Handlan-Buck Manufacturing Co. v. Wendelkin Construction Co.

101 S.W. 702, 124 Mo. App. 349, 1907 Mo. App. LEXIS 224

• Court: Missouri Court of Appeals
• Decided: April 16, 1907
• Status: Published

Opinion

GOODE, J.

(after stating tbe facts.) — Plaintiff’s main proposition is that tbe bill of sale given by tbe Wendelkin Company to Charles H. Alexander is absolutely void because said company, a foreign corporation, was doing business in Missouri without having complied with tbe statutes. This proposition was affirmed, so far as any right of tbe defaulting corporation is concerned, in the case of Tri-State Amusement Co. v. Forest Park Highlands Amusement Company, decided by tbe Supreme Court, 192 Mo. 404. It was decided tbe other way in Carson-Rand Co. v. Stern, 129 Mo. 381, 31 S. W. 772. In the opinion in the Tri-State case, it is said tbe Carson-Rand case falls in tbe class of decisions construing contracts of foreign corporations made, not in Missouri, • but in the home State of the corporation and valid there. The opinion in the Carson-Rand case does not state that the contract was a foreign one and the reasoning of the court shows clearly that a domestic contract was in issue. Moreover, the agreed statement of facts on which the case was submitted contained, among other things, the agreement that plaintiff had for a long time conducted a lumber yard in St. Louis; that the notes in suit were made and executed in the city of St. Louis, were payable in St. Louis and that the sales of lumber for which the notes were given were made in St. Louis. The proposition relied on in that case, as shown by the briefs, was that this State does not recognize the rule of some other States, to-wit; that a foreign company refusing to comply with the laws of the State cannot make a valid contract therein. The opinion said:

“What was the paramount object of the enactment? Not to exclude such concerns from participation in the business done in Missouri; but to compel a compliance with certain conditions by them. Those conditions were imposed with a view probably, to place foreign and domestic companies on a footing of equality in the field of commerce.

“The object of the law was rather to induce observance of those conditions than to deprive any foreign corporation of a right of action, or other property.”

The judgment was reversed and the cause remanded for further proceedings; an order as entirely incompatible with the theory that the notes were void, as was the reasoning of the opinion. However, it is the latest decision that controls, and under it a contract made by a foreign corporation in Missouri, when the corporation has not complied with the Missouri laws authorizing it to do business, must be treated as void in an action on it by the corporation, unless there are circumstances to bring it within some exception to the rule; for example, that the contract was made outside the State and was valid where made. In the present case no delinquent foreign corporation is seeking to enforce a contract made with it. The. contract in issue is asserted, not by the corporation, but by the interpleader Alexander and a firm claiming under him, W. D. Wylie & Co. This contract had been entirely performed by the Wendelkin Company and Alexander before the litigation arose over it.- It is not assailed as invalid by either party to it, but is attacked by a stranger as void in the hands of the obligee and his assignees, Wylie & Co. To concede this proposition would be to wipe out all rights, no matter how thoroughly vested, obtained under a contract, no matter how completely executed, made in Missouri with a foreign corporation doing business without authority of law. We do not see how on its theory, the position of the Handlan-Buck Company is any better than that of Alexander, except that the latter holds the affirmative of the issue. The debt for which the HandlanBuck Company attached, grew out of a contract with the Wendelkin Company, and there is no more proof that Alexander knew the Wendelkin Company had not complied with the statutes when it executed the bill of sale, than there is that the Handlan-Buck Company knew the fact when it sold the goods for which it sues. In fact there is no evidence on. the subject one way or the other. We think the most extreme construction of the statutes will not warrant us in annulling the bill of sale in the hands of innocent parties in possession of the property transferred by it, and that the declarations of law plaintiff asked respecting the inability of a foreign corporation to transact business in Missouri, prior to complying with our statutes, were irrelevant even though, abstractly considered, they may be correct. Whether the statutes were intended to invalidate contracts made by non-complying corporations, or merely to suspend the remedy on those contracts the legislation was directed against the corporations, and not against third parties who might deal with them in ignorance of their disobedience. And the statutes are especially inapplicable when the contracts assailed are no> longer executory, but fully executed. To this effect are the decisions on analogous contracts not possessing moral turpitude, but prohibited by a statute. [Mason v. Pitt, 21 Mo. 391; Rollins v. McIntire, 87 Mo. 495.] The most frenzied policy of strengthening the acts intended to compel certain steps to be taken by foreign companies before doing business in this State, can find no motive for holding contracts void, when to do so will neither punish a delinquent company nor influence foreign companies generally to comply with the law. It is not easy to discern how such a company will be affected financially by its assets being taken to pay one creditor rather than another; and aside from sentiment, it likely would be indifferent about the matter. To hold the title-of the interpleader void will visit the entire penalties of the statute on innocent parties and yet the ruling will not operate even in terrorem on foreign companies. Such a construction of the law would leave the property, as among several persons claiming title under a company in default, not with him who got possession first and had, by all analogies, the better right, but with him, who in the course of litigation, happened to escape the burden of proof. In this case plaintiff took the property from the interpleader by process of attachment, and because the latter was compelled to sue to get it back, he must lose, though he has been put to trouble and cost in caring for the property. This result is both unreasonable and unrighteous. No case has been cited holding that a transfer of property by a delinquent foreign company to a third person ignorant of the company’s default, vested no title in the transferee, but was so utterly void in the hands of the obligee, after possession taken and complete execution of the agreement, that another person could wrest the property from the transferee to satisfy a claim arising out of a contract with the same delinquent corporation. This point was considered and decided in Mason v. Pitt, 21 Mo. 391, wherein Downing v. Ringer, 7 Mo. 585, the original case on the subject, was ruled to compel no such result. The point was determined again the same way in Rollins v. McIntire, 82 Mo. 496, 505, a decision that went further than Mason v. Pitt, and to the extent of holding that, although the person under whom Rollins claimed, had entered -on the premises in controversy, under an executory agreement of sale made in violation of a statute requiring the plat of an addition to be recorded before lots were sold, Rollins acquired an equity for the title against one taking the legal title later, but pursuant to the same executory agreement and with notice of Rollins’ title (loc. cit. 507). That Downing v. Ringer does not forfeit the title to property held by an innocent transferee because he got it under a prohibited and unenforcible contract, is declared in Mason v. Pitt, in this passage:

