Opinion
No. 31273.
June 11, 1934. Suggestion of Error Overruled July 11, 1934.
1. APPEARANCE.
Appearance and motion to quash process constitute sufficient appearance regardless of validity of original summons (Code 1930, sections 2999, 3461).
2. FORCIBLE ENTRY AND DETAINER.
Statute authorizing summary remedy against wrongful possession of land gives remedy to one claiming under deed of trust or mortgage, although not immediate vendee or vendee under original grantor in deed of trust (Code 1930, section 3456).
3. CORPORATIONS.
Statute denying to foreign corporation violating statute in failing to file copy of charter access to courts for any relief does not avoid contract so as to affect third persons (Code 1930, section 4164).
4. CORPORATIONS.
Question in respect to failure of foreign corporation to file charter cannot be raised except by state when suit is brought by third persons, or when litigation is between other persons than corporation violating statute and the state (Code 1930, section 4164).
5. MORTGAGES.
Sale under deed of trust in pais passes title from trustee to purchaser.
6. CORPORATIONS.
Contract for purchase of property sold on foreclosure under deed of trust which had been executed to foreign corporation not having filed its charter within state held not void as to third persons purchasing property (Code 1930, section 4164).
7. FORFEITURES.
Law does not favor forfeitures, and, before forfeitures will be decreed, they must come within terms of statute imposing liability.
APPEAL from Circuit Court of Forrest County.
Heidelberg Roberts, of Hattiesburg, for appellant.
No one is entitled to avail himself or herself of the summary proceeding of unlawful entry and detainer unless he or she falls in the classes as outlined in the statute, section 3456, Code of 1930.
Green McCorkle v. Simon Yarrell et al., 55 Miss. 576; Williams v. Simpson, 70 Miss. 113, 11 So. 689; Taylor v. Orlansky, 92 Miss. 761, 46 So. 50, 136.
Chapter 69 of the Mississippi Code of 1930 provides for a summary remedy for an individual claiming right to possession of property under certain states of fact. There is nothing in any part of this chapter which would indicate that such a summary proceeding is available to an individual who gets title to property with knowledge that some one other than the party through whom he claims is in possession of the property and claims to be owner of the title thereto.
Section 4140 of the Mississippi Code of 1930 deals with the fact that every foreign corporation doing business in the state of Mississippi must file with the secretary of state a written power of attorney designating the said secretary of state or an agent upon whom process may be had in the event of any suit against said corporation.
Section 4164, Code of 1930.
Section 4165 of the Mississippi Code of 1930, dealing with the powers and responsibility of a foreign corporation, is in part as follows: "And the acts of the agents of any such foreign corporation shall have the same force and validity as the acts of agents of private persons; but such foreign corporations shall not do or commit any act in this state contrary to the laws or policy thereof, and shall not be allowed to recover on any contract made in violation of law or public policy."
Sections 4165 and 4208, Code of 1930.
Our court has held that where a plaintiff in an action of unlawful entry and detainer claims by virtue of a sale under trust deed the defendant can defeat a recovery by showing that he gave plaintiff the trust deed to secure a debt contracted with him while he was conducting a business as a merchant without having paid a sufficient privilege tax.
Williams v. Simpson, 70 Miss. 113, 11 So. 689.
By the common law a contract founded upon an illegal consideration, or one made against public policy, is void, and no action can be maintained hereon.
Bohn v. Lowery, 77 Miss. 424, 27 So. 604.
There is made a part of this record certificates from the secretary of state to the effect that the Hatchie Investment Company, the Union Planters Bank Trust Co., and Franklin Bond Mortgage Company are not qualified to do business in the state of Mississippi, and that said corporations have failed to file a written power of attorney designating a resident agent for the service of process upon such corporations.
One test of whether or not a foreign corporation is "doing business" within the meaning of our statute is whether or not it is doing such acts as are within the function of its corporate powers.
Peterman Construction Supply Co. v. Blumenfeld, 156 Miss. 55, 125 So. 548.
Whether foreign corporation is doing business within state is largely question of fact to be determined by circumstances of each particular case.
Wiley Electric Co. v. Electric Storage Battery Co., 167 Miss. 842, 147 So. 773; Dodds v. Pyramid Securities Co., Inc., 165 Miss. 269, 147 So. 328.
We cannot see how the court could hold other than that this is a Mississippi contract.
