Katz v. Herrick

• Decision Date: 25 January 1906
• Citation: Katz v. Herrick, 12 Idaho 1, 86 P. 873 (Idaho 1906)
• Parties: ALMA D. KATZ, Appellant, v. C. E. HERRICK, Respondent
• Court: Idaho Supreme Court

86 P. 873

12 Idaho 1

ALMA D. KATZ, Appellant, v. C. E. HERRICK, Respondent

Supreme Court of Idaho

January 25, 1906

FOREIGN CORPORATIONS-COMPLIANCE WITH LAWS PRECEDENT TO DOING BUSINESS - INSURANCE COMPANIES - CONSTITUTIONAL REQUIREMENT-POLICY OF THE STATE-CONTRACTS IN VIOLATION OF LAW CANNOT BE ENFORCED-TITLE TO LEGISLATIVE ACT-CURATIVE OR RETROSPECTIVE ACT-PURCHASER WITH NOTICE.

1. Under the provisions of section 10, article 11 of the constitution, and section 2653 of the Revised Statutes as amended by act of March 10, 1903, it is made unlawful for any foreign corporation to transact business in this state without having first filed a copy of its articles of incorporation with the Secretary of State and the county recorder of the county in which its principal place of business is established, and having also in like manner filed written appointment designating and authorizing an agent within the state to receive and accept service of process in any and all matters in which the corporation may be a party or concerned.

2. A foreign corporation failing to comply with the requirements of the constitution and of section 2653 of the Revised Statutes, as amended by act of March 10, 1903, cannot maintain a suit or action in any of the courts of this state for breach or violation of any contract entered into during the time the corporation had so failed and neglected to comply with the constitution and statute.

3. The people in adopting section 10, article 11 of the constitution have clearly announced the public policy of this state toward foreign corporations, and have proclaimed in unmistakable language that such artificial beings, existing only in contemplation of law, must subject themselves to the jurisdiction and laws of this state before they can be accorded any recognition or legal existence within its jurisdiction.

4. Where the constitution or statute prohibits an act or declares that it shall be unlawful to perform it, it is the fair and reasonable interpretation and construction thereof to say that the people in the one case and the legislature in the other have intended to interpose their power and authority to prevent the act, and as one of the means of its prevention intended that the courts should not lend their power and authority in its enforcement.

5. As to whether or not the act of February 8, 1905, entitled "An act relating to foreign corporations doing business in the state of Idaho," is in violation and contravention of section 10, article 11 of the constitution quaere.

6. Where the sole purpose and object of a legislative act is the validating and legalizing of the past transactions of a foreign corporation which has done business in this state without having first complied with the provisions of the constitution and statute in filing its articles of incorporation and designating an agent upon whom service of process may be had, and the title to such act is, "An act relating to foreign corporations doing business in the state of Idaho": Held, that the title does not express or indicate the subject matter of the act, and does not comply with section 16 of article 3 of the constitution, and that such act is for that reason unconstitutional and void.

7. Act of February 8, 1905, entitled "An act relating to foreign corporations doing business in the state of Idaho," is a retrospective and retroactive law, and is in that respect out of the usual and ordinary scope of legislation, and such act should have a title indicating in some manner the retroactive intent and operation of the statute.

8. Where K. was at all times mentioned the agent and manager of a foreign insurance company which was doing business in this state without having first complied with the requirements of section 10 of article 11 of the constitution, and section 2653 of the Revised Statutes, as amended by act of March 10 1903, and a solicitor for such company took H.'s promissory note in payment of a premium on a policy of life insurance, and thereafter assigned such note to K., on which K. advanced him the amount of his commission, and the solicitor thereupon agreed to repay K. in case H., the maker of the note, failed to pay the same: Held, that K. was not an innocent purchaser of the note for value.

(Syllabus by the court.)

APPEAL from the District Court of the Third Judicial District, for Ada County. Hon. George H. Stewart, Judge.

Judgment for defendant. Plaintiff appealed. Affirmed.

Judgment of the lower court affirmed. Costs awarded to respondent.

Edwin Snow and Harry S. Kessler, for Appellant.

The company is not prohibited from doing business during noncompliance with the foreign corporation act of 1903. No penalty or punishment is prescribed for doing business. It is not made a crime, but the act itself clearly sets out what result is to follow. No contract or agreement made in the name of or for the use or benefit of such corporation prior to the making of such filings can be sued upon or be enforced in any court of this state by such corporation.

Notes taken by foreign insurance companies within this state are not void because they have not complied with the laws authorizing them to do business within its limits, but the remedy upon such notes is suspended until they do comply with said laws. (American Ins. Co. v. Wellman, 69 Ind 413.) This is construing a law which expressly prohibits companies from doing business in the state without compliance and which fixes a criminal penalty for failure to do so.

