Davis & Worrell v. General Motors Acceptance Corporation

• Decision Date: 22 May 1922
• Docket Number: 10
• Citation: 241 S.W. 44,153 Ark. 626
• Parties: DAVIS & WORRELL v. GENERAL MOTORS ACCEPTANCE CORPORATION
• Court: Arkansas Supreme Court

241 S.W. 44

153 Ark. 626

DAVIS & WORRELL v. GENERAL MOTORS ACCEPTANCE CORPORATION

No. 10

Supreme Court of Arkansas

May 22, 1922

Appeal from Lawrence Chancery Court, Western District; Lyman F Reeder, Chancellor; affirmed.

STATEMENT OF FACTS.

The General Motors Acceptance Corporation brought this suit in equity against Davis & Worrell and the Newport Foundry & Machine Company to obtain judgment against the defendants in the sum of $ 1,969.20 and $ 1,916.48, the balance due respectively on two promissory notes given for two motor trucks, and to foreclose its vendor's lien on the same.

Davis & Worrell defended on the ground that the General Motors Acceptance Corporation could not maintain the suit because it was a foreign corporation and had not complied with our statute regulating such corporations, and that the sale of the motor trucks to them by the Newport Foundry & Machine Company had been induced by false representations.

The General Motors Acceptance Corporation is a foreign corporation organized under the laws of the State of New York and it has a branch office at Dallas, Texas. On the 17th day of May, 1920, Robert Davis and Frank Worrell, doing business as Davis & Worrell, at Imboden, Ark., purchased from the Newport Foundry & Machine Company of Newport, Ark., two motor trucks, and after making a cash payment executed their negotiable promissory notes for the balance of the purchase money. Title to the motor trucks was retained in the seller until the balance of the purchase price was paid.

L. C Barber was a witness for the plaintiff. According to his testimony he was assistant credit manager for the General Motors Acceptance Corporation at Dallas, Texas, and the purchase of the notes in question was made in June, 1920 before the notes became due. The notes were purchased at Dallas, Texas, for value received before maturity. There is a balance due on one truck of $ 1,969.20 and on the other of $ 1,916.48. It was the custom of the plaintiff to furnish blank forms of notes to the Newport Foundry & Machine Company of Newport, Ark., and to purchase notes executed to that company by purchasers of motor vehicles from it. The plaintiff has no agency in the State of Arkansas, but buys commercial paper from approximately forty concerns selling motor vehicles in the State of Arkansas. The plaintiff does not do business with any concern in Arkansas that does not handle the products of the General Motors Corporation. That corporation however, is not owned by the plaintiff, and it does not appear whether the two corporations have the same directors and stockholders. The plaintiff company is not operated to handle the financial end of the General Motors Corporation. It purchases commercial paper from various persons and corporations in the State of Arkansas and elsewhere which sell motor vehicles. It requires the dealers from whom it buys the commercial paper to make a financial statement, and the amount of credit extended to such dealer depends upon such financial statement. The Newport Foundry & Machine Company had made such a statement, and the plaintiff had agreed to extend a line of credit to it. The plaintiff makes an investigation of the dealer's financial condition and gives him a rating on this. The dealer indorses the commercial paper to the plaintiff. The investigation of the dealer is made through references given by him and by reports from commercial agencies.

Davis & Worrell were investigated by the plaintiff before it purchased the notes in question. The notes in question were purchased from the Newport Foundry & Machine Company, and that company indorsed the notes. Blank forms of contracts are furnished to dealers from whom the plaintiff contemplates buying notes. The plaintiff requires a purchaser's statement on the back of each contract. It then investigates in every instance both the maker and the indorser of the commercial paper through various commercial agencies, before buying the security.

The approval of the paper in the present case was made in Dallas Texas, and the purchase of it was made there; and the money was paid outside the State.

J. V. Isaacs, the manager of the Newport Foundry & Machine Company, was also a witness for the plaintiff. According to his testimony he sold the notes in question to the plaintiff at Dallas, Texas, and the payment was made through a bank at Chicago, Ill. The notes were given for sale of motor trucks to Davis & Worrell and were indorsed by the Newport Foundry & Machine Company to the General Motors Acceptance Corporation. The Newport Foundry & Machine Company was not the agent of the General Motors Acceptance Corporation, and that company did not have anything to do with the business of the Newport Foundry & Machine Company. The Newport Foundry & Machine Company made arrangements with the plaintiff for a line of credit with it. It had made a statement of its financial condition to the plaintiff and had a general line of credit based on that statement and the investigation of its condition made by the plaintiff.

According to the testimony of the defendants, Davis & Worrell, the sale of one of the trucks was procured by fraudulent representations. Evidence was adduced by the plaintiff to contradict this testimony. The evidence on this phase of the case will be stated more particularly in the opinion when we come to discuss the question of whether or not the sale should be set aside on account of the fraudulent representations of the seller.

The court found the issues in favor of the plaintiff and a decree was entered accordingly.

To reverse that decree Davis & Worrell have duly prosecuted an appeal to this court.

Decree affirmed.

Mehaffy, Donham & Mehaffy, for appellant Davis & Worrell.

Appellee had no capacity to sue on the notes, as it was a foreign corporation doing business in this State without having complied with the law. 128 Ark. 211. By the conduct of its business appellee has violated act 313 of Acts 1907. See 115 Ark. 166; 124 Ark. 539. The defect in the notes was inherent, and a subsequent purchaser must take notice of such defect. 136 Ark. 52.

Appellee was not an innocent purchaser of the notes, as it knew exactly how the Newport Foundry & Machine Company conducted its business, and knew that that company was selling the trucks as new, when in fact one of them was second-hand. See cases in 121 Ark. 250; 110 Ark. 578; 97 Ark. 537; 105 Ark. 281.

Boyce & Mack, for appellant, Newport Foundry & Machine Company.

There was no fraud in the sale of the trucks and no misrepresentation. They were sold under a written contract. Oral warranties or agreements could not properly be shown. 45 Ark. 284; 108 Ark. 254.

Rogers, Barber & Henry, for appellee.

The appellee was not engaged in an intrastate business. Its contracts were made and money paid in another State, thus carrying on an interstate business not subject to regulation by this State. See 57 Ark. 24; 206 F. 802; 55 Ark. 625; 160 U.S. 167; 92 Ala. 145; 98 Ala. 409; 54 Ark. 566.

OPINION

HART, J. (after stating the facts).

It is first contended by counsel for Davis & Worrell, the defendants, that the plaintiff, General Motors Acceptance Corporation, is not entitled to maintain this suit because it has not complied with our statute regulating foreign corporations doing business in this State. Crawford & Moses' Digest, secs. 1825-32 inclusive.

It appears from the record that the plaintiff has not complied with our statute prescribing the terms upon which foreign corporations may do business in this State. It is the contention of the plaintiff that the transaction in question does not bring it within the prohibition of the statute. The statute does not specify what particular acts shall constitute doing business in this State by a foreign corporation. The general holding, however, is that the doing of business is the exercise in this State of...