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  "name": "E & E INDUSTRIES, INC. v. CROWN TEXTILES, INC.",
  "name_abbreviation": "E & E Industries, Inc. v. Crown Textiles, Inc.",
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    "judges": [
      "Judges WELLS and COZORT concur."
    ],
    "parties": [
      "E & E INDUSTRIES, INC. v. CROWN TEXTILES, INC."
    ],
    "opinions": [
      {
        "text": "WHICHARD, Judge.\nDefendant contends the court erred in dismissing its counterclaim for non compliance with N.C. Gen. Stat. 55-154. We agree.\nN.C. Gen. Stat. 55-154 provides, in pertinent part:\n(a) No foreign corporation transacting business in this State without permission obtained through a certificate of authority under this Chapter or through domestication under prior acts shall be permitted to maintain any action or proceeding in any court of this State unless such corporation shall have obtained a certificate of authority prior to trial; nor shall any action or proceeding be maintained in any court of this State by any successor or assignee of such corporation on any cause of action arising out of the transaction of business by such corporation in this State until:\n(1) A certificate of authority shall have been obtained by such corporation or by a foreign corporation which has acquired substantially all of its assets, or\n(2) Substantially all of its assets have been acquired by, a domestic corporation or one or more individuals.\nAn issue arising under this subsection must be raised by motion and determined by the trial judge prior to trial.\n(b) The failure of a foreign corporation to obtain a certificate of authority to transact business in this State shall not impair the validity of any contract or act of such corporation, and shall not prevent such corporation from defending any action or proceeding in any court of this State.\nThe issue here is whether a nonqualifying corporation such as defendant, against which an action is brought in this State, may bring a compulsory counterclaim in that action. We hold that it may.\n\u201cThe weight of authority in states having provisions similar to [N.C. Gen. Stat. 55-154] is that the statutory bar to an unregistered corporation\u2019s maintaining an action does not preclude it from asserting a counterclaim arising out of the subject matter of a plaintiffs suit.\u201d Aberle Hosiery Co. v. American Arbitration Ass\u2019n, 337 F. Supp. 90, 92 (E.D. Penn.), appeal dismissed, 461 F. 2d 1005 (3rd Cir. 1972). \u201cA statute merely prohibiting the commencement or maintenance of an action does not prevent a noncomplying foreign corporation from interposing and recovering on a counterclaim arising out of the transaction in suit.\u201d 20 C.J.S. Corporations Sec. 1859 at 83. Accord, e.g., Environmental Coatings v. Baltimore Paint, 617 F. 2d 110 (5th Cir. 1980); Johnson & Anderson, Inc. v. Barlow Assoc., 528 F. Supp. 417 (E.D. Mich. 1981). See also Robinson, North Carolina Corp. Law, Sec. 31-8 (3d ed.) at 464 (\u201cit would seem that the unqualified foreign corporation could assert a counterclaim in defending an action brought against it in the North Carolina courts.\u201d). Cf, contra, e.g., Kutka v. Temporaries, Inc., 568 F. Supp. 1527, 1532 (S.D. Tex. 1983); Bozzuto\u2019s Inc. v. Frank Kantrowitz & Sons Inc., 117 N.J. Super. 146, 149, 283 A. 2d 907, 908 (1971).\nDefendant\u2019s claim is a compulsory counterclaim as defined by N.C. Gen. Stat. 1A-1, Rule 13(a). It is for the balance due on the contract which plaintiff alleges defendant breached and thus is clearly a \u201cclaim which . . . arises out of the transaction or occurrence that is the subject matter of the opposing party\u2019s claim.\u201d N.C. Gen. Stat. 1A-1, Rule 13(a). Ordinarily, failure to assert a compulsory counterclaim will bar future action on the claim. Hudspeth v. Bunzey, 35 N.C. App. 231, 233, 241 S.E. 2d 119, 121, disc. rev. denied, 294 N.C. 736, 244 S.E. 2d 154 (1978). See also 3 Moore\u2019s Federal Practice Par. 13.12[1] (2d ed. 1985). Thus, if N.C. Gen. Stat. 55-154 barred a nonqualifying corporation like defendant from asserting a compulsory counterclaim, \u201cit would be permanently deprived of the right to assert this claim against the plaintiff.\u201d Clayton Carpet Mills, Inc. v. Martin Processing, 563 F. Supp. 288, 290 (N.D. Ga. 1983). We doubt that our General Assembly \u201cintended such a far-reaching consequence when it enacted [N.C. Gen. Stat. 55-154].\u201d Id.\nN.C. Gen. Stat. 55454(a) and (b) follow Sec. 124 of the Model Business Corporation Act (MBCA). 