Union Trust Co. v. Sickels

125 A.D. 105, 109 N.Y.S. 262, 20 N.Y. Ann. Cas. 210, 1908 N.Y. App. Div. LEXIS 2724

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: March 4, 1908
• Status: Published

Opinion

Robson, J.:

Defendant demurs to plaintiff’s complaint upon tiie single ground that it does not state facts sufficient to constitute a cause of action. Respondent on the argument of this appeal ássigns three grounds, upon each of which he claims that the complaint is insufficient.

First. That it is defective in not alleging that plaintiff’s assignor, the United States Independent Telephone Company, a foreign stock corporation, had procured from the Secretary of State the certificate required by section 15 of the General Corporation Law,

* that it had complied with the requirements of the law to authorize it to do business in this State.

Second. That this action cannot be maintained because it does not appear from plaintiff’s complaint that the United States Independent Telephone Company has paid the license fee required to be paid by it as a foreign corporation doing business in this State under the General Corporation Law,† and, therefore, no action can be maintained in the courts of this State by it or its assignee.

Third. That the complaint does not contain an allegation that the United States Independent Telephone Company is in readiness to deliver to defendant the forty per cent of stock bonus of that company, which, according to the contract upon which this action is brought, might be sold to be thereafter delivered with the bonds subscribed for by defendant.

The demurrer was allowed by the Special Term upon the first ground above stated, as appears by the opinion delivered on decision of the case, and the other two grounds now urged by respondent were not considered, or at least were not adverted to.

It is now definitely settled that if the complaint in an action,' brought either by the corporation or its assignee, shows that the cause of action alleged is upon a contract made in this State by a foreign stock corporation which is doing business in this State, the complaint is demurrable if it fails to allege in addition that the .corporation had before making the contract procured the certificate required by section 15 of the General Corporation Law. (Welsbach Co. v. Norwich Gas & Electric Co., 96 App. Div. 52; affd., 180 N. Y. 533; Wood & Selick v. Ball, 190 id. 217.)

The prohibition by the statute of the enforcement of contracts made by a foreign corporation extends only to actions upon contracts made within this State by a foreign stock corporation (other than' a moneyed corporation) doing business within this State. (South Bay Co. v. Howey, 190 N. Y. 240, 247.) It follows that, unless the complaint shows these facts as to the character of the corporation, and its doing business and malting the contract within this State, the complaint is not demurrable because it fails to allege that the required certificate was procured.

The complaint in this action alleges specifically that plaintiff’s assignor, the United States Independent Telephone Company, is a foreign corporation. That it is also a stock corporation appears as a fair inference from the fact that it had authorized its agent to sell with the bonds described in the underwriting contract a certain percentage of stock of the company. That the contract, which is the basis of this action, was made within this State, it is urged, also appeal's from the facts alleged in the complaint as to the execution of the contract by defendant, and the address of defendant, which he added to his signature, as required by the contract. Whether or not it can be fairly inferred from the facts pleaded, as to the execution of the contract, that it was made in this State, it is not now necessary to determine; for I do not think it appears, either by the facts set out in the complaint, or by any fair or reasonable inference to be drawn therefrom, that the United States Independent Telephone Company was doing business in this State. The only business which the complaint shows it had done anywhere or at any time was the making of the collateral trust mortgage to the Security Trust Company of Bochester to secure the total issue of §25,000,000 bonds, the making of this underwriting agreement, constituting the manager, as its agent, to sell §2,500,000 of these bonds, others of which had apparently already been disposed of, the procuring by the agent of defendant’s signature to this underwriting agreement, the receipt of moneys from defendant on his contract, delivery to him of the bonds he thus paid for, and the assignment of the underwriting contract to plaintiff to secure the payment of a note given the latter for a loan of §43,000. All of these facts relate only to and are a part of an apparently legitimate effort on the part of the telephone- company to dispose of its bonds; that is, in other words, to borrow money. What the expression “doing business,” or to “do business,” within this State, as used in the statute, really means has received judicial attention in many cases; but, except in the present case, it does not seem to have been yet held that a foreign corporation was doing business in this State, within the meaning of the statute, when it had done no business therein beyond presenting for sale and selling to individual purchasers, or floating on the market, either its stock or its bonds. (Payson v. Withers, 19 Fed. Cas. 29, 30.) The plain reading of the statute shows that it was intended to prevent a foreign stock corporation from doing in this State the business for the doing of which it was organized until it had procured the required certificate, and that it does not contemplate a prohibition, either of the sale of its stock, or borrowing money on its obligations. It obviously relates only to the regular and customary business operations of the corporation. (Potter v. Bank of Ithaca, 5 Hill, 490; People v. Horn Silver Mining Co., 105 N. Y. 76; Beard v. Union & American Pub. Co., 71 Ala. 60, 62.) What business the United States Independent Telephone Company was organized to conduct-does not appear in the complaint, except as its name may give some indication of its character. But in what place, or within what territory, that business was to be conducted, or was actually carried on, does not appear, either by direct allegation, or warrantable inference, from any fact disclosed by the complaint. It follows that the complaint does not show that this company was doing business in this State; and, therefore, on the facts now appearing neither it nor its assignee was precluded by the statute referred to from maintaining an action on the contract set forth in the complaint.

That the second ground of objection to plaintiff’s complaint cannot, in any event, be taken by demurrer has apparently been distinctly held by the Court of Appeals in two recent cases. (Wood & Selick v. Ball, 190 N. Y. 217; Halsey v. Jewett Dramatic Co., Id. 231.)

The third ground, which is hereinbefore set out, is also insufficient to sustain the demurrer. While the manager, as agent of the telephone company, was, by the terms of the underwriting agreement, authorized to sell to the subscribers stock of the corporation, apparently as a bonus for the subscription, “ not to exceed ” a certain percentage of the amount of subscription for bonds to be delivered therewith, it does not appear that under the contract, as pleaded, any sale of stock to defendant in addition to the bonds he subscribed for was in fact made. Defendant agreed to pay for the bonds as calls were made on him for payment, according to the provisions of the underwriting agreement. Such calls were made, and he failed and neglected "to respond. The telephone company was at all times, and is now, as the complaint alleges, able and ready to deliver the bonds in fulfillment of the contract when defendant should comply with his part of the agreement. We think.the complaint states a complete cause of action against the defendant.

All concurred.

Interlocutory judgment reversed, with costs, and demurrer overruled, with costs, with leave to defendant to plead over upon payment of the costs of the demurrer and of this appeal.

See Laws of 1892, chap. 687, § 15, as amd. by Laws of 1901, chap. 538, and Laws of 1904, chap. 490.— [Rep.

See Tax Law (Laws of 1896, chap. 908), § 181, as amd. by Laws of 1901, chap. 558. and Laws of 1906, chap. 474.— [Rep.