A. Booth & Co. v. Weigand

79 P. 570, 28 Utah 372, 1904 Utah LEXIS 85

• Court: Utah Supreme Court
• Decided: December 31, 1904
• Docket: No. 1578
• Status: Published

Opinions

BARTCH, J.

The plaintiff, a foreign corporation incorporated and existing by virtue of the laws of the state of Illinois, and doing business in that state and in Utah, brought this action to recover the value of merchandise sold and delivered to the defendant. The complaint is in the nsnal form, and contains three canses of action. The defendant demurred to the complaint upon the ground, among others, that the plaintiff had not the legal capacity to sue, being a. foreign corporation, and not having complied with the laws of this state. The demurrer was overruled, and thereupon the defendant filed an answer alleging, inter alia, that the plaintiff had not legal capacity to sue, because it is a foreign corporation, and is maintaining an office and storeroom and doing a general mercantile business in Salt 'Lake City, buying and selling at retail; that it has not filed a copy of its articles of incorporation with the Secretary of State or the county clerk, and that it has failed to designate an agent upon whom process may he served, and has not accepted the provisions of the Constitution of Utah, and has wholly failed to comply with the provisions of the Revised Statutes and of the Constitution relating to foreign corporations; that, by reason of such failure to comply with the laws of Utah, plaintiff was unlawfully, engaged in and doing an unlawful business; and that, as a consequence, the contracts, assignments of accounts, and transactions sued on are illegal and void. To this a demurrer was interposed and sustained and, the defendant electing to stand on his answer, judgment was entered in favor of the plaintiff. The decisive question presented upon this appeal is whether the contracts of a foreign corporation, made while doing business in this State, without complying with our laws relating to such corporations, are valid and can be enforced in the courts of this state by the corporation. The appellant insists that under our Constitution and statutes, and the facts admitted in this case, such a question must be answered in the negative.

The Constitution, so far as material here, provides, in section 1, art. 12, that “all corporations doing business in this state, may, as to such business, be regulated, limited or restrained by law;” and in section 4, Id., that “all corporations shall have the right to' sue, and shall be subject to be sued, in all courts in like cases as natural persons.” Section 6, same article provides., “No corporations organized outside of this State, shall be allowed to transact business within the State on conditions more favorable than those prescribed by law to similar corporations organized under the laws of this State.” Section 9' of the same article reads: “No corporation shall do business in this State, without having one or more places of business, with an authorized agent or agents, upon whom process may be served; nor without first filing a certified copy of its articles of incorporation with the Secretary of State.” All of the provisions of the Constitution are both “mandatory and prohibitory,” because there are no “express words” which declare them to- be otherwise. Section 26 art. 1, Const. On this subject, section 351, Rev. St. 1898, provides: “All corporations, not organized under the laws of this State, before doing business within the state shall file with the Secretary of State and with the county clerk of the county wherein their principal office in the state is situated, a certified copy of their articles of agreement, certificate of incorporation, and bylaws and in case of alteration or amendment of said articles of incorporation or by-laws, shall file certified copies of such alterations or amendments with each of said officers, and shall also, before doing business within the State, by resolution of their board of directors, accept the provisions of the Constitution of this State, and also designate some person residing in the county in which its principal place of business in the state is situated, upon whom process issued by authority of or under any law of the State may be served. A copy of such resolution shall be certified by the president and secretary, under seal of the company, and filed in the office of the Secretary of State and in the office of the county clerk of the county in which its principal office is situated. ’ ’ Here are express provisions of statute requiring certain things to be done before a foreign corporation can legitimately transact business within this State, and these provisions are in terms mandatory and prohibitory, and in entire harmony with the provisions of the Constitution relating to such corporations. For the evident purpose of compelling a compliance with these laws by foreign corporations before attempting to transact business in this state, the Legislature, in section 352, Rev. St. 1898, further provided: “Any such corporation failing to comply with the provisions of the foregoing section shall not be entitled to the benefits of the laws of this state relating to corporations; and any person acting as agent of a foreign corporation which shall neglect or refuse to comply with the foregoing provisions, shall he deemed guilty of a misdemeanor, and shall he personally liable on any and all contracts made in this State by him for and in behalf of such company during the time that it shall remain so in default; provided, that this section shall not be held to apply to persons acting as agents for foreign corporations for a special or temporary purpose or for a purpose not within the ordinary business of such corporation, nor shall it apply to attorneys-at-law as such.” This section, as will be observed, is also in its terms mandatory and prohibitory, and fixes certain penalties for a failure on the part of foreign corporations to comply with the provisions of the preceding section. The first penalty is directed against the corporation itself which has failed to comply with the laws in question, and that is that such corporation “shall not be entitled to the benefits of the laws of this State relating to corporations; ’ ’ and then there are further penalties provided as a punishment for any agent who acts for such corporation which has failed to comply with the provisions contained in the..preceding section.

