Case Name: Wood & Selick, Appellant, v. Annie M. Ball, Respondent
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1907-12-17
Citations: 190 N.Y. 217
Docket Number: 
Parties: Wood & Selick, Appellant, v. Annie M. Ball, Respondent.
Judges: 
Reporter: New York Reports
Volume: 190
Pages: 217–231

Head Matter:
Wood & Selick, Appellant, v. Annie M. Ball, Respondent.
Corporations — Action by Foreign Corporation — Compliance with Provisions op Section 15 op General Corporation Law Must Be Alleged in Complaint. The provisions of section 181 of the Tax Law (L. 1896, ch. 908; amd. L. 1901, ch. 558, § 1), commanding the payment of a license fee by foreign corporations for tin; priv .lege of carrying on business within this state, and prohibiting the maintenance of actions by such corporations in the courts of this state unless such license fee shall nave been paid within certain specified times, is a condition subsequent to their right to carry on business within the state, and a complaint in an action by such a corporation is not defective for failure to allege a compliance with this section, non-compliance being a matter of defense to be availed of by answer; but the requirement of section 15 of the General Corporation Law (L. 1892, ch. 687; amd. L. 1901, cli. 538, § 1), that ‘‘No foreign stock corporation other than a monied corporation shall do business in this state without first having procured * * * a certificate that it has complied with all the requirements of law * * *” and prohibiting any such corporation from maintaining “ 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,” is a condition precedent to the right of such a corporation to lawfully do business in this state, the procurement of such license prior to the transaction of any business being necessary to validate its contracts ; and in an action brought by it to recover for goods alleged to have been sold and delivered an allegation in the complaint that the condition precedent in the statute has been performed is essential in order to set forth a cause of action, and the objection that the complaint, does not state facts sufficient to constitute a cause of action is not waived by the failure to raise it by demurrer or answer.
Wood & Selick v Ball, 114 App. Div. 743, affirmed.
(Argued October 30, 1907;
decided December 17, 1907.)
Appeal from a judgment of the Appellate Division of the Supreme Court in the fourth judicial department, entered August 14, 1906, affirming a judgment in favor of defendant entered upon a dismissal of the complaint by the court at a Trial Term.
This action was commenced on the 28th of November, 1904, in the County Court of Jefferson county. The following is a copy of the complaint, aside from the title and demand for judgment.
“ For a complaint against defendant, plaintiff alleges, that it is a foreign corporation, duly organized under the laws of the State of New Jersey, and having its principal office for the transaction of business in the City of New York, N. Y., and that the defendant is a resident of the City of Water-town, Jefferson County, N. Y.
“ Plaintiff further alleges, that on or about the dates men tioned in schedule 'A,’ hereto annexed and made to form a part hereof, plaintiff sold and delivered to defendant, at her request at Watertown, 27. Y., all the goods, wares and merchandise mentioned in said schedule ‘A,’ and consisting of an. article used by bakers and known to tbe trade as ‘ Liquid Egg.’ That said goods were reasonably worth $97.44 and for which defendant promised to pay plaintiff that sum; that said goods were sold upon a credit of 30 days net or cash less one per cent, which term of credit has long since expired ; that no part of said sum of $97.44 has been paid and defendant is indebted to plaintiff therefor in the sum of $97.44 and interest thereon from the 29tli day of April, 1904.”
Annexed to the complaint was a scliedule'sliowing that the goods were sold between the fifteenth of October and the fourth of December, 1903.
The answer contained a partial denial and a counterclaim for breach of warranty, to which a reply was served. There was no allegation in any pleading, nor any evidence, that the plaintiff cither had or had not conrplied with section fifteen of the General Corporation Law.
Upon the trial plaintiff produced evidence tending to support every allegation of the complaint. It was also proved. without objection that the plaintiff is a stock corporation. The defendant put in no evidence but moved for a nonsuit and the court granted the motion upon the ground that the complaint did not set forth a cause of action, in that it contained no allegation of compliance by the plaintiff with section fifteen of the General Corporation Law. Upon appeal to the Appellate Division the judgment was affirmed, one of the justices dissenting. The plaintiff appealed to this court.
Gr. 8. McCartin and John W. Carlisle for appellant.
The trial court erred in nonsuiting the plaintiff. (Fuller & Co. v. Schrenk, 58 App. Div. 222; 171 N. Y. 670; C. R. Parmelee Co. v. Haas, 171 N. Y. 579 ; Crane v. Powell, 139 N. Y. 379 ; Well v. Monihan, 129 N. Y. 161; Rowell v. Janvrin, 151 N. Y. 60; Rima v. R. I. Works, 120 N. Y. 433 ; Welsbach Co. v. N. G. & C. Co., 96 App. Div. 52 ; 180 N. Y. 533.) The failure to comply with the statute must he pleaded as a matter of defense unless it appeared on the face of the complaint. (O'Reilly, Skelly & Fogarty Co. v. Greene, 18 Misc. Rep. 423; Nicoll v. Clark, 13 Misc. Rep. 128; Thompson v. C. Assur. Co., 33 Misc. Rep. 39 ; Aikens, Lambert & Co. v. Haskins, 27 Misc. Rep. 631; International Society v. Dennis, 76 App. Div. 327; N. Y. T. C. Co. v. Williams, 102 App. Div. 1; L. & N. E. R. R. Co. v. A. B. & T. Co., 40 Misc. Rep. 698 ; Emerich v. Sloane, 108 App. Div. 330 ; D. F. S. Co. v. J. G. & J. R. Co., 87 App. Div. 21.)
J. A. McConnell for respondent.
The plaintiff, being a foreign stock corporation, other than a moneyed corporation, and the complaint having failed to allege compliance with section 15 of the General Corporation Law, prohibiting foreign stock corporations from doing business in this state and from maintaining any action in this state upon any contract made in this state unless prior to the making of such contract the required certificate shall have been procured, such complaint is defective and demurrable, on the grounds that it does not state facts sufficient to constitute a cause of action. (Welsbach Co. v. N. G. & E. Co., 96 App. Div. 52; 180 N. Y. 533.) The failure of plaintiff to allege and prove compliance with the statute was properly raised at the close of plaintiff’s proofs. (Code Civ. Pro. § 499 ; Tooker v. Arnoux, 76 N. Y. 397; Coffin v. Reynolds, 37 N. Y. 640 ; Sheridan v. Jackson, 72 N. Y. 170; Thrall v. Vil. of Cuba, 88 App. Div. 410.) The statutory provisions requiring foreign stock corporations to procure the certificate therein mentioned, attached as a condition precedent to the commencement of any action by this corporation in the courts of this state upon the contract set forth in the complaint herein. And it was, therefore, necessary for the plaintiff to allege in its complaint and prove upon the trial a compliance with said provisions. (Welsbach v. N. G. & E. Co., 96 App. Div. 52; Reining v. City of Buffalo, 102 N. Y. 308; Thrall v. Vil. of Cuba, 88 App. Div. 410; Jewell v. City of Ithaca, 72 App. Div. 220 ; Fuller v. Schrenk, 58 App. Div. 222; Pope v. T. H. C. Co., 107 N. Y. 61 ; Seaman v. Barentsen, 180 N. Y. 333.)

Opinion:
Vann, J.
The question presented by this appeal has led to some conflict of opinion. (Fuller v. Schrenck, 58 App. Div. 222; Welsbach Co. v. Norwich Gas & Electric Co., 96 App. Div. 52.) While we regard the conflict as now settled, a few words may remove a doubt which has arisen because we have held that the failure of the plaintiff to allege compliance with section fifteen of the General Corporation Law renders a complaint demurrable, and have also held that the failure to allege compliance with section 181 of the Tax Law does not render a complaint demurrable. (Welsbach Co. v. Norwich Gas & Electric Co., 180 N. Y. 533; Parmele Co. v. Haas, 171 N. Y. 579.)
These decisions are not in conflict. Each rests upon a statute peculiar to itself, which differs so essentially from that governing the other as to effect a different purpose and call for the application of a different rule in pleading. An examination of the decisions, the one rendered with an opinion and the other by simply answering questions certified, without comparing the statutes upon which they are founded, has led to some confusion which Ave uoav hope to dispel.
In the Parmele case Ave had before us the Tax Luav, Avhich is a revenue act." As written when that case was decided it provides that"" Every foreign corporation," Avith certain exceptions not uoav material, "authorized to do business under the General Corporation Luav, shall pay to the state treasurer, for the use of the state, a license fee of one-eighth of one per centum for the privilege of exercising its corporate franchises or carrying on its business in such corporate or organized capacity in this state, to be computed upon the basis of the capital stock employed by it Avithin this state, during the first year of carrying on its business in this state; and if any year thereafter any such corporation shall employ an increased amount of its capital stock within this state, the same license fee shall be due and payable upon any such increase. The tax imposed by this section on a corporation not heretofore subject to its provisions shall be paid on the first day of December, 1901, to be computed upon the basis of the amount of capital stock employed by it within the state during the year preceding such date, unless on such date such corporation shall not have employed capital within the state for a period of thirteen months in which case it shall be paid within the time otherwise provided by this section. No action shall be maintained or recovery had in any of the courts in this state by such foreign corporation without obtaining a receipt for the license fee hereby imposed within thirteen months after beginning such business within the state, or if at the time this section takes effect such a corporation has been engaged in business within this state for more than twelve months, without obtaining such receipt within thirty days after such tax is due." (L. 1896, ch. 908, § 181 ; L. 1901, ch. 558, § 1.)
