Bankers' Life Company v. Horsfall

Prior to December 20, 1916, Maude M. Horsfall and her husband, Allen L., negotiated a real estate loan through the Security Bank of Pipestone, Minn. This bank was incorporated under the laws of Minnesota in 1909. A promissory note in the amount of $10,000, and a real estate mortgage to secure that note were made out at the Security Bank of Pipestone, by its officers, which note and mortgage were executed and delivered by the Horsfalls to the Pipestone bank. The mortgage was acknowledged before a notary public at Flandreau, this state. The note and mortgage were then delivered by the Horsfalls to the said Pipestone bank, and the $10,000 in money was paid by that bank to the Horsfalls. The mortgage was recorded on December 23, 1916. This note was later sold and indorsed to the plaintiff by the Security Bank of Pipestone, Minn., and the mortgage securing said note was assigned to plaintiff on February 7, 1917. Before the commencement of this action. Allen L. Horsfall died. No part of the $10,000 received by the Horsfalls as the proceeds of this loan was ever paid back, and this action is to foreclose the mortgage. The record shows that on March 8, 1917, Maude M. Horsfall and husband, Allen L., conveyed all of the mortgaged premises by warranty deed to Fred Walton, Ernest Walton, and Luta Walton; that on February 25, 1919, the Waltons conveyed all of the mortgaged premises to Tom Campbell; that on March 2, 1920. Campbell and wife conveyed said premises to J.E. Johnson; that on the same date J.E. Johnson and wife conveyed said premises to Ole B. Simons and Walter E. Simons. All of these conveyances were subject to the mortgage in question, and were recorded in the office of the register of deeds of Moody county, this state. The record shows that on December 14, 1923, Ole B. Simons and Walter E. Simons, both unmarried, conveyed said mortgaged premises to C.E. Duffus, by quitclaim deed, and that Duffus does not claim adversely to plaintiff's mortgage; that the defendants Simons were adjudicated bankrupts after the commencement of this suit and before the trial hereof, and are not now in any manner interested in this suit. The respondent in open court waived all claims to a personal judgment against all of the defendants, and on the trial had judgment and findings in its favor and a decree and order of sale of the premises. It is from such findings and judgment appellants now appeal.

The appellants contend that there is a want of legislative power authorizing foreign corporations to loan money on real estate in this state, without first having complied with the statute requiring foreign corporations to file a statement in writing, constituting the secretary of state its agent for the service of process.

Respondent claims that the statutes pertaining to foreign corporations, in force at the time this mortgage was given, give complete and ample power, both expressed and implied, to foreign corporations to advance and loan money and to take mortgages and trust deeds thereon.

Appellant has assigned some thirteen assignments of error, and we will endeavor to take them up in the order given.

Assignment No. 1 — appellants claim that the court erred in making its finding of fact No. 1. We think this assignment should be overruled and the finding of fact No. 1 sustained, for the reason that there is ample evidence to prove the incorporation of the Security Bank of Pipestone, Minn. Miller v. N.P. Ry. Co.,18 N.D. 19, 118 N.W. 344, 19 Ann. Cas. 1215.

Assignment No. 2 should be overruled, and finding of fact No. 2 sustained, for the reason that there is sufficient evidence to prove that the defendant was a holder in due coarse of the note. notwithstanding the quite evident clerical error, which shows that the note was not assigned until March 7, 1923.

Assignments Nos. 3, 4, 7 should all be overruled, since they all pertain to the same argument as the assignments Nos. 1 and 2.

Assignment No. 5 should be overruled, for the reason that no evidence relating to the bankruptcy proceedings of defendants Simons was submitted upon the trial. Eyster v. Gaff, 91 U.S. 521,23 L. ed. 403; Thatcher v. Rockwell, 105 U.S. 467. 26 L. ed. 949.

Assignments Nos. 6 and 8 should be overruled, for, where an issue is joined in a trial, the assessment of attorney fees is within the discretion of the court. Section 2605, R.C. 1919: Fruth v. Bolt, 39 S.D. 371, 164 N.W. 270. There was an issue joined in this case, and we think the allowance of $250 attorney fees must be held to be a reasonable and valid allowance.

Assignment No. 9 should be overruled. It is covered by the same argument as assignments Nos. 1, 6, 8.

