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Friedenwald Company vs. Peter R. Warren

Massachusetts Supreme Judicial Court1907-05-15
195 Mass. 432

Summary

Holding. The trial court properly excluded evidence regarding a foreign corporation's non-compliance with statutory registration requirements, as such matter must be raised by answer in abatement and cannot be introduced for the first time during trial after issue has been joined. The judgment for the plaintiff is affirmed.

Friedenwald Company, a foreign corporation, sued Peter Warren in Massachusetts courts. Warren attempted to introduce evidence that Friedenwald had not complied with state statutory requirements for foreign corporations doing business in the Commonwealth, including appointment of a registered agent, filing of organizational documents, and annual financial certifications. Warren argued this non-compliance should bar Friedenwald from maintaining the action. The trial court excluded this evidence and directed a verdict for Friedenwald.

The court held that Warren's defense was properly excluded because it constituted matter in abatement rather than a defense on the merits, and such matter must be raised in the answer, not during trial. The statute itself does not void contracts made by non-compliant foreign corporations; it merely creates a temporary disability preventing such corporations from pursuing judicial remedies until compliance is achieved. Since Warren had not raised this defense in his answer before trial commenced, he was barred from asserting it at trial.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

  • Whether a defendant may raise a foreign corporation's statutory non-compliance during trial or only through answer in abatement
  • Whether statutory requirements for foreign corporations create substantive bars to recovery or temporary procedural disabilities
  • The proper pleading procedure for affirmative defenses based on regulatory non-compliance

Procedural posture

The defendant appealed from a directed verdict for the plaintiff-foreign corporation at trial, contesting the trial court's exclusion of evidence regarding the plaintiff's failure to comply with statutory registration requirements.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion

majority opinion

Sheldon, J.

1. The court had a right in the exercise of its discretion to refuse to allow the defendant to file his proposed amendment, and no exception lies to the exercise of that discretion. Hurley v. Donovan, 182 Mass. 64, 71. Graef v. Bernard, 162 Mass. 300. Smith v. Whiting, 100 Mass. 122.

2. The plaintiff is a foreign corporation. It is provided in substance by our statutes that foreign corporations before doing business in this Commonwealth shall appoint the commissioner of corporations to be their attorney for the service of process, shall file with him copies of their charters and by-laws and certain certificates, and shall annually, within a certain fixed period, file with the secretary of the Commonwealth a certificate as to their financial condition ; and that a failure to comply with these requirements “ shall not affect the validity of any contract with such corporation ; but no action shall be maintained or recovery had in any of the courts of this Commonwealth by any such foreign corporation so long as it fails to comply with ” these requirements. St. 1903, c. 437, §§ 58, 60, 66. The defendant offered to show that this corporation had a usual place of business and was doing business in this Commonwealth, but had not complied with these requirements; and asked the court to rule that in that event the plaintiff could not recover, and that the burden was on the plaintiff to prove either that at the commencement of the action it was not transacting business in this Commonwealth, or that it had complied with the requirements of the statute. The court excluded the evidence as incompetent under the pleadings, refused to make the rulings requested, and, the other facts not being in dispute, ordered a verdict for the plaintiff.

The defendant contends that the burden was upon the plaintiff to show its right to maintain the action, and that ¿11 the facts necessary to be proved for this purpose were put in issue by his general denial; and that may be granted. Hill v. Crompton, 119 Mass. 376. Cape Ann National Bank v. Burns, 129 Mass. 596. But this means only that a general denial puts in issue those facts which the plaintiff must aver and prove to establish & prima facie case. Amsinck v. American Ins. Co. 129 Mass. 185, 188, and cases cited. It never has been held that a plaintiff must deny or disprove matter merely in abatement, not going to the jurisdiction of the court; whether this would call for a positive or a negative averment. See Lincoln v. Taunton Copper Co. 11 Cush. 440, 441; Bewail v. Lee, 9 Mass. 363; Ainslie v. Martin, 9 Mass. 454.

The statute does not forbid foreign corporations which have not complied with its requirements from making contracts in this State, or declare such contracts invalid; on the contrary it expressly recognizes their validity, but provides that “no action shall be maintained or recovery had in any of the courts of the Commonwealth by any such foreign corporation,” so long as it fails of such compliance. St. 1903, c. 437, § 58. This implies a temporary disability merely, like that of alien enemy at common law or any other personal disability. Hutchinson v. Brock, 11 Mass. 118. Jaha v. Belleg, 105 Mass. 208. This is different from the statutes which were considered in Jones v. Smith, 3 Gray, 500, Washington County Ins. Co. v. Dawes, 6 Gray, 376, 379, and Reliance Ins. Co. v. Sawyer, 160 Mass. 413; and the decisions in those cases have no bearing here. Accordingly it has been held in Indiana and West Virginia that somewhat similar statutory provisions can be taken advantage of only by answer in abatement as distinguished from an answer in bar. Singer Manuf. Co. v. Effinger, 79 Ind. 264. Daly v. National Ins. Co. 64 Ind. 1. Singer Manuf. Co. v. Brown, 64 Ind. 548. Walter A. Wood Co. v. Caldwell, 54 Ind. 270. Tennis Brothers Co. v. Wetzel & Tyler Railway, 140 Fed. Rep. 193; S. C. (on appeal) 145 Fed. Rep. 458. It was of course too late in this case to file an answer or to set up matter in abatement after issue had been joined and a trial begun on the merits. Craig Silver Co. v. Smith, 163 Mass. 262, 268.

Apart however from any question of pleading, all the decisions in other States, so far as they have been, brought to our attention, agree that compliance with the terms of such statutes as are here in question need neither be averred nor in the first instance proved by a foreign corporation. Nickels v. People’s Building Association, 93 Va. 380. Sprague v. Cutter & Savidge Lumber Co. 106 Ind. 242. Langworthy v. Carding, 74 Minn. 325. Hanson v. Lindstrom, 15 N. D. 584. Parlin Orendorf Co. v. Hord, 78 Mo. App. 279. But if this be so it necessarily follows that under our practice act a defendant who wishes to reply upon the fact that a foreign corporation which has sued him has not complied with the provisions of our statute must set up that fact in his answer. “ Whenever a defendant intends to rest his defence upon any fact which is not included in the allegations necessary to the support of the plaintiff’s case, he must set it out in clear and precise terms in his answer; and as the plaintiff is not bound to aver anything which tends to defeat his action, or which shows that his claim is illegal or void in its inception or otherwise, all such matters must be set out and averred in the answer.” Mulry v. Mohawk Valley Ins. Co. 5 Gray, 541, 543. There is no occasion to refer to the many subsequent decisions which have maintained this doctrine.

It follows that the rulings at the trial were correct; and we need not consider the sufficiency of the offer of proof. Nor need we consider whether if the facts claimed by the defendant were proved they could have any further effect than to prevent the plaintiff from taking judgment until it should have complied with the terms of the statute. See Carson-Rand Co. v. Stern, 129 Mo. 381; Creelman Lumber Co. v. I)e Lisle, 107 Mo. App. 615; Buffalo Zinc § Copper Co. v. Crump, 70 Ark. 525; Hamilton v. Reeves Co. 69 Kans. 844; Ward Land Co. v. Mapes, 147 Cal. 747.

It has not been argued that the decision of this case could be affected by the provisions of St. 1906, c. 372, passed since the action was brought.

Exceptions overruled.