Apache Land & Cattle Co. v. Franklin Life Ins. Co.

• Decision Date: 20 November 1944
• Docket Number: No. 10764.,10764.
• Citation: 145 F.2d 964
• Parties: APACHE LAND & CATTLE CO. v. FRANKLIN LIFE INS. CO.
• Court: U.S. Court of Appeals — Ninth Circuit

145 F.2d 964 (1944)

APACHE LAND & CATTLE CO. v. FRANKLIN LIFE INS. CO.

No. 10764.

Circuit Court of Appeals, Ninth Circuit.

November 20, 1944.

Guy Axline, of Holbrook, Ariz. and Kramer, Morrison, Roche & Perry, of Phoenix, Ariz., for appellant.

Fennemore, Craig, Allen & Bledsoe, of Phoenix, Ariz. (Louis F. Gillespie, of Springfield, Ill., of counsel), for appellee.

Before DENMAN, STEPHENS, and HEALY, Circuit Judges.

DENMAN, Circuit Judge.

The Apache Land & Cattle Company, a Colorado corporation, hereinafter called "Apache," appeals from a summary judgment in a suit by Apache to quiet title to certain lands in Apache County, Arizona, holding Apache has no interest in such lands and that the fee simple title is in appellee, the Franklin Life Insurance Company, an Illinois corporation, hereinafter called "Franklin."

It is agreed that Franklin, in a suit by it as a foreign corporation to foreclose a mortgage on the lands on the nonpayment of a loan secured by the mortgage, obtained a judgment of foreclosure of the lands and a deed from the sheriff of Apache County. It is agreed that the deed transferred the title to the lands to Franklin, unless the foreclosure proceeding is not res judicata of the right of Franklin to make the loan and accept the mortgage.

Franklin's motion for the summary judgment appealed from was based upon the verified exhibits accompanying the motion. These are copies of the judgment in the foreclosure suit, the execution and order of sale, the sheriff's return thereon, the sheriff's certificate of sale, the sheriff's deed, the complaint of Apache, the answer of Franklin, and Apache's reply. The judgment in the foreclosure suit discloses that Apache was served and that there was filed in its behalf a "Confession of Judgment" for the total principal sum of $225,000, dated July 6, 1940, and "wherein it is stipulated and agreed that upon the entry of a judgment for the said sum the court may also enter an order and decree directing the sale of said mortgaged lands and premises as under foreclosure, in accordance with the laws of the State of Arizona, and the application of the proceeds thereof to the satisfaction, as far as possible, of said indebtedness after the payment of all proper costs and charges arising in connection with said sale and the costs of said action."

We are required to accept as a fact the allegation of Apache's reply that Franklin, a foreign corporation, had failed to qualify to do business in Arizona when the loans were made and the lands mortgaged to it, as required by the provisions of section 53-802, Arizona Code Annotated 1939, republishing section 658 of Revised Code of Arizona 1928. The Code at the time of the making of the note and mortgage provided "53-802. Acts void unless statutes complied with. — No foreign corporation shall transact any business in this state until it has complied with the requirements of the preceding section, and every act done by said corporation prior thereto shall be void."

The question then is, whether in Arizona the complaint of a foreign corporation mortgagee, suing in a court of that state to foreclose a mortgage of Arizona lands, initiates litigation in which the defendant mortgagor is required to set up the defense that the mortgage is void because the mortgagee had failed to qualify to do business when the mortgage was given? If so, the judgment giving to the foreign corporation the title to the lands is res judicata of its power so to do.

We are of the opinion that in Arizona such a complaint of a foreign corporation requires the defendant to claim the illegal character of the mortgage securing the loan defendant has received from the plaintiff. Collister v. Inter-State Fidelity Building & Loan Ass'n of Utah, 44 Ariz. 427, 38 P.2d 626, 98 A.L.R. 1020, a case not cited, much less distinguished, in appellant's brief, seems controlling. In that case the plaintiff sought to recover certain moneys paid by it on a mortgage note because the interest rate agreed upon was usurious. The Arizona Supreme Court held that there could be no recovery because in a prior suit in which the defense of usury...