#### Lanz-Owen & Company, Appellant, vs. Garage Equipment Manufacturing Company, Respondent.

*December 10, 1912*

January *7, 1913.*

*Foreign corporations: Contracts: Validity: Right to hold real property: Removal of disability: Relation: Validating deed or lease: Limitation upon action or defense: Statutes construed.*

1. Under sec. 17706, Stats., the contract of a foreign corporation which has not complied with that section, affecting the personal liability of such corporation or relating to property within this state, is void only at the election of the party dealing with the corporation. Neither the corporation nor its assigns can enforce the contract against the other party; hut such party may affirm or disaffirm it at his election. Timlin, J., dissents.

2. By subsec. 1 of see. 1770), Stats. (Laws of 1911, ch. 142), the disability of a foreign corporation, coming within the terms of the act, to hold real property within this state which it had acquired or attempted to acquire as there stated, was removed from the time the act took effect; hut such removal did not relate hack to the date of the deed or lease under which the corporation claimed title, nor validate such instrument from its inception.

3. Suhsec. 2 of said sec. 1770) limited to one year after the act took effect the time within which any person claiming that the legal title to real property was invalid hy reason of the failure of any corporation coming within the terms of subsec. 1 to comply with sec. 17706 might commence an action or interpose a defense on such grounds; and such limitation, being a reasonable one, was within the power of the legislature.

4. The right to commence such action or interpose such defense was not limited to a person who had contracted with the corporation.

5. A “corporation coming within the terms of subsection 1” was one that had acquired or attempted to acquire legal title by deed or lease to real property in this state before complying with sec. 17706, and which thereafter complied with that section before the enactment of sec. 1770).

6. The words “legal title” in subsec. 2 of sec. 1770) refer to the same subject as do the same words in subsec. 1, namely, a legal title by deed or lease.

*5567. Real property in this state was leased by the owner to a foreign corporation which had not complied with sec. 17706, Stats., but which thereafter complied therewith before see. 1770; tools; effect. After sec. 1770; took effect the corporation sued one who, it alleged, had unlawfully withheld from it the possession of the leased property. Within a year after sec. 1770; took effect the defense was interposed that the lease to plaintiff was invalid because given before plaintiff had complied with sec. 17706. *Held,*on demurrer, that such defense was good..

Appeal from an order of tbe circuit court for Milwaukee county: W. J. TubNEk, Circuit Judge.

*Affirmed.*

Plaintiff, a foreign corporation, on tbe 30tb day of April, 1910, entered into a written lease witb tbe owner of a building situated in Milwaukee, a part of wbicb was occupied by tbe defendant, for three years commencing on tbe 1st day of April, 1910. Plaintiff claims defendant’s lease of tbe premises in question expired May 1, 1910. On said date it notified defendant of its lease and demanded possession of tbe portion of tbe premises beld by defendant. Possession was refused and withheld from plaintiff from May 1 to July 1, 1910. This action, begun on tbe 5th day of July, 1911, is brought to recover damages caused by tbe alleged unlawful detention of tbe premises by tbe defendant.

As a first defense to tbe cause of action tbe defendant alleged upon information and belief that prior to tbe 25th day of June, 1910, tbe plaintiff bad in no wise complied witb any of tbe provisions of sec. 1770b, Stats., and acts amend-atory thereof, alleging tbe same in detail, and that by reason of a noncompliance therewith it was not at any time prior to tbe 25 th day of June, 1910, authorized or licensed to lease or bold real estate or to transact business in tbe state of Wisconsin; that tbe lease set forth in tbe complaint, if made at all, was made, and delivered to plaintiff within tbe state of Wisconsin, prior to tbe 25th day of June, 1910, and before plaintiff bad complied witb tbe requirements of sec. 1770&> Stats., and tbe acts amendatory thereof, and that tbe same *557was null and void and ineffective to give plaintiff any right to tbe possession of tbe premises mentioned in tbe complaint. The first defense also contained allegations to the effect that during the month of November, 1910, plaintiff brought an action against the defendant in the circuit court for Milwaukee county to recover damages for the same wrong complained of by it in the present action; that after a demurrer to the complaint' on the ground that it did not state facts sufficient to constitute a cause of action had been overruled, by consent of both parties the action was duly discontinued on the 27th day of March, 1911.

Plaintiff demurred to the first defense on the ground that it appeared upon the face thereof that it did not constitute a defense. From an order overruling such demurrer it appealed.

For the appellant there was a brief by *Lines, Spooner, Li-tis & Quarles,*and oral argument by *Fred O. Filis.*

For the respondent there was a brief by *Flanders, Bottum, Fcmsett & Bottum,*and oral argument by *O. E. Monroe.*

Vinje, J.

