Court Opinion

ID: 3812842
Source: CourtListenerOpinion
Date Created: 2016-07-06 07:50:46.452023+00
Date Added: 2024-06-11T13:50:42.092233
License: Public Domain

The original opinion in this case was handed down at the February sitting of the January, 1903, term. The case had been given that careful consideration which is usual, and it was deemed that all propositions necessary for the correct determination of the case had been considered and correctly analyzed.
Within the time prescribed by the rules, a petition for rehearing was filed which attacked every material question decided by this court, even to the extent of alleging that some of the authorities cited did not sustain the doctrine they were cited to sustain; that others had been either overruled or departed from; that the issues had been misconceived; that the questions here involved could only be litigated in direct proceedings instituted by the sovereign, and even that we had failed to read the defendant's charter correctly. These assertions were made with such energy, and bold and apparent confidence, that out of abundant caution the petition for rehearing was sustained. Additional briefs were filed, and additional time was consumed in oral argument; and after diligently investigating the labyrinth of record and briefs which is now a part of this case, we have arrived at the conclusions which we expressed in the former opinion, and feel entirely satisfied with the principles therein laid down.
Possibly no good purpose will be subserved by the reiteration of the principles heretofore laid down; and yet, owing to the storm of disapproval raised by the defeated parties *Page 221 
upon the filing of the former opinion, it may not be amiss to emphasize, as it were, some of the propositions heretofore enunciated.
It will be noticed by carefully anaylzing the petition for rehearing and the various briefs filed in support of the contentions, that the first rule of law contained in the syllabus of the opinion is entirely lost sight of in the avalanche of authority and argument of counsel for the defendant in error; and that the question contended for, that a foreign corporation acting in excess of its conferred authority may be questioned as to its authority only by the state, is a rule adhered to and laid down as a correct proposition of law, in the first part of the second syllabus.
No distinction, however, is sought or attempted to be made by counsel between cases questioning the right of a corporation to hold property already acquired which is in excess of its authority, and where there is an attempt on the part of such corporation to acquire title to property which is vested in an individual, where the right to hold such property is in excess of its conferred authority. And it is largely upon this distinction that the former opinion is based.
In support of the contentions that the decisions cited by this court did not sustain the doctrine they were cited to sustain, counsel undertake to dissect the case of the LandGrant Railway Co. v. Coffey County, 6 Kan. 245, and, among other things, claim that this case is not upheld by the authorities, has no support from the other courts, and has been overruled. Why such an assertion as this should be made we are unable to say, because it is made in face of the fact that this case has been cited by numerous courts and approved *Page 222 
and upheld in every instance in which it has been cited. The cases which have been called to our attention in which the Kansas case has been cited with approval, include Judge Thompson's work on Corporations, Morawetz on Corporations, Beach on Private Corporations, the New York court of appeals, the supreme court of Wisconsin; and no doubt other citations of approval could be found of equal weight if effort were made in that direction.
The principles involved in this case were not new even at the time the case was decided. The decision was in perfect harmony with the underlying principles upon which it was based, and it was only because of the vigorous language used, and the vast financial interests involved, that this decision caused any more comment or notice than any other involving the same general principles.
There is one proposition involved in that decision which, like many in this case, is entirely overlooked by counsel for defendant in error. The state or sovereign was not a party to that case. The question involved was the right of the company to acquire property, viz: the bonds of the county. No question arose there over property previously acquired by the company, but it arose over the right of the company to acquire additional property, and the county contested that right.
In this particular, then, that case and the one at bar are exact parallels; that is, it is not a case in which the state or sovereign was attempting to question the legality of the company's franchise. The defense was one questioning the right to compel a transfer of property by the county to the company, as Myatt in the present case is questioning the *Page 223 
right of the company to compel a transfer of property which he owned, and in which the company claimed an interest.
