Law Trust Society v. Hogue

62 P. 380, 37 Or. 544, 1900 Ore. LEXIS 114

• Court: Oregon Supreme Court
• Decided: October 8, 1900
• Status: Published

Opinions

Mr. Justice Moore,

after stating the facts, delivered the opinion of the court.

It is contended by defendant’s counsel that the evidence introduced at the trial is insufficient to establish the corporate existence of the Jarvis-Conklin Mortgage Trust Co. or of the plaintiff, and that the court erred in finding otherwise, while plaintiff’s counsel insists that the transcript fails to show that Jones has any substantial interest in the result of the suit, and hence his plea is a nullity ; that said plea and answer do not deny, but only allege upon information and belief, a- lack of knowledge respecting the incorporation of said company and society, and therefore the allegations of the complaint in these particulars are not put in issue thereby ; that proof of the existence of a corporation cannot be demanded by parties who have entered into a contract with it; and that said answer, so far as it attempts to controvert the existence of the corporation, is in the nature of a plea in abatement, which, being joined with an answer to the merits, amounts to a waiver of said plea. The evidence shows that Jones is the equitable owner of the mortgaged premises, for whom Hogue probably holds the legal title in trust; and, having been made a party defendant, he undoubtedly had the right to set forth by answer as many defenses as he had : Hill’s Ann. Laws, § 73. Our statute, in prescribing the manner of controverting the allegations of a complaint, so far as applicable herein, is as follows : “The answer of the defendant shall contain (1) a specific denial of each material allegation of the complaint controverted by the defendant, or of any knowledge or information thereof sufficient to form a belief Hill’s Ann. Laws, §-72. It will be remembered that the plea and answer do not deny any knowledge or information concerning the incorporation of the Jarvis-Conklin Mortgage Trust Co. or of plaintiff, unless the defendants’ allegations that they have no knowledge or information thereof sufficient to. form a belief shall be construed as a denial. In Flood v. Reynolds, 13 How. Prac. 112, under a statute of New York which permitted a defendant in certain cases to deny that he had any knowledge or information sufficient to form a belief, it was held that an allegation by the defendant that he had no knowledge or information of a material allegation of the complaint sufficient to form a belief was a compliance with the requirements of the statute. Mr. Justice Harris, in speaking of the defendant’s averment, says: “He had a right, therefore, instead of denying the truth of the allegation, to put its truth in issue, by asserting that he could not say whether it was true or not, because he had no knowledge or information on the subject from which he could form a belief. He was not bound to go through with the idle ceremony of denying the truth of the allegation, after having asserted that he had no belief whatever whether it was true or not.” In Grocers Bank v. O'Rorke, 6 Hun, 18, it is said : “It has been held in various cases that an answer alleging that defendant has no knowledge or information sufficient to form a belief makes a complete denial.” See, also, Meehan v. Harlem Sav. Bank, 5 Hun, 439.

