The Constitution of Colorado provided that no foreign
corporation should do business in the state without having a known
place of business and an agent upon whom process might be served. A
statute of the state made provision for the filing by such
corporation with the Secretary of a certificate showing its place
of business and designating such agent or agents, and also a copy
of its charter of incorporation, or of its certificate of
incorporation under a general incorporation law, and, in case of
failure to do so, that each and every officer, agent and
stockholder of the corporation should be jointly and severally
personally liable on its contracts made while in default. Said act
further provided that no corporation, foreign or domestic, should
purchase or hold real estate except as provided in the act. The act
did not indicate a mode by which a foreign corporation might
acquire real estate in Colorado. G.,
Page 132 U. S. 283
being the owner in fee of a tract of realty in that state,
conveyed it by deed of warranty to a corporation organized under
the laws of Missouri, which had not then attempted and did not
afterwards attempt to comply with those provisions of the
Constitution or laws of Colorado. F., the defendant below, claimed
through this corporation. Some months after his deed to the
corporation, G. executed, acknowledged and delivered a quitclaim
deed of the premises to the grantor of P., the plaintiff below.
Held:
(1) That perhaps the reasonable interpretation of the statute
was that a foreign corporation should not purchase or hold real
estate in Colorado until it should acquire, in the mode prescribed
by the local law, the right to do business in that state.
(2) That these constitutional and statutory provisions were
valid so far as they did not directly affect foreign or interstate
commerce.
(3) That the company violated the laws of the state when it
purchased the property without having previously designated its
place of business and an agent.
(4) But that the deed was not thereby necessarily made
absolutely void as to all persons and for every purpose, inasmuch
as the Constitution and laws of Colorado did not prohibit foreign
corporations from purchasing and holding real estate within its
limits.
(5) That the penalty of personal liability of officers, agents
and stockholders in case of noncompliance with the provisions of
the statute having apparently been deemed by the state legislature
sufficient to effect its object, it was not for the judiciary to
enlarge that penalty by forfeiting the estate for the benefit of
parties claiming under a subsequent deed from the same grantor
(6) That the grantee under the subsequent quitclaim deed could
occupy no better position than the grantor, common to both parties,
would have occupied if he had himself brought the action, and that
in that case it could not have been maintained.
This was an action in the nature of an action of ejectment.
Judgment for the plaintiff, to which this writ of error was sued
out. The case is stated in the opinion.
MR. JUSTICE HARLAN delivered the opinion of the Court
This is an action in the nature of ejectment to recover the
possession of certain real property in Gilpin County, Colorado --
namely, the North Comstock, Grand View, Clipper, and Comstock
Page 132 U. S. 284
lodes, and a building lot in Central City, in the same county,
together with the dwelling house thereon, the fee and possession of
all which property were claimed by the plaintiff, the present
defendant in error. The defendants admitted their possession of the
premises described in the complaint except the Clipper lode, and
alleged their ownership and right of possession of the other
property. They distinctly disclaimed all interest in the Clipper
lode, and denied that they were or had ever been in possession of
it. A trial by jury was waived in writing by the parties, and the
case was heard on an agreed statement of facts, upon which the
court was asked to declare the law and enter judgment accordingly.
Judgment was rendered in favor of the plaintiff for the possession
of all the property described in the complaint, including the
Clipper lode. The question to be determined is whether the judgment
is supported by the agreed facts,
These facts are, in substance, as follows: the common source of
title is William Groshon, who, on the 16th of June, 1877 at Central
City, in the State of Colorado, conveyed, with warranty, all the
property described in the complaint to the Comstock Mining Company,
a corporation organized under the laws of Missouri for the purpose
of carrying on mining business, and with the object, expressed in
its articles of incorporation, of purchasing, owning, and
controlling mining property, both real and personal, in the State
of Colorado and of conducting a mining business therewith. This
deed was duly recorded in the proper local office on the 25th of
June, 1877. Before the purchase from Groshon, the company was
engaged in the prosecution of its mining business at and near
Central City, where it established an office.
On the day of the execution of Groshon's deed, the company made
to Ezra D. Fritts its three promissory notes, aggregating $30,000,
which were intended to be used and were used in part payment of the
price of the property conveyed to it, and in order to secure the
payment of the notes, it executed to Thatcher, as trustee, a deed
of trust upon the property, except the Clipper lode, conditioned
that on default in the payment of either of the notes or the
Page 132 U. S. 285
interest thereon, the trustee might sell and dispose of the said
mining property. That deed of trust was duly recorded on the 26th
of June, 1877.