This Kansas case as well as numerous others, many of which are cited by counsel for defendant in error in their brief upon other propositions, show as conclusively as any proposition of law can be shown, that there are instances where an individual may contest the right of a corporation to acquire property, and in order to successfully maintain his contentions he may plead and prove that the corporation has no legal right to acquire the property contended for. This principle has been decided time and again by the courts of the different states; and was likewise so decided in the early days of the supreme court of the United States, and has been followed from that time to the present.
Some of the principles underlying this case are decided in the case of Paul v. Virginia, 8 Wall. 168, and in this decision, the early case of the Bank of Augusta v. Earl, 13 Pet. 519, is commented upon and approved.
In the case of Paul v. Virginia, the court lays down the proposition; that artificial persons created by the legislature possess only the attributes which the legislature has prescribed. And again, the court lays down the proposition that a corporation has legal existence alone in the state where created.
Again, the court says:
* * *"That the clause of the Constitution could never have intended to give the citizens of each state the privileges of citizens of the several states, and at the same time to exempt them from the liabilities attendant upon the exercise of such privileges in those states; that this would be to give the citizens of other states higher and greater privileges *Page 224 
than are enjoyed by citizens of the state itself, and would deprive each state of all control over the extent of corporate franchises proper to be granted therein."
"It is impossible," continued the court, "upon any sound principle to give such a construction to the article in question."
Should the defendant in error be held to have the right to acquire the property in the manner in which it is sought to be acquired in this case from the plaintiff, and to enjoy the privileges sought to be conferred by the charter, it would have the effect to give to the corporations of Kansas a greater and more unlimited privilege and authority than the Territory will allow its own domestic corporations, for there is no provision of law, as stated in the former opinion, which will allow a corporation to be formed for the purposes mentioned in the second article of the defendant's charter; and the United States statute forbids the territorial legislature granting private charters and special privileges, and specifies the purposes for which corporations may be formed.
Again, the court in the case last cited says:
* * * "The corporation being the mere creation of local law, can have no legal existence beyond the limits of the sovereignty where created. As said by this court in Bank ofAugusta v. Earl, 'It must dwell in the place of its creation, and cannot migrate to another sovereignty.' The recognition of its existence, even by other states, and the enforcement of its contracts made therein, depend purely upon the comity of those states  — a comity which is never extended where the existence of the corporation or the exercise of its powers are prejudicial to their interests or repugnant to their policy. Having no absolute right of recognition in other states, but depending for such recognition and the enforcement of its contracts upon their assent, it follows, *Page 225 
as a matter of course, that such assent may be granted upon such terms and conditions as those states may think proper to impose. They may exclude the foreign corporation entirely. They may restrict its business to particular localities, or they may exact such security for the performance of its contracts with their citizens as in their judgment will best promote the public interest. The whole matter rests in their discretion."
* * * "And if, when composed of citizens of one state, their corporate powers and franchises could be exercised in other states without restriction, it is easy to see that, with the advantages thus possessed, the most important business of those states would soon pass into their hands. The principal business of every state would, in fact, be controlled by corporations created by other states."
Now, as stated in the former opinion, it is doubtful indeed if the laws of Kansas authorize a corporation to be formed for the purposes named in the charter of this company. Indeed, this is a very favorable statement for the defendant in error, a more favorable statement, we think, than the courts of Kansas would give it, if the questions here involved were being litigated there. At any rate, until the passage of the act of 1903, which we will hereafter notice, the laws of this Territory did not authorize the formation of a corporation to transact the business named in the charter of the company, nor the business it was assuming to carry on. The statutes of this Territory and of the United States lay down specificially those purposes for which corporations may be organized. The purposes are limited. The authority to organize for the purpose of "owning, buying, selling, leasing, renting, exchanging and improving lands, town lots and other real estate and buildings and improvements thereon" *Page 226 
are not included in any provision for which corporations may be organized. The statute having defined specifically the purposes for which corporations may be formed, all others are excluded.
It is plain, therefore, that the defendant corporation in this case is seeking to exercise a privilege which cannot be enjoyed by any of the corporations of this Territory be cause authority to organize for such purpose is not conferred by any law of this Territory.
