86 P. 873 | Idaho | 1906
Lead Opinion
(After making the statement.) — The first question to be determined by us in this action is whether or not, under the constitution and laws of Idaho, a foreign corporation can maintain an action in the courts of this state for the breach of a contract entered into by such corporation within the state without first having complied with the constitution and statute in filing a copy of its articles of incorporation, and designating a statutory agent upon whom service of process can be made. Section 10 of article 11 of the constitution provides: “No foreign corporation shall do any business in this state without having one or more known
It will be seen that in the very inception of our existence as a state, the framers of the constitution provided that no foreign corporation shall do any business in this state without having first authorized a lawful agent within the state upon whom process may be served, and also having established a known place of business. This provision of the constitution is self-acting, and self-operative, to the extent that it requires the facts therein enumerated to actually exist at the time such corporation begins to transact business within the state. The constitution, however, failed to require the corporation to furnish evidence of such facts and make the same a matter of record within any designated office or offices. The legislature, nevertheless, in the exercise of its undoubted power and authority, enacted section 2653, supra, and thereby pointed out the specific acts and things necessary to be done by any foreign corporation in compliance with the constitutional and statutory provisions, and in order to entitle it to do business within this state. The people, in adopting section 10 of article 11 of the constitution, clearly announced and proclaimed the policy of the state toward foreign corporations, and have said in unmistakable language that such artificial beings existing only by the will of a foreign state, must subject themselves to the jurisdiction and laws of this state before they can have any recognition or legal existence within its borders. Even in the absence of any constitutional declaration on .the subject, the power of the legislature to impose conditions and restrictions upon foreign corporations before allowing them to do business in the state is clearly settled and firmly established.
In 1868 Mr. Justice Field, in the leading case of Paul v. Virginia, 8 Wall. 181, 19 L. ed. 357, laid down the doctrine as
It has been contended by appellant that since the statute points out certain penalties against a corporation and its agents and employees, in case it attempts to do business without complying with the statute, and since it also fails to specifically declare contracts entered into in violation of the statute to be void, that it was the intention of the legislature to only impose such restrictions and penalties, and not the intention to avoid such contracts. It will be seen that the constitution requires that a corporation shall have an authorized agent and a known place of business before transacting any business within the state. The statute says that “before doing business in this state” a foreign corporation must comply with the statute, etc. It also provides that no contract or agreement can be enforced by any corporation that has failed to comply with the statute. This language seems to us to clearly indicate both the intention of the
In the consideration of statutory provisions similar to the one under discussion, it is said by the authors, at section 847-b of volume 3 of Clark and Marshall on Private Corporations, that “Most of the courts hold that the object of the statute is to prohibit foreign corporations, on grounds of public policy, from doing any business in the state until they have complied with all the conditions precedent prescribed by the statute; that this prohibition is absolute, and renders illegal contracts made by a foreign corporation in the state in violation of the statute; and that, since the contract is thus illegal, the corporation cannot maintain an action to enforce the same. ’ ’ The authors quote at some length and with approval from the opinion of Justice Walker in Cincinnati Mutual Health Assur. Co. v. Rosenthal, 55 Ill. 85, 8 Am. Rep. 626. This is one of the leading and most numerously cited cases on the subject, and, in considering the legislative intent in the passage of an act very similar to the one here under consideration, the Illinois court says: “When-the legislature prohibits an
It is next urged by the appellant that if it be held that the corporation cannot maintain its action without first showing a compliance with the statute, that still he is entitled to recover
The supreme court of Alabama, in Lindsay v. United States Sav. etc. Co., 120 Ala. 126, 24 South. 171, 42 L. R. A. 783, recently had occasion to consider the sufficiency of the title to a legislative act which had for its purpose the legalization of past transactions, and the court there entered into a discussion of the subject at considerable length and with much reason. The court says: ‘ ‘ The future, and not the past, is the ordinary usual field and scope of legislation.....Prospective laws— laws looking to and operating in the future — are the rule; retrospective laws, looking backward, are exceptions. (Wade on Retroactive Laws, sec. 1.) Because the future, not the past, is the usual field and scope of operation, comes the general rule that, by construction, retfoactive or retrospective operation will not be given a statute, unless its terms show clearly the legislative intention that it should have such operation..... And there may be ‘curative,’ or, as they are sometimes termed ‘healing,’ statutes, the subject being expressed in general terms, and may satisfy the requirement of the constitution. But when it is proposed by an act like the present to deal with existing contracts and liabilities, there should be in the title some expression of that intention — some indication that such is the intent, or the purposes of the constitutional requirement are not satisfied.” To the same effect is Snell v. Chicago, 133 Ill. 413, 24 N. E. 532, 8 L. R. A. 858; Lockport v. Gaylord, 61 Ill. 276; Brieswick v. Mayor of Brunswick, 51 Ga. 639, 21 Am. Rep. 240.
