Blodgett v. Lanyon Zinc Co.

• Decision Date: 23 February 1903
• Docket Number: 1,749.
• Citation: 120 F. 893
• Parties: BLODGETT et al. v. LANYON ZINC CO.
• Court: U.S. Court of Appeals — Eighth Circuit

120 F. 893

BLODGETT et al. v. LANYON ZINC CO.

No. 1,749.

United States Court of Appeals, Eighth Circuit.

February 23, 1903

Syllabus by the Court.

In the absence of prohibitive legislation, a corporation may contract, acquire, hold, and convey real estate as fully in another state as in the state of its incorporation.

In the absence of an express provision of statute to the contrary the innocent acts and contracts of a foreign corporation which has failed to comply with the statutes permitting it to do business in the state where the contracts are made and the acts done, are valid and enforceable, because it is not the intent of the authors of such laws to strike down contracts or acts in performance of them that are not evil in themselves.

The prohibition by a state of the maintenance of actions in its courts by a foreign corporation does not prohibit or limit the right of that corporation to maintain such actions in the national courts, nor does it forbid the corporation from defending actions in the state courts.

In a lease for 10 years, with a stipulation that in case no well was sunk within 2 years it should become void unless the lessee should elect from year to year to continue it by paying $40 each year, it is not essential that the $40 should be paid before the commencement of the year, but the payment may be made at any time during the year.

The grantor of an option, who prevents its exercise within the time specified in his grant, may not take advantage of the failure of its timely exercise, but must give a reasonable time therefor after the obstruction he interposed is removed.

John F Thompson and Stephen H. Allen (William H. Thompson and Otis C. Allen, on the brief), for appellants.

Charles E. Benton and Altes H. Campbell (John F. Goshorn and J. B. F. Cates, on the brief), for appellee.

Before CALDWELL, SANBORN, and THAYER, Circuit Judges.

SANBORN Circuit Judge.

This is an appeal from a decree which dismissed a bill exhibited by Mary Blodgett, Mary K. Hackney, Lewis E. Hackney, and James Q. Blodgett to avoid a lease made by Mary K. Blodgett, the owner of the life estate in the 160 acres described therein, upon two grounds: (1) That the Lanyon Zinc Company, a corporation and the owner of the lease under properly executed conveyances from the lessee and its grantees, has no corporate existence, nor power to do business, nor right to hold real estate, in the state of Kansas, because it has failed to comply with the laws of that state regulating foreign corporations and the method by which they may be permitted to do business in Kansas; and (2) that the zinc company has failed to make its election to continue the lease in force from April 10, 1899, to April 10, 1900, by paying to the complainant Mary Blodgett, or depositing to her credit in the Bank of Allen County, the sum of $40, as stipulated by ther terms of the lease.

The proof at the hearing failed to sustain the first reason assigned in the bill for the granting of the relief which the complainant sought. The proof was that the Lanyon Zinc Company was a corporation of the state of New Jersey; that on March 3, 1899, it purchased and obtained from the holder thereof a proper assignment of the lease in question; that in April, 1899, it applied to the charter board of the state of Kansas to engage in business in that state; that on April 10, 1899, it paid into the office of the Secretary of State its charter and application fees; and that on January 18, 1900, the charter board of the state of Kansas issued to it a charter to do business within that state pursuant to the provisions of Sess. Laws 1898, p. 27, c. 10 (Gen. St. Kan. 1901, Secs. 1259-1264). Conceding that the zinc company had not, at the time it acquired the lease, complied with the act of 1898, upon which counsel for the appellants base their objections, so that it was entitled to do business in the state of Kansas, its title to the leasehold estate was not impaired by that fact. In the absence of prohibitive legislation, a corporation of one state is authorized to receive and hold real estate in another state, and to make and execute contracts relative to both real and personal property. The presumption is that the right to contract concerning, to take, and to convey title to, real and personal property, is free. Now there is nothing in the act of 1898, nor in any of the legislation of the state of Kansas which has been called to our attention, which prohibits a corporation of another state from acquiring, holding, and conveying real and personal property in that state in the absence of a compliance with the provisions authorizing it to do business therein. The result is that the proof in this case establishes the fact that the Lanyon Zinc Company had a corporate existence and the right to hold real estate in the state of Kansas at the time it received the assignment of the lease, and at the time this action was commenced, and the first claim for the destruction of its leasehold estate is without foundation.

