Rowe v. Stevens

137 P. 159, 25 Idaho 237, 1913 Ida. LEXIS 32

• Court: Idaho Supreme Court
• Decided: November 29, 1913
• Status: Published

Opinions

STEWART, J.

This is a petition based upon an affidavit for a writ of review. The petition and affidavit allege that the Shenon Ranch Company was at all times mentioned a corporation under and by virtue of the laws of the state of .Montana, with its principal place of business in the city of Butte, Silver Bow county, Montana; that on October 8, 1910, the Shenon Ranch Company (hereafter designated in this opinion as the ranch company) filed with the recorder of Lemhi county, said Lemhi county being the county within the state of Idaho in which the ranch company designated its principal place of business, a copy of its articles of incorporation duly certified by the Secretary of State of Montana; that on October 17, 1910, the ranch company filed with the Secretary of State of the state of Idaho a copy of the articles of incorporation duly certified by the county recorder of Lemhi county, and paid to the Secretary of State at the time the same fees as are provided by law; that on November 10, 1910, and within three months, it commenced to do business in the state of Idaho. The ranch company designated W.“ H. Mulkey, a resident of Lemhi county, in which the principal place of business of the ranch company .was located, in which its principal business was conducted, as its agent, upon whom process issued by authority of or under any law of the state might be served, and within the time aforesaid, or on or about the 10th of November, the ranch company filed in the office of the Secretary of State of Idaho and in the office of the clerk of the district court of Lemhi county such designation in writing; that said ranch company did not pay the license tax for the year 1912 required by chap. 6 of the General Laws of the state of Idaho passed by the extraordinary session of the state legislature in 1912 and approved on January 30,1912, and has not paid the said license tax required by said law for the year 1913 and has not paid the penalty prescribed by chap. 6 of the general laws on account of its failure to pay the license tax for the years aforesaid; that on October 1, 1912, the Secretary of State of Idaho made a report to the governor giving a list of the corporations which had become delinquent in the payment of the license tax provided in sec. 3 of the act above described, and thereupon the governor issued Ms proclamation declaring that the right to do business in the state would be forfeited unless payment of the license tax together with penalty by law for such delinquencies be made to the Secretary of State on or before the hour of 4 o’clock of the 30th day of November then next following, to wit, November 30, 1912; that the Secretary of State in his report to the governor described the ranch company as being a foreign corporation that had failed to pay the license required by the law for the year 1912; that the ranch company has not at any time paid the license for 1912 required by the act above mentioned, and that the governor’s proclamation was duly published, and that át the hour of 4 o’clock of the 30th day of November the right of the ranch company to do busmess M the state of Idaho became forfeited to the state, and that the ranch company has no legal right to do business in the state since November 30, 1912, and has no power to sue or be sued in the state of Idaho; that the plaintiffs herein, James H. Rowe, James K. Heslet, Thomas Tomich, Charles Copenharve and J. C. Phillips, were the sole and only directors and managers in office of the affairs of the ranch company at the hour of 4 o’clock P. M., November 30, 1912, and ever since have been and now are the sole directors of the said ranch company in the state of Montana, and that said directors by operation of law became ipso facto trustees of the ranch company for the benefit of its creditors and stockholders at the hour of 4 o’clock on November 30, 1912, and ever since have been and now are by reason of the provisions of chap. 6 above mentioned; that on March 17,1913, the Shenon Land Company (hereafter designated as the land company), a corporation then and now existing under and by virtue of the laws of the state of Idaho, attempted and pretended to bring an action in the district court of Lemhi county against the ranch company by filing in the district court of Lemhi county a complaint which is made a part of the petition, and on March 17, 1913, a summons was issued in the action and the summons was directed to said ranch company, and in the month of March the summons was served by the sheriff of Lemhi county upon W. H. Mulkey as the agent of the ranch company; that within twenty days from such service upon Mulkey the plaintiffs, as directors of the ranch company in the state of Montana, caused an appearance of the ranch company to be entered in the action and a demurrer to the complaint to be filed in the district court, and on April 23, 1913, the plaintiffs as such directors .caused an answer and cross-complaint to be filed in the said pretended action, a true copy of which is attached and made a part of the affidavit and petition for review; and on April 24th the land company filed in the action an answer to the cross-complaint of the ranch company; that on April 23d the action commenced by the land company against the ranch company came on for trial before Hon. J. M. Stevens and a jury. The trial continued from day to day over Sunday until April 28, 1913. On said day upon opening court James H. Rowe filed in the court and presented to the judge a suggestion in writing of the termination of the existence in the state of Idaho of the right to do business in the state of Idaho of the ranch company, and a copy of said written suggestion is attached and made a part of the petition. The court discharged the jury and the trial terminated without any judgment of any kind being given or entered therein. Then on the following day, April 29, 1913, the plaintiffs commenced an action in the district court of Lemhi county against the land company by filing their complaint in the same court and having summons issued, and thereafter, the exact time being to this petitioner unknown, E. W. Whitcomb, one of the attorneys for the land company, presented to Hon. J. M. Stevens, Judge, at his chambers, a motion, and on September 3, 1913, the judge acting as judge of the district court' made an order which was filed in the action, and thereafter on September 8, 1913, the land company filed in the action in the district court an amended complaint; it is further alleged that at the time of the commencement of the action by the land company on March 17, 1913, the ranch company had no legal existence in the state of Idaho, and had no right to carry on business, and that there was in fact no action pending against the ranch company, and that the order made by the judge on September 3d was. void and beyond his power and authority; that the plaintiffs are the parties beneficially interested in the order so made by the judge on September 3d, and that the judge had no authority or jurisdiction or power as judge of said district court to make an order appointing any person trustee to defend an action against the ranch company that was not pending at the hour of 4 o’clock, November 30, 1912; and that the directors and managers in office of the affairs of the ranch company at the time its right to do business in the state of Idaho was forfeited are the only persons capable of being sued with respect to or upon any claim or demand against the ranch company; and that the action commenced on March 17, 1913, by the land company, was not instituted or commenced until after the forfeiture of the right of the ranch company to do business.

