Harris v. United States Mexico Oil Company

• Decision Date: 11 February 1922
• Docket Number: 23,506
• Parties: T. W. HARRIS, Appellee, v. UNITED STATES MEXICO OIL COMPANY, Appellant
• Court: Kansas Supreme Court

204 P. 754

110 Kan. 532

T. W. HARRIS, Appellee, v. UNITED STATES MEXICO OIL COMPANY, Appellant

No. 23,506

Supreme Court of Kansas

February 11, 1922

Decided January, 1922

Appeal from Bourbon district court; EDWARD C. GATES, judge.

Judgment affirmed.

SYLLABUS

SYLLABUS BY THE COURT.

1. CORPORATIONS--A "Massachusetts Trust" Is a Corporation. A "Massachusetts trust" is a corporation within the meaning of that word as defined in section 6 of article 12 of the Kansas constitution as including "all associations and joint-stock companies having powers and privileges not possessed by individuals or partnerships," and as used in statutes the subject matter of which makes the definition pertinent and within the reason of the legislation. The decision to that effect in Lumber Co. v. State Charter Board, 107 Kan. 153, 190 P. 601 10 A. L. R. 879, is adhered to.

2. SAME--Service on a "Massachusetts Trust" by Publication. In a proper case service by publication may be had upon a "Massachusetts trust" which is not a resident of this state, as a foreign corporation.

3. SAME--Defect in Publication Service--Cured by Voluntary Appearance. Any defect in the service by publication in this case is held to have been cured by the insertion in a motion to set aside the judgment against the defendant, on account thereof, allegations denying the merits of the plaintiff's claim upon the facts.

W. F. Jackson, of Fort Scott, and William W. Fry, of St. Paul, Minn., for the appellant.

J. I. Sheppard, and James G. Sheppard, both of Fort Scott, for the appellee.

OPINION

MASON, J.:

On April 9, 1920, T. W. Harris brought an action in the district court of Bourbon county against a defendant described as United States Mexico Oil Company, a corporation, asking judgment for $ 2,999 claimed to be due him under a written contract with such defendant executed May 24, 1918, for the drilling of three wells, one north and two south of the Osage river, in Bourbon county. An attachment was issued and levied and service was made by publication under allegations that the defendant was a foreign corporation and a nonresident of Kansas. On May 29, 1920, a motion was filed in behalf of "the above styled and named defendant, the United States Mexican Oil Company, a corporation, and also persons interested and owning the property attached," to dismiss the action for want of jurisdiction of the defendant and the subject matter, alleging that the action had been improperly brought in Bourbon county and that no valid service had been made. No proof was made or offered in support of this motion, and it was overruled on the day it was filed. On January 5, 1921, judgment was rendered in favor of the plaintiff, finding that the defendant was indebted to him in the amount claimed, and ordering the attached property sold to pay the debt. On March 4, 1921, the defendant, describing itself as "the United States Mexico Oil Company, a voluntary trust of Wichita, Kansas," filed a motion to vacate the judgment for want of jurisdiction, accompanied by an affidavit setting out among other matters the details of its organization as a "Massachusetts trust." The motion was overruled and the defendant appeals.

1. A principal contention of the defendant is that it is a voluntary trust and not a corporation and that the proceedings against it are void on that account. This court has already decided that an organization of the character of the defendant is deemed to be a corporation within the meaning of the Kansas law making permission from the charter board necessary to enable a corporation to do business in this state. (Lumber Co. v. State Charter Board, 107 Kan. 153, 161, 190 P. 601, 10 A. L. R. 879.) The defendant urges, however, that that case is out of harmony with decisions in other states and with the reason of the matter, and ought to be overruled. The effect of the decision was to hold that an organization in the form known as a "Massachusetts trust" is subject to regulation and control under the existing statutes regarding corporations. A regular session of the legislature has since been held without making any change in the law as so interpreted. This implies legislative acceptance of the policy of regulating organizations such as the defendant and gives room for the presumption that if the existing law had been otherwise interpreted such regulation would have been provided by new legislation--a special reason why the decision should not be overturned except upon the strongest grounds.