There is another reason assigned by counsel for the complainants for their alleged right to the relief they seek, so similar to that which has just been considered that it will be convenient to discuss it here. The lease was dated April 10, 1894. By its terms Mary Blodgett granted to the Troy Oil Company, a remote assignor of the Lanyon Zinc Company, the exclusive right for 10 years from the date of the lease to enter, and operate for oil and gas, upon a certain tract of land in Allen county, Kan., and it provided that, 'in case no oil or gas well is sunk on these premises within two years from this date, this lease shall become absolutely null and void, unless the second party shall elect from year to year to continue this lease by paying or depositing to the credit of the first party each year forty dollars at Bank of Allen County, Kan., until a well is complete on these premises. ' The zinc company deposited the $40 at the Bank of Allen County, Kan., for Mary Blodgett for the year from April 10, 1899, to April 10, 1900, on December 23, 1899. Counsel for the complainants insist that this deposit was invalid and ineffective to continue the lease in force, because, at the time it was made, the zinc company had not acquired permission to engage in business as a foreign corporation in the state of Kansas under the act of 1898, and had failed to comply with various provisions of that statute. It will be borne in mind that, while this corporation had not received its charter to do business within that state, it had applied for it, had paid the charter and application fees into the office of the Secretary of State, where they were held awaiting the decision of the charter board, and that it ultimately received its charter on January 18, 1900. It is also worthy of notice that there is no provision of the statutes of Kansas prohibiting a foreign corporation from doing business in that state, or declaring that any act or contract of a foreign corporation that fails to comply with the requirements to enable it to obtain permission to do business from the charter board shall avoid any of its acts or contracts. Conceding that the Lanyon Zinc Company had not complied with the corporation laws of Kansas so as to entitle it to permission from the charter board to do business in that state, no reason occurs to us why this fact should be held by the courts to avoid its contracts or the effect of its acts in performance of its agreements, in the absence of the denunciation of any such penalty for the failure to comply with its statutes by the Legislature of the state which made them. On the other hand, there are two established and familiar rules of law which prohibit the complainants from availing themselves of the failure of their lessee to comply with the statutes authorizing it to do business in the state for the purpose of escaping from the performance of their obligations under their contract. One is that the laws relative to the admission of foreign corporations to do business in the state of Kansas were not enacted for the purpose of destroying contracts or prohibiting their performance. It was not the intent or purpose of the Legislature by these laws to regulate the agreements of foreign corporations with the citizens of the state of Kansas, or to supervise or prohibit the performance of their contracts. The object of these statutes was to subject foreign corporations doing business in the state to the jurisdiction of its courts, and to the inspection and supervision of its officers, not to the end that the citizens of the state might avoid their contracts and perpetrate injustice, but to the end that justice might be administered to both the corporations and the citizens. Hence it is that the private citizen is not the party empowered to enforce these corporation laws, nor is the nullification of his contracts or of acts done in performance thereof the true remedy for their violation. The state alone is authorized to enforce them, and the ouster and dissolution of the corporation, or an injunction against its proceedings at the suit of the state, is the only remedy available. Sioux City Terminal R. & W. Co. v. Trust Co. of North America, 82 F. 124, 134, 27 C.C.A. 73, 83; Bank v. Matthews, 98 U.S. 621, 629, 25 L.Ed. 188; Fritts v. Palmer, 132 U.S. 282, 292, 10 Sup.Ct. 93, 33 L.Ed. 317; Bank v. Townsend, 139 U.S. 67, 76, 11 Sup.Ct. 496, 35 L.Ed. 107; Thompson v. Bank, 146 U.S. 240, 251, 13 Sup.Ct. 66, 36 L.Ed. 956.

The second rule is that where a contract or an act in performance of it is not malum in se, and its invalidity is not declared as a penalty for a violation of a statute, the courts may not declare it, and thus affix a penalty not prescribed by the lawmaking power. Fritts v....