Brioschi-Minuti Co. v. Elson-Williams Const. Co.

• Court: North Dakota Supreme Court
• Writing for the Court: BRONSON
• Citation: Brioschi-Minuti Co. v. Elson-Williams Const. Co., 41 N.D. 628, 172 N.W. 239 (N.D. 1919)
• Decision Date: 06 March 1919
• Parties: BRIOSCHI-MINUTI CO. v. ELSON-WILLIAMS CONST. CO. et al.

41 N.D. 628

172 N.W. 239

BRIOSCHI-MINUTI CO.

v.ELSON-WILLIAMS CONST. CO. et al.

Supreme Court of North Dakota.

March 6, 1919.

Syllabus by the Court.

In an action upon a contract by a foreign corporation which has not complied with the statute, section 5238, Compiled Laws 1913, imposing conditions precedent to the right to do business in this state, the noncompliance of such corporation with the statute is a matter of defense, to be alleged and proved by the defendant, unless the complaint clearly shows a violation of the statute.

The transaction or doing of business in this state within the inhibition of the statute does not cover a single business transaction or an isolated transaction, following Hart-Parr v. Robb-Lawrence, 15 N. D. 55, 106 N. W. 406.

Where, in such action, the complaint alleges the furnishing of labor and material for ornamental plaster work in the construction of county buildings and necessarily the performance of some of the work and the furnishing of some of the material in this state, it is held that such allegations do not necessarily aver a transaction, or doing of business in this state contrary to the statute.

Where, in such action, the answer does not allege affirmatively that the plaintiff has transacted or done business in this state contrary to the statute, it is insufficient to establish the defense of noncompliance with the statute.

In such action a defendant surety, to avail itself of the defense of exoneration under section 6683, Compiled Laws 1913, requiring a creditor to proceed against the principal upon the requirement of the surety, must allege in its answer a seasonable notice and demand to proceed against the principal and prejudice resulting to the surety by reason of the failure of the creditor so to do.

Where a statutory contractor's bond is furnished under the provisions of section 6832, Compiled Laws 1913, a direct obligation exists in favor of those who furnish labor or material, for whose benefit such bond is given, and a surety thereon cannot be released or exonerated from this obligation through an assignment of the principal contract, a change in its terms, the default of the principal contractor, or an improper payment of moneys due thereunder, even though made without the knowledge or consent of the surety, where the obligee therein who has furnished labor or material pursuant to the original contract has not participated in such changes, had knowledge thereof, nor consented thereto.

Held, that the defenses of the surety company, alleging in separate defenses the assignment of the principal contract, changes in its terms, improper payments to the contractor, and defaults of the contractor, made with the knowledge and consent of the county and the principal contractor, and without the knowledge and consent of the surety, are insufficient to establish a defense of exoneration of the surety upon its obligation to the plaintiff, an obligee in the statutory bond furnished by the surety in the absence of an allegation that the obligee participated therein or consented thereto.

Appeal from District Court, Divide County; Leighton, Judge.

Action by the Brioschi-Minuti Company against the Elson-Williams Construction Company and the Dakota Trust Company. From an order overruling its demurrer as to certain defenses, and sustaining it as to a defense, the Dakota Trust Company appeals. Reversed, and ordered that demurrer be sustained.

B. H. Schriber, of St. Paul, Minn., and F. A. Leonard, of Crosby, for appellant.

Lawrence & Murphy, of Fargo, for respondent.

BRONSON, J.

On March 15, 1917, the Elson-Williams Construction Company, a Minnesota corporation, made a contract for the construction of a courthouse in Divide county. On March 31, 1917, this construction company and the defendant trust company, as surety, executed a statutory bond pursuant to section 6832, Compiled Laws of 1913, for the performance of such contract and the payment of all claims and demands for labor and material to be furnished thereunder. On May 9, 1917, the plaintiff, a Minnesota corporation, made a contract with this construction company to furnish all labor and material necessary to make models, casts, and erect all the ornamental plaster of every nature and description, as required by the plans and specifications for the buildings to be constructed. This action is brought on the subcontract so made and upon the statutory bond given for the balance due the plaintiff against both the construction company and the trust company. The complaint sets forth a copy of the subcontract and the bond given, and alleges that, pursuant to such contract, it has furnished the material and labor required, that the material has been actually incorporated in the buildings, with the consent and approval of the board of county commissioners of Divide county, and that the buildings have been accepted as complete by the architects for Divide county. The defendant trust company interposed an answer, alleging six separate defenses, to which the plaintiff demurred. In the trial court the demurrer was overruled as to five defenses and sustained as to the sixth defense. From the order of the district court so overruling the demurrer, this appeal is prosecuted.