The next contention with which we are met is that since the act of March 18,1901, establishing the office of insurance commissioner, and providing for the regulation and licensing of insurance companies, imposes substantially the same requirements and restrictions'on insurance companies as section 2653, supra, enjoins on foreign corporations in general, it was unnecessary for an insurance company to comply with section 2653, and was not the intention of the legislature that it should do so. We do not think we are either required to consider, or
Lastly, the appellant, Mr. Katz, is not an innocent purchaser for value. He was in charge and control of the Mutual Life Insurance Company’s business in this state, and had notice of the consideration for which the note was executed, and is presumed to have known of the company’s failure and neglect to comply with the law in filing a copy of its articles and designation of an agent on whom service of process might be had. Plaintiff occupies no more favorable position in the ease than the insurance company would hold if suing on this contract. On this point Clark and Marshall on Private Corporations, volume 3, section 847h, say: “By the weight of authority, if a negotiable note or bond is given to a foreign corporation in a transaction which is illegal because of the corporation’s failure to comply with the conditions precedent to the right to do business prescribed by statute, the illegality may be set up as against a holder of the note or bond who has not paid value, or who purchased with notice, but not as against a bona fide purchaser for value without notice.”
It follows from what has been said that the judgment of the lower court must be affirmed, and it is so ordered. Costs awarded to respondent.
Rehearing
ON REHEARING.
This case was heard and decided at the November, 1905, term of this court, and a petition for rehearing was thereafter filed by counsel for appellant. A petition for rehearing was also filed by Messrs. W. E. Borah, James E. Babb and John P. Gray as amici curiae, after having secured permission so to do from a majority of the justices. After an examination of the petitions a rehearing was ordered. The cause was again argued and submitted at this present term of court. We have been furnished with briefs by the attorneys of the respective parties to the action, and in addition thereto we are favored with an elaborate and exhaustive brief, both by way of argument and citation of authorities, signed by Messrs. W. E. Borah, James E. Babb, John P. Gray and Stiles W. Burr, ’and also a brief by Messrs. W. B. Heyburn and John P. Gray, as amici curiae, urging a reversal of our former judgment, and insisting that the same is erroneous, and that we have misconstrued the provisions of our constitution and statute. We are also furnished with a brief by Messrs. M. A. Folsom and J. E. Blair, as amici curiae, reviewing the authorities, and presenting an argument in support of the original opinion as filed by the court. Counsel, in opposition to the views originally announced by the court, submit two principal and leading propositions : First, that section 10 of article 11 of the constitution is not mandatory and self-operative, and that it does not provide any penalty for its violation; second, that*the act of February 8, 1905, entitled “An act relating to foreign corporations doing business in the state of Idaho, ’ ’ was properly
Upon the first point urged there has been presented a great array of authorities. Our examination of the decisions and constitutions of various states discloses that a number of the states, notably western states, have constitutional provisions very similar to, and in many instances identical with, section 10, article 11 of the Idaho constitution. Upon the contention that this provision of the constitution is not self-operative and self-executing, the authorities are almost uniformly against the contention made. It is quite uniformly held that all negative or prohibitory clauses in mandatory or prohibitive form are of themselves self-operative as to the subject matter or thing to be prohibited or denied. (Law v. People, 87 Ill. 385; Davis v. Burke, 179 U. S. 399, 45 L. ed. 249, 21 Sup. Ct. Rep. 210. See 6 Am. & Eng. Ency. of Law, 2d. ed., 913; Oakland Paving Co. v. Hilton, 69 Cal. 483, 11 Pac. 3.)