On the 5th of January, 1878, default having occurred in the
payment of the notes, the deed of trust was foreclosed under the
power of sale contained in it, and on that day Thatcher executed,
acknowledged, and delivered his deed for all said real estate and
mining property (except the Clipper lode) to Fritts. That deed was
duly recorded January 7, 1878.
The defendants claimed title and possession by virtue of divers
mesne conveyances, in due form, from the company and its assigns
under the above deed of trust for all of the property excepting the
Clipper lode, which has never been conveyed by it.
On the 13th of April, 1878, Groshon executed, acknowledged, and
delivered his deed of quitclaim of all the real estate and mining
property in the complaint described to Samuel S. Porter. That deed
was delivered to Porter on the 20th of May, 1878, but has never
been recorded. The latter, by his deed of quitclaim, executed May
20, 1878, conveyed to defendant Palmer. The latter deed was
delivered to the grantee on the 25th of May, 1878, but it remains
unrecorded. Afterwards, June 28, 1879, Palmer filed in the office
of the clerk and recorder of the county where the property is
situated notice, according to law, of the bringing of this suit and
the object thereof.
The Comstock Mining Company, at the time of its purchase from
Groshon, had not, nor has it since that time, complied or attempted
to comply with section ten of article fifteen, of the Constitution
of Colorado, nor with sections twenty-three and twenty-four of the
General Laws of that state, otherwise known as sections 260, 261 of
chapter 19 of the General Statutes of Colorado, 1883, prescribing
the terms and conditions upon which foreign corporations may do
business in that state.
A copy of the incorporation laws of Missouri, under which this
company was organized, was at the time of its organization on file
in the office of the Secretary of State of Colorado,
Page 132 U. S. 286
but was not filed by it. Its articles of incorporation were
filed in the office of the Clerk and Recorder for Gilpin County,
where its business interests were located, on August 10, 1877, and
a copy of the incorporation laws of Missouri, under which the
company was organized, was also on file in the same office at and
after the time the company was organized.
The defendants, during the time of their possession of the
property, have held the same in good faith under the above deeds,
and have paid taxes legally assessed and levied upon it, to the
amount of $400, and plaintiff has paid no taxes thereon. They have
put improvements upon the property in the way of building and
repairing the dwelling house described in the complaint, of the
value of $350.
It is clear from the facts agreed that the object of Groshon's
conveyance to the Comstock Mining Company was to pass to that
corporation whatever interest he had in the property. It is equally
clear that under the trust deed to Thatcher, the sale and
conveyance to Fritts, and the subsequent mesne conveyances to the
defendants, the latter acquired whatever interest the Comstock
Mining Company got by Groshon's deed to it.
But it is contended that no title or interest whatever passed
from Groshon by his deed of June 16, 1877, even as between him and
the company, and consequently it was competent for him, at his
pleasure and notwithstanding he received the consideration for
which he stipulated, and even after the sale and conveyance of the
property under the deed of trust, to make to other parties a
quitclaim deed that would override not only his conveyance to the
Comstock Mining Company, but all subsequent conveyances based upon
it.
This proposition is based upon certain provisions of the
Constitution and laws of Colorado relating to foreign
corporations.
The Constitution of that state declares that
"No foreign corporation shall do any business in this state
without having one or more known places of business, and an
authorized agent or agents in the same upon whom process may be
served."
Art. XV, ยง 10.
The statutory provisions for failing to comply with which
Page 132 U. S. 287
the Comstock Mining Company is alleged to have taken nothing by
Groshon's conveyance to it are these:
"SEC. 260. Foreign corporations shall, before they are
authorized or permitted to do any business in this state, make and
file a certificate, signed by the president and secretary of such
corporation, duly acknowledged, with the Secretary of State, and in
the office of the recorder of deeds of the county in which such
business is carried on, designating the principal place where the
business of such corporation shall be carried on in this state, and
an authorized agent or agents in this state residing at its
principal place of business upon whom process may be served, and
such corporation shall be subjected to all the liabilities,
restrictions, and duties which are or may be imposed upon
corporations of like character organized under the general laws of
this state, and shall have no other or greater powers. And no
foreign or domestic corporation established or maintained in any
way for pecuniary profit of its stockholders or members shall
purchase or hold real estate in this state except as provided for
in this act, and no corporation doing business in this state
incorporated under the laws of any other state shall be permitted
to mortgage, pledge, or otherwise encumber its real or personal
property situated in this state to the injury or exclusion of any
citizen, citizens, or corporations of this state who are creditors
or such foreign corporation, and no mortgage by any foreign
corporation, except railroad and telegraph companies, given to
secure any debt created in any other state shall take effect as
against any citizen or corporation of this state until all its
liabilities due to any person or corporation in this state at the
time of recording such mortgage have been paid and
extinguished."
