2 S.D. 596 | S.D. | 1892
Lead Opinion
This action was originally brought by the plaintiff, as assignee of the La Belle Ranche Horse Importing Company, to recover for the alleged conversion by the defend- ^ ant William Lee, as sheriff of Lake county, of certain goods, merchandise, and property, taken by him from the possession of the plaintiff, the same being the assigned property. The balance of the defendants are the indemnitors of the sheriff. The defendants in their answer justify the taking of the property by the sheriff under several attachments and executions against the assignor. The answer sets forth the proceedings taken to procure the attachments, showing the compliance with the statutory conditions pertaining to the issuing of those processes; also the proceedings in the circuit court against the assignor in several actions whereby judgments were regularly obtained against it. The answer further alleges that the plaintiff had no other right, title, or interest in said property, or any part of it, except alleged to be derived from a certain assignment made by the assignor on the 10th day of January, 1890, and that said assignment is void as to all honajide creditors — First, because the assignor was a foreign corporation, which had not complied with the constitution and laws of this state in relation to foreign corporations; second, because the alleged assignment was not authorized by the stockholders of the corporation, nor executed by a duly elected or qualified board
At an early stage of the trial, and before the defendants had entered upon their defense, the court ruled, on several objections to the introduction of evidence, in substance, •that the defendants would not be permitted to raise any question as to the validity of the assignment, and all questions relating to its validity were withdrawn from the jury. At the conclusion of the evidence the court instructed the jury that “for the purposes of this case, in this court, the ruling has been, and it will govern you, that this assignment is valid in all respects; that George L. Wright was the owner, by reason of that assignment of the property on the 4th day of February, 1890, and is entitled to recover from William Lee and the American Exchange Bank, who indemnify and acted with him in the seizure of the property, whatever you, in your judgment, shall find that property was worth.” Whatever doubt may arise as to whether a foreign corporation can make a valid assignment of its property in á state where it has not complied with the constitution and laws of that state in regard to doing business in it, and as to whether that question can be raised by parties who have recognized the validity of the corporation by dealing with it, there certainly can be no question of the right of a bona fide creditor of such corporation to contest the validity of such an assignment upon the ground that it has never been authorized by, or duly executed by, a duly-elected board of directors, or signed by the proper officers of the corporation; or, if so authorized and properly executed, that the fraudulent intent in making it may not be inquired into; or, if neither of these, that the statutory requirements have not been complied with in order to make a valid assignment. A corporate body, as well as a private individual, when in failing circumstances and unable to redeem its paper or pay its debts, may, even without any statutory provisions and upon general principles of equity, assign its property to a trustee, in trust to collect its
The first question for consideration will be, can the La Belle Ranche Horse. Importing Company, being a foreign corporation which has not complied with the constitution and laws of the State of South Dakota in relation to such corporations, transact business, own and dispose of property, and, in case of insolvency, make within this state a valid assignment of its assets for the benefit of creditors? It is conceded that this company has mad.e no attempt to comply with the provisions of the constitution or the statutes in relation to foreign corporations, and the proofs show that, for over four years prior to the making of the alleged assignment in question, the assignor of the plaintiff, in defiance of the laws of the state, transacted a large portion of its business, amounting to many thousands of dollars, within this state. No business was done by the company in the State of Minnesota, -where it was incorporated, excepting holding an occasional stockholders’ meeting at a room in some hotel, or at the office of an attorney in the town of Albert Lee. In all respects the ordinary business of the corporation was transacted in this state, the same as it would have been done if it had been formed under its laws. The alleged assignment was made in South Dakota by officers elected at .a meeting of directors held in this state. It is generally conceded as law
As the question is not, then, the comity of the courts, but that of the state, and is upon the adoption or qualified adoption in the state of the laws, or, rather, the incidents growing out of the laws, of Minnesota in relation to corporations, it follows that the power of determining the question whether and how far, or with what modification, or what conditions, the laws of that state, or any right depending upon them, shall be recognized here, belongs to the legislature ox law-making power; and that the judiciary whose province is to declare the law, and not make it, must be guided in their decision by the principles and policy adopted by the legislature in reference to the question; and, in ascertaining what the legislative policy is, we must be guided, not only by such express provisions as they have chosen to make, and the natural implication from them, but also by what has not been expressed in the enactment. Williams v. Creswell, 51 Miss. 818. A corporation, being the creature of positive law, has such powers as are conferred upon it, and it can make any lawful contract, expressly or by necessary implication, authorized by its charter. In the case at bar it is not claimed but that the company had the power to make contracts in relation to holding property, buying- and selling the same, and could, by its agents, enter into other states than that of its domicile. If, then, it is claimed that a foreign corporation cannot make a lawful contract in this state which is
In support of the contention of the appellants we are cited to a large number of decisions based upon statutes similar to
In the case of Bank v. Page, 6 Or. 431, the supreme court of Oregon passed upon the same statute, and upheld it, and said: “We regard all these provisions of the statute wise and necessary, and we think they should be so construed as to give them force and effect. It was suggested in the argument of this case that a contract, made in violation of some of its provisions, is not necessarily void. Some authorities were cited which give countenance to this view of the law. We think that in some cases it may be true. The general rule is that a contract in violation of law is void.” These decisions upon the Oregon statute have been reaffirmed in the case of Insurance Co. Elliott, 7 Sawy. 18, 5 Fed. Rep. 225, and in the case of Hacheny v. Leary, 12 Or. 40, 7 Pac. Rep. 329.
