Salitan v. Carter, Ealey and Dinwiddie

• Decision Date: 01 February 1960
• Docket Number: No. 22902,22902
• Citation: 80 A.L.R.2d 455,332 S.W.2d 11
• Parties: Samuel SALITAN and Irving Jacobs, doing business under the style and firm name of Credit Industrial Company, Appellants, v. CARTER, EALEY AND DINWIDDIE, a Corporation, Respondent.
• Court: Missouri Court of Appeals

Page 11

332 S.W.2d 11

80 A.L.R.2d 455

Samuel SALITAN and Irving Jacobs, doing business under the style and firm name of Credit Industrial Company, Appellants, v. CARTER, EALEY AND DINWIDDIE, a Corporation, Respondent.

No. 22902.

Kansas City Court of Appeals, Missouri.

Feb. 1, 1960.

Harry T. Limerick, Jr., Columbia, for appellant.

Stinson, Mag. Thomson, McEvers & Fizzell, Kansas City James W. Starnes, Alvin D. Shapiro, Kansas City, Missouri Bankers Association, amicus curiae.

Thompson, Mitchell, Thompson & Douglas, Robert Neill, William G. Guerri, St. Louis, St. Louis Clearing House Association, amici curiae.

Edwin C. Orr, Orr & Sapp, Columbia, for respondent.

HUNTER, Judge.

This is an action by Samuel Salitan and Irving Jacobs, alleged general partners, doing business as Credit Industrial Company, plaintiff-appellant, to recover from defendant-respondent, Carter, Ealey and Dinwiddie, a corporation, on three negotiable trade acceptances in the face amount of $1,544, and interest.

The case was tried to a jury. It was defendant's contention, among others, in its pleading and throughout the trial that Sterling Materials Company, Inc., the payee of the instruments, was a New York corporation and was not legally qualified to do business in Missouri; that it was unlawfully doing business in Missouri at the time of the sale of its material to defendant for which these trade acceptances were given; that those trade acceptances grew out of its unlawful business activity in Missouri and were void and invalid.

At the close of all the evidence the trial court directed a verdict for the defendant and plaintiff has appealed from the resultant judgment.

At the trial plaintiff adduced evidence to the following effect: Plaintiff is a limited partnership under the laws of the State of New York and does business only in that state. It is engaged in the business of buying negotiable instruments and carrying on the general business of a finance company.

The instruments sued on were dated December 15, 1953, and the named payee was Sterling Materials Company, Inc., a New York corporation. They were signed by defendant on that date, and were due on April 15, 1954, May 15, 1954, and June 15, 1954, respectively. They were transferred to the plaintiff for value on December 17, 1953, and plaintiff gave notice to defendant advising of the purchase and that defendant was looked to for payment. ¹

Defendant adduced evidence to the effect that Sterling Materials Company, Inc., was engaged in the heat and air-conditioning business and that defendant did business with it on numerous occasions.

In support of its defense that the instruments were void defendant then endeavored to show (1) that Sterling Material Company had an office in St. Louis, Missouri, at the time its contract with defendant was signed, (2) that the Sterlings' representative in Columbia called their St. Louis office for the material to be shipped from their St. Louis office to Columbia and (3) that the Sterling Material Co., Inc., is not authorized to do business in the State of Missouri. However, objection to this line of questioning on the ground that plaintiff was holder in due course, and that it was immaterial that payee was doing business in Missouri although unauthorized to do so, was sustained, and defendant, outside the presence of the jury, made it as an offer of proof to which the objection was again sustained.

At the close of the case the trial court, without stating the reason, sustained defendant's motion for a directed verdict, entered judgment accordingly, and, later overruled plaintiff's motion for judgment notwithstanding or in the alternative for a new trial.

It is plaintiff's contention as stated in its brief that 'the only question before this court on this appeal is whether or not a holder in due course of a negotiable instrument, purchased from a foreign corporation not authorized to do business in the State of Missouri, can prevail.' Defendant agrees to the extent that this is the principal question. We, therefore, address ourselves to that question.

In 1891 our legislature enacted a provision concerning nonlicensed foreign corporations, the relevant portion of which read: '* * * no foreign corporation as above defined, which shall fail to comply with this act, can maintain any suit or action, either legal or equitable, in any of the courts of this state, upon any demand, whether arising out of contract or tort; * * *.' See, Laws of Mo.1891, Sec. 3, page 76; Mo.Rev.Statutes 1899, Sec. 1026.