National Mutual Building Loan Assn. of New York v. Frank V. Brahan, 80 Miss. 407, 31 So. 840; Quartette Music Co. v. Haygood, 108 Miss. 755, 67 So. 211.
The general rule is that when a foreign corporation transacts some substantial part of its originary business in a state, it is doing, transacting, carrying on, or engaging in business therein, within the meaning of the statute.
14-A C.J. 1270, par. 3977; Coburn v. Coke, 69 So. 574; Chattanooga National B. L. Association v. Denson et al., 47 L.Ed. 870.
Our courts have held that individuals and corporations cannot do indirectly what they are not permitted to do directly.
Houston v. National Mutual Building Loan Association, 80 Miss. 31.
Neither the trustee's deed nor the deed of Hatchie Investment Company to O.C. Grigsby and J.E. Schwartz are supported by a valid consideration.
Day v. Davis, 64 Miss. 253, 8 So. 203; 2 Devlin on Real Estate, par. 834, page 1501; 18 C.J. 116, par. 42-E.
Under the rules applicable to trusts generally, all persons capable of holding real or personal property may hold as trustees. Persons directly in interest should not, at least not without the knowledge and consent of the debtor, be made trustees in a deed of trust.
41 C.J. 378, par. 174.
J.E. Davis and George W. Currie, both of Hattiesburg, for appellees.
Section 3461 of the Code of 1930 controls in counties not having a county court, but in counties having a county court, the county court has exclusive jurisdiction in all unlawful entry and detainer cases.
Code of 1930, section 693; Miss. State Highway Department v. Haines, 162 Miss. 216, 139 So. 169.
The only effect of a motion to quash original process is to enter the appearance of the defendants to the succeeding term of the court (Code of 1930, section 2999), and this is precisely the practical result in the present case.
This is a suit by the assignees by mesne conveyance of the trustee against the mortgagor and the mortgagor's assignee, and comes within the express provisions of the law.
Marks v. Howard, 70 Miss. 445, 12 So. 145.
The trust deed and note were not void, but created legal rights. It should be noted that a trust deed is not merely a contract, but a defeasible conveyance of real estate. Regardless of the non-compliance of the beneficiary corporation, the trust deed conveyed the legal title of said real estate to the trustee.
Section 4165, Code of 1930; Springfield Grocery Co. v. Devitt, 126 Miss. 169, 88 So. 497; Woodson v. Hopkins, 85 Miss. 165, 183, 37 So. 1010.
The Mississippi Code expressly provides: "All corporations, heretofore or hereafter organized, whether they be domestic or foreign, are hereby authorized and clothed with full power and right to own, in fee simple or otherwise, lands for any legitimate purpose in this state."
Section 4150, Code of 1930.
There is no Mississippi statute declaring that conveyances to noncomplying corporations shall be void, and that no title shall be acquired thereby; and in the absence of such statute title is acquired, and only the state can complain.
State ex rel. Attorney-General v. Hines Lbr. Co., 106 Miss. 780, 64 So. 459; Middleton v. Georgetown Mercantile Co., 117 Miss. 134, 77 So. 956; 14-A C.J. 1323; Foreign Corporations, 12 R.C.L. 30.
The original trust deed is functus officio, and the defendants cannot be heard to complain.
Corporations, 14-A C.J. 1305; Foreign Corporations, 12 R.C.L., sec. 66; Beale on Foreign Corporations, pages 355-356, 368; Jones on Mortgages (7 Ed.), page 193.
Though a mortgage was originally invalid by reason of the failure of the mortgagee, a foreign corporation, to comply with such laws, after the contract evidenced by the mortgage has been fully executed by a sale and conveyance under the mortgage, the mortgagor cannot thereafter avail himself of the objection.
Jones on Mortgages (7 Ed.), page 194; Grider v. American Freehold Land Mtg. Co., 99 Ala. 281, 12 So. 775; George v. New England Mtg. Security Co., 109 Ala. 548, 20 So. 331.
If the argument of the learned counsel for appellants is sound, the courts should hold that all contracts and mortgages held by unlicensed merchants should be void and unenforceable. But the supreme court of Mississippi has repeatedly held precisely the contrary.
Sullivan v. Ammons, 95 Miss. 196, 48 So. 244; Huddleston v. McMillan Bros., 112 Miss. 168, 72 So. 892; Levinson v. Cox, 127 Miss. 250, 90 So. 1.
