Colby v. Cleaver

• Decision Date: 21 December 1908
• Docket Number: 282,283.
• Citation: 169 F. 206
• Parties: COLBY v. CLEAVER et al. C. H. COLBY & CO. v. McBIRNEY et al.
• Court: U.S. District Court — District of Idaho

169 F. 206

COLBY v. CLEAVER et al.

C. H. COLBY & CO. v. McBIRNEY et al.

Nos. 282, 283.

United States Circuit Court, D. Idaho, Central Division.

December 21, 1908

Hawley Puckett & Hawley, for complainants.

Morrison & Pence, Hugh E. McElroy, and William B. Davidson, for defendants.

DIETRICH District Judge.

Each of these suits was brought for the purpose of foreclosing a real estate mortgage. Both cases involve the same question, and they have been argued and submitted together. The answers allege that the mortgages were given to the Des Moines Life Insurance Company, a corporation organized under the laws of the state of Iowa, which corporation, at the date of the execution and delivery of the mortgage, was doing business in the state of Idaho without having complied with the provisions of the laws of the state relating to foreign corporations. The complainants present exceptions to those portions of the answers setting forth as a defense the default of the mortgagee in that respect; it being alleged that the complainants are not the actual holders or the owners in good faith of the instruments sued upon, and that the mortgages are subject to all of the defenses which would be available to the defendants as against the mortgagee were it the complainant. The provisions of law relied upon by the defendants is found in section 2653 of the Revised Statutes of Idaho of 1887, as amended by an act of the Legislature of Idaho approved March 10, 1903 (Laws 1903, p. 49). The section, as amended, provides that every corporation not created under the laws of the state of Idaho must, before doing business in the state, file in certain offices a copy of its articles of incorporation, and also a designation of an agent upon whom process, running against the corporation may be served, and in case of resignation or death of such agent the corporation is required to designate his successor. Then follows this provision:

'No contract or agreement made in the name of, or for the use or benefit of, such corporation, prior to the making of such filings as first herein provided, can be sued upon or be enforced in any court of this state by such corporation, and such corporation cannot take or hold title to any realty within this state prior to making such filings, and any pretended deed or conveyance of real estate to such corporation prior to such filings shall be absolutely null and void; and any and all officers, agents and representatives, of said corporation, or persons claiming to be officers or agents of the same, who shall make or attempt to make any contract or agreement or contract any indebtedness in the name of such corporation or for its use and benefit, before such original filings are made, or while such corporation is in default upon filing a reappointment as hereby provided, shall be jointly and severally, personally liable upon and for all such contracts and agreements as principal contractors.'

It is further provided that the statute of limitations shall not run in favor of such corporation while it is in default. The purpose of the statute is remedial; the clear intention being to require foreign corporations doing business within the state to place within the reach of persons contemplating or having business relations with them certain information with regard to their organization, and also to make them amenable to the process of the state courts in case of any controversy growing out of their business transactions in the state.

Certain penalties are imposed for failure to comply with the law. Such corporation is denied the benefit of the statute of limitations while it remains in default. Any of its officers or agents, transacting business for it before it complies with the law, are made personally liable upon its contracts as principals. Conveyances of real estate to it are declared to be absolutely void. As to executory contracts or agreements entered into with such corporation while it is in default, it is declared that they cannot 'be sued upon or be enforced in any court of this state by such corporation'; and this is the particular clause of the law which we are now called upon to construe.

It is clear that the Legislature did not intend that such contracts or agreements should be absolutely void; otherwise, they would have been placed in the same category with conveyances of realty. That they are not void is the settled doctrine of the Supreme Court of the state. Valley Lumber & Mfg. Co v. Nickerson et al., 13 Idaho, 682, 93 P. 24; Valley Lumber & Mfg. Co. v. Driessel, 13 Idaho, 662, 93 P. 765 15 L.R.A. (N.S.) 299. Moreover, it is equally clear that it was not the intention of the Legislature to declare them unenforceable against the corporation. The real question is whether such a contract is ever or at all enforceable by or upon behalf of such corporation. The Supreme Court of the state has, in effect, held that it is not a lifeless thing, that the provisions thereof in favor of the corporation are not void, but that, when such contract is sued upon in a state court by the corporation, it shall be just as available to the corporation as it would be had the corporation not been in default at the time of the execution of the contract, unless the defendant, seasonably and in an appropriate manner, makes objection upon the statutory ground. See Valley Lumber & Mfg. Co. v. Nickerson and Valley Lumber & Mfg. Co. v. Driessel, cited ...