State v. Company

• Decision Date: 09 April 1904
• Docket Number: 13,348
• Parties: THE STATE OF KANSAS v. THE AMERICAN BOOK COMPANY et al
• Court: Kansas Supreme Court

76 P. 411

69 Kan. 1

THE STATE OF KANSAS v. THE AMERICAN BOOK COMPANY et al

13,348

Supreme Court of Kansas

April 9, 1904

Decided January, 1904.

Error from Shawnee district court; Z. T. HAZEN, judge.

Judgment affirmed.

SYLLABUS

SYLLABUS BY THE COURT.

1. FOREIGN CORPORATIONS -- Contracts Made Before Compliance with the Statute. Contracts made with a foreign corporation before it has obtained permission under the provisions of chapter 10, Laws of 1898, and chapter 125, Laws of 1901 (Gen. Stat. 1901, § 1259, et seq.), to do business in this state are not for that reason invalid or subject to cancelation at the suit of one of the contracting parties.

2. FOREIGN CORPORATIONS -- Regulation by the State, and Not by a Citizen. The regulation of foreign corporations under the statutes referred to devolves upon the state, and a private individual is not allowed to interfere except in the single instance of a failure by the corporation to file its annual statement, and then only to the extent of abating a suit against him until the required statement shall have been filed.

3. FOREIGN CORPORATIONS -- When Injunction Will Not Lie. After a foreign corporation has complied with the law and has received permission to do business in the state it cannot be enjoined at the suit of the state from performing contracts made before such permission was obtained.

4. FOREIGN CORPORATIONS -- Negotiation with State School-text-book Commission Distinguished. The negotiation of a foreign corporation with the state school-text-book commission, resulting in a contract and bond to supply the public schools with text-books, does not constitute the doing of business within the state by such corporation, within the meaning of the statutes cited in the first paragraph of this syllabus.

Otis E. Hungate, G. C. Clemens, and Quinton & Quinton, for The State.

Rossington, Smith & Histed, and H. J. Bone and Hite & Nichols, as amici curiae, for defendants in error.

BURCH, J. All the Justices concurring.

OPINION

BURCH, J.:

In the year 1897 the legislature passed an act relating to text-books for use in the public schools of this state, providing for state uniformity and maximum charges for such books, and creating a commission to select them. This act was amended and supplemented at the sessions of 1898 and 1901. The commission thus created consists of eight members, and to enable it to select and adopt uniform series of school text-books for use in the public schools it is authorized and empowered to advertise for receive, open, pass upon, and accept bids, and upon such acceptance to enter into definite and binding contracts with bidders for the furnishing of such text-books.

In the year 1898 the legislature passed an act, which it amended in certain particulars in 1901, providing methods whereby corporations organized under the laws of other jurisdictions seeking to do business in this state may be permitted to do so. The procedure for the purpose of obtaining such permission is practically the same as that for obtaining a domestic charter. The foreign corporation desiring it must file an application therefor, setting forth the following information:

"1st. A certified copy of its charter or articles of incorporation. 2d. The place where its principal office or place of business is to be located. 3d. The full nature and character of the business in which it proposes to engage. 4th. The names and addresses of the officers, trustees or directors and stockholders of the corporation. 5th. A detailed statement of the assets and liabilities of said corporation, and such other information as the board may require in order to determine the solvency of the corporation." (Laws 1898, ch. 10, § 2; Gen. Stat. 1901, § 1260.)

The application must be accompanied by a fee, and, as a condition precedent to the granting of the application, the corporation must file its irrevocable written consent submitting itself to the jurisdiction of the courts of this state. A charter board passes upon the application, and if it be granted the corporation is required to pay certain additional fees and to file with the secretary of state a certified copy of its charter. In passing upon the application the charter board is required to make special inquiry with reference to the solvency of the corporation. All corporations doing business in the state are required to file annual statements disclosing varied information regarding their composition, organization, and business. The failure to file such statement within a given period works a forfeiture of the right to do business, which the charter board may ascertain, declare, and publish.

The statute (Laws 1898, ch. 10, § 12; Gen. Stat. 1901, § 1283) further provides:

"No action shall be maintained or recovery had in any of the courts of this state by any corporation doing business in this state without first obtaining the certificate of the secretary of state that the statements provided for in this section have been properly made."

Foreign corporations admitted to do business in this state are made subject generally to the same judicial control, restrictions and penalties as those organized under the laws of this state.

Prior to the 31st day of May, 1902, the American Book Company, a corporation of the state of New Jersey, complied with the corporation law described in all particulars except those relating to the payment of fees. The state authorities at that time interpreted the law in a manner exempting foreign corporations already doing business in the state from the payment of the prescribed fees, and the book company fell within that category. It filed its annual report and received a certificate of the secretary of state to that effect.

On May 31, 1902, the book company entered into three contracts with the state school-text-book commission to supply the schools of the state with certain text-books, and gave bond for the performance of the obligation it assumed, as the text-book law required. These contracts were made in consummation of accepted bids submitted to the commission on May 5, 1902, pursuant to advertisement therefor. On June 7, 1902, an action of quo warranto was commenced in this court against the book company, which on July 21, 1902, resulted in a judgment ousting it from doing business in the state on account of failure to comply fully with the statutes governing its admission to the state. (The State v. Book Co., 65 Kan. 847, 69 P. 563.) On August 5, 1902, the book company complied with the law in all respects, and was duly admitted to do business in the state.

On August 18, 1902, this action was brought in the district court of Shawnee county in the name of the state for the cancelation of the contracts the book company had made. At that time the book company had partially performed those contracts, and was proceeding to a full discharge of its obligations under them. On September 2, 1902, a temporary injunction against further performance of the contracts was refused, and the state, by this proceeding in error, seeks a reversal of that order.

To secure an injunction the state relied upon the failure of the book company to comply with the law before entering into the contracts assailed and the judgment of ouster. The decision in the case of The State v. Book Co., supra, did nothing more than determine that for a non-compliance with the law relating to its admission into the state the book company should be ousted from its claimed right to do business in the state until it should have complied with the requirements of that law. The naked question, therefore, remains -- Are the contracts referred to now subject to cancelation because made before the book company had been admitted to do business in this state?

The question of capacity to contract is not involved on either side of the case. The book company and the text-book commission each possessed every qualification necessary to bind by contract. By the laws of their creation and organization they were each endowed with this faculty. The case is not like one in which the ability to invest an agreement with any engaging quality is altogether withheld, nor is it like one in which the limits of some agency have been transgressed. There is here no lack of capability, no defect of power, and no deficiency of authority. The only question is whether power may be effectually displayed as against the provisions of the corporation law.

The statute describes itself as an act "providing for the regulation of foreign corporations and the method by which they may be permitted to do business in this state," and it purports to cover that entire field. It prevents the exercise of corporate franchises in this state with respect to matters for which citizens of this state cannot incorporate, prevents concerns which are morally and financially irresponsible and untrustworthy from freely invading the state and imposing upon its citizens, and subjects foreign companies to the jurisdiction of local authorities. Official supervision of these affairs is committed to a state board. Such affairs, however, relate to nothing but the character and condition of the corporation itself. They are all enumerated in the statements of the application for admission and in the annual reports. There is no intimation of any purpose whatever to interfere in the relations between the corporation and the citizen. Business between them is as unregulated as it is between natural persons. Nor does the statute in terms prohibit foreign corporations from doing business in this state, or avow any purpose to deny the people the benefit of commercial intercourse with them. Indeed, under its title, the statute could not extend beyond regulation. It prescribes no penalty whatever...