In Illinois it was enacted that “it'shall not be lawful for any agent or agents of any insurance company incorporated by any other state than the State of Illinois, directly or indirectly, to take risks or transact any business of insurance in this state without first producing a certificate of authority from the auditor of the state. Public Laws of 1855, p. 46. The statute also imposed a penalty for a violation of its provisions. The supreme court held that a promissory note, given to an insurance company which had not complied with the statute, was void, and could not be enforced. Assurance Co. v. Rosenthal, 55 Ill. 85, 91. Justice Walker, in delivering the opinion, says: “When the legislature prohibits an act, or declares that it' shall not be lawful'to perform it, every rule of interpretation must say that the legislature intended to interpose its power to prevent the act, and, as one of the means of its prevention, that the courts
The same rule was applied in Wisconsin, under a similar statute. Insurance Co. v. Harvey, 11 Wis. 394. In Indiana an act applicable to foreign corporations provides that “such foreign corporations shall not enforce in any of the courts of this state any contract made by their agents, or by persons presuming to act as their agent, before compliance * * * with the provisions of Sections 1 and 2 of this act.” It was decided by the supreme court that, while contracts made by foreign corporations which had not complied with the statute were valid, the corporation could not sue on such contracts until after the statutory requirements had been fulfilled, and that the company’s right tó sue must be pleaded in abatement. Mowing etc. Co. v. Caldwell, 54 Ind. 270; Smith v. Little, 67 Ind. 549; Daly v. Insurance Co. 64 Ind. 1; Manufacturing Co. Efflinger, 79 Ind. 264; Elston v. Piggott, 94 Ind. 14. This act was superceded, as to foreign corporations, by the act of 1865, which prohibited such companies and their agents from doing business within the state until certain conditions had been complied with, and a certificate obtained from the auditor of the state. It was decided by the supreme court that this statute did not merely affect the right to sue in the courts of the state, but that contracts made before complying with the prescribed conditions were absolutely void by force of the statute. Hoffman v. Banks, 41 Ind. 1; Insurance Co. v. Thomas, 46 Ind. 44. In Massachusetts, Pennsylvania, Michigan, and Kentucky, a similar doctrine has been laid down in their courts construing statutes relating to foreign corporations. Roche v. Ladd, 1 Allen, 436; Insurance Co. v. Pursell, 10 Allen, 231; Williams v. Cheney, 3 Gray, 215; Insurance Co. v. Harvey, 11 Wis. 394; Brackett v. Hoyt, 29 N. H. 264; Buxton v. Hamblen, 32 Me. 448; Bancroft v. Dumas, 21 Vt. 456; Thorne v. Insurance Co. 80 Pa. St. 15; Scott v. Duffy, 14 Pa. St. 20; Insurance Co v. Stoy, 41 Mich. 385, 1 N. W. Rep. 877; Pierce v. State, 106 Ill. 11; Franklin Ins. Co. v. Louisville & A. Packett Co., 9 Bush. 590.
