Commercial Nat. Bank v. Jordan

• Decision Date: 27 April 1916
• Citation: 71 So. 760,71 Fla. 566
• Parties: COMMERCIAL NAT. BANK v. JORDAN.
• Court: Florida Supreme Court

71 So. 760

71 Fla. 566

COMMERCIAL NAT. BANK v. JORDAN.

Florida Supreme Court

April 27, 1916

Error to Circuit Court, Duval County; D. A. Simmons, Judge.

Action by the Commercial National Bank against William S. Jordan. Judgment for defendant, and plaintiff brings error. Reversed with instructions.

Syllabus by the Court

SYLLABUS

Chapter 5717, Laws of Florida 1907, entitled 'An act to prescribe the terms and conditions upon which foreign corporations for profit may transact business or acquire, hold or dispose of property in this state,' does not declare all contracts notes, or other securities made by or on behalf of any foreign corporation in this state before it has complied with the statutory requirements to be absolutely void. The legislative purpose as appearing in such act being to render such contracts unenforceable in the hands of the corporation or its assigns, but enforceable against it or them.

Section 4 of chapter 5717, Laws of Florida 1907, declaring every contract made by or on behalf of any foreign corporation affecting its liability or relation to property within the state before it shall have complied with the provisions of the act to be void on its behalf and on behalf of its assigns, but shall be enforceable against it or them, does not expressly nor by necessary implication declare that a negotiable promissory note, taken by such corporation in a business transaction in this state before it had complied with the requirements of the statute, shall be void in the hands of a bona fide holder for value and without notice of the transaction of which such note formed a part.

Where a negotiable promissory note taken by a foreign corporation in a business transaction in violation of the provisions of chapter 5717, Laws of Florida 1907, passes into the hands of an indorsee in good faith, without notice, before maturity and for value, it is not subject in his hands to such defenses as may have been available under the statute by the maker against the payee.

COUNSEL John C. Cooper & Son, of Jacksonville, for plaintiff in error.

Powell & Pelot, of Jacksonville, for defendant in error.

OPINION

ELLIS J.

The question presented by this record is: Whether a negotiable promissory note in the hands of an indorsee in good faith and without notice, for a valuable consideration before maturity is enforceable against the maker, where the promissory note in question was given by the maker in renewal of a note which had been given to a foreign corporation in payment for certain shares of the common stock of the corporation, which corporation had not transacted any business in Florida prior to June 1, 1907, and which at the time the original and renewal notes were executed had not complied with the provisions of chapter 5717, Laws of Florida 1907, entitled 'An act to prescribe the terms and conditions upon which foreign corporations for profit may transact business, or acquire, hold or dispose of property in this state.'

The sections of chapter 5717, Laws of Florida 1907 which are involved in this question are 1, 4, and 6, which are as follows:

'Section 1. That no foreign corporation shall transact business or acquire, hold or dispose of property in this state until it shall have filed in the office of the secretary of state a duly authenticated copy of its charter or articles of incorporation, and shall have received from him a permit to transact business in this state.'

'Sec. 4. Every contract made by or on behalf of any foreign corporation affecting its liability or relating to property within the state before it shall have complied with the provisions of this act shall be void on its behalf and on behalf of its assigns, but shall be enforceable against it or them.'

'Sec. 6. This act shall not apply to any foreign corporation whatever transacting business in this state at the time this act shall take effect: Provided, that any such foreign corporation hereafter increasing its capital stock shall comply with the provisions of section 3 in relation thereto.'

In the case of Ulmer v. First National Bank of St. Petersburg, 61 Fla. 460, 55 So. 405, this court said, speaking through Mr. Chief Justice Whitfield, that chapter 5717, Acts of 1907, does not conflict with nor impose unlawful burdens upon interstate or foreign commerce, nor does it deny to foreign corporations any right secured to them by the state or federal Constitutions. The court having under consideration a similar contract, made by a foreign corporation which had not complied with the statute, held that the making of such contract in the state on behalf of the foreign corporation violates the statute, and the note a part of the contract or transaction will not be enforced by the courts of the state. The case cited, however, does not decide the point presented here, because the pleadings in that case showed that the note was taken by the indorsee bank with notice of and subject to its infirmities under the existing laws, while in the case at bar the pleadings show that the indorsee bank is a holder of the paper for value in good faith and without notice of the paper's infirmities under the law.

The note was executed and delivered in violation of the statute. It was part of the transaction which section 1 of the act forbade the corporation to engage in until it had complied with the conditions named in the section. Section 8 of the act makes the violation of the provisions of section 1 by a foreign corporation, or any officer or agent of such a corporation, a misdemeanor, and subjects the corporation to punishment by fine, and its officer or agent violating the provisions of the act to fine or imprisonment, or both. So the transaction upon which the promissory note rests was not only in violation of the statute, but was a crime punishable by fine and imprisonment.

In 3 R. C. L. p. 1016, subject, 'Bills and Notes,' section 224, the doctrine is announced that it by no means follows, 'because a contract made in violation of law, common or statutory, is void between the original parties; that if given the form of negotiable paper, it is void in the hands of a bona fide holder. Indeed, it is the distinguishing characteristic of the law of negotiable paper that, when a contract takes that form it is not in the hands of a bona fide holder, subject to the defense which avoided it in the hands of the original parties. It is well settled by the authorities that, no matter how illegal or immoral the consideration of a note or bill, it is valid in the hands of a bona fide holder for value, unless some statute makes the instrument absolutely void.' In support of this text the following authorities were cited: Union Trust Co. v. Preston Nat. Bank, 136 Mich. 460, 99 N.W. 399, 122 Am. St. Rep. 370, reported also in 4 Ann. Cas. 347. A check was certified by an officer of a bank when the drawer of the check at the time did not have the amount thereof standing to his credit on the bank's books. The certification of the check under the foregoing circumstances was forbidden by the statute of Michigan, and punishable as a crime. The check found its way into the hands of a bona fide holder for value before maturity. The court held that the check was not in the hands of a bona fide holder subject to the defense of illegality in its inception, and cited approvingly Vinton v. Peck, 14 Mich. 287, State Capital Bank v. Thompson, 42 N.H. 369, New v. Walker, 108 Ind. 365, 9 N.E. 386, 58 Am. Rep. 40, Smith v. Bank, 9 Neb. 31, 1 N.W. 893, where the court expressed its disapproval of a statement contrary to the doctrine quoted made in Kittle v. De Lamater, 3 Neb. 325, Hart v. Machine Co., 72 Miss. 809, 17 So. 769, Press Co. v. Bank, 58 F. 321, 7 C. C. A. 248, Lynchburg Nat. Bank v. Scott, 91 Va. 652, 22 S.E. 487, 29 L. R. A. 827, 50 Am. St. Rep. 860, where a note obligating the maker to pay usurious interest was held to be valid in the hands of a bona fide holder in the absence of a statute which in express terms or by necessary implication declared the note to be void. Judge Carpenter, speaking for the court, said:

'That though the statute, by necessary implication, made the contract made in violation thereof absolutely void as to nonnegotiable contracts, and as to negotiable contracts in the hands of persons haivng knowledge of the defects, yet * * * the statute will not be considered to have that effect should the contract be negotiable in form, and be found in the hands of a bona fide holder.'

There is a note following this case as reported in 4 Ann. Cas. 347, in which the decisions of many states are cited in support of the proposition that:

'A negotiable contract will be enforced at the suit of a bona fide holder, notwithstanding the instrument would be unenforceable between the original parties by virtue of...