“The case of Downing v. Ringer (7 Mo. 585), decides that the proprietor of a town, the plat of which is unrecorded, cannot recover the purchase money for a lot sold in such town, inasmuch as the penalty imposed on the vendor for such an act implies a prohibition, and. the courts cannot aid him in doing that which is forbidden by law.

“If the vendee of a lot, in such a town, knowing that the plat was unrecorded when he purchased, should bring an action to enforce a specific performance of the contract of sale, he might be met with the statute. But, in this case, there is nothing showing that the vendee was affected with any notice of the fact that the plat was unrecorded.

“But the answer to this whole matter of the plat 'being unrecorded is, that the contract is executed, the title has passed, and the law imposes no penalty on the vendee.” (We italicize.)

Courts and commentators have descanted on the injustice of holding contracts void even in the hands of the delinquent company, and the mischief would be intolerable if innocent parties were held to occupy no better position. [6 Thompson, Corporations, sec. 7955.]

It is strenuously insisted by plaintiff that when the property in controversy was attached, the interpleader did not have possession of it under the bill of sale executed June 27,1902, but held possession under the chattel mortgage executed in Texas, March 20, 1902, and afterwards recorded in Cape Girardeau county. It Avould appear from the petition, though there is no evidence on the subject, that some of the merchandise for Avhich plaintiff attached, Avas sold prior to the recording of that instrument. The petition alleges that the plaintiff’s indebtedness accrued from sales Avhich reached from January to June, 1902. Plaintiff’s position is that as the interpleader had possession of the property under the chattel mortgage, said mortgage could not take effect against its demand, because of the clause of section 1024 of the Revised Statutes of 1899, which provides that “no corporation incorporated under the laws of any other State, territory or country, doing business in this State, shall be permitted to mortgage, pledge or otherwise incumber its real or personal property situated in this State, to the injury or exclusion of any citizen or corporation of this State which is a creditor of such foreign corporation; and no mortgage by any foreign corporation, except railroad and telegraph companies, given to secure any debt created in any other State, shall take effect as against any citizen or corporation of this State until all its liabilities due to* any person or corporation in this State at the time of the recording of such mortgage, have been paid and extinguished.” If we grant, for the moment, that the evidence conclusively showed the interpleader was in possession of the disputed property under the Texas mortgage, instead of the bill of sale, still the judgment in his favor could not be reversed for that reason, in the absence of proof that when said mortgage was recorded the Wendelkin Company owed plaintiff a debt. The presumption obtains that the ruling of the trial court was right, there being no affirmative showing to the contrary. No declaration of law was asked on hypothesized facts, regarding the right of plaintiff to collect its demand out of the attached property as against the interpleader’s lien or title, if it was claiming under the Texas mortgage. Plaintiff’s contention simply is that the undisputed evidence shows the inter-pleader was in possession under that instrument and, therefore, could not maintain its interplea. But it is obvious that this would depend on whether or not plaintiff’s indebtedness Avas in existence when the instrument was recorded, as to which there is no proof. Neither is the evidence conclusive that possession was taken under the Texas mortgage. M'oses Alexander swore the bill of sale was given in lieu of the Texas mortgage and that he took possession of the property at Neely’s Landing under the bill of sale. It is true he had had a sort of manual possession or custody of the property in St."' Louis prior to the execution of the bill of sale, but this he said, Avas as agent of Scott & Company. There is some confusion in the testimony of Moses Alexander regarding when and under what instrument he took possession of the property in dispute; but the evidence is certainly not conclusive that it was under the Texas mortgage instead of the bill of sale.

