SHERWOOD V. ALVIS.

[83 ALABAMA, 115.]

CONTRACT MADE BY OR WITH CORPORATION, IF BEYOND ITS CORPORATE POWER, is not enforceable, and the other party is not estopped from invoking the defense of ultra vires; but if the contract be within its corporate power, the other party is estopped from disputing the regular and complete organization of the corporation.

CONTRACT MADE BY FOREIGN CORPORATION IS NOT VOID, AND MAY BE ENFORCED, in Alabama, although it was entered into in disregard of the constitutional prohibition (Ala. Const., art. 14, sec. 4) declaring that no foreign corporation shall do any business in the state without having a resident agent and a known place of business; and the other party to the contract is estopped from pleading its invalidity on this account, after having received the benefits.

STATUTORY real action brought by Sherwood against Alvis and others, to recover the possession of certain lands, with damages for the detention. The material facts appear in the opinion.

Thorington and Smith, and O. Kyle, for the appellant.
John M. Chilton, contra.

By Court, STONE, C. J. The contract out of which the present litigation grew was made in Alabama. The New England Mortgage Security Company, a corporation organized under the laws of Connecticut, lent money to Alvis, and received from him a mortgage on real estate lying in Alabama, to secure the repayment of the loan.

The mortgage contained a power of sale on default. Under authority alleged to have been conferred by the corporation, it is claimed that an agent advertised and sold the land according to the requirements of the mortgage; that Sherwood became the purchaser, and received a conveyance in the name of the corporation, executed by the said agent, styling himself attorney in fact. Sherwood thereupon instituted this statutory real action to recover possession of said lands, together with damages for the detention. It is not shown that Sherwood is an outsider, purchasing in his own right, nor is there in the record any evidence tending to show the price at which he purchased, nor whether he paid the purchase-money. Plaintiff did not succeed in getting his title before the jury.

The main defense arose under certain special pleas, which averred that the New England Mortgage Security Company was a foreign corporation; that the loan was made and the

mortgage executed in Alabama; and that at the time the contract was made the said corporation had no known place of business in Alabama, and no agent or agents therein.

A demurrer to these pleas was overruled, and this presents the first question for our consideration. The constitutional prohibition relied on is in the following language: "No foreign corporation shall do any business in this state without having at least one known place of business and an authorized agent or agents therein ": Constitution of 1875, art. 14, sec. 4.

We have held, in a long list of decisions, that a contract made by or with a corporation which is outside of the pale of its corporate authority confers no rights, and that the making of such contract does not estop the party promising from invoking the defense of ultra vires: Smith v. Alabama Life Ins. Co., 4 Ala. 558; City Council v. M. & W. Plank-road Co., 31 Id. 76; Waddill v. A. & T. R. R. Co., 35 Id. 323; Grand Lodge of Alabama v. Waddill, 36 Id. 313; Chambers v. Falkner, 65 Id. 448; Wilks v. Ga. Pac. R. R. Co., 79 Id. 180; Westinghouse Machine Co. v. Wilkinson, 79 Id. 312. The contract we are considering, however, is not without the scope of the New England Mortgage Security Company's corporate powers. It is directly within the line of business for which that corporation was created.

On the other hand, following a well-established, uniform rule, we have declared that if a person contract with a corporation in a matter within its corporate power, the mere making of such contract estops the promisor from disputing the corporation's regular and complete organization: Lehman v. Warner, 61 Ala. 455. The distinction is between an entire absence of authority in the organic law itself and a failure to comply with some prerequisite which the law has made a condition precedent to the exercise of corporate functions. In the one case, there is a want of power to act; in the other, only an abuse of power conferred.

The case of Smith v. Sheeley, 12 Wall. 358, like the present suit, was an action for the recovery of a lot of land. One of the main questions considered and decided was, whether the Nehama Valley Bank could be lawful grantee of the lot which was the subject of the suit. While Nebraska was only a territory, its legislature had incorporated the bank, but the act of incorporation was never approved or confirmed by Congress. By act approved July 1, 1836, Congress enacted:

"That no act of the territorial legislature of any of the territories of the United States incorporating any bank, or any institution with banking powers or privileges, shall have any force or effect whatever until approved and confirmed by Congress." This act of Congress was in force when the territorial legislature incorporated the Nehama Valley Bank. The court, Mr. Justice Davis delivering its unanimous opinion, said: "It is insisted, however, as an additional ground of objection to this deed, that the bank was not a competent grantee to receive title. It is not denied that the bank was duly organized in pursuance of the provision of an act of the legislature of the territory of Nebraska; but it is said that it had no right to transact business until the charter creating it was approved by Congress. This is so, and it could not legally exercise its powers until this approval was obtained. But this defect in its constitution cannot be taken advantage of collaterally. No proposition is more thoroughly settled than this, and it is unnecessary to refer to authorities to support it. Conceding the bank to be guilty of usurpation, it was still a body corporate de facto, exercising at least one of the franchises which the legislature attempted to confer upon it; and in such a case a party who makes a sale of real estate to it is not in a condition to question its capacity to take the title after it has paid the consideration for the purchase." To the same effect is Union Mutual Life Ins. Co. v. McMillan, 24 Ohio St. 67; Clark v. Middleton, 19 Mo. 53; Harris v. Runnels, 12 How. 79. See also Gold Mining Co. v. National Bank, 96 U. S. 640; National Bank v. Matthews, 98 Id. 621; National Bank v. Whitney, 103 Id. 99; Reynolds v. Bank, 112 Id. 405; Fortier v. Bank, 112 Id. 439; Sedgwick on Statutory and Constitutional Law, 2d ed., 73, 340; Thorington v. Gould, 59 Ala. 461.