The consideration of this court, accordingly, is addressed to the sufficiency of these five separate defenses, as a matter of law, and they will be considered seriatim.

[1][2] 1. The first defense alleges that the plaintiff, a foreign corporation, has not complied with the laws of this state relative to foreign corporations (section 5238, C. L. 1913); that it is not authorized to transact any business in this state, and that, if any contract has been made in its behalf, the same is under the laws of this state and void, under section 5242, C. L. 1913, and that therefore the plaintiff is barred and estopped from maintaining this action.

Section 5238, Compiled Laws of 1913 (as amended by chapter 96 of the Laws of 1915), as far as material herein provides as follows:

“No foreign corporation, association or joint-stock company, * * * shall sell or otherwise dispose of its capital stock or transact any business within this state, * * * until such corporation shall have filed in the office of the secretary of state a copy of its articles of incorporation, * * * together with a certificate,” etc.

The plaintiff contends that this defense does not allege that the plaintiff has transacted or done business in this state contrary to the statute; also that in any event the pleadings present no other issue than the performance of a single or isolated transaction within the state which is not subject to the inhibitions of the statute.

The defendant contends that it appears upon the fact of the pleadings that the plaintiff was transacting business within the state without compliance with and contrary to the statute.

In the subcontract, made a part of the compliant, the plaintiff agreed to furnish all material and perform all work for the county buildings, at Crosby, N. D., in accordance with the general conditions of the principal contract and the drawings and specifications therefor, all of which are made a part of the subcontract. In section 2 of such subcontract, it is further provided:

“The subcontractor and the contractor agree that the material to be furnished by the subcontractor, are all the labor and material necessary to make the models' cast and erect all the ornamental plaster of every nature and description, including all the ornamental plaster, which is to be run or cast on the job as well as that which is to be cast in the factory and erected on the job.”

In section 3 thereof, the plaintiff further agreed to complete the several portions thereof and the whole of the work so sublet by November 15, 1917, and to proceed with the erection and installation of the work comprehended in such manner as to co-operate with the plain plastering contractor and the general contractor.

These provisions of the contract, made a part of the complaint, undoubtedly show that the plaintiff agreed to furnish some materials and to perform some labor in North Dakota. Whether these provisions, however, affirmatively allege a “transaction of business” in this state is another question.

It has heretofore been held by this court that the burden is not on a foreign corporationto either prove compliance with the statute or that it was not doing business in this state contrary to the statute; that the presumption is in favor of their right to do business; that he who asserts that there is illegality in the transaction, fair on its face, must plead and prove it; that if the illegality of the contract sued on or the absence of the right to sue does not appear on the face of the complaint, the facts showing the illegality or absence of right to sue must be pleaded as a defense. Hart-Parr Co. v. Robb-Lawrence Co., 15 N. D. 55, 60, 106 N. W. 406;Hanson v. Lindstrom, 15 N. D. 584, 108 N. W. 798.

The statute involved must be considered in connection with the constitutional provisions and other cognate statutory provisions.

Section 136 of the Constitution provides that no foreign corporation shall do business in the state without having one or more places of business and an authorized agent or agents in the same, upon whom process may be served.

Section 5240, Compiled Laws 1913, requires foreign corporations, subject to the provisions of section 5238, to appoint the secretary of state its attorney upon whom process may be served, and section 5242, Compiled Laws of 1913, provides that contracts made without compliance with section 5238, Compiled Laws 1913, shall be void on the behalf of the offending corporation or its assigns.

Concerning these matters, this court, in Hart-Parr Co. v. Robb-Lawrence Co., supra, stated:

“In view of this constitutional provision, it is clear that compliance only with the statutory provisions above referred to would be of no avail in this state, unless it...