Wright v. Lee

• Decision Date: 16 March 1892
• Court: South Dakota Supreme Court
• Parties: GEORGE L. WRIGHT, Plaintiff and respondent, v. WILLIAM LEE, Sheriff of Lake County and the American Exchange Bank, Defendants and appellants.

2 S.D. 596

51 N.W. 706

GEORGE L. WRIGHT, Plaintiff and respondent,

v.

WILLIAM LEE, Sheriff of Lake County and the American Exchange Bank, Defendants and appellants. South Dakota Supreme Court Appeal from the Circuit Court, Lake County, SD Hon. Frank R. Aikens, Judge Reversed Bailey & Stoddard, Sioux Falls, SD Keith & Bates, Sioux Falls, SD Miller, Noyes & Hiller; Joy, Hudson, Call & Joy Attorneys for appellants. McMartin & Carland, Sioux Falls, SD Attorneys for respondent. Opinion filed March 16, 1892

BENNETT, J.

This action was originally brought by the plaintiff, as assignee of the La Belle Ranche Horse Importing Company, to recover for the alleged conversion by the defendant William Lee, as sheriff of Lake county, of certain goods, merchandise, and property, taken by him from the possession of the plaintiff, the same being the assigned property. The balance of the defendants are the indemnitors of the sheriff. The defendants in their answer justify the taking of the property by the sheriff under several attachments and executions against the assignor. The answer sets forth the proceedings taken to procure the attachments, showing the compliance with the statutory conditions pertaining to the issuing of those processes; also the proceedings in the circuit court against the assignor in several actions whereby judgments were regularly obtained against it. The answer further alleges that the plaintiff had no other right, title, or interest in said property, or any part of it, except alleged to be derived from a certain assignment made by the assignor on the 10th day of January, 1890, and that said assignment is void as to all bona fide creditors. First, because the assignor was a foreign corporation, which had not complied with the constitution and laws of this state in relation to foreign corporations; second, because the alleged assignment was not authorized by the stockholders of the corporation, nor executed by a duly elected or qualified board of directors of the corporation; third, because it was fraudulent, and was made to hinder, delay, and defraud creditors; fourth, because no inventory was ever filed, or affidavit made and attached to it, as required by law.

At an early stage of the trial, and before the defendants had entered upon their defense, the court ruled, on several objections to the introduction of evidence, in substance, that the defendants would not be permitted to raise any question as to the validity of the assignment, and all questions relating to its validity were withdrawn from the jury. At the conclusion of the evidence the court instructed the jury that “for the purposes of this case, in this court, the ruling has been, and it will govern you, that this assignment is valid in all respects; that George L. Wright was the owner, by reason of that assignment of the property on the 4th day of February, 1890, and is entitled to recover from William Lee and the American Exchange Bank, who indemnify and acted with him in the seizure of the property, whatever you, in your judgment, shall find that property was worth.” Whatever doubt may arise as to whether a foreign corporation can make a valid assignment of its property in a state where it has not complied with the constitution and laws of that state in regard to doing business in it, and as to whether that question can be raised by parties who have recognized the validity of the corporation by dealing with it, there certainly can be no question of the right of a bona fide creditor of such corporation to contest the validity of such an assignment upon the ground that it has never been authorized by, or duly executed by, a duly-elected board of directors, or signed by the proper officers of the corporation; or, if so authorized and properly executed, that the fraudulent intent in making it may not be inquired into; or, if neither of these, that the statutory requirements have not been complied with in order to make a valid assignment. A corporate body, as well as a private individual, when in failing circumstances and unable to redeem its paper or pay its debts, may, even without any statutory provisions and upon general principles of equity, assign its property to a trustee, in trust to collect its debts, pay and distribute its assets to lawful creditors, and may exercise that right to the same extent and in the same manner as a natural person, unless restricted by its charter or some statutory provision. Catlin v. Bank, 6 Conn. 233; Buell v. Buckingham, 16 Ia. 285; Ringo v. Biscoe, 13 Ark. 563; Aug. & A. Corp. (10th Ed.) § 191; Covert v. Rogers, 38 Mich. 363; Shockley v. Fisher, 75 Mo. 498. When an assignment has been made by either a private individual or corporation, in case of apparent fraud or illegality, the course is sometimes adopted by creditors of treating it as a nullity, and proceeding as though it had not been made, or it may be assailed by a direct proceeding in a court of competent jurisdiction for the express purpose of having it judicially declared to be void. The assignment in the case at bar was treated by the attaching creditors as a nullity.

