Williams v. Bank of Commerce of Memphis

• Decision Date: 26 March 1894
• Court: Mississippi Supreme Court
• Parties: ICHABOD T. WILLIAMS ET AL. v. BANK OF COMMERCE OF MEMPHIS ET AL

16 So. 238

71 Miss. 858

ICHABOD T. WILLIAMS ET AL. v. BANK OF COMMERCE OF MEMPHIS ET AL

Supreme Court of Mississippi

March 26, 1894

FROM the chancery court of Bolivar county. HON. W. R. TRIGG Chancellor.

The opinion states the case.

Decree reversed.

Moore &amp Jones, for appellants.

As the Fischer & Burnett Lumber Company had not complied with the law of Tennessee in reference to foreign corporations, its contracts in that state are illegal and invalid. See Lumber Co. v. Thomas, 92 Tenn. 587. As to the power of a state to impose terms upon a foreign corporation, see Lascher v. Stimson, 33 Atlantic Rep., 552; Cooper Mfq. Co. v. Ferguson, 113 U.S. 727; Bank v Earle, 13 Peters, 519.

The contention that the company was at least a de facto corporation with regard to the transaction in the state of Tennessee, if adopted, would act as a repeal of the statute. Such a construction has not been made in alike case. Moreover, there has been no sort of a compliance with the provisions of the law in Tennessee. It will not avail appellees to say that, in dealing with said company in its usual course of business, it acted in good faith, without notice that it was violating the law. The laws of the state are enforced without notice to the individuals, and must be known to all. Pringle v. Phillips, 5 Sandf. (N. Y.), 157. The Tennessee statute fixed the penalty upon parties contracting with a delinquent corporation. See Lumber Co. v Thomas, supra.

Where there can be no civil right there can be no civil remedy, and there can be no legal remedy for that which is in itself illegal. Bank v. Owens, 2 Peters (U.S.), 527; 1 Parsons on Con., 381; Benjamin on Sales, 380.

No man ought to furnish another with the means of transgressing the law, knowing that he intends to make that use of it. Story's Conflict Laws, § 253; 1 Maule & S., 593; 3 B. & Ald., 179; 20 Wendell (N. Y.), 390; 12 Wall. (U.S.), 342, 349.

The contract being against public policy, the amount of the loan cannot be recovered. Anson on Con., 224; 29 N.H. 264; 17 B. Monroe, 352; 54 Ala. 154; 3 Denio, 226; 46 Iowa 299.

The subsequent note and trust-deed were given in Mississippi, and are equally as infirm as the obligation that previously existed. Brown v. Tarkington, 3 Wall. (U.S.), 377; Addison on Con., 730; Anson on Con., 2 Am. Ed., 231, 260, 261.

The contract being void under the laws of Tennessee, cannot be enforced here. Ivey v. Lalland, 42 Miss. 444. The general rule is that a contract illegal where made, is void everywhere. 2 Parsons on Con., 570; 3 Am. & Eng. Enc. L., 506.

It was error to allow counsel fees as damages on dissolution of the injunction. Such damages cannot be separated from those which would have been incurred in any event in defense of the suit. There is nothing to show that the expense of the defense was increased by the fact that the injunction was granted. The injunction was merely ancillary to the main relief sought. See 66 Ill. 127; 85 Ib., 323; 99 Ib., 600; 23 Ohio 264; 25 Ib., 278; 25 Iowa 48; 2 High on Injunction, § 1686; 86 Ky. 516; 81 Me. 313; 13 Oregon, 362.

It will be noted that this is not a contest between the lumber company and the beneficiaries under the trust-deed.

T. B. Edgington, on the same side,

Filed a lengthy brief, and, as to the questions decided by the court made the following points: Failure by the lumber company to comply with the laws of Tennessee made its contracts in that state illegal and void. The Tennessee statute excluding foreign corporations front doing business until compliance with its requirements is valid. 2 Morawetz on Cor., 971; 5 Sawyer, 88; 6 Preg., 431.

Persons dealing with a corporation must take notice of its charter. 2 Morawetz on Cor., 591. Legislation is notice. Ib., 592; 19 N.Y. 222; 41 Ga. 660.

Appellees had notice of the statute under the registration law, and also, especially, under the decisions of the supreme court in Lumber Co. v. Thomas, 92 Tenn. 587.

Moreover, the new deed of trust executed in Mississippi recites that a doubt as to the validity of the first trust-deed had arisen. It is evident that the parties went to Mississippi to evade the laws of Tennessee. They became confederates of the offending corporation.

The new notes, being payable in Tennessee, are governed by the laws of that state. Story on Conflict Laws, § 272; 2 Kent's Com., 459; Story on Prom. Notes, 159; Ivey v. Lalland, 42 Miss. 444; Mortgage Co. v. Jefferson,, 69 Ib., 770.