To this petition counsel for the defendant filed a motion to quash and dismiss the petition. We will consider this motion in the order which counsel present in their briefs upon the argument, which they designate as follows: 1. Did the lower court exceed its authority in making the order complained of? 2. If so, does certiorari lie to correct the error? 3. Are the plaintiffs beneficially interested so as to entitle them to invoke this court’s power to issue a writ of review?

As to the question of the court’s exceeding its authority, counsel for the plaintiffs call the court’s attention to the authority conferred in sec. 11, chap. 6 of the Laws of 1912, and claim that sec. 11 confers no authority upon the court to appoint a receiver or trustee.

The main contention of the petitioners is, that the district court had no authority to appoint, upon the petition filed in this case, any person as trustee to defend an action against the ranch company which was not pending at the hour of 4 o’clock P. M. on November 30, 1912, and that the only persons capable of being sued since November 30, 1912, with respect to or upon any claim or demand against the said ranch company, are the persons who were directors or managers in office of the affairs of the said ranch company at the time its right to do business in the state was forfeited, at the hour of 4 o’clock P. M., November 30, 1912, under the act of March 17, 1913, and that no action or suit so commenced on March 17, 1913, by the land company, was instituted or commenced in said court until after the forfeiture of the right of said company to do business in the state of Idaho; that it could not and cannot be prosecuted againsti any person or persons except the persons who were directors and managers in office of the affairs of the said company at the time its right to do business in the state of Idaho was forfeited, to wit, November 30, 1912.

The petitioners in their brief refer to an act, chap. 6, Extraordinary Sess. Laws 1912, p. 10, which follows the general laws of the state passed at the 11th session, and claim that the order of the trial court should be reviewed with reference to his action in appointing a trustee, and that a corporation organized under the statutes of this state and doing business in this state cannot sue a foreign corporation which has not complied with the act of January 30, 1912, above referred to herein, secs. 1, 2 and 10.

It is true from the record in this ease that the ranch company was a corporation organized under the laws of the state of Montana, and the record does not show that the ranch company did’ comply with the laws of the state, but so far as appointing a trustee or receiver for the foreign corporation, the ranch company, there is nothing in the record to show that the court rested his jurisdiction to appoint a receiver wholly upon the act of January 30, 1912, except there was presented to the court the fact that the company had not complied with the act. The trial court no doubt rested upon the constitution and the statutes enacted in carrying out its original jurisdiction in all cases both at law and in equity, and such appellate jurisdiction as may be conferred by law. (Const., art. 5, sec. 20.)

To carry out and give effect to this constitutional provision the legislature has provided, sec. 3830: “The district court has original jurisdiction: 1. In all cases both at law and in equity; 2. In all special proceedings; 3. In the. issuance of writs of mandamus, certiorari, prohibition, habeas corpus and all writs necessary to the exercise of its powers.....” Also sec. 2787 of the Rev. Codes, which was not repealed or changed by the act of January 30, 1912. This section provides: “Unless other persons are appointed by the court, the directors or managers of the affairs of such corporation at the time of its dissolution are trustees of the creditors and stockholders, or members, of the corporation dissolved, and have full power to settle the affairs of the corporation. ’ ’ This section does not apply in this case, but only applies to the right to do business in the state.

