Young v. Gaus

• Decision Date: 17 November 1908
• Citation: 113 S.W. 735,134 Mo. App. 166
• Parties: YOUNG v. GAUS et al.
• Court: Missouri Court of Appeals

113 S.W. 735

134 Mo. App. 166

YOUNG v. GAUS et al.

St. Louis Court of Appeals. Missouri.

November 17, 1908.

Rehearing Denied December 1, 1908.

CORPORATIONS (§ 659) — FOREIGN CORPORATIONS — CONTRACTS — ACTIONS ON NOTES — DEFENSES.

Where officers and stockholders of a foreign corporation, doing business in the state in violation of Rev. St. 1899, § 1025, as amended by Laws 1903, p. 121 (Ann. St. 1906, p. 888), requiring certain steps to be taken by such corporations, precedent to obtaining a license to do business, made a note to the corporation, and then, acting as officers and agents of the corporation, assigned the note to an innocent holder for value in the name of the corporation, they were estopped, when sued on the note, to assert as a defense, their violation of section 1025 and the consequent invalidity of the note, or the corporation's lack of legal right to assign it to an innocent holder for value, both at common law and under Laws 1905, p. 250, § 60 (Ann. St. 1906, § 463-60) declaratory of the law of negotiable paper, which provides that the maker of a negotiable instrument by making it engages that he will pay it according to its tenor, and admits the existence of the payee and his then capacity to indorse.

Appeal from St. Louis Circuit Court; Jas. E. Withrow, Judge.

Action by Fred Young against H. Gaus and others. Judgment for plaintiff, and certain defendants appeal. Affirmed.

Harlan, Jeffries & Wagner, for appellants. A. A. Paxson, for respondent.

BLAND, P. J.

The action is on the following promissory note: "$1000. St. Louis Mo., April 15, 1907. Four months after date we promise to pay to the order of the Rio Grande Land, Water & Power Company one thousand and 00/100 ____ dollars. Payable at the office of the Rio Grande Land, Water & Power Co. For value received negotiable and payable without defalcation or discount and with interest from date at the rate of six per cent. per annum. No. ____. Due Aug. 15th. E. M. Shutt, John Sehrt, A. W. Hoffman, H. S. Whitener, H. Gaus." The note was indorsed as follows: "The Rio Grande Land, Water & Power Co., per B. W. Magin, Asst. Treas.," and before maturity, for a valuable consideration, was indorsed and delivered by the payee therein to plaintiff. It was admitted on the trial "that E. M. Shutt was president, and A. W. Hoffman vice president and treasurer, of defendant corporation, the Rio Grande Land, Water & Power Company, and that the defendants John Sehrt and H. Gaus were directors of the company at that time, and are yet, and that H. S. Whitener was a stockholder in the company, but not a director, and is yet." The evidence further shows that the appellants, other than the corporation, made and delivered the note to the corporation for its accommodation. At maturity the note was protested for nonpayment, and notice thereof was duly served on all the defendants. On the trial the following stipulation was filed: "It is hereby stipulated and agreed by and between the parties hereto, through their respective attorneys, that for the purposes of this cause it is admitted that the defendant the Rio Grande Land, Water & Power Company, payee in the note sued on in this cause, is a corporation organized for the purpose of gain, and existing under and by virtue of the laws of the territory of New Mexico; that at the time the note sued on in this cause was made and delivered to the defendant the Rio Grande Land, Water & Power Company, and at the time of its indorsement and delivery to plaintiff, the defendant the Rio Grande Land, Water & Power Company had not filed in the office of the Secretary of State of the state of Missouri, a copy of its charter or articles of association, and had not in any respect complied with section 1025 of the Revised Statutes of Missouri of 1899, enacted in 1903 (Laws 1903, p. 121 [Ann. St. 1906, p. 888]), relating to foreign corporations doing business in this state. It is further admitted that the note sued on in this case was made, executed, and delivered in the city of St. Louis, Mo., and that the defendant the Rio Grande Land, Water & Power Company was, at the time of the execution and delivery of said note, and at the time of its indorsement and delivery to plaintiff, doing and carrying on within this state the business for which it was organized, and that said Rio Grande Land, Water & Power Company took out a license to do business in this state on August 15, 1907. Plaintiff, however, reserves the right to object, and does hereby object, to the facts above mentioned as not being relative to the issues in this cause, and as not constituting a defense to plaintiff's cause of action." It was also admitted that the makers of the note did not receive anything for signing it. The defense pleaded and relied upon is that the payee of the note, the Rio Grande Land, Water & Power Company, is a foreign corporation, and had not at the time the note was made, or at the time it was assigned to plaintiff, complied with section 1025, Rev. St. 1899, as amended in 1903 (Laws 1903, p. 121), and therefore was unauthorized to do business in this state. The issues were submitted to the court without the intervention of a jury. No declarations of law were asked or given. The court found the issues for plaintiff, and rendered judgment in his favor for the face of the note with interest. After an unsuccessful motion for new trial, defendants Gaus, Sehrt, and Whitener appealed.

The question presented by the record for decision is this: Can appellants, who are officers and stockholders of a foreign corporation, doing business in this state in violation of section 1025 (Laws 1903, p. 121), make a negotiable promissory note to the corporation, and then, acting as officers and agents of the corporation, assign the note to an innocent holder for value, in the name of the corporation, and, when sued on the note, set up their own wrong and fraud as a defense thereto? We unhesitatingly answer this question in the negative. A corporation can only act by and through its officers and agents, and the business done by the Rio Grande Land, Water & Power Company in this state was through the agency of at least two of these appellants. It would be a travesty upon justice and a reproach to the law of the state if, in these circumstances, the appellants could shelter themselves behind the unlawful act of the corporation, and thus indirectly set up their own wrong and fraud to escape a liability they voluntarily contracted. It has never been held in this state that a foreign corporation, unlawfully doing business herein, by failing to comply with section 1025, supra, may set up its own wrong as a defense when sued by a citizen of the state, in the courts of this state, to recover an honest debt due him from the corporation. To hold that the statute was enacted for the purpose of enabling foreign corporations, unlawfully doing business in this state, to shelter themselves behind it for the purpose of evading their honest debts to citizens of this state, contracted in good faith, and in ignorance of the fact that the corporation was a foreign one, or, if foreign, that it had failed to comply with the requirements of the statute, would be to stultify the Legislature that enacted it. The Legislature had no such purpose in view. One purpose of the statute is to bring revenue into the treasury of the state; the other is to protect citizens of the state dealing with foreign corporations by compelling them, as a condition to the right to do business in the state, to submit to the jurisdiction of the courts of the state.

It is held in the following cases that all contracts, made in this state by foreign corporations doing business in violation of section...