Case Name: John T. Myatt v. The Ponca City Land and Improvement Company
Court: Oklahoma Supreme Court
Jurisdiction: Oklahoma
Decision Date: 1903-02-05
Citations: 14 Okla. 189
Docket Number: 
Parties: John T. Myatt v. The Ponca City Land and Improvement Company.
Judges: Hainer, J., who presided in the court below, not sitting; Beauchamp and Irwin, J. J., absent; Burford, C. J., and Burwell, J., concurring in the judgment, but not in all of' the reasons given; the other Justice concurring.
Reporter: Oklahoma Reports
Volume: 14
Pages: 189–235

Head Matter:
John T. Myatt v. The Ponca City Land and Improvement Company.
(Filed February 5, 1903.)
1. CORPORATIONS — Foreign—Rule of Comity. It is indispensable-that a corporation seeking to-invoke the doctrine of comity must first be possessed of some right, power or privilege in the country of its domicil, and unless it has both existence and some right or power there, it cannot be awarded any in a foreign state.
2. SAME — Individual Proceeded Against May Question Corporate-Right. A foreign corporation, acting in excess of its conferred authority, may be questioned as to its authority only by the state. But where, in an action by a foreign corporation, there is an attempt on the part of such corporation to acquire title to property vested in an individual, such individual may, under the statute of .Oklahoma, deny its. corporate capacity as a defense to its right of recovery.
(Syllabus by the Court.)
Error from the District Court of Kay County; before Bayard T. Mainer, Trial Judge.
II. B. Martin, Geo. S. Green and J. F. King, for plaintiff' in error.
Ilachney & Lafferty and James B. Diggs, for defendant in error. '
STATEMENT OE PACTS.
This is an action to quiet title to lot 20, block 38, in the townsite of Hartman, a legal subdivision of the city of Ponca City, in Kay county, Territory of Oklahoma.
This action was commenced in the district court of Kay •county, September 1, 1900, and on November 23 following, defendant, The Ponca City Land and Improvement Co., filed its answer and cross petition.
To this answer and cross petition plaintiff made reply ■on December 3, 1900.
Upon the issues thus made or attempted to be made the ■cause came on for trial before said court at the March term, ■1901, and was tried by the court without a jury, and on the 22nd day of June, 1901, judgment was rendered therein ■in favor of the defendant, The Ponca City Land and Improvement Co., and against plaintiff, John T. Myatt, from which judgment the plaintiff prosecutes this appeal.
The history of conditions leading up to and existing at the time of the commencement of this action, as near as they can be ascertained after a most patient and laborious examination of the 480 pages constituting the record in this case, may be stated as follows:
By an act of congress and proclamation of the President, the Cherokee Strip, embracing the present Kay county of this Territory, was opened to settlement on the 16th day of September, 1893, and on that day one Daniel F. Stiles made his '“homestead entry” upon the N. W. 1-4 of section 27, in township 26 north, range 2 east I. M., of which the lot in question forms a part.
On the same day J. W? Lynch settled upon and made his homestead entry on the S. E. 1-4 of said section and one Broadhead made his homestead entry on the S. W. 1-4 of said section.
In due course of time each of these parties made final proofs before the land department, and received the patent from the United States conveying to them respectively the title to their several quarter sections.
The patent to Daniel E. Stiles to the said N. W. 1-4 of section 27, was issued to him on July 23rd, 1895, and on the following day, July 24th, 1895, Daniel E. Stiles conveyed the same to Harry G. C. Stiles. On August 22d, 1895, Harry C. C. Stiles conveyed said quarter section to B. S. Barnes and John W. Dalton. Thereafter and on September 23d, 1895, the said B. S. Barnes and John W. Dalton conveyed lot 20 in block 38 (being the lot in question) in the then called town of Hartman, a subdivision of the town of Ponca City, to this plaintiff.
It is also alleged in the pleadings, and we do'not find it anywhere disputed, that at some time in the month of September, 1893, the above named parties, B. S. Barnes and John W. Dalton, entered into a copartnership having for its object and purpose the laying out and establishing of a town.upon said three quarter sections, t'o wit: the N. W. 1-4 and the south 1-2 of said section 27, township 26 north, range 2 east, and in the latter part of said month of September, 1893, with the knowledge, consent and approval of said Stiles, Lynch and Broadhead, the said Barnes & Dalton laid off into lots, blocks, streets and alleys, the south half of said section 27, and a part of the said northwest quarter of said section.
These parties, in order to induce settlement of their said projected town of Ponca City, made public announcement of their said purpose, object and intentions, and held out various inducements and promises to the public in reference thereto, among which was the representation and promise to eventually obtain the fee simple title to said premises, and to convey the same to said settler upon their projected town-site for the actual cost and expenses of obtaining the title thereto, and an additional charge of $2.00 for each lot selected, settled upon or improved. Plaintiff alleges that these various promises and inducements were personally made by said Barnes & Dalton to him, and that believing the same and relying thereon, he selected and entered upon the lot in question in the latter part of September, 1893, and immediately thereafter built thereon a frame store house on a solid foundation, and thereafter enlarged the same so that the building, (for several years past and at the time of receiving his title to said lot,) was of the size of 20 by 100 feet or more.
