department of Assessment and Taxation ("SDAT"). The first exhibit was a certificate from SDAT, dated January 15, 2009, which stated that Tri-County was a corporation in good standing and duly authorized to exercise all powers recited in its charter. The second exhibit was a printout from SDAT's website, dated January 20, 2009, which stated that Tri-County revived its charter on January 15, 2009, but was not in good standing.

The court granted appellees' motion to dismiss at the conclusion of the argument. In so doing, the court indicated that it was relying upon the grounds of failure to state a claim for which relief could be granted under Maryland Rule 2-322(b). Citing Dual Inc. v. Lockheed Martin Corp., 383 Md. 151, 857 A.2d 1095 (2004), and Stein v. Smith, 358 Md. 670, 751 A.2d 504 (2000), as support, the court stated:

This case was filed in the name of a corporate entity whose charter had been forfeited at the time it was filed and remained forfeited until January 15th of 2009, just a couple of days ago; . . . . So, what we have here is a situation where Tri-County did not exist, was not a legal entity when it filed the lawsuit. . . .

The court also remarked: "It's fortuitous, perhaps, for Tri-County, at least, that limitations have not yet expired and that this case can be righted through the filing of a new complaint. . . ."³ The court then dismissed the complaint without prejudice⁴ and reiterated that Tri-County would be "free to re-file when they feel it's appropriate." As a result of the ruling, appellees voluntarily dismissed their counterclaim.

STANDARD OF REVIEW

Maryland Rule 2-322(b) states:

Permissive. The following defenses may be made by motion to dismiss filed before the answer, if an answer is required: (1) lack of jurisdiction over the subject matter, (2) failure to state a claim upon which relief can be granted,. . . If not so made, these defenses and objections may be made in the answer, or in any other appropriate manner after the answer is filed.

Maryland Rule 2-322(c) further states, "a court may defer the determination of the defense of failure to state a claim upon which relief can be granted until the trial." In reviewing the disposition of a motion to dismiss, the reviewing court must assume the truth of all relevant and material facts that are well pleaded and of all inferences which can be reasonably drawn therefrom. Pendleton v. State, 398 Md. 447, 459, 921 A.2d 196 (2007) (citations omitted). When a party seeks a dismissal on the ground that the complaint fails to state a claim upon which relief can be granted, the party is asserting that, even if the allegations are true, the opposing party is not entitled to relief as a matter of law. Lubore v. RPM Assocs., 109 Md.App. 312, 322, 674 A.2d 547 (1996).

The record in this case indicates that the parties stipulated that Tri-County's corporate charter was forfeited on the date it filed suit against appellees. The parties introduced two joint SDAT exhibits to that effect. Ordinarily, if the circuit court considers matters outside of the pleadings in considering a motion to dismiss, it must treat the motion as a motion for summary judgment. Dual, supra, 383 Md. at 165, 857 A.2d 1095. Maryland Rule 2-322(c) states:

If, on a motion to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 2-501, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 2-501.

The circuit court did not treat the motion to dismiss as a motion for summary judgment.⁵ Because the parties do not dispute that Tri-County's charter was forfeited when it filed suit, we will regard that additional information as supplementary to the allegations in the complaint and shall "consider the relevant facts pled in the complaint, as so supplemented." Smith v. Danielczyk, 400 Md. 98, 105, 928 A.2d 795 (2007) (citation omitted).⁶ We therefore review the court's ruling under the motion to dismiss standard.

DISCUSSION

I.

The record reveals that Tri-County's charter was forfeited on October 5, 2007, and was not revived until January 15, 2009. Tri-County filed a petition for mechanic's lien on November 9, 2007, and filed an amended complaint on April 3, 2008. Tri-County does not dispute that its charter was forfeited at the time it initiated suit against appellees. Instead, Tri-County argues that, although it is generally true that a complaint filed by a forfeited corporation is a nullity, its right to sue was restored by the revival of its corporate charter; and therefore, its complaint is retroactively valid.

Maryland Code (1975, 2007 Repl. Vol.), Corporations & Associations Article ("CA"), § 3-503(d) states that, after SDAT has declared a corporate charter forfeited, "the powers conferred by law on the corporation are inoperative, null and void. . . ." See also Dual, supra, 383 Md. at 163, 857 A.2d 1095 (stating that upon forfeiture of the corporate charter, a corporation loses the power to sue) (citing Stein, supra, 358 Md. at 675, 751 A.2d 504). If and when a corporation revives its charter, the revival of it has the following effect:

All the assets and rights of the corporation, except those sold or those of which it was otherwise divested while the charter was void, are restored to the corporation to the same extent that they were held by the corporation before the expiration or forfeiture of the charter.

CA § 3-512. The revival of a corporate charter, therefore, brings the corporation back to life, and restores its rights as if they had never been lost. See, e.g., Arnold Developer, Inc. v. Collins, 318 Md. 259, 265-66, 567 A.2d 949 (1990) (findi...