E. C. Artman Lumber Co. v. Bogard
| Decision Date | 06 May 1921 |
| Citation | 191 Ky. 392 |
| Parties | E. C. Artman Lumber Company v. Bogard. |
| Court | Kentucky Court of Appeals |
Appeal from McCracken Circuit Court.
WHEELER & HUGHES for appellant.
MOCQUOT, BERRY & REED for appellee.
The appellant and plaintiff below, E. C. Artman Lumber Company, is a Michigan corporation but conducting its business of operating a saw mill at Metropolis, Illinois. On April 19, 1916, it entered into a written contract with U. L. Rogers, who owned a tract of land in Trigg county, Kentucky, whereby it purchased from him nine standing white oak trees and one elm tree, each of which was described in the written contract and branded with the letter X. Plaintiff was to have as much time as it required to remove the trees; or in other words, there was no limitation of the time within which their removal should be made. The consideration of the purchase was $162.00 which was paid in cash at the time. The trees were not removed when this country became involved in the Great War, and after that labor conditions and transportation conditions were such as to postpone their removal, and in July, 1919, without repaying plaintiff the consideration or offering to do so, Rogers sold the same timber to the appellee and defendant below, Robert Bogard, who cut the white oak trees into saw logs and shipped them to a lumber concern at Paducah, Kentucky, and sold them for $800.00. At the time defendant purchased the trees from Rogers he had actual knowledge of all the facts connected with plaintiff's purchase of them and of their being branded.
This suit was filed in the McCracken circuit court by plaintiff against defendant in which it sought to recover of the latter the price he received for the logs made from the trees, and in the petition it waived the tort, if any, of which defendant was guilty, and sought recovery upon an implied contract on the part of defendant to pay for the trees which he had appropriated and converted to his own use. Among the defenses interposed was a non-compliance by plaintiff with the provisions of section 571 of the Kentucky Statutes, which in substance requires every corporation, except foreign insurance companies, before it shall be permitted to transact or carry on any business in this state to file with the secretary of state a statement properly signed and "giving the location of its office or offices in this state, and the name or names of its agent or agents thereat on which process can be served." By written stipulation the parties agreed at the trial that plaintiff had not complied with that section of the statute at the time of its purchase of the trees, nor at any time since, and all the other above recited facts were also agreed to except nothing was stated therein as to why plaintiff was prevented from cutting the trees before defendant purchased them, but it was stipulated that it would have done so "if it had not been prevented by the action of defendant, in cutting, removing and taking possession of said trees." The law and the facts were submitted to the court without the intervention of a jury and it rendered judgment in favor of defendant and dismissed the petition. Plaintiff's motion for a new trial having been overruled, it prosecutes this appeal, and it is agreed by counsel for both sides that the only question for determination is whether, under the facts, as contained in the stipulation, the defense of a noncompliance with the provisions of the section, supra, of the statute constitutes an available defense. In avoidance of that defense plaintiff urges, (1) that a noncompliance therewith furnishes a defense only to the other contracting party or parties with the derelict corporation and may not be relied on by a stranger to the contract, as it is claimed defendant is in this case, and who, as it is further claimed, is a tort feasor and as such cannot invoke the statute; (2) that plaintiff was not "carrying on business" in this state within the contemplation of the statute, since the record shows only the single transaction, and therefore the statute is not applicable; (3) that the contract was an interstate one and in furtherance of interstate commerce, which relieved plaintiff of the duty of complying with the statute, since it is incompetent for the state to enact such regulatory measures affecting interstate transactions; (4) that the doctrine of estoppel should apply because Rogers would be estopped to question the right of plaintiff to enter into the contract and defendant, his privy, is similarly affected, and (5) that the contract under which plaintiff purchased the timber and paid the consideration is an executed one and its right to maintain the action is not affected because of its failure to comply with the statute.
Manifestly, if either one of the matters relied on in avoidance of the defense presented is meritorious the judgment is erroneous and should be reversed, otherwise it should be affirmed. We have concluded that the learned judge who tried the case was correct in denying the first four of them, but that he erred in rejecting the fifth and last one, and because of that conclusion we will but briefly state, without discussion or elaboration, our reasons therefor as they relate to the first four grounds of avoidance.
The courts are divided in their conclusions concerning the inherent nature of a contract executed by a corporation in violation of such regulatory statutes. Some of them hold the contract to be void while others say it is voidable only at the option of the party not in fault. Some of the early opinions of this court in interpreting the effect of a contract so made would indicate that this court adopted the first view above expressed, i. e., that the contract was void, and the courts of some of the other states adopt that view while others hold the contract to be voidable only. For a discussion of the subject we refer to 14a Corpus Juris, pages 1294-1302, inclusive, and the many cases referred to in the notes. Frequently the question is made to turn upon the phraseology of the statute under consideration, but we held in the very recent case of Yewell v. Board Drainage Commissioners of Daviess County, 187 Ky. 434, that a contract by a corporation made without complying with section 571, supra, of the statute, was voidable and not void. In doing so we followed the also very recent case of Warren Oil & Gas Co. v. Gardner, 184 Ky. 411. In that case section 199b of the statute was involved, which is one regulating the conduct of the business of partnerships, but necessarily the legal effect of such noncompliance upon the contract entered into in violation of the two statutes would be the same and we have concluded that because of the two recent cases referred to, and for the reasons hereinafter to be stated in considering avoidance number (5), that the true principle is to regard such contracts as voidable and not void. This being true defendant was not a technical tort feasor; for if Rogers had the right to avoid the contract he did so when he sold defendant the timber in 1919, and the latter acquired all the rights by virtue of his purchase in and to the timber which was then possessed by Rogers. If defendant had entered into no contract with Rogers and had no privity relations with him and had willfuly and maliciously cut and appropriated the timber, there would be great reason to withhold from him the defense here interposed.
The matters relied on in avoidance (2) are equally untenable, since this court in the well considered case of Oliver Company v. Louisville Realty Company, 156 Ky. 628, and numerous others both prior and subsequent thereto, allowed this defense in a suit on a contract involving but a single transaction and, impliedly at least, adjudged that such a single transaction came within the prohibitory terms of our statute, and that it was not essential to enable the other party to rely upon them that there should have been many contracts made by the corporation or a succession of them covering a period of time, in order for it to be engaged in "carrying on any business in this state." This question, like the one considered above, is also largely governed by the terms of each statute under consideration. Corpus Juris, supra, 1274-1276. The state of Alabama has a statute worded exactly as is ours and the supreme court of that state in the case of Farrior v. New England Mortgage Security Co., 88 Ala. 275, 7 So. 200, held that the doing of a single act of business, if it was in the exercise of a corporate function, came within the purview of the statute and in the opinion the court said: "The phrase `doing any business' is more comprehensive in meaning than the carrying on, or engaging in business generally, which involves the idea of continuance, or the repetition of like acts." And this conclusion was reached by giving some effect to the...
To continue reading
Request your trial