In the month of January, 1894, the said J. W. Lynch (who had entered the said S. E. 1-4 of said section) became a member of the said copartnership firm of Barnes & Dalton, and he also joined in all the representations, promises and inducements to settlers, made by the said Barnes & Dalton.
, That many hundred people, including the plaintiff, were thus induced to and did settle upon, occupy and improve the said townsite of Ponca City, so that during the years-1893 and 1894 a large and thriving town of from 1,500 to 2,500 people was established on said townsite, and that by reason of the improvements, occupation and labor of said settlers put upon the said lots, plaintiff’s said lot, exclusive of the buildings and improvements thereon, became of the value of $2,000, whereas at the time he settled upon'the same its value did not exceed $1.00.
This is a rough outline of the conditions under which the said city of Ponca City, originated, and which prevailed therein up to the time of the organization of the so-called corporation, “The Ponca City Land and Improvement Company,” on the 12th day of -December, 1894. It will thus be seen that the said firm of Barnes & Dalton for a time, and a little later, the copartnership firm of Barnes, Dalton & Lynch, were the projectors and promoters of the said town of Ponca City and by their joint and several promises, representations and inducements had persiiaded and obtained people to settle upon and build up their projected town of Ponca City, to each and all of whom they were under the solemn pledge and promise of procuring and passing to them the title to their respective lots.
From this time (January 12, 1894) forward, the pleadings and proof upon both sides introduce a new factor into the case.
The parties who had composed, and at that time did compose the copartnership firm of Barnes, Dalton & Lynch, to wit: B. S. Barnes, John W. Dalton and J. W. Lynch, conceived the idea that the object and purpose of the said co-partnership could be better, more conveniently and easily carried out and performed, through the medium of a corporate organization, and accordingly they journeyed to the state of Kansas, and there on the said 12th day of January, 1894, with the said (consent) of three persons there residing, formed or attempted to form the so-called corporation, “The Ponca. City Land and Improvement Company/’ the defendant named in this action.
This organization is best designated and described in the language of its articles of incorporation, which read as follows:
“CHARTER.
“Ti-ie PoNCa City LaND AND IMPROVEMENT CompaNy.
1st.
“This corporation shall be known as the Ponca City Land . and Improvement Company.
2nd.
“The purpose for which this corporation is formed is to own, buy, sell, lease, rent, exchange and improve lands, town lots and other real estate and buildings and improvements thereon in Oklahoma Territory.
3rd.
“The office and principal place of business of this corporation shall be in Arkansas City, Cowley county, Kansas. It shall also have branch offices in such places as the directors may deem necessary in.the transaction of its business.
4th.
“This corporation shall exist for the period of fifty years.
5th.
“The number of directors of this corporation shall be seven (7) and the names and residences of those for the first year shall be: •
B. S. Barnes, Ponca City, Oklahoma Ter.
.1. W. Lynch, Ponca City, Oklahoma Ter.
JOHN W. I)ALTON, Ponca City, Oklahoma Ter.
■H. F. Hatoi-i, Arkansas City. Kansas.
Z. T. ARMSTRONG, Arkansas City, Kansas.
H. J. Hatch, Arkansas City, Kansas.
G-. B. BarNES, Ponca City, Oklahoma Ter.
6th.
“The capital stock of this corporation shall be one hundred thousand dollars ($100,000.00) divided into one thousand shares of the par value of one hundred dollars ($100.00) each.
B. S. Barnes, Ponca City, Oklahoma Territory.
J. W. LyNCH, Ponca City, Oklahoma Territory.
JOHN W. Dalton, Ponca City, Oklahoma Territory.
H. F. Hatch, Arkansas City, Kansas.
Z. T. ARMSTRONG, Arkansas City, Kansas.
H. J. H'atoh, Arkansas City, Kansas.
G. B. BaRNES, Ponca City, Oklahoma Territory.
'“State oe Kansas.
ss.
■Cowley County.
“Be it remembered that on this 10th day of December, A. D., 1894, before the undersigned, a notary public in and for said county and state, personally came B. S. Barnes, J. W. Lynch, and John W. Dalton, all of Ponca City, Oklahoma Territory, and IT. F. Hatch, Z. T. Armstrong and H. J. Hatch, all of Arkansas City, Kansas, to me personally known to be the identical persons who subscribed the above instrument of writing and each duly acknowledged the execution •of the same. ’ ■
“Arthur W. Wiloox,
“Notary Public.
'“[seal.]
“My commission expires Apr. 16-96.”
“State oe Kansas.
“OeEICE OE SECRETARY OE STATE.
“I, E. S. Osborn, secretary of state of the State of Kansas, do hereby certify that the following and annexed is a true and correct copy of the original instrument of writing hied in my office December 12th, 1894.
“In testimony whereof, 1 have hereunto subscribed my name and affixed my official seal.
“Done at Topeka, Kan., this 12th ,day of December, 1894.
“R. S. OSBORN, “Secretary of State.
“[seal.]
TERRITORY OE OKLAHOMA.
SECRETARY'S OFFICE.
“Guthrie, O. T., Jan. 17, 1895.
