A. Booth & Co. v. Weigand

STPAUP, J.

1. The respondent, plaintiff below, is a corporation organized under the laws of the state of Illinois. It brought an action against appellant, defendant below, on three counts, or causes of action. — the first for goods sold and delivered by it to the appellant; the second and third on assigned claims for goods sold and delivered to appellant by the Cudahy Packing Company, a corporation, and by E. Gr. Hines, doing business as Hines Mercantile & Commission Company. The defendant answered, alleging that the plaintiff had not legal capacity to sue on any of the causes of action, on the ground that it was a foreign corporation and had not complied with the laws of this state permitting foreign corporations to do business within its borders, and that it was conducting at Salt Lake City a general mercantile business of buying and selling at retail fish, game, and poultry, and there maintained an office and principal place of business. As a further defense to the first cause of action it was alleged that the goods were sold and delivered whilst it was engaged in such business. As a further defense to the second and third causes it was alleged that at the time of the assignments by the Cudahy Packing Company and by Hines of their claims to plaintiff it was, unlawfully and in violation of the statutory and constitutional provisions of the state permitting foreign corporations to do business, engaged in said fish, game, and poultry business; but it was not alleged that the claims or the assignments thereof were in any manner connected with said business, or in anywise grew out of the same, or were at all related thereto; nor was it alleged that the business conducted by the said assignors was in any particular unlawful or wrongful, or that either of the assignors had violated any provision of law. The lawful status of the assignors and of their business is unquestioned. Plaintiff’s demurrer to this answer being sustained, and the defendant declining to further answer, judgment was entered for plaintiff.

The defendant appealed therefrom, and at the October term, 1904, this court decided that none of the said contracts could be enforced in the courts of this state by the plaintiff *137 because of its uoucompliauce witb tbe following constitutional and statutory provisions : Article 12, section 9:

“No corporation shall do business in this state, 'without haying one or more places of business, with an authorized agent, or agents, upon whom process may be served; nor without first filing a certified copy of its articles of incorporation with the secretary of state.”

Section 351, Revised Statutes 1898:

“All corporations, not organized under the laws of this state, before doing business within the state, shall file with the Secretary of State,” etc., “a certified copy of their articles of agreement, a certificate of incorporation, and by-laws, etc., and shall also, before doing business within the state, by resolution, etc., accept the provisions of the Constitution of this state, and designate some person residing in the county in which its principal place of business in the state is situated upon whom process, etc., may be served.”

Section 352, Rev. St. 1898:

“Any such-corporation failing to comply with the provisions of the .foregoing section shall not be entitled to the benefits of the laws of this state relating to corporations; and any person acting as agent of a foreign corporation which shall neglect or refuse to comply with the foregoing provisions, shall be deemed guilty of a misdemeanor and shall be personally liable on any and all contracts made in this state by him for and in behalf of such company during the time that it shall remain so in default,” etc.

Tbe following constitutional provisions were also referred to: Article 12, section 1:

“All corporations doing business in this state, may, as to such business, be regulated, limited or restrained by law.”

Section 4:

“All corporations shall have the right to sue, and shall be subject to be sued, in all courts, in like cases as natural persons.”

Tbe case is reported in 28 Utah 372, 79 Pac. 570.

A petition for rebearing having been granted, tbe matter is again before us for review. We are persuaded that tbe for *138 mer decision is erroneous, and is against tbe weight of authority, especially as to the second and third causes.

2. It is well first to notice the principal cases cited in support of the former decision:

Paul v. Virginia, 8 Wall. 168, 19 L. Ed. 357, is cited and quoted from. In that case, Paul, a resident of Virginia, and an agent of a New York Insurance company, was convicted in the state court for engaging in the insurance business without a deposit bond as required by the statute. He appealed to the Supreme Court of the United States, attacking the validity of the statute, and denying the power of the state to pass such a law.

