COAL HARBOR STOCK FARM, INC., et al., Plaintiffs and Respondents, v. Ben MEIER, as the Secretary of State of the State of North Dakota and his successors in office, Defendant and Appellant.
Civ. No. 8719
Supreme Court of North Dakota
Sept. 1, 1971
Rehearing Denied Nov. 16, 1971
583
For reasons stated in this opinion, wе concur with the trial court that the evidence submitted is insufficient to overcome the presumption that the services rendered by the daughter to the mother in the instant case were gratuitous. Accordingly, the order of the trial court is affirmed.
STRUTZ, C. J., and PAULSON, KNUDSON and TEIGEN, JJ., concur.
Helgi Johanneson, Atty. Gen., and John E. Adams, Asst. Atty. Gen., Bismarck, for defendant and appellant.
TEIGEN, Justice.
The Secretary of State has appealed from a summary judgment adjudging that he erred in refusing to approve the proposed articles of incorporation and to issue a certificate of incorporation for a proposed corporation to be named Coal Harbor Stock Farm, Inс. This summary judgment directs the Secretary of State to approve the proposed articles and to forthwith issue a certificate of incorporation to effectuate the corporate existence of the proposed corporation.
The Secretary of State refused to approve the proposed articles on the ground
The Secretary of State, in rejecting the articles, gave notice that he is of the opinion that the purpose of the proposed corporation, as set forth in its proposed articles “to engage in the business of farming or agriculture, solely in North Dakota,” is contrary to the prohibition contained in
“All corporations, both domestic and foreign, except as otherwise provided in this chapter, are hereby prohibited from engaging in the business of farming or agriculture.”
Based on this statute the Secretary of State found that the proposed articles were not in conformity with the requirements of
It is the duty of the secretary of state to issue a certificate of incorporation if he finds that the articles of incorporation conform to law.
If the secretary of state fails to approve articles of incorporation, the persons who filed them may appeal to the district court of the county in which the registered office of such corporation is proposed to be located, whereupon the matter shall be tried de novo by the district court. The district court shall either sustain the action of the secretary of state or direct him to take such action as the court may deem proper. An appeal to this court is authorized frоm the order or judgment of the district court.
The proceedings in the instant case were treated by the parties and the trial court as an appeal to the district court under the above cited section of the Century Code, and an issue which had been initially raised objecting to the form of the proceedings instituted has been dropped.
The matter was submitted in summary judgment proceedings on a stipulation of facts to the district court. The district court notes that
“All corporations, both domestic and foreign, which now own or hold rural real estate which was acquired prior to July 29, 1932 and which is used or usable for farming or agriculture, except such as is reasonably necessary in the conduct of their businesses, shall dispose of the same on or before July 29, 1942, and said corporations may farm and use said real estate for agricultural purposes until such date. The ownership limitation provided by this section shall be deemed a covenant running with the title to the land against any grantee, successor, or assignee of a corporation, which is also a corporation.”
Section 10-06-02, N.D.C.C. [Emphasis added.]“Any corporation, either domestic or foreign, which, on or since July 29, 1932,
has acquired or hereafter shall acquire any rural real estate, used or usable for farming or agriculture, by judicial process or operation of law or pursuant to section 10-06-05, shall dispose of such real estate, except such as is reasonably necessary in the conduct of its business, within ten years from the date that it was so acquired. During said ten year period, the corporation may farm and use such lands for agricultural purposes. The ten year limitation provided by this section shall be deemed a covenant running with the title to the land against any grantee, successor, or assignee of such corporation, which also is a corporation.” Section 10-06-03, N.D.C.C. [Emphasis added.]“In case any corporation, either domestic or foreign, violates any provision of this chapter or fails, within the time fixed by this chapter, to dispose of any real estate to which it has acquired title and which is not reasonably necessary for the conduct of its business, then title to such real estate shall escheat to the county in which such real estate is situated upon an action instituted by the state‘s attorney of such county, and such county shall dispose of the land within one year at public auction to the highest biddеr, and the proceeds of such sale, after all expenses of such proceedings shall have been paid, shall be paid to the corporation which formerly owned the land.”
Section 10-06-06, N.D.C.C. [Emphasis added.]
It was stipulated and agreed: “That in the Articles of Incorporation, under Section 2(a), the power is proposed to ‘acquire rural real estate used or usable for farming or agriculture solely in North Dakota, reasonably necessary in the conduct of the business of farming or agriculture;’ that an indispensable prerequisite to engaging in the business of farming or agriculture is the acquisition of some rural real estate; that farms or ranches cannot be operated without rural real estate.” It was also stipulated that the individuals forming the corporation are farmers and that if the corporation is formed the future business of the corporation will also be farming.
