192 Wis. 307 | Wis. | 1927
The plaintiff, in the year 1905, was organized under the laws of this state as a corporation for the purpose'bf- buying and selling real estate, and subsequent to such organization it actually purchased considerable real property in the course of the conduct of its business. During the years .1913, 1914, and 1915 it incurred obligations for which it executed its notes, secured by mortgages upon its property, which securities the defendant Porth became the owner of by assignment. In the year 1921 and subsequent years prior to-1924, default having occurred in the payment of the principal and interest of the securities, foreclosure actions were begun, prosecuted to final judgment, the property sold, and deficiency judgments entered. The defendant Porth claims that after the foreclosure sales he became the owner of the title to the mortgaged premises and also of the deficiency judgments.-
In-the year 1916-the plaintiff failed to comply with the provisions of ch. 180 of the Statutes, and the secretary of state, on the 1st day of January, 1917, declared the corporate rights and privileges of the corporation forfeited, and entered such forfeiture in the records of his department.
On the 7th of May, 1923, the corporation, through its officers, executed a quitclaim deed of the premises described in the complaint to the defendant Porth, such deed reciting as a consideration the payment of one dollar and the satisfaction of the deficiency judgments obtained in the foreclosure proceedings. This action was thereafter begun to set aside such deed, upon the ground of a failure of consideration.
In support of plaintiff’s contention the argument is advanced by its counsel that after the declaration of forfeiture by the secretary of state on January 1, 1917, the plaintiff merely continued to exist for a period of three years, pursuant to the provisions of ch. 181 of the Statutes, for the purpose of liquidating and winding up -its affairs, and that upon the expiration of such three-year period it became extinct as a body corporate; that it lost all of its corporate franchises and privileges, and to all intents and purposes became defunct; that it follows as a necessary consequence that the attempted rescission of the forfeiture in 1923 was nugatory; that the plaintiff had no authority in 1924 to execute the quitclaim deed above referred to; and that the consideration recited in the deed failed.
Assuming that the plaintiff, under the facts and circumstances of the case, was in a position to bring the present action, the issues ráisfed are both interesting and novel and involve a construction of chs. 180 and 181 of the Statutes. Ch. 180 of the Statutes of 1923 is entitled “Domestic Corporations: Organization and Powers.” Ch. 18Tis entitled “Dissolution and Reorganization.”
Ch. 180 was enacted over half a century subsequent to the adoption of ch. 181. The purpose of ch. 180 becomes clearly apparent when wé consider its enactment from a historical standpoint. Prior to 1905 a gradual change had manifested itself in the business world, which consisted of an ever-increasing substitution of corporations in lieu of individual and partnership enterprises, and this was especially true in business concerns operating with a large amount of capital. The legislature realized hot only what had occurred in the past, but the revolutionary trend of events concerning the future. In order, therefore, to furnish reliable information to creditors and to those cohtemplating business relations with a private corporation, ch. 180 was enacted. It is a mere regulatory measure. Regulation, however desirable, will fall short of its design unless it is
Taking sub. (2) of sec. 180.08 of the Statutes as standing alone, it may be plausibly argued that the failure to comply with the provisions thereof would operate as a forfeiture, and that the secretary of state acts merely as a ministerial officer in finding certain facts, which, if found, bring into operation the act of the legislature. In order, however, to arrive at the true intent of the legislature, we must construe the entire section as a whole. Sub. (7) of sec. 180.08 authorizes the secretary of state to rescind the forfeiture on the payment of a penalty of $25 and the filing of the affidavit required by said section. This in itself indicates that it was the legislative intent, not that the corporation had forfeited its franchises and charter, but that it might still be recognized as a valid operating legal entity upon compliance with certain conditions. If the corpora
The secretary of state is a mere ministerial officer. He possesses no judicial powers, and in fact, if the legislature had attempted to vest him with such, the act would be unconstitutional and void. It therefore becomes apparent that when the legislature authorized the secretary of state to declare a forfeiture, it merely intended that such declaration should operate as a cause for forfeiture, which could be enforced in a proper action brought by the attorney general or by any private party in the naffie of the state, under the provisions of sec. 286.36 of the Statutes.
The question herein involved was presented to the supreme court of North Dakota in the case of Farmers’ State
“The failure to pay the annual license fee does not ipso facto work a forfeiture of the corporate charter. At most, it affords prima facie evidence of the nonuser of the charter and might amount to a violation of the provisions of law by which it has incurred a forfeiture of its corporate rights, privileges, and franchises; but such a result would not follow until there had been a legal determination of the fact of violation. ...”
We deem the logic of the Brown Case applicable to the instant case, and we approve of the same and adopt it as sound law. In this connection we call specific attention to the following portion of sub. (2) of sec. 180.08 of the Statutes, which reads: “In case said report is not filed by said January first, the corporate rights and privileges granted to such corporation shall be forfeited. ...” Considering that portion of the section just quoted together with the other provisions of ch. 180, we are constrained to hold that what the legislature intended was not a forfeiture ipso facto but a cause for forfeiture, which could be enforced in accordance with the provisions of sec. 286.36.
Our view thus expressed is further fortified by cases in our own court, such as Powers v. C. H. Hamilton P. Co. 60 Wis. 23, 18 N. W. 20; Sleeper v. Goodwin, 67 Wis. 577, 31 N. W. 335; Strong v. McCagg, 55 Wis. 624, 13 N. W. 895; and Stolze v. Manitowoc T. Co. 100 Wis. 208, 75 N. W. 987, cited in respondent’s brief. See, also, Held v. Crosthwaite, 260 Fed. 613, cited in respondent’s brief. Further, it may be said that in those states where a forfeiture is declared under statutes similar to that of our own state, the acts contain a provision making it unlawful for any corporation in default to exercise the powers of such corporation or to transact its ordinary business, and they further provide that any exercise of corporate powers shall constitute a misdemeanor and be punishable by fine or im
We therefore conclude that inasmuch as the failure of the plaintiff to comply with the provisions of ch. 180 did not work ipso facto a forfeiture of the corporate rights and franchises, and that at the time it executed the deed in question which it is the object of this action to declare void and ineffectual it was exercising its usual and ordinary functions, that the consideration expressed in the deed constituted a valuable consideration, and that the deed vested in Porth all the right, title, and interest of the plaintiff in the property conveyed.
Plaintiff’s counsel argues that the plaintiff corporation died a legal death on January 1, 1920; that to all intents and purposes it thereafter had no existence; in other words, was as dead as a natural person who had passed beyond this worldly sphere; that, being dead, it could not be resurrected; and yet plaintiff alleged in its complaint that it is a corporation duly organized and existing under the laws of the state of Wisconsin. If at the time of the commencement of the action it was not dead but alive, the interesting question presents itself, when and how was it resurrected? If it was defunct, and if after 1920 the assets remaining at that time became the property of the stockholders, then the stockholders should have been made parties. On the other hand, if it had never lost its corporate franchises and privileges, then it was alive, to all intents and purposes, and the deed executed by it in 1923 constituted a valid transfer. So that, whichever horn of the dilemma is taken, the plaintiff corporation would have no right to the relief herein prayed for.
By the Court. — Judgment affirmed.