Terry's Office Products & Service, Inc. v. Elsbury

CARTER, Justice. Plaintiff, Terry’s Office Products and Service, Inc., appeals from an order of the district court dismissing its action against defendants, Burdette F. Elsbury and Specialized Office Systems, Inc., for alleged breach of agreement in a commercial transaction. At the time of the commencement of the action, plaintiff’s certificate of incorporation had been canceled for failure to file a required annual report with the Secretary of State. Defendants challenged plaintiff’s right to bring the action based on the circumstances of that suspension. Prior to the court’s ruling on the matter, plaintiff’s certificate of incorporation had been reinstated. The district court dismissed the action in reliance on the language of Iowa Code section 496A.130 (1989), which we have italicized below: The cancellation of the certificate of incorporation of a corporation shall not take away or impair any remedy available to or against such corporation, its directors, officers or shareholders for any right or claim existing or any liability incurred prior to such cancellation, but no action or proceeding thereon may be prosecuted by such corporation until it shall have been reinstated. Id. (emphasis added). The primary issue which is posed in considering plaintiff’s challenge to the order of dismissal is whether lack of capacity to prosecute the action at the time it was filed was a matter which was retroactively cured by the reissuance of a valid certificate of incorporation subsequent to the commencement of the action. We conclude that it was and reverse the judgment of the district court. The fact that an action is brought by a party who lacks capacity to sue is not jurisdictional. Middle States Utils. Co. v. City of Osceola, 231 Iowa 462, 467, 1 N.W.2d 643, 646 (1942); Gunnar v. Town of Montezuma, 228 Iowa 581, 585, 293 N.W. 1, 3 (1940). Where, as here, the incapacity is a temporary matter the court should in the first instance treat a challenge to plaintiff’s capacity to sue under section 496A.130 as a plea in abatement rather than in bar. See McCormick v. Blossom, 40 Iowa 256 (1875) (answer alleging incapacity of plaintiff is in the nature of a plea in abatement). The bringing of the action is not void ab initio. Support for the view that a lack of capacity such as that which is asserted in the present case may be cured is found in the following statement from 59 Am.Jur.2d Parties section 181, at 681 (1987) (citing Dodge v. North Hudson, 188 F. 489 (N.D.N.Y.1911)) (footnotes omitted): As a general rule, a plaintiff may, by amendment of his complaint or declaration, change the source of the authority by which he brings the suit without changing the cause of action or the parties .... [A] domiciliary administrator who commences an action in a foreign jurisdiction for the wrongful death of the deceased, and who is refused the right to maintain such action until ancillary administration is obtained in the state of the forum, is not required to commence a new action, but is entitled to set up the fact of his ancillary administrative authority by an amendment. The issue of curing retroactively a lack of capacity to sue under section 496A. 130 was decided favorably to a plaintiff corporation in Stutzman Feed Service, Inc. v. Todd & Sargent, Inc., 336 F.Supp. 417, 418 (S.D.Iowa 1972). [295] The result reached in Stutzman Feed Service and which we reach in the present case is not inconsistent with the holding of this court in Hearth Corp. v. C-B-R Development Co., 210 N.W.2d 632 (Iowa 1973). The issue in the latter case concerned capacity to contract during the period in which a corporation’s charter is suspended. That is a matter not addressed by the language of section 496A.130 and is an issue separate and distinct from capacity to maintain an action. For the reasons stated, we hold that the incapacity of the plaintiff corporation in the present case was retroactively cured by the reissuance of its certificate of incorporation. The judgment of the district court is reversed and the ease is remanded to that court for further proceedings not inconsistent with this opinion. REVERSED AND REMANDED. All justices concur except SCHULTZ, J., and McGIVERIN, C.J., HARRIS and SNELL, JJ.