Plaintiff contends that the undisputed evidence shows there was fraud in fact in the transfer of the property in dispute to the interpleader and that the transaction was tainted with fraud as against the creditors of the Wendelkin Company. We do not accept this proposition. There is little evidence tending to prove fraud. The property was taken by Alexander at a valuation of $9,950, and if there were facts to support an inference that it was worth more, there was positive testimony that its value was not in excess of the price at which the interpleader took it. The indebtedness of the Wendelkin Company to the interpleader was, as stated, some $22,000, or thereabouts.

Conceding there was an issue of fraud to be decided by the trier of the fact, regarding the bona lides of the preference of the interpleader by the Wendelkin Company, the question arises whether the court’s rulings on the declarations of law requested on said issue were proper. Plaintiff insists the court refused to pass on it as an issue of fact and disposed of it, instead, as an issue of law. This contention is based on the refusal of three declarations requested by plaintiff Avhich, in substance, declared that if the court sitting as a jury, believed from the evidence the object or effect of the bill of sale from the Wendelkin Company to the interpleader was to hinder, delay and defraud the creditors of the Wendelkin Company and interpleader participated in the intent and thereby the creditors were hindered, delayed and defrauded, then the bill of sale was void and the inter-pleader could not recover. We do not think the conchision that the court refused to try the issue of fraud, follows from the refusal of the declarations requested, if attention is paid to the way in which they were drawn. They propounded the proposition that if the object or effect of the transfer was to hinder, delay or defraud the creditors of the Wendelkin Company, and Alexander participated in the purpose, and creditors were thereby hindered and defrauded, the instrument was invalid as to creditors. A debtor in failing circumstances in this State has the right, except as prevented by the bankrupt law, to prefer one creditor to another. In exercising the right he may transfer all his property to the one preferred if this is done with an honest purpose to give a preference and not with the intention of obstructing other creditors in the collection of their debts or defrauding them. If, however, the preference is colorable and mixed with it is the intent to hinder, delay or defraud creditors not preferred, the contract of preference is invalid as against such creditors, if the preferred one knew of and shared in the fraudulent purpose of the debtor. But there must be an intention hostile to' the rights of non-preferred creditors. The mere fact that the effect of the transfer is to hinder and delay them in the collection of their debts, will not, of itself, make the preference invalid. [Dougherty v. Cooper, 77 Mo. 528; Holmes v. Braidwood, 82 Mo. 610; Crothers v. Busch, 153 Mo. 606, 55 S. W. 149; Reedy & Gaft v. Stern, 12 Mo. App. 115; Kendall v. Shoe Co., 46 Mo. App. 580; Frank v. Curtis & Son, 58 Mo. App. 349; Scott Hardware Co. v. Riddle, 84 Mo. App. 275.] Now the declarations as asked, would have made the preference of Alexander void as against plaintiff if the object or effect was to hinder, delay or defraud plaintiff. No doubt it would have been void if that had been the intention and purpose with which it was made and Alexander had shared in the purpose. But as the declarations were drawn in the disjunctive and made, not only the object, but the effect of the preference, fatal to its validity, the law was erroneously stated. Hence it cannot be concluded that the requested declarations were refused because the court thought there was no evidence tending to prove fraud. We may say in passing that if any such evidence was given, it was slight. The argument that there was such evidence is based largely on the supposed great value of the property transferred in comparison with the indebtedness owed by the Wendelkin Company to Alexander. But the only two witnesses who testified regarding the value of the property swore it was reasonably worth about what Alexander allowed for it. In truth no one reading the record can doubt that plain-did not rely on this issue at all. It introduced no evidence, nor offered any, to show actual fraud. What little evidence regarding the value of the property conveyed, is contained in the record, was elicited by counsel for the interpleader, for the purpose, we suppose, of showing a fair consideration was given. However, in view of the form of the declarations of law asked on the point, we cannot say the trial judge treated the question of actual fraud as one which must be found in favor of the interpleader as a matter of law. The proper conclusion to be drawn is, that he weighed whatever evidence was introduced, touching the question of fraud, and refused the requests because they stated' the law inaccurately.

The judgment is affirmed.

All concur.