The trial court found that the purpose and intent of the Corporate Farming Law (
In its conclusions of law, the trial court holds as follows:
“V.
“That the purpose of the proposed corporation of the Coal Harbor Stock Farm, Inc., as contained in the Articles of Incorporation is a valid and legal purpose, within the express exception contained in the Corporate Farming Act, Chapter 10-06 of the North Dakota Century Code.
“VI.
“That by its terms, Chapter 10-06 prohibits a corporation from holding and farming rural real estate only when such real estate is not reasonably necessary for the conduct of its business. The law, therefore, specifically provides that a corporation may farm and hold rural real estate whеn such rural real estate is reasonably necessary for the conduct of its business.
“VII.
“That the holding and farming of rural real estate is not only reasonably necessary to the conduct of the business of the plaintiff, Coal Harbor Stock Farm, Inc., but is also an indispensable pre-
requisite to the accomplishment of the stated purpose of the corporation to ‘engage in the business of farming or agriculture solely in North Dakota.‘”
We do not agree with the trial court‘s construction of the Act.
This court, in three previous opinions, construed and applied the Corporate Farming Law. The opinions are: Asbury Hospital v. Cass County (two cases), 72 N.D. 359, 7 N.W.2d 438 (1943), and 73 N.D. 469, 16 N.W.2d 523 (1944) [both were affirmed by the United States Supreme Court in 326 U.S. 207, 66 S.Ct. 61, 90 L.Ed. 6]; Loy v. Kessler, supra. Although the prеcise question before us in this case was not at issue in those cases, we find the key to the solution of this case lies in the first Asbury case. Judge Christianson, the author of that opinion, wrote:
“Corporations are organized for the purpose of carrying on and conducting certain specified business or activity. They are granted certain powers to be used to perform the functions for which they are organized. There is an obvious distinction between the objects or business which a corporation is organized to accomplish or conduct and the powers with which it is vested for the purpose of conducting the business or attaining its objects. When the statute provides that there shall be excepted from its operation such real estate ‘as is reasonably necessary in the conduct of the business of a corporation, it means such real estate as is reasonably necessary for carrying on the business or activity which the corporation was created to carry on. [Citations omitted.]
“‘In order for a foreign corporation to be ‘doing business’ or ‘transacting business’ in a state—(within the purview of laws imposing conditions on its right to do business in such State)—‘there must be a doing of some of the works, or an exercise of some of the functions, for which the corporation was created and not merely what the corporation might have authority to do. A distinction, in other words, is to be observed in this connection betwеen the purposes of a corporation and its powers. So the doing of an act which, though within the power of the corporation, is not a part of the business which it was authorized to conduct, is not doing business.’ [Citation omitted.]” [Emphasis added.]
The prohibition “from engaging in the business of farming or agriculture” contained in
“Nothing in this chapter shall be construed to prohibit co-operative corporations, sevеnty-five per cent of whose members or stockholders are actual farmers residing on farms or depending principally on farming for their livelihood, from acquiring real estate and engaging in co-operative farming or agriculture.”
The prohibition contained in
Thus rural real estate which is owned by a corporation organized for the purpose of engaging in farming or agriculture does not qualify for the exception.
In other words,
“Where the statutes authorize the formation of corporations for ‘any lawful purpose,’ the word ‘unlawful,’ as applied in this connection, is not used exclusively in the sense of malum in se or malum prohibitum; it is also used to designate powers which corporations are not authorized to exercise, or contracts which they are nоt authorized to make, or acts which they are not authorized to do—in other words, such acts, powers, and contracts as are ultra vires.” 18 Am.Jur.2d Corporations, Section 33.
We are agreed that
The summary judgment of the district court is reversed and it is directed to enter a summary judgment in conformity with this opinion.
STRUTZ, C. J., and ERICKSTAD, PAULSON and KNUDSON, JJ., concur.
ON PETITION FOR REHEARING
TEIGEN, Justice.
The plaintiffs, who are the respondents in a petition for rehearing, reargue several points previously raised, argued and considered by this court. Succinctly stated, these points are: (1) that the business prohibition clause contained in
Rule 16 of the Rules of Practice in the Supreme Court of North Dakota sets forth that a petition for rehearing “must not be a restatement or reargument of matters contained in the brief,” and that such petition must distinctly point out something which has been overlooked in the statutory provisions or the controlling principles of law, or which was not called to the attention of the court on argument or in the briefs. Parker Hotel Company v. City of Grand Forks, 177 N.W.2d 764 (N.D.1970); Fish v. France, 71 N.D. 499, 2 N.W.2d 537 (1942).
