Rowe v. Stevens

• Decision Date: 29 November 1913
• Citation: 137 P. 159,25 Idaho 237
• Parties: JAMES H. ROWE, JAMES K. HESLET, THOMAS TOMICH, CHARLES COPENHARVE and J. C. PHILLIPS, Plaintiffs, v. J. M. STEVENS, Judge of the District Court of Lemhi County, Idaho, and the DISTRICT COURT OF LEMHI COUNTY, Idaho, Defendants
• Court: Idaho Supreme Court

137 P. 159

25 Idaho 237

JAMES H. ROWE, JAMES K. HESLET, THOMAS TOMICH, CHARLES COPENHARVE and J. C. PHILLIPS, Plaintiffs, v. J. M. STEVENS, Judge of the District Court of Lemhi County, Idaho, and the DISTRICT COURT OF LEMHI COUNTY, Idaho, Defendants

Supreme Court of Idaho

November 29, 1913

WRIT OF REVIEW-FOREIGN CORPORATION-POWER TO DO BUSINESS IN STATE-POWER OF DIRECTORS WHO LIVE IN ANOTHER STATE WHERE THE CORPORATION IS ORGANIZED TO SUE AND DEFEND SUITS IN THE STATE WHERE THE FOREIGN CORPORATION IS PROHIBITED UNDER THE LAWS OF THE STATE-APPEARANCE OF CORPORATION NOT QUALIFIED UNDER THE LAWS OF THE STATE.

(Syllabus to Opinion of Justice STEWART.)

1. The constitution, art. 5, sec. 2, provides: "The judicial power of the state shall be vested in a court for the trial of impeachments, a supreme court, district courts, probate courts, courts of justices of the peace, and such other courts inferior to the supreme court as may be established by law for any incorporated city or town."

2. Sec 3830, Rev. Codes, prescribes the powers of the district courts: "The district court has original jurisdiction 1. In all cases both at law and in equity; 2. In all special proceedings; 3. In the issuance of writs of mandamus certiorari, prohibition, habeas corpus and all writs necessary to the exercise of its powers"

3. Sec 2787, Rev. Codes, has not been repealed or changed by the act of January 30, 1912. This section provides: "Unless other persons are appointed by the court, the directors or managers of the affairs of such corporation at the time of its dissolution are trustees of the creditors and stockholders, or members, of the corporation dissolved, and have full power to settle the affairs of the corporation." This section does not apply in this case but only applies as to the right to do business in the state.

4. Held, that there are no provisions in the statutes which limit the jurisdiction of the court in appointing trustees and receivers of a foreign corporation, which owns valuable property in the state and is making contracts and carrying on business, where such corporation becomes insolvent and has creditors and is unable to pay the debts of the corporation; and such corporation can be sued in the courts of the state, and the courts acquire jurisdiction of such corporation by reason of the fact that such corporation has appointed an agent and a principal place of business in the state, and the district court and the judge thereof has power to make such appointment. (Sec. 4329, Rev. Codes.)

5. Except so far as the control of the affairs of a domestic or foreign corporation is placed in the hands of the receiver, its officers and directors, except when enjoined by the court appointing the receiver, continue to exercise their functions as if no receiver had been appointed.

6. Held, in this case, that the application and showing filed show no beneficial interest of the petitioners which would justify this court in issuing a writ of review to annul the order made by Judge Stevens at chambers, appointing a trustee or receiver for the ranch company.

7. Held, that the present action, if brought by parties interested, might have been sufficient, because of the necessities and interests of the different parties, and that it would be more speedy and remedial than an appeal.

(Syllabus to Opinion of Chief Justice AILSHIE.)

1. Where a foreign corporation has complied with the laws of this state and engaged in business and acquired property in the state, and thereafter failed to pay the corporation license tax and forfeited the right to continue to do business in the state, and thereafter a mortgagee commenced an action against the corporation to foreclose the mortgage without knowing that such corporation had forfeited its right to do business in the state, and the directors of the corporation resident of the state where the corporation was organized, not knowing of the state law requiring the corporation tax, employed an attorney and directed him to defend in the action, and an answer was filed and the trial of the case was actually entered upon, and thereafter the attorney for the corporation withdrew on the ground that under the statute the corporation was not entitled to defend in the action, held, that it was not in excess of the jurisdiction of the trial court to thereafter appoint a trustee of the corporation to defend the action, and that the power to do so is conferred upon the court both by the provisions of sec. 11, chap. 6 of the Laws of the Extraordinary Session of 1912 and by the provisions of subdivisions 5 and 6 of sec. 4329 of the Rev. Codes.

2. A foreign corporation duly organized and existing under the laws of a foreign state, which has complied with the foreign corporation laws of this state so as to entitle it to do business, and thereafter forfeited such right by reason of its failure to pay the corporation tax, is no longer entitled to prosecute or defend actions in the state, but it is not in all respects in the same condition as a domestic corporation which has been dissolved or has expired by reason of the expiration of its charter.