Referring to the case of the Bank of Augusta v. Earl, 13 Pet. 519, we wish to notice some of the propositions there decided. Before doing so, however, we wish to state that this case was one of the Bank of Augusta, a corporation of the state of Georgia, against a citizen of Alabama, brought to recover on a bill of exchange discounted at Mobile, Alabama, by the agent of the bank, and which had been protested for non-payment. The bill was made and endorsed for the purpose of being discounted by an agent of the bank who had funds in his hands belonging to the bank, for the purpose of purchasing bills of exchange, which funds were derived from the bills and notes discounted by the bank in Georgia. The bill was discounted by the agent of the bank in Mobile for the benefit of the bank. The defense was that the Bank of Augusta had no authority to discount bills of exchange outside of the state in which it was created, and that a contract of such character made with individuals outside of the state was illegal and void.
The court below held that the plaintiff could not recover, and that the purchase of the bills by the agent of the plaintiff was prohibited by the laws of Alabama, and gave *Page 227 
judgment for the defendant. The supreme court reversed the trial court, and in doing so enunciated some of the propositions that have since been universally followed by that court as well as by others.
The first proposition we wish to notice is this: That the power of a corporation to transact business beyond the limits of the state in which it was incorporated is questioned. In fact, that is the principal question in the case. Another feature of the case should be noticed. This was not a direct proceeding by the sovereign to annul the franchise, but it was a case by the corporation against an individual, which individual was seeking to avoid a contract on the ground that the corporation had no legal authority to make it at the place where made.
In this respect the case is parallel with the one at bar; that is to say, that the case is between a corporation and an individual, and not between the corporation and the state or sovereign. The authority to exercise the privilege sought to be exercised is the question involved in that case as well as the one at bar, but beyond this there were some questions involved in that case that are not involved in this, viz: that the bank was seeking to compel the performance of a contract which had been made between the parties, and that the defendant, Earl, had profited and been benefited by the contract, and had received something of value therefor from the company. These questions are not involved here.
Nowhere does the court in this case question the right of the defendant, Earl, to maintain his defense, if his contentions are well founded, i. e., that the bank had no legal authority to discount bills in a state other than where created; *Page 228 
and nowhere in the case does the court intimate that the rule of comity would prevent the defendant from maintaining his defense if the authority was repugnant to the laws of the state, or if the contract was an illegal one because of the want of authority on the part of the company to make contracts of that character within the state of Alabama. The court in this case says:
"The only rights it can claim are the rights which are given to it in that character, and not the rights which belong to its members as citizens of the state. And we now proceed to inquire what rights the plaintiffs in error, a corporation created by Georgia, could lawfully exercise in another state; and whether the purchase of the bill of exchange on which this suit is brought was a valid contract, and obligatory on the parties."
" * * * 'A corporation * * * is an artificial being, invisible, intangible, and existing only in contemplation of law. Being a mere creature of the law, it possesses only those properties which the charter of its creation confers upon it, either expressly or as incidental to its very existence.' * * * Corporations created by statute must depend both for their powers and the mode of exercising them, upon the true construction of the statute itself."
"It may be safely assumed that a corporation can make no contracts and do no acts either within or without the state which creates it except such as are authorized by its charter, and those acts must also be done by such officers and agents and in the manner as the charter authorizes."
The term charter as herein used refers to the law of the state authorizing the formation of corporations. Applying these rules to this case, where is the provision in the laws of the State of Kansas or in this Territory that authorizes this company to acquire the property involved in this *Page 229 
case in the manner in which it is sought to be acquired? Further the court says:
"And if the law creating a corporation does not by a true construction of the words used in the charter give it a right to exercise its powers beyond the limits of the state, all contracts made by it in other states would be void."
Now, it will be noticed that it is not the charter or articles of incorporation that must give the company the power to transact business beyond the limits of the state, but it is the law under which the corporation is created which must give the corporation the right to exercise its powers beyond the limits of the state; otherwise, says the supreme court of the United States: "All contracts made by it in other states would be void."
