Tarr v. Western Loan & Savings Co.

• Decision Date: 05 February 1909
• Citation: 15 Idaho 741,99 P. 1049
• Parties: J. E. TARR and ANNA A. TARR, Appellants, v. WESTERN LOAN AND SAVINGS COMPANY, a Corporation, Respondent
• Court: Idaho Supreme Court

99 P. 1049

15 Idaho 741

J. E. TARR and ANNA A. TARR, Appellants, v. WESTERN LOAN AND SAVINGS COMPANY, a Corporation, Respondent

Supreme Court of Idaho

February 5, 1909

FOREIGN CORPORATIONS-COMPLIANCE WITH LAW BEFORE DOING BUSINESS IN THE STATE-ESTOPPEL TO PLEAD NONCOMPLIANCE-VALIDITY OF STATUTE IMPOSING LIABILITIES ON FOREIGN CORPORATIONS.

1. Where a foreign corporation at the time it entered into a contract had filed its designation of agent and principal place of business as required by statute, and had filed a copy of its articles of incorporation with the secretary of state of the state of Idaho, duly certified to by the secretary of state of the territory where the corporation was organized, but such copy was not certified to by the county recorder of any county of this state, and no certified copy of its articles of incorporation had been filed with the recorder of any county of this state; held, that the corporation had failed to substantially comply with the requirements of the statute, and that it therefore cannot maintain an action to enforce any contract entered into by it while thus in default.

2. The statute of this state requiring foreign corporations to do and perform certain acts before commencing to do business in this state, is mandatory, and must receive a substantial compliance before such corporations will be allowed to maintain their actions in this state to enforce contracts entered into prior to their compliance with the law.

3. The fact that sec. 2653, Rev. Stat. of 1887, as amended by act of March 10, 1903, imposed additional requirements on foreign corporations that were already doing business in this state under the provisions of the statute before amendment, is not violative of any contract right, for the reason that substantially the same duties are imposed on like domestic corporations, and there is therefore no discrimination against foreign corporations that had previously complied with the statute and placed themselves on an equal footing with like domestic corporations.

4. The fact that a party to a contract with a noncomplying foreign corporation has made numerous payments of interest installments before being sued, and without objection on the ground of the noncompliance of the corporation, does not constitute a waiver of the right to plead the corporation's failure to comply with the statute and constitution of this state in order to entitle it to do business within the state.

5. In a case where a person has secured a loan from a noncomplying foreign corporation and has failed to pay the same as provided for by his contract, even though the corporation has failed to qualify as provided by law in order to entitle it to do business in this state, the borrower will not be heard in a court of equity to admit the contract and the indebtedness and at the same time prosecute his action to cancel the mortgage given to secure the indebtedness, simply because the corporation failed to comply with the statute in qualifying to do business.

(Syllabus by the court.)

APPEAL from the District Court of the Sixth Judicial District for the County of Bingham. Hon. J. M. Stevens, Judge.

Action by the plaintiffs to have a mortgage declared void and canceled. Cross-complaint by defendant to foreclose the mortgage and answer by plaintiffs to the cross-complaint. Judgment for defendant and plaintiffs appeal. Reversed.

Judgment reversed, with direction. Costs awarded in favor of appellants.

Hansbrough & Gagon, for Appellants.

Where a statute of a state provides that a foreign corporation shall not do business within the state except upon compliance with certain conditions, and such a corporation does business in the state in violation of the statute, and, through the business so done, a contract accrues to it which would otherwise be enforceable in the courts of the state, the corporation cannot, because of the statutory prohibition maintain an action upon such contract in the courts of the state. (Katz v. Herrick, 12 Idaho 1, 86 P. 873; 19 Cyc. 1289, 1290; Hanchey v. Southern Home Bldg Assn., 140 Ala. 245, 37 So. 272; Central Mfg. Co. v Briggs, 106 Ill.App. 417; Cassaday v. American Ins. Co., 72 Ind. 95; Seamans v. Temple Co., 105 Mich. 400, 55 Am. St. Rep. 457, 63 N.W. 408, 28 L. R. A. 430; Sherman Nursery Co. v. Aughenbaugh, 93 Minn. 201, 100 N.W. 1101; Ehrhardt v. Robertson, 78 Mo.App. 404; Commonwealth Mut. F. Ins. Co. v. Hayden, 60 Neb. 636, 83 Am. St. Rep. 545, 83 N.W. 922; Haverill Ins. Co. v. Prescott, 2 N.H. 547, 80 Am. Dec. 123; South Amboy T. C. Co. v. Poersehke, 90 N.Y.S. 333, 45 Misc. 358; Commonwealth Mut. F. Ins. Co. v. Edwards, 124 N.C. 116, 32 S.E. 404; Bank of British Columbia v. Page, 6 Ore. 431; Wolf v. Lancaster, 70 N.J.L. 201, 56 A. 172; Tabor v. Interstate Bldg. Co., 91 Tex. 92, 40 S.W. 954; Booth & Co. v. Weigand, 28 Utah 372, 79 P. 570; Lycoming F. Ins. Co. v. Wright, 55 Vt. 526; Seamans v. Zimmerman, 91 Iowa 363, 59 N.W. 290, and many others.)

