Case ID: misc_49/html/0452-01.html
Source: Caselaw Access Project
Author: {"author": "Giegerich, J. Greenbaum, J. (concurring).", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

William F. McNamara, Appellant, v. Foxhall Keene, Respondent.
    (Supreme Court, Appellate Term,
    February, 1906.)
    Foreign corporations — Powers — Right to sue. (Stock Corporation Law, § i5-)
    Constitutional law—Obligation of contracts — Regulation of remedies.
    The amendment of 1901 (L. 1901, ch. 538) to section 15 of the Stock Corporation Law which prohibited any foreign stock corporation doing business in this State from maintaining any action therein upon any contract made by it therein unless, prior to the making of such contract, it had been duly authorized to do business, and which extended such prohibition to any assignee of such corporation and to any person claiming under either of them, is not. .applicable to a contract of such corporation made in 1900, as to hold otherwise would result in violating the constitutional provisions protecting contract obligations from impairment.
    In an action upon a claim arising on a contract made in this State with a foreign corporation doing business therein in 1900 and assigned after the said amendment .of 1901, it is error to set aside a judgment for , plaintiff upon the ground that he could not maintain the action.
    
      An omission from the answer of an allegation that plaintiff’s assignor did not, subsequently to the making of the contract and before the commencement of the action, obtain authority to do business is fatal.
    Appeal by the plaintiff from an order of the City Court of the city of Hew York, made at the Trial Term, setting aside a verdict directed by the Court.
    Hiles & Johnson (John J. Cunneen of counsel), for appellant.
    Russell H. Laúdale (George Gordon Battle of counsel), for respondent.
   Giegerich, J.

The learned trial judge first directed a verdict for the plaintiff, as a matter of convenience, there being no question of fact, and, later, after considering the question of law involved, granted a motion to set aside the verdict and to dismiss the complaint.

The plaintiff is the assignee of a foreign corporation. The cause of action assigned arose on contracts made in 1900. At that time, and until the amendment of 1901 (Chap. 538) to section 15 of the General Corporation LaWj the assignee of a foreign corporation could sue upon a claim, although the corporation might not be able to do so, because of its failure to comply with the provisions of that section. Lindheim v. Sitt, 33 Misc. Rep. 62; Box Board & Lining Co. v. Vincennes Paper Co., 45 id. 1.

The amendment of 1901 extended the prohibition to the assignee, and it was subsequently to such amendment that the assignment herein to the plaintiff was made.

The question is whether such amendment can be made applicable to contracts in existence at the time it was passed, without violating the constitutional provisions protecting contract obligations from impairment.

In People ex rel. Reynolds v. Common Council, 140 N. Y. 300-307, it was said: “All contract obligations are protected from impairment by state legislation by the provisions of the Federal Constitution. The obligation of a contract is impaired in the constitutional sense, by any law which prevents its enforcement, or which materially abridges the remedy for enforcing it which existed when it was contracted, and does not supply an alternative remedy equally adequate and efficacious ” (citing McGahey v. Virginia, 135 U. S. 662).

In Lewis Publishing Company v. Lenz, 86 App. Div. 451-454, in speaking of the prohibition against- the corporation itself bringing the action under the statute in question, the court said: If this provision, enacted subsequent to the making of the contract in this case, be read as retroactive, then it is vicious as impairing the obligation of such contract.”

The respondent relies on the following language used in Neuchatel Asphalt Co. v. Mayor, 155 N. Y. 373, 377, viz.: This statute was simply declaratory of the policy of the state that foreign stock corporations should not carry on any business in this state, which similar corporations organized under its laws could not lawfully conduct. Its purpose was not to avoid contracts; but to provide for an effective supervision and control of the business proposed to be carried on here by foreign corporations. It provided no penalty, in the event of a non-compliance, other than the suspension of civil remedies. Such, and such only, were the consequences of the violation of the statute and none others will be implied as intended by the legislature.”

All that was necessary, as the statute stood when the last case arose, was for the foreign corporation to comply with the law and then begin its action. As the statute was amended later, however, and as it stands now, such power of subsequent compliance was taken away from the delinquent company, the act now requiring such compliance not only before suit brought, but before the contract is made.

All the Court of Appeals decided in that case was that a suspension- of civil remedies until the company had complied with the act was not an avoidance of the contract. The present case is quite different. If the act be construed and applied in the manner it was in the court below, then we have not a case of suspension of remedy nor of an alternative remedy (namely, by assignment), but a case of absolute withdrawal of all remedy in our courts. _

This, I think, brings the case within the principle enunciated in People ex rel. Reynolds v. Common Council, 140 N. Y. 300, and above quoted.

The order appealed from should be reversed and judgment entered on the verdict, with the costs in this court and the court below.

Greenbaum, J. (concurring).

The allegation of the defense is “ That prior to the making of said contracts and agreements the said Locomobile Company (plaintiff’s assignor) had not procured from the Secretary of State the certificate required by section 15 of the General Corporation Law.”

The contract upon which the action is based is alleged to have been made in 1900, at which time section 15 of the General Corporation Law provided inter alia, “ Ro foreign stock corporation * * * doing business in this state without such certificate shall maintain any action in this state upon any contract made by it in this state, unless * * * it shall have procured such certificate.”

Under this provision, an action was maintainable by a foreign corporation if, at any time before bringing an action, it procured the certificate. Neuchatel Asphalt Co. v. Mayor, 155 N. Y. 373.

The amendment to section 15 of the General Corporation Law, made by chapter 538 of the Laws of 1901, after the decision in the Neuchatel case, supra, provided: “ Bo foreign stock corporation * * * in the state shall maintain any action in this state upon any contract made by it in this state, unless prior to the making of such contract, it shall have procured such certificate.”

Manifestly, by its very language, this amendment had no application to contracts made prior to April 25, 1901, the date of the passage of the amendment.

To hold otherwise would result in an impairment of the contract obligation into which the corporation entered in the year 1900.

The obligation of a contract is' impaired in the constitutional sense by any law which prevents its enforcement or which materially abridges the remedy for enforcing it which existed when it was contracted and does not supply an alternative remedy equally adequate and efficacious. (McGahey v. Virginia, 135 U. S. 662).” People ex rel. Reynolds v. Common Council, 140 N. Y. 30; Lewis Publication Co. v. Lenz, 86 App. Div. 452.

There is no allegation in the answer that the Locomobile Company did not, subsequently to the making of the contract and before the commencement of the action, obtain the authority to do business. Such omission is fatal.

Assuming all that the pleader set forth, no valid defense is alleged.

It was error to set aside the judgment upon the ground that plaintiff cannot maintain the cause of action. Such a defense is an affirmative one, unless the facts upon which it may be predicated are declared in the complaint, in which case a demurrer would lie. Emmerich Co. v. Sloane, 108 App. Div. 330; C. R. Parmele Co. v. Haas, 171 N. Y. 583.

Order reversed and judgment directed to be entered in favor of plaintiff, with costs and disbursements to appellant in this court and the court below.

Scott, J., concurs in result.

Order reversed, with costs and disbursements to appellant in this court and the court below.