Court Opinion

ID: 5170475
Source: CourtListenerOpinion
Date Created: 2022-01-02 04:54:12.493068+00
Date Added: 2024-06-11T08:26:04.011806
License: Public Domain

AILSHIE, C. J.,
Concurring Specially. — I have been somewhat in doubt as to just why this particular proceeding should have been deemed necessary. I am opposed to passing on moot questions, and especially so. where a court is overrun with real, live controversies and litigation, as is the case in this court. This observation is prompted by the following view which I gather from the record in this case. The foreign corporation as such was not entitled to defend in the foreclosure action in the district court, for the reason that it had failed to comply with the state statute in paying its license tax or excise under the provisions of chap. 6 of the Laws of the Extraordinary Session of 1912. The directors of the corporation, however, being residents of the state of Montana, and not being in fact aware of the statute and of the inability of the corporation to appear and defend in the action, employed attorneys and made a formal appearance in the case, filed their answer for the corporation and went to trial. When the existence of the statute and fact of their noncompliance therewith were called to the attention of their attorneys, they immediately withdrew from the case. Apparently, as soon as the counsel for plaintiff was able to catch his breath and get his bearings, he applied to the district court for the appointment of a trustee .to defend this action and the court made an appointment. Now, the directors of this noncomplying corporation come to this court, not as officers of the corporation but as “trustees of the corporation and stockholders,” and seek to question the authority of the receiver to defend in the original foreclosure action, and yet it appears that they have never sought to intervene in that action or to make any appearance whatever as trustees. While under the statute they cannot defend as a corporation, *251still they are clearly entitled to intervene and defend in the action and urge all the defenses which trustees as such could urge in any action, whether commenced directly against them or by.them. Their right to appear and defend in this action has never been denied or questioned, and their right to the possession of the property is not involved in this proceeding, and for that very reason I fail to see where there is any real live issue presented to this court for its consideration in the present action. If they should be denied the right to intervene and defend in the foreclosure action, then they would have a real grievance, or if any question arises between them and the receiver as to the right of possession of the property, then there may be a real, live question for the determination of the court. In the meanwhile, I see nothing but moot questions. It is clear to my mind that when these same men who are now acting as trustees of the noncomplying corporation were in court as the officers of the corporation and then withdrew and neglected or refused to appear as individuals and trustees, they could not complain of the action of the court in appointing someone to represent this noncomplying corporation for the purpose of defending in the foreclosure action.
The complaint filed in this court, praying for a writ of review, alleges the incorporation and corporate existence of the Shenon Ranch Co. under the laws of the state of Montana and its compliance with the constitution and laws of the state of Idaho so as to entitle it to do business in this state and its acquisition of property in this state and its subsequent failure to pay the annual license tax and the successive acts of the Secretary of State and the governor forfeiting its right to do business in this state subsequent to November 30, 1912. It alleges that "W. H. Mulkey was duly and regularly appointed the statutory agent of the corporation with his residence* at Salmon City, Lemhi county. The complaint then proceeds: “Thereafter, and within twenty days from the service of the said summons upon the said W. H. Mulkey, the plaintiffs herein, as directors of the said Shenon Ranch Co. in the state of Montana, caused an appearance of *252the said Shenon Ranch Co. to be entered in the said pretended action, and a demurrer to the said complaint to be filed in the said district court.
“Thereafter and on or about April 23, 1913, the plaintiffs herein, as such directors, caused an answer and cross-complaint to be filed in the said pretended action, a true copy of which said answer and cross-complaint, marked exhibit 2, is hereto attached and made a part of this affidavit and petition for a writ of review. Thereafter and’ on or about April 24, 1913, the said Shenon Land Co., Ltd., by' its attorneys, E. W. Whitcomb and F. J. Cowen, filed in the said pretended action in the said district court an answer to the said cross-complaint of the said Shenon Ranch Co., a true copy of which said answer to said cross-complaint, marked exhibit 3, is hereto attached and made a part hereof.
“On or about the 23d day of April, 1913, the said pretended action, so commenced by the said Shenon Land Co., Ltd., against the said Shenon Ranch Co., came on for trial in the said district court of Lemhi county, Idaho, before the Honorable J. M. Stevens and a jury. The trial of said pretended action continued thereafter from day to day and over Sunday, until the 28th day of April, 1913, on which last-named day, upon the opening of said district court, James H. Rowe filed in the said district court, and presented to the said judge thereof, a suggestion in writing of the termination of the existence in the state of Idaho of the right to do business in the state of Idaho of the said Shenon Ranch Co., a true copy of which said written suggestion, marked exhibit 4, is hereto attached and made a part hereof.”
