Wright v. Lee

• Decision Date: 29 July 1893
• Citation: 55 N.W. 931,4 S.D. 237
• Parties: WRIGHT v. LEE et al.
• Court: South Dakota Supreme Court

55 N.W. 931

4 S.D. 237

WRIGHT v. LEE et al.

Supreme Court of South Dakota

July 29, 1893

Syllabus by the Court.

1. The question of the right of a duly-organized foreign corporation to do business in this state without having complied with the statutes of this state as to filing an authenticated copy of its articles of incorporation, etc., cannot be raised or determined collaterally.

2. Transacting business in the state by such noncomplying foreign corporation is a usurpation of power by such corporation, but with the state rests the right to elect whether it will acquiesce in such usurpation, or dispute and prevent it.

3. Sections 5345, 5346, Comp. Laws, providing that the remedies heretofore reached by writ of quo warranto, and proceedings by information in the nature of quo warranto, might be obtained by civil action, as provided in said sections, were not repealed by the adoption of the state constitution.

4. The action provided for in said sections is available against a foreign corporation. "Annulling the existence of a corporation," as expressed in said section, must be taken to mean, in respect to a foreign corporation, annulling its existence and life within the limits of the state.

5. But even if said sections were repealed, or if the action provided by them were not available against a foreign corporation, quo warranto proceedings would still remain and be entirely adequate for the maintenance of the authority of the state against a usurping foreign corporation.

6. A corporation duly organized under the laws of another state and publicly doing business in this state, without having complied with the statutory requirements above referred to is, until its authority is challenged by the state, a de facto corporation.

7. In a general assignment by a corporation, the inventory required by the statute may be verified by its secretary, although the board of directors had authorized the president and secretary to execute the assignment; the object of the statute being fulfilled when the justness and truthfulness of the inventory is guarantied by the oath of the assignor, in the only way in which it, as a corporation, could verify the same, to wit, by one of its managing officers.

8. Such inventory does not necessarily show upon its face that it does not contain all the creditors of the assignor because it shows certain of its lands are subject to mortgages, while the holders of such mortgages do not appear as creditors; as the assigning corporation may have bought such lands subject to the mortgages, without assuming to pay them, or becoming debtors to the holders of them.

9. Section 4660 et seq., Comp. Laws, prescribe the manner of making, and declare the legal effect of, an assignment made under such provisions. It must be made "in good faith," and, when made, is subject to the Code provisions "relative to trusts and to fraudulent transfers."

10. An assignment not made "in good faith," or which would be invalid under the Code provisions "relative to trusts and fraudulent transfers," even though modally within the letter of the statute, is not effectual to protect the property assigned against the attacks of creditors by attachment.

11. Section 4675, being, in respect to the provisions to be now noticed, an amendment subsequently attached to the law, and providing that all proceedings under the law should be subject to the supervision of the district court, and authorizing the judge of said court, upon petition of creditors showing cause therefor, to interfere, require an accounting, remove the assignee for cause, appoint a new one etc., was not intended to, and does not, radically change the plan and theory of the original law, but adds a new feature to it, important, but still incidental.

12. Whether, after the power of the court authorized by said section 4675 has been actively called into exercise, as it is provided it may be for cause shown, the assigned estate is in custodia legis, and thus protected from attachment, quaere.

On rehearing. Affirmed.

For report on appeal, see 51 N.W. 706.

KELLAM J.

This case is now before us upon rehearing. The original opinion is published in __ S.D. ___, and in 51 N.W. 706, where the facts are fully stated. Appellants asked and were allowed a rehearing for the further discussion of the following propositions: (1) The court erred in holding that the question of noncompliance with the statute in relation to foreign corporations could not be inquired into collaterally; (2) in holding that the La Belle Ranche Horse Importing Company (respondent's assignor) was a de facto corporation; (3) in holding that a sufficient affidavit was made to the inventory; (4) in holding the inventory to be in compliance with the provisions of the assignment laws of the state.