The first question for consideration will be, can the La Belle Ranche Horse Importing Company, being a foreign corporation which has not complied with the constitution and laws of the State of South Dakota in relation to such corporations, transact business, own and dispose of property, and, in case of insolvency, make within this state a valid assignment of its assets for the benefit of creditors? It is conceded that this company has made no attempt to comply with the provisions of the constitution or the statutes in relation to foreign corporations, and the proofs show that, for over four years prior to the making of the alleged assignment in question, the assignor of the plaintiff, in defiance of the laws of the state, transacted a large portion of its business, amounting to many thousands of dollars, within this state. No business was done by the company in the State of Minnesota, where it was incorporated, excepting holding an occasional stockholders’ meeting at a room in some hotel, or at the office of an attorney in the town of Albert Lee. In all respects the ordinary business of the corporation was transacted in this state, the same as it would have been done if it had been formed under its laws. The alleged assignment was made in South Dakota by officers elected at a meeting of directors held in this state. It is generally conceded as law that no state has the power to create corporations, or to regulate their powers, or to authorize the exercise of corporate franchises in another state. It may confer powers in the nature of a commission, to be exercised anywhere upon condition that their exercise be assented to by the state or sovereignty where their exercise is sought; but without this assent, express or implied, such powers would be nugatory outside the state granting them. Each state, by its own legislature, must determine for itself all such questions of public policy arising within its limits. But upon the principle of comity, which is a part of the voluntary law of nations recognized, to a greater or less extent, by all civilized governments, effect is frequently given in one state or country to the laws of another in a variety of ways, especially upon questions of contracts, rights of property, and rights of actions connected with or depending upon such foreign laws. If this were not done, commercial and business intercourse between the people of different states and countries could scarcly exist. Among the states of the Union, the relations and intercourse of its citizens are more intimate than those of what may be more strictly called “foreign states.” Commercial and business enterprises can scarcely be called “foreign intercourse.” State lines are not regarded by the people as much more than county or township lines, where they define a public policy or one in which the welfare of the general people is at stake. If we read aright, such has been the general course and tendency of the judicial decisions in the several states. Especially has this comity been generally admitted and administered in reference to corporate rights and interests. The rule seems to be well settled that the corporate existence, rights of making and enforcing contracts, of acquiring property and transacting business, (not requiring the exercise of official corporate action,) of a corporation created by the laws of one state, will be recognized and protected in another, subject only to the qualification that the enjoyment and exercise of such rights shall not be contrary to the laws or settled policy of the state in which they are sought to be enjoyed or exercised, or prejudicial to the interests of such state or its citizens. As was well observed by Judge Story in his Conflict of Laws, § 35, 37, in reference to questions of this kind, wherein he fully approves of the principles announced by the supreme court of the United States in the case of Rank v. Earle, 13 Pet. 589: “In the silence of any positive law affirming or denying or restraining the operation of foreign laws, courts of justice presume the tacit adoption of them by their own government, unless they are repugnant to its policy or prejudicial to its interests. It is not the comity of the courts, but the comity of nations, [states,] which is administered and ascertained in the same way, and guided by the same reasoning, by which all other principles of municipal law are ascertained and guided.”

As the question is not, then, the comity of the courts, but that of the state, and is upon the adoption or qualified adoption in the state of the laws, or, rather, the incidents growing out of the laws, of Minnesota in relation to corporations, it follows that the power of determining the question whether and how far, or with what modification, or what conditions, the laws of that state,...