Western Electrical Co. v. Pickett

• Decision Date: 06 November 1911
• Citation: 118 P. 988,51 Colo. 415
• Parties: WESTERN ELECTRICAL CO. v. PICKETT. et al.
• Court: Colorado Supreme Court

118 P. 988

51 Colo. 415

WESTERN ELECTRICAL CO. v. PICKETT. et al.

Supreme Court of Colorado

November 6, 1911

Error to District Court, El Paso County; W. S. Morris, Judge.

Action by the Western Electrical Company against Charles D. Pickett and others. Judgment for defendants, and plaintiff brings error. Affirmed.

W. M. Swift and J. E. McIntyre, for plaintiff in error.

McKesson & Little, T. C. Turner, and John R. Watt, for defendants in error.

HILL J.

This controversy is over the meaning to be given a portion of general sections 904 and 910, Revised Statutes 1908. That portion of section 904 involved reads: 'No such corporation, joint stock company or association shall have or exercise any corporate powers or hold or acquire any real or personal property, franchises, rights or privileges, or be permitted to do any business or prosecute or defend in any suit in this state until the said fee shall have been paid.' The portion of section 910 involved reads: 'No corporation * * * of any foreign state or kingdom * * * shall exercise any corporate powers or acquire or hold any real or personal property, or any franchises, rights or privileges or do any business or prosecute or defend in any suit, in this state until it shall have received from the Secretary of State a certificate setting forth that full payment has been made by such corporation.'

On January 12, 1906, the plaintiff in error, a nonresident corporation, attempted the institution of this action by filing its complaint and causing a summons to be issued thereon. Thereafter, first by motion and then by answer, the defendants challenged the right of the plaintiff to prosecute this action; it being a foreign corporation, organized for pecuniary profit, which was doing business in the state of Colorado, and the transactions out of which this litigation arose accrued in this state while it was doing business here. Also, the defendants pleaded the statute of limitations. The cause was tried to the court upon April 4, 1908, upon an agreed statement of facts together with a special demurrer. Judgment was for the defendants for costs. The plaintiff brings the case here for review upon error.

The allegations of the complaint and the admitted facts justify the conclusion that the plaintiff was a nonresident corporation organized for pecuniary profit; that it was doing business in this state within the meaning of the statute that all the transactions involved transpired in this state so that no questions of interstate commerce, comity between sister states, or otherwise, are involved. The record discloses that at the time the original complaint was filed (on January 12, 1906) the action was not then barred by the statute of limitation, but would have been on the 10th day of July, 1906, unless, by some action of the plaintiff, its operation was suspended. On March 7, 1906, the defendants, by motion, raised the question of the right of the plaintiff to prosecute this action; it not having then complied with the statute. This motion appears to have been overruled. Thereafter, and on the 16th of July, 1906, the defendants by answer raised the same question. On June 22, 1907, which was before final trial, the plaintiff complied with the laws of Colorado in respect to foreign corporations.

This presents three questions for consideration: First. Did the plaintiff, it not having then complied with our laws, have a right to institute this suit, or proceed with any steps in its prosecution after its right to do so was challenged? Second. Did the the plaintiff have the right to proceed with the prosecution of its suit after it was challenged, by thereby complying with the laws of this state in respect to foreign corporations? Third. If the plaintiff had the right to proceed with the prosecution of its action by thereafter complying with the laws of this state in respect to foreign corporations, did the attempted institution of its action in January, 1906, have the effect to at that time suspend the operation of the statute of limitations, and keep it so suspended until it thereafter complied with the law, or did it continue to run in favor of the defendants until the law in this respect was complied with by the nonresident corporation? If the last question is answered in the negative, it makes unnecessary any decision upon the first two.

There seems to be an irreconcilable conflict of authorities upon the entire question of such statutes. One line of authorities holds that all such contracts made by foreign corporations doing business in this state prior to the compliance with the act are void, and cannot thereafter, or at all, be enforced. Section 7950, vol. 6 (1st Ed.) Thompson on Corporations. Another line of cases holds that contracts made by such corporation while doing business in this state with citizens of the state, before complying with such conditions, are not absolutely void; but the statute merely operates to suspend the remedy of the foreign corporation in the courts of the state upon such contracts until it shall have complied with the statutory conditions. This is upon the theory that until such compliance an action by the foreign corporation to enforce the contract is prematurely brought, so that an answer setting up the noncompliance by the foreign corporation would be an answer in the nature of a plea in abatement, and judgment in favor of the defendant would operate merely to abate the suit. Section 7956, Thompson on Corporations, vol. 6 (1st Ed.).

This court appears to be committed to this last line of authorities upon the question that such contracts are not absolutely void. Utley et al. v. Clark-Gardner L. M. Co., 4 Colo. 369; Fritts v. Palmer, 132 U.S. 282, 10 S.Ct. 93, 33 L.Ed. 317; International Trust Co. v. Leschen & Sons Co., 41 Colo. 299, 922 P. 727. Other well-reasoned cases, under similar statutes, seem to take the view that the plea in abatement is good, and upon account thereof an action instituted prior to a compliance with the act should be dismissed, and the plaintiff be compelled to comply with the provisions of the statute, and then to institute a new suit, in order to be allowed to prosecute its alleged cause of action. In the case of Caesar v. Capell (C. C.) 83 F. 403, in commenting upon a somewhat similar statute of the state of Tennessee, the court, speaking through Mr. Justice Hammond, quoted with approval from volume 6, Thompson on Corporations, as follows: 'A failure to comply with the regulations of the statute does not make the contract absolutely void, but only operates to suspend the remedy until such time as the foreign insurance company shall comply with the statute; that until such compliance should take place any suit brought to enforce the contract would be only prematurely brought, and a plea setting up the defense should be, not a plea in bar because of the invalidity of the contract, but only a plea in abatement to dismiss that particular suit.' To the same effect is Crefeld Mills v. Goddard (C. C.) 69 F. 141, where it was held that the effect of such a statute is not to invalidate contracts made in the state by a foreign corporation doing business there without a certificate, but only to suspend the remedy until such certificate has been procured. The New York act involved in that case states, in substance, that no foreign corporation shall do business in that state without having first procured from the Secretary of State a certificate, etc., and, further, that no such corporation doing business in that state without such certificate shall maintain an action in the state upon any contract made by it in that state until it shall have procured such certificate. In that case the court also said: 'In many cases the delay to which a delinquent corporation would be subjected while endeavoring to secure a certificate might be injurious, and perhaps fatal, to its remedy upon a contract; and, doubtless, the Legislature was of the opinion that the suspension of the remedy during the interim would furnish a sufficient incentive to coerce a compliance with the law.' To the same effect is the case of Neuchatel Asphalt Co., Limited, v. Mayor, etc., of New York, 155 N.Y. 373, 49 N.E. 1043.

But it is unnecessary to determine whether or not the plaintiff by complying with the act after the question...