These several constitutional and statutory provisions are in harmony with each other, and, undoubtedly, were enacted for the purpose of placing foreign corporations which would comply with such provisions upon the same plane, in the transaction of corporate business in this State, as domestic corporations. The principal terms and conditions prescribed are that the foreign corporation shall file certain evidence of its corporate existence, designate its principal place of business within this State, and appoint an agent, at snch place of business, upon whom process may be served. Such terms and conditions are reasonable, and were doubtless prescribed to protect the citizens of the State in their dealings with such corporations from the hardships and inconveniences which might otherwise be entailed upon them by being compelled to pursue their rights in other jurisdictions. That the State has a right to impose such terms upon such corporations, as conditions precedent to their right to carry on corporate business within its limits, we entertain no doubt. A corporation is a creature of statute — of local laws— 1 and, except for such laws, it would have no existence. The grant of its corporate existence is • a grant of special powers and privileges to its incor-porators to pursue the objects of its creation, and transact its corporate business the same as an individual transacts his private business. The persons who compose the legal entity, generally, so far as ordinary trading, manufacturing, and mining corporations are concerned, are hot responsible individually for the corporate debts. A corporation being such a creature of local laws, it has no legal existence without the limits of the jurisdiction which created it. “It exists- only in contemplation of law, and by force of the law; and where the law ceases to operate, and is no longer obligatory, the corporation can have no existence. It must dwell in the place of its creation, and cannot migrate to another sovereignty.” Bank of Augusta v. Earle, 13 Pet. 588, 10 L. Ed. 274. In these respects a corporation is not like an individual, who exists because of the laws of God, our Creator, and may reside in one State or country and do business and make valid contracts in another. The corporation is endowed, with no natural attributes, but has only such powers as are conferred upon it by its charter and laws of its creation, and one state or country can make no laws nor create any corporation for another, although the corporate existence of a corporation may he recognized by another State, and its contracts made therein enforced by the comity of the State. Comity, however, will not be extended by States 2 to such an extent as to recognize the existence of a corporation and the exercise of its powers when the same are inimical to their interest, repugnant to their policy, or contravene their laws. “Having no absolute right of recognition in other States, but depending for such recognition and the enforcement of its contracts upon their assent, it follows, as a matter of course that such assent may be granted upon such terms and conditions as those States may think proper to impose. They may exclude the foreign corporation entirely, they may restrict its business to- particular localities, or they may exact such security for the performance of its contracts with their citizens as in their judgment will best promote the public interest. The whole matter rests in their discretion.” Paul v. Virginia, 8 Wall. 168, 181, 19 L. Ed. 357. In Pembina Min. Co. v. Pennsylvania, 125 U. S. 181, 8 Sup. Ct. 737, 31 L. Ed. 650, it was said: ‘‘ The State is not prohibited from discriminating in the privileges it may grant to foreign corporations as a condition of their doing business or hiring offices within its limits, provided always such discrimination does not interfere with any transaction by such corporations of interstate or foreign commerce. It is not every corporation, lawful in the state of its creation, that other States may be willing to admit within their jurisdiction, or consent that it may have offices in them; such, for example, as a corporation for lotteries. And, even where the business of a foreign corporation is not unlawful in other States the latter may wish to limit the number of such corporations, or to subject their business to such control as would be in accordance- with the policy governing domestic corporations of a similar character. ’’