"SEC. 261. Every company incorporated under the laws of any
foreign state or kingdom or of any state or territory of the United
States beyond the limits of this state and now or hereafter doing
business within this state shall file in the office of the
Secretary of State a copy of their charter of incorporation, or, in
case such company is incorporated by certificate under any general
incorporation law, a copy of such
Page 132 U. S. 288
certificate and of such general incorporation law, duly
certified and authenticated by the proper authority of such foreign
state, kingdom, or territory."
Gen.Stat.Colo. 1883, c.19.
Precisely what was meant by the words in section 260 "except as
provided for in this act" is difficult to tell, since the act does
not indicate any particular mode in which a foreign corporation may
acquire real estate in Colorado. But perhaps the reasonable
interpretation of the statute is that a foreign corporation shall
not purchase or hold real estate in Colorado for purposes of its
business until it first acquires, in the mode prescribed by the
local law, the right to do business in that state.
No question is made in this case -- indeed, there can be no
doubt -- as to the validity of these constitutional and statutory
provisions, so far at least as they do not directly affect foreign
or interstate commerce. In
Cooper Manufacturing Co. v.
Ferguson, 113 U. S. 727,
113 U. S. 732,
this Court said that
"The right of the people of a state to prescribe generally, by
its Constitution and laws, the terms upon which a foreign
corporation shall be allowed to carry on its business in the state
has been settled by this Court."
It may be assumed, therefore that the Comstock Mining Company,
being a corporation of another state, had no right to do business
in the State of Colorado until after it had one or more known
places of business within its limits and an authorized agent
designated upon whom process could be served, nor until it had made
and filed in the proper office the certificate prescribed by
section 260 of the statute relating to foreign corporations. It may
also be assumed for the purposes of this case that this company
violated the law of that state when it purchased the premises here
in controversy without having, in the mode prescribed by the
statutes of Colorado, previously designated its principal place of
business in that state and an agent upon whom process might be
served.
But it does not follow that the title to the property conveyed
to the Comstock Mining Company remained in Groshon notwithstanding
his conveyance of it to that company in due form and for a valuable
consideration.
Page 132 U. S. 289
The Constitution and laws of Colorado, it should be observed, do
not prohibit foreign corporations altogether from purchasing or
holding real estate within its limits. They do not declare
absolutely or wholly void, as to all persons and for every purpose,
a conveyance of real estate to a foreign corporation which has not
previously done what is required before it can rightfully carry on
business in the state. Nor do they declare that the title to such
property shall remain in the grantor despite his conveyance. So far
as we are aware, the only penalty imposed by the statutes of
Colorado upon a foreign corporation carrying on business in the
state before acquiring the right to do so is found in section 262
of the same chapter, which provides:
"A failure to comply with the provisions of sections 23 and 24
[sections 260 and 261] of this act shall render each and every
officer, agent, and stockholder of any such corporation so failing
herein jointly and severally personally liable on any and all
contracts of such company made within this state during the time
that such corporation is so in default."
The fair implication is that in the judgment of the Legislature
of Colorado, this penalty was ample to effect the object of the
statutes prescribing the terms upon which foreign corporations
might do business in that state. It is not for the judiciary at the
instance or for the benefit of private parties, claiming under
deeds executed by the person who had previously conveyed to the
corporation, according to the forms prescribed for passing title to
real estate, to inflict the additional and harsh penalty of
forfeiting for the benefit of such parties the estate thus conveyed
to the corporation and by it conveyed to others. If Groshon, the
grantor of the Comstock Mining Company, had himself brought this
action, the injustice of his claim would be conceded. But the
present plaintiff, who asserts title under a quitclaim deed from
Groshon made after the property had passed, by the sale under the
deed of trust from the mining company, cannot in law occupy any
better position than the original grantor would have done if he had
himself brought this action. If the legislature had intended to
declare that no title should pass under a conveyance to a foreign
corporation purchasing real estate before it acquires the
Page 132 U. S. 290
right to engage in business in the state, and that such a
conveyance should be an absolute nullity as between the grantor and
grantee, leaving the grantor to deal with the property as if he had
never sold it, that intention would have been clearly manifested.
If the construction placed by the plaintiff upon the Constitution
and statutes of Colorado be sound, there would be some ground to
say that a foreign corporation, taking a conveyance of real estate
for purposes of its business in Colorado, before it had acquired
the right to do business there, would have no standing in the
courts of that state for the purpose of having the estate so
acquired protected against trespasses upon it. And yet the contrary
has been held by the Supreme Court of Colorado in
Utley v.
