Case ID: ohio-st_27/html/0343-01.html
Source: Caselaw Access Project
Author: {"author": "Ashburn, .J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The Newburg Petroleum Company v. John H. Weare, et al.
    1. It is not contrary to the laws of Ohio, nor against public policy, in the present condition of her laws, for a foreign corporation, lawfully organized in a sister state, to do business in Ohio.
    2. A foreign corporation, authorized by the laws of the state in which it was organized to do business in this state, may transact business in Ohio not inconsistent with Ohio laws; may sue and be sued in our courts.
    
      3. Persons entering into contract with, such foreign corporation concerning property, or rights in property, appropriate to its business in Ohio, will be estopped, after dealing with said corporation, recognizing by their acts its validity and receiving the benefits of the contract, from denying the power of the corporation to make the contract, in an action on the contract.
    Error to District Court of "Washington county.
    
      Ewart § Shaw, for plaintiffs in error:
    I. This action is brought on a contract made by the defendant, Weare, with the plaintiff, under which Weare was put in possession of the leasehold, and has received the benefits of the contract. He and the other defendants are, therefore, estopped from denying the plaintiff's existence as a corporation, or its power to contract or be contracted with, sue or be sued, in an action in affirmance of the contract. Steam Nav. Co. v. Weed, 17 Barb. 381; McCutcheon v. The Steamboat Co., 13 Penn. 13; Silver Lake Bank v. North, 4 Johns. Ch. 370; The State of Indiana v. Woram, 6 Hill, 37; Moss v. The Rossie Lead Mining Co., 5 Hill, 137; Palmer v. Lawrence, 3 Sandf. 170; Potter v. Bank of Ithaca, 5 Hill, 490; Sydam v. The Morris Canal and Banking Co., 5 Ib. 491; The Sacketts Harbor Bank v. The Lewis County Bank, 11 Barb. 213; The Chester Glass Co. v. Drury, 16 Mass. 102; 8 Ind. 333; Brookville v. Greensburg Turnpike Co., Ib. 392; Jones v. The Cincinnati Type Foundry, 14 Ib. 89; Hubbard v. Chappel, Ib. 601; Heaton v. Cincinnati and Fort Wayne R. R. Co., 16 Ib. 275; Mickel v. German Savings Fund Society, Ib. 181; Williams v. Franklin Township Academical Association, 26 Ib. 310; Bank of Circleville v. Renick et al., 15 Ohio, 322; Trumbull Co. Mu. Fire Ins. Co. v. Horner, 17 Ib. 407; Medill v. Collier, 16 Ohio St. 599; D. & C. R. R. Co. v. Hatch & Co., 1 Dis. 84; Bank of Chillicothe v. Swayne, 8 Ohio, 237; Miami Exporting Co. v. Clark, 13 Ohio, 21; 22 N. Y. 272.
    II. A corporation of this state may contract in another .state to which it is empowered by its charter, may hold property thereunder, sue and be sued, unless prohibited by the statute of such other state. 13 Pet. 519, 588 ; Story’s Con. of L., sec. 37; 14 Pet. 122; 34 N. Y. 208; Bank of Ashland v. Jones, 16 Ohio St. 145; 12 Ohio, 122; 2 Ohio St. 167; S. & C. 738; S. & S. 217, sec. 34; Ib. 232; Ib. 234, sec. 442; Ib. 166, sec. 171; Ib. 176, sec. 208; American Bible Society v. Minshall, 15 Ohio St. 537; Hanna & Finley v. International Petroleum Co., 622; 25 Ohio St. 279.
    
