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activity of Federal agencies.1 If the State statute has the effect of wholly invalidating contracts, other jurisdictions, including the Federal courts, are bound thereby and may not entertain actions by foreign corporations on such contracts if the invalidity is pleaded.2 Where, however, the sole effect of the statute is to deny a remedy in the State courts, without invalidating the contracts, other jurisdictions, including the Federal courts, may enforce the contracts. See cases, infra.
The questions here considered arise almost entirely in cases where the foreign corporation seeks recovery upon a contract. When relief is sought against it, it is almost universally held that the corporation may not set up its own violation of the law as a defense. The existing rule in each State is attempted to be here set forth.
In this State, it is provided that every foreign corporation shall, before doing business therein, file an instrument with the Secretary of State designating its authorized agent, and shall also file a certified copy of its articles of incorporation. Sec. 3642 Code. Doing business before filing such instrument is expressly made unlawful. Sec. 3644 Code. It is further provided that every corporation shall be required to procure from the Secretary of State a permit admitting it to do business in the State. Sec. 3651 Code.
i Loomls v. People's Const. Co., 211 Fed. Rep. 453; Horn Silver Mining Co. v. N. Y., 143 U. S. 314; Taber v. Interstate B. & L. Assn., 91 Tex. 92; Butler Bros. Shoe Co. v. U. S. Rubber Co., 156 Fed. Rep. 1, and cases cited; Goodner Krumm Co. v. Owens Mfg. Co., 152 Pac. 86.
Of course, the statutes here considered do not apply to interstate commerce. The succeeding discussion is not concerned with the definition of "doing business" or "transacting business" in the particular States, but assumes that the
questions considered arise with respect to such corporations and such business or acts as come within the scope of the statute in question,
Some States have special statutes applicable to insurance companies, public service companies, and building and loan associations; they are not included in this paper.
2 Chattanooga B. & L. Assn. v. Denson, 189 U. S. 408; Loomis v. People's Const. Co., supra; Chapman v. Hallwood Cash Register Co., 73 S. W. 967.
For failure to procure this permit, Sec. 3653 provides:
"No such corporation, its agents, officers, or servants, shall transact any business for or in the name of such corporation within the State of Alabama without having first procured said permit, and all contracts, engagements, or undertakings or agreements with, by, or to Buch corporation, made without obtaining such permit, shall be null and void."
Sec. 3647 requires the payment of an initial tax. Sec. 3649 provides:
"The tax required by the second preceding section shall be paid but once, only; but such payment does not relieve any foreign corporation from the duty of complying with the requirements of existing laws. All contracts made in this State by any foreign corporation which has not first complied with the provisions of the two preceding sections, shall, at the option of the other party to the contract, be wholly void."
From the foregoing, there can be no doubt of the effect of non-compliance with the laws of Alabama. The courts hold that a contract made by a foreign corporation without complying with the laws is wholly void. Dudley v. Collier, 87 Ala. 431; Hanchey v. Southern Home B. & L. Assn., 140 Ala. 245, and cases cited; Alabama Western R. E. Co. v. Talley-Gates Const. Co., 162 Ala. 396; Mullen Mfg. Co. v. Bank, 57 South. 762. Since a contract so made is void, it will not be enforced by the Federal courts. In re Conecuh Pine Lumber & Mfg. Co., 180 Fed. Rep. 249; Thomas v. Birmingham Ry. L. & P. Co., 195 Fed. Rep. 340; Chattanooga Natl. B. & L. Assn. v. Denson, 189 U. S. 408.8 A novel and important decision has lately been rendered by the Fifth Circuit Court of Appeals, which will be of interest in all States having statutes similar to Alabama. In Montgomery Traction Co. v. Montgomery L. W. & P. Co., 229 Fed. Rep. 672, it appeared that the foreign corporation was not competent to enter into a contract in Alabama at the time it did so, but that several months after entering
s See also the provisions of the Annual Franchise Tax Law, Laws of 1915, No. 464, Sec. 16, Subdiv. 4, which provides as follows:
"No foreign corporation required to pay a tax under this article shall do any business in the State of Alabama not constituting interstate
commerce, or maintain or defend any action in any of the courts of this State upon a contract made in this State other than contracts based upon interstate commerce, unless such corporation shall have paid such tax within sixty (60) days after the same became due." into the contract it complied with the statute. Thereafer the parties by their conduct manifested an intention to govern themselves by the provisions of the contract. The Court held that by their conduct the parties adopted the provisions of the contract as expressing their respective obligations; and that, while they could not ratify a void contract, they could, when each was qualified to contract, elect to adopt the instrument as their contract. The Court followed its holding in Turner Construction Co. v. Union Terminal Co., 229 Fed. Rep. 702, infra, where the former Florida statute was considered.4
The Foreign Corporation Law of Arizona provides as follows:
"No corporation such as is mentioned in Section 149 of this title shall transact any business whatsoever in this State until and unless it shall have first filed its articles of incorporation and the appointment of an agent and shall have paid its license fee and shall have received from the Corporation Commission a license authorizing said company to do and transact business in this State, as required in the two preceding sections, and every act done by said corporation prior to said filing, payment of fees, and the procurement of said license, shall be utterly void." Sec. 2228 Civ. Code, 1913. (Sec. 149 referred to in the above statute is now Sec. 2226 Civ. Code, 1913.)
