Donaldson v. Thousand Springs Power Co.

Decision Date02 December 1916
Citation162 P. 334,29 Idaho 735
CourtIdaho Supreme Court
PartiesGILBERT DONALDSON, Appellant, v. THE THOUSAND SPRINGS POWER COMPANY, a Corporation, SALT LAKE SECURITY & TRUST COMPANY, a Corporation, FRANK N. BANCROFT, THOUSAND SPRINGS LAND & TRANSPORTATION COMPANY, LIMITED, a Corporation, A. M. GRANT, P. M. DAVIS, SAMUEL PARROTT and R. D. ROBERTS, as Directors of Said THOUSAND SPRINGS LAND & TRANSPORTATION COMPANY, LIMITED, Respondents

FOREIGN CORPORATIONS - CONSTRUCTION OF STATUTES - VALIDITY OF DEEDS AND CONTRACTS-FAILURE TO COMPLY WITH SEC. 10, ART. 11, OF THE CONSTITUTION AND SEC. 2792, REV. CODES, AS AMENDED BY SESS LAWS 1915, p. 270-OPTION TO PURCHASE-EQUITABLE INTEREST-LEGAL TITLE-ESTOPPEL-TRUSTS-JUDGMENT LIENS.

1. Foreign corporations failing to comply with sec. 10 of art 11 of the constitution of Idaho, and the provisions of sec 2792, Rev. Codes, as amended by chap 124, p. 270, 1915 Sess Laws, cannot take or hold title in their own name to realty in this state prior to a compliance with the constitution and laws of this state affecting foreign corporations, and under the provisions of said statute any pretended deed or conveyance of realty to such corporation prior to a compliance with the constitution and laws of this state is absolutely null and void. The statute, however, does not provide for the additional and harsh penalty of declaring void all conveyances made to a trustee for the use and benefit of such corporation, for property purchased in its behalf by such trustee preparatory to actually engaging in business in this state.

2. Where land has been conveyed by a judgment debtor to a trustee of a foreign corporation, and the full purchase price has been paid therefor by the trustee of the foreign corporation, prior to the entry of the judgment in favor of such judgment creditor, in the absence of fraud the judgment lien attaches to the precise interest which the judgment debtor actually had in the land at the date of the entry of the judgment, and said judgment lien cannot be made effectual to bind or to convey any greater or other estate than the judgment debtor himself, in the exercise of his rights subsequent to the completion of said sale, could have voluntarily transferred or alienated.

3. A contract or agreement for the purchase of real property which contemplates that the purchaser shall hold such property in trust for a foreign corporation which has not complied with the constitution and laws of this state, is not enforceable in the courts of this state, as regards the execution of the trust, under the provisions of sec. 2792, Rev. Codes, as amended by 1915 Sess. Laws, chap. 124, p. 270.

4. Acceptance of an option to purchase land within the time specified and in compliance with the conditions of the option, changes such option into a contract of sale, binding upon both parties, and entitles the grantee to call for performance, as of the date of the giving of the option, so as to cut off intervening rights acquired with knowledge of the existence of the option.

[As to what constitutes doing business in the state by foreign corporation, see notes in Ann.Cas. 1912A, 553; Ann.Cas. 1913E, 1154]

APPEAL from the District Court of the Fourth Judicial District for Gooding County. Hon. James R. Bothwell, Judge.

Action to subject the property of a foreign corporation to the payment of a judgment, and to set aside conveyances to such corporation for noncompliance with sec. 10 of art. 11 of the constitution and the provisions of sec. 2792, Rev. Codes, as amended by chap. 124, p. 270, 1915 Sess. Laws. Demurrer to complaint sustained. Affirmed.

Judgment affirmed. Costs awarded in favor of respondents.

J. B. Eldridge, for Appellant.

Sec. 2792, Rev. Codes, is mandatory, and any conveyance made to a corporation that has failed to comply with the said law is, as there declared, null and void. (Dickens-West Min. Co. v. Crescent Mining & Mill. Co., 26 Idaho 153, 141 P. 566.)

It was the intention of the legislature to prohibit foreign corporations from doing business in this state prior to the time that they comply with the law of this state. (Katz v. Herrick, 12 Idaho 1, 86 P. 873.)

"A deed is a contract between the grantor and grantee, although the grantee does not sign it." (Negaunee Iron Co. v. Iron Cliffs Co., 134 Mich. 264, 96 N.W. 468; Wierengo v. American Fire Ins. Co., 98 Mich. 621, 57 N.W. 833; Watkins v. Nugen, 118 Ga. 372, 45 S.E. 262; Tyler v. Cate, 29 Ore. 515, 45 P. 800; Newmyer v. Roush, 21 Idaho 106, Ann. Cas. 1913D, 433, 120 P. 464.)