The laws of the State of Georgia authorized the Bank of Augusta to deal in bills of exchange, and that law, says the supreme court, "gives it the power to purchase foreign bills as well as inland;" or, in other words, to purchase bills payable in another state. "The power thus given clothed the corporation with a right to make contracts out of the state in so far as the State of Georgia could confer it."
And this was largely the turning point in that case; that is, the foundation for the right of the bank to transact business in a foreign state, and make contracts therein, was the authority given the bank by the laws of the State of Georgia to deal in bills of exchange, which was held to give it power to purchase foreign bills as well as inland.
Being organized then in harmony with the law which provided for the organization of banks of discount, to operate within the State of Georgia, and such contracts being within the scope of its limited powers in the state in which *Page 230 
it was created, the court holds that by the rule of comity such power might be extended beyond the limits of the state, and such contracts as they were allowed to make within the state in which the organization was created might be made in the sovereignty in which it does not reside. The court further says:
"The corporation must no doubt show that the law of its creation gave it the authority to make such contracts through such agents. Yet, as in the case of a natural person, it is not necessary that it should actually exist in the sovereignty in which the contract is made. It is sufficient that its existence as an artificial person in the state of its creation is acknowledged and recognized by the law of the nation where the dealing takes place; and that it is permitted by the laws of that place to exercise there the powers with which it is endowed."
Now, where did the corporation in this case show that the laws of the State of Kansas gave it authority to make such contracts, and where did the corporation show that it was permitted by the laws of the Territory to exercise here the powers with which it claimed to be endowed? Speaking further, the supreme court says:
"Every power, however, of the description of which we are speaking, which a corporation exercises in any state, depends for its validity upon the laws of the sovereignty in which it is exercised."
Again, we ask, applying this rule, where is the law of this Territory upon which the defendant in error must depend for the validity of its contract or authority or power to make the same? And the supreme court further says: "A corporation can make no valid contract without their sanction;" that is, the sanction of the sovereign where it is *Page 231 
exercised, "express or implied." Now, there is no express or implied sanction in any of the laws of this Territory, for the defendant company to make any such contract. And again the supreme court says in this case that when a corporation is rightfully and legally formed in one state:
"The courts of justice have always expounded and executed contracts according to the laws of the place in which they were made, provided that law was not repugnant to the laws or policy of their own country. The comity thus extended to other nations is no impeachment to sovereignty. It is the voluntary act of the nation by which it is offered, and is inadmissible when contrary to its policy or prejudicial to its interest."
Had the supreme court found that the Bank of Augusta did not by virtue of the laws of the state in which it was created have the power or authority to discount bills of exchange within its own state, the decision would have been, that by extending to it the rule of comity, it could not enforce such a contract in another state, and a defense to such an action could be successfully maintained by an individual in a collateral proceeding, where the right of franchise was not directly involved.
We think this is sufficient to put at rest for all time the contentions made by the defendant in error that the plaintiff in error in this case cannot maintain the propositions for which he is contending.
We now come to the question of what, if any, effect has the act of the legislature of 1903 upon the parties and their standing in this case? This act is chapter 9 of the Session Laws of 1903, and is in the way of an amendment of the Laws of 1893, and among other things intends to provide that *Page 232 
corporations may be organized for the purposes named in the charter of this company. The provision of the act to which our attention is called and which it is claimed has a bearing here is that part of the proviso which reads as follows:
"Provided further, that any corporation heretofore organized or attempted to be organized for any of the purposes herein specified under the laws of this Territory, or in another state or territory, and which has filed a copy of its charter or articles of incorporation in the office of the secretary of this Territory, as required by law, shall have the same power to transact business as if incorporated under the terms of this act, and shall have the privileges, franchise and powers conferred by this act, the same as any corporations created under the terms of this act, and the acts of such corporations are hereby legalized, confirmed and ratified: * * * *"
Now it is plain from the reading of this provision that in some respects it was intended to act prospectively and in others retrospectively. In so far as the act gives to these defective corporations the same power to transact business as if incorporated under the terms of this act, and in so far as it gives to them the privileges, franchises and powers conferred by this act, the same as any corporation created under the terms of the act, it is intended to act prospectively; but in so far as it attempts to legalize and confirm the past acts of the corporations, it is plainly intended to act retrospectively.