This jurisdiction, therefore, had the absolute right to prescribe, as it did in the foregoing constitutional 3 and statutory provisions, such terms and conditions upon which a foreign corporation might do business here, as would put the corporation in a position to be amenable to the process of the courts of this State. When, therefore, the plaintiff corporation established a place of business and commenced to ‘ ‘ do business” in this State, it was bound to recognize our laws and their mandatory and prohibitory character, especially of the Constitution. Having failed to do this, and having proceeded in violation of such laws to 4 exercise its corporate powers, its contracts cannot be enforced by the corporation in our courts. The force of this position was clearly recognized by this court in Barse Live Stock Co. v. Range Valley Cattle Co., 16 Utah 59, 50 Pac. 630, where it was said: “It will be conceded in the outset that, if the contract upon which the plaintiff’s action was brought was made in violation of a law of the state, it cannot be enforced by any court in the State.” In Thorne v. Travellers’ Ins. Co., 80 Pa. 15, 21 Am. Rep. 89, it was said: “There can be no doubt of the constitutional power of the Legislature to prescribe the conditions under which a foreign corporation shall transact business in this State, and the manner in which its agents shall be qualified before entering on their duties. It has often been held that an action founded on a transaction prohibited by statute cannot be maintained, although a penalty be imposed for violating the law, and it be not expressly declared that the contract be void.” So, in Cincinnati Mut. H. A. Co. v. Rosenthal, 55 Ill. 85, 8 Am. Rep. 626, it was said: “When the Legislature prohibits an act, or declares that it shall be unlawful to perform it, every rule of interpretation must say that the Legislature intended to interpose its power to prevent the act, and, as one of the means of its prevention, that the courts shall hold it. void. This is as manifest as if the statute had declared that it should be void. To hold otherwise would be to give the person or corporation or individual the same rights in enforcing prohibited contracts as the good citizen who respects and conforms to the law. To' permit snch contracts to he enforced, if not offering a premium to violate a law, it certainly withdraws a large portion of the fear that deters men from defying the law. To do so, places the persons who violates the law on an equal footing with those who strictly observe its requirements. That this contract is absolutely void as to appellee we entertain no doubt.” Likewise in Re Comstock, 3 Sawy. 218, Fed. Cas. No. 3,078, it was stated. ‘ ‘ This foreign corporation having no power to do business in this State except by the consent of the State, and consent having been given upon a condition precedent which was never performed, the power to make this contract was never in the corporation. So far as it was concerned, the act was ultra vires,” 6 Thomp., Corp., secs. 7959-7960; 2 Morawetz, Priv. Corp., sections 662-666; Railroad v. Power Co., 23 Utah, 22, 63 Pac. 995; Cary-Lombard L. Co. v. Thomas, 92 Tenn. 587, 22 S. W. 743; Dudley v. Collier, 87 Ala. 431, 6 South. 304, 13 Am. St. Rep. 55; Webb v. Alexander, 7 Wend. 281; Smith v. Alberta (Idaho), 74 Pac. 1071; Farrior v. New Eng. M. S. Co., 88 Ala. 275, 7 South. 200; Stevenson v. Ewing (Tenn.), 9 S. W. 230; Miller v. Ammon, 145 U. S. 421, 12 Sup. Ct. 884, 36 L. Ed. 759; Cooper M. Co. v. Ferguson, 113 U. S. 727, 5 Sup. Ct. 739, 28 L. Ed. 1137; Electric N. & M. T. Co. v. Perry (C. C.) 75 Fed. 898; Crefeld Mills v. Goddard, (C. C.), 69 Fed. 141.

It must be conceded that the authorities as to the question herein presented and considered are in conflict and irreconcilable, but we are of the opinion that the conclusion reached is inevitable under the mandatory and prohibitory character of our constitutional and statutory provisions, and that the court erred in sustaining the demurrer to the answer.

The judgment must be reversed, with costs, and the case remanded for further proceedings in accordance herewith. It is so ordered.

BASKIN, C. J., concurs.