Murphy v. Mo. & Kan. Land & Loan Co.

• Decision Date: 12 December 1914
• Citation: 28 N.D. 519,149 N.W. 957
• Court: North Dakota Supreme Court
• Parties: MURPHY et al. v. MISSOURI & KANSAS LAND & LOAN CO. et al.

28 N.D. 519

149 N.W. 957

MURPHY et al.

v.MISSOURI & KANSAS LAND & LOAN CO. et al.

Supreme Court of North Dakota.

Dec. 12, 1914.

Syllabus by the Court.

Plaintiffs bring this action to determine adverse claims. Substituted service was had. All defendants appeared. Corporation answers and asserts title in itself. Individual defendants do not answer. Thereafter, but before the trial was begun, the 20-year period expired for which the foreign corporation was chartered. Ignorant thereof, the attorneys for the parties then served and filed amended pleadings and went to trial. Attorneys of corporation were also attorneys for the individual defendants. Upon trial plaintiffs failed to prove title in them, but established payment by them of $329 taxes paid under void tax deeds. On plaintiffs resting, defendants moved for dismissal because of plaintiff's failure of proof. Later the defunct corporation defendant submitted its proof as on the merits. Plaintiffs having pleaded a forfeiture of charter of the defendant corporation because of noncompliance with the Kansas statutes under which it was chartered, at the close of the trial the case was kept open for proof on that question, and later depositions were taken and filed, disclosing not a forfeiture, but the death of the corporation through the lapsing of its charter. Thereupon its former officers, designated by the Kansas statute as those upon whom trusteeship devolved, made written application supported by affidavit and the depositions taken for their substitution, and that the action not abate, but continue against them as trustees for said foreign corporation defendant dissolved. Trial was then closed; the court not ruling on the motion to substitute, but taking everything under advisement. On the first session of the trial in March, 1912, plaintiff's attorneys gave oral notice in open court that they would apply for a default judgment against the individual defendants not answering, but appearing. Later, and before the final session of the trial, judgment was entered without notice and as by default in favor of plaintiffs, and against said nonanswering individual defendants, adjudging the individual defendants to have no interest in the lands as against the plaintiffs. Six weeks after the final session of the trial, after motion to substitute had been made, but not ruled upon, and after default judgment had been taken against the individual defendants, the plaintiffs filed a written dismissal of the action and a written application to the court for an order of dismissal both, as against the foreign corporation, claiming there was no adverse party corporation defendant. This motion was not ruled upon. The trustees asking substitution have not answered, and the title of the action remains unchanged. The court made its findings, conclusions, and order for judgment without any change in the title, finding in favor of the foreign corporation, and awarding judgment quieting title in its favor, with a writ of restitution for possession to it, and finding that the applicants for substitution as trustees were entitled to be substituted, and setting aside, as erroneously and inadvertently entered, the judgment by default taken against the individual defendants, and ordered payment to plaintiffs the amount of the taxes. Judgment was accordingly entered without change of title adjudging the foreign corporation to own the land and awarding it the costs of suit. From this judgment plaintiffs appeal, demanding a trial de novo. Held, plaintiffs' tax deeds under which they assert title are void, and they have failed in their proof of right to recover as against the individual defendants appearing, but not answering, and as to whom the action should be dismissed as to plaintiffs, as already tried on the merits.

Upon the lapsing of the charter of the foreign corporation, it became defunct, but the proceedings subsequently had will be treated in equity as voidable-not void.

The motion for substitution of the trustees should have been then and there granted, and said trustees ordered substituted as defendants in lieu of the defunct corporation, and the action continued against them. They as trustees should have served and filed pleadings, and the issue so joined should have been tried as between plaintiffs and said trustees before rendition of judgment.

Plaintiffs having affirmatively disclosed their want of interest as against the individual defendants as to whom trial was had, judgment in their favor against the defendants could not be entered by default. Said defendants were not in default, but appeared, as they had a right to do, under the adverse claims statutes (Comp. Laws 1913, §§ 8151, 8153), even though not answering. The judgment awarded as by default was properly set aside.

