Case 86 — Action to Enforce Mortgage Lien

January 16.

#### Aultman & Taylor Co. v. Mead, &c.

APPEAL FROM LETCHER CIRCUIT COÚRT.

Judgment for Defendants and Plaintiff Appeals.

Reversed.

Foreign Corporations — Failure to File Statement with Secretary of State — Special Demurrer — Pleading Conclusions of Law— Sales — Failure of Consideration — Recovery of Payments Made —Rescission—Power of Attorney to Confess Judgment — Consent to Sale Under Void Judgment.

Held: 1. The fact that a foreign corporation suing for the price of goods sold had not complied with Kentucky Statutes, section 571, requiring it to file statement with the Secretary ,of State, designating its place of business and the name of an agent on whom process might he executed, is not ground of special demurrer, though the fact appears by affidavit.

2¡ A paragraph of an answer denying that defendants are indebted to plaintiff on the note sued on pleads a mere conclusion of law, and is not good.

3. The fact that a saw mill for the price of which plaintiff sued had been wrongfully .taken from defendants after they had used it-for three years, does not support a plea of failure of consideration, there being no complaint of -the original transaction.

4. Defendants can not recover money voluntarily paid on the price, there being no claim that it was paid by mistake of law or fact, or that any fraud was practiced to induce the payment, and there being no prayer for a rescission.

5. Defendants, after using the saw mill three years, can not have a rescission, as they can not place plaintiff in *statu quo.*

6. Under Kentucky Statutes, section 416, declaring that a power of attorney to confess judgment shall be void, an answer signed and sworn to before suit was filed, consenting to judgment enforcing a mortgage lien, gave the court no jurisdiction of defendant’s person, and a judgment rendered pursuant thereto was void.

7. In an action to recover the price of a saw mill sold to defendants, they may plead by way of set-off and counterclaim the damages suffered by the seizure and sale of the mill under a void judgment in plaintiff’s favor, provided they did not consent to the sale.

*584KENNEDY & WILLIAMSON, and TYREE & ADAMS, fob appellant.

S. B. DISHMAN and S. E. BAKER, fob appellees.

(No briefs in record.)

Opinion of the couet by

JUDGE BURNAM.

In October, 1883, appellant sold and delivered to ap-pellees a sawmill and appurtenances at the price of $1,900. 4 part of the purchase money was paid in cash, and for the balance three notes were executed, aggregating $1,595. To secure the payment thereof, appellees executed their mortgage on the sawmill and appurtenances, and upon six tracts of land lying in Letcher county, aggregating 900 acres. They failed to pay these notes at maturity, with the exception of a few hundred dollars, and in the summer of 1885 they were delivered to an attorney in Floyd county for collection. He wrote to the appellees, who resided in Letcher county, asking that they be paid, in response to this communication, first Mr. Albert Mead, and subsequently Mr. James M. Mead, went to see him, and it was agreed that suit should be instituted thereon at the ensuing October term of the Floyd Circuit Court. And, in consideration that no steps should be taken to enforce the judgment until after January 1, 1886, James M. Mead authorized the attorney to prepare and file an answer of appellees to the suit which was thereafter to be begun, ■consenting to a judgment enforcing the mortgage lien, and waiving all questions of jurisdiction which might arise as to the power of the Floyd Circuit Court to render the judgment. This answer was sworn to on the 10th day of September, 1885. Subsequently the proposed suit was filed, and also the answer which had been previously sworn to by James M. Mead, and thereupon judgment was entered directing the master commissioner to sell *585the sawmill pursuant to tbe terms of the judgment; and in February, 1880, the sawmill, engine, etc., were sold by the commissioner on the premises of appellees in Letcher county, Ky., at the price of $700, to one Fitzpatrick. Ap-pellees -were both present at the sale, and, according to the overwhelming weight of testimony in. the record, made no objection to the sale. After the sale they assisted the purchaser in taking down the mill and removing it from the premises, going a part of the way home with the purchaser. This sale was confirmed by the court, and the proceeds credited upon appellant's judgment. No further steps seem to have been taken by either of the parties until the institution of this suit, in 1897, in which appellant sought to recover of appellees the balance due it on the notes, and to enforce its mortgage upon the real estate in Letcher county. Appellees filed a general and special demurrer to the petition. The special demurrer was based upon an affidavit that appellant' was a foreign corporation, and had failed to file with the Secretary of State a statement designating its place of business and the name of its agent upon whom process might be executed. The demurrers were overruled. They thereupon filed an answer in three paragraphs. In the first paragraph they denied that they were indebted to appellant in any sum on the notes sued on. They did not deny the execution Gf the notes, or set up any facts in bar of appellant’s right to recover. In the second paragraph they allege that plaintiff had, 1886, forcibly, and against their will and consent, taken possession of the sawmill for which the notes were executed, and converted it to its own use, and that by reason of such conversion the consideration for which the notes were executed had failed. In the third paragraph they make their answer a counterclaim, and *586ask judgment against appellant for tbe various sums of money wbicli they had paid on the notes, aggregating the sum of $727.62, with interest thereon from the date of the payment of the several items thereof. To this answer, and each paragraph thereof, appellant demurred, which was overruled. It thereupon filed an answer, in which it denies the alleged forcible seizure and conversion of the sawmill, or that the consideration for which the notes were executed had failed. Subsequently it offered to file an amended reply, in which it recited all of the facts in connection with the suit instituted by it in Floyd county in October, 1885, and the sale of the sawmill pursuant to a judgment entered therein. The court refused to allow this amended reply to be filed, and subsequently it tendered and offered to file a second amended reply, in which it alleged that the sawmill was sold in February, 1886, by agreement and consent of appellees; that it sold for $700, its full value, which had been credited upon the debts of appellees; pleaded an estoppel, and also relied upon the lapse of time and the statute of limitations in bar of recovery by appellees of the various sums of money paid by them for the sawmill. The court refused to allow this amended reply to be filed, and the case was transferred to the ordinary docket, and a jury impaneled to determine the question whether the plaintiff had forcibly and unlawfully taken possession of the sawmill, under divers instructions from the court. On this trial the jury found that the mill had been wrongfully and forcibly taken from defendants. Thereupon the appellant moved for a' judgment *non obstante veredicto,*under section 386 of the Code, which was overruled, and a judgment entered dismissing appellant’s petition, canceling the mortgage given to secure the debt, and a judgment ren-*587tiered in favor of appellees for the various sums of money voluntarily paid by them, with interest thereon from date, and to reverse that judgment this appeal is prosecuted.