It may be objected that, inasmuch as the New England Mortgage Security Company derived its corporate existence and powers from the state of Conneticut, and is therefore not subject to the jurisdiction of our courts, save as it may attempt to exercise its corporate functions within this state, both the state and the people are without remedy, if the corporation is allowed to enforce a contract made in disregard of our constitutional prohibition. This would seem to follow as a necessary sequence. But is that a sufficient reason for disregarding the sound logic and morality of the many authorities cited above? Suppose the framers of our constitution, instead of confining their inhibitory language to foreign corporations, had declared

that no domestic corporation shall do any business without having at least one known place of business, etc.,-would any one contend that a contract entered into in disregard of such prohibition would be void? The authorities cited above, and countless others, with uniform voice answer such inquiry in the negative. Suppose our constitution had two inhibitory clauses, one applicable to foreign and the other to domestic corporations, but in all other respects alike, - could we give different interpretations, and hold that the violation of one would annul the contract, while the violation of the other would simply arm the state with power to vacate the charter for the abuse?

Another argument: The legislature, at its last session (Sess. Acts, 102), passed an act "to give force and effect to section 4, of article 14, of the constitution of the state of Alabama,"-the section we are interpreting. That statute points out the mode of declaring and making known the designated place of business, and the authorized agent or agents to reside thereat, of foreign corporations proposing to do business in this state. It also imposes heavy penalties on foreign corporations and their agents for engaging in business without complying with the statute, and provides a means for their collection. It does not make the contract void. Contracts by foreign corporations entered into since the approval of that statute--February 28, 1887 would not be void, but the offenders would be liable to the penalties: Sedgwick on Statutory and Constitutional Law, 2d ed., 339-341; Ala. Gr. So. R. R. Co. v. McAlpine, 71 Ala. 545.

Would it not be strange if the constitutional prohibitiona matter not within legislative control-should receive one interpretation before the enactment of the statute, and a different one after the enactment? The circuit court erred in overruling plaintiff's demurrer to pleas 2, 3, 4, 5.

In what we have said, we have no wish to question or weaken our former decisions holding that contracts by or with corporations which are outside of their corporate powers cannot be enforced. We are unwilling, however, to extend that principle, and make it embrace a case like the present.

We are aware that this court has held the clause in the constitution we been considering to be prohibitory, without legislative action to give it effect: American U. Tel. Co. v. W. U. Tel. Co., 67 Ala. 26; 42 Am. Rep. 90; Beard v. U. & Amer. Pub. Co., 71 Ala. 60. Neither of these cases, however, was

decided on that question. Nor did we consider what effect the constitutional prohibition would have on contracts made by foreign corporations without compliance with its requirements. This case brings that question before us for the first time.

The questions on the admissibility of evidence will not be likely to arise again in the form in which this record presents them. The execution and seal of the corporation, appended to the power of attorney, can be proved by deposition, and examined copies of the by-laws in the same way.

Reversed and remanded.

CONTRACT BY OR WITH CORPORATION, when ultra vires: Chicago Gas Light Co. v. Gas Light Co., 2 Am. St. Rep. 124; Miners' Ditch Co. v. Zellerbach, 99 Am. Dec. 300; Rock River Bank v. Sherwood, 78 Id. 669, and note 677; Bradley v. Ballard, 8 Am. Rep. 656; Northern Union Packet Co. v. Shaw, 19 Id. 781.

ESTOPPEL TO RAISE QUESTION OF ULTRA VIRES: Day v. Spiral Spring Buggy Co., 58 Am. Rep. 352; Central Railroad v. Smith, 52 Id. 353, and note 358; Wright v. Pipe Line Co., 47 Id. 701; State Board v. Citizens' Street R'y Co., 17 Id. 702; Whitney Arms Co. v. Barlow, 20 Id. 504; Hough v. Cook County Land Co., 24 Id. 230; Pixley v. West. Pac. R. R. Co., 91 Am. Dec. 623, and note 637.

FOREIGN CORPORATION, requirements which may be exacted of: Ducat v. Chicago, 95 Am. Dec. 529, and note 536-539; Folger v. Columbian Ins. Co., 96 Id. 747; Thorne v. Travelers' Ins. Co., 21 Am. Rep. 89; Mowing Machine Co. ▼. Caldwell, 23 Id. 641.

ESLAVA V. JONES.

[83 ALABAMA, 139.]

PUBLIC MINISTERIAL OFFICER IS ANSWERABLE IN CIVIL ACTION FOR ANY ACT OF NEGLIGENCE or misconduct, whereby damage proximately results to the party complaining.

WRONGFUL ISSUE OF WRIT, WHEN ACTION WILL NOT LIE THEREFOR. — An action for damages does not lie against a circuit clerk who wrongfully issued a writ of venditioni exponas, commanding the sheriff to sell certain lands in the plaintiff's possession which had been previously levied on by an execution against another. The issue of the writ in such case, and the sale thereunder, did not affect the right, title, or possession of the plaintiff, and the costs, expenses, and attorney's fees necessarily incurred in defense of a suit brought by the purchaser to recover possession of the lands alleged as special damages, not being the natural and proximate consequences of issuing the writ, the action cannot be maintained.

MALICE AND WANT OF PROBABLE CAUSE MUST CONJOIN to render actionable the misuse or abuse of legal process in the common-law or ordinary remedies.