“I do hereby certify that the Ponca City Land and Improvement Company have this day filed in- this office certified copy of their Articles of Incorporation and appointed an agent, in full compliance with the laws of this Territory.
“In testimony whereof, I have hereunto set my hand and affixed the great seal of the Territory the date first above written.
“ThoMAs J. Lowe, “Secretary of Oklahoma Territory.”
Having filed their articles of incorporation with the secretary of state of the State of Kansas, they next obtained a certified copy thereof and on the 17th day of January, 1895, filed the same with the secretary of Oklahoma Territory.
The reply of the plaintiff to defendant’s answer and cross petition challenges the legality and good faith of the defendant’s organization and denies its corporate existence at all, and to this reply no rejoinder was made.
It appears from the evidence of defendant that David C. Prior and Chester Howe were also in some manner interested in the copartnership or syndicate, as it seems to have been commonly called, which preceded the said corporate incorporation of defendant, 'but what the amount of their interest was, or of what it consisted, is not disclosed by the record, ■except that it is alleged that Prior was to have one-seventh interest in the said syndicate. It further appears that the said Barnes, Lynch, Dalton and Howe had the active control and management of the business of said syndicate. That the syndicate had arranged and agreed with said Broadhead, and with said J. W. Lynch for the conveyance by each of them of the quarter sections of said section 27, upon which they had respectively settled and made homestead entry, together constituting the said south half of said section 27, township 26 north, range 2 east, and in like manner had arranged with said Daniel F. Stiles to convey to said syndicate a portion of the N. W. 1-4 of said section, which with the said south half would constitute the village of Ponca City. That thereafter the said James W. Lynch, Burton S. Barnes, John W. Dalton and Chester Howe, the agents and managers of said syndicate, did proceed to and did organize the corporation “The Ponca City Land and Improvement Co./’ and for that purpose associated with themselves three citizens of the State of Kansas as charter members thereof, to wit: H. F. Hatch,.H. J. Hatch and Z. T. Armstrong, but that said last named three parties possessed no interest whatever in such organization.
Lynch and Broadhead complied with the contract made with the syndicate, and after the organization of the corporation conveyed their respective quarter sections, to wit: The S'. E. and the S. W. 1-4 of said section 27, to the said corporation. At what time this was done is not disclosed by the record.
After the organization of the corporation, the said Barnes, Dalton, and Lynch received from the said Harry C. C. Stiles a conveyance of a portion of the said N. W. 1-4 of said section 27, this last conveyance embracing the lot in controversy in this action, which conveyance, however, ran to said Burton S.. Barnes and John W. Dalton, and not to said corporation or the officers thereof.
The corporate existence of defendant was challenged by the reply of the plaintiff, and again by the objection to the reception in evidence of its charter, and repeated in the demurrer of plaintiff to the evidence of defendant, and lastly by the motion for a new trial.
The cause was tried in the court below upon two principal issues: •
1st. The legal capacity of the defendant corporation to-maintain an action to obtain title to the premises in controversy.
2nd. The doctrine of lis pendens, by reason of the pen-dency of cases 452 and 453 at the time of plaintiff receiving-his title.
Many questions were raised and litigated upon the trial, and are repeated in the briefs filed in this court, but as we have reached such a conclusion upon the first proposition as necessarily disposes of the case, it becomes unnecessary to pass upon the numerous questions involved in the second.

Opinion:
Opinion of the court by
Gillette, J.:
The foregoing is as near a statement of the origin of this corporation as we are able to evolve from the 400 and more pages of record before us.
The various proceedings and transactions of this assumed corporation since the filing of its articles of incorporation are not disclosed by the record, and in the view we have taken of the ease it becomes unnecessary to unravel all its mysterious manipulations and proceedings.
If anything were needed to add to or confirm our impressions of the chief object and purpose of its creation, it would be furnished by the end sought to be attained by defendant in error in this action. One commendable thing on the part of its promoters and officers in their indivdiual capacity stands out above all question, and that is they seem to have honestly attempted to keep good faith with this plaintiff, and to have performed the contract they entered into with him at the time he settled upon the townsite of Ponca City.
The plaintiff's title is derived by a straight chain from the Government to'himself and, unless tainted with some fraud upon his part, must be sustained.
There is nowhere in the case any conflict in reference to the syndicate or corporation, its object and purpose, and the persons composing it, from about the 16th of September, 1893, to the time of the organization of the defendant corporation. Neither does it seem to be anywhere disputed that the corporation was organized or attempted to be, foT the express purpose of more easily and readily transacting the business of said pre-existing syndicate.
It is urged by the plaintiff in error that the court erred in quieting the title to the lot in question in the Ponca City Land and Improvement Company, for the reason that under its charter it could not acquire and hold real estate in Oklahoma Territory.
It will be observed that the charter of this corporation did not authorize it to transact any business, or have any vitality iff the state of Kansas. In short, the announced and sole and only purpose and object of its incorporation was to carry on and transact the business specified in its charter in the Territory of Oklahoma.
