Producers' Naval Stores Co. v. McAllister

BRYAN, Circuit Judge. February 28, 1914, the Blue Creek Company, a Florida corporation, executed its negotiable notes, aggregating $200,000, and a mortgage upon lands in Florida to secure the same, [15] to the Producers’ Naval Stores Company, a Georgia corporation. The mortgage contained a covenant that the mortgagee ' should have the right to assign it to a trustee. March 28, 1914, the Producers’ Naval Stores Company indorsed the notes and assigned the mortgage to the Citizens’ & Southern Bank of Savannah, a Georgia corporation, as trustee, for the equal benefit of the holders of the promissory notes. The Blue Creek Company, for the purpose of evidencing its assent to the trust created, joined in the execution of the assignment of the mortgage. The notes were executed, indorsed, and, delivered, and the mortgage and assignment thereof were executed and delivered, at Savannah. July 14, 1917, the Blue Creek Company granted certain rights of way and privileges on the mortgaged lands to one Rentz and to the Carpenter- O’Brien Company by an instrument ttnder seal, which recited that: “The lands of the Blue Greek Company are subject to the lien of the mortgage held by the Citizens’ & Southern Bank of Savanah, Oil., as the owner and holder of tho indebtedness secured by such mortgage.” December 30, 1917, the Citizens’ & Southern Bank of Savannah instituted foreclosure proceedings in the proper state court of Florida. March 11, 1918, a final decree of foreclosure was rendered, under which a sale of the mortgaged .property was made on May 6, 1915, to Courtney Thorpe, and thereafter the sale was approved and confirmed by the state court. May 3, 1918, a petition in bankruptcy was filed against the Blue Creek Company, and at the same time application to enjoin the foreclosure sale was denied by the court below. February 24, 1919, appellee, as trustee in bankruptcy of the Blue Creek Company, filed its suits against the appellants, Producers’ Naval Stores Company, Citizens’ & Southern Bank of Savannah, and Courtney Thorpe, .purchaser at the foreclosure sale, praying that the mortgage and assignment thereof, the decree of foreclosure, and special master’s deed, all be declared null and void, and that Thorpe be required to execute a deed to appellee, and thereby remove from the record title the apparent cloud upon it. After the taking of evidence, a final decree was entered granting the relief prayed, and canceling the mortgage and the deed to Thorpe as clouds upon appellant’s title. The decree of the District Court, holding void the mortgage and the foreclosure .proceedings had thereunder, is based upon chapter 5717, Daws of Florida, enacted in 1907 (Comp. Daws 1914, § 2682a et seq.). Sections 1, 4, and 7 of that statute were amended by chapter 6876, approved June 4, 1915. Section 1 was as follows: “That no foreign corporation shall transact business or acquire, hold or dispose of property in this state until it shall have filed in the office of the secretary of state a duly authenticated copy of its charter or articles of incorporation, and shall have received from him a permit to transact business in this state.” It was amended by adding: “And any foreign corporation which shall violate the provisions of this section shall render itself, its officers and agents severally liable to the penalties and lines provided in section 8 of this act, but no violation of this act [16] shall affect the title to property thus acquired, ¿eld or disposed of in violation of the provisions hereof!” Section 4 was as follows: “Every contract made by or on behalf of any foreign corporation affecting its liability or relating to property within the state before it shall have .complied with the provisions of this act shall be void on its behalf and on behalf of its assigns, but shall be enforceable against it or them.” . It was amended to read: “That the failure of any such foreign corporation to comply with the provisions of this act shall not affect the validity of any contract with such foreign corporation, but no action shall be maintained or recovery had in any of the courts of this state 4>y any such corporation, or its successors or assigns, so long as such foreign corporation fails to comply with the provisions of this act.” Section 7 was as follows: “A foreign corporation is defined to be a corporation incorporated by or under the laws of any other state or territory or of any other country.” •It Was amended by adding: “But nothing in this act shall apply to or include banking or trust companies incorporated under the laws of any other state, territory or other country.” Other sections of the act of 1907 provide that the secretary of state shall issue permits to foreign corporations to transact business in the. state, upon the filing by them of their charters or articles of incorporation, and the payment by them of the charter fees required-of domestic corporations, and that foreign corporations which trans-áct business or fail to pay charter fees and secure permits shall be punished by fine or imprisonment. By chapter 6875, approved June 5, 1915, it was further enacted that “the invalidity created by chapter 5717, Laws of Florida 1907,” should be removed as' to contracts of foreign corporations which should comply within a specified time with the requirements relating to the securing of permits and the payment of charter fees. The invalidity of conveyances of real property to foreign corporations, as to trustees and as to grantees of such corporations who were innocent purchasers for value, is removed unconditionally, and therefore, in.the absence of a compliance with the requirements to secure permits and pay charter fees by the offending corporations. [1] The Supreme Court of Florida has held that contracts made by foreign corporations in violation of the provisions of chapter 5717 are voidable, and not void. In Commercial Bank v. Jordan, 71 Fla. 566, 71 South. 760, that court, in construing this statute and in reviewing its former decisions, used the following language: " “The .statute does not in express terms declare that all contracts, notes or other securities, "made by or on bebalf of any foreign corporation before it shall have complied with the statutory requirements shall be absolutely void or of no effect whatsoever, nor did this court in the Ulmer Case, 61 Fla. 460, 55 South. 