Stensvad v. Ottman

• Citation: 208 P.2d 507,123 Mont. 158
• Decision Date: 10 May 1949
• Docket Number: 8884.
• Parties: STENSVAD v. OTTMAN et al.
• Court: United States State Supreme Court of Montana

208 P.2d 507

123 Mont. 158

STENSVAD v. OTTMAN et al.

No. 8884.

Supreme Court of Montana

May 10, 1949

Appeal from District Court, Fourteenth Judicial District Musselshell County; F. V. Watts, Judge.

Action by H. A. Stensvad against Frank C. Ottman, as county treasurer and others for a writ of mandate compelling the county treasurer to execute tax deed to certain land and to set aside the redemption certificate issued to the defendant Montana Valley Land Company. From a judgment denying the writ and dismissing the action, the plaintiff appeals.

Judgment affirmed.

Ralph J. Anderson, Helena, for appellant.

G. J Jeffries, Roundup, and Albert C. Angstman, of Helena, argued orally.

J. M Watts, Roundup, Pope & Smith, Missoula, for respondents.

Russell E. Smith, of Missoula, argued orally.

METCALF, Justice.

The Montana Valley Land Company was incorporated under the laws of Delaware July 17, 1924. On July 26, 1924, it was authorized to do business in the state of Montana. On April 1, 1932, the charter of the Montana Valley Land Company was proclaimed void in Delaware under the provisions of section 105, Rev. Codes of Delaware, 1935, for failure for two consecutive years to pay its Delaware taxes. From 1934 to 1944 the Montana Valley Land Company made no return of its annual net income to the state board of equalization as required by section 2299, R. C. M. 1935, and failed to file the annual reports required by section 145.2, R. C. M. 1935 between July 23, 1929 and June 28, 1945.

On July 21, 1932, certain real estate in Musselshell county, of which the Montana Valley Land Company was the record owner, was sold at a tax sale to Musselshell county. On March 27, 1944, the plaintiff and appellant paid the delinquent taxes due on the land and received from Musselshell county an assignment of its tax sale certificate. On August 8, 1944, the plaintiff published his notice of intention to apply for a tax deed on October 14, 1944, and served a copy of the notice on the Montana Valley Land Company. On October 13, 1944, the Montana Valley Land Company paid to the county treasurer of Musselshell county an amount of money sufficient to redeem the land from the tax sale and a redemption certificate was issued by the county treasurer of Musselshell county. Defendant, Frank C. Ottman, county treasurer of Musselshell county, informed the plaintiff of the redemption of the property and tendered the redemption money to the plaintiff but it was refused.

The plaintiff petitioned for a writ of mandate compelling the county treasurer of Musselshell county to execute a tax deed to the land of the Montana Valley Land Company and to set aside the redemption certificate issued to the defendant, Montana Valley Land Company. The petition for the writ was denied and judgment dismissing the action was entered. The plaintiff appealed from the judgment.

The Montana Valley Land Company had also failed to pay its taxes for two successive years in Delaware, the state of its domicile. The Delaware law (sec. 105, Rev.Codes, Delaware, 1935) declares that after a corporation's failure to pay franchise taxes for two consecutive years 'the charter of such corporation shall be void, and all powers conferred by law upon such corporation are declared inoperative * * *.' The Delaware law also provides for the revival of a corporation whose charter has been declared void upon the performance of certain acts. (Sec. 2106, Rev.Codes, Delaware, 1935.) The Montana Valley Land Company on May 12, 1945, obtained a certificate of revival. A certified copy of that certificate together with a copy of the Articles of Incorporation, consent to the laws of Montana, designation of agent, etc., were filed in the office of the secretary of state of Montana in accordance with section 6651, R. C. M. 1935. At the time the corporation redeemed the real property here involved its powers had been declared inoperative and more than 12 years had elapsed since the proclamation of forfeiture had been made in Delaware.

Section 2074, Rev.Codes of Delaware, 1935, provides: 'All corporations, whether they expire by their own limitation, or are otherwise dissolved, shall nevertheless be continued for the term of three years from such expiration or dissolution bodies corporate for the purpose of prosecuting and defending suits by or against them, and of enabling them gradually to settle and close their business, to dispose of and convey their property, and to divide their capital stock but not for the purpose of continuing the business for which said corporation shall have been established; * * *.'

The question is whether the Montana Valley Land Company more than three years after the proclamation of forfeiture of its charter and before its revival had sufficient life to redeem from a tax sale.