While the general rule is that a contract jirohibited by statute is void,. and if a statute provides a penalty for doing an act any 'contract under such a statute is invalid, whether it be so declared or not, yet, as Judge Frazier says in the case of Deming v. State, 23 Ind. 416: “The rule is properly applied only where the reason upon which it is founded exists. The law ceases with the reason thereof, and it is a grave error to-regard it as a merely arbitrary rule applicable to all contracts which are prohibited by statute. It is generally applicable because the thing prohibited is immoral or against public policy.. ” In Insurance Co. v. Robinson, 25 Ind. 539, Gregory, J., in delivering the opinion, says: “It is urged in argument that the complaint is bad for' not showing a compliance by the local agent of the company with the requirements of the act respecting foreign corporations and their agents.” “It is contended, under the law, that all contracts of foreign corporations are void, and that the exception to the rule is when they comply with its provisions. * * * We do not so regard that statute. ” The opinion then speaks approvingly of the principle asserted touching contracts prohibited by statute, and then proceeds: “It would seem to follow that the contracts of a foreign corporation, made in violation of a statute made for the protection of our citizens, would not, as to the latter, be void. ”
Thus it will be seen that there are many exceptions to the general rule, and the question is, how shall a court determine whether a case is within or without the rule? In the case of Harris v. Runnels, 12 How. 79, Mr. Justice Wayne, in delivering the opinion of the court, said: “That legislators do not
In the case of Pangborn v. Westlake, 36 Iowa, 548, Justice Cole says: “We are therefore brought to the true test, which is that while, as a general rule, a penalty implies a prohibition, yet the courts will always look to the language of the statute, the subject-matter of it, the wrong or evil which it seeks to remedy or prevent, and the purpose sought to be accomplished in its enactment; and if, from all these, it is manifest that it was not intended to i mply a prohibition or to render the prohibited act void, the courts will not so hold and construe the statute accordingly. ” See, also, Howell v. Stewart, 54 Mo. 400; Bank v. Hale, 59 N. Y. 53; Manufacturing Co. v. Ferguson, 113 U. S. 727, 5 Sup. Ct. Rep. 739; Sherwood v. Alvis, (Ala.) 3 South. Rep, 808. The case of Bank v. Mathews, 98 U. S. 628, was where a national bank had accepted a note and a deed of trust as security for a loan of money, contrary to the provisions of the national banking act. Justice SWAYNE, in delivering the opinion, says: “The statute does not declare such security void. It is silent upon the subject. If congress so meant, it would have been easy to say so, and it is hardly to be believed that this would not have been done, instead of leaving the question to be settled by the uncertain result of litigation and judi
. From these cases, and many others which could have been produced, while there is some conflict on the question, it appears that what the legislature meant in the enactment of the statute in relation to foreign corporations is to be inferred from an examination of the entire act, and the intention, in every instance, is to be the guide to a court in determining whether the particular case should form an exception to the general rule. That intention may be inferred from all its provisions in connection with the subject-matter and circumstances. The object sought to be accomplished exercises a potent influence in determining the meaning of not only the principle, but the minor provisions of a statute. To ascertain it fully, a court will be greatly assisted by knowing the mischief intended to be removed or suppressed, or the necessity of any kind which induced the enactment. In the cases above cited, and in fact all to which our attention has been called by the very able briefs upon the part of the appellants and respondent, all say the objects of the statute under consideration are to place foreign corporations within the reach of the process of the courts in the jurisdiction where the corporation is doing business, and to protect parties doing business with them from imposition, and
In the decisions holding the acts of a foreign corporation void when done in violation of constitutional or statutory prohibition, and when no penalties are provided for, great stress and force is placed upon the fact that to hold the acts valid would render the enactment nugatory, as there would be no way to enforce it. With this contention we cannot agree, especially within our jurisdiction. It is provided by Section 5346, Comp. Laws, that an action may be brought by any states attorney in the name of the state, on leave granted by the circuit court or a judge thereof, against any corporation, when it is claimed that it has or is exercising a franchise or privilege not conferred upon it by law. It appears from the record in case that the La Belle Ranche Horse Importing Company is a
The case of Smith v. Sheeley, 12 Wall. 358, seems to us to be one in point. The main question considered and decided was whether the Nehama Valley Bank, of Omaha, Neb., could be a lawful grantee of a lot of land. While Nebraska was only a territory its legislature had incorporated the bank, but the act of incorporation was never approved or confirmed by congress. By an act approved July 1, 1836, congress enacted ‘ ‘that no act of the territorial legislature of any territory of the United States, incorporating any bank or any banking institution with banking powers or privileges, shall have ar y force or effect whatever until approved and confirmed by congress.”