As to the contention made by counsel that this constitutional provision carries with it no penalty and affords no defense to an action, and that it is only available to the state in an action of ouster against noneomplying foreign corporations, we are unable to agree with the argument advanced. It is true that many authorities, while not discussing the direct effect of such a constitutional provision, upon the whole support counsel’s contention. It is noteworthy, however, that the authorities that attempt to deal with the general principle involved are in irreconcilable conflict both as to the reasons advanced for their holding and as to the conclusions reached therefrom. In the language of Justice Kellam in Wright v. Lee, 4 S. Dak. 237, 55 N. W. 933, “the conclusions of the courts are not only irreconcilable with each other, but no general controlling principle can be deduced from the judgments or the reasoning of the eases.” Some courts have held that contracts made in violation of such constitutional or statutory provisions are wholly void; others have held them voidable only, while still others hold that such provisions have no effect upon, and no application to, contracts
A great deal is said in the briefs of counsel, as well as in some of the authorities cited, about the evil the courts encourage in upholding a citizen of the state in dishonest transactions by allowing him to interpose this defense. That sounds very reasonable and is quite persuasive, but these authorities in this line of reasoning seem to lose sight of the honesty and morality — or, rather, lack thereof — involved on the other side of the question when corporations come into the state and decline to comply with its laws and subject themselves to the service of its process for the depredations and transgressions they commit while thus doing business in violation of its laws. "We fail to see any greater evil in allowing a citizen to interpose as a defense the fact that a foreign corporation has failed to comply with the constitution and statute in appointing an agent and establishing a known place of business than there is in allowing such companies to come into the state and prey upon its citizens in total disregard of the law and say that such contracts are binding and enforceable. We -have never held, and never intended so to do, that such contracts are entirely and absolutely void. On the contrary, we .intimated in the original opinion that they are enforceable on the side of the party with whom they have assumed to contract. We did say, however, that the corporation should be without any remedy in the courts on an action to enforce contracts made by them while in default of compliance with the requirements of law. The evil does not exist so much in the contract as in the legal existence of one of the contracting; parties. They are in some respects in the same position as a de facto domestic corporation that has failed or neglected
Much is said as to the evil effects to flow from such holding, but we are satisfied from our examination of the question that the greater number of these evils are imaginary and chimerical rather than real. We hold the citizen liable criminally even though he did not know the law he has violated, and we know of no valid reason why a corporation should not be equally chargeable with knowledge of the law and its requirements. Courts of equity are always able to protect innocent and honest persons in legitimate transactions, and we are satisfied that the courts of this state can and will protect all persons who have had honest dealings with noneomplying foreign corporations where they deserve protection. The best way, however, to secure a compliance with and obedience to the laws is to begin at the fountainhead and enforce its obedience on all alike. These corporations can always get service on the citizen; but where they fail to comply with the law, he can seldom get service on them. Indeed, he can seldom find where they live, from whence they came or whither they have gone.
Counsel lay much stress on Fritz v. Palmer, 132 U. S. 282, 33 L. ed. 317, 10 Sup. Ct. Rep. 93. A careful perusal of that case discloses that it is not in point here. That was an action in ejectment to recover possession of certain real estate. Plaintiff’s grantor had previously conveyed the property to a foreign corporation that had not complied with the laws of the state of Colorado prior to its commencement to do business in the state. The court said: ‘ ‘ It may be' assumed, therefore, that the Comstock Mining Company, being a corporation of another state, had no right to do business in the state of Colorado until after it had one or more known places of business within its limits, and an authorized agent designated upon whom process could be served, nor until it had made and filed in the proper office the certificate prescribed by
The Fritz-Palmer decision did not arise from an action to enforce a contract, but from a suit to cancel and avoid a contract; the holding that incompetency of the corporation to take and hold title to real estate could only be invoked by the state was a sound, equitable principle peculiarly applicable to that class of cases, but has no application here. There no right had been jeopardized, no risk had been incurred by the party pleading the noncompliance of the adversary; here the hazard and risk is admitted — hazard and risk of being unable to get service of process on the noncomplying corporation. The right to take and hold title to real property is one that can neither legally nor equitably concern the vendor thereof after he has parted with his title and received the purchase price therefor.
Counsel furnish an exhaustive argument and cite a great number of authorities in support of their position that the title to the act of February 8, 1905, is a sufficient compliance with section 16 of article 3 of the constitution. The citations are entirely too numerous for us to undertake to analyze them; besides, they are all on such different subjects of legislation and concern such a variety and diversity of topics of legislation, and the facts and circumstances under which they were enacted and considered by the courts so at variance with the ease at bar, that a review and analysis of them would be of no special value in this opinion. A great many -of the eases cited in support of the title to the act under consideration were cases where the legislature had amended municipal charters or charters of public or governmental institutions, wherein the various legislatures have ratified and confirmed some municipal or public act in which the rights of private individuals were not abridged or affected, and where the public only were interested and concerned. We do not conceive that that line of cases are authority in determining the suffi
Counsel also assert that Brieswick v. Brunswick, cited by this court, was overruled in Hope v. City of Gainesville, 72 Ga. 246, and Bonner v. Milledgeville Ry. Co., 123 Ga. 973, 50 S. E. 973. An examination of these latter authorities entirely fails to justify the assertion made as to their effect upon the former authority. The principal case in which the Georgia court held that its former decisions contained obiter, and in which it distinguished, was Gardner v. Georgia R. & B. Co., 117 Ga. 534, 43 S. E. 863, but the point on which the court was distinguishing was an entirely different proposition from that involved here, and did not involve the Brieswick-Brunswick case. Indeed, the latter case is not mentioned or cited in the Gardner case.
The elaborate, exhaustive .and able briefs with which we have been favored have seemed to demand more than ordinary consideration and examination of the authorities and questions touched, and we have accordingly devoted to them much
We conclude that the judgment of the court as previously announced must stand as the unanimous conclusion and judgment of the court, and it is so ordered.