Except for the section of the Kansas constitution relied upon in the case above cited, it may be conceded that "Massachusetts trusts" are not to be classed as corporations. (See Note, 7 A. L. R. 612, 621, 628.) That section, giving a definition of the term corporation which we have held to include voluntary trusts such as the defendant, reads:

"The term corporations, as used in this article, shall include all associations and joint-stock companies having powers and privileges not possessed by individuals or partnerships; and all corporations may sue and be sued in their corporate name." (Art. 12, § 6.)

In Idaho a somewhat similar constitutional definition has been held (one of the three justices dissenting) not to include such organizations. (Spotswood v. Morris, 12 Idaho 360, 85 P. 1094.) The provision there interpreted, however, contains two very significant words which are omitted from that of the Kansas constitution--those which we italicize in the following copy of the section:

"The term 'corporation,' as used in this article, shall be held and construed to include all associations and joint stock companies having or exercising any of the powers or privileges of corporations not possessed by individuals or partnerships." (Idaho Const., Art. 11, § 16.)

The word "corporations" in the italicized phrase obviously means corporations in the general sense, not enlarged or modified by the definition in which it occurs; otherwise the word would be defined in its own terms. The powers and privileges of corporations as such, as the word is ordinarily used, may well be regarded as those conferred by legislative act. That this feature of the matter influenced the decision of the Idaho court is indicated by the language of the syllabus--"To legally possess or exercise powers or privileges of corporations requires a sovereign grant." When the Kansas constitution was adopted a provision like that of the constitution of Idaho, including the words "of corporations," was contained in the constitutions of New York (Constitution of 1846, Art. 8, § 3) and Michigan (Constitution of 1850, Art. 15, § 11), with which the framers of our own constitution were presumably familiar. The Kansas provision was obviously derived from that of New York. Its omission of the words "of corporations" must be regarded as intended to affect the meaning and give to it much the same force as though it read: "The term corporations, as used in this article, shall include all associations and joint stock companies having powers and privileges not possessed by individuals or partnerships, whether or not such powers and privileges are of a character peculiar to corporations as the word is ordinarily used--that is, whether or not they result from a legislative grant." It is quite obvious that the purpose was not to embody in the constitution the ordinary definition of the word corporations but to give to that word as used in the article of which the provision was a part a special and enlarged meaning. The kind of association there described is by the terms of the section itself authorized to sue and be sued. The definition so adopted is not necessarily to be applied to the word corporation wherever it is used in the statute; but where the subject matter makes it pertinent and within the reason of the legislation that is the natural course. As was pointed out in the Lumber Company case trusts of the character of the defendant have among other powers and privileges not possessed by individuals or partnerships those of continuous existence and exemption from personal liability. They enjoy practically all the advantages of ordinary corporations, and no reason is apparent why they should not be subjected to the same obligations and regulations. Of their origin it is said in the defendant's brief:

"The thing that brought these Pure Trusts in existence in Massachusetts and New York, was the fact that corporations could not hold real estate and deal in the same, and the Trust organization was created to do the very thing that corporations were not permitted to do, and were made necessary to transact business which corporations were forbidden by law to transact."

The defendant cites and relies upon a decision that a statutory limited partnership is not a corporation within the application of the rule treating a corporation as a citizen of the state creating it for the purpose of determining the jurisdiction of the federal courts where based on diverse citizenship--a rule founded on the presumption, or rather fiction, that all the stockholders of a corporation are citizens of the state under whose laws it is created. ( Great Southern Fire Proof Hotel Co. v. Jones, 177 U.S. 449, 44 L.Ed. 842, 20 S.Ct. 690.) The case, in our judgment, sheds no light upon the question we are now considering. In the opinion it was said:

"Nor can we accede to the suggestion that this question of jurisdiction is affected by the clause of the Constitution of Pennsylvania providing that the term 'Corporations,' as used in article XVI of that instrument, 'shall be construed to include all joint stock companies or associations having any of the powers or privileges of corporations not possessed by individuals or partnerships,' Const. Pa., art....