It is admitted upon all hands, and is now too well settled to be disputed, that the several states of this Union-are sovereign within their territorial limits, and it therefore necessarily results that their sovereignty and power to legislate, stops at their boundary lines. Kansas could not pass any act of legislation to take effect as such beyond its boundary lines. Any right, power or authority of one of the states of this Union, to he exercised and enforced beyond its borders, would have no binding force or effect as a statute of such state in the jurisdiction where such power is sought to be exercised, whatever force or effect it might have in a foreign jurisdiction would be given it by the comity of nations existing between the several states, and not proprio vigore as a statute law.
Comity is defined by Webster as, "Courtesy between equals: friendly civility," and he gives as sjmonyms, "civility, good breeding, good will." And comity of nations is defined as: "The courtesy by which nations recognize within their own territory, or in their own courts, the peculiar institutions of another nation; or the rights and privileges acquired by its citizens in their own landBouvier defines it as: "The most appropriate phrase to express the true foundation and extent of the obligation of the laws of one nation within the territory of another. It is derived altogether from the voluntary consent of the latter, and it is inadmissible when it is contrary to its known policy or prejudicial to its. interests. In the silence of any positive rule affirming or denying- or restraining the operation of foreign laws, courts of justice presume the tacit adoption of them by their own government, unless.repugnant to its policy or prejudicial to its interest. It is not the comity of the courts, but the comity of the nation which is administered and ascertained in the same way and guided by the same reasoning, by which aLl principles of the municipal law are ascertained and guided." (Bouvier's L. D. p. 254; Story, ConfL. Laws, 38).
With this definition and 'exposition of the word comity it is manifest that when one sovereignty attempts to legislate for, and to create legal rights and obligations in another, comity is not consulted or invoked.
It is undoubtedly true that where, under the authority of a state, an incorporation is authorized for a purpose peculiar to that state, which is not authorized by the laws of another state, and, in the conduct of the business of such corporation, the acquisition of title to land, or the purchase and ownership of property, in such other state becomes necessary, such property may be purchased and owned, as the purchase and ownership is only ancillary to the organization of and conduct of the business in the state where such corporation was organized, and for the conduct of which the corporation is formed. But this is a distinct proposition from that by which it is contended that one state may authorize an incorporation, the primary object of which is the purchase of and speculation in lands of such other state. We cannot find an authority which goes to this extent, and upon reason we think the proposition must be denied.
Comity can only arise when a citizen, whether natural or artificial, of one state, having certain powers, rights or privileges in the state of his domicil, passes into another state and there desires or attempts to exercise these same privileges or powers.
Thus viewed and understood it is indisputable that the party seeking to invoke the doctrine of comity, must first be possessed of some right, power or privilege in, the country of' his domicil, and unless he has both existence and some right or power there, he cannot through the medium of comity be awarded any in the foreign state.
Corporations are created for some purpose other than the-mere exercise of, creative power, and consequently when a corporation is attémpted to be created without giving to it any power to act in the state of its creation, it can exercise none in any foreign country.
Where one state attempts to legislate for the exercise of power solely in another state, there is no opportunity for the application of the doctrine of comity, and to recognize the binding force of such enactment upon the ground of comity would be a recognition of a legal right to exercise sovereignty beyond its territorial limits, and a surrender of sovereignty and legislative authority by the state whose limits and jurisdiction have thus been invaded and usurped. In this instance if the State of Kansas may rightfully legislate into existence a corporation with no power to act, except in Oklahoma, then it must be conceded that the legislature of Kansas has jurisdiction over Oklahoma, which by comity the courts of Oklahoma must acknowledge and enforce. No such result can be deduced from the authorities on this subject.
See.'2 of the charter of this supposed corporation reads:
"The purpose for which this corporation is formed is to own, buy, sell, lease, rent, exchange and improve lands, town lots and other real estate and buildings and improvements thereon in Oklahoma Territory."
In Land Grant Railway Company v. Commissioners, of Coffey County, 6 Kan. 245, it was held that a corporation organized in the State of Pennsylvania with authority to> transact and carry on its business anywhere except in the-State of Pennsylvania had no right or power to transact business in the State of Kansas and that no rule of comity on the part of Kansas towards the State of Pennsylvania required the recognition of its powers as enumerated in its articles of incorporation. We can see no substantial difference between the ease at bar and the one above cited, for while the State of Pennsylvania provided that the Land Grant Railway and Trust Co. might transact its business anywhere except in the State of Pennsylvania, in this case 'the State of Kansas provides that the defendant in error shall have power to transact, its business only in Oklahoma and grants to it no power to do business in the State of Kansas. We do not think it necessary to cite authorities to the effect that the powers of a corporation are limited to those specially enumerated in its charter and those incident thereto.
By no rule of construction or rational use of language-can this be said to be an Oklahoma corporation, for it is. neither authorized by the laws of Oklahoma, nor does it pretend to be organized under them, or to have its home m reach of their authority. For similar reasons it cannot be held to be a Kansas corporation, for it is neither authorized to do business in that state, nor created for the purpose of doing any business under the authority of the laws of that state.
