Billingslea Grain Co. v. Howell

HALL, J. Appellant Grain Company, a private corporation organized under the laws of Oklahoma, through W. S. Wisdom, as its agent, was engaged in buying grain and cotton seed at Dodsonville, Tex., during the summer and fall of 1916, for shipment. About the 10th of October of that year Wisdom was forced to leave and appellee, John Howell, accepted the agency for appellant Grain Company at Dodsonville, and represented said company in the purchase of cotton seed and grain until about November 2d, when he, according to his statement, ceased to buy for appellant Grain Company and entered into an agreement with interveners, Hendricks & Scruggs, a firm of Hollis, Okl., whereby they should furnish the funds for his use in making purchases, and that the profits and losses should be shared equally between said firm and Howell. It appears, however, that 'Bil-lingslea Grain Company was not notified of this arrangement, and of the fact that Howell had ceased to act as their agent, until November 6th, whereupon it filed this suit in Collingsworth county, Tex., and had a writ of sequestration issued and levied upon the grain and cotton seed then in Howell’s hands at Dodsonville. Howell filed an original answer, consisting of a general denial and of a special answer, alleging that he was the agent of Hendricks & Scruggs, a partnership, and that the 'property seized by the writ was not the property of appellants, nor of the said Howell, but was in truth and in fact the property of said I-Iendricks & Scruggs; that it was paid for out of the funds of said Hendricks & Scruggs, under an agreement between defendant and said Hendricks & Scruggs that defendant should be paid a commission on all grain and cotton seed so purchased. He prayed that Hendricks & Scruggs -be made parties defendant, and alleged that at the instance and request of Hendricks & Scruggs he had replev-ied the property levied upon. Hendricks & Scruggs filed an original answer, adopting the answer of John Howell, and praying for judgment in their favor. On the same day Hendricks & Scruggs filed a plea in abatement, alleging that appellant Grain Company was a foreign corporation; that it had not complied with the laws of the state of Texas, and obtained a permit to do business in the state, and was therefore not entitled to maintain the suit. This plea was tried, together with the other issues, and the cause submitted to a jury upon special issues, many of them immaterial and not necessary to be considered in disposing of this appeal. The substance of the material issues found by the jury is: That Howell, on the 6th day of November, 1916, informed appellant that he would not let them have the grain; that appellant offered to pay Howell the price paid for the com, maize, and cotton seed, and his commission; that all grain and cotton seed purchased prior to November 2, 1916, was bought for appellant company, but that such purchases were not intended by Howell to be made for appellant company between November 2d and November 6th; that Howell accepted employment of appellant and agreed to act as his agent for the purchase of grain and cotton seed after W. S. Wisdom ceased to act, about October 10, 1916, but did not give appellant notice that he would not represent them as agent until November 6th; that appellant did not agree to release Howell from his contract of agency. In reply to a number of questions the jury found that appellant was a foreign corporation, that it was transacting business in Texas without a permit, and that only part of the grain purchased and sold by said company was on interstate shipments. The judgment is evidently based upon the findings of the jury upon this issue, and decrees that the suit be dismissed. The proposition is urged by the second assignment of error that the court should not have dismissed the action, since it appears that, although plaintiff was a foreign corporation, and doing business in this state without a permit, it further appears that John Howell, as agent for the corporation, had purchased property and was holding it as such agent, and that therefore a failure to comply with Vernon’s Sayles’ Ann. Civ. St. 1914, art. 1314, did not apply to such a suit. In the original opinion we reversed the judgment of the lower court, basing our conclusion upon the Tennessee case, Memphis & Arkansas City Packet Co. v. Agnew, 177 S. W. 949, L. R. A. 1916A, 640, and the authorities cited in, the annotation found in L. R. A. 1916A, 646. As there stated, the weight of authority upon the general question of the right of a foreign corporation to maintain an action in a jurisdiction where it has not complied with the stat *672 ute requiring it to obtain a permit is with the holding in the Agnew Case, to the effect that such statutes do not generally apply to suits between a foreign corporation and its agents and officers. A review of the matter, however, in the light of the motion for rehearing, and an able and exhaustive oral argument upon it, has convinced us that the judgment should be affirmed. Vernon’s Sayles' Civil Statutes, art. 