The Supreme Court of Arizona does not seem to have construed the above provision, but its meaning is sufficiently clear.
The Constitution of Arkansas contains an express provision to the effect that no foreign corporation shall do
4 The lower court reached the same conclusion on the above and additonal grounds. See 219 Fed. Rep. 963. The writer is informed that a petition for a writ of certiorari will be presented to the Supreme Court of the United States to review this case.
The decision is contrary to the spirit, if not the express ad]udications of the following cases: United Lead Co. v. Reedy Elevator Co., 222 111. 199; in re Conecuh Pine
Lumber & Mfg. Co., 180 Fed. Rep. 249; Allen v. City of Milwaukee, 128 Wis. 678; Pittsburgh Construction Co. v. Westside Belt R. R. Co., 154 Fed. Rep. 929; Heileman Brewing Co. v. Peimeisl, 85 Minn. 121— in which the courts held that compliance with the statute after the contracts had been entered into did not avail the foreign corporations.
Compare, also, the decisions of the Alabama courts, and Gilmer v. business in the State except while it maintains one or more known places of business, and has an authorized agent at the same upon whom process may be served. Art. XII, Sec. 11. It has been held, however, that this provision is not self-executing. Railway Co. v. Fire Assn., 60 Ark. 325. Legislation has been enacted carrying the Constitution into effect. The present statute, passed in 1907, provides for the imposition of a fine for violation of the law and further—
"As an additional penalty, any foreign corporation which shall fail or refuse to file its articles of incorporation or certificate, as aforesaid, cannot 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." Sec. 824r Kirby's Supp. Dig. 1911.
Under this provision, it is held that a contract made within the State by an unregistered foreign corporation is not void, but in order to be enforceable the corporation must comply with the statute before suit is brought; it is not sufficient to comply after suit has been brought. Waxahachie Medicine Co. v. Daly, 183 S. AV. 741.5
The statutes of this State require a corporation to file with the Secretary of State an instrument designating an agent upon whom process may be served. Sec. 405, Civ. Code. For failure to comply with Sec. 405, it is provided:
"Every corporation which complies with the provisions of this chapter is thereafter entitled to the benefit of the laws of this State, limiting the time for the commencement of civil actions, but no corporation not created by or under the laws of this State is entitled to the benefit thereof, nor can any such corporation maintain or defend any action or proceeding in any court of this State until the corporation has complied with the provisions of the preceding sections." Sec. 406, Id.
Savings & Loan Co., 103 Tenn. 272, where it was held that a mortgage taken by a foreign corporation before compliance with the statute of Tennessee was void, and that a subsequent mortgage taken after compliance, for the secret purpose of validating the first, but under pretense of making concessions to
the mortgagor was likewise void.
o Under the former statute passed in 1901, it was held that a contract made by a non-complying corporation was not void, and a corporation could comply during suit. Woolfort v. Dixie Cotton Oil Co., 77 Ark. 203, and cases cited.
From the above provision, it would seem that the corporation could comply with Sec. 405 at any time before the trial of a suit. The statute further requires the foreign corporation to file in the office of the Secretary of State a certified copy of its articles of incorporation. See. 408, id.; Sec. 1 of Ch. 190, Laws of 1915. For failure so to do, a penalty is provided, and also the following:
"In addition to which penalty, no foreign corporation which shall faU to comply with Sections 408 and 409 of this code can maintain any suit or action in any of the courts of this State, or acquire or convey any legal title to any real property within this State, until it has complied . with said sections." Sec. 410, Civ. Code.
Before the enactment of the corporation license tax law of 1915, it was held that a corporation could file the certified copy of its articles after it has begun suit and then make the proper allegations to that effect in an amended complaint. The Court construed the provision strictly and held that it did not prohibit the commencement of an action by a foreign corporation, but merely its maintenance. Ward Land & Stock Co. v. Mapes, 147 Cal. 747, 752-753. It was also held that a foreign corporation which had not complied with Sec. 408 could nevertheless defend an action brought against it in the courts of the State. American DeForest, etc., Co. v. Superior Court, 153 Cal. 533.
Whether the Corporation License Tax Law (Ch. 190, Laws of 1915), has made any change in the law of California on this subject is not clear. The statute applies both to domestic and foreign corporations, but we are concerned only with its application to the latter. Section 1 of the Act contains the same requirements as Section 408, Civ. Code. Section 3 provides as follows:
"No corporation heretofore or hereafter incorporated under the laws of this State, or of any other State, territory, or foreign country, shall do or attempt to do any intrastate business within this State, by virtue of its charter, or certificate of incorporation, without a State license therefor."
Section 4 requires corporations to procure an annual license and to pay a license tax. Sections 7 and 10 provide for the forfeiture of the right of all foreign corpora