To the same effect is the case of the State of Kansas ex rel v. The Topeka Water Company, 61 Kan. 547; for while it was held by a majority of the court in this last case that defendant therein, organized under the laws of New Jersey, had power to construct and operate a water works system for the city of Topeka, Kansas, yet the recognition of this power by the state of Kansas was distinctly put upon the ground that the corporation had also power and authority to construct and operate a system of water works in the state of New Jersey, the court in that ease using the following significant language:
"If it be determined under the written articles of 'association (the charter) that the company was granted power therein to operate one or more water works plants in the State of New Jersej'-, it then follows that its right to own and operate the property in question is secured. We think, as before stated, that the power was conferred by this charter to own and • operate water works anywhere in the United States, including New Jersey."
As will be seen the court in that case finds that the company had power to construct and operate water works in the state of New Jersey and concludes therefore that under the rules of comity, it had power to also construct and operate water works in the city of Topeka, Kansas, and thereby distinguishes the case from Land Grant Railway Co. v. Commissioners of Coffey Co., supra. Even this conclusion is strongly resisted in a dissenting opinion by Chief Justice Doster, on the ground that it was manifest that the intent and purpose of the organization of the water company was to do business in the State of Kansas, and not primarily in the 'State of New Jersey.
Bv no jugglery of words can it be claimed, much less shown, that the Ponca City Land and Improvement Company* under its charter, is authorized to "own, buy, sell, lease, rent, exchange and improve lands, .town lots and other real estate and buildings and improvements thereon" in the State of Kansas.
The rule of comity recognized and applied by the State of Kansas to foreign corporations, ought to be entirely acceptable when applied to her own creations by a foreign sovereignty.
In the last above cited case the majority opinion of the court lays down the proposition that the authorized powers granted by a charter must be interpreted strictly against the donee in the grant, using the following language:
"While it is a canon of construction that such charters must be interpreted strictly against the donees in the grant, yet we cannot, even in the light of this rule, conclude that under the various sections of this charter, the operations of the company, and its powers to act, were confined to Shawnee county, Kansas.-"
The plain import of this language is that if it were so-limited, the corporation would have had no power under its-charter, to carry on its business in the State of Kansas, and Chief Justice Doster in his dissenting opinion addressing himself to the same proposition says:
"It is a fundamental rule in the construction of public grants, made without consideration, that they are construed most strongly against the donee. This applies to grants of corporation franchises as well as to grants of all other character. The same rule of construction should apply to the certificate of incorporation or articles of association between corporations. In stating the object of their association these corporators choose their own language, and in the exercise of the special privileges they ask and obtain they should be •strictly limited by the terms they themselves use."
Applying the rule here laid down and strongly stated by the Kansas court, to the articles of association here under -consideration, is it not plain that the only power sought to be granted, and the only power asked for by the corporators, is the power to speculate in real estate in the Territory of 'Oklahoma? Whether this power could, under the laws of Kansas, be conferred upon a corporation to be exercised in that state, is exceedingly doubtful. Certain it is that a corporation for this purpose could not be granted under the .laws of this Territory.
If Kansas may grant such powers as are enumerated in 'this charter and the same are enforceable in Oklahoma under 'the law of comity between, states, it must be admitted that 'the State of Kansas has the jurisdiction and right to legislate •concerning powers and privileges not within its jurisdiction, and which belong exclusively to Oklahoma,'if indeed Okla-lioma is not barred from such legislation by the Statutes of the United States. By section 6 of the Organic Act of the "Territory of Oklahoma, it is provided:
"See. 6. That the legislative powers of the Territory •shall extend to all rightful subjects of legislation, not inconsistent with the Constitution and laws of the United States."-
See. 1889 of the General Statutes of the United States provides:
"The legislative assemblies of the several territories shall .not grant private charters or especial privileges but they may, by general incorporation acts, permit persons to associate .themselves together as bodies corporate for mining, manufac turing, and other industrial pursuits, or the construction or operation of railroads, wagon roads, irrigating ditches, and the colonization arid improvement of land in connection therewith, or for colleges, seminaries, churches, libraries, or . any benevolent, charitable or scientific institution."
Counsel for defendant in error at the outset of their brief upon this branch of the ease, cite and quote the statute of the State of Nansas under which they claim this corporation to be organized, viz:
"The purposes for which a private corporation may be formed are the purchase, location and laying out of town-sites, and the selling and conveyance of the same in lots in .subdivisions or otherwise."
Counsel then proceeded: "It is clear that under this provision of law á corporation could be legally incorporated to acquire the title to real estate in Oklahoma, and as the charter does not prohibit it from holding land in the State of Nansas, or anywhere else, it necessarily follows that it would have such power."
We are unable to reach the conclusion that counsel for defendant in error have so readily arrived at as to the power conferred by the Nansas statute. Under that statute undoubtedly a corporation may be formed for the purchase and laying out of townsites and the selling of the same in lots .and subdivisions. This authority deals with what is ordinarily termed a townsite company, while nothing of this kind is expressed in the charter under consideration, for it appears that under this charter there is authority for the transaction of a general real estate business. It was formed for the ' sole purpose of buying and selling real estate in general. In fact, its language is broad enough to enable it to buy and -own every foot of real estate in the Territory of Oklahoma. Such authority as this is not, in our judgment, conferred by the statute of Kansas, and the exercise of such corporate power is expressly forbidden by the statute of the United States above quoted.