The case of Pembina Min. Co. v. Pennsylvania, 125 U. S. 181, 8 Sup. Ct. 737, 31 L. Ed. 650, cited, was one where a mining company, a -corporation under the laws of Colorado, and there having its principal office, was assessed a tax for “office license” in the state of Pennsylvania. The validity of the act authorizing the state to make such assessment was assailed and claimed to be unconstitutional. It is readily perceived that these cases presented altogether different questions from the one here under consideration. Inasmuch as the right of the state to impose conditions upon which foreign corporations may do business within its- borders is conceded in this case, and the validity of neither the constitutional nor statutory provisions is questioned, these cases are of no importance in the determination of the real question before us, which is, as to the second and third causes: Does o-ur Constitution or statute in effect declare that a contract is void, or non-enforceable by a foreign noncomplying corporation, when made by it within the state and when relating to single or isolated transactions, and, as to the first cause, is such a contract void or nonenforceab-le by it, when relating to and growing out of general business transacted by it within the state ?

Barse Live Stock Co. v. Range Valley Cattle Co., 16 Utah 59, 50 Pac. 630, cited, is a case where plaintiff, a foreign corporation, brought an action against appellants to compel them to transfer to it on the books certain stock claimed to have been assigned, and to recover dividends that had been paid *139 tbereon. Its right to maintain tbe action was questioned because of its non-compliance with tbe enabling statute, but tbe claim was beld untenable. Confined to tbe actual point decided and before tbe court, tbe decision is an authority bere for tbe respondent on tbe second and third causes, and is not an authority against it on the first, because tbe question involved was not before tbe court.

In tbe case of Railroad v. Telluride Power Co., 23 Utah 22, 63 Pac. 995, cited, tbe claim was made that tbe power company, a Colorado corporation, was not organized in compliance with tbe laws of that state, and bad not conferred upon it tbe power to acquire and bold tbe subject-matter of tbe litigation; and tbe question decided was that

“A corporation of Colorado coming into this state cannot bring -with it powers with which it is not endowed in Colorado. It can only have an existence under the express laws of the state where it is created, and can exercise no power which is not granted by its charter or some legislative act.”

The ease of Miller v. Ammon, 145 U. S. 421, 12 Sup. Ct. 884, 36 L. Ed. 759, cited, involved tbe validity.of an ordinance and tbe right to recover for liquor sold in violation of its terms. But, as was well said in that case, “the liquor traffic is freighted with peril to tbe general welfare, and tbe necessity of careful regulation is universally conceded.” There tbe business itself was injurious to health, and affected morals and society, and, because of those evils, it was legislated against and restricted. Here tbe business was not only innocent, but was in aid of tbe necessities of life. This distinction, well recognized in most cases, has in some not been fully observed, and may account for some of tbe diversity of opinion upon this question.

Tbe case of Electric, etc., Co. v. Perry (C. C.), 75 Fed. 898, cited, is somewhat similar, for there tbe corporation brought an action against tbe chief of police and constables to restrain them from interfering with its business of pool selling in violation of law.

Tbe case of Crefeld Mills v. Goddard (C. C.), 69 Fed. *140 141, cited, was upon a statute which expressly provided, that any foreign corporation doing business in the state (New York) without complying with the statute “shall maintain no action in this state upon any contract made by it in this state.” The difference between that statute and ours is readily perceived. Whenever the statute has expressly declared that the contract is unenforceable, that, of course, is the end of the controversy. Such a statute is self-construing, and the court has no other duty than to- give it effect.

The case of Cooper Mfg. Co. v. Ferguson, 113 U. S. 727, 5 Sup. Ct. 739, 28 L. Ed. 1137, cited, is an authority for the respondent so far as it goes. There, the noncomplying foreign corporation made a contact in the state of Colorado and there brought an action upon the contract. Upon the questions being raised that the corporation had not the right to maintain the action, and that its contract was void because of its noncompliance with the enabling statute, it was held that the contract was valid, and that the corporation had the right to maintain its action thereon.

