Shaw Supply Co. v. Morgan

• Decision Date: 27 November 1929
• Docket Number: 5241
• Citation: 282 P. 492,48 Idaho 412
• Parties: SHAW SUPPLY COMPANY, INC., a Corporation, Respondent, v. J. R. MORGAN, Appellant
• Court: Idaho Supreme Court

282 P. 492

48 Idaho 412

SHAW SUPPLY COMPANY, INC., a Corporation, Respondent, v. J. R. MORGAN, Appellant

No. 5241

Supreme Court of Idaho

November 27, 1929

CORPORATIONS-CONTRACTS WITH-DENIAL OF CORPORATE CAPACITY-ESTOPPEL-FOREIGN CORPORATIONS-NONCOMPLIANCE WITH STATE LAW-HOW PLEADED-ENTIRE AND SEVERABLE CONTRACTS-CONSTRUCTION.

1. One dealing with an association in such a way as to recognize and in effect admit its legal existence as a corporate body is estopped to deny its corporate existence, in any action arising out of or involving such contract.

2. Failure of foreign corporation to plead and prove compliance with provisions of C. S., sec. 4772, as to filing its articles before maintaining any action on contract, must be raised either by special demurrer or answer; otherwise, the objection to noncompliance is waived.

3. Mere denial of corporate existence of plaintiff in action on contract did not raise a question of foreign corporation's noncompliance with provisions of C. S sec. 4772, as to filing articles before maintaining any action on contract.

4. Portion of contract relating to compromise of pending action in consideration of the stated amounts was complete in itself and sufficient to support action thereon.

5. Whether contract is severable or indivisible must be determined by court from subject matter of the agreement, and language used therein controls.

6. Contract providing for compromise of pending action in consideration of stated sum, and providing for final settlement of controversy over certain property, the whereabouts of which was unknown, was severable as respected right to maintain action for recovery thereon.

7. In action on contract involving only portion thereof compromising pending action in consideration of the payment of a stated sum, evidence relative to misrepresentations concerning other severable portion of contract was inadmissible.

8. Misrepresentation in securing compromise of pending action that party had been to certain expense in attending and in bringing witness to attend trial was not a sufficiently material representation because of which contract could be rescinded.

APPEAL from the District Court of the Eleventh Judicial District for Twin Falls County. Hon. William A. Babcock, Judge.

Action on contract. Judgment for plaintiff. Affirmed.

Judgment affirmed. Costs to respondent.

Turner K. Hackman, for Appellant.

The court erred in not requiring plaintiff to prove corporate existence of plaintiff.

"In Williams v. Bank of Michigan, 7 Wend. (N. Y.) 539, Chancellor Walworth said: 'A contract made with the company by that name is neither an admission or any evidence whatever that it is entitled to sue by that name as a corporation aggregate.' And in Welland Canal Co. v. Hathaway, 8 Wend. (N. Y.) 480, 24 Am. Dec. 51, Judge Nelson said When a corporation sues as such 'if they have not the powers and privileges assumed on their part in their dealings with him, it is their own fault, and not his. Whether they had these powers must have been known to themselves; not to the defendant, and no act of his could legally add to or detract from them. Why, then, should he be estopped from denying their corporate capacity, or they be excused from establishing it by legal evidence, when they are endeavoring to enforce their rights in a manner, and before a tribunal, which can entertain their suit only upon the proof or assumption that they are a corporate body, duly constituted by competent authority.'" (Maryland Tube & Iron Works v. West End Improvement Co., 87 Md. 207, 39 A. 620, 39 L. R. A. 810, 814.)

Don J. Henry, for Respondent.

This court has held many times that where a party contracts with a corporation he is thereafter estopped to deny that it was a corporation.

In Ferguson Fruit & Land Co. v. Goodding, 44 Idaho 76, 258 P. 557, this court says:

"We are of the opinion that respondents having dealt with appellant as a corporation, in executing the mortgage, are now estopped, in an action to foreclose it, from denying that they dealt with appellant as a corporation or to deny it was a corporation when the mortgage was entered into. 1 Fletcher, Cyclopedia on Corporations, secs. 330-334, pp. 679-696; Toledo Computing Scale Co. v. Young, 16 Idaho 187, 101 P. 257."

And later in New Idea Spreader Co. v. Satterfield, 45 Idaho 753, 265 P. 664, this court has again said:

"Where guarantors in a written agreement to hold themselves responsible for payment of merchandise sold to Farmers Equity dealt with plaintiff as a corporation, they could not deny the plaintiff's corporate capacity."

VARIAN, J. Budge, C. J., and Givens and Wm. E. Lee, JJ., concur.

OPINION

VARIAN, J.

Plaintiff brought this action upon a contract entered into compromising a certain action then pending between the parties in Twin Falls county. Defendant answered, denying the corporate existence of plaintiff, admitting the execution of the contract, and prayed rescission thereof upon the ground of fraud, material misrepresentations, etc. At the close of the testimony, defendant renewed a motion for nonsuit which was denied, the court granting plaintiff's motion for an instructed verdict.

The first error assigned is that the court erred in not requiring plaintiff to prove its corporate existence. The contract sued on refers to plaintiff as "Shaw Supply Company, Inc., a corporation, by H. G. Shaw, its president, party of the first part," and is signed "Shaw Supply Co., Inc., Henry G. Shaw, Pres." Having admitted the execution of the contract, appellant brings himself within the rule that one having dealt with an association in such a way as to recognize and in effect admit its legal existence as a corporate body is estopped to deny its corporate existence in any action arising out of or involving such contract. (14 C. J., p. 227; Toledo Computing Scale Co. v. Young, 16 Idaho 187, 101 P. 257; New Idea Spreader Co. v. Satterfield, 45 Idaho 753, 265 P. 664.)

The complaint shows that respondent is a foreign corporation, and therefore required to plead and prove compliance with the provisions of C. S., sec. 4772, as to filing its articles, etc., before maintaining any action upon any contract made by it. (C. S., sec. 4775.) In order to take advantage of the failure of plaintiff to comply with the statute, defendant must raise the question either by special demurrer or answer; otherwise, the objection to noncompliance is waived. (Valley Lumber & Mfg. Co. v. Driessel, 13 Idaho 662, 13 Ann. Cas. 63, 93 P. 765, 15 L. R. A., N. S., 299; Valley Lumber & Mfg. Co. v. Nickerson, 13 Idaho 682, 93 P. 24; Marshall Field & Co. v. Houghton, 35 Idaho 653, 208 P. 851; Farmers' & Mechanics' Bank v. Gallagher Inv. Co., 43 Idaho 496, 253 P. 383.) Merely denying the corporate existence of respondent did not raise the question of non-compliance, and having failed to demur specially or set up want of capacity to sue by answer, appellant waived the right to object. (Marshall Field & Co. v. Houghton, supra.)

Error is assigned in that the court erred in holding as a matter of law that the contract involved was severable. The contract, dated November 30, 1926, recites that plaintiff is a corporation; that it had instituted an action in the district court of the eleventh judicial district for Twin Falls county; and that the partes are desirous of adjusting all matters "in controversy in said action"; that in consideration of one dollar by each party to the other in hand paid, it is agreed that defendant should pay plaintiff $ 300 on or before January 20, 1927, and the further sum of $ 500 on November 1, 1927, with interest at the rate of ten per cent per annum from said last-mentioned date. The contract concludes with a provision that plaintiff will dismiss the present action pending, as above mentioned. The portion of the contract just referred to is complete in itself, and is the part sued on in this action.

The contract also recites that there is a controversy existing between the parties over the...