Again, bearing in mind that the object of the statute under consideration is to bring foreign corporations within the jurisdiction of the courts of our state, and to protect our citizens from imposition and. fraud, and afford them adequate and speedy relief against either, we find in the case at bar that this reason did not exist. The record shows that from the time of its organization to the time of the assignment the corporation had a principle place of business and its executive officers within this state. No difficulty has been experienced in making personal service upon it, and in obtaining valid judgments against it, and its property has at all times been within reach of the processes of the courts. If the statute, which it is said has not been complied with, had been specifically fulfilled, no greater facility could have been afforded to carry out the object of the enactment. This corporation could therefore make a valid contract, hold and dispose of property, sue and be sued,
The next question demanding attention is, was the alleged assignment authorized by the stockholders of the corporation, and executed by a duly elected board of directors, or signed by the proper officers of the corporation? It is conceded, or at least it is not denied, that the laws of the state of Minnesota contain no prohibition upon the corporation to transact business in this state, nor was there any prohibition as to transacting the business for which it was incorporated. The business of the corporation was such as was legal and legitimate, as well in the jurisdiction of its creation as in this state, excepting the prohibition that has been heretofore discussed; and there was nothing to interfere with the full operation of the law of comity between the states in relation to foreign corporations. A corporation only acts through its agents, and any act that can be performed by the directors of a corporation, who are only its agents, may be performed anywhere if the meeting of the directors is otherwise legal. By the articles of incorporation of the La Belle Ranche Horse Importing Company, we find that “the government of said corporation and the management of its affairs shall be vested in a board of directors, consisting of not less than three and not more than five, who shall be stockholders of and in said corporation. ’ ’ The board of directors, then, had the exclusive power to manage the business of the company. In such cases the sole right is in the directors, and not in the stockholders as such. As was said in the case of McCullough v. Moss, 5 Denio, 575, “when a charter invests a board with the power to manage the concerns of a corporation, the power is exclusive in its character. The corporators have no right to interfere with it, and courts will not, even on a petition of a majority, compel the board to do an act contrary to its judgment. The stockholders, as such, in their collective capacity,
But in the case at bar it is alleged that the assignment was made by a board of directors who pretended to hold their office by virtue of an election by the stockholders of the company at a meeting held in the state of South Dakota, and outside the state of its creation, and it is claimed that that action of the stockholders in such election was void. Morawetz on Corporations, in Section 488, says that “there is no objection to shareholders meeting outside of the state, providing all the shareholders give their consent, and, in the absence of an express statutory prohibition, there appears to be no reason why shareholders in an ordinary business corporation should not provide in their articles of association that meetings may be called at convenient places outside of the state under whose laws the company is formed.” The articles of incorporation do not expressly provide for stockholders meeting outside of the state of Minnesota, nor do they state where such meetings shall be held, but it is stated that the principle place of business shall be at Winfred, S. D. The record of the meetings at which these directors were elected shows that the stockholders of the corporation were present or represented, and that no objection was made to the meetir g being held in Madison, S. D., or to tb e election of the directors, but at this meeting the action of the directors in making the assignment was unanimously approved. In support of the position assumed by the appellants, they rely principally upon the case of Miller v. Ewer, 27 Me. 517. A close investigation of that case, however, will show that the facts are not similar to the one at bar. In that case the first meeting of the stockholders for organization was held outside the limits of the state creating it, and no proof of the organization of the company or for the election of its officers had ever been held in
The reasoning of this case seems to be conclusive. The laws of Minnesota, introduced in evidence, under which this company was incorporated, gave it the power to establish one or more offices without the state and to transact business thereat, provided that an office should always be maintained in that state where legal process may be served on the person in charge. The record also shows that the corporators met and
The validity of the assignment in the case at bar is assailed upon the ground that it was fraudulent, and made to hinder, delay and defraud creditors. That the question of fraud and fraudulent intent in making an assignment can be litigated in a proceeding like this suit has been too often decided by the courts to be a matter of serious doubt or controversy. The allegation of the answer is that the assignment was fraudulent, and made to hinder, delay, and defraud the creditors of the company, and was made in pursuance of a conspiracy between the assignee and one Mosher to wreck the company and possess themselves of the property. Both the assignee and Mosher were directors of the company at the time the assignment was made. On the trial it appeared that the respondent and assignee was one of the orignal incorporators of the company, and was its secretary from its organization until the date of the assignment; and at the meeting of the stockholders in Madison he was elected a director, and declined to be re-elected secretary, because he wished to be made an assignee. It also ap pears that he was a creditor of the company, and there were un
The fourth ground upon which the assignment is assailed is that the assignor did not comply with the statutory requirements in relation to making a valid assignment, for the reason that no inventory and affidavit were ever filed as required by law. The law governing assignments for the benefit of creditors requires that the assignor shall make and file a true and full inventory of all the creditors; their place of residence; the sums owing to them, and the nature of the debt; the consideration of the liability; each existing judgment, mortgage, or other security; the exempted property of the assignor; and a list of all real and personal property, and its value, and all incumbrances on it. This must be done within 20 days after the assignment. The assignor must make'an affidavit to be annexed to and filed with the inventory, that it is all respects true and just, according to the best of the assignor’s knowledge and belief. This assignment must be recorded, and the inventory filed, with the recorder of deeds of the county where the assignor resides at the date of the assignment, or, if he did not reside in the state, with the like officer where the principal office is situated, or, if he had no residence or principal place of business, with a like officer where the principal part of the assigned property is situated. The statute also provides that, if these requirements are not fulfilled, the assignment shall be void against creditors of the assignor, and against purchasers and incumbrancers in good faith and for value. Sections 4667-4671, Comp. Laws. To the inventory as filed, three objections were raised by the appellants. First, that the affidavit annexed to the inventory, as originally filed, did not comply with the provisions of the statute; second, that the inventory, as originally ti'ind. clid not contain the matters required by the statute to be contained in it; third, that the inventory, as finally tiled with the additional matter added, was wholly unverified.