The cases of Cincinnati, etc., Co. v. Rosenthal, 55 Ill. 85, 8 Am. Rep. 626, and Thomas v. Travelers’ Ins. Co., 80 Pa. 15, 21 Am. Rep. 89, are also cited. They may be 'said to support the decision, especially as applied to the first cause of action ; and yet there are dissimilarities when the difference between executory and executed contracts and statutory restrictions of a particular kind of business or specified things are considered. In the first case the statute provided that it should not be lawful for any agent of a foreign insurance company “to directly or indirectly take risks, or to do or transact any business of insurance in this state” without first procuring a certificate, etc. Without complying with the statute the agent insured a citizen of Illinois, who gave his promissory note in payment, of premiums. In an action on the note by the company it was held that the contract was void, because of the noncompliance with the statute. The .statute was directed against a particular kind of business, and the doing of specific acts and things was made unlawful. The giving of the note was with respect to these specific things denounced *141 by tbe statute. It will also be observed that there the contract was executory on the part of the company seeking to enforce it. Here the contract was fully executed on the part of the plaintiff, and the consideration thereof accepted and retained by the defendant. Much to the same effect is the cited Pennsylvania case.

The cases cited from Alabama support the decision; but these cases have been criticised. In speaking of them, and other like cases, Mr. Thompson, in his Commentaries on the Law of Corporations (volume 6, section 1955), says:

“It cannot escape attention that these decisions ignore the distinction, often taken hy enlightened courts in respect to the validity of contracts, between contracts which are merely malum prohibitum and contracts which are malum in se. Such decisions put the contracts under consideration, although perfectly innocent and meritorious im themselves, on the footing of contracts which are essentially criminal, corrupt, or fraught with moral turpitude, or otherwise opposed to the public policy of the State. In leveling such contracts to this ground, and in allowing their own citizens to repudiate them on such a plea while keeping the consideration, the courts degrade the commercial morals of the people, encourage general dishonesty, expel capital from the state, and bring its judiciary into deserved disrepute.”

3. It of course is conceded that there is a conflict of authorities upon this question, and that there axe authorities which support the decision, especially as to the first cause of action. There are, however, certain recognized principles underlying most of the decisions. They are: That by the law of comity among nations a corporation created by one sovereignty is permitted to make contracts in another and to sue in its courts, and the same law of comity prevails among the several states of the Union. That the state may prescribe the terms and conditions upon which a foreign corporation may be permitted to carry on its business within its borders. When, by express terms, it has been declared by the state, or where such an intention is clearly manifest from the language used, that contracts, made within the state by a foreign corporation in the course of business within the meaning of constitutional and statutory provisions without complying therewith, are void or unenforceable, and no action can be main *142 tained thereon by the noncomplying corporation, at least so long as such noncomplianee exists. That in each case it is the intention of the Legislature, rather than the letter of the statute, which controls. The question before us is therefore to be determined by ascertaining the meaning of the statute and the Constitution, and by determining whether it was the intention of the lawmakers in effect to declare void contracts made in the state by foreign noneomplying corporations. As to the contracts of the second and third causes of action, the solution is not difficult; for the taking of the assignments or the bringing of an action on the assigned claims was not “doing'business” within the meaning of the constitutional or statutory provisions. The business conducted by respondent, as alleged in the answer, was that of buying, selling, and retailing fish, game, and poultry. It is not alleged that the claims or the assignments had any connection therewith. So far as made to appear, they were wholly independent thereof. Of course, if respondent had been engaged in the business of buying claims, or in the collection business, and the assignments were had in pursuance thereof, it would be different. The words “doing business,” as used in these provisions, refer to a general transaction of business, and not to an isolated-transaction, or to single, or wholly collateral acts. The statute obviously relates to some regular or customary business.' (Barse Live Stock Co. v. Range Valley Stock Co., 16 Utah 59, 50 Pac. 630; Cooper Mfg. Co. v. Ferguson, 113 U. S. 727, 5 Sup. Ct. 739, 28 L. Ed. 1137; Colo. Iron Wks. v. Sierra Grande Min. Co., 15 Colo. 499, 25 Pac. 325, 22 Am. St. Rep. 433; Florsheim Bros. Dry Gds. Co. v. Lester, 60 Ark. 120, 29 S. W. 34, 27 L. R. A. 505, 46 Am. St. Rep. 162; Gilchrist v. Helena, etc., Co. [C. C.] 47 Fed. 593; Elliott, Priv. Corp. [3 Ed.] p. 271, and cases. Note to Cone Export & Commission Co. v. Poole, 24 L. R. A. 289.) The taking of the assignments and the bringing suit thereon by the respondent, being wholly independent of its business, renders the transaction the same as though a foreign corporation had acquired claims by assignment without the state and brought suit thereon, or as of any noncomplying foreign cor *143 poration’s making a contract witbin the state involving isolated transactions or single acts, and maintaining an action thereon. As to such matter, the foregoing authorities demonstrate that it is not “doing business” within the meaning of like statutes.