Policy of insurance itself is valid, notwithstanding the company has not complied with the law. (Berry v. Knight Templars etc. Indemnity Co., 46 F. 439; Ehrman v. Teutonia Ins. Co. (D. C.), 1 F. 471, 1 McCrary, 123; Ganser v. Fireman's Fund Ins. Co., 34 Minn. 372, 25 N.W 943; Marshall v. Reading Ins. Co., 29 N.Y.S. 334, 78 Hun, 83.)

New Hampshire courts have held that if the policy is valid, the premium note is valid, even though the foreign corporation and its agents had laid itself open to criminal liability by writing policies before they had complied with the law. ( Union Ins. Co. v. Smart, 60 N.H. 458; Connecticut River Ins. Co. v. Way, 62 N.H. 622; Provincial Life Ins. Co. v. Lapsley, 15 Gray (Mass.), 252.)

A contract is not void when the statute at the same time otherwise limits the effect or declares the consequences which shall attach to the making of the contract. (9 Cyc. 481, Philadelphia Loan Co. v. Tower, 13 Conn. 249; Rossman v. McFarland, 9 Ohio St. 369.)

Davidson & Stoutemyer, for Respondent.

That this contract is absolutely void as to appellee we entertain no doubt. (Cincinnati Mutual Health Assur. Co. v. Rosenthal, 55 Ill. 85, 8 Am. Rep. 626.)

This construction of such statutes is supported by the overwhelming weight of authority. (3 Clark and Marshall on Private Corporations, par. 847b; In re Comstock, 3 Saw. 218, F. Cas. No. 3078; Semple v. Bank of British Columbia, 5 Saw. 88, F. Cas. No. 12,659; Northwestern Mutual Life Ins. Co. v. Elliott, 5 F. 225, 7 Saw. 17; McCanna & Fraser Co. v. Citizens' Trust etc. Co., 74 F. 597; Diamond Glue Co. v. United States Glue Co., 103 F. 838; Farrior v. New England Mortgage Security Co., 88 Ala. 275, 8 So. 200; Rising Sun Ins. Co. v. Slaughter, 20 Ind. 520; Union Central Life Ins. Co. v. Thomas, 46 Ind. 44; Cassady v. American Ins. Co., 72 Ind. 95; Franklin Ins. Co. v. Louisville etc. Packet Co., 9 Bush (Ky.), 590; Buxton v. Hamblen, 32 Me. 448; Williams v. Cheney, 8 Gray (Mass.), 206; National Mutual Fire Ins. Co. v. Pursell, 10 Allen (Mass.), 231; Reliance Mutual Ins. co. v. Sawyer, 160 Mass. 413, 36 N.E. 59; Seamans v. Temple Co., 105 Mich. 400, 55 Am. St. Rep. 457, 63 N.W. 408, 28 L. R. A. 430; Seamans v. Christian Bros. Mill Co., 66 Minn. 205, 68 N.W. 1065; Williams v. Scullin, 59 Mo.App. 30; Barbor v. Boehm, 21 Neb. 450, 32 N.W. 221; Stewart v. Northampton Mutual Live Stock Ins. Co., 38 N.J.L. 436; Pennington v. Townsend, 7 Wend. (N. Y.) 276; Bank of British Columbia v. Page, 6 Or. 435; Hacheny v. Leary, 12 Or. 40, 7 P. 329; Thorne v. Travelers' Ins. Co., 80 Pa. 15; 21 Am. Rep. 89; Cary-Lombard Lumber Co. v. Thomas, 92 Tenn, 587, 22 S.W. 743.)

The illegality of the transaction may be set up as against a holder of the note or bond who has not paid value, or who purchased with notice. (3 Clark and Marshall on Private Corporations, sec. 847h; Jones v. Smith, 3 Gray (Mass.), 500, Atlantic Mut. Fire Ins. Co. v. Fitzpatrick, 2 Gray (Mass.), 279; Roche v. Ladd, 1 Allen (Mass.), 437; Ehrhardt v. Robertson Bros., 78 Mo.App. 404; Warren v. Stoddard, 6 Idaho 692, 59 P. 540.)

The validating act of 1905 is unconstitutional under section 16, article 3, of the constitution of the state of Idaho. The title of this act is, "An act relating to foreign corporations doing business in the state of Idaho." The legalization of past transactions is not within the title of the statute which states that it is to regulate the business of building and loan associations. (Lindsay v. United States Sav. etc. Co., 120 Ala. 156, 24 So. 171, 42 L. R. A. 783. See, also, Brieswick v. Brunswick, 51 Ga. 639, 21 Am. Rep. 240; Lockport v. Gaylord, 61 Ill. 276; Snell v. Chicago, 133 Ill. 413, 24 N.E. 532, 8 L. R. A. 858.)

W. E. Borah, James E. Babb, John P. Gray, C. L. Heitman and Stiles W. Burr, amici curiae.

The object of penalty provisions, especially those which strike at the validity of the corporation's acts and contracts and those which deny it access to the courts, is to compel compliance by the corporation with the state's requirements, not to punish the corporation nor to deprive it of its property or property rights; such penalties are not enacted for the benefit of persons who contract with such corporation, pocket the consideration, and then seek to evade their...