Whether it shall be held that the contract is void, invalid or unenforceable in the courts is immaterial, as it amounts to one and the same thing, so far as the enforcement of the contract is concerned. The general rule of law is, that a contract made in violation of the statute is void, and when a party cannot establish his cause of action without relying upon an illegal contract, he cannot recover. (Miller v. Ammon, 145 U.S. 421, 12 S.Ct. 884, 36 L.Ed. 759; Penn v. Bornman, 102 Ill. 523; Alexander v. O'Donnell, 12 Kan. 608; Gunter v. Leckey, 30 Ala. 591; Kennedy v. Cochrane, 65 Me. 594; Pangborn v. Westlake, 36 Iowa 546-549.)

The defendant having failed to comply with the laws of 1903, by making all of the filings required by that law before doing business in the state, it was in default, and the judgment should have been in favor of the plaintiffs, and the note and mortgage should have been canceled. (Kiesel v. Bybee et al. (Idaho), 95 P. 20; Katz v. Herrick, supra; Hanchey v. Southern Home B. & L. Assn., 140 Ala. 245, 36 So. 272.)

Hasbrouck & St. Clair, for Respondent.

In this case the respondent had made such filings prior to the taking of the mortgage as really protected all people doing business with it. The respondent was not then a "tramp, predatory and rapacious foreign corporation"--in one place one day, in another the next day, and out of the state, or where it could not be found by the processes of the courts of Idaho on the third day; but for eight years before taking of this mortgage, and ever since, the respondent has had a legally designated agent in this state, upon whom process might be served, and had the same on file in the proper offices. For twelve years it has had a certified copy of its articles of incorporation on file with the secretary of state of this state, though it had not, when this mortgage was given, filed a copy of its articles with the recorder of any county of Idaho; nor was the copy filed twelve years ago with the secretary of state, certified by the recorder of any county of Idaho; but what real difference could this technical failure have upon the rights of Idaho people? (Jordan v. Western Union Tel. Co., 69 Kan. 140, 76 P. 396; Nelson Bennett Co. v. Twin Falls etc. Co., 14 Idaho 5, 93 P. 789; Kiesel v. Bybee (Idaho), 95 P. 20.)

It does not appear from the journal that the 1903 amendment to sec. 2653 was constitutionally passed, or that on the final passage the bill was read at length, section by section, as required by the constitution. (Cohn v. Kingsley, 5 Idaho 416, 49 P. 985, 38 L. R. A. 74; Brown v. Collister, 5 Idaho 589, 51 P. 417.)

AILSHIE, J. Stewart, J., concurs.

OPINION

AILSHIE, J.

This action was commenced by the plaintiffs for the purpose of obtaining a decree canceling a certain mortgage of record and declaring the same null and void. The defendant filed its answer and also a cross-complaint seeking a foreclosure of the mortgage. The plaintiffs answered the defendant's cross-complaint and set up the defense that the defendant is, and was at the time the contract was made and entered into, a foreign corporation doing business in this state, and that at the time the contract was made and entered into the corporation had not complied with the constitution and statutes of this state with reference to filing a designation of its agent and certified copies of its articles of incorporation. The case went to trial and resulted in a judgment of foreclosure in favor of the defendant, from which plaintiffs have appealed. The decision in this case turns upon the question as to whether or not the defendant corporation had complied with the constitution and statutes of this state governing and regulating foreign corporations doing business in this state. The contract involved was entered into between the appellants and respondent on March 11, 1904, at Bingham county, this state. The facts as to the respondent's compliance with the constitution and statutes of the state are substantially as follows:

On October 10, 1896, the defendant filed in the office of the clerk of the district court of Ada county, and also with the secretary of state of the state of Idaho, a designation in writing of Ada county as the county of its principal place of business in this state, and a designation of a resident of Ada county as its statutory agent upon whom process might be served. On the same day the defendant filed in the office of the secretary of state a copy of its articles of incorporation, certified to by the secretary of state of the territory of Utah. These constitute the only acts performed by the corporation in compliance with the laws of this state prior to entering into this contract. Subsequent to the execution of the contract, the company did certain acts in compliance with...