Clark-Gardner Mining Company, 4 Colo. 369. That was an action
of trespass brought by a New York corporation. The declaration in
one count charged the defendants with breaking and entering upon
certain claims of the Gardner lode and breaking ore, etc. The other
count was
de bonis asportatis. The defendants filed a
special plea in abatement alleging that the plaintiff was a foreign
corporation, and had never complied with the above statutory
provisions as to filing a certificate designating its principal
place of business in the state and an authorized agent upon whom
process could be served. The court, waiving any expression of
opinion as to what would be its decision if the plea had been one
in bar of the action, held that the prohibition in respect to
foreign corporations, while they extended to the carrying on of
business before complying with the laws of the state, did not
abridge the right of a foreign corporation to sue in the courts of
Colorado.
The views we have expressed are supported by several
adjudications in this Court in cases somewhat analogous to the
present one, among which are those arising under sections 5136 and
5137 of the Revised Statutes of the United States. The first of
those sections authorizes national banking associations to loan
money on personal security. The other section provides:
"A national banking association may purchase, hold, and convey
real estate for the following purposes, and for no others: first,
such as shall be necessary for its immediate accommodation
Page 132 U. S. 291
in the transaction of its business; second, such as shall be
mortgaged to it in good faith by way of security for debts
previously contracted; third, such as shall be conveyed to it in
satisfaction of debts previously contracted in the course of its
dealings; fourth, such as it shall purchase at sales under
judgments, decrees, or mortgages held by the association, or shall
purchase to secure debts due to it. But no such association shall
hold the possession of any real estate under mortgage, or the title
and possession of any real estate purchased to secure any debts due
to it, for a longer period than five years."
In
National Bank v. Matthews, 98 U. S.
621,
98 U. S. 627,
the question was directly presented whether a national bank was
entitled to the benefit of a deed of trust upon real estate, which,
with the note described in it, was taken not as security for or in
satisfaction of debts previously contracted in the course of its
dealings, but for a loan made by the bank at the time the deed of
trust was assigned to it. The Supreme Court of Missouri held the
deed of trust to be void in the hands of the bank because its loan
was made upon real estate security in violation of the statute. But
this Court, after observing that the result insisted upon did not
necessarily follow, said:
"The statute does not declare such a security void. It is silent
upon the subject. If Congress so meant, it would have been easy to
say so, and it is hardly to be believed that this would not have
been done instead of leaving the question to be settled by the
uncertain result of litigation and judicial decision. Where
usurious interest is contracted for, a forfeiture is prescribed and
explicitly defined."
Again:
"Where a corporation is incompetent by its charter to take a
title to real estate, a conveyance to it is not void, but only
voidable, and the sovereign alone can object. It is valid until
assailed in a direct proceeding instituted for that purpose."
In
National Bank v. Whitney, 103 U. S.
99,
103 U. S. 103,
which involved the validity of a mortgage to a national bank to
secure future advances made to the mortgagor, the right of the bank
to enforce the mortgage was sustained upon the principles announced
in
National Bank v. Matthews. The Court said:
Page 132 U. S. 292
"Whatever objection there may be to it as security for such
advances from the prohibitory provisions of statute, the objection
can only be urged by the government."
To the same effect are
Swope v. Leffingwell,
105 U. S. 3, and
Reynolds v. Crawfordsville Bank, 112 U.
S. 405,
112 U. S.
412.
In
Smith v.
Sheeley, 12 Wall. 358,
79 U. S. 361,
which was an action of ejectment, the question was collaterally
raised as to the validity of the title acquired by a banking
institution, under a deed of the premises, in consideration of a
certain sum paid by it to the grantor. The bank was created by an
act of the Territorial Legislature of Nebraska, with power "to
issue bills, deal in exchange, and to buy and possess property of
every kind." But when that act passed, there was in force an act of
Congress, which provided 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, hereafter to be passed, shall have
any force or effect whatever until approved and confirmed by
Congress."
The act of the territorial legislature incorporating the bank,
above referred to, never was approved or confirmed by Congress. It
was urged, as an objection to the deed made to the bank -- upon
which deed one of the parties relied -- that it was not a competent
grantee to receive title. This Court said:
"It is not denied that the bank was duly organized in pursuance
of the provisions of an act of the Legislature of the Territory of
Nebraska; but it is said 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 the party who makes a sale of real estate to
it is not in a position to question its capacity to take the title
after it has paid the consideration for the purchase. If, prior to
the execution of
Page 132 U. S. 293
the deed, there had been a judgment of ouster against the
corporation at the instance of the government, the aspect of the
case would be different."