The allegations, of the plea and answer were not denials of any knowledge or information of a material allegation of a fact in the complaint sufficient to form a belief (Cumins v. Lawrence County, 1 S. D. 158, 46 N. W. 182); but under the rule that in the interpretation of a pleading, for the purpose of determining its effect, its allegations shall be liberally construed, with a view of substantial justice between the parties (Hill’s Ann. Laws, § 84; Jackson v. Jackson, 17 Or. 110, 19 Pac. 847; Corbett v. Wrenn, 25 Or. 305, 35 Pac. 658; Wyatt v. Wyatt, 31 Or. 531, 49 Pac. 855), such allegations, in my opinion, are equivalent to denials, and put in issue the allegations of the complaint controverted thereby. If it be assumed that a party who enters into a contract with an alleged corporation in the use of, and within the scope of, corporate powers and franchises, is estopped to deny its corporate existence in a suit by the de facto corporation to enforce the contract (7 Am. & Eng. Enc. Law [2 ed.], 668; 1 Thompson, Corp. § 518 ; Bliss, Code Pl. [3 ed.] § 252) ; that the execution of the promissory note by Hogue and wife to the Jar vis-Conklin Mortgage Trust Co. is sufficient evidence of its corporate existence (Woodson v. Bank of Gallipolis, 4 B. Mon. 203 ; Depew v. Bank of Limestone, 1 J. J. Marsh. 378 ; Gaines v. Bank of Mississippi, 12 Ark. 769) ; that the obligation created by the estoppel binds the party making it, and all persons privy to him (8 Enc. Pl. & Prac. 6 ; Jackson-Sharp Co. v. Holland, 14 Fla. 384) ; that Jones sustained that relation to Hogue and wife; and that the estoppel relied upon is apparent from an inspection of the complaint, thus avoiding the necessity of specially pleading it, — the rule invoked is inapplicable, because the plaintiff failed to demur to the answer and plea, thereby waiving the estoppel (8 Enc. Pl. & Prac. 9; Trimble v. State, 4 Blackf .* 42; Love v. Kidwell, 4 Blackf. 553 ; Collins v. Mitchell, 5 Fla. 364; Smith v. Whitaker, 11 Ill. 417 ; Bartholomew v. Candee, 14 Pick. 167 ; Oregonian Ry. Co. v. Oregon Ry. & Nav. Co. 10 Sawy. 464, 22 Fed. 245). A plea of nul tiel corporation imposes upon the plaintiff the burden of proving its corporate existence, but whether it should be considered as a plea in abatement or in bar has been the subject of much controversy. In Oregonian Ry. Co. v. Oregon Ry. & Nav. Co. 10 Sawy. 464 (22 Fed. 245), Mr. Justice Deary, in speaking of such a defense, says : ‘A corporation may exist for many purposes, and yet not have capacity to sue in a particular case, and a plea in abatement is the proper mode of taking advantage of that fact; but the defense of-a want of corporate existence goes further, and may be pleaded either in abatement or bar. But the latter is the most effective, and unless the matter is specially pleaded, as in abatement, it will be considered in bar or to the merits.” In Guaga Iron Co. v. Dawson, 4 Blackf. 202, it was held that a plea of nul tiel corporation was a plea in bar. To the same effect, see Bliss, Code Pl. (3 ed.) § 248 ; Christian Society v. Macomber, 3 Metc. (Mass.), 235. Such plea does not suggest a better writ, thereby lacking one of the essential elements of a plea in abatement; and as it tends to defeat, and not to postpone, the action, we think the better reason supports the theory that a plea of nul tiel corporation goes to the merits, and is a plea in bar, and, this being so, Hogue and wife did not waive such defense by joining it with a plea to the merits.

The issue thus presented being material, and, as I believe, properly pleaded, the question is whether the evidence introduced at the trial was sufficient to establish the corporate existence of the mortgagee and its assignee. Plaintiff’s counsel offered in evidence what purport to be copies of the articles of incorporation of the Jarvis-Conklin Mortgage Trust Co., and a-certificate of its corporate existence issued November 3, 1888, by Michael K. Mc-Grath, the then Secretary of State of the State of Missouri, to the effect that said company had become a body corporate, with all the rights and privileges granted to trust companies under the laws of the State of Missouri, and certified to November 30, 1897, by A. A. Lesuer, Secretary of State of that state, and attested by his official seal. There was also introduced in evidence what purports to be a printed copy of the memorandum of incorporation of the Law Guarantee & Trust Society, Limited, adopted April 11, 1888, and amended in part March 13, 1895, which amendment appears to have been approved April 27, 1895, by a decree of the. high court of justice, in the chancery division, said articles and amendment being certified to by Walter S. Bates, assistant secretary, and each certified to as “a true copy” by J. S. Purcell, registrar of joint stock companies, and certificates appended thereto, issued May 6,1897, by said registrar, to the effect that said society was incorporated under the companies’ acts of 1862 to 1886, as a limited company, on April 11, 1888, and that said society had by special resolution altered its objects, which alteration was confirmed by order of the high court of justice April 27, 1895, and that a copy of said order, and a printed copy of the memorandum of association so altered, were registered pursuant to the companies’ act of 1890 on May 10, 1895. There is also appended the certificate of Patrick A. Collins, Consul General of the United States for Great Britain and Ireland at London, and attested by his official seal, to the effect that the signature of J. S. Purcell, subscribed to the annexed certificates, is the true and proper handwriting of J. S. Purcell, C. B., inland revenue office, registrar of joint stock companies ; that the “companies’ registration office” in London has no official seal; and that, to all acts signed as the annexed, full faith and credit are and ought to be given in judicature and there-out. The laws of the State of Missouri and the companies’ acts of Great Britain of 1862 to 1886 and of 1890, referred to in the secretary’s and registrar’s certificates, were not offered in evidence.