It will be seen from the foregoing extract from the complaint that the directors of this corporation are residents of the state of Montana and that they joined in the employment cf counsel and in directing the filing of an answer and prosecution of the defense in this case and that the- trial was actually entered upon. It is true that the statute prohibits a corporation defending in an action under such circumstances and attaches a penalty for so doing. It is equally true that the statute (sec. 11, chap. 6 of the Laws of the Extraordinary *253Session of the legislature of 1912) makes it the duty of the directors of a noncomplying corporation to act as trustees of the corporation and its stockholders in both the prosecution and defense of all actions then pending or subsequently instituted. The courts must look through and beyond mere technicalities and forms and' names and reach, if possible, the justice of the ease as the facts disclose it. It would be a clear subversion of the ends of justice to say that these men, organized and doing business under the laws of Montana and subsequently under the laws of Idaho under a corporate name, can respond to the service of process, appear and answer and enter upon the trial of a ease in their corporate name and. then in the midst of the trial withdraw in their corporate name and capacity and decline to appear in their individual capacity or as trustees which the law designates them, and then complain that the court is proceeding without jurisdiction when it appoints a receiver or trustee pendente lite to appear and defend the action. • A court of justice ought to turn a deaf ear to such a complaint. If that bind of a practice were to be recognized and adhered to, it would place a premium on foreign corporations that have become indebted failing to pay their license tax and comply with the law and thereby increase the difficulties and expense of a citizen of this state prosecuting an action for the collection of a debt or liability incurred by such foreign corporation. It would thus accomplish what the statute intended to prevent.
The order of the trial court appointing a receiver or trustee herein recites that the directors of this noncomplying corporation are nonresidents of the state and beyond the jurisdiction of the court, and that fact is not denied. The fact that these trustees filed a separate and independent action in the court by no means subjects them to the jurisdiction of the court in this action, unless they see fit to appear in the action, and only a constructive service could be had if the service must be had against them as individuals. It is true the order of the court appointing the receiver, in the closing part thereof, seems to be general in form, and clothes the *254receiver with full power and authority to settle the business and affairs of the corporation in general. The only question, however, here involved and the only one which I shall treat is the appointment of this receiver for the purpose of defending this action and the necessary and incidental authority -to act during the collection of any judgment that may be • obtained therein. I have no doubt of the right of the court to make the appointment under the provisions of sec. 11 of chap. 6 of the Laws of the Extraordinary Session of 1912, as well as the provisions of subds. 5 and 6 of sec. 4329 of the Rev. Codes. This court has previously held in two cases that a trial court possesses such power under the provisions of subds. 5 and 6 of sec. 4329.
In Gibbs v. Morgan, 9 Ida. 100, 72 Pac. 733, this court said: “As far as possible courts of equity should adapt their practice to the existing conditions of the business world and apply their jurisdiction to the changed conditions and cases arising thereunder, and should not too strictly adhere to forms and rules established under different circumstances and decline to administer justice and enforce rights for which there is no other remedy. ’ ’
In Hall v. Nieukirk, 12 Ida. 33, 118 Am. St. 188, 85 Pac. 485, the Gibbs-Morgan case was approved, and in the syllabus to the ease, approved by the court, it is said: “Under our statute, an appointment of a receiver does not necessarily cause a dissolution of the corporation, unless the court so directs; the receiver may be appointed simply to manage the affairs of the company during the pendency of the litigation.”
It was sought throughout the presentation of this case; to apply to a noncomplying foreign corporation the same rule applicable to a dead domestic corporation or individual. Such a doctrine is unsound for any purpose except as a theory. It is a palpable fallacy. A domestic corporation is the creature of the laws of this state, and when its term of existence expires, it is dead and cannot have any existence here any longer or anywhere else; so, also, when its right to further do business has been forfeited or has been dissolved *255by legal procedure. Not so with a foreign corporation. Its ceasing to comply with the laws of the state and to further obey them simply results in excluding it’ from this jurisdiction, but it still lives in the jurisdiction of its creation and its officers and stockholders are still interested and continue to direct its affairs. While theoretically dead in this state, the actual facts show that it was very much alive. The directors who sent their attorney to this state to file an answer were acting as directors of the corporation, at least until their attorney reached the state line. Thereafter it may be •admitted that he was merely representing these directors as the trustees of the corporation, but it must be apparent at once that any rights they acquire as trustees under the laws of Idaho will inure to the benefit of the corporation under the laws of Montana.