The new note and trust-deed were without any consideration, and were therefore void as to creditors of the maker and grantor. A transfer is voluntary when made in pursuance of an agreement which cannot be enforced. Bump. on Fraudulent Con., 249. An illegal consideration is no consideration. 38 N.H. 199; 50 Me. 248; 3 W.Va. 548.

A contract contrary to public policy will not be enforced at the suit of either party in law or in equity. 1 King's Dig., 1398; 4 Humph., 131; 4 Heisk., 204; 6 Ib., 445. Subsequent renewal of an illegal contract does not remove the taint. 6 Cold., 35; 9 Heis., 455; 12 Ib., 325.

Section 572, code 1892, is limited to injunctions filed by mortgagors or grantors of trust-deeds. It provides that the damages shall be added to the debt and collected by a sale of the property. This cannot be done except in cases where the debtor himself, or one in privity with him, enjoins. In this case, the injunction was obtained by a stranger to the instrument.

Calvin Perkins, for appellees and cross-appellants.

The bill does not aver that either of the hanks knew, when they made the loans to the Fischer & Burnett Lumber Company, that it had not filed a copy of its charter with the secretary of state, as required. This was not ignorance of law, but ignorance of fact. Appellants misunderstand the meaning and the effect of the decision in Lumber Co. v. Thomas. For violation of the statutes, the offending corporation in thin case cannot be fined exceeding $ 500, yet the banks who dealt with it, and advanced their money without any notice that a certain act had not been done by the borrower, and were innocent of any intent to violate the law, are, it is claimed, to be mulcted in the sum of $ 33,600. The case relied on holds no such doctrine. It merely holds that the courts will repel the guilty party, and that no rights can be predicated on an illegal contract in flavor of such party. See also Ohio Insurance Co. v. Insurance Co., 11 Humph., 1. On this subject we refer also to Fritts v. Palmer, 132 U.S. 282. The court is being virtually asked by the complainants to confiscate appellees' property because another party to the contract is under the ban of the statute.

The banks having made the loans, not being in pari delicto with the lumber company, could have maintained an action of assumpsit to recover the money paid by them. 52 Am. Dec., 758; 103 U.S. 49.

When the lumber company executed the new deed of trust and notes in Mississippi, it was merely securing the payment of perfectly legal demands which could have been enforced by an appropriate action either in Tennessee or in Mississippi. Making the new notes payable in Tennessee was not transacting business in that state. A state statute forbidding such notes would be void. 113 U.S. 736.

On the question of the notes being executed in Mississippi and payable in Tennessee, see Brown v. Freeland, 36 Miss. 181; 91 U.S. 406; 12 R.I. 265.

There is absolutely no warrant for the contention that, under § 572, code 1892, the five per centum damages cannot be awarded because the injunction was sued out by another person than the grantor in the deed of trust. Burns v. Dreyfus, 69 Miss. 211.

Charles Scott, on the same side.

Argued orally by Fontaine Jones and T. B. Edgington, for appellants, and Calvin Perkins, for appellees, cross-appellants.

OPINION

COOPER J.

The appellants, who are creditors of the Fischer & Burnett Lumber Company, an incorporated company under the laws of this state, exhibited their bill in this cause in the chancery court of Bolivar county against the said Fischer & Burnett Lumber Company, and against the Bank of Commerce and the Continental National Bank of Memphis, Tennessee, and the Seaboard National Bank of New York, and against James A. Omberg and Charles F. M. Miles, and against other defendants who have no relation to the questions presented by this appeal. The purpose of the bill is to cancel as fraudulent certain deeds of trust executed by the Fischer & Burnett Lumber Company to Omberg and Miles to secure the payment of certain notes to the other above-named defendants, and to subject the property thereby conveyed to the payment of complainants' demands.

By the laws of the state of Tennessee, corporations created under the laws of other states desiring to engage in business in that state, are required, before engaging therein, to file a copy of its charter with the secretary of state, and also to cause an abstract of the same to be recorded in the office of the register in the county in which it desires to carry on its business, or to acquire or own property, and it is made unlawful for any foreign corporation to do, or attempt to do, any business, or to own or acquire any property in that state, without having first complied with the provisions of the law, under a penalty of a fine of not less than one hundred nor more than five hundred dollars, at the discretion of the jury. Milliken & Vertrees' Laws of Tenn., §§ 1992-2003; Laws of 1891, p. 212.

The Fischer & Burnett Company, without having complied with the law of Tennessee, opened an office in the city of Memphis, in that state, and engaged in business there, in which business it contracted debts to the Bank of Commerce and to the Continental Bank. The debt to the Seaboard National Bank...