Assignments Nos. 10, 11, 12, 13 have been examined separately, and have been found to be without merit.

Chapter 210, Laws of 1909 § 16, provides that all foreign insurance companies shall file their articles of incorporation in the office of the insurance commissioner. Section 691, C. C. 1903, provides that such insurance companies shall appoint an attorney in this state upon whom legal process may be served, and, if they fail to appoint such attorney, process may be served on the insurance commissioner. Section 8902, R.C. 1919, as amended by chapter 157, Laws of 1921, contains the present law as to foreign corporations, other than those exempt, filing copy of their articles of incorporation in the office of the secretary of state, thus establishing such officer its agent for the service of process. Section 9182, R.C. 1919, provides for the appointment of the insurance commissioner as the resident agent for all insurance companies doing business in the state. If any of the provisions in sections 883, 884, 885, C.C. 1903, were contradictory to the 1909 enactment, such provisions were repealed by that act. Wright v. Lee, 2 S.D. 596, 51 N.W. 706; Root et al v. Sweeney, 12 S.D. 43, 80 N.W. 149. Sections 883, 884, 885, R.C. 1903, must be held to be mere police regulations and were not intended to supersede the amended statute relating to banking and insurance. A mortgage cannot be declared void under these police statutes.

In their argument, appellants claim that respondent was not authorized to invest its funds in the note and mortgage in this suit, that it was only authorized to do an insurance business in this state, and so could only write and issue insurance policies and collect premiums. The investment of the funds of an insurance company is as much its business as the writing of insurance, and that is one of the necessary incidental powers of such companies, even in the absence of express statutory authority. It is evident that the Legislature never intended that any attempt of an insurance company to loan money on real estate in this state, without first having filed articles of incorporation with the secretary of state, "must be held void." 14A C.J. 1323:

"And where one borrows money from a foreign corporation, or otherwise incurs a debt to it, and gives a mortgage as security, he cannot defend a suit to foreclose on the ground that the transaction was ultra vires.'"

It was to the advantage of the defendants herein to make such loan, and they are —

"estopped from their own contract or conduct from setting up, as a defense to an action to enforce the contract, that it was beyond the power of the corporation to make it, particularly while retaining the fruits or the benefits of the contract." 14A C.J. 1420.

"The right of a corporation to take, hold, and enforce mortgages on land situated in a foreign state, may, of course, be prohibited or limited by express statutory enactments or by the settled public policy of the domestic state otherwise manifested. But a general prohibition or limitation of the right to exercise the power to acquire and hold land does not prohibit or limit the right of a foreign corporation to take hold, and enforce a mortgage given to secure a debt valid and enforceable within the state in which the land is situated. * * * In any event, a statute which prohibits or limits the right of foreign corporations to take, hold, and enforce mortgages on land situated within the domestic state will not act retrospectively, and the fact that a foreign corporation has not complied with the requirements of such a statute will not prevent it from foreclosing a mortgage executed and taken prior to its enactment." 14A C.J. 1322.

19 Cyc. 1289:

"Upon the question of whether the failure of a foreign corporation to comply with the restrictive statutes, such as those under consideration, before undertaking to do business in the domestic state, will render its contracts, made with the citizens of that state, void and voidable, the decisions are in a state of irreconcilable contradiction."

In view of this conflict, we think the better rule to follow would be to declare the plaintiffs estopped from asserting the invalidity of the contract. This would be more consistent with fair and honorable dealings. To permit the confiscation of the moneys involved in this loan would constitute an immoral act, and ought not to be permitted by the court.

The order of the lower court denying and overruling a motion for a new trial is affirmed.

POLLEY, P.J., and SHERWOOD, GATES; and CAMPBELL, JJ., concur in result.

Note. — Reported in 205 N.W. 714. See, Headnote (1), American Key-Numbered Digest, Costs, Key-No. 172, 15 C.J. Sec. 249; (2) Mortgages, Key-No. 581(5), 27 Cyc. 1785: (3) Insurance, Key-No. 4, 32 C.J. Sec. 24; (4) and (5) Insurance, Key-No. 24, 32 C.J. Sec. 21; (6) Corporations, Key-No. 388(5), 14a C.J. Sec. 2172; (7) Corporations, Key-No. 656, 14a C.J. Sec. 4028; (8) Corporations, Key-No. 641, 14a C.J. Sec. 4028.