So far as they are pertinent to either of the questions thus presented, the facts are not in dispute. The assignor, the La Belle Ranche Horse Importing Company, was a foreign corporation, organized under the laws of the state of Minnesota, and it had never complied with the provisions of sections 3190-3192 of the Compiled Laws, by filing with the secretary of the territory of Dakota, or with the secretary of state of the state of South Dakota, a copy of its articles of incorporation, or by the appointment of an agent residing in the territory authorized to accept service of process. The contention of appellants was and is that, without compliance with these provisions, such foreign corporation was incapable of transacting business in this jurisdiction, and that every contract it attempted to make was void, and should be so declared upon a showing of such noncompliance. Neither side, of course, questions the inherent power of the state to exclude foreign corporations from transacting business within its limits, subject to the constitution and laws of the United States, as declared in such cases as Bank v. Earle, 13 Pet. 588; Paul v. Virginia, 8 Wall. 168; Carroll v. East St. Louis, 67 Ill. 568; Doyle v. Insurance Co., 94 U.S. 535; Thompson v. Waters, 25 Mich. 214; People v. Association, 92 N.Y. 311. The question here is not as to the existence of the power, but to what extent, if at all, the state has undertaken to exercise it, and what is the legal effect of what it has done. The constitutional provision which, it is also claimed, makes void any attempt of this foreign corporation to transact business in this state under the conceded conditions of this case, is as follows: "No foreign corporation shall do any business in this state without having one or more known places of business, and an authorized agent or agents in the same, upon whom process may be served." Section 6, art. 17, Const. The admission of the respondent is that his assignor, a foreign corporation, had not filed its articles of incorporation with the secretary of the territory or of the state, nor filed an appointment of an agent with such secretary, or in the office of the register of deeds of the county in which its principal place of business is located. It will be at once observed that the constitutional provision does not require either of these things to be done. Its requirement is satisfied if such foreign corporation had in fact a known place of business, and an authorized agent, upon whom process might be served in this state. It was not required of respondent, as assignee, in order to validate the acts of his assignor, that he show that such assignor had met the prescribed conditions. That he had not done so, if material at all, was defensive, and must come from the other side. Sewing-Machine Co. v. Moore, 2 Dak. 280, 8 N.W. 131; Lumber Co. v. Keefe, (Dak.) 41 N.W. 743. The admission did not negative the conditions named in the constitution. It was not admitted by plaintiff, nor proved by defendants, that such corporation did not in fact have a known place of business and an authorized agent in this state, but only that it had not filed its articles of incorporation, nor filed any appointment of an agent; hence it does not appear but that respondent's assignor was fully qualified to transact business in this state, so far as the constitutional provision controls.

Section 3190, Comp. Laws, is: "No corporation created or organized under the laws of any other state or territory shall transact any business within this territory *** until such corporation shall have filed in the office of the secretary of the territory a duly authenticated copy of its charter or articles of incorporation, and shall have complied with the provisions of this article," etc. Section 3192 names the other provisions to be complied with, to wit, the appointment of a resident agent, authorized to accept service of process, and the recording of the same in the office of the secretary of the territory, (now state,) and of the register of deeds of the county wherein such agent resides. It is specifically admitted that this was not done. The defendants claimed below, and, as appellants, they claim here, as already observed, that the consequence of such noncompliance was to render void and of no effect every attempted act or contract of such noncomplying corporation. Upon the former examination and decision of this case, we were impressed with the great diversity of views expressed by different courts upon this question, under constitutional and statutory provisions like our own; but a closer study satisfies us, not only that the conclusions of the courts are irreconcilable with each other, but that no general controlling principle can be deduced from the judgments or the reasoning of the cases. In some instances, as in Bank v. Page, 6 Or. 431, it is argued that the evident legislative intent was to prevent disqualified foreign corporations from transacting...