In the Welsbaoh case we had before us the General Corporation Law, which is not a revenue act, but is designed to regulate domestic corporations of all kinds and to prescribe the conditions upon which foreign stock corporations may do business in this state. It provides that "No foreign stock corporation other than a monied corporation, shall do business in this state without having first procured from the secretary of state a certificate that it has complied with all the requirements of law to authorize it to do business in this state, and that the business of the corporation to be carried on in this state is such as may be lawfully carried on by a corporation incorporated under the laws of this state for such or similar business . No such corporation now doing business in this state shall do business herein after December 31st, 1892, without having procured such certificate from the secretary of state, but any lawful contract previously made by the corporation may be performed and enforced within the state subsequent to such date. No foreign stock corporation doing business in this 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." (L. 1892, ch. 687, §15; L. 1901, ch. 538, §1.)
The provision of the Tax Law, which led to the result reached in the Parmele case, is a condition subsequent. There is a command to pay a license fee for the privilege of carrying on business in this state, but not until business has been carried on for a longer or shorter period, varying according to circumstances. The amount is to be fixed by the comptroller, who is authorized to examine books, records and employees for that purpose. (L. 1895, ch. 210.) It cannot be paid in advance, for it must first be computed and the computation is made on the basis of the capital stock employed in this state, which cannot.be known in advance. When computed on that basis it is to be paid " within thirty days after such tax is due." Unless it is paid within thirteen months after the commencement of business in this state, or if the corporation has already carried on business in this state for a certain length of time, within thirty days after the taxis due, no action can be maintained in our courts by the corporation in default. There is no express prohibition against doing business without a license, but a penalty is imposed through the withholding of the right to sue, unless a license fee is paid within the period prescribed. We, therefore, held that a complaint which did not allege compliance with this section was not defective for that reason, but that noncompliance was a matter of defense, to be availed of by answer. This is in accordance with the general rule that performance of a condition subsequent, which continues in force a right already acquired, need not be pleaded, while performance of a condition precedent, by which the right itself is acquired in the first instance, must be pleaded.
On the other hand, the requirement of section 15 of the General Corporation Law, which led to the result in the Welsbaoh case, is a condition precedent to the right of a foreign stock corporation to lawfully do business in this state. The procuring of a license must precede the transaction of business or the contracts of the corporation are not lawful. Aside from the provision withholding legal remedies, no such corporation can lawfully make contracts in this state without obtaining the certificate in advance. The object of this statute is not to raise revenue, but to require certain foreign corporations, once for all time, to comply with such conditions as the legislature deemed necessary for the protection of our own citizens. Those requirements appear in section 1G and the certificate provided for in section 15 is conclusive evidence that they have been performed. Thus the corporation is required to file with the secretary of state a sworn copy of its charter and a statement setting forth the business which it proposes to carry on in this state; to designate a place of business within this state which is to be its principal place of business here and to appoint a j>erson upon whom legal process may be served in this state. These are the conditions upon which it is permitted to enter the state for the purpose of carrying on business. Until it complies with them and procures a certificate from the secretary of state that it has complied with them it cannot carry on business here except in violation of la-w. The command is that it " shall do no business in this state without first " procuring the certificate of compliance. " Without," as thus used, is a word of exclusion, and excludes from the right to do business in this state every foreign corporation of the kind specified which has not obeyed the statute. "The legislature has said that the thing shall not be done and. that is enough." (Jackson v. Walker, 5 Hill, 27, 32 ; Foley v. Speir, 100 N. Y. 552; Johnston v. Dahlgren, 166 N. Y. 354, 358.)
The intention of the legislature is made emphatic by its command addressed to corporations already engaged in business here when the original act took effect. "Ho such corporation now doing business in this state shall do business herein after December 31st, 1892, without having procured such certificate, but any lawful contract previously made by the corporation may be performed and enforced within the state subsequent to such date." The saving clause inserted to protect contracts already made when the act was passed indicates that contracts made after that date are unlawful unless the statute is complied with.
The Welsh aeh case came before us upon a certificate of the Appellate Division, presenting the following questions for decision:
" 1. Was the complaint demurrable upon the ground that it appears upon the face thereof that the plaintiff did not have legal capacity to sue ?
"2. Was the complaint demurrable on the ground that facts are not therein stated sufficient to constitute a cause of action ? "
We affirmed the order appealed from and answered both questions in the affirmative. The only defect claimed to exist in the complaint in that case was the omission to allege compliance with section 15 of the General Corporation Law. The same defect exists in the complaint now before us. There is no allegation, either general or specific, that the condition precedent in the statute has been performed. -(Code Civ. Pro. § 533.) Such an allegation is essential in order to set forth a cause of action, and the objection that the complaint does not state facts sufficient to constitute a cause of action is not waived by the failure to raise it by demurrer or answer. (Id. § 499.)
It is suggested that a recovery ought to be permitted, if possible, because the defendant had the goods,' and it is equitable that she should be compelled to pay for them, but that which a statute prohibits is not equitable, and, as was said below, " the logic of that suggestion might do away with the statute in every instance."
We think that compliance with section 15 of the General Corporation Law should be alleged and proved by a foreign corporation such as the plaintiff, in order to establish a cause of action in the courts of this state. The cases holding otherwise should be regarded as overruled and the conflict of authority ended.
The judgment appealed from should be affirmed, with costs.