There is no provision in the act which limits the jurisdiction of the court in appointing trustees and receivers of a foreign corporation, which owns valuable property in the state and is making contracts and carrying on business, where such corporation becomes insolvent and has creditors, and is unable to pay the debts of the corporation, and there is no question but that such corporation can be sued in the courts of the state, and the courts acquire jurisdiction of such foreign corporation by reason of the fact that such corporation has appointed an agent and a principal place of business located in the state; and the district court and the judge thereof has power to make such appointment. (See. 4329, Rev. Codes.)

A receiver was apppointed September 3, 1913, several months after the action of the land company against the ranch company was filed for the foreclosure of its mortgage securing a promissory note issued by the ranch company for the sum of $66,483.60, securing its mortgage deed, bearing date May 28, 1910, covering certain property located in the state of Idaho.

In the case of Hall v. Nieukirk, 12 Ida. 33, 118 Am. St. 188, 85 Pac. 485, this court held that under subds. 5 and 6 of sec. 4329, Rev. Stats., a receiver will be appointed where it is shown that the corporation is insolvent or in imminent danger of insolvency, and in all eases where receivers have heretofore been appointed by the usages of. the courts of equity. The record in this case sufficiently shows that this rule is applicable to this case. In the former case the court cites many authorities applicable to the facts of this case, and in that case the court holds, under our statutes an appointment of a receiver does not necessarily cause a dissolution of the corporation, unless the court so directs. The receiver may be appointed simply to manage the affairs of the corporation during the pendency of the litigation.

High on Receivers, see. 344b, lays down the rule announced in the above case, and also the following rule:

“Except so far as the control of its affairs is placed in the hands of the receiver, it continues to exist for all purposes, and its officers, except as enjoined by the court appointing the receiver, continue to exercise their functions as if no receiver had been appointed.”

The question of the right of a foreign corporation to sue without complying with the statutes has been under consideration a great many times by the different courts of the United States, and the jurisdiction and rule adopted in such constructions of courts have been collected in Thompson on Corporations, 2d ed., vol. 5, secs. 6716 to 6726, inclusive, wherein the rule is stated that in many jurisdictions the failure to comply with the statutory requirements for doing business does not affect the right of a foreign corporation to maintain actions in the local tribunals. (Webster v. Ore. Short Line Ry. Co., 6 Ida. 312, 55 Pac. 661; Vermont L. & T. Co. v. McGregor, 5 Ida. 320, 51 Pac. 102; Valley Lumber Co. v. Nickerson, 13 Ida. 682, 93 Pac. 24.)

In sec. 6718 (Thompson on Corporations, supra), many cases are cited where it is held that a foreign corporation cannot maintain an action within the courts of the state on any contract executed within the state without complying with the required provisions. A foreign corporation is not permitted to sue in the domestic courts until it has placed itself in a position to be sued according to local statutes. This latter rule, we think, states the correct rule to be applied, with certain exceptions found in sec. 6717. In the present case we think the rule stated in sec. 6718 is the rule to be applied to the facts shown in this case.

On November 30, 1912, the time fixed by the governor under the act approved January 30, 1912, the ranch company, its directors and officers, forfeited all rights as such or on its behalf, and they were disqualified to do business under the laws of this state, and such forfeiture continued from that time until the present, and by reason of that fact the ranch company and its directors on its behalf were prohibited to appear in the courts of this state affecting any transaction or contract, including the contract made between the land company and the ranch company at the time the same was entered into, and the plaintiffs in this case could not acquire an interest in the property in controversy except by an instrument in writing, subscribed by the parties creating, granting, assigning, surrendering or declaring the same, or hy the lawful agent thereunto authorized by writing. (Sec. 6007, Rev. Codes.) Neither could the mortgage executed by the ranch company to the land company to secure the balance due on the purchase price of said land be renewed or extended, except by writing, executed with the formalities required in the case of a grant or conveyance of real property. (See. 3389, Rev. Codes.)

Under these provisions of the statute it is clear that the plaintiffs, when this application was filed in this court, had no beneficial interest which would justify this court in issuing a writ of review to annul the .order made by Judge Stevens at chambers, appointing a trustee or receiver for the ranch company, under the allegations and facts presented to the, judge at the time he made the order appointing the receiver in this case. We think, also, that the present action, if brought by parties interested, might be sufficient, because of the necessities and interests of the different parties, and that it would he more speedy and remedial than an appeal.

Other reasons than those we have discussed and decided in this case were presented, but in our judgment they are not material and do not control the questions involved.

We therefore hold in this case that Judge Stevens, judge of the district court of the fifth judicial district, did not err in making the order, and was authorized to make the same. The writ is quashed and the application dismissed. Costs awarded to defendants.