The issue raised by the demurrer calls for the construction of ch. 142, Laws of 1911, as amended by sec. 12, ch. 664, Laws of 1911. The enactment is as follows:

> “Section 1. There is added to the statutes a new section to read: Section 1770;'. 1. Any corporation organized otherwise than under the laws of this state, having acquired, or attempted to acquire, legal title by deed, or lease to any real property in this state, before complying with the terms of section 17706 of the statutes, or acts amendatory thereof, and which has thereafter, and before the passage of this act, complied with said section, shall be and is hereby relieved from any disability provided in said statute or prohibition therein contained, so far as said section relates to. the acquisition and holding of the property so acquired, or attempted to be acquired.

> “2. Any person claiming that the legal title of any corporation or of any person claiming by, through, or under such *558corporation, to any real property acquired, or attempted to be acquired, is invalid by reason of the failure of any corporation coming witbin tbe terms of subsection 1 of tbis section to comply with section 1710b of tbe statutes, or acts amendatory thereof, shall commence action to recover tbe property, or to declare tbe legal title of said corporation void, or interpose a defense on such grounds, witbin one year from tbe passage and publication of tbis act, and in case of failure to do so bis right of action or defense, based upon the failure to comply with said section by any such corporation, shall be deemed to have expired; provided that tbis section shall not affect any action now pending.

> “Section 2. Tbis act shall take effect and be in force from and after its passage and publication.”

Tbe plaintiff contends that tbis amendment to sec. 1770b, Stats., relieves from disability any corporation that, before its passage, complied with sec. 1770b, and that such removal of disability relates back to tbe date of tbe instrument through which legal title was acquired or attempted to be acquired, and validates tbe instrument from its inception. Hence that plaintiff, having complied with sec. 1770b on June 25, 1910, bad its disability to lease property witbin tbis state removed as of tbe date of its lease, to wit, April 30, 1910, and was therefore entitled to tbe possession of tbe premises in question on May 1, 1910, when defendant’s lease expired.

Tbe correctness of tbis contention must be tested by tbe language and manifest purpose of tbe amendatory act. Prior to its passage every contract made by or on behalf of any foreign corporation included in sec. 1770b affecting tbe personal liability of such corporation or relating to property witbin tbis state, before it bad complied with said section, was wholly void on its behalf and on behalf of its assigns, but was enforceable against it or them. ' Reference to tbe decided cases affected by tbis section shows that tbe contract entered into is not absolutely void. *Ashland L. Co. v. Detroit S. Co.*114 Wis. 66, 89 N. W. 904; *Beaser v. Barber A. P. Co.*120 Wis. 599, 98 N. W. 525; *Allen v. Milwaukee,*128 Wis. *559678, 106 N. W. 1099; *Duluth M. Co. v. Clancy,*139 Wis. 189, 120 N. W. 854; *Rib Falls L. Co. v. Lesh & M. L. Co.*144 Wis. 362, 129 N. W. 595; *Hanna v. Kelsey R. Co.*145 Wis. 276, 129 N. W. 1080. In the first case cited, the proper limitation is found on page 78 of the opinion by declaring it a nullity in so far as it is sought to be enforced on behalf of the foreign corporation by way of counterclaim. In the last cáse cited, language declaring it void without limitation is used, but the court was dealing with a case in which a foreign corporation sought to assert the validity of its deed, and it was held that plaintiff, though not a party to but affected by it, could invoke the aid of the statute. The decision upon this branch went no further. The contract is void only at the election of the party dealing with the corporation. Neither the corporation nor it's assigns could enforce it against the other party. But such party may affirm or disaffirm the contract at his election. And as the law stood prior to the amendment of 1911, no period of limitation within which such right' of affirmance or disaffirmance must be exercised was prescribed. By the first subsection of the amendment the disability of a foreign corporation that previous to the amendment thereof had complied with sec. 17706 was removed so far as it related to the acquisition and holding of property acquired or attempted to be acquired. The language is, such corporation “shall be and is hereby relieved from any disability provided in said statute or prohibition therein contained, so far as said section relates to the acquisition and holding of the property so acquired, or attempted to be acquired.” But such removal of disability dates from and after the time the act took effect. It does not relate back to the date of the contract, much less validate the contract from the time it was made. The effect of the first subsection is to remove, from the time the act takes effect, the disability of a foreign corporation coming within its provisions, t'o hold property within this state. It says nothing as to the validity *560or invalidity of any contract previously entered into relative to the same. Tbe presumption obtains, except as to some mere remedial statutes, that, unless the contrary clearly appears, enactments have only a prospective effect. *Chicago T. & T. Co. v.*Bashford, 120 Wis. 281, 97 N. W. 940. That there was no legislative intent to validate past contracts is evidenced by subsection 2, which provides a period of limitation of one year within- which a party who has entered into any contract with a foreign corporation coming within the provisions of subsection 1 of the act, namely, one that at the time of entering into the contract had not complied with the provisions of sec. *1770b,*but which before the passage of the amendment in 1911 had complied therewith, may begin an action to disaffirm the contract, or set up a defense t'o a contract, on the ground that sec. 1770b was not complied with. Had the legislature conceived that the legal disability to hold property was removed from the date of the contract, or that the contract by force-of the amendment became valid from the time of its execution, there would have been no necessity or reason for providing a period of one year within which it might be defeated by action or defense. As the law stood before the passage of the amendment', such action might be instituted, or defense set up, at any time. After such amendment took effect, it could be begun or set up as to corporations coming within the provisions of subsection 1 only within a year thereof. In other words, the legislature prescribed a period of limitation within which the right to disaffirm should be exercised as to corporations within its provisions. Foreign corporations failing to comply with sec. 1770b previous to the amendment are unaffected thereby. As to them the limitation of one year does not apply.