Let us see now what provision, if any, the act under consideration (see. 11 of chap. 6, Laws Extraordinary Session 1912) makes for appointment of a trustee or receiver. The statute says: “In all cases of forfeiture under the provisions of this act, the directors or managers in office of the affairs of any domestic corporation whose charter may be so forfeited, or of any foreign corporation whose right to do business in this state may be so forfeited, or any other person or persons who may be appointed by any court of competent jurisdiction to perform that duty, are deemed to be trustees of the corporation and stockholders or members of the corporation whose power or right to do business is forfeited.” The statute has therefore only conditionally appointed the directors of the dissolved or noncomplying corporation as trustees, and it has left it to the discretion and within the power of the court to appoint some competent person er persons to act as trustee or trustees where the directors fail to act or for any lawful reason the court may deem them disqualified or improper persons to so act.
Further pursuing the provisions of the statute, we find that it specially provides that no abatement shall take place in any action pending at the time of the forfeiture, and that the same may be prosecuted to final judgment and execution *256may issue thereon without bringing in anybody else or substituting a receiver or trustee for the purpose of defending the action. The statute, however, is silent as to any action instituted after the forfeiture, and of course it could not be foreseen by the law-making body that a case of this kind would arise where the action would be instituted after the forfeiture had in fact been declared and still the forfeiture would be unknown both to the creditor and the corporation, and the corporation would actually appear and enter upon the defense of the action. If, however, we should take this statute as impliedly indicating that an abatement would take place in an action instituted after the forfeiture, there would still be no justification for the inference that by the use of the word “abatement” it was intended that the forfeiture would absolutely destroy any right of action- a creditor might have and that the abatement of the action would be permanent and result in a dismissal thereof.
The present ease was a suit in equity and in rem to fore-; close a mortgage, and “in equity an abatement means mérely a state of suspended animation from which the suit may be revived” (1 Cyc. 21; Zoellner v. Zoellner, 46 Mich. 511, 9 N. W. 831); that is, the suit may revive when the reason for the abatement ceases, such, for example, as the appointment of a receiver pendente lite, or a guardian pendente lite, or a special administrator, or a special representative to defend the action. In the case at bar, the action was abated until a trustee was appointed to represent the stockholders of the noncomplying corporation.
There is another principle of law everywhere recognized, the application of which would lead one to believe that an action commenced against a foreign corporation, even after the forfeiture of its right to do business, might not wholly fail but would only abate until such time as a proper party could be brought in to defend or a trustee might be ap•pointed, and that' is the presumption which arises that a person once in existence continues to live until the contrary is shown. In other words, if this foreign corporation had come into the state and complied with the laws thereof so as to *257give it the standing of a domestic corporation and entitle it to do business in this state, so long as it continues to do business the presumption would arise that it is alive and complying with the laws of the state. No presumption of its death would arise, and it is doubtful if a party who has a cause of action against such corporation would be chargeable with the duty of investigating to determine before commencing his action whether or not it had terminated its existence by failing to comply with the law. It is unnecessary, however, to determine that question in this case, for the reason that we must pass upon cases in the light of the facts of each particular case, and in the present action the directors of the corporation responded to the service of summons on the statutory agent and appeared and answered and actually entered upon the trial of the case. We hold that in such case the action should not be dismissed but would only abate until such time as the trustees appear or are brought in to defend or a proper trustee is appointed by the court to defend the action.
Upon a full view of this case as the peculiar facts are disclosed, I conclude that the action of the trial judge in appointing a receiver to defend in this action will not be vacated and set aside on writ of review, and that the directors of this Montana corporation have a right to appear in their individual capacities as trustees and defend in this action. It therefore becomes unnecessary to consider the proposition suggested on oral- argument that the trustee appointed by the court does not intend to interpose any defense in this case. The writ should be quashed, and it is so ordered.