See also Myers v.
Croft, 13 Wall. 295;
Jones v. Guaranty &
Indemnity Co., 101 U. S. 622,
101 U. S. 628;
Fortier v. New Orleans Bank, 112 U.
S. 439,
112 U. S.
451.
To the above cases may be added those holding that an alien may
take by deed or devise and hold against anyone but the sovereign
until office found.
Cross v. De
Valle, 1 Wall. 5,
68 U. S. 13;
Governeur v.
Robertson, 11 Wheat. 332;
Bank v.
Matthews, 98 U. S. 621,
98 U. S. 628;
Phillips v. Moore, 100 U. S. 208.
Also those holding that the question whether a corporation, having
capacity to purchase and hold real estate for certain defined
purposes or in certain quantities, has taken title to real estate
for purposes not authorized by law or in excess of the quantity
permitted by its charter concerns only the state within whose
limits the property is situated. It cannot be raised collaterally
by private persons unless there be something in the statute
expressly or by necessary implication authorizing them to do so.
Cowell v. Springs Company, 100 U. S.
55,
100 U. S. 60;
Jones v. Habersham, 107 U. S. 174,
107 U. S.
188.
It results from what has been said that the court erred in
rendering judgment for the plaintiff for any part of the premises
described in the complaint.
The judgment is reversed with directions to enter judgment,
upon the agreed statement of facts, for the defendants.
MR. JUSTICE MILLER, dissenting.
I earnestly dissent from the opinion of the majority of the
court. I do not enter into the question of the circumstances under
which a foreign corporation can do business within the limits of
the State of Colorado under section 23 of the General Statutes of
1883 of that state, nor do I here consider or attach importance to
the question of how far a party dealing with a foreign corporation
which has not complied with the rules prescribed by the state to
enable it to do business in the state is estopped by the
presumption that, in making contracts with
Page 132 U. S. 294
it, it has recognized its official existence and its right to
contract. I base my dissent in the present case upon the following
emphatic language in the laws of that state:
"No foreign or domestic corporation established or maintained in
any way for pecuniary profit of its stockholders or members shall
purchase or hold real estate in this state except as provided for
in this act."
It is very clear that the words "as provided for in this act"
have relation to the acts, prescribed for all corporations, of
filing with the Secretary of State, and the recorder of deeds of
the county in which that business is carried on, the necessary
statement of their corporate existence, properly certified, and the
appointment of agents in the state residing in its principal place
of business. The language I have just cited from this statute is
unambiguous, and is not a declaration of powers and rights
conferred upon these corporations; but it is prohibitory, and
declares that no corporation shall purchase or hold real estate
that has not complied with this requirement. It has been a
recognized doctrine of this Court for a great many years, perhaps a
century, that the transfer of title to real estate, whether by
inheritance, by purchase and sale, or by any other mode by which
title to property is acquired, is rightfully governed by the laws
of the state in which the land is situated. The policy of
permitting corporations to hold real estate has always been a
restricted one. Corporate bodies, whether for public use or for
private purposes, have always been subjects of limitation on their
right to hold real estate. It may be prohibited altogether. It may
be allowed with distinct limitations as to amount either in
quantity or in value. In this respect, it is wholly within the
control of legislative action. I can conceive of cases where
corporations have been authorized to acquire a limited amount of
real estate such as the legislature may conceive to be useful and
necessary to the purpose for which they are organized, or to take
property for specific uses, in which the question as to whether
they have exceeded that amount or perverted the use may be one for
the state alone, and not of any private citizen. But the positive
declaration that a corporation shall not purchase or hold real
Page 132 U. S. 295
estate, which is not a grant of power, but an express denial of
its power to hold any real estate under the circumstances
mentioned, is in my opinion destructive of the right to hold any
real estate at all under those circumstances. Whenever it is shown
that any of these corporations have not complied with the
requirements of the statute, they are forbidden to purchase or hold
real estate. Any such purchase is therefore void. It is the
positive declaration of the law of the land. The title does not
pass, and it needs no inquest of the state to establish that fact.
The title which would have passed if the corporation had a right to
purchase does not pass. It remains in the party who attempted to
grant or convey it. The grantee can neither purchase nor hold real
estate. The assumption of the opinion of the court is that it may
purchase and it may hold real estate. I have not time to give the
authorities on this subject. They are numerous, but they are
generally applicable to cases in which the granting power of the
corporation is wanting in sufficient language to enable it to
purchase and hold, and not to statutes which are in their terms
prohibitory, forbidding, and peremptory.