Even if the title is acquired in violation of an express statutory prohibition, it is valid as against every one but the state, and the corporation may hold the land subject to the right of escheat in proceedings by the state.
Foreign Corporations, 12 R.C.L., section 30.
A corporation holding land in a state other than that of its creation, in the absence of restrictions imposed by the laws of the state in which the land is situated, may make any conveyance thereof which its charter authorizes.
Middleton v. Georgetown Mercantile Co., 117 Miss. 134, 77 So. 956; State ex rel. Attorney-General v. Hines Lbr. Co., 106 Miss. 780, 64 So. 729; Corporations, 14-A C.J., page 1323; Foreign Corporations, 12 R.C.L., section 30.
The filing of a suit to obtain possession of lands acquired by a noncomplying foreign corporation is not doing business in Mississippi.
Corporations, 14-A C.J., pages 1273-1274, secs. 3983 and 4008; Foreign Corporations, 12 R.C.L., sec. 28.
The statute does not forbid a nonresident corporation to sell property in the state owned by it, nor require it to file a copy of its charter in the state for the mere purpose of selling specific property.
Long Beach Canning Co. v. Clark, 141 Miss. 171, 106 So. 646.
Argued orally by M.M. Roberts, for appellant, and by Geo. W. Currie, for appellees.
O.C. Grigsby and J.E. Schwartz, citizens of Hattiesburg, Mississippi, instituted an action of unlawful entry and detainer in the county court of Forrest county for land lying in that county, which said Grigsby and Schwartz had purchased from the Hatchie Investment Company of Memphis, Tennessee. The Hatchie Investment Company had purchased the land at a foreclosure sale under a deed of trust executed by E.J. Williams in 1929 to secure the indebtedness therein mentioned owing to the Franklin Bond Mortgage Company domiciled in Memphis, Tennessee. Subsequent to the execution of the deed of trust to the Franklin Bond Mortgage Company, E.J. Williams executed a deed of trust on the same property to the Citizens' Bank of Hattiesburg to secure certain money due it, and later executed a deed to said bank in satisfaction of his debt conveying the lands involved in this suit.
At the time the deed of trust was given to the Franklin Bond Mortgage Company and up to the time of the institution of this suit and the trial of the case, the Franklin Bond Mortgage Company had never filed, with the secretary of state of Mississippi, any charter, or paid any fees, permitting it to do business in the state as a foreign corporation. However, it maintained offices and had agents in the city of Hattiesburg, and entered into numerous transactions, lending money and taking deeds of trust to secure such loans.
On February 6, 1933, J. Frank Brown, substituted trustee in the deed of trust given by Williams to the Franklin Bond Mortgage Company, sold under foreclosure said property to the Hatchie Investment Company, who had acquired the mortgage from the Franklin Bond Mortgage Company; the property having been bid off at the foreclosure sale by an attorney in the city for said J. Frank Brown, substituted trustee. The Hatchie Investment Company paid three thousand dollars for the property.
On April 15, 1933, O.C. Grigsby and J.E. Schwartz purchased the property from the Hatchie Investment Company, and, before bringing suit, made demand, in writing, for possession of the property, which demand being refused, suit was brought as stated for the possession of the property under section 3456, Code 1930. When suit was filed, summons was issued and directed to be returnable before the county court on the first day of the term of court, which was more than twenty days after the date of the summons.
A motion was made in the county court to quash the process, and said motion was overruled. The defendant then pleaded certain pleas in abatement, setting up that the right of action did not exist in favor of the appellees and that the contract between Williams and the Franklin Bond and Mortgage Company was void, because that corporation, being a foreign corporation, was not authorized to do business in the state of Mississippi, and that the foreclosure proceedings were void for that reason, and also setting up that the Union Planters' National Bank and the Hatchie Investment Company and W.C. Scott, who bid for the Hatchie Investment Company at the time of the sale, were under some understanding or collusion to defeat the law by bidding in the property in the name of the Hatchie Investment Company, which is a subsidiary or a mere conduit for the Franklin Bond Mortgage Company, and that the deed to the appellees was made in furtherance of an effort to defeat the law by conveying to themselves the title to the land, so as to avoid the consequences of not having complied with the law of the state. It was also alleged in the special pleas that neither the Hatchie Investment Company nor the Union Planters' National Bank were qualified to do business in Mississippi; each being a foreign corporation.