It follows, from the provisions of the amendment and the original act, that if a year elapses within which no action is begun or defense set up by the other party, then as to corporations within its provisions the contract becomes valid on *561behalf of the corporation, and it will be protected in the rights it then enjoys, or is then entitled to, under the contract. The amendment, after the expiration of the period of limitation fixed by it, protects a corporation coming within its provisions in the rights which it has possessed and enjoyed under its contract previous thereto. It .does not create, or provide for the enforcement of, new rights relating to the past which were not then either possessed or enjoyed by the corporation. It makes no contract for the parties, nor does it allow the corporation to insist upon the validity of contracts already made, unless the other party fails to disaffirm or- set up a defense to the contract within the year. In other words, it leaves the contract made just as it was, except that it provides that the right of the party dealing with a corporation, that is within the amendment, to disaffirm the contract must be exercised within the year, otherwise it shall be deemed to be binding upon him.

A party dealing with a foreign corporation that had not complied with sec. *lYIOb*did not agree to become bound absolutely. He entered into such contract with the right reserved to enforce or disaffirm it at his election. The amendment has not cut off such right of election, but has merely prescribed a reasonable period within which it must be exercised. The power of the legislature to prescribe a reasonable time within which rights may be enforced is unquestioned. It is also evident that a period of one year is a reasonable time within which to exercise the right of election to disaffirm.

It follows that the plaintiff had no contract which it could enforce at the time the defendant held possession of the leased premises; that, never having possessed or enjoyed any right thereunder as against the defendant after its disability to hold property in this state was removed, the defendant, though treated as a trespasser, violated no legal rights of the plaintiff. Subsection 2 of the amendment specifically permits it to set *562up sucb defense witbin a year. Tbe language is, “any person” claiming that tbe legal title is invalid by reason of tbe failure of any corporation coming witbin tbe amendment to comply with sec. 17706 shall commence action or interpose a defense witbin a year. Tbe right to do so is not limited to the party contracting with tbe corporation. *Hanna v. Kelsey R. Co.*145 Wis. 276, 129 N. W. 1080. Here the defendant' has set up sucb a defense witbin tbe year.

Plaintiff’s contention that subsection 2 does not apply to a corporation that has complied with sec. 17706 before tbe enactment of tbe amendment is manifestly untenable. It' is just to sucb a corporation that it does apply. Tbe language is, “tbe failure of any corporation coming witbin tbe terms of subsection 1 of this section.” A corporation coming witbin tbe terms of subsection 1 of tbe section is one that acquired or attempted to acquire property witbin this state before it complied with see. 17706 and that bad complied therewith prior to the passage of tbe amendment. Likewise, its claim that subsection 2 does not apply to leases because it does not mention them, has no support. Tbe language of subsection 1 is, “having acquired, or attempted to acquire, legal title by deed, or lease;” that of subsection 2 is, “claiming that tbe legal title” is invalid. Tbe words “legal title” in tbe second subsection refér to precisely-the same subject ás do tbe words “legal title” in the first subsection, namely, a legal title by deed or lease. It was not necessary to repeat tbe latter words.

In disposing of this case tbe court has assumed that defendant bad no valid lease of tbe premises after May 1, 1910, and that plaintiff’s right t'o maintain tbe present action is not ■affected by tbe discontinuance of tbe former action.

*By the Court.*— Order affirmed.

TimliN, J.

I concur in tbe decision of tbe court, but I do not wish to be bound by the following statements contained in tbe written opinion:

> *563“The contract is void only at the election of the party dealing with the corporation. Neither the corporation nor its assigns conld enforce it against the other party. Bnt such party may affirm or disaffirm the contract at his election.”

I think these statements are erroneous and contrary to previous decisions, and I fear the words will hereafter be made a basis for the claim on the part of the foreign unlicensed corporations that such contract may be validated by subsequent affirmation or by estoppel, and the statute thus frittered away.