However, the petitioners in this petition have raised two new points which were not raised or argued at the time of the original presentation of the matter to this court; neither were these matters raised in the summary judgment proceedings in the trial court. Petitioners now argue that to deny them a certificate of incorporation deprivеs them of their right to equal protection of the law under the State and Federal Constitutions, and grants a special privilege to nonfarming corporations; that this is in violation of Sections 1, 11 and 20 of the North Dakota Constitution and Section 1 of the Fourteenth Amendment to the Federal Constitution. The second point raised is that the Corporate Farming Law, as interpreted, violates Section 70 of the North Dakota Constitution which prohibits special legislation.
We will first consider the argument that Sections 1, 11 and 20 of our constitution and Section 1 of the Fourteenth Amendment to the Federal Constitution are violated.
Section 1 of the North Dakota Constitution provides:
“All men are by nature equally free and independent аnd have certain inalienable rights, among which are those enjoying and defending life and liberty; acquiring, possessing and protecting property and reputation; and pursuing and obtaining safety and happiness.”
Section 11 of the North Dakota Constitution provides:
“All laws of a general nature shall have a uniform operation.”
Section 20 of the North Dakota Constitution provides:
“No special privileges or immunities shall ever be granted which may not be altered, revoked or repealed by the legislative assembly; nor shall any citizen or class of citizens be granted privileges or immunities which upon the same terms shall not be granted to all citizens.”
Section 1 of the Fourteenth Amendment to the Federal Constitution provides:
“All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”
The petitioners contend that the Corporate Farming Law, as construed by our decision, has denied them equal protection of the law as guaranteed by the above constitutional provisions. In support of this argument they argue that
“In short, it would constitute an invidious discrimination against the respondents to deny them the privilege, as other corporations now have, to own and farm any tract of rural real estate for at least a ten year period at the end of which time the crucible under the ‘reasonably necessary’ test must be met.”
They ask what “evil” is tо be avoided in prohibiting a corporation from engaging in the business of farming or agriculture and permitting a corporation engaged in another type of business to farm for a period of ten years.
Section 131 of the North Dakota Constitution provides:
“* * * the legislative assembly shall provide by general laws for the organization of all corporations hereafter to be created, and any such law, so passed, shall be subject to future repeal or alteration.”
Section 137 of the North Dakota Constitution provides:
“No corporation shall engage in any business other than that expressly authorized in its charter.”
“All corporations, both domestic and foreign, except as otherwise provided in this chapter, are hereby prohibited from еngaging in the business of farming or agriculture.”
We pointed out in the original opinion that a distinction exists between the purposes of a corporation and its powers. The Corporate Farming Law clearly prohibits any corporation, except co-operative corporations, seventy-five per cent of whose members or stockholders are actual farmers residing on farms or depending principally on farming for their livelihood, from engaging in the business of farming or agriculture. The State‘s objective in enacting the Corporate Farming Law is to prohibit all corporations, except qualified co-operative corрorations, from engaging in the business of farming or agriculture. Thus if the General Motors Corporation and the Ford Motor Company, mentioned by the petitioners, are authorized under their foreign charters to engage in the business of farming in addition to the manufacture and sale of motor vehicles, such corporations are, under the Corporate Farming Law, prohibited from engaging in the business of farming or agriculture in North Dakota, and the ten-year ownership limitation provided by
The United States Supreme Court in Asbury Hospital v. Cass County, 326 U.S. 207, 66 S.Ct. 61, 90 L.Ed. 6 (1945), held:
“The legislature is free to make classifications in the application of a statute which are relevant to the legislative purpose. The ultimate test of validity is not whether the classes differ but whether the differences between them are pertinent to the subject with respect to which the classification is made.”
It affirmed the holdings of this court in its decisions in that case as reported in 72 N.D. 359, 7 N.W.2d 438 (1943) and 73 N.D. 469, 16 N.W.2d 523 (1944). In that case our court held that the provisions of the Corporate Farming Law excepting lands owned and held by a corporation whose business is dealing in farm lands and lands belonging to co-operative corporations, seventy-five per cent of whose members or stockholders are farmers residing on farms or who depend principally upon farming for their livelihood, do not violate the equal protection clause of the United States Constitution. The United States Supreme Court, in Asbury, stated:
“* * * We cannot say that there are no differences between corporations generally and those falling into the excepted classes which may appropriately receive recognition in the legislative application of a state policy against the concentration of farming lands in corporate ownership.