Counsel for the defendant in error have with commendable energy and distinguished ability pointed out many cases-upon which they rely for an affirmation of the judgment of the trial court, and to sustain their contention that "a private individual and litigant cannot' question the right of a foreign corporation to hold real estate, in a state or territory, such question being solely one between the commonwealth and the corporation."
It will here 'be observed that the case under consideration does not cover the ground here proposed by counsel for defendant in error, for the reason that it is not an action brought for such a purpose. This was an action originally brought to quiet the title of the plaintiff in and to the town lot in question, and plaintiff declares himself to be the holder of both the legal and equitable title in fee simple, and charges that the defendant company claims some interest or estate therein adverse to the plaintiff, which is a cloud upon his title, and asks to have the same removed. Defendant,, answering to this petition, charges that the plaintiff's title is in fraud of the rights of defendant thereto, for the reason that his grantors were officers of the defendant corporation,, and conveyed to plaintiff a title which rightfully belonged to defendant; which answer is followed by a cross petition wherein defendant asks for the cancellation of plaintiff's title, for the possession of said property, and for the sum of $1000' damages for its unlawful detention.
Plaintiff replied to this cross petition by .denying its allegations, and denying the corporate capacity of defendant to maintain its action. Upon the issue thus formed the canse went to trial, at the close of which defendant waived its right to possession to or for damages for detention, and asked only to have the title decreed in itself. It will be seen therefore that this is an action by the defendant in its alleged corporate capacity to recover from the plaintiff the legal title to the lot, and the question here presented is the capacity of the defendant cross petitioner, to maintain the action.
The defendant cross petitioner submitted its proofs including a copy of its articles of incorporation, to the introduction of which plaintiff objected, which objection was overruled and excepted to, and, at the close of defendant's evidence, demurred thereto, which was likewise overruled and excepted to. This procedure is in accord with the statute of this Territory. Sec. 89, of chapter 66, General Statutes of 1893, which provides:
"The defendant may demur to the petition only when it appears on its face .
"2nd. That the plaintiff has no legal capacity to sue." And section 91 of said chapter provides:
"When any of the defects enumerated in section 89 do not appear upon the face of the petition the objection may be taken by answer."
This defect of want of capacity did not appear on the face of the petition, and it was properly taken advantage of by reply, under the provisions of the statute above quoted, as well as by objections to the introduction of its charter in evidence and the demurrer to defendant's evidence at its close. Thus we are brought face to face with the proposition touching the corporate existence of defendant corporation, and its right to recover in this-action. .
This is not, therefore, an action by an individual seeking the cancellation of articles of incorporation from a foreign state, but is an action resisting its right of recovery under its articles of incorporation, upon the ground of a want of corporate power.
A judgment denying its (defendant's) right to recover upon the ground of a lack of corporate capacity, is only incidental to a determination of the plaintiff's right to recover.
To recapitulate and summarize, in order to be clearly understood as to the issue in this case presented, let it be understood that the plaintiff'in this case is not seeking to question the right of a foreign corporation to hold real estate in this Territory. Tn this case the corporation has not acquired, but is now by this action seeking to acquire the lands and premises in question; and plaintiff, now owning and in possession of the premisés, is simply resisting this effort on the part of the corporation to acquire and take 1'rom him the lands in question. Defendant corporation never has had either title to or possession of this lot, and its only claim and demand now is to have the legal title declared in it, by reason of the equitable claim it makes thereto. It will thus 'be seen that the corporate right of defendant is presented to the court in the same manner as in Land Grant Ry. Co. v. Commissioners of Coffey Co., 6 Kan. 245; Caroll v. East St. Louis, 67 Ill. 568.
We will notice some, of the cases presented by defen dants in error, which are cited as antagonizing the proposition above stated. The strongest of, these, and the one most nearly in line with defendant in error's theory, is Colwell v. Colorado Springs Co., 100 U. S. 55. In this ease the patentee of lands from the United States conveyed to the National Land and Improvement Co., of El Paso county Colorado, a corporation created under the laws of Pennsylvania, with power to acquire, hold and grant lands located in Utah, Arizona or adjoining states and territories lying west of the Mississippi. The day following the conveyance by the pat-entee to the Pennsylvania Company, such company conveyed the lands to the Colorado Springs Company, a company incorporated in Colorado in 1871, with power to hold and dispose of lands, town lots, mineral springs and other property; .also to construct and operate railroads, wagon roads and mills for manufacturing' lumber and generally to do all things authorized by the.laws of tire territory which might tend to accomplish the purpose stated. At the time of the incorporation of this Colorado Springs Company, the legislature of Colorado was not empowered to authorize the formation of corporations to aid and encourage immigration, and for that purpose to take, possess and convey real property in the territory. Therefore, the defendant' contended that the company and its grantor, the Pennsylvania company, could not acquire a right to the premises in. controversy. And in response to this position the supreme court says:
"For some of the purposes designated in the articles of incorporation, the law in existence authorized the incorporation of companies; therefore, the incorporation here was not wholly illegal.
