DAVID LUPTON'S SONS CO. v. AUTOMOBILE CLUB OF AMERICA(1912)
[225 U.S. 489, 490] Messrs. William Ford Upson and William Forse Scott for plaintiff in error.
[225 U.S. 489, 491] Mr. William W. Niles for defendant in error.
Mr. Justice Hughes delivered the opinion of the court:
The plaintiff in error, David Lupton's Sons Company, a Pennsylvania corporation, was engaged in the business of manufacturing and installing metal window frames and sash. Its factory was in Pennsylvania. In 1905 it entered into a contract in New York with the defendant, the Automobile Club of America, by which it agreed to manufacture and to place in position frames and sash for the defendant's building, to be erected in the city of New York, for the sum of $10,344. While the Lupton Company was putting in the frames a strike occurred, and all the other persons employed by the defendant in the construction of the building stopped work on account, as it is found, 'of the character and condition of labor' employed by the Lupton Company, and the material it furnished, of which complaint had been made by a New York labor union. After various negotiations, the defendant-under an adjustment by the architect, and in order to get its building constructed-employed another [225 U.S. 489, 494] concern to complete the work embraced in the contract with the Lupton Company. The latter received, for what it did, $5,837.72; the defendant paid for the completion $3,796.76; and if this were credited against the contract price there would remain a balance of $709.52.
The Lupton Company, insisting that it was wrongfully prevented from performance, brought this suit in the circuit court of the United States to recover the sum of $5,000 as the damages sustained by the alleged breach. The defendant pleaded several defenses, as well as a counterclaim for damages for breach by the plaintiff. Among the defenses was one that the Lupton Company could not maintain this action because it was a foreign corporation doing business in the state of New York without a certificate of authority, in violation of 15 of the general corporation law of that state. Laws of 1890, chap. 563, 15; Laws of 1892, chap. 687, 15, as amended.
Upon written stipulation the action was referred to a referee to hear and determine the issues. The referee reported his findings of fact and conclusions of law, holding that the contract was void under the statute and that the complaint should be dismissed. Upon the plaintiff's application, the report was recommitted in order that further findings might be proposed. The referee then passed on numerous requests submitted by the plaintiff, and on the filing of his supplemental report, which left unchanged the original conclusions of law, judgment was entered for the defendant. The Lupton Company brings the case here on writ of error to the circuit court, upon the ground that the New York statute, as applied to the transaction in question, was in contravention of the Constitution of the United States, as an unwarrantable interference with interstate commerce.
As the trial was had before the referee, pursuant to the stipulation, the only question presented here is whether [225 U.S. 489, 495] there is any error of law in the judgment rendered by the court upon the facts found by the referee. The findings of fact are conclusive in this court. We cannot review any of the exceptions to these findings or to the refusal of the referee to find facts as requested. Roberts v. Benjamin, 124 U.S. 64, 71 , 74 S., 31 L. ed. 334, 336, 337, 8 Sup. Ct. Rep. 393; Shipman v. Straitsville Min. Co. 158 U.S. 356, 361 , 39 S. L. ed. 1015, 1016, 15 Sup. Ct. Rep. 886; Chicago, M. & St. P. R. Co. v. Clark, 178 U.S. 353, 364 , 44 S. L. ed. 1099, 1105, 20 Sup. Ct. Rep. 924; Hecker v. Fowler, 2 Wall. 123, 17 L. ed. 759; Bond v. Dustin, 112 U.S. 604 , 28 L. ed. 835, 5 Sup. Ct. Rep. 296; Paine v. Central Vermont R. Co. 118 U.S. 152, 158 , 30 S. L. ed. 193, 195, 6 Sup. Ct. Rep. 1019
Under 15 of the general corporation law of the state of New York a foreign stock corporation, other than a moneyed corporation, is prohibited from doing business in the state without having first procured from the secretary of state a certificate that it has complied with certain prescribed conditions. The corporation is required ( 16) to file with the secretary of state a sworn copy of its charter and a statement setting forth the business which it proposes to carry on in the state; to designate its principal place of business within the state, and to appoint a person upon whom legal process may be served. Wood & Selick v. Ball, 190 N. Y. 217, 224, 83 N. E. 21. Section 15 provides: 'No foreign stock corporation doing business in this state shall maintain any action in this state upon any contract made by it in this state unless, prior to the making of such contract, it shall have procured such certificate.' In his original report, the referee found that the Lupton Company was doing business in the state of New York, within the meaning of the statute, without a certificate of authority; and after the report was recommitted, he made additional findings with respect to the nature of its business, upon which the plaintiff in error bases it contention that the statute has been held to apply to transactions in interstate commerce which were not subject to the state's interdiction. It is not necessary, however, to review these findings, for the statute has received a construction by the [225 U.S. 489, 496] highest court of the state of New York which precludes it, in any aspect of the case, from being regarded as a bar to the maintenance of this action.
The referee's ruling that the contract was void was based upon the statement in the opinion in Wood & Selick v. Ball, supra, that 'the procuring of a license must precede the transaction of business, or the contracts of the corporation are not lawful.' But in Mahar v. Harrington Park Villa Sites, 204 N. Y. 231, --, L.R.A.(N.S.) --, 97 N. E. 587, the court of appeals of New York has declared that a contract made by a foreign corporation doing business within the state without certificate of authority is not absolutely void; that the only penalty prescribed by the general corporation law for a disregard of the provisions of 15 is a disability to sue upon such a contract in the courts of New York; and that the contract remains valid and effective in all other respects.