“* * * Statutory discrimination between classes which are in fact different must be presumed to be relevant to a permissible legislative purpose, and will not be deemed to be a denial of equal protection if any state of facts could be conceived which would support it.” Asbury Hospital v. Cass County, 66 S.Ct. 61, 65.
Courts are not concerned with the wisdom of legislation. It is not for us to determine whether the act banning corporate farming as a business is a wise or an unwise enactment. We are concerned only with the legislative power.
It is a matter of common knowledge that North Dakota is an agricultural state. Its principal industry is that of farming. It is also common knowledge that prior to the enactment of the Corporate Farming Law there were corporations in existence which were organized and operated for the purpose of engaging in the business of farming and agriculture. These corporations farmed huge tracts of land in this State in competition with individual farmers. It must be presumed that the people оf the State, before enacting the Corporate Farming Law by initiated measure in 1932, and the legislators, when they amended the law in 1933, informed themselves and determined that to prohibit corporate farming as a business, except for qualified co-operatives, was necessary to protect the economy of the State and the welfare of its citizens. At the same time they recognized that corporations engaged in a business other than farming were empowered to acquire and hold rural real estate suitable for the purpose of farming and, therefore, the tenure of such holdings was limited for a prescribed maximum number of years to enable these corporations to dispose of their holdings, but excepting from the limitation such lands as were reasonably necessary in the conduct of their businesses. This exception relates to a business other than farming or agriculture. Thus the exception would be opera-
Thus the people, by the initiated act, and the legislature, by amendment to the initiated act, have classified corporations organized to engage in the business of farming or agriculture as a separate class of corporations which are prohibited from doing business in this State, by declaring that the business of farming or agriculture is an unlawful corporate purpose except when cоnducted by a qualified co-operative corporation. Under the circumstances, we find this to be a reasonable classification on the basis that the difference between a corporation organized for the purpose of engaging in farming or agriculture and a corporation organized for other business purposes is pertinent to the subject to which the classification is made, is relevant to a permissible legislative purpose, and is not a denial of equal protection under either the State or Federal Constitution.
“Corporations as creatures of the law may, within reasonable limits, be divided into classes, and eаch class given such rights, capacities, and powers as the legislature may see fit. For this reason a corporation may not necessarily have the right to complain of a discrimination in favor of other classes of corporations or that all or any of the rights of natural persons have not been given to it. Generally speaking, the action of the state in so classifying corporations and in conferring different powers upon them is not in contravention of the Fourteenth Amendment of the Federal Constitution. Legislation which applies equally to all corporations in like circumstances and which makes a natural and reasonable classification is not vicious class legislation. If a classification of corporations for the purpose of legislation is natural and reasonable and based on some distinctive difference in the business of the several classes, a difference peculiar to and inhering in its very nature, it is valid and will be sustained. In order, however, to justify diversity of treatment of corporations, the classification must be founded on differences either defined by the Constitution or such as are natural or intrinsic and reasonable.” 16 Am.Jur.2d, Constitutional Law, Section 519.
We believe there is a reasonable basis for the classification made, and that the people аnd the Legislature did not make such an arbitrary or unreasonable discrimination as to constitute a denial of the equal protection of the law or the requirement that all laws of a general nature shall have a uniform operation.
Lastly, the petitioners contend that our construction of the Corporate Farming Law violates Section 70 of the North
“In all other cases where a general law can be made applicable, no special law shall be enacted; nor shall the legislative assembly indirectly enact such special or local law by the partial repeal of a general law, but laws repealing local or special acts may be passed.”
In support of their contention that the Corporate Farming Law, as interpreted in our opinion, violates this section of the Constitution, the petitioners argue that they, as citizens, are not treated as other citizens under like circumstances and conditions. They say that this is so because “other citizens may incorporate a general business corporation and engage in the business of farming on any particular piece of real estate for at least ten years while the respondents are denied the same privilege because of the fact that they have chosen to designatе the purpose of their corporation as that of farming.” [Emphasis added.] The premise of this argument is false. A general business corporation may not engage in the business of farming or agriculture.
For the reasons stated herein, the petition for rehearing is denied.
STRUTZ, C. J., and ERICKSTAD, PAULSON and KNUDSON, JJ., concur.