The affidavit at1 gched to the inventory was made by Charles
At this point, however, we are met with a seeming difficulty which has been overlooked by the attorneys for both the appellants and respondent, or has been considered by thorn as of but little or no importance. But, inasmuch as the point might be urged as material on a new trial ordgr-efl, we have deemed it necessary to express our views upon it, although raised upon our own motion. The resoluticsh of the board of directors authorizes and directs the imesidbnt, C. E. Place, and the secretary to make and execute an assignment of the prop
Sutherland, in his work on Statutory Construction, (Section 447,) says: “When a statute is affirmative, it does not necessarily imply that the mode or time mentioned in it are exclusive, and that the act provided for, if done at a different time or in a different manner, will not have effect. Such is the literal implication, it is true; but since'the letter may be modified to give effect to the intention, namely, that the legislature intends what is reasonable, and especially that the act shall have effect; that its purpose shall not be thwarted by any trivial omission, or a departure from it in some formal, incidental, and comparatively unimportant particular.” Judge Cooley, in his admirable work on Constitution limitations, (page 98,) gives the following rule for determining whether statutes are mandatory or directory: “Those directions, which are not of the essence of the thing to be done, but which are given with a view merely to the orderly and prompt conduct of the business, and by a failure to obey which the rights of those interested will not be prejudiced, are not commonly to be regarded as mandatory; and if the act is performed, but not in the time or in the precise mode indicated, it may still be sufficient if that which is done accomplishes the substantial purpose of the statute.”
In respect to the requirements of the assignment statutes relating to the inventory, it seems that the essential thing to be done or the substance of the thing to be> provided for, “is the making and filing of a correct inventory of the assets of the assignor within 20 days after the execution of the deed of as
As to the inventory. It appears from the undisputed evidence that, after the assignment was made and filed, an inventory, verified as stated above, was filed in the register of deeds office of Lake county. After this, Place took the inventory from the files, and took it apart, and inserted five pages of additional matter, containing a list of other personal property belonging to the assignor company. It was then returned to the register of deeds without an additional verification. A close inspection of the record in the case discloses the fact that the assignor company had large .dealings with the Bank of South Dakota previous to the assignment, and at this time there were a large number of notes that had been left by the company in the hands of the bank for collection or otherwise, which had been paid, to be accounted for by the bank. In accounting for them there was some differences claimed by the company as errors in the calculations upon the amounts due on the notes and the amount collected, and it was holding the bank for this difference. When the first inventory was filed, the assignor made the following statement in relation to these notes:
It is unnecessary to review the alleged errors in relation to the exclusion of evidence relative to the value of the property taker, because for the error of the trial court in excluding from the jury the evidence tending to show fraud in making the assignment, and that it was made to hinder, delay, and defraud creditors, the cause must be reversed and remanded for a new trial; and it is so ordered.
Concurrence Opinion
I concur in the decision of this case as to reversal. I am not, however, entirely satisfied that Section 4668, Comp. Laws, requiring the assignor to make, at-attach to, and file with the inventory an affidavit, in verification of the same, should be regarded as directory only; and, if not, — if the affidavit is indispensable to make the inventory complete under the statute, — then I am not fully satisfied that the affidavit made by the president alone was sufficient, where the authority to make and execute the assignment had been expressly and especially conferred by resolution uoon the two officers, president and secretary. As this particular question was not argued, I prefer to reserve my opinion.
Concurrence Opinion
I concur in reversing the judgment of the court below on the ground that the court erred in not submit-, ting the question of actual fraud in the assignment to the jury. On the other questions discussed I express no opinion.