Whether the contract relating to the first cause of action is void or unenforceable by respondent presents a question which is more difficult; but the decided weight of authority and the trend of later cases are to the effect “that the failure of the foreign corporation to comply with the domestic statutes prescribing the conditions upon which it shall be permitted to do business within the state does not render its contracts made therein void and nonenforceable, or prevent it from maintaining an action against the domestic citizen thereon, unless the statute so states in express language.” 6 Thomp. Com. L. of Corp., sec. 7957, and cases. Unless such an intention is clearly expressed in the statute.the courts will not hold such contracts void or nonenforceable. They will not do so by implication from loose and indefinite language. The primary object and evident purpose of the statute are to subject foreign corporations to the jurisdiction of our courts, to the inspection and supervision of the officers of our state, and to acquaint them and the citizens dealing with the corporation of its nature and powers. They are not to invalidate acts or contracts of such noncomplying corporations, nor to afford the citizen of the state an opportunity to avoid his contracts made with it, nor is the nullification of his contract or of acts done in pursuance thereof the remedy for the violation of the statute. The state is authorized to enforce the statute, and may do so by proper proceedings on its behalf. Section 3610 and 3611, Revised Statutes 1898. That, together with the penalty imposed for its violation, no doubt was deemed sufficient by the Legislature to accomplish the purpose of the statute, and it is not for the judiciary at the instance or for the benefit of private parties to inflict the additional and harsh penalty of forfeiture by striking down contracts and acts not evil in themselves, especially when, as here, the contract had been fully executed on the part of the corporation, *144 and tbe consideration thereof accepted and retained by tbe citizen. Tbe following authorities fully sustain us: 2 Morawetz, Priv. Corp. [2 Ed.], section 665; 6 Thomp. Com. L. of Corp. 7957; Taylor, Priv. Corp. [3 Ed.], section 401; Elliott, Priv. Corp. [3 Ed.], sections 268, 269; Nat. Bank v. Matthews, 98 U. S. 621, 25 L. Ed. 188; Fritts v. Palmer, 132 U. S. 282, 10 Sup. Ct. 93, 33 L. Ed. 317; Bedford v. E., etc., Loan Ass’n, 181 U. S. 227, 21 Sup. Ct. 597, 45 L. Ed. 834; Blodgett v. Lanyon Zinc Co., 120 Fed. 893, 58 C. C. A. 79; Caesar v. Capell [C. C.], 83 Fed. 403; Washburn Mill Co. v. Bartlett, 3 N. D. 138; 54 N. W. 544; Kindel v. Lithographing Co., 19 Colo. 310, 35 Pac. 538, 24 L. R. A. 311; Wright v. Lee, 4 S. D. 237, 55 N. W. 931; Toledo Tie & Lumber Co. v. Thomas, 33 W. Va. 566, 11 S. E. 37, 25 Am. St. Rep. 925; Dearborn Foundry Co. v. Augustine, 5 Wash. 67, 31 Pac. 327; Fire Engine Co. v. Town of Mt. Vernon, 9 Wash. 142, 37 Pac. 287, 38 Pac. 80; Tabor et al. v. Goss & Phillips Mfg. Co., 11 Colo. 419, 18 Pac. 537; Tolerton & Stetson Co. v. Barck, 84 Minn. 497, 88 N. W. 19; Larned v. Andrews, 106 Mass. 435, 8 Am. Rep. 346; Hartford Ins. Co. v. Mathews, 102 Mass. 221; Vermont Loan & Trust Co. v. Hoffman, 5 Idaho 376, 49 Pac. 314, 37 L. R. A. 509, 95 Am. St. Rep. 186; Mandlebaum v. Gregovich, 17 Nev. 87, 28 Pac. 121, 45 Am. Rep. 433.