Plaintiffs could not, after the submission of the cause supposedly on the merits, in the face of a pending motion for substitution of parties, dismiss as to the defunct corporation because it had become defunct, and leave intact, reserved by the motion, said erroneous judgment previously entered against the individual defendants.

The findings and order made thereon are to be treated as an order for a substitution of trustees as defendants as of the date the motion was made, and as an order vacating said default judgment, and as authorizing dismissal of this action as to the individual defendants, so far as plaintiffs are concerned. Further than this, the findings, conclusions, order, and judgment are vacated and set aside.

Respondents urge that, as it appeared that plaintiffs have no interest or title, on plaintiffs' appeal after such proof, judgment in defendants' favor should be summarily affirmed, and no review be had of defendants' proof. Held that, as defendants assert and have recovered affirmative judgment of title and possession (conceding the trustees to be parties), they stand as plaintiffs in their relations to appellants, with their counterclaim deemed denied, with the burden of proof upon them before any judgment other than for dismissal of the action can be rendered under the statutes governing procedure in adverse claim suits. Sections 8151, 8153, C. L. 1913.

The cause is remanded, with directions to change title of the action that it may run against the trustee defendants; that plaintiffs and said trustee defendants may join issue on pleadings, and trial and further proceedings be had according to law.

Any final judgment rendered will allow defendants for the amount of taxes and interest thereon paid by them under color of title, the void tax deeds.

After trial on the merits or opportunity afforded for trial, appellants will recover costs and disbursements taxable on this appeal. Past and future district court costs and disbursements will be awarded in favor of the party to whom is awarded final judgment of title to the half section of land in controversy.

Additional Syllabus by Editorial Staff.

A “forfeiture” of a corporate charter is a different thing from a “dissolution” of the corporation without forfeiture, by lapse of its charter; and hence a pleading setting up forfeiture of charter by nonuser and noncompliance with the statute was insufficient to set up dissolution of the corporation by lapse of time.

Appeal from District Court, Logan County; Coffey, Judge.

Action by J. J. Murphy and another against the Missouri & Kansas Land & Loan Company, a foreign corporation, and others. From a judgment for defendants, plaintiffs appeal. Modified on rehearing and remanded.

See, also, 22 N. D. 336, 133 N. W. 913.

Watson & Young, of Fargo, for appellants. Andrew Miller and W. P. Costello, both of Bismarck, for respondents.

GOSS, J.

This is an equitable action brought to determine adverse claims to real estate. This opinion is written after a rehearing had. Substituted service of summons was made upon the five individual defendants and one corporation defendant in 1910, and all of them appeared in due time by their attorneys of record, who served written notice of appearance and demand for a copy of the complaint on behalf of all defendants. The individual defendants have never answered, and are in default of answer, but their attorneys of record appeared for them at all times during the progress of the trial. An original answer and counterclaim was served by the corporation, the Missouri & Kansas Land & Loan Company, which was held to have been served in time, on appeal to this court decided in 22 N. D. 336, 133 N. W. 913. Remittitur on that appeal left this court in January, 1912. A few days prior thereto, December 26, 1911, the 20-year period of corporate existence, the lifetime of the corporation under the Kansas statutes, expired; it thereby becoming dissolved with this action undetermined after issue joined. On April 30, 1912, the attorneys for the plaintiffs and the defendant corporation served respectively amended complaint, answer, counterclaim, and reply thereto on eve of the trial, and proceeded to a trial upon the merits, all in ignorance of the lapsing of the corporate charter.

[11] The amended complaint, and likewise the reply, pleads a forfeiture of the corporate charter by nonuser and noncompliance with the Kansas law, but the pleadings do not plead a dissolution of the corporation by lapse of time. A forfeiture is one thing, and dissolution without forfeiture, by lapse of charter, is a different thing. Motions were subsequently made to strike out the portions of the plaintiffs' complaint and plaintiffs' reply to defendants' counterclaim, pleading the forfeiture of corporate existence as not in issue, and not a matter to be alleged by way of reply, but it is unnecessary to pass upon said motion, for reasons hereinafter stated.

Plaintiffs' original complaint is in the statutory form to determine adverse claims, and recites tax deeds as the basis of title. The original answer of the corporation interposed in 1910 before its dissolution denied the title of the...