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§ 765.

When foreign corporation has right to enter other state.

§ 766. Suit against foreign corporations.

§ 767. Jurisdiction of state court over internal affairs of foreign corpora

tion.

§ 762. (Corporations, Sec. 126.) Definition and general

statement.

(Note: A foreign corporation is a corporation created by another legislative jurisdiction than the one in which its right to come to do corporate acts, to carry on business, to own property, is being considered. Thus an Illinois corporation is a foreign corporation in Indiana.)

Case 712. Empire Mills v. Alston Groc. Co., - Tex. Ap., 12 L. R. A. 366.

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DAVIDSON, J.: "Again, it may be said in this connection that 'it is a fundamental principle that the laws of a state can have no binding force, proprio vigore, outside of the territorial limits and jurisdiction of the state enacting them.' * 'Hence it follows that a state cannot grant to any person the right to exercise a franchise in a foreign state or country; for a franchise is the result of a law authorizing particular individuals to do acts or enjoy immunities which are not allowed to the community at large.' Morawetz, Priv. Corp. 1st ed. 500, 535.

"A grant of corporate existence is a grant of special privileges to the corporators, enabling them to act for certain designated purposes as a single individual, and exempting them (unless otherwise provided) from individual liability. The corporation, being the mere creation of local law, can have no legal existence beyond the limits of the sovereignty where created. 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.' Morawetz Priv. Corp. 1st ed. Sec. 500.

"The rule of comity is entirely in subjection to the sovereign will of the state, and can only exist by permission of the state in which it is sought to employ it.

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Question 712: Has a corporation a right to enter other states? By virtue of what does it enter?

Case 713. Paul v. Virginia, 8 Wall. (U. S.) 168.

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"Now a grant of corporate existence is a grant of special privileges to the corporators, enabling them to act for certain designated purposes as a single individual, and exempting them (unless otherwise specially provided) from individual liability. 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 of Augusta v. Earle, 13 Pet. 519, 10 L. Ed. 274: '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 is 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, 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."

Question 713: What does this case hold?

(Note: This case also held that the issuance of an insurance policy by a citizen of one state to a citizen of another, is not interstate commerce.)

§ 763. (Corporations, Sec. 127.) Common provisions in respect to foreign corporations.

(Note: The provisions in respect to foreign corporations are as follows:

(1) Copies of charter to be filed.

(2) Certain information respecting amount of business, location of property, etc.

(3) Statement of location of principal office in the state, with name of official or agent on whom papers may be filed. (4) Fees to be paid.

(5) Penalty for non-compliance in shape of a fine, and a pro

vision that contracts entered into in the state during such compliance are void, or cannot be enforced in the courts of the state.)

Case 714. Fruin-Colnon Contracting Co. v. Chatterson, 146 Ky. 540.

CARROLL, J.: "She set up that the appellant [a foreign corporation] had failed to comply with this statute [the foreign corporation law] and hence could not recover against her on the contract made with the board of public works for the street improvement. In a reply, appellant admitted that when the contract was awarded and the work completed it had not complied with the statute, but averred that it did so afterwards, and in November, 1909. Chancellor Miller, now a judge of this court, ruled that, under the facts admitted in the pleadings, the plaintiff could not recover and entered a judgment dismissing the petition. On this appeal, the only question presented is, Did the failure of the appellant to comply with the statute before making the contract and completing the work under it deny it the right to recover the cost of the improvement?

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"With the question of estoppel out of the way, the exact matter for decision is, Will a foreign corporation be assisted by the courts of this state to enforce a contract that was entered into and completed at a time when it was unlawful for the corporation to carry on in this state the business it was engaged in, and out of which the contract arose? The statute does not provide that contracts entered into before it has been complied with shall be void or nonenforceable, nor does it use any language in reference to the contract; but, when a statute makes it unlawful to do business under certain conditions, it seems to necessarily and logically follow that the doing of the business under the prohibited conditions is in itself unlawful. When the doing of the act is made unlawful, there is no reason why the statute should also declare that contracts made in violation of it should also be unlawful. When the law prohibits a thing, it is unlawful to do it, and the courts should not lend their aid to the enforcement of prohibited contracts. Courts are established to afford remedies to litigants who seek relief growing out of lawful transactions, and not to aid those

who would invoke their assistance to enforce contracts made in violation of law. Their chief purpose is to secure the observation of laws enacted for the safety and protection of life and property and the general well-being of the people, and it would be a startling departure from this purpose if they should also give relief to parties who are seeking to enforce contracts made in violation of law. Such a course of procedure would be a perversion of justice, and convert the courts into instruments to aid lawbreakers, in place of punishing them. It is also argued that it would be a hardship on this corporation to lose the value of its work, but this furnishes no excuse why it should obtain relief, as there is scarcely a penal statute the enforcement of which does not impose severe burdens; and if the severity of the punishment should be treated as a reason for disregarding the statute, many beneficial laws would be unenforced.

"Our attention has been called by counsel for appellant to authorities from other states, holding that the courts will not deny relief in cases of this character, but will leave the offending corporations to be punished under that penalty feature of the statute. That there is much diversity of opinion on the subject under consideration to be found in the decisions of the courts of other states cannot be doubted by any person who has examined the cases, but we think the weight of authority supports the principle that when a statute expressly declares that it shall be unlawful to do business until its requirements shall have been complied with, a contract made in contravention of the statute will not be enforced by the courts.

Question 714: What was the defense made in this case? How was this defense met? Did the defense prevail? Are all the states in accord on this question?

(Note: In some states, the penalty for non-compliance with foreign corporation laws is (as in the above case) loss of right to sue on contracts entered into before compliance with the law and compliance with the law afterwards and before suit

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