Parke Davis & Co. v. Mullett

• Decision Date: 05 July 1912
• Parties: PARKE, DAVIS & CO. v. MULLETT.
• Court: Missouri Supreme Court

149 S.W. 461

PARKE, DAVIS & CO. v. MULLETT.

Supreme Court of Missouri, Division No. 2.

July 5, 1912.

1. CORPORATIONS (§ 657)—FOREIGN CORPORATIONS—STATUTORY PROVISIONS—COMPLIANCE WITH REQUIREMENTS.

The transaction of business in this state by a foreign corporation which has not complied with the conditions precedent prescribed by Rev. St. 1909, § 3039, is unlawful and contrary to state policy ; and every contract in furtherance of such business is void.

2. CORPORATIONS (§ 657)—FOREIGN CORPORATIONS—STATUTORY PROVISIONS—COMPLIANCE WITH REQUIREMENTS.

Where a foreign corporation, at the time a contract was executed, was doing business in this state without having complied with the conditions precedent prescribed by Rev. St. 1909, § 3039, a subsequent compliance with the statute did not validate the contract.

3. CORPORATIONS (§ 657)—FOREIGN CORPORATIONS—CONTRACTS—EFFECT OF PARTIAL LEGALITY.

Where a part of the consideration for a note was the sale of goods by a branch office in this state of a foreign corporation which had not complied with the conditions precedent prescribed by Rev. St. 1909, § 3039, and part the sale of goods by the company at its home office in another state, the note was wholly void.

4. CORPORATIONS (§ 659)—FOREIGN—CORPORTIONS—CONTRACTS WITHIN STATE-ESTOPEL.

A president of a corporation, who had executed a note to a foreign corporation, part of the consideration for which was a sale of goods within the state, without having complied with the conditions precedent prescribed by Rev. St. 1909, § 3039, was subsequently paid a dividend on account of such note upon the bankruptcy of a successor of the purchaser corporation. Held, that he was not thereby estopped from setting up the invalidity of the note ; the foreign corporation being in no worse condition, so far as its rights under the note were concerned, than before.

5. CONTRACTS (§ 134)—ILLEGALITY-RATIFICATION.

A contract which is violative of public policy or positive law is not ratified by the recognition of its validity by a party or his agent.

Appeal from Circuit Court, Jackson County; J. G. Park, Judge.

Action by Parke, Davis & Co., against Fred Mullett. Judgment for defendant, and plaintiff appeals. Affirmed.

Webster, Gilmore &. Crowley and C. M. Woodruff, for appellant. E. Wright Taylor and C. I. Spellman, for respondent.

BLAIR, C.

This is an action on a note, instituted May 29, 1905, by Parke, Davis & Co., a Michigan corporation. An answer was filed, the averments of which elicited a reply (in 1907), wherein it was alleged, among other things, that plaintiff had not, prior to December 22, 1905, complied with the statute requiring foreign corporations to secure license before transacting business in this state ; that plaintiff had divided its business into two departments, the "line department" and the "formula department"; that in the line department plaintiff transacted business in Missouri, but in the formula department it did not, the business of that department being transacted at the home office in Michigan; that about one-third of the amount represented by the face of the note accrued from business transacted and goods sold and delivered in Missouri by plaintiff's branch office in Kansas City, and the remainder accrued from the sale of goods by the home office in Michigan.

The reply further alleged that the whole amount represented goods sold or manufactured for corporations of which defendant was president, the assets of which were subsequently (October 25, 1904) disposed of to another corporation in which defendant was a stockholder, and which six months thereafter (May 3, 1905) was adjudicated a bankrupt ; that defendant had executed the note in suit October 25, 1904; and that, subsequent to May 3, 1905, he secured an allowance in his favor of a like amount against the bankrupt's estate, and had received a dividend thereon, amount unknown. It is also alleged that defendant's agent, in April, 1905, being vested with authority to act for defendant respecting the note in suit, acknowledged its validity. It is alleged that by reason of such acknowledgment and defendant's securing the allowance of his claim in bankruptcy plaintiff refrained from proceeding against the estate of the bankrupt. In this state of the case, defendant's motion for judgment on the pleadings was sustained, and plaintiff appealed. It is contended the note is valid, at least in part, and, if that be not true, defendant is estopped to assert its invalidity.

1. The reply, in effect, admits plaintiff was transacting business in Missouri in violation of the statute (sections 3039, 3040, R. S. 1909), in so far as the' business of its Kansas City branch office was concerned; and it follows its business was, to that extent at least, unlawful and contrary to state Policy, as declared by the statutes mentioned (Zinc & Lead Co. v. Zinc Mining Co., 221 Mo. 7, 120 S. W. 31, 23 L. R. A. [N. S.] 492; Tri-State Amusement Co. v. Amusement Co., 192 Mo. 404, 90 S. W. 1020, 4 L. R. A. [N. S.] 688, 111 Am. St. Rep. 511, 4 Ann. Cas. 808), and every contract into which it entered in furtherance of that business was void. Plaintiff's compliance with the statute in December, 1905, did not put it in any better position.

A very substantial part of the consideration of the note in suit accrued from unlawful transactions. Plaintiff contends, however, that the part of that consideration which accrued from transactions with its home office was lawful, and a recovery in this case, to the extent thereof, should have been permitted. This contention cannot be maintained. In case of a partial, simple failure of consideration, such a rule is applied; but when a part of the consideration of a note is illegal the whole is infected and the entire note vitiated. This rule has been often recognized by the courts of this state. Sumner v. Summers, 54 Mo. loc. cit. 346 ; Cheltenham Fire-Brick Company v. Cook, 44 Mo. 29 ; Sawyer v. Sanderson & Thomas, 113 Mo. App. 233, 88 S. W. 151; Bick v. Seal, 45 Mo. App. 475. The doctrine is universal. Mr. Daniel, in his work on Negotiable Instruments (5th Ed.) vol. 1, § 204 (3) says: "When the defense is founded on illegality of consideration, it is to be distinguished from a defense on the ground of a want or failure in the consideration by this peculiarity: That a partial illegality vitiates the bill or note in toto, while the partial want or failure of consideration only vitiates it pro tanto." See, also, 1 Parsons, Notes and Bills, § 217; 2 Chitty on Contracts (11th Ed.) p. 973 ; Bishop on Contracts (2d Ed.) § 487; First National Bank v. Miller, 235 Ill. loc. cit. 143, 85 N. E. 312; Arnett v. Wright, 18 Okl. loc. cit. 341, 342, 89 Pac. 1116; Oakes v. Merrifield, 93 Me. loc. cit. 301, 45 Atl. 31; McTighe v. McKee, 70 Ark. loc. cit. 294, 67 S. W. 754; O'Connor v. Kleiman, 143 Iowa, loc. cit. 435, 121 N. W. 1088; Wadsworth v. Dunncam, 117 Ala. 661, 23 South. 699.

Considerations arising out of...