Although this provision did not state specifically that all contracts made in this state by foreign corporations doing business in this state and not qualified to do business as required by the statutes of this state were void, nonetheless, the Missouri decisions construing this statutory section as it existed prior to 1931 interpreted it as making them 'absolutely void'. These early cases declared that as the statute established an absolute and unqualified bar to the maintenance of an action in our courts by such corporation illegally doing business in this state its contracts were void, and a transfer of them to third parties merely placed such third parties in the shoes of the transferor, i. e. the holder of a void contract. See, Booth v. Scott, 276 Mo. 1, 205 S.W. 633, 641; Flinn v. Gillen, 320 Mo. 1047 10 S.W.2d 923; Ehrhardt v. Robertson Brothers, 78 Mo.App. 404; German American Bank v. Smith, 202 Mo.App. 133, 208 S.W. 878; Tri-State Amusement Co. v. Forest Park Highlands Amusement Co., 192 Mo. 404, 423-424, 90 S.W. 1020, 4 L.R.A.,N.S., 688; United Shoe Machinery Co. v. Ramlose, 210 Mo. 631, 649, 109 S.W. 567. Accordingly, a subsequent compliance by the foreign corporation with the requirements of the chapter did not remove the void nature of the contract and no recovery could be obtained on it by a transferee. The rationale was that if the contract was void subsequent licensing or compliance with the law did not validate it, for a void act is no act and cannot be validated. Ehrhardt v. Robertson Brothers, supra; Keim v. Vette, 167 Mo. 389, 403, 67 S.W. 223, 227; Seneca Textile Corporation v. Missouri Flower & Feather Co., Mo.App., 119 S.W.2d 991.

In 1931 our legislature for the first time added to the above provision after the word 'tort' the following words: 'While (such) requirement has not been complied with.' (Italics ours.) Laws of Mo., 1931, Sec. 2, page 298, Mo.R.S., 1939, Section 5074. In Montgomery Ward & Co., Inc., v. Becker, 334 Mo. 789, 69 S.W.2d 674, the Supreme Court held this act unconstitutional upon grounds not pertinent to any issue presently before us. In 1937 the act with the mentioned constitutional objection removed was again passed by the legislature and contained the mentioned words of the 1931 act 'while such requirement has not been complied with.' Laws of Mo., 1937, page 204; Mo.R.S., 1939, Section 5074.

In 1943 our legislature adopted a new corporation code. In it the quoted words were transferred and included in Section 109, Laws of Mo., 1943, page 469, which became Section 351.635, R.S.Mo.1949, V.A.M.S. We quote therefrom:

'* * * No foreign corporation, failing to comply with this act, can maintain any suit or action, either legal or equitable, in any of the courts of this state, upon any demand, whether arising out of the contract or tort, while the requirements of this Act have not been complied with.' (Emphasis ours.)

This is the first case requiring an interpretation of the act as amended by the italicized language to reach an appellate court of this state. It necessarily merits thorough consideration.

It is the contention of defendant that an instrument, such as those before us, where given to a foreign corporation doing business in Missouri without qualifying is, under the statute as amended, still a void instrument, and thus, is not enforceable even by a bona fide purchaser for value.

Thus, our first question is whether under new Section 351.635 a contract or trade acceptance is void or whether it is merely unenforceable in Missouri courts until the foreign corporation complies with the requirements of the mentioned chapter.

We must, of course, construe the statute as it presently reads and not as it formerly read. Missouri cases construing the repealed section are no longer controlling on the question before us. Our purpose now must be to ascertain the legislative intent as expressed in the amended statute and in so doing we must take particular notice that the legislature has added eleven new words to the former section. These eleven words are plain and clear. Their purpose is unmistakable. ²

It is our opinion that the quoted language, carried forward to and contained in the 1943 amendment, changed the prior law of Missouri to the end that contracts of nonlicensed foreign corporations are no longer 'absolutely void' but rather under Section 351.635 are merely unenforceable until such time as the foreign corporation complies with the requirement of the mentioned chapter and that thereafter such contracts may be enforced just as may any other contract of a foreign corporation made at a time when such corporation was in full compliance with the requirements of the chapter.

In the 1943 amendment there is no absolute prohibition of the enforcement of the contract by action in any Missouri court. Rather, there is a prohibition of such enforcement only 'while' the chapter is not complied with. To our minds this plainly means that the prohibition exists and applies only so long as the statute has not been complied with and that thereafter the bar on the maintenance of a suit or action is removed. The word 'while' as used in the amended language connotes a change of right upon the change of conditions regarding compliance. As used it means that if after failing to comply with this chapter the requirements of this chapter have been complied with, then the foreign corporation 'can maintain any...