Sherwood v. Alvis

• Decision Date: 09 December 1887
• Parties: SHERWOOD v. ALVIS.
• Court: Alabama Supreme Court

3 So. 307

83 Ala. 115

SHERWOOD v. ALVIS.

Supreme Court of Alabama

December 9, 1887

Appeal from circuit court, Lee county; J. M. CARMICHAEL, Judge.

Statutory real action in nature of ejectment. On the thirteenth day of March, 1882, the defendant, John P. Alvis, executed a mortgage upon the lands, herein sued for, to the New England Mortgage Security Company, a corporation incorporated under and by the laws of the state of Connecticut, for the purpose of securing the payment of a note made by said Alvis to the said company, and described in the said mortgage. The mortgage gave the mortgagee the right or power to sell the said lands therein conveyed, in default of payment of the interest as it matured on said debt. The defendant failed to pay one of the installments of interest when it fell due. Thereupon the mortgagee proceeded to expose the land for sale, which was sold and conveyed to the plaintiff, J. K. O Sherwood, who bid in the property at said sale, and who now sues to recover possession of the lands so purchased. The defendant pleaded the general issue, and pleaded specially in substance, that the plaintiff could not claim under that sale; for, as the New England Mortgage Security Company was a foreign corporation, and had no known place of business, nor any authorized agent or agents within this state, as required by the statute, the contract was void, and the mortgage from Alvis to said company was void and of no effect. The plaintiff interposed demurrers to each of these pleas on the ground that the defendant was estopped from setting up such a plea. The court overruled each of the demurrers. Plaintiff appealed. There were questions of evidence presented by the record, but the court does not decide them.

O Kyle and Thorington & Smith, for appellant.

J M. Chilton, for appellee.

STONE C.J.

The contract out of which the present litigation grew was made in Alabama. The New England Mortgage Security company, a corporation organized under the laws of Connecticut, lent money to Alvis, and received from him a mortgage on real estate lying in Alabama, to secure the repayment of the loan. The mortgage contained a power of sale on default. Under authority alleged to have been conferred by the corporation, it is claimed that an agent advertised and sold the land according to the requirements of the mortgage; that Sherwood became the purchaser, and received a conveyance in the name of the corporation, executed by the said agent, styling himself "Attorney in Fact." Sherwood thereupon instituted this statutory real action to recover possession of said lands, together with damages for the detention. It is not shown that Sherwood is an outsider, purchasing in his own right, nor is there in the record any evidence tending to show the price at which he purchased, nor whether he paid the purchase money. Plaintiff did not succeed in getting his title before the jury.

The main defense arose under certain special pleas, which averred that the "New England Mortgage Security Company was a foreign corporation; that the loan was made and the mortgage executed in Alabama; and that at the time the contract was made the said corporation had no known place of business in Alabama, and no agent or agents therein." A demurrer to these pleas was overruled, and this presents the first question for our consideration. The constitutional prohibition relied on is in the following language: "No foreign corporation shall do any business in this state without having at least one known place of business, and an authorized agent or agents therein." Const. 1875, art. 14, § 4.

We have held, in a long line of decisions, that a contract made by or with a corporation, which is outside of the pale of its corporate authority, confers no rights; and that the making of such contract does not estop the party promising from invoking the defense of ultra vires. Smith v. Insurance Co., 4 Ala. 558; City Council v. Plank-Road Co., 31 Ala. 76; Waddill v. Railroad Co., 35 Ala. 323; Grand Lodge v. Waddill, 36 Ala. 313; Chambers v. Falkner, 65 Ala. 448; Wilks v. Railroad Co., 79 Ala. 180; Machine Co. v. Wilkinson, Id. 312. The contract we are considering, however, is not without the scope of the New England Mortgage Security Company's corporate powers. It is directly within the line of business for which that corporation was created. On the other hand, following a well-established, uniform rule, we have declared that if a person contract with a corporation in a matter within its corporate power, the mere making of such contract estops the promisor from disputing the corporation's regular and complete organization. Lehman v. Warner, 61 Ala. 455. The distinction is between an entire absence of authority in the organic law itself, and a failure to comply with some prerequisite, which the law has made a condition precedent to the exercise of corporate functions. In the one case, there is a want of power to act; in the other, only an abuse of power conferred.

The case of Smith v. Sheeley, 12 Wall 358, like the present suit, was an action for the recovery of a lot of land. One of the main questions considered and decided was whether the Nehama Valley Bank could be the lawful grantee of the lot which was the subject of the suit. While Nebraska was only a territory, its legislature had incorporated the bank, but the act of incorporation was never approved or confirmed by congress. By act approved July 1, 1836, congress enacted "that no act of the territorial legisature of any of the territories of the United States, incorporating any bank or any institution with banking powers or privileges, shall have any force or effect whatever until approved and confirmed by congress." This act of congress was in force when the territorial legislature incorporated the Nehama Valley Bank. The court, Mr. Justice DAVIS delivering it unanimous opinion, said: "It is insisted, however, as an additional ground of objection to this deed, that the bank was not a competent grantee to receive title. It is not denied that the bank was duly organized in pursuance of the provision of an act of the legislature of the territory of Nebraska,...