Court Opinion

ID: 7809606
Source: CourtListenerOpinion
Date Created: 2022-09-07 17:11:14.193248+00
Date Added: 2024-06-11T16:30:25.936438
License: Public Domain

Smith, J., (dissenting). The majority opinion does not set out .section 2 of the Act of 1913 which it construes. It reads as follows: “Any foreign corporation which shall fail to comply with the provisions of this act, and shall do any business in this State, shall be subject to a fine of not less than one thousand dollars, to be recovered before any court of competent jurisdiction, * * * and, as an additional penalty, any foreign corporation which shall fail or refuse to file its articles of incorporation or certificate as aforesaid, can not make any contract in this State which can be enforced by it either in law or in equity, and the complying with the provisions of this act after suit is instituted shall in no way validate said contract.” Act 313, Acts 1907, page 744. The International Typesetting Machine Company, in selling a machine to Hogan, committed no wrong malum in se. Upon the contrary, any wrong done is malum prohibitum. But for the act of the General Assembly in question, Hogan would not be permitted to escape the payment of the balance due by him to the typesetting machine company which, with the interest, amounted to $2,137.90 at the time of the rendition of the decree for that amount in the court below. But for this statute, the vendor of the machine could itself recover the purchase price, and any wrong done by it consists only in failing to comply with the statute, and its action, therefore, was wrong only to the extent to which the statute has made it so. All the States have not always had statutes of this character. Indeed, there are States which not even yet have found it necessary to enact such a statute; and, for that matter, Arkansas has not always had a statute forbidding foreign corporations frombringing suit to enforce an otherwise valid contract, because of the corporation’s failure to comply with á statute enacted for its regulation. This statute itself has encountered some vicissitudes, as a portion of it was held violative of the Constitution of the United States in the case of Ludwig v. Western Union Telegraph Co., 216 U. S. (54 L. Ed. 423), 146. The portion of section 2, upon which the majority base their opinion in the instant case, was not involved, however-, in the opinion of the Supreme Court of the United States, supra. Kansas is one of the States which has legislation similar to our own in the respect indicated, and a portion of their act met a fate similar to our own in the case of Western Union Telegraph Co. v. State of Kansas (54 L. Ed. 355), which is reported at page 1 of the same volume of the United States Supreme Court Reports in which the case of Ludwig v. Western Union Telegraph Company is found. The Kansas statute has not received in that State the liberal construction here given the statute of this State. The Supreme Court of Kansas had before it the exact question here decided, and reached exactly the opposite conclusion. In the case of Boggs v. O. S. Kelly Mfg. Co., 90 Pac. 765, the Supreme Court of that State said: “A contract made by a foreign corporation while it is engaged in business in this State is not tainted and rendered unenforceable by the fact that the statute has not been complied with. State v. Book Co., 69 Kan. 1, 76 Pac. 411, 1 L. R. A. (N. S.) 167. When a foreign corporation is precluded from bringing an action by reason of its non-compliance with 'the law, it is because of the personal disability with which it is burdened at the time. If it assigns the claim, its incapacity will not prevent the assignee from .suing. Northwest Thresher Co. v. Riggs (Kan. Sup.), 89 Pac. 921. If it complies with the law, its competency as a plaintiff: is restored, even if such step is taken after an action is begun. Hamilton v. Reeves & Co., 69 Kan. 844, 76 Pac. 418. When it ceases to do business in the State, it is no longer under the bar of the statute. Its violation of the law having ceased, it has the same rights as a litigant as any other foreign corporation which is not attempting to carry on its business in Kansas. Its former disregard of the statute is not made a ground for denying it access to the courts. The plaintiff, therefore, could maintain the action.” The case of State v. Book Co. is erroneously cited in that opinion, as being in 1 L. R. A. (N. S.) 167; the opinion is found at page 1041, 1 L. R. A. (N. S.) In the case last cited an attempt was made to cancel a contract made by . the American Book Company with the State' School Text Book Commission because that company had not complied with the laws of that State .authorizing it to do business in that State. The portion of the statute of that State there invoked is as follows: “No action shall be maintained or recovery had in any of the courts of this State by any corporation doing business in this State without first obtaining the certificate of the Secretary of State that the statements provided for in this section have been properly made.” The opinion is a well-considered one, and cites many authorities in support of the conclusion announced. The case note cites still other authorities. Much of the reasoning of the court in that case is applicable here. It was there said “the book company and the Text Book Commission each possessed every qualification necessary to bind by contract. By the laws of their creation and organization they were each endowed with this faculty. * * * The statute described itself as an act ‘providing for the regulation of foreign corporations and the method by which they may be permitted to do business in this State, ’ and it purports to cover that entire field. * * * It does not anywhere use the terms ‘unlawful,’ ‘illegal’ or ‘void, ’ or any equivalent for them, as applied to the transaction of business without authority. It does not declare any determination whatever to reach beyond the offending company and nullify wholesome business bargains in matters of lawful trade. Foreign corporations may be supervised, but business is not proscribed * * *; the courts have no authority to interpolate in the law provisions concerning which the Legislature, with all the resources of the English language at its command, remained silent, or to annex penalties for a violation of the law which the Legislature, with a great arsenal to choose from, failed to mention. Hence, contracts made with a foreign corporation before it has obtained permission to do business in the State are not for that reason invalid or subject to cancellation.” Among the other numerous cases cited by the court was the case of State Mutual Fire Ins. Asso. v. Brinkley Stave & Heading Co., 61 Ark. 1. In this Arkansas case Mr. Justice Hughes, speaking for the court, quoted with approval the following statement of law from the case of Toledo Tie & Lumber Co. v. Thomas, 11 S. E. 37: * it is stated — correctly, as we think — by the Supreme Court of Appeals of West Virginia that ‘a contract made by a foreign corporation before it has complied with the statutory prerequisites to the right to do business in another State will not on that account be held absolutely void, unless the statute expressly so declares; and if the statute imposes a penalty upon the corporation for failing to comply with such prerequisites, such penalty will be deemed exclusive of any others.’ (See cases cited in that opinion.) ” And upon its own authority, in the same opinion, this court, in construing a statute of this State, .said: “The insurance contracts in this case were not void on account of the failure of the insurance company to comply with the statutory prerequisites to the right of a foreign insurance company to do business in this State. The penalty imposed by the statute was exclusive of any other forfeiture. Washburn Mill Co. v. Bartlett, 54 N. W. 544; 2 Morawetz, Corp., § 665.” It will be observed that our statute, like the statute of Kansas, is characterized by the absence of the words “unlawful,” “illegal” or “void,” or any equivalent for them, as applied to the transaction of business without authority. And, in my opinion, we have not only given the statute a construction which the Supreme Court of Kansas refused to give it, but we have given it a construction which is not in harmony with previous utterances of this court in the construction of the statute. In the case of Waxahachie Medicine Co. v. Daly, 122 Ark. 451, we held (to quote the syllabus): “A contract made by a foreign corporation before complying with the laws of this State, is not made void by Act 313, page 744, Acts of 1907, and when the laws are complied with before suit is brought, such contracts are enforcible.” We there expressly held that such a contract as we have here was not void, although the statute had made it unenforceable either in law or in equity. I think the doctrine of that case can not be reconciled with the opinion in the instant ease. See also Watkins Medicine Co. v. Horne, 133 Ark. 570. There is no intimation in the record in the instant case that the assignee of the note and the vendor of the machine had in any way conspired together to circumvent the law. The contrary affirmatively appears, and the opinion recognizes the plaintiff in the suit as an innocent purchaser. Can it be the law that commercial paper originating in Arkansas can not be safely purchased in the usual course of business without inquiry as to whether foreign corporations connected with such paper have complied with the laws of this State? The courts everywhere have always held that statutes, either penal or criminal, must be strictly construed, and the decisions of this State have not been discordant. We have a number of cases which are in harmony with an almost infinite number of other cases to that effect. The statute here is both penal and criminal, and such statutes have always been construed to exclude all persons and transactions from their operations which are not expressly included by their provisions. Only by the most liberal construction can our statute be made to include the innocent holder of negotiable paper, and -that result is- arrived at only by taking into account the supposed purpose of the Legislature, rather than the language of the statute. But if the statute was neither penal nor criminal, should it receive the construction here given it? I think not. We are not called upon here to decide what the effect of collusion would be between a corporation and its assignee, as we have no such case before us, and we should not, to prevent the mere possibility of collusion, give the statute a construction which may, in a measure, at least, affect the negotiability of commercial paper originating in this State. Now, if the case is to be settled upon precedent rather than upon principle, I think our duty is equally free from doubt. A statement of the law contrary to the holding of the majority will be found in 18 C. J., § 1038, 12 R. C. L. § 59, 19 Cyc. 1305. Appended to these texts will be found notes citing a large number of cases. At the section of Corpus Juris, above referred to, the law is stated as follows: “If a negotiable note is given to a foreign corporation in a transaction which is illegal, because of the corporation’s failure to comply with the conditions precedent to the right to do business prescribe by statute, the illegality can not be set up as against a bona fide purchaser for value without notice; and the word ‘assigns’ as used in a statute making the contract void on behalf of such corporation ‘or its assigns’ does not include the bona fide holder in due course of a negotiable instrument. ’ ’ A number of cases are cited as supporting the text quoted, and only one case is cited as opposing, and that .is the case of First Nat. Bank of Massillon v. Coughron, 52 S. W. 1112. This, a Tennessee case, is a decision by the Court of Chancery Appeals, and was delivered on May 13, 1899. Two years prior to that decision (May 17, 1897) the Court of Appeals of the Sixth Circuit, construing the Tennessee statute, held that (to quote the syllabus), “A State statute declaring it unlawful for any foreign corporation to do business or to acquire property in the State without first complying with the provisions of the statute, and imposing a fine for violation thereof (Acts Tenn. 1891, Ch. 122) does not render invalid, in the hands of an innocent purchaser for value, negotiable paper taken by a foreign corporation without complying with the statute, nor render unenforceable a trust deed securing the same on property in the State.” Lauter v. Jarvis-Conklin Mtg. Trust Co., 85 Fed. 895. That case was before Taft and Lurton, circuit judges, and Hammond, who was the district judge for the Western District of the State, the appeal having been taken from the Eastern District of Tennessee. In 1915, the question was presented to the Supreme Court of the State in the case of Edwards v. Hambly Fruit Products Co., 180 S. W. 163. The court declared, to quote the syllabus, “Under negotiable instruments law, Acts 1899, chapter 94, section 60, providing that the maker of a negotiable instrument, by making it, engages that he will pay it according to its tenor, and admits the existence of the payee and his then capacity to endorse, the innocent holder of a negotiable note may recover thereon, though the payee was a foreign corporation, which, though required to do so, had not complied with the law in respect to filing a copy of its charter of incorporation.” The opinion refers to the case of First Nat. Bank v. Caughron, supra, and, without approving it, disposes of it by saying that whatever may have been the rights of an innocent holder of a negotiable note prior to the passage of the negotiable instruments law in that State (Acts 1899, chapter 94), section 60 of that act gave the right to sue. If the negotiable instruments law has any controlling effect, it may be said that we have the same law and section- 60 of our act is identical with section 60 of the Tennessee statute. Act No. 81, Acts 1913, page 260. I therefore dissent, and am authorized to say that Mr. Justice Wood concurs in the views here expressed.