405, hold that such was the legislative intention. The language of the court: was: ’ ‘If .the. statute has-been . violated by the foreign corporation in acffuiriog- the/note or in, making a contract of which the. note is a part, the gospoifttipn cannot, enforce the payment of the note in the courts of the state; [17] and if the note was taken by the indorsee bank with notice of and subject to its infirmities under the existing laws the bank cannot recover through the courts.’ “In the case of Campbell v. Daniel, 68 Fla. 282, 67 South. 90, this court, having under consideration the same statute and speaking through Mr. Justice Cockrell, said: ‘The statute does not forbid the municipality or any citizen of the state entering into a contract with a nonregistered foreign corporation to the contrary the statute in terms permits the enforcement of the contract on its behalf.’ Hero the essential difference beween a void and a voidable contract was pointed out. The clear legislative purpose was to render such contracts unenforceable in the hands of the corporation or its assigns, but enforceable against it or them. The use of the word ‘void’ in the statute in connection with those following necessarily conveys a meaning different from what would have been the word’s significance had it stood alone. While the statute uses the word ‘void,’ it describes a ‘voidable’ contract.” [2] Giving effect to the rule announced by the highest court of the state, and conceding for the purposes of this case that a mortgage is a contract relating to property within the state, it follows that the mortgage here involved was not void, but only voidable. The mortgage being only voidable at most, the power of the Legislature to validate it is not onen to serious question. Ewell v. Daggs, 108 U. S. 143, 2 Sup. Ct. 408, 27 L. Ed. 682; West Side R. R. Co. v. Pittsburgh Construction Co., 219 U. S. 92, 31 Sup. Ct. 196, 55 L. Ed. 107; Pensacola & Atlantic R. R. Co. v. State, 45 Fla. 86, 33 South. 985, 110 Am. St. Rep. 67. [3] It is equally clear that the Legislature, by the amendatory acts of 1915, intended to exercise its power of validating contracts which were voidable under the act of 1907. Section 16 of article 3 of the Constitution of Florida requires the subject of an act of the Legislature to be expressed in its title. Chapter 6875 is entitled: “An act to remove, under certain terms and conditions, the invalidity created by chapter 5717, Law's of Florida 1907, as to certain classes of contracts heretofore made to, by or in behalf of any foreign corporation.” The act itself purports to remove the invalidity theretofore existing in notes, deeds, and other conveyances of real property, and contracts generally. The terms and conditions mentioned in the act refer to securing permits and paying charter fees required by the earlier act within a specified time. No terms and conditions, as already stated, are imposed as to conveyances of real property, the title to which has been or shall thereafter be acquired by innocent purchasers for value. [4] Chapter 6876 is entitled “An act to amend sections 1, 4 and 7” of the act of 1907. The amendment to section 1 undertakes to make valid the title to property, though acquired, held, or disposed of in violation of the original act. Section 4, which is directly involved in this case, was entirely changed, so as to provide specifically that a violation of the act as amended should not affect the validity of any contract, and it was provided that no action should be maintained in any of the courts of the state by a foreign corporation so long as it should fail to comply with the provisions relating to the securing of permits and the payment of charter fees. It was undertaken to relieve banks and trust companies entirely from a compliance with the [18] provisions, terms, and conditions upon which business might be transacted or contracts made in the state of Florida. limiting our observations to the case before us, we are of opinion that the intention of the Legislature, as expressed in the amendatory acts, was made effective to accomplish the purposes sought. No reason is suggested for a different conclusion, unless the mortgage is held to be absolutely void and incapable of validation. It is suggested, however, that the Citizens’ & Southern Bank of Savannah has never secured a permit to do business, or filed its charter with the secretary of state. But it was relieved from doing' that, as a bank under chapter 6876, and as an innocent purchaser under chapter 6875. [5] We are of opinion, therefore, that after the passage of the acts of 1915 the mortgage constituted a valid lien upon the real property which the trustee in bankruptcy claims as an asset of the bankrupt estate. If, however, there remained anything voidable in it, the mortgagor ratified the mortgage by joining the Citizens’ & Southern Bank in the execution of an instrument under seal conveying certain rights of way over the mortgaged lands to Rentz and the Carpenter-O’Brien Company. The instrument recited that the lands were then subject to the lien of the mortgage. It was held by this court in Turner Construction Co. v. Union Terminal Co., 229 Fed. 702, 144 C. C. A. 112, in construing the right of a foreign corporation under the act of 1907, here involved: That “after both the parties were free of any disability they could make a new contract and recognize the instrument already signed as embodying the terms of it.” [B] But, if it be conceded that, when the suit was brought to foreclose the mortgage, .a successful defense could have been interposed by the mortgagor, upon the ground that the mortgage continued to be voidable, a failure to assert such defense concluded its right thereafter to attack the foreclosure proceedings. The state court in which the foreclosure was had was a court of general jurisdiction, and its decree became binding upon all the parties to the suit. [7] The trustee in bankruptcy acquired no rights additional to those possessed by the bankrupt. It is not correct to say that the lien of the mortgage was" created within four months of the bankruptcy proceedings. In any view of the case, the lien of the mortgage attached more than four months before the filing of the petition in bankruptcy, and was not affected thereby. Metcalf v. Barker, 187 U. S. 165, 23 Sup. Ct. 67, 47 L. Ed. 122. Our conclusion is that appellee is not entitled to the relief prayed, or to any relief. The decree of the District Court is therefore reversed, with directions to dismiss the bill of complaint.