Judge Thompson, in his work on Corporations (section 220), in speaking of the manner of proving the existence of a corporation, says : “If it is a corporation created by a foreign statute, the statute must be proved as a fact, in the mode prescribed by the law of the forum for the proof of foreign laws. If the statute is a special law of a foreign state, the mode of proving it will usually be by an ex-etaplified copy, certified by the Secretary of State, or otherwise authenticated as provided by the act of congress. If the corporation is organized under a general law of another state of the Union, it will usually be sufficient, under the rules of evidence in most of the states, statutory or resting in adjudged cases, to prove it bj$the production of a book of the statutes of such other state, which purports on its face to be published by the authority of such state.” In United States Bank v. Stearns, 15 Wend. 314, Mr. Chief Justice Savage, in speaking of the character and degree of evidence required in such cases, says : “The least proof which has been held sufficient is the production of an exemplification of the act incorporating the plaintiffs, and evidence of user under their charter.” In Savage v. Russell, 84 Ala. 103 (4 South. 235), it was held that a foreign corporation whose existence was denied must show not only the papers and proceedings of incorporation, but the statute of the sister state authorizing such incorporation. In Eagle Works v. Churchill, 2 Bosw. 166, it was held that the certificate of the Secretary of State of a sister state was sufficient to prove the existence of a corporation, provided that due proof of the statute under which the corporation was organized was also made. The plaintiff, having neglected to offer in evidence books printed or published under the authority of the State of Missouri and of Great Britain, and purporting to contain the general laws under which the JarvisConklin Mortgage Trust Co. and plaintiff were probably incorporated, and the latter’s articles amended (Hill’s Ann. Laws, § 725), failed to establish the de facto existence of said company and society: State v. Savage, 36 Or. 191 (60 Pac. 610).

Another question to be considered is that of usury. Our statute provides, in effect, that on contracts interest at the rate of ten per cent, per annum may be charged, by express agreement of the parties, and no more, and if it shall be ascertained in any suit brought on any contract that a rate of interest has been contracted for greater than so authorized, either directly or indirectly, the same shall be deemed usurious, and shall work a forfeiture of the entire debt so contracted to the school fund of the county where such suit is brought: Hill’s Ann. Laws, §§ 8587, 3589. The trial court, upon the issue under consideration, found, in effect, that it was calculated and understood by the lender and borrowers at the time the note was executed that the sum of $5,956.40, with interest at the rate of eight per cent, per annum for five years, was equal in amount to the sum of $6,600 for the same term at the rate of five and one-half per cent, per annum; that there was no agreement to pay or receive usurious interest; and that the two and one-half per cent, additional interest stipulated for in case of default was in the nature of a penalty, which the defendant might avoid by making payment of the interest and principal when they severally matured, — but refused to enforce such penalty; and, the plaintiff not having appealed therefrom, the only question to be considered is whether such finding is justified by the terms of the note. In Union Trust Co. v. Hagood (C. C.), 97 Fed. 360, Mr. Justice Simonton, in promulgating a rule for determining whether a stipulation for the payment of an increased rate of interest in case of default constitutes usury, or is only a penalty, says: “If, from the contract, it appears that the parties, when making it, understood that the words of the note were not peremptory, but that the maker would be indulged, provided he paid the increased rate of interest, this would be usury ; but if the threat of increased interest was held out to enforce prompt payment, and if the increased rate was penalty for the default, it would not be usury.”