3. Where the directors of a foreign corporation have entered an appearance on behalf of the corporation and filed an answer and entered upon the trial of the case and thereupon discovered that the corporation had forfeited its right to do business in the state, and is no longer entitled to defend in an action, it is the duty of such directors to intervene in such action and defend the same if they do not want a trustee appointed by the court for the purpose of defending such action.

4. In a suit in equity and in rem to foreclose a mortgage, an abatement of the action does not necessarily work a dismissal of the action or destroy the cause of action, but merely operates to suspend the further prosecution thereof until the cause which resulted in the abatement is removed, when a revival may be had and the action may be prosecuted to final judgment.

5. Where a foreign corporation is shown to have complied with the laws of this state and to have lawfully entered upon business in this state, one dealing with such corporation or desiring to prosecute an action against it may presume that it has paid the corporation tax and is still entitled to do business in this state, and he is not chargeable with the duty of making inquiry and examination to ascertain if it has kept in good standing so long as it has continued to do business.

An original petition and affidavit for writ of review. Writ quashed and action dismissed.

Writ quashed and the application dismissed. Costs awarded to defendants.

J. B. Roote and A. C. Cherry, for Plaintiffs.

The order of the lower court was based upon the supposed authority contained in sec. 11, chap. 6, of the Laws of Extra-ordinary Session of 1912. This act confers no authority upon the court to appoint a receiver or trustee. We must look elsewhere for that authority. (Sec. 2787, Rev. Codes; Havemeyer v. Superior Court, 84 Cal. 327-356, 18 Am. St. 192, 24 P. 121, 10 L. R. A. 627; Merges v. Altenbrand, 45 Mont. 355, 123 P. 21; Ferrell v. Evans, 25 Mont. 444, 65 P. 714.)

There was no action pending in which an order could be made. After Nov. 30, 1912, no suit could be brought against Shenon Ranch Co. (Crossman v. Vivienda Water Co., 150 Cal. 580, 89 P. 335; 5 Thompson on Corp., secs. 6721, 6723; Clark & Marshall on Corp., secs. 322-329; 10 Cyc. 1316; Pendleton v. Russell, 144 U.S. 640, 12 S.Ct. 743, 36 L.Ed. 574.)

Directors of corporations, at time of dissolution, or the termination of corporate existence, become ipso facto trustees of corporate property for the benefit of creditors and stockholders. (Sec. 2787, Rev. Codes; Havemeyer v. Superior Court, supra; Crossman v. Vivienda Water Co., supra; In re Balfour and Garrett, 14 Cal.App. 261, 111 P. 615.)

There is no appeal from the order complained of. Sec. 4807, Rev. Codes, specifies the cases in which appeals lie, and appeals cannot be taken in any cases except those mentioned. Nor is there any plain, speedy or other adequate remedy at law. ( Sweeny v. Mayhew, 6 Idaho 455, 56 P. 85; Cummings v. Steele, 6 Idaho 666, 59 P. 15.)

The plaintiffs are the persons "beneficially interested" and are entitled to this court's writ of review to annul the order made by Judge Stevens at chambers appointing a trustee or receiver for the Shenon Ranch Co. ( Adams v. Wood, 8 Cal. 306; Washington County Abstract Co. v. Stewart (opinion on rehearing), 9 Idaho 379, 74 P. 955; Manhard Hdw. Co. v. Rothschild, 121 Mich. 657, 80 N.W. 707; Daniels v. Grayson College, 20 Tex. Civ. App. 564, 50 S.W. 205; Peavy v. Goss, 90 Tex. 93, 73 S.W. 317; State v. Eves, 6 Idaho 148, 53 P. 543; Estate of Boland, 55 Cal. 312; Goldtree v. Thompson, 83 Cal. 422, 23 P. 383.) Except as otherwise provided by statute, the effect of the dissolution of a corporation is to terminate its existence as a legal entity, and render it incapable of suing or being sued as a corporate body or in its corporate name. It is dead, and can no more be proceeded against as an existing corporation than could a natural person after his death. There is no one who can appear or act for it, and all actions pending against it are abated, and any judgment attempted to be given against it is void. (5 Thompson on Corp., 2d ed., secs. 6550, 6553, 6564; Mumma v. Potomac etc. Co., 8 Pet. 281, 8 L.Ed. 945; First Nat. Bank v. Colby, 21 Wall. 609, 22 L.Ed. 687; Combes v. Keyes, 89 Wis. 267, 46 Am. St. 839, 62 N.W. 89, 27 L. R. A. 369; Oakland R. Co. v. Oakland etc. Co., 45 Cal. 365, 13 Am. Rep. 181; Nelson v. Hubbard, 96 Ala. 238, 11 So. 428, 17 L. R. A. 375-377; Marion Phosphate Co. v. Perry, 74 F. 425, 33 L. R. A. 252, 20 C. C. A. 490, 41 U.S.App. 14.)

E. W....