2 Model Bus. Corp. Act Ann. 2d Sec. 124, Pars. 1, 2 (pp. 773-74). The avowed purpose of this section of the MBCA is \u201cto provide penalties applicable to foreign corporations which evade [state] regulation by transacting business, other than business constituting interstate commerce, without obtaining [a] certificate of authority . . . .\u201d Id. at 774. N.C. Gen. Stat. 55454(a) allows an unqualified corporation to maintain an action in a court of this State by obtaining a certificate prior to trial. N.C. Gen. Stat. 55454(b) permits an unqualified corporation to defend an action in a court of this State without obtaining a certificate at all. Logically, therefore, the General Assembly \u201cwould not have expressly permitted defense by nonqualifying corporate defendants but impliedly circumscribed the scope of that defense by denying the right to bring compulsory counterclaims . . . .\u201d Environmental Coatings, supra, 617 F. 2d at 112. Accord, Johnson & Anderson, supra, 528 F. Supp. at 420. By suing in a forum of this State a foreign corporation which has not obtained a certificate of authority before the commencement of the action, a North Carolina corporation effectively waives any protection N.C. Gen. Stat. 55-154 affords it from compulsory counterclaims asserted by the party sued. Clayton Carpet, supra, 563 F. Supp. at 289.\nAccordingly, we hold that defendant may maintain its compulsory counterclaim for the balance due on the disputed contract. A different result might obtain for a permissive counterclaim under N.C. Gen. Stat. 1A-1, Rule 13(b). See Levitt Multihous. Corp. v. District of El Paso Cty., 188 Colo. 360, 363-65, 534 P. 2d 1207, 1208-10 (1975). We are not confronted with that issue here, however.\nGiven our holding that a nonqualifying foreign corporation may maintain a compulsory counterclaim, we do not reach defendant\u2019s other argument. The order is reversed, and the cause is remanded for further proceedings on plaintiffs claim and defendant\u2019s compulsory counterclaim.\nReversed and remanded.\nJudges WELLS and COZORT concur.",
        "type": "majority",
        "author": "WHICHARD, Judge."
      }
    ],
    "attorneys": [
      "Caldwell and Planer, by Geoffrey A. Planer, for plaintiff ap-pellee.",
      "Steve B. Dolley, Jr., and Basil L. Whitener for defendant appellant."
    ],
    "corrections": "",
    "head_matter": "E & E INDUSTRIES, INC. v. CROWN TEXTILES, INC.\nNo. 8527SC1056\n(Filed 6 May 1986)\nCorporations \u00a7 26\u2014 suit against unqualified foreign corporation \u2014compulsory counterclaim allowed\nThe trial court erred by dismissing defendant\u2019s counterclaim in a breach of contract action where plaintiff was a North Carolina corporation, defendant was a South Carolina corporation doing business in North Carolina without a certificate of authority, and defendant\u2019s counterclaim was compulsory. By suing in a forum of this state, a North Carolina corporation effectively waives any protection N.C.6.S. 55-154 affords it from compulsory counterclaims by a foreign corporation which has not obtained a certificate of authority. N.C.G.S. 1A-1, Rule 13(a) and (b).\nAppeal by defendant from Hyatt, Judge. Order entered 14 August 1985 in Superior Court, GASTON County. Heard in the Court of Appeals 6 February 1986.\nPlaintiff, a North Carolina corporation, brought this action against defendant, a South Carolina corporation, alleging breach of contract by defendant\u2019s failure timely to deliver goods and its delivery of defective goods. Defendant denied plaintiffs material allegations and counterclaimed for the balance due for goods delivered to plaintiff pursuant to the contract.\nPlaintiff moved to dismiss defendant\u2019s counterclaim under N.C. Gen. Stat. 55454(a), which requires that a foreign corporation transacting business in this State obtain a certificate of authority prior to maintaining any action or proceeding in any court of this State. The court found that defendant is a South Carolina corporation transacting business in North Carolina without a certificate of authority and concluded as a matter of law that \u201cno proceeding can be maintained by the defendant corporation on its counterclaim until it shall have obtained the Certificate of Authority prior to trial.\u201d Accordingly, the court granted plaintiffs motion to dismiss defendant\u2019s counterclaim.\nDefendant appeals.\nCaldwell and Planer, by Geoffrey A. Planer, for plaintiff ap-pellee.\nSteve B. Dolley, Jr., and Basil L. Whitener for defendant appellant."
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