Court Opinion

ID: 9767074
Source: CourtListenerOpinion
Date Created: 2023-08-29 05:08:28.914625+00
Date Added: 2024-06-11T07:30:28.206062
License: Public Domain

Ed. F. McFaddin, Justice, dissenting. I vote to reverse the 'Circuit Court judgment because I am of the opinion that the appellant should prevail; and here are the reasons for my vote. W. F. Sebel, Inc. was a nondomesticated foreign corporation. Under Ark. Stat. Ann. § 64-1202 (Repl. 1957) the notes that Hernreich executed to Sebel were not void. Bather, Sebel, as a nondomesticated foreign corporation, was denied the right to use the Arkansas State Courts to collect the notes. Sebel could have enforced the notes in the United States District Court in Arkansas if the jurisdictional amounts had been great enough. Citizens Bank v. Shaw, 293 F. 63;1 and Pellerin v. Hogue, 219 F. Supp. 629. In Waxahachie Medicine Co. v. Daly, 122 Ark. 451, 183 S. W. 741, we said: “Our court has held that the failure of a foreign corporation to comply with the requirements of the statutes prescribing conditions upon which foreign corporations may enter and do business within the State did not render its contracts void, ...” All our statute (§ 64-1202) does is to deny to the nondomestieated foreign corporation the right to use the Arkansas State Courts. If the Legislature had wanted to make the notes void it could have done so in appropriate language, just as usurious notes are void, even in the hands of a bona fide holder. Since the notes were not void, then, under Ark. Stat. Ann. § 85-3-305 (Add. 1961), the appellant, as the conceded bona fide holder (for value before maturity and without notice), took the notes free of the claim of void-ability that Hernreich could have made against Sebel Co. The statute just cited says that the holder in due course “. . . takes the instrument free from ... (2) all defenses of any party to the instrument with whom the holder has not dealt except ... (b) ... illegality of the transaction as renders the obligation of the party a nullity.” That the notes were not a nullity is shown by Citizens Bank v. Shaw, supra; so, under the plain wording of our statute (a part of the Uniform Commercial Code adopted in 1961), these notes are enforceable in the hands of the appellant. This point is made crystal clear in the comment following' Ark. Stat. Ann. § 85-3-305 (Add. 1961) wherein, in speaking of paragraph (b) of subsection (2), as above quoted, the comment says: “5. Paragraph (b) of subsection (2) is new. It covers mental incompetence, guardianship, ultra vires acts or lack of corporate capacity to do business, any remaining incapacity of married women, or any other incapacity apart from infancy. Such incapacity is largely statutory. Its existence and effect is left to the law of each state. If under the local law the effect is to render the obligation of the instrument entirely null and void, the defense may be asserted against a holder in due course. If the effect is merely to render the obligation voidable at the election of the obligor, the defense is cut off.” (Emphasis supplied.) When the Legislature adopted the Uniform Commercial 'Code with this comment before it, the law had been settled at that time that notes such as these were not null and void, but merely voidable; and the comment says that, under such circumstances, “the defense is cut off.” The Majority Opinion quotes from Dean Waterman’s article which appeared in Yolume 5 of the Law School Bulletin in December 1936. Dean Waterman there says: “As pointed out, Arkansas is perhaps the sole jurisdiction which denies to holders in due course the righ to recover from the maker under a statute on unlicensed foreign corporations, such as ours, which does not declare the instrument void.” Since 1936 the Arkansas Legislature has adopted the Uniform Commercial Code; and the logical effect of that adoption is to remove Arkansas from “the sole jurisdiction,” and put Arkansas with the great weight of authority in other jurisdictions. This is particularly important in matters of commercial paper. The Majority Opinion concedes that the Hogan case was the ease of an assignee, and admits that we have no ease in Arkansas directly in point. Here is the language in the Majority Opinion: “Thus it is apparent that this is really the first time this court has had occasion to rule directly on the question presented.” In view of the adoption of the Uniform Commercial Code, as above quoted, and in the light of the cases in all other jurisdictions, I am thoroughly of the opinion that the appellant had the right to maintain this suit in the State courts. The Majority Opinion is reading something into the law that is not there, because it is in effect saying that the notes are absolutely void; and that is not what Ark. Stat. Ann. § 64-1202 (Repl. 1957) says. For the reasons herein stated, I respectfully dissent.  This case thoroughly establishes that notes like those in question are not void. The case has been cited in Ockenfels v. Boyd, 297 F. 614 (8th Cir.); Shaw v. Citizens Bank, 10 F. 2d 315 (8th Cir.); and in annotations in 132 A.L.R. 473 and 133 A.L.R. 1179.