One cannot do indirectly what he cannot do directly; one cannot be a cestui que trust if he cannot take title in the first instance. (1 Perry on Trusts, 6th ed., 47, 50.)

Where the corporation had no right to take title to real property in the first instance, and where it had been deprived of that right, the trustees could not hold the title. (Late Corporation of the Church of Jesus Christ of Latter-day Saints v. United States, 136 U.S. 1, 10 S.Ct. 792, 34 L.Ed. 481.)

It was not the intention of the legislature to permit foreign corporations to come into our state through the instrumentality of an agent and transact business and take title to real property, and thus defeat the object of the statute itself. (Wood v. Independent School Dist., 21 Idaho 734, 124 P. 780; Colburn v. Wilson, 24 Idaho 94, 132 P. 579; State v. Omaechevviaria, 27 Idaho 797, 152 P. 280.)

Longley & Walters and P. B. Carter, for Respondents.

If title were to fail from Ponsford to Bancroft and from Bancroft to the Thousand Springs Power Company, still Ponsford would be holding an option to purchase the property involved in this action with each and all the provisions of which there has been complete compliance. Appellant must avoid all transfers from his debtor before he may have recourse to the property involved for the satisfaction of his claim. An optionee secures an equitable interest when an option to purchase real estate has been granted. (Kerr v. Day, 14 Pa. 112, 53 Am. Dec. 526; Donnally v. Parker, 5 W.Va. 301; Barrett v. McAllister, 33 W.Va. 738, 11 S.E. 220; Telford v. Frost, 76 Wis. 172, 44 N.W. 835.)

Sec. 2792, Rev. Codes, is penal in its nature, and must be strictly construed. (36 Cyc. 1183; Alleghany Co. v. Allen, 69 N.J.L. 270, 55 A. 724.)

It applies only to corporations actually engaged in business in the state at the time of taking or holding title. (Foore v. Simon Piano Co., 18 Idaho 167, 108 P. 1038.)

Were the corporation incapable of taking title because it had failed to comply with the laws of Idaho, nevertheless the title would remain in its trustee, and this would not avail the plaintiff in any manner. (Keating v. Keating Min. Co., 18 Idaho 660, 112 P. 206.)

Though the corporation were incapable of holding the equitable interest, still there would be no resulting trust to the grantor, the grantor having received the consideration for the conveyance to the trustee. (Perry on Trusts, 6th ed., secs. 151, 158, 159.)

The trustee takes title. (Lewin on Trusts, 8th ed., sec. 19, p. 66.)

BUDGE, J. Sullivan, C. J., MORGAN, J., Concurring.

OPINION

BUDGE, J.

The complaint in the above-entitled action contains, among other things, the following alleged facts, from which the conclusions of law incorporated in the statement of facts herein stated necessarily follow:

On April 25, 1910, the Thousand Springs Land & Transportation Company, Limited, a domestic corporation, being the owner and in rightful possession of 92.35 acres of land in Gooding county, Idaho, certain personal property, consisting of steel pipes, penstocks, timber, tools, etc., and certain filings and permits issued by the state engineer to the right to the use of water flowing out of certain springs, part of which are located on said land, entered into an agreement with one Arthur Ponsford, whereby Ponsford was given an option to purchase the same.

On April 30, 1910, Ponsford made a declaration of trust, in which he declared that he held said option in his name as trustee for various parties named therein as beneficiaries, whose respective interests and liabilities, in case they accepted the trust, were set out; that he became liable to forfeit a certain sum in case the option should not be exercised; that the beneficiaries named should become and constitute a committee known as the Thousand Springs Committee, for the purpose of organizing a corporation to acquire title to the property described in the option, said corporation to be known as the Thousand Springs Power Company; and that upon the organization of said corporation Ponsford was to transfer and convey to said corporation all of his right, title and interest under the option. This declaration of trust was signed by Ponsford and was also signed and accepted by the beneficiaries named therein.

On July 5, 1910, Ponsford and the beneficiaries named in the declaration of trust made an initial payment of $ 5,000 to the Thousand Springs Land & Transportation Company, in accordance with the option as modified, and on August 17, 1910, they entered into actual possession of the property described in the option.

On September 15, 1910, the Thousand Springs Power Company was incorporated under the laws of Arizona.

On October 20, 1910, Ponsford transferred to the Thousand Springs Power Company all his right, title and interest under the option, and the so-called Thousand Springs Committee, by Frank N. Bancroft, transferred to the Thousand Springs Power Company all of its right, title and interest in and to the declaration of trust.

On May 26, 1911, the Thousand Springs Power Company duly executed its power of attorney to Frank N. Bancroft, chairman of its organization committee, authorizing him to take the legal title, in...

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