In view of tbe foregoing authorities it is not reasonable to presume that tbe Legislature intended to make void and unenforceable contracts like these under consideration. It is claimed, however, that the respondent was procluded from at all contracting in this state, whether on a single transaction or in course of its general business, and was forbidden from suing on such a contract because of the provision.

“Any such corporation failing to comply with the provisions of the foregoing section shall not be entitled to the benefits of the laws of this state relating to corporations.”

We have already shown, as to the second and third causes of action, the matter alleged did not constitute “doing business,” within the meaning of the statute, hence they are not *145 affected by tbe cause referred to. To say that the clause rendered the contract of the first cause of action void, and forbade respondent’s suing thereon, we are obliged to do so by implication from loose and uncertain language. Because of its noncompliance with the statute, to say that the respondent shall not have the “benefit” to make a contract, or to sue in the courts of this state, is a meaningless expression. These things are not “benefits.” The making of a contract involves power and capacity; suing -thereon, a right. Unless a very unsatisfactory, and loose definition is given the word “benefits,” these things cannot be embraced within it. Whether the respondent had the power and capacity to contract is dependent upon its charter or the legislative act creating it. To construe this clause to mean that a noncomplying foreign corporation cannot sue in our courts is to deny such right to all such corporations, whether the contract was made here or elsewhere ; in this case, whether the goods were sold without the state or, sold within it. Surely such consequences were not contemplated by the Legislature, and, if so, it would have been against the express provisions of the Constitution giving the right to all corporations, without condition or limitation, to sue in our courts. It is somewhat difficult to understand just what the Legislature intended hy the said clause, but it is quite clear no such consequences as these were intended.

Reference to the history of legislation upon this subject will, to some extent, account for the use of the term “benefits” in the statute. The territorial law (section 2293, Comp. Laws 1888) was:

“Any such corporation failing to comply with the prpvisions of this section, shall not he entitled to the henefits of the laws of this territory, limiting the time for the commencement of civil actions.”

In this connection the use of the word “benefits” was appropriate and expressed sense. After statehood (Sess. Laws 1896, p. 308, c. 8.1), this particular clause was amended by changing the expression “of the laws of this territory limit *146 ing tbe time for tbe commencement in civil actions” to tbat “of tbe laws of tbe state relating to- corporations.” Wben nsed in tbis connection tbe word “benefits” renders tbe meaning incongruous and obscure. With sucb amendment tbe law was inserted In tbe Revised Statutes of 1898. . Looking at tbe statute relating to corporations we find a chapter on general incorporation, prescribing tbe nature of articles of agreement, powers of tbe corporation, including those to contract and to sue and be sued, powers and duties of officers relating to stock, stockholders, and meetings, amendments, etc., corporations not for pecuniary profit, tbe sections relating to foreign corporations above quoted; a chapter on assessments ; one on banking corporations and banks; one on building and loan associations ; one on loan, trust, and guaranty associations; and one on railroad corporations. All these relate to tbe manner of incorporating, to prescribing powers and duties, and imposing conditions and restrictions and tbe like; but nowhere is there found anything with reference to benefits, unless it can be said tbe whole .and every part of the title is embraced and meant to be within tbe term. To- give it sucb a meaning leads to tbe conclusion tbat a foreign corporation cannot sue a citizen of tbis state in our courts on a contract made or obligation incurred wholly without tbe state without first complying with tbe enabling statute. To say it may maintain such an action, but may not maintain an action on a contract made by it within tbe state, is to make a distinction not made by tbe statute, if tbe word “benefits” is to be given tbe meaning contended for. If suing is a “benefit,” and tbe right to sue at all is denied to all noncomplying foreign corporations, why say they may sue on a contract made or obligation incurred wholly without tbe state, but may not do so if it is made or incurred within the state ? To say it does not mean to restrict the right to sue, but does mean that sucb a corporation cannot make a valid contract within tbe state, why single that out from all tbe many other provisions of tbe title, or why exclude the one relating to “sue and be sued ?” Tbe difficulty is, we are dealing with a common term, “benefits,” which does not properly describe or embrace the things being con *147 sidered, tbe power of contracting and tbe right of suing, and thus we are whirled into obscurity.