      H. L. Sibley, also for plaintiff in error:
    I. The law seems to be well settled, that a “ party who contracts with another as á corporation is estopped to deny the legal existence of such corporation,” in an action on the agreement. Worcester Med. Inst. v. Harding, 11 Cush. 285; Cong. Society in Troy v. Perry, 6 N. H. 163; Dutchess C. M. Co. v. Davis, 14 Johns. 238; Eaton v. Aspinwall, 19 N. Y. 119; M. E. U. Church v. Picket, 19 N. Y. 482; Leonardsville Bank v. Willard, 25 N. Y. 474; Cochran v. Arnold, 58 Penn. St. 399; Bradley v. Ballard, 55 Ill. 413 ; Callander v. P. and H. R. R. Co. 11 Ohio St. 517; Warner v. Callander, 20 Ohio St. 197; Smith v. Shelby, 12 Wal. 358.
    II. In the application of this doctrine, where the ground of objection is either that the corporation never was legally organized, or, if lawfully constituted, that its corporate franchises have subsequently been forfeited, by misuser or otherwise, and therefore that in legal contemplation there is no corporate entity which a court of law can recognize, it seems to be uniformly held that this question can not be made collaterally, but only by a direct proceeding against the corporation. Gill’s Adm’x v. K. and C. Gold and S. M. Co., 7 Bush. 636; Hughes v. Bank of Somerset, 5 Littell, 45; Harrison v. L. and F. R. R. Co., 9 B. Mon. 470; Wight v. S. R. R. Co., 16 B. Mon. 5; Buffalo and A. R. R. Co. v. Cary, 26 N. Y. 75; Duke v. Cahawba Nav. Co. 16 Ala. 372; Cochran v. Arnold, 58 Penn. St. 399; Webb v. Moler, 8 Ohio, 548; Smith v. Shelby, 12 Wal. 358.
    III. The failure of the courts below to notice the distinction between ordinary corporate franchises and those of a prerogative character was, we think, a source of misapprehension, and cause of erroneous decision. This important distinction, and the principles on which it is founded, are ably and clearly stated in a leading case in Vermont, whérein the inter-state rights of corporations are folly discussed. State of Vermont v. Boston, etc., R. R., 25 Vt. 433.
    IV. As there is no legislation of this state forbidding it, on the settled principles of state comity, this company is entitled to exercise any but prerogative franchises conferred by its charter, in Ohio. Hence, in its corporate character and functions, the company is recognized by our law, and its entire competency to make the agreement in question, and to be a party to a suit thereon, must, therefore, be upheld by our courts. Lumbard v. Aldrich, 8 N. H. 31; State, etc. v. Boston, etc., R. R., 25 Vt. 433; Hutchins v. New England C. and M. Co., 4 Allen, 580; State v. Sherman, 22 Ohio St. 411; American Bible Society v. Minshall, 15 Ohio St. 537; 23 Ohio St. 622; Thompson v. Swoope, 24 Penn. St. 474.
    
      Simeon Nash, for defendant in error :
    The petition is defective. It does not set out what power's were vested in it, the plaintiff", by the laws of New York. The courts of Ohio can not take judicial notice of the laws of New York, and hence can not know whether it has, by its charter, the powers which it claims to exercise in Ohio. As a corporation, the plaintiff can exercise only such powers as are granted it by its charter. Dartmouth College v. Woodward, 4 Wheat. 636; Bank of Augusta v. Earle, 13 Pet. 519; 13 Curtis, 277; United States v. Dandridge, 12 Wheat. 64; 2 East. 273; Oowper, 174, 343; Salk. 651; Burr, 1077; 4 T. R. 182; 3 Esp. 164 ; Ingraham v. Hart, 11 Ohio, 255.
    As to what is the law governing corporations generally, see Bank of Augusta v. Earle, 13 Pet. 519, 588; Runyan v. Costor’s Lessee, 14 Pet. 122; Miller v. Ewer, 27 Me. 509; 26 Me. 326; Hill v. Beach, 12 N. J. 31; Merrick v. Brainard, 38 Barb. 575; 56 N. Y. 623; Bard v. Pool, 2 Kernan, 507; 3 Met. 564; 13 Gray, 489; 1 Black, 286; 20 Ind. 492; 20 Wallace, 148; Hilles v. Parish, 1 McCarter (N. J.), 380; Aspinwall v. Ohio, etc., R. R. Co., 20 Ind. 492; Day v. Newark India-rubber Manufacturing Co., 1 Blatchf. 628.
    Corporations are not estopped from showing their want of power to make the contract sued on. Albert v. Savings Bank of Baltimore, 1 Md. Ch. 407; Abbot v. Baltimore and Rapp. Steam Packet Co., 1 Md. Ch. 542.
    Can not act out of the state creating it. Gill v. Kentucky, etc., Mining Co., 7 Bush, 635; Martin v. Mobile, etc., R. R. Co., Ib. 116; Baltimore, etc., R. R. Co. v. Glenn, 28 Md. 287; 11 Ind. 404.
    I claim, therefore, that this corporation is a fraud against the law of New York, which can not give any authority for a corporation created by it to carry on business in Ohio; that this corporation, organized in New York, not to do-business there, but in Ohio, is a fraud upon our legislation, and illegal and void in Ohio, and is against the public policy of this state.
    On the question of estoppel, see Mattox v. Hightshun, 39 Ind. 95; Bigelow on Estoppel, 285, 298; Doe v. Ford, 3 Ad. & E. 649; Doe v. Howells, 2 Barn. & Ad. 744; Ferguson v. Landrum, 5 Bush, 230; Todd v. Herr, 42 Barb. 217 People v. Murray, 5 Hill, 468; Van Hook v. Whittock, 26 Wend. 43; Burlington v. Gilbert, 31 Iowa, 356; 8 Allen, 371; 7 Gray, 277; 22 N. Y. 312; 3 Kern. 638; Welland Canal Co. v. Hathaway, 8 Wend. 480; Bigelow on Estoppel, 474; 16 Ind. 275; 16 Ib. 190; 22 N. Y. 307; 40 N. Y. 168; L. R. 2 Exch. 356; 11 C. B. 775; 18 Q. B. 618; 3 Ch. Ap. 651; Lindley on Part. 199, 269.
    Nor does this ease come within the doctrine of estoppel in pais. 31 Ind. 1; Kenzie v. Steel, 18 Ohio St. 38; Donaldson v. Hall, 2 Daly, 325; Davies v. Haywood, 64 N. C. 83; 31 Ind. 76; 30 Ib. 488; 8 Ohio St. 270; 5 Ohio St. 307; 7 Ohio St. 105; 16 Ohio St. 612.
   Ashburn, .J.

