Donaldson v. Thousand Springs Power Co.
| Decision Date | 26 January 1917 |
| Citation | 162 P. 334,29 Idaho 754 |
| Court | Idaho Supreme Court |
| Parties | GILBERT 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 |
J. B. Eldridge and E. G. Davis, for Appellant.
"If there are statutes which prevent corporations from taking the legal title to lands, they cannot evade the statutes by taking the legal title to trustees and the beneficial interest to themselves; thus they cannot be cestuis que trust in lands the legal title to which they are not licensed or enabled to take." (Hill on Trustees, sec. 52; Lewin on Trusts, secs. 19, 36; Perry on Trusts, sec. 63; Myers Mfg. Co. v. Wetzel (Tenn. Ch.), 35 S.W. 896; 2 Thompson on Corporations, 2d ed., 695, sec. 1605; 1 Mechem on Agency, 2d ed., sec. 129, p. 90; Hanna v. Kelsey Realty Co., 145 Wis. 276, 140 Am. St. 1075, 129 N.W. 1080, 33 L. R. A., N. S., 355.)
These contracts were void, because in violation of the statute. (Lindsey v. Rottaken, 32 Ark. 619, 631; Chateau v. Singla, 114 Cal. 91, 94, 55 Am. St. 63, 45 P. 1015, 33 L. R. A. 750; Estate of Groome, 94 Cal. 69, 29 P. 487; Buck v. Eureka, 109 Cal. 504, 42 P. 243, 30 L. R. A. 409; Brooklyn Life Ins. Co. v. Bledsoe, 52 Ala. 538, 551; Bishop on Contracts, arts. 471--547; Buckley v. Humason, 50 Minn. 195, 36 Am. St. 637, 52 N.W. 385, 16 L. R. A. 423.)
"A 'void contract' is in fact no contract, since an instrument of that nature does not alter the relations previously existing between the contracting parties, nor will it serve as the foundation of any right." (Allen v. City of Davenport, 132 F. 209, 65 C. C. A. 641; Penn v. Bornman, 102 Ill. 523, 529; Bush on Contracts, sec. 458; Downs v. Blount, 170 F. 15, 22, 95 C. C. A. 289, 31 L. R. A., N. S., 1076; Gist v. Smith, 78 Ky. 367; Bank of the United States v. Owens, 2 Pet. (27 U.S.) 527, 539, 7 L.Ed. 508, 512.)
The transaction of business by a foreign corporation which had not complied with the laws of the state is unlawful and contrary to state policy, and every contract in furtherance of such business is void. (Parke, Davis & Co. v. Mullett, 245 Mo. 168, 149 S.W. 461; Thomas v. West Jersey R. R. Co., 101 U.S. 71, 87, 25 L.Ed. 950, 953.)
Longley & Walters and P. B. Carter, for Respondents.
In this state, a contract made with a noncomplying corporation is not void. It is merely unenforceable in any court of this state. (Valley Lumber & Mfg. Co. v. Driessel, 13 Idaho 662, 13 Ann. Cas. 63, 93 P. 765, 15 L. R. A., N. S., 299; Tarr v. Western Loan & Savings Co., 15 Idaho 741, at 750, 99 P. 1049, 21 L. R. A., N. S., 707.)
A rehearing was granted in this case and the argument on rehearing was had at this term of court. The facts are very fully stated in the original opinion of the court.