If the Legislature intended to deny non-complying foreign corporations the power or capacity to contract in this state, or to deny them the right to maintain an action in our courts upon contracts growing out of business conducted by them in this state, it well could have said so in terms of no uncertain meaning, and should not have left it to conjecture and speculation. Until the Legislature has expressed such an intention in clear and express terms, or until such an intention is otherwise clearly manifested, we may well presume no such consequences were intended; and we are neither authorized nor disposed to ingraft them upon a statute of such doubtful language and elastic meaning as is the clause referred to. The authorities all recognize that the purpose of these constitutional and statutory provisions is not designed or intended as a prohibition upon foreign corporations to contract in the state, to the extent of declaring such contracts void and nonenforceable. Until the Legislature shall do so, we are unwilling to give the citizen the right to discharge an innocent contract made by him with a noncomplying corporation and to avoid his obligation thereon or to prohibilrjts enforcement, especially when, as here, the contract on the part of the corporation is fully executed and the citizen has received and retained the consideration thereof, merely upon the ground that the corporation failed to perform “a duty that it owed to the state at large, but the nonperformance of which in no manner prejudiced him-.” (Washburn Mill Co. v. Bartlett, supra.)

It has been said, and is often expressed in the cases, that a contract made in violation of law, or made to do an act expressly forbidden by a statute, is void, and cannot be enforced. This is true, whether the. act is forbidden because of an attached penalty, or because otherwise forbidden by clear terms of the statute. These principles of law are conceded,

“But in determining the purpose of the enactment courts consider the nature-of the forbidden act, for the very obvious reason that when such act is immoral or criminal in its nature, or dangerous to life, *148 health, or property, the presumption must prevail that legislative wisdom intended to stamp it out; while, if the act be innocent in itself and in its consequences, no such presumption necessarily arises.” (Washburn Mill Co. v. Bartlett, supra.)

Notwithstanding these general principles, it is also true

“That if it is manifest from the language of the statute, or from its subject-matter and the plain intent of it, that the act was not to be made void, but only to punish the person doing it with the penalty prescribed, it is equally clear that the courts would readily construe the statute in accordance with its language and its plain intent. 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 imply a prohibition or to render the prohibited act void, the courts will so hold and construe the statute accordingly.” (Pangborn v. Westlake, 36 Iowa 546.)

Considering the purpose and object of tbe enactment of tbe statute as heretofore observed, it is quite clear tbat tbe Legislature did not intend to render void and unenforceable tbe contracts under consideration. Where, as here, tbe contract itself being innocent and concerning a subject-matter itself harmless and lawful, and being fully executed upon tbe part of tbe corporation and the consideration thereof retained by the citizen, he will not now he heard to defend against its enforcement, and he permitted to nullify his just obligation with respect to it, solely upon the plea of the noncpmpliance of the corporation with the enabling statute. No court has gone to any greater extent than have the courts of Alabama in holding contracts of noncomplying corporations void, yet that court refused to entertain the defense when the contract was fully executed upon the part of the corporation. It was said:

“If the contract were executory, and it were shown the company had failed to comply with the requirements of the section of the Code above referred to, there could be no question but that, under our adjudications, there could be no recovery on tbe notes. But plaintiff, however, testified to a state of facts which, if true, takes these notes out from the iu- *149 fluence of those decisions, and places them under the influence of others which hold that, where the contract has been executed, there can be no relief granted, because the transaction originated with a foreign company, which had not complied with our laws.” (Russell v. Jones, 101 Ala. 261, 13 South. 145.)

When due regard was given to the distinction between exec-utory and executed contracts, and to the difference between contracts when relating to things or acts themselves unlawful, or immoral, or opposed to public policy, or to a particular hind of business, or to specific things or acts restricted or forbidden by statute, and when relating to things or acts innocent and lawful within themselves, much of the apparent conflict among the decisions disappears.

Our conclusion, therefore, is that the court below properly sustained the demurrer; that the order of this court, made in' the former opinion, reversing the judgment below, is vacated; and that the judgment of the court below should be, and hereby is, affirmed, with costs.

MuGARTT, J., concurs.