A demurrer was sustained to these pleas, and the case came on for trial.
It appeared that J. Frank Brown, as substituted trustee, advertised the property for sale, and had an attorney to cry it off, as stated above; that one W.C. Scott, a representative of the Hatchie Investment Company and the Union Planters' National Bank, and the Franklin Bond Mortgage Company, gave a check to J. Frank Brown for three thousand dollars, the purchase money, and Brown subsequently gave a check to Scott for a similar amount.
It is contended by the appellant that the court below should have quashed the process because the statute requires the process to be issued not less than five days, nor more than twenty, before the return day, and that the return day is to be fixed for a day certain, under section 3461, Code 1930.
We think the appearance and the motion to quash constituted sufficient appearance regardless of the validity of the original summons, and, inasmuch as the case was not tried at the return day, but this appearance brought the defendants into court, it was tried at some subsequent term. See Code 1930, section 2999.
It is next contended that the appellees were not entitled to the remedy under section 3456, Code 1930, because the Bank of Hattiesburg had obtained a deed from Williams prior to the foreclosure and was in possession and had not withheld or deprived the appellees of possession within the meaning of the statute.
Section 3456 reads as follows: "Any one deprived of the possession of land by force, intimidation, fraud, stratagem, stealth, and any landlord, vendor, vendee, mortgagee, or trustee, or cestui que trust, or other person against whom the possession of land is withheld, by his tenant, vendee, vendor, mortgagor, grantor, or other person, after the expiration of his right by contract, express or implied, to hold possession, and the legal representatives or assigns of him who is so deprived of possession, or from whom possession is so withheld, as against him who so obtained possession, or withholds possession after the expiration of his right, and all persons claiming to hold under him, shall, at any time within one year after such deprivation or withholding of possession, be entitled to the summary remedy herein prescribed."
We think the intent and purpose of this section is to give a remedy to one who claims under a deed of trust or mortgage, although not an immediate vendee or a vendee under an original grantor in a deed of trust.
It is next contended that the contract was void, and that no validity can be given to the deed under the foreclosure. It will be noted, in considering this contention, that the Franklin Bond Mortgage Company is not a party to the suit, is seeking no relief in court, and has sought none. The statute bearing on the matter denies, to a corporation violating the statute, access to the courts for any relief. We do not think the statute avoids the contract so as to affect third persons, and we are of the opinion that nobody can raise this question but the state of Mississippi, when suit is brought by third persons, or when the litigation is between other persons than the corporation violating the statute and the state of Mississippi. In other words, a sale under a deed of trust in pais passes the title from the trustee to the purchaser. In the original contract between the Franklin Bond Mortgage Company and Williams, the title passed from Williams to the trustee. The language of the statute does not make the contract entirely void. See Middleton v. Georgetown Mercantile Company, 117 Miss. 134, 77 So. 956; Long Beach Canning Company v. Clark, 141 Miss. 177, 106 So. 646; Nicholson v. Myres (Miss.), 154 So. 282; Quitman County v. Stritze, 70 Miss. 320, 13 So. 36; and the authorities cited under these cases. See, also, Springfield Grocery Co. v. Devitt, 126 Miss. 169, 88 So. 497.
In our opinion, the case of Long Beach Canning Co. v. Clark, supra, is applicable here. In that case it was held, where a foreign corporation did business in this state without filing its charter as required by section 935, Code 1906 (which is brought forward in the Code of 1930, section 4164), that this did not prevent it from selling property to liquidate its affairs on discontinuing its business, and that the statute prohibiting a foreign corporation from transacting business unless its charter was filed was intended only to deny such foreign corporation access to the courts of the state to enforce rights growing out of business transacted contrary to the statute. It would be too sweeping a decision to hold that the contract was utterly void as to third persons, and it would impose an unreasonable burden on other parties to compel them to see to it that a corporation had complied with the law of the state, when they desired to buy the property of such corporation.
The state might take appropriate action, and might possibly forfeit the property acquired by a foreign corporation which had not complied with the law, but only the state could take such action. The statute denies access to the courts by such a corporation, and the courts merely leave them as they are found, and will not aid in refusing rights growing out of the contract made without complying with the law. The law does not favor forfeitures, and, before forfeitures will be decreed or adjudged, they must come within the terms of the statute imposing that liability.
The circuit court having reached the same conclusion, its judgment will be affirmed.
Affirmed.