Sec. 10 of art. 11 of the constitution and sec. 2792, Rev. Codes, are mandatory. (Katz v. Herrick, 12 Idaho 1, 86 P. 873; Dickens West Min. Co. v. Crescent Min. & Mill. Co., 26 Idaho 153, 141 P. 566.) It is unnecessary to decide in this case whether under sec. 2792, Rev. Codes, a foreign corporation in any case may take title to real estate in Idaho without first filing its articles of incorporation, except as an incident to interstate commerce, since under the facts of this case the foreign corporation was doing business within the purview of the statute and constitution. The taking of title to the Thousand Springs property, assuming such taking of title to be an act of the Thousand Springs Power Company, was not a single isolated transaction, even though it be conceded that it was the first act of doing business. If it was the first act, it was but the first of a series of acts intended to be done by the corporation under its corporate powers. This view is in harmony with the opinion of the supreme court of the United States as expressed in Cooper Mfg. Co. v. Ferguson, 113 U.S. 727, 5 S.Ct. 739, 28 L.Ed. 1137. In the course of its opinion the court says:
The cases holding that a single isolated transaction is not to be considered doing or carrying on of business within the state are cases where the matter involved was a single transaction without any intention on the part of the foreign corporation of continuing to transact other acts of business within the state. (See Commercial Bank v. Sherman, 28 Ore. 573, 52 Am. St. 811, 43 P. 658; Meddis v. Kenney, 176 Mo. 200, 98 Am. St. 496, 75 S.W. 633; Florsheim Bros. Dry Goods Co. v. Lester, 60 Ark. 120, 46 Am. St. 162, 29 S.W. 34, 27 L. R. A. 505; Keene Guaranty Sav. Bank v. Lawrence, 32 Wash. 572, 73 P. 680; Miller v. Williams, 27 Colo. 34, 59 P. 740; Live-Stock Commission Co. v. Haston, 68 Kan. 749, 75 P. 1028.)
Such cases are to be distinguished from those where the act complained of was one of a series of transactions intended to be performed within the state. (See Deere Plow Co. v. Wyland, 69 Kan. 255, 2 Ann. Cas. 304, 76 P. 863; Farrior v. New England Mortgage Security Co., 88 Ala. 275, 7 So. 200; Chattanooga Nat. Bldg. & Loan Assn. v. Denson, 189 U.S. 408, 23 S.Ct. 630, 47 L.Ed. 870.)
It is claimed, however, that the statute applies to foreign corporations only, and does not prohibit the taking and holding of title to realty by trustees for the use and benefit of such corporations, and does not render null and void deeds and conveyances to such trustees; that the statute is penal in its nature and should be strictly construed. The rule of construction to be applied to all our statutes is found in sec. 4, Rev. Codes, which provides that The rule of strict construction is one used in determining what the real intent and object of the law is in cases where it is properly applicable. The law under consideration, however, is not properly considered a penal statute of such a nature that the rule of strict construction may be invoked. Foreign corporations have no natural or inherent right to carry on business in any state other than that in which they are organized. (Paul v. Virginia, 75 U.S. 168, 8 Wall. (75 U.S.) 168, 19 L.Ed. 357; Bank of Augusta v. Earle, 38 U.S. 519, 13 Pet. (38 U.S.) 519, 10 L.Ed. 274; Fritts v. Palmer, 132 U.S. 282, 10 S.Ct. 93, 33 L.Ed. 317.) Statutes prescribing the terms upon which a foreign corporation may carry on business within the borders of a state, strictly speaking, are statutes granting a privilege.
In this case Bancroft took the deed in his own name as agent for the Thousand Springs Power Company. He acted under a power of attorney executed by the company, and immediately upon receiving the deed executed a declaration of trust to the effect that he held the property in trust for the use and benefit of the said company. According to the record he had no personal interest in the property. His action was the action of the company. The trust resulting from such a transaction would have been a passive trust and the Thousand Springs Power Company for all intents and purposes would have been the absolute owner of the property. A prohibitory statute providing that such foreign corporation cannot take or hold title to any realty within this state prior to making the filing required by the statute must be construed to mean any title. The mere agent of such foreign corporation cannot be permitted to take title in himself for the use and benefit of such corporation. Such a transaction would be a palpable evasion of the statute. Bancroft's deed, therefore, was void.
There is nothing in the case of Keating v. Keating Min Co., 18 Idaho 660, 112 P. 206, inconsistent with this view. In that case Keating conveyed the title to one Watson. Watson was not at the time of the conveyance to him, nor at any other time, trustee for a foreign corporation. At the time title to the property was conveyed to him he was under no disability and was competent to acquire and hold the title. The court's opinion was based in the first instance upon the ground that the contract for the sale of said mining claims (to Watson) was a legal valid contract, procured without conspiracy or fraud on the part of the defendants, and that Keating had accepted and received the entire purchase price therefor. The court also held that Keating was estopped by his laches in any case from maintaining the action. The defendants in this case were not entitled...
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