1318, relating to the right of foreign corporations to maintain a suit in this state, is: “No such corporation can maintain any suit or action, either legal or equitable, in any of the courts of this state, upon any demand, whether arising out of contract or tort, unless at the time such contract was made, or tort committed, the corporation had filed its articles of incorporation under the provisions of this chapter, in the office of the secretary of state for the purpose of procuring its permit.” The Minnesota statute in almost the same language was construed by the Supreme Court of that state in Thomas Mfg. Co. v. Knapp, 101 Minn. 432, 112 N. W. 989, and the reasoning of the court in that ease we think is decisive of the proposition urged by the second assignment above. Elliott, Justice, speaking for the court, said: “This court has consistently adhered to the rule that there can be no recovery upon a contract entered into in direct violation of the law. * * * Foreign corporations are denied the right to resort to the courts for the purpose of enforcing any claim arising out of business which they are forbidden to transact within the state without having first complied with the requirements of the statute. The terms of the statute are in no wise burdensome. In order to secure compliance therewith, the Legislature has imposed a penalty upon the corporation, and in addition thereto has withdrawn the privilege previously enjoyed through comity of maintaining action in the courts of the state. It is expressly provided that ‘no corporation which shall fail to comply with the provisions of this Act can maintain any suit or action, either legal or equitable, in any of the courts of this state, upon any demand, whether arising out of contract or tort.’ No limitations are expressed, and no exceptions can be implied. The corporation must comply with the law, or the courts of the state are closed to it. The statute expresses a clearly defined public policy, and it is inconceivable that in the face of this prohibition a foreign corporation may, without complying with the statute, establish an agency within the state, proceed to transact business in violation of the statute, and, when its agent neglects to account for money received in the course of such business, bring an action in the state court against the agent and be heard to assert that the agent cannot raise the question of the right of the corporation to maintain the action. This would be to make the public policy of the state subsidiary to the propriety and policy of a rule of private law which forbids an agent to question the right of his principal to money collected by him for the principal. Such a rule entirely ignores the broad and controlling rights of the public. In the present case, for instance, the question is not whether Knapp is under a moral and legal obligation to pay this note or to account for money which he has received as the agent of the appellant. Knapp’s rights and obligations are matters of secondary importance in the face of the statute, which declares that the corporation cannot maintain any action upon any demand, whether arising out of contract or tort. As far as the right to raise this question is concerned, it is immaterial whether the action is upon a promissory note, or to recover money received by an agent for the use of his principal. The doctrine of estoppel cannot be applied to enable a person or corporation to do what is forbidden by law.” It occurs to us, upon a reconsideration that under the broad and comprehensive language of our statute the language above quoted is decisive of this controversy. A review of the cases cited in the note to the Agnew Case, supra, shows that the statutes which were under consideration are not as broad as the statute of this state and of Minnesota. Nearly all of the cases holding that such statutory provisions are not applicable to suits between the corporation and its agent quote with approval from U. S. Express Co. v. Lucas, 36 Ind. 361, and this case is referred to by Judge Elliott, in the following language:' “It was held that, while a foreign corporation which had not complied with the statute could not recover on a bond given by an agent for the proper discharge of his duty, it could maintain an action against the agent for money had and received in the course of the agency for the use of the corporation. It was said that the agent was estopped to dispute the title of his principal to the money. The court asks: ‘Why should an agent be allowed to place himself in a position of hostility to his principal and himself claim that which he hag received for him?’ This seems to be wide of the mark. The question is not what the agent, as between himself and his principal, should be permitted to do, but what the delinquent corporation is permitted to do by the laws of the state?” The original opinion is withdrawn, and the judgment is affirmed. HUFF, C. J., not sitting, being absent in Austin with committee of judges passing on applications for writs of error. Footnotes [1] other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes