Fruin-Colnon Contracting Co. v. Chatterson

• Decision Date: 30 January 1912
• Citation: 143 S.W. 6,146 Ky. 504
• Parties: FRUIN-COLNON CONTRACTING CO. v. CHATTERSON et al.
• Court: Kentucky Court of Appeals

143 S.W. 6

146 Ky. 504

FRUIN-COLNON CONTRACTING CO. v. CHATTERSON et al.

Court of Appeals of Kentucky.

January 30, 1912

Appeal from Circuit Court, Jefferson County, Chancery Branch, First Division.

Action by the Fruin-Colnon Contracting Company against I. C Chatterson and others. From a judgment dismissing the petition, plaintiff appeals. Affirmed.

Adrian C. Humphreys, for appellant.

Chatterson & Blitz, for appellees.

CARROLL J.

The appellant, a Missouri corporation, was awarded in April 1909, by the board of public works of the city of Louisville a contract for the construction of street improvements, a portion of which abutted on the property of appellee. Having completed the contract in August, 1909, it brought this action in 1910 against the appellee upon an apportionment warrant to enforce its lien upon her property to satisfy the cost of the improvement. For defense to the action, the appellee relied on section 571 of the Kentucky Statutes (section 2158, Russell's St.), providing that: "All corporations except foreign insurance companies formed under the laws of this or any other state, and carrying on any business in this state, shall at all times have one or more known places of business in this state, and an authorized agent or agents thereat, upon whom process can be served; and it shall not be lawful for any corporation to carry on any business in this state, until it shall have filed in the office of the Secretary of State a statement, signed by its president or secretary, giving the location of its office or offices in this state, and the name or names of its agent or agents thereat upon whom process can be served; and when any change is made in the location of its office or offices, or in its agent or agents, it shall at once file with the Secretary of State a statement of such change; and the former agent shall remain agent for the purpose of service until statement of appointment of the new agent is filed; and if any corporation fails to comply with the requirements of this section, such corporation, and any agent or employé of such corporation, who shall transact, carry on or conduct any business in this state, for it, shall be severally guilty of a misdemeanor, and fined not less than one hundred nor more than one thousand dollars for each offense."

She set up that the appellant had failed to comply with this statute and hence could not recover against her on the contract made with the board of public works for the street improvement. In a reply, appellant admitted that when the contract was awarded and the work completed it had not complied with the statute, but averred that it did so afterwards and in November, 1909. Chancellor Miller, now a judge of this court ruled that, under the facts admitted by the pleadings, the plaintiff could not recover, and entered a judgment dismissing the petition. On this appeal, the only question presented is, Did the failure of the appellant to comply with the statute before making the contract and completing the work under it deny it the right to recover the cost of the improvement?

A number of reasons are assigned by counsel for appellant why the judgment should be reversed, one of them being the contention that a person dealing with a corporation and contracting with it as such is estopped to deny its existence or its power to contract. And, it is said that this street improvement contract, although not made directly with appellee, was made by her agent, the city of Louisville, and therefore, after the work had been completed and appellee has received the benefit thereof, she could not set up as a defense the want of power on the part of the corporation to make the contract.

It has been adjudicated in a number of cases decided by this court, and is a well-settled doctrine, that a person who contracts with a corporation is estopped to deny its corporate existence, or its charter power to contract, in an action brought by it to enforce the contract. This principle was first announced by this court in Bank of Galliopolis v. Trimble, 6 B. Mon. 601, and was followed in Jones v. Bank of Tennessee, 8 B. Mon. 122, 46 Am. Dec. 540, Henderson, etc., R. Co. v. Leavell, 16 B. Mon. 359, Lail v. Mt. Sterling Coal R. Co., 13 Bush, 32, and in many other cases, and was subsequently incorporated in the law in section 566 of the Kentucky Statutes (section 2152, Russell's St.), reading: "No corporation organized under this chapter shall be permitted to set up or rely upon the want of legal organization as a defense to any action against it; nor shall any person transacting business with such corporation, or sued for injury done to its property, be permitted to rely upon such want of legal organization as a defense."