Numerous errors are complained of, but we will only consider those which we regard as material and important. The objection that appellants did not comply with section 571 of the Kentucky Statutes is fully answered in the opinion of the court in the case of Johnson v. Mason Lodge (Ky.), (51 S. W., 620), and it will therefore be unnecessary for us to again consider that question.

The general demurrer filed to each paragraph of the answer should have been sustained. The flrst paragraph simply pleaded a conclusion of law, and the facts relied on in the second paragraph are insufficient to support the plea of “failure of consideration.”

There is no allegation of any mistake in the original purchase, or that appellees did not get what they contracted for. The original transaction is not complained of for any reason. The alleged failure of consideration arises out of the sale of the property by the master commissioner three years after the purchase, and is. not available to sapport the plea of no consideration. See Griswold v. Taylors Adm’r, 1 Metc., 228; Robinson v. Bright’s Ex’r, 3 Metc., 30; Chenault v. Bush, 84 Ky, 528, (2 S. W., 160). Nor were appellees entitled to recover back the money theretofore voluntarily paid by them for the sawmill, as there is no claim that it was paid by mistake of law or fact, or that any fraud was practiced upon them to induce the payment. There was no plea asking a rescission of the contract, nor could such a plea have been upheld under the facts of this case, as appellees could not have put appellant, in so far as the mill is concerned, in as good a situation as it was before, as three years’ use *588of a sawmill of this character would very probably materially reduce its salable value. See 1 Beach, Cont., section 975; City of Louisville v. Anderson, 79 Ky., 334; Tyler v. Smith, 18 B. Mon., 793.

The judgment of the Floyd Circuit Court decreeing a sale of the mill, etc., was void, as the answer of appellees was signed and sworn to before the suit was begun, and was, in effect, only a power of attorney to confess judgment, under section 416 of the Kentucky Statutes, as construed in Ball v. Poor, 81 Ky., 26, and in Hay v. Cole, 11 B. Mon., 70, and did not give the Floyd court jurisdiction of the person of the defendants or authorize the judgment. As this fact appeared on the face of the record filed in this proceeding, appellees were entitled to plead it by way of defense. It follows, as a necessary consequence, that the sale of the mill, etc., by the master commissioner of the Floyd court, under and by virtue of this judgment, was illegal, and did not estop appellees in this proceeding from X'leading, by way of set-off and counterclaim, any damage which they may have sustained by reason of such illegal sale, which was the proximate result thereof, if they did not consent to the saje. This, however, they have not attempted to do, and the testimony tends very strongly to show that the sale was made with their consent, cer. tainly without objection on their part, and that the mill itself brought its fall value. The circuit judge erred in overruling appellant’s motion to file a reply setting up these facts, and pleading limitation and estoppel. On the pleadings as they then stood, the motion for a judgment notwithstanding the verdict should have' prevailed. For reasons indicated, the judgment is reversed, and the cause remanded for proceedings consistent with this opinion.