In Lawrence v. Cowles, 13 Ill. 577, an action to recover on a promissory note, with interest after maturity at the rate of ten' per cent, per annum, the statute permitting only six, it was held that the increased rate of interest was in the nature of a penalty to secure the punctual payment of the debt, the court saying : “It was in the power of the maker to avoid the payment of interest altogether, by the prompt payment of the principal. Where, by the terms of a contract, a party can discharge himself by paying the real amount due, the transaction is not obnoxious to the statute against usury.” In Cutler v. How, 8 Mass. *257, it was held that where, by the terms of a contract, the party may, by payment at a day certain, avoid any stipulated penalty, such contract is not usurious. To the effect that a stipulation is a contract to pay after maturity a greater rate of interest than that prescribed by law is a penalty only, and not usurious, see 27 Am. & Eng. Enc. Law (1 ed.), 994; Ramsey v. Morrison, 39 N. J. Law, 591; Gower v. Carter, 3 Iowa, 244 (66 Am. Dec. 71) ; Wilson v. Dean, 10 Iowa, 432. In Wilday v. Morrison, 66 Ill. 532, it was held that where a promissory note provides that, if the principal is not paid when due, a greater rate of interest shall be paid than is allowed by law, and it is made payable on so long a time as not to induce the belief that the interest clause was intended as an evasion of the statute, it will not be held to be usurious from such fact alone. The note being payable five years after its execution leads us to believe that the stipulation to pay the increased rate of interest after maturity was intended as a penalty, and not to evade the statute ; and, this being so, there was no error in said finding of the court below.

For the failure to make proof of the corporate existence of the mortgagee and its assignee, the decree, in my opinion, ought to be reversed, and the suit dismissed without prejudice : Hill’s Ann. Laws, § 408. My associates, however, are of the opinion that the answer of defendant Jones is insufficient as a plea in abatement, because it does not allege, either positively or upon information and belief, that the plaintiff is not a corporation. Having attempted to plead nul tiel corporation in abatement, the sufficiency of his answer must be determined by the technical rules ■ governing such a plea, and must contain a full and direct averment of all material facts necessary to constitute it: 1 Enc. PI. & Prac. 23. The answer of the defendant Hogue is insufficient to put in issue the corporate existence of either the plaintiff or the Jarvis-Conklin Mortgage Trust Co., because it does not deny the allegations of the complaint touching their incorporation. Our statute requires the answer to contain a specific denial of each material allegation controverted by the defendant, or of any knowledge or information thereof sufficient to form a belief: Hill’s Ann. Laws, § 72. Under this provision, a mere affirmative averment that the defendant has no knowledge or information sufficient to form a belief concerning a material matter alleged in the complaint is not a denial, and presents no issue for trial: Pomeroy, Code Rem. (3 ed.) § 640 ; Bliss, Code Pl. (3 ed.) § 326 ; San Francisco Gas Co. v. City of San Francisco, 9 Cal. 453. The New York cases heretofore referred to were decided under a statute authorizing either a general or specific denial. At common law a direct traverse is made by an affirmation the contrary to that of the opposite party. Hence it was entirely proper for the courts of New York to hold that an affirmative allegation would amount, in effect, to a denial. But our statute requires a specific denial, and since the answer of defendant Hogue does not deny the corporate existence of the plaintiff or of the JarvisConklin Mortgage Trust Co., either positively or upon information and belief, no issue upon that question was presented for trial. Therefore the error, if any, in the admission of evidence tending to prove their corporate existence was immaterial. The decree is therefore affirmed. Affirmed .