In the Mahar Case, the action was brought to recover a sum deposited under a contract made in New York with the defendant, a foreign corporation, which it was alleged was transacting business in the state without authority at the time the contract was made. It was asserted, in support of the action, that the contract was void, and hence that there was a failure of consideration. The court of appeals held that the complaint did not state a cause of action. In the opinion delivered by Willard Bartlett, J., in which the majority of the court concurred, it is said:
In this view, despite its transaction of business without authority, the foreign corporation could sue upon its contracts in any court of competent jurisdiction other than a court of the state of New York. Accordingly, it was held by the court of errors and appeals of New Jersey that a suit might be brought by the corporation in that state upon a contract made in New York, where it was doing business without the prescribed certificate. Alleghany Co. v. Allen, 69 N. J. L. 270, 55 Atl. 724. The court conceded the general rule both in New Jersey and New York to be that a contract void by the law of the state where made would not be enforced in the state of the forum. But it was held that the New York statute did not in terms declare the contract void; it provided that no such action should be maintained in that state.
In dismissing the writ of error to review that judgment (Allen v. Alleghany Co. 196 U.S. 458, 465 , 49 S. L. ed. 551, 556, 25 sup. Ct. Rep. 311, this court commented upon the decision of the New York court in the case of the neuchatel Asphalte Co. v. New York, 155 N. Y. 373, 49 N. E. 1043, which rose under the statute in an earlier form, the section (15) of the general corporation law then providing that the foreign corporation should not maintain 'any action in this state upon any contract made by it in this state until it shall have procured such certificate.' This court said: 'The court of appeals in that case held that the purpose of the act was not to avoid contracts, but to provide effective supervision and control of the business carried on by foreign corporations; that no penalty for noncompliance was provided, except the suspension of civil remedies in that state, and none others would be implied. This corresponds with our rulings upon similar questions. Fritts v. Palmer, 132 U.S. 282 , 33 L. ed. 317, 10 Sup. Ct. Rep. 93.'
It must follow, upon the similar construction of 15, as it read at the time of the transaction in question, that [225 U.S. 489, 500] the Lupton Company, whether or not it was doing a local business in New York, had the right to bring this suit in the Federal court. The state could not prescribe the qualifications of suitors in the courts of the United States, and could not deprive of their privileges those who were entitled under the Constitution and laws of the United States to resort to the Federal courts for the enforcement of a valid contract. Union Bank v. Vaiden, 18 How. 503, 507, 15 L. ed. 472, 474; Hyde v. Stone, 20 How. 170, 175, 15 L. ed. 874, 875; Cowles v. Mercer County, 7 Wall. 118, 122, 19 L. ed. 86, 87; Home Ins. Co. v. Morse, 20 Wall. 445, 22 L. ed. 365; Barron v. Burnside, 121 U.S. 186 , 30 L. ed. 915, 1 Inters. Com. Rep. 295, 7 Sup. Ct. Rep. 931; Lawrence v. Nelson, 143 U.S. 215 , 36 L. ed. 130, 12 Sup. Ct. Rep. 440; Re Tyler, 149 U.S. 164, 189 , 37 S. L. ed. 689, 697, 13 Sup. Ct. Rep. 785; Barrow S. S. Co. v. Kane, 170 U.S. 100, 111 , 42 S. L. ed. 964, 968, 18 Sup. Ct. Rep. 526. The state in the statute before us made no such attempt. The only penalty it imposed, to quote again from the Mahar Case, was a disability to sue 'in the courts of New York.' Before this decision of the state court, the circuit court of appeals for the second circuit reached the same conclusion as to the meaning of the statute, and upheld the right of the foreign corporation to sue in the Federal court. Johnson v. New York Breweries Co. 101 C. C. A. 639, 178 Fed. 513. The court below erred in dismissing the complaint.
With respect to the facts going to the merits of the claim of the Lupton Company, the referee made numerous findings which it is not necessary to set forth or to review at length. The contract provided that 'in the event of any strike or cessation of work, caused by character or condition of labor employed or material furnished,' the owner should have full authority 'to arbitrate or adjust the matter,' and the contractor should make good the loss, to be fixed by the architect or by arbitration. This clause was evidently inserted to meet the sort of difficulty which actually arose. The referee found, as has been stated, that it was 'on account of the character and condition of labor employed by the plaintiff and the material furnished [225 U.S. 489, 501] by it' that the strike took place and all the other persons employed on the building stopped work. It was also found that to complete the contract the defendant necessarily expended the sum of $3,796,76. This was done under an adjustment by the architect, and upon the findings the defendant was properly allowed a credit for the amount thus paid. There remained due to the plaintiff the sum of $709.52, for which it was entitled to judgment with interest.
Judgment reversed and the cause remanded to the District Court with instructions to enter judgment in favor of the plaintiff for $709.52, with interest from the date of the commencement of the action.
[ Footnote 1 ] As amended by Laws 1892, c. 687.