"A corporate body competent to exercise some of the powers mentioned was created, and under tbe statutes of tbe territory could acquire, bold and convey by deed or otherwise, any real or personal estate whatever, pecessary to enable it to carry on its business. Whether the particular premises in controversy are necessary for that business is not important; that is a matter between the government of the state, succeeding that of the territory, and the corporation, and is no concern of the defendant. It would create great inconveniences and embarrassments if, in actions by corporations to recover possession of their real property, an investigation was permitted into the necessity of such property for the purposes of their incorporation, and the title made to rest upon the proof of that necessity/'
It is plain that the court is here passing upon a proposition materially different from the one under consideration. The question in that case involved the proposition of the necessity of this property by tbe company for the purpose of its corporate business, a part of those purposes being authorized and a part unauthorized by the law of the territory, and the court says that it is a matter of concern to the territory and not to the defendant whether or not this particular piece of property was necessary to the legal or illegal purposes of the 'incorporation.
In the case at bar, the necessity of the property in question to the conduct of the defendant's business is not involved. The question here is as to whether or not the defendant corporation, organized for no other purpose than the ownership of real estate in Oklahoma, may sue for and recover upon its equitable rights a title which has never been vested in it; and herein lies a marked distinguishing feature, for in this case the only business of the defendant is the ownership of and power to speculate in real estate, which it seeks to acquire, never having had the legal .title thereto; while in that case the defendant is questioning the conditions of a title from the corporation to himself, and is therefore denying the power of his own grantor to pass to him a title with covenants which he has accepted. We think it may be stated as a fundamental proposition that a party is estopped, when sued by his grantor for a breach of the covenant, from denying the capacity of his grantor; and this especially, when he seeks to retain the property so purchased after condition broken, and to avoid the covenant. Iiow a corporation or-agnized in Kansas for the primary and sole purpose of doing business in the Territory of Oklahoma with no power to do any business in Kansas, and with only such powers in Oklahoma as .are granted to it by the laws of Kansas, can be supported and upheld by Colwell v. Colorado Springs Co., we confess our inability to understand.
In that case it was admitted that the corporation was organized under the laws of the then Territory of Colorado; with some powers to act therein. In this case the corporation is not organized in this Territory, and its existence as a corporation is wholly denied.
To the same effect, but with less application to the facts in this case, is Runyon v. Coster, 14 Pet. 120.
In that case the defendant in error, Coster, as trustee of the New York and Schuylkill Coal Co., brought suit to oust the plaintiff in error, Runyon, from the possession of certain lands in the State of Pennsylvania.
The plaintiff introduced evidence of title and proof of its incorporation under the laws of the State of New.York, and the defendant below, without offering any evidence, ask ed the court to charge the jury in his favor, but the court gave the contrary direction.
It appears from this case that the New York and Schuylkill' Coal Company was incorporated under the authority of an act of the legislature of New York for the purpose of sujjplying New York City and its vicinity with coal. Runyon, the plaintiff in error, having secured possession of the land> action was brought to oust him from posesssion. Under the law of Pennsylvania, lands held by corporations without a license from that state, escheated to the commonwealth. The court held that the right of action assumed by the plaintiff in error was one that belonged exclusively to the state. In addition to the reasons assigned for the conclusion of the court, it will be observed that the New York company was chartered for the purpose of doing business in New York, (to wit: Supplying the city with coal,) and, in the absence of a statute of the kind mentioned, in Pennsylvania, under the law of comity, that the company might rightfully hold land in that state. We think there can be no question, that if the statute of Pennsylvania interfered, it would so interfere for the benefit of the state, and not for the benefit of the plaintiff in error.
To the same effect is Hickory Farm Oil Co., v. Buffalo, et al, 32 Fed. 22.
Defendant in error has cited numerous authorities, all of which tend to establish the proposition that an individual may not maintain an action on his own behalf to recover for his individual use and benefit a title which has vested in a corporation, where such corporation is not authorized to purchase and hold the same, and to the effect that the power to question the corporation's right to hold, is vested alone in the state.
We do not question these authorities. When a person empowered to transfer the title to real estate 'conveys the same to a corporation, the title passes from him, and whether rightfully or wrongfully, must be vested in the corporation, and it does not lie with him or any one else claiming through or under him to dispute the right of the corporation to re--ceive the same. In such case, the state alone may question the right of the corporation to 'take and hold the title. But this is quite a different question from that in which a corporation, having no power or right to take and hold title to any property, attempts to take from another the title and property which he now rightfully holds.
In the one case the corporation takes the title because it must vest somewhere; and having passed from the grantor it must vest in his grantee. In the other, the corporation is seeking to acquire title not vested in it, and which is vested in the one from whom he seeks to recover it. And the distinction is more apparent when it appears that the corporation has no existence, and therefore no capacity to legally acquire property of any kind.
In this case the corporation is invoking the power oí the state, through the medium of the courts, to secure to it a title which it may not hold, and when its want of capacity is shown judgment should be entered against it. Such want of capacity may be shown by one in whom the legal title is vested in resisting the attempt of such corporation to acquire that title.
