Court Opinion

ID: 6686766
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:33:26.822458+00
Date Added: 2024-06-11T16:00:59.442339
License: Public Domain

CORSON, J.
(dissenting). I am unable to- concur in the-opinions of my associates in holding that the contract in controversy in this action was void, for the reason that it was entered into prior-*539to the plaintiff filing its articles of incorporation and appointing a resident agent as prescribed by the Code. Section 883 of the present Code is substantially the same as section 3190, Comp. Raws Dak. 1887, with the addition ofa the clause providing that no action could be maintained until the provisions of the act should be complied with. Section 3192 was amended by the addition of a similar clause thereto. The only material change, in my judgment, therefore, in the sections was to add the provisions above mentioned. In 1892 this court, in Wright v. Dee, 2 S. D. 596, 51 N. W. 706, after an exhaustive discussion as to- the construction to be given to section 2190 in the Compiled Daws of 1887 held that: “Unless the statute prescribing the prerequisites to the right to do business declares that the contract made by a foreign corporation shall be void the courts should not declare them to' be so1 absolutely.” With this decision before it, the Degislature in 1895 made the amendments above stated, but omitted to declare in either section that a contract made before a corporation had complied with the statute was void; and, so far as the question involved in this- controversy is concerned, the statute in my opinion remains practically the same as it stood at the 'time that decision was made. I am unable to find in either section, as amended, any language declaring a contract made by, or deed executed to, a corporation before it has complied with the law void, or that indicates any intention of the Degislature to-make such a contract or deed void; but, on the contrary, the Deg-islature has expressly prescribed the penalties imposed by it for failure to comply with the law, by providing that no action shall be maintained by any such corporation in the courts of this state, until it has complied with the law, and providing for the punishment of any agent who may make such contract. The Degislature having expressly prescribed the penalties imposed upon a corporation for failure to comply with the law, it is not competent for this court by construction to add any other penaltiés thereto; it being a well-settled rule of law that a statute penal in its nature must receive a strict construction, and the pénalties cannot be increased by judicial construction.
Mr. Justice RUDDER, in his opinion, has cited a large number of authorities in support of the decision of a majority of the court. *540The decisions, says the author, in the article entitled “Foreign Corporations” (Am. & Eng. Enc. of Raw, vol. 13, p. 875), “are in hopeless, conflict,” and, as will be observed upon an examination of that article, quite as large a number of cases are cited holding such contracts not void under statutes similar to- our own, and in my judgment these decisions are supported by better reasoning. The learned author, in the article on Foreign Corporations in 19 Cyc. 1298, says, “The shocking immortality involved in the proposition that a citizen should be judicially encouraged to repudiate his contract, fairly made, with a foreign corporation, and to keep the fruits of such contract while repudiating the obligation on his part — to keep the goods but not'to pay for them — has led some of the Legislatures and courts to find a way out, by adopting the rule that the failure of a - foreign corporation to comply with statutes imposing conditions upon which it may enter the state and do business does not operate to render its contracts, made with inhabitants of the state, wholly void, but merely operates to suspend the remedy of the foreign corporation in the courts of the state upon such contracts, until it shall have complied with the statutory conditions. Under this rule, until such compliance, any action by the foreign corporation to enforce the contract is prematurely brought, but is not barred, so that an answer setting up the noncompliance of the foreign corporation with the statute would be an answer in the nature of a plea in abatement, and judgment upon it in favor of defendant would operate merely to .abate the suit.” In support of the proposition the author also cites a large number of decisions, including the states of New York, Massachusetts, Kansas, Missouri, and others, and a large number of decisions from the federal courts. Mr. Thompson, in his work on corporations (volume 6, § 7950), in discussing this subject, says that “the decisions are in a state of irreconcilable contradiction,” and in the conclusion of the section says that such contracts are usually held void, where they are “unaccompanied with any specific penalty”; but in further discussing this subject, in section 7956, he says: “The spectacle of the demoralization produced by judicial decisions which uphold the citizens of the state in repudiating their honest engagements with foreign corporations, on grounds having no relation to the merits of those *541engagements, was evidently the circumstance which drove the Supreme Court of Indiana to. a reconsideration of this question, so as to hold that the statue of that state relating to foreign corporations and their agents, which put such foreign corporations and their agents under a restraint enforced by 'a penalty, against doing business in the state until they complied with certain named conditions, did not operate to render the contracts made by such corporations, with citizens of the state, before complying with such’ conditions, absolutely void, but merely operated to suspend the remedy of the foreign corporation in the courts of the state upon such contracts, until it should have complied with the statutory conditions. The new theory was that, until such compliance, any action by the foreign corporation to enforce the contract was prematurely brought ; so’ that an answer setting up the noncompliance of the foreign corporation with the statute would be an answer in the nature of a plea in abatement, and judgment upon it in favor of the defendant • would operate to abate the suit.”
I shall not attempt to review the numerous decisions upon this subject further than to tall attention to' two decisions; one by the Court of Appeals of New York, and the other' by the Supreme Court of the United States. In the case of the Neuchatel Asphalte Co. v. City of New York, 155 N. Y. 373, 49 N. E. 1043 decided in 1898, under a statute substantially the same as our own as amended in 1895, that learned court uses the following language in construing the act under consideration in that case: “Its purpose was not to avoid contracts, but to- provide for an effective supervision and control of the business proposed to be carried on here by foreign corporations. It provided no penalty, in the event of a noncompliance, other than the suspension of civil remedies. Such, and such only, were the consequences of the violation of the statute, and none others will be implied as intended by the Legislature. The offense aimed at was only an offense because declared by the statute to be so, and its particular proportion and consequences were defined therein.” The trial court in that case held the contract void, but its ruling was reversed by the Supreme Court, and the decision of the latter court was affirmed by the unanimous decision of • the Court of Appeals as above stated. Substantially the same view *542was taken by the Supreme Court of the United States in Fritts v. Palmer, 132 U. S. 282, 10 Sup. Ct. 93, in construing a statute similar to our own of the state of Colorado. The Circuit Court of the District of Colorado- had held a deed made by a party to the defendant corporation void for the reason that the deed was made to the corporation before it bad filed its articles of incorporation and appointed a resident agent. . But the Supreme Court- of the United States reversed the decision, all the judges concurring except Miller, J., and held that, inasmuch as the law of Colorado had prescribed certain penalties for a failure to comply with the act, those penalties must be deemed- all the penalties the Legislature intended to impose upon the corporation, and therefore that the deed was valid, notwithstanding it was made in violation of the. law.
For fourteen years the law as anounced in the decision in Wright v. Lee, supra, has been regarded as the law of-this state, and as to realty a rule of property. The decision of my associates, without any apparent reason therefor or any material change in the law, other than precluding a'corporation from maintaining an action in this state, as I view the law, until it has complied with the provisions of the Code, has in effect, if not directly, reversed and overruled the decision of this court in that, case. The rule established by that decision has become so well settled and understood by the bar of this sate, and so far a rule of property, that it seems to me unwise and injudicious at this time to reverse it, in view of the fact that the Legislature, although amending the sections, has failed to declare a contract made in violation of the provisions of the sections void. I am of the opinion that in this case it would have been proper for the trial court, under the pleadings and evidence, to have dismissed the action without prejudice, for the reason that at the time the’ action was commenced the plaintiff corporation had not complied with the provisions of the Code and that the judgment of the court should now be reversed, with directions to the court below to enter a judgment dismissing the action without prejudice.