A determination of this question depends upon the law of the domiciliary state of the corporation. Restatement, Conflict of Laws, sec. 158, p. 228; Fidelity Metals Corp. v. Risley, 77 Cal.App.2d 377, 175 P.2d 592; Treemond Co. v. Schering Corp., 3 Cir., 122 F.2d 702; Stentor Electric Mfg. Co. v. Klaxon Co., D.C., 23 F.Supp. 351; Fletcher Cyc. of Corporations, Vol. 17, sec. 8580, p. 779.

In Harned v. Beacon Hill Real Estate Co., 9 Del.Ch. 411, 84 A. 229, 234, the Delaware corporation's charter had been proclaimed void in 1906 and never reinstated. An action was commenced in 1911 for the appointment of a receiver in order to sell a farm belonging to the corporation for the benefit of the stockholders. Even though more than three years had elapsed the court permitted the corporation to be named as defendant in the suit. The Delaware Supreme Court said: 'Even though the corporation named as defendant in the present case had been dissolved, and three years had passed since the dissolution, it nevertheless was sufficiently alive and existent at the time the action below was instituted, to be the owner of the real estate sought to be sold.' (Emphasis supplied.) The court then contrasted corporations created under the laws of Delaware with incorporated towns in England. The latter after the expiration of their charter were said to be 'not dormant, disabled, or incapable of action merely, but absolutely dissolved, civilly dead, without life or being, and altogether at an end.' The Delaware corporation was not defunct, 'its active powers, but not its being, are gone. The one is dead, the other is dormant.'

'And any property which may not have been disposed of by the company before dissolution, or during the succeeding three years, is not lost, but remains the property of the corporation, so that it may be sold and disposed of for the benefit of its creditors and stockholders.' Harned v. Beacon Hill Real Estate Co., supra, was cited and approved on this point in Townsend v. Delaware Glue Co., 12 Del.Ch. 25, 103 A. 576.

In Watts v. Liberty Royalties Corporation, 106 F.2d 941, 944, the Circuit Court of Appeals for the Tenth Circuit analyzed the foregoing Delaware statute and concluded that because of the provisions for reinstatement in the Delaware corporation law, the corporate powers are only suspended during the corporation's dormancy. 'So long as a corporation may be reinstated by the payment of delinquent fees and have validated all of its acts that were done while its powers were suspended, the corporation is not dead. Its powers are only in suspension and reinstatement of its charter restores it to all of its powers and validates all of its acts, including the acts done while its charter was suspended.'

In Wax v. Riverview Cemetery Co., 2 Terry 424, 41 Del. 424, 24 A.2d 431, a Delaware court took cognizance of the Circuit Court's decision in Watts v. Liberty Royalties Corporation, supra, and quoted with approval the first sentence of the above excerpt we have quoted. See also Tradesmen's Nat. Bank & Trust Co. v. Johnson, D.C.Md., 54 F.2d 367.

Therefore, under the statutes and decisions of Delaware and the federal decisions interpreting the Delaware statutes, a corporation whose charter has been declared void for nonpayment of franchise tax is not completely dead but has sufficient life to be a repository of title to real estate even though a period of more than three years has elapsed.

For like decisions from other states under statutes similar to Delaware's see Watts v. Liberty Royalties Corporation, supra, Hibernia Securities Co. v. Morey,

23 Cal.App.2d 482, 73 P.2d 939, which distinguish between statutes declaring corporations dead for all purposes and those providing for reinstatement and revival.

Since the corporation was not dead but only suspended and had sufficient life to be a repository of title, it follows that the corporation could protect that title by the payment of taxes. The Colorado Supreme Court adopted this reasoning in Ruth v. Devany, 84 Colo. 476, 271 P. 623, 624. In that case a corporation owned certain mining property. The property was sold to the county for delinquent taxes in 1921. The following year the corporation was declared defunct and inoperative for failure to pay corporation license tax and make the required reports. The Colorado statute permitted reinstatement after payment of all delinquent taxes and fees and an additional fee of $5.00. The county assigned the tax certificate to the plaintiff in June 1925. In September 1925 the directors of the corporation redeemed the property from tax sale. The redemption certificate named the corporation as the one redeeming. The question was whether the corporation was entitled to redeem. The Colorado court said: '* * * the right of the Seaton Mines Corporation to transact business was suspended; but neither the payment of taxes nor the payment of redemption money comes within the prohibition of the statute. Payment...