There is another phase of this ease which we think de serves consideration. It is shown by the record that the lot in question, in 1893 was a part of the homestead entry of D. F. Stiles, and that while said Stiles held and occupied the same under his homestead entry, Barnes & Dalton proceeded to organize a townsite movement upon this land, and that one Lynch and one Broadhead, adjacent thereto, and in conformity to their general scheme, laid off portions of this (Stiles') land in town lots and blocks, and proceeded to induce townsite settlers to locate thereon, charging a small entrance fee, for which they gave a certificate, promising in each instance to procure for the townsite settlers legal titles to the lots settled upon and improved. Under this arrangement the plaintiff in this case went on to the lot in question, and built thereon permanent and valuable improvements which remain to this time.
Afterwards D. F. Stiles made final proof on the land, and deeded the same to Harry C. C. Stiles, who in turn deeded it to Barnes & Dalton, and Barnes & Dalton convejnd the lot to plaintiff, John T. Myatt, in consideration of $100.00 then paid.
Prior to this time, Barnes & Dalton had gone to the State of Kansas, and there caused (or attempted to) the incorporation of defendant corporation under the laws of that state. To do this it became necessar]*, under the laws of Kansas, to associate three persons, residents of that state, to .join in the organization of defendant corporation. The record in this case accounts for all the stock of the corporation, but none of it appears to have ever been subscribed or held by either of the three signers residents of Kansas. Indeed, the record distinctly shows that none ever was issued to them or intended to be. Barnes testified that he and Dalton held a two-thirds interest and liyneh. the other third, of all the interests of the company, and this evidence was not disputed.
It is stated in the pleadings and shown in the evidence that' 'Barnes, Dalton and Lynch, at the time of the organization of said corporation, were all residents of the Territory of Oklahoma, but deemed it more expedient to organize the .same under the laws of the State of Kansas. When it is remembered that a corporation for such purposes could not be legally organized under the laws of Oklahoma, it becomes manifest why it .was more "expedient" to organize under the laws of Kansas. But when it further appears that they call to their aid for the purpose of organization three persons, to wit: H. F. Hatch, H. J. Hatch and Z. T. Armstrong, residents of that state, strangers, and in no way interested in the formation of the corporation, and whose only connection with it has 'been to sign their names to its charter, it then becomes manifest also that the said corporation was created by a fraud upon the laws both of Oklahoma and Kansas.
Barnes, Dalton, Lynch, Howre and Prior, in fact, all persons connected with this corporation, who, prior to- the time of its organization had formed what is termed the syndicate for the establishing of the town of Ponca City, engaged in such undertaking in direct violation of the laws of the United States.
Every manipulation entered into between them and the homestead settlers was Void because in violation of and prohibited by the laws of the United States. They could not organize under the laws of Kansas a corporation for the purpose of carrying out their townsite scheme, which, when organized, would stand cleansed of their individual -wrong and fraud, by inviting into it three dummies from Kansas. This corporation coming into existence (if it ever had any) as the Ponca City Townsite Co., burdened with the • illegality of purpose which gave it birth, and being a corporate-entity within and of itself, innocent of intentional wrong, was nevertheless charged with the errors of its founders, because of its being 'brought into existence in order to consummate such errors to the profit and advantage of those-who gave it being.
The stream cannot rise higher than its source and thiscorporation can stand upon no higher ground or,be entitled to no greater rights than its founders and creators. It cannotsue for and recover that which its founders were barred from acquiring.
Incorporation was never intended as a cloak to cover crime, or to enable individuals to perpetuate a wrong"or profit by a fraud.
This corporation was not so separated from its incor-porators and officers as to give it a right to sue for and obtain that- which its officers would have been barred from acquiring. Barnes, Dalton & Ljmch before the formation of this corporation had agreed that the title to this lot should be conveyed to Myatt, and that they would procure the title and convey the same to him.
They placed him in possession, and on the faith of their carrying out this agreement, Myatt entered into open and notorious possession of the premises, and erected thereon valuable and permanent improvements, and later paid to Barnes- and Dalton $100 at the time the conveyance was executed and delivered to him.
All this Barnes, Dalton & Lynch lmew when they organized this corporation, and what they knew as individuals they could not be ignorant of as officers of the corporation, nor can the corporation be held innocent of what its president, secretary and treasurer well knew, nor yet can it be permitted to profit for their benefit, where they themselves would be estopped.
The cause was tried in the court below mainly in reference to the issue of lis pendens notice made by the pleadings, and the briefs of counsel filed in this court are principally devoted to a discussion of that question; but the conclusions we have reached upon the first branch of the case, make it unnecessary to enter upon the discussion of that question, or of the many exceptions to the rulings of the court in reference to the admission of evidence upon the trial.
Having determined that the organization of- the defendant corporation, The Ponca City Land and Improvement Company, was wholly illegal and void, it follows as a necessary result that the judgment of the court below, quieting the title to these premises in the said corporation, must beset aside, and the cause remanded with directions to enter judgment in favor of and quieting the title in the plaintiff, John T. -Myatt.
Hainer, J., who presided in the court below, not sitting; Beauchamp and Irwin, J. J., absent; Burford, C. J., and Burwell, J., concurring in the judgment, but not in all of' the reasons given; the other Justice concurring.