Now, applying the familiar rule that acts will not be given a retrospective action unless plainly intended, the powers given to the corporations included in the act, and the privileges and franchises granted, are plainly prospective, and date from and after the passage of the act. And applying *Page 233 
the rule that retrospective statutes are not valid where they impair the obligation of existing contracts, can this act be held to affect the subject matter and the parties to this case?
It will be noticed that that part of the act which is intended to be retrospective is of a curative character; that is, it is intended to cure the defective acts of the corporations. It was probably not intended to undertake to breathe life into inanimate objects. It can only be held to apply to acts performed by the company which, because of the conditions, were defective or illegal, and to ratify and confirm them.
Now, as between the company and the plaintiff in error in this case, there is no defective or illegal act which the company has performed, and therefore, there is no defective or illegal act which can be held to be cured or ratified by this act. Besides, if it should be held that this act was intended to and did reach the subject-matter of this action, and to breathe life into that which did not before legally exist, it would affect the contract made between the plaintiff in error and his grantors, and for that reason the act would be void. We do not wish to be understood as holding the act to be void, because we do not think it affects the parties to this case in that manner, or was intended so to do. What, if any, acts it may be held to affect, legalize and ratify, it is not now necessary to determine, and we do not so determine. The only question that we do now decide is that the act has no effect upon the subject-matter or the parties in this action.
One further observation: The facts disclosed in the *Page 234 
record and referred to in the former opinion show that Barnes, Dalton, Lynch and others formed a copartnership, generally called a syndicate, for the purpose of laying out the townsite of Ponca City; and by their inducement, advertisement and conduct, induced the plaintiff in error, together with many others, to go upon the lots included in the townsite, and occupy and improve the same; that they agreed that upon the performance of certain conditions of occupancy and improvement, and the payment of a small sum, they would convey to the occupants the legal title to the lots which they occupied.
The plaintiff in error having fulfilled the conditions as to improvement and occupancy was, upon the payment of the sum determined upon by the syndicate, entitled to a deed transferring to him the full legal title. He paid that sum to Barnes and Dalton, members of the syndicate or copartnership who at the time held the legal title. The other members of the company and those who were the incorporators of the defendant company were parties to the contract with the plaintiff in error and had knowledge of and participated in the inducements held out to him and others to go upon the townsite and occupy and improve the property, so that the doctrine of lis pendens
upon which the trial in the court below was largely had, became and was of very slight importance in determining the rights of the parties in this case, for the reason that notwithstanding it should be admitted that the transfer of the title to this lot from Barnes and Dalton to the plaintiff in error was made at a time when suit was pending between the defendant corporation and Barnes and Dalton over this and other property, and that the suit was such a one as would create lis pendens
notice; still, that fact *Page 235 
would be of little consequence here, for the acts of the former syndicate or copartnership, and the individual members thereof, and this corporation and its incorporators and officers, were so interwoven and combined that even if the transfer had not been made from Barnes and Dalton to the plaintiff in error, and the company now held the legal title, the plaintiff in error at any time could have maintained his action to compel this company to transfer the lot to him, upon the payment of the monetary consideration agreed upon.
Having reached the conclusion that the propositions laid down in the former opinion are correct and should be adhered to, and for the further reasons expressed in this opinion, the judgment heretofore entered in this case will be allowed to stand, and the judgment of the court below quieting title to the premises in the said corporation will be set aside and the cause remanded with direction to enter judgment in favor of and quieting title in the plaintiff, John T. Myatt.
Hainer, J., who presided in the court below, not sitting; all the other Justices concurring. *Page 236