Hogan v. Intertype Corp.

Humphreys, J. Appellee instituted suit in the chancery court of Sebastian County, Greenwood District, against appellant, to recover judgment and enforce a mortgage lien on a type setting machine for $1,810 and interest at the rate of 6 per cent, per annum from June 15,1914, evidenced by a number of notes. The chief defense interposed by appellant was that the notes and mortgage sued upon evidenced a contract made in this State by a foreign corporation without complying with the necessary statutory requirements prerequisite to doing business in the State of Arkansas. The facts, in substance, are as follows: On May 24, 1914, a salesman of the New Orleans agency of the International Typesetting Machine Company, with main office in New York, called on appellant in Huntington, Arkansas, and procured a written contract from appellant for a typesetting machine. This contract was forwarded to the New Orleans agency, and the manager thereof considered it a contract which should be ratified by the company, and, for that purpose, sent it to the main office in New York on May 29th, recommending its acceptance. On May 28,1914, the manager of the New Orleans agency consigned the machine to the International Typesetting Machine Company, Huntington, Arkansas, “notify Dan Hogan.” According to the testimony of appellee, this manner of shipment was made in ordér that the machine would still be in the possession of the International Typesetting Machine Company in case the contract was rejected by it. The contract was approved by the company at its main office, and notification thereof was mailed to appellant under date of June 13,1914. The written contract does not appear to have been introduced in evidence, so the only evidence as to its contents appears in the testimony of appellant which, upon this particular point, is as follows: “Q. State all the facts and circumstances incident to the making and delivery of the notes and mortgage in question and of your purchase of the machine for which the notes and mortgage were given. “A. A representative of the New Orleans agency for the International Typesetting Machine Company called on me at my office in Huntington, Arkansas, on or about May 24,1914, and offered to sell me the typesetting machine upon terms which afterwards were agreed upon. I told him I would not purchase the machine until I knew that it would do the work he represented that it would do, and he proposed that, if I would pay the freight on the machine from New Orleans, he would ship it at once, and that he would send a man to set it up and demonstrate that it would do the work that he insisted it would do, and if the machine proved as represented I could purchase it upon terms agreed upon. On this agreement the machine was shipped from New Orleans to Huntington Arkansas, billed to ‘International Typesetting Machine Company, notify Dan Hogan. ’ It arrived in Huntington, Arkansas, about June 5, 1914. I paid the freight on it and had it hauled to my office. About June 20 an agent of the company arrived in Huntington, who unboxed the machine, put it up and demonstrated to my satisfaction that it would do the work as represented. I thereupon executed and delivered to him the notes and mortgage sued on in this action. The notes, which were payable at the Bank of Huntington, were dated back to June 14, 1914, in accordance with my agreement with him.” At the time the notes and mortgage were executed, the International Typesetting Machine Company was a New York corporation. A receiver was afterwards appointed for the company, and the assets of the company, including the notes and mortgage in question, were sold under order of court by the receiver to the appellee, Intertype Corporation. Neither corporation before or since the institution of the suit complied with the laws of Arkansas authorizing foreign corporations to carry on business in Arkansas. Un the pleadings and tacts, the chancellor ruled the transaction interstate business, and not business done within the State contrary to law by a foreign corporation ; and, in keeping with the ruling, rendered a judgment against appellant in the aggregate of $2,137.90, declared said amount a lien upon the typesetting machine, and decreed a foreclosure of the lien, from which judgment and decree of foreclosure appellant has prosecuted an appeal to this court. Appellant insists that the sale of the machine was consummated within the State, and therefore an intrastate, and not an interstate, transaction. According to the testimony of appellee, the property was shipped into the State of Arkansas to the International Typesetting Machine Company, so that it might retain possession thereof until the contract was approved at the home office in New York. Another way of stating the fact that the title to the property was not passed by the International Typesetting Machine Company to appellant until after it reached Huntington, Arkansas. We think it conclusively established by the facts in this case that the International Typesetting Machine Company owned the machine in question after it ¡arrived in Huntington, Arkansas, and thereafter sold it to appellant, accepting in part payment notes executed and payable in Arkansas and secured by a mortgage on the machine, which was also, executed and filed for record in this State. One test laid down by the Arkansas cases differentiating an interstate transaction from an intrastate transaction is the ownership of the property after it arrives within the State. Clark v. J. R. Watkins Medical Co., 115 Ark. 166; J. R. Watkins Medical Co. v. Williams, 124 Ark. 539; Miellmier v. Toledo Scale Co., 128 Ark. 211. An interstate transaction contemplates a consignor without and a consignee within a State, or vice versa. In the instant case, the property was not only retained by the seller after it reached Arkansas, but an agent of the seller was sent to the State for the purpose of demonstrating that the machine would do the work represented, in order to consummate the sale; and, after making a satisfactory demdnstration, the agent accepted in part payment therefor long time notes executed and payable at Huntington, Arkansas, and a mortgage on the machine to secure the notes, which was recorded in Greenwood, Arkansas. This constituted a business transaction in Arkansas by a foreign corporation contrary to the statute law. Act 313, Acts 1907. The following authorities bear pointedly upon the issue here involved and sustain the rule announced by the court. Browning v. Waycross, 233 U. S. 16; State v. Robertson, 196 S. W. 1132; General Ry. Signal Co. v. Commonwealth, 87 S. E. 598; American Amusement Co. v. East Lake Chutes Co., 56 So. 961; Ft. Worth Glass & Sand Co. v. S. R. Smythe Co., 128 S. W. 1136; Vulcan Construction Co. v. Harrison, 95 Ark. 588. Under section 2, Act 313, Acts 1907, a contract made by a foreign corporation without complying with the laws can not be enforced by it either in law or in equity. It is insisted by appellee that the enforcement thereof applies to the corporation taking the paper and not to its assignee. In this case, the plaintiff is an assignee of the original seller or taker of the paper. This very narrow and limited construction of the statute would render it nugatory. Under this construction all foreign corporations doing business in this State would likely escape the penalty imposed by the statute. It was necessarily the intention of the Legislature to render any paper growing out of a transaction of this character defective so that it could not fall into the hands of an innocent purchaser and be enforced in this State. We think the notes and mortgage evidenced a contract made by the corporation in violation of the statute laws of the State. The defect was inherent in the notes and mortgage, and therefore a subsequent purchaser must take notice of the defect. For the error indicated, the judgment and decree is reversed and the cause dismissed.