This action was brought by plaintiff to> recover a royalty reserved under a contract of assignment by plaintiff to defendant, Weare, of certain oil-land leases-in Washington county, Ohio. The other defendants have .and hold interests in the leaseholds from Weare.

Plaintiff charges, substantially, that on the 30th day of June, 1866, it was, and now is, a corporation duly organized under the laws of the State of New York; that Derrickson Reynolds, the owner in fee of the land, demised it to certain parties named, who afterward assigned the leaseholds to the plaintiff; that the leasehold lauds are in Washington county, Ohio ; that plaintiff became the owner of the leases for the purpose of excavating for coal, carbon oil, etc.; that plaintiff, at that date, being seized of an unexpired term in said lands, entered into a contract with' defendant, Weare, and assigned to him said leaseholds, reserving to plaintiff one-sixth of the oil and other minerals produced therefrom, and, in consideration for said assignment of said leases to him, defendant, Weare, agreed and promised to pay plaintiff one-sixth of the oil produced thereon; that plaintiff put defendant, Weare, into possession of .the lands under said contract; that Weare and •others holding under him have ever since remained in possession and enjoyment of the said leaseholds; that four thousand and sixteen barrels of oil have heen produced thereon since Weare took possession; that six hundi’ed and sixty-nine barrels would be plaintiff’s royalty under the •contract; that it has received but one hundred and twenty-three barrels, leaving due plaintiff' five hundred and forty-six barrels of oil; that defendants refuse to pay them to plaintiff. Plaintiff prays for an account and general relief.

In our view of the case, it is unnecessary to consider the pleadings further than to state that the answer, by not denying, admits the facts stated in the petition, and charges .as a defense that plaintiff is an organization formed to avoid the laws of Ohio governing corporations in Ohio for .similar purposes. On the trial plaintiff' offered, without •objection, the statutes of the State of New York, under which it claims its organization; also a certificate of its organization there, duly authenticated. No other testimony was offered by either party. The District Court dismissed the action. Plaintiff demanded a new trial. Denied. A hill of exceptions, embodying all the testimony, was taken, and made part of the record. To the judgment and ruling of the court plaintiff’ assigns in this court as causes of error the following:

“1. That the said court erred in finding that the plaintiff’ was not entitled as a corporation under the comity of nations to bring an action or sue in the courts of Ohio.

“ 2. That the said court erred in overruling and denying-the plaintiff's motion for a new trial.

“ 3. That the said judgment was given for the said defendants, when it ought to have been given for the said plaintiff, according to the law of the land.*

By the statutes of New York, such corporations as-plaintiff are authorized to complete their organization and transact business in a sister state in the manner provided in section 1 of “ an act to authorize the formation of corporations for manufacturing, mining, mechanical, or chemical purposes,” and the amendments thereto. Section 2 declares them “ bodies politic and corporate in fact and in name by the name stated in such certificate,” . . . and “ by their corporate name shall be capable, in law, of purchasing, holding, and conveying any real and personal estate whatever which may be necessary to enable the said company to carry on their operations named in such certificate.” The original act was amended in 1857, and section 3 of the amendment provides : “ If any company shall be formed under said act for the purpose of carrying on any part of its business, in any place out of this state, the said certificate shall so state, and shall also state the name of the town and county in which the principal part of the business of said company within this state is to be transacted, and said town and county shall be deemed the town, place, and county in which the operations and business of the company are to be carried on, and its principal place of business, within the meaning of the provisions of this act.”

In compliance with the statutes of New York, A. M. Sherman, Charles S. Miles, and E. Warner, on September 21,1864, made, acknowledged, and filed, as required by section 1 of the original and section 3 of the amended act, a certificate, stating, amongst other things, “ that the corporate •name of the said company is to be the £ Newburg Petroleum Company;’ that the objects for which the said company is to be formed are mining, digging, and boring for petroleum and mineral oils, and pumping, extracting, and vending the same; also mining and vending coal and other minerals, and for doing such other things as are or may be connected with or necessary to the prosecution of the busi■ness of the said company; that the amount of the capital •stock of said company is to be $50,000; that the term of the existence of the said company is to be twenty years from the day of the date thereof; that the number of shares ■of which the said stock is to consist is to be five thousand shares, of the par value of ten dollars each; that the number of the trustees shall be five, and the names of those who shall manage the concerns of the said company for the first year are A. M. Sherman, O. S. Miles, E. Warner, Par■don C. Sherman, and Francis H. Towes; that the said company is formed.for the purpose of carrying on some part of its business out of the State of New York, namely, the county of Washington, in the State of Ohio ; and the principal part of the business of said company within this state is to be transacted in the city of New York, where its office is to be located.”

It is clear that plaintiff, at the time it entered into the • contract with Weare, was, under the statutes of New York, “ a body politic and corporate,” with power to do business in that state, and capable, so far as the laws of that state ■ could make it, to transact business in Washington county, Ohio, and of ££ purchasing, holding, and conveying any real and personal estate whatever which may be necessary to enable the said'corporation to carry on its operations named in the certificate.”

Two questions are presented by this record:

1. The legal right of a foreign corporation to make and -enforce a contract in Ohio.

2. The effect of defendant, Weare’s, conduct in reference •to the contract upon his defense in the action.

The power that a foreign corporation may exercise in another state depends for its validity upon the condition of the laws of the sovereignty in which it is exercised; and such corporation can make a valid contract only when the sanction of such sovereignty is given expressly or impliedly. Ohio, in such .ease, has no law of prohibition, and the course of decision in her highest court has been such .as to give sanction to such contracts.

Corporations organized in New York are, for the purposes of litigation, citizens of that state, and, until prohibited by statute, have the rights of artificial citizens in this state, in respect to acquiring, holding, and disposing of property and interests in property in the proper transaction of their business. And incident to this power is the right t> sue and quality to be sued in our courts. This comity between the States of New York and Ohio made it lawful for plaintiff to enter into the contract in this ease, and to -use this forum to enforce its rights under the contract.

In the ease of the American Bible Society et al. v. A. G. Marshall et al., 15 Ohio St. 537, the power of a foreign corporation to take property by devise in Ohio, to possess and litigate concerning it in our courts, was recognized. That was a case in which, by the laws' of the State of New York, where the corporation was organized, corporations are prohibited from taking property by devise, unless authorized to do so by its charter or the statute. Brinkerhoff, J., in the opinion, says : “ There is nothing in the legislation of this state to limit the general capacity of the Bible society to take, by devise, real estate in Ohio.”

We find nothing in the laws or the public policy of Ohio prohibiting a foreign corporation from entering into contracts in relation to their business, or selling any property they may,in relation to their business, have acquired, and property relating to their corporate capacity. When Ohio interposes by legislation to prohibit the introduction of this kind of labor and capital into the state, it will be time enough to declare the organization of such companies as the plaintiff a fraud upon our laws and our public policy.

It is claimed that the organization of this corporation in New York was not to transact business in that state, but a device to do business in Ohio and evade responsibility under the laws of this state.

This question has been settled in the case of Hanna & Finley v. The International Petroleum Co., 23 Ohio St. 622. The defendant in error was a foreign corporation, char-, tered by the laws of Pennsylvania, and authorized to cai’ry on its business in Pennsylvania and other states.

It commenced business in Ohio, having an office in Pennsylvania.- Whilst pi’osecuting its business in Ohio, in 1866, it became involved in a legal controversy concerning some property it claimed to own. in this state. A petition in error was filed in the District Court of Morgan county to reverse a judgment of the Court of Common Pleas, and was reserved to the Supreme Court. There, as here, one of the errors assigned was that “ the International Petroleum Company could not own property or be a party to a suit in Ohio.” Welch, J., says : “ That a foreign corporation under the present laws of Ohio can hold property in this state, and sue and be sued in her courts, is well settled, and is perhaps not intended to be denied.” In the case in course of decision it is not only denied, but it is claimed in argument that plaintiff is a fraud both on the New York law and our own legislation and policy, and this chiefly because it has only an office in New York city, and does its principal business in Ohio.

This objection to the power and legality of this corporation is so well met in the case referred to in 23 Ohio S.t., that we will quote the language of the opinion in part. The judge says : “ The argument seems to be that this company was not a corporation, either because it was empowered by its charter to do business outside the state of its creation, as well as inside the state, or else because at the time these proceedings were had the company had done no business, beyond its mere organization in the State of Pennsylvania. We are unable to see why the incorporation should be invalidated on either or both of these grounds. The question is simply whether a corporation, authorized by its charter to do business both at home and abroad, and which, after doe organization at home, commences its foreign business first, has a legal existence as a corporation. We think that it has. The life of a corporation dates from its organization, and not from the time it begins to do business.”

The plaintiff, by virtue of its organization-in due manner, had au actual legal existence in New York so soon as it was duly organized, and a permissive existence in Ohio so soon as it commenced business in Ohio. Owning property and transacting ordinary business by foreign corporations in this state, under the permissive authority of their organization, are not assumptions of prerogative power or right. When the case arises of a foreign corporation assuming the prerogative to levy a tax upon any portion of our people, to build a bridge upon our soil, to collect toll, etc., questions will arise not involved here, and which we do not now consider.

What effect shall be given to the conduct of defendant, Weare, in relation to this contract as shown by the record?

Weare entered into the contract with the plaintiff charged with the knowledge that it was a foreign corporation ; that it was authorized by its organic laws to do business in Ohio ; that from the nature of its business it was necessary for it to hold land, to take the assignment of leases, mine for minerals, and bore for oil, etc.; he took the assignment of leaseholds that plaintiff had purchased from others; took possession of the lands under plaintiff; sold or assigned interests in the leases to other persons; and agreed, in consideration that plaintiff' would assign to him the leaseholds, to pay plaintiff'one-sixth of all the oil produced; has secured from the leases six thousand and sixteen barrels of oil, paid plaintiff' one hundred and twenty-three barrels of the royalty, and retains, as is alleged, five hundred and forty-six barrels of the oil, which plaintiff' claims under the contract.

This he retains upon the theory that plaintiff is a fraud upon the laws of New York, a fraud upon the laws of Ohio, and a fraud upon the polity of nations. In this we hold he has mistaken the law.

In view of these facts, Weare is estopped from denying the legal existence of the plaintiff as a New York corporation ; from denying the power of the plaintiff to make a legal contract for the transfer of the leaseholds to him; from denying the right of the plaintiff to maintain an action to compel him to account. A person benefited by a contract, holding on to it and receiving the benefits arising out of it, can not, in this collateral manner, question its va lidity. As the contract was a legal one, there can be no fur ther question, in this proceeding, about the legal organiza tion of the corporation or its power to do business in Ohio As a general rule, a party will be concluded from denying his own acts or admissions which are designed to and do influence the conduct of another, and when such denial will operate to the actual injury of that other person.

The defense in this ease appears to have in it no equitable consideration, and the laws will not sanction an inequitable proceeding where the integrity of the law can be maintained by a different course. Good faith requires that a person, who has recognized the existence of a corporation by dealing with it openly, with full knowledge of its business character, is yet in the enjoyment of the fruits of the transaction with it under the contract, should be estopped from denying, in this collateral way, the power of the corporation to enter into the contract. When parties seem unwilling to comply with contracts, lawful in their character, courts consider it a duty to admonish them, that it is not fraudulent nor contrary to public policy for them to do so.

Judgment of the District Court and Court of Common Pleas reversed, and cause remanded to the Court of Common Pleas for further proceedings,,

Scott, Chief Judge, Day, Wright, and Johnson, JJ., concurred.