But in none of the cases above mentioned was the corporation involved acting in violation of an express statute in making the contract, or charged with having made a contract that it was forbidden by law to enter into. The plea of estoppel was made and sustained upon the theory that a person who deals or contracts with a corporation in its corporate name and capacity cannot afterwards rely upon some defect in its organization to defeat a contract voluntarily entered into with it. It is therefore very clear that neither this line of cases nor the statute has any application to the question here made. In this case the plea does not raise the question that appellant corporation was not properly organized, or assail the legality of its existence, or question its charter power to make a contract of the character involved, but it is put distinctly upon the ground that the statute declares that "it shall not be lawful for any corporation to carry on any business in this state until it shall have filed in the office of the Secretary of State a statement signed by its president or secretary, giving the location of its office or offices in this state, and the name or names of its agent or agents thereat upon whom process can be served," so that we have no difficulty in putting these cases aside as wholly irrelevant to the question presented by this record. There are, however, other cases more directly in point in which the doctrine of estoppel has been extended to embrace contracts that were made when one of the parties to the contract was forbidden by statute to contract until after it had complied with certain statutory requirements. Of this class of cases we might select Johnson v. Mason Lodge, 106 Ky. 838, 51 S.W. 620, 21 Ky. Law Rep. 493, which was followed in Aultman & Taylor Co. v. Mead, 109 Ky. 583, 60 S.W. 294, 22 Ky. Law Rep. 1189, as a fair example. In that case it appears from the opinion that Mason Lodge was an incorporated institution organized under the laws of this state, and that Johnson executed to it his note for borrowed money, upon which note the corporation brought suit. As a defense to the action, Johnson set up that at the time of the execution of the note and the commencement of the action the corporation had not filed with the Secretary of State a statement showing the location of its office and the name of its agent or agents upon whom process could be served as required by section 571 of the Kentucky Statutes, supra, and for this reason the obligation sued on was unenforceable. In holding this defense untenable the court, without considering the effect of section 571 on the contract, put its decision upon section 566 of the Kentucky Statutes, supra, and the cases heretofore cited, holding that, persons transacting business with corporations will not be permitted to rely upon the want of legal organization as a defense. The opinion further distinguished the case of Vanmeter v. Spurrier, 94 Ky. 22, 21 S.W. 337, 14 Ky. Law Rep. 684, and Vannoy v. Patton, 5 B. Mon. 248--that will be hereafter noticed--upon the ground that: "In the case of Vanmeter v. Spurrier, the statute under consideration was one to protect the public against worthless fertilizers, and the case of Vannoy v. Patton from the sale of liquor without license. *** The vice was in the contract itself, and they are therefore distinguished in this respect from this case, which only involves the idea of disability to sue; and it appears to us that the defenses relied on in this case are inconsistent, and neither of them is tenable."

It is worthy of notice that in this opinion the case of Smith v. Robertson, 106 Ky. 472, 50 S.W. 852, was not mentioned, although it would seem that the conclusion announced in the Johnson Case conflicts with the conclusion reached in the Smith Case. In Smith v. Robertson, Smith was the owner of a stallion that was bred to a mare owned by Robertson under an agreement by which Robertson agreed to pay for the service fee $150. The action was brought by Smith to recover this fee. As a defense to the action, Robertson pleaded and relied upon section 4201 of the Kentucky Statutes (section 6142, Russell's St.), providing that: "Any person who shall engage in any business, or sell or offer to sell, any article on which a license is required, before procuring the license and paying the tax thereon, as required by law, shall be deemed guilty of a misdemeanor and, on conviction, be fined not less than fifty nor more than one thousand dollars for each offense unless otherwise specially provided" -- and averred that Smith had not, before the service charged for was rendered, paid the annual license fee required by law for standing his stallion. And...