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But the rule is not universal, either in respect of actions ex contractu or ex delicto. Properly restrained, the rule is that a plaintiff cannot recover where he derives his title to maintain his action from his own breach of the law. But the mere fact that, at the time when the cause of action arose, whether it be a cause of action ex contractu or ex delicto, the plaintiff was engaged in a collateral violation of law, will not, under the rule, disable him from maintaining his action. For illustration, coming into the domain of the law of torts, if a man is driv ing with his team on the wrong side of the road, or is allowing his wagon to stand transversely across the street, instead of lengthwise upon it as required by a city ordinance,3-and in that condition another traveler negligently drives upon his team and vehicle, he may have an action for the resulting damages. On this principle, although the corporation cannot make its own violation of the law the ground of an action, yet the other contracting party is not precluded thereby from maintaining his action to enforce the contract; for the prohibition of the statute is not against him, but in so far as he participates in its violation, his act is not of such a character that his right of action arises proximately out of his own wrongful act, but if his act is wrongful at all, its wrongfulness is collateral to his right of action. He may, indeed, know that the corporation has no right to do business in the State without complying with certain statutory conditions; indeed he is bound to know this if he is bound to know the law; but he may not know whether or not, in the particular case, the corporation has complied with those conditions; and where
Thomas v. Brady, 10 Pa. St. 164; Scott v. Duffy, 14 Pa. St. 18, 20; Holt v. Green, 73 Pa. St. 198; s. c. 13 Am. Rep. 737; Law v. Hodgson, 2 Camp. 147; 8. c. 11 East, 300; Langton v. Hughes, 1 Maule & S. 593.
1 Gregg v. Wyman, 4 Cush. (Mass.) 322; Way v. Foster, 1 Allen (Mass.), 408; Woodman v. Hubbard, 25 N. H. 67; s. c. 57 Am. Dec. 310; Phalen v. Clark, 19 Conn. 421; s. c. 50 Am. Dec.
253; Simpson v. Bloss, 7 Taunt. 246; Bosworth บ. Swansey, 10 Met. (Mass.) 363; s. c. 43 Am. Dec. 441.
2 Spofford v. Harlow, 3 Allen (Mass.), 176.
Steele v. Burkhardt, 104 Mass. 59; s. c. 6 Am. Rep. 191.
See, for further illustrations of this principle, 2 Thomp. Neg. (1st ed.), p. 1161, § 11, and p. 1201, § 49.
the State neglects to proceed against it to oust it from so violating its sovereignty, he may innocently and rightfully conclude that it has complied with the law. In such a case it would be a perversion of the statute if the courts of the State were to use it to strike down the rights of their own citizens, they being guilty of no wrong; and it would be a violation of a well understood principle,' to allow the foreign corporation, by way of defense to a meritorious action brought by a domestic citizen, to set up its own turpitude and violation of the domestic law. Such, it is confidently believed, is not the law."
§ 7960. Corporation Estopped to Set up its Want of Compliance with Such Statutes in Avoidance of its Own Contracts. If the State does intervene, and if the domestic citizen, for whose protection the statute was framed, does not elect to rescind it, then, upon every sound principle, the foreign corporation will not be heard to set up its own violation of the domestic law in avoidance of its contract made with a citizen of the domestic State. It will not be allowed, when sued by such citizen to enforce such a contract, to defend on the ground that it has failed to comply with the statutes of the State requiring certain things to be done as a condition precedent to its right to do business within the State. It will not be suffered thus to set up its own turpitude
1 Ante, § 6015.
When, therefore, there was a constitutional provision prohibiting foreign corporations from doing business within the State without having at least one known place of business, and an authorized agent, or agents, therein, the New England Mortgage Security Company, a corporation organized under the laws of Connecticut, made a loan of money and received from the borrower a mortgage on certain real estate situated in Alabama, to secure the repayment of the loan.-In an action to recover possession of the land by one who
had purchased it at a trustee's sale under the mortgage, the mortgagor set up the defense that the mortgagee was a foreign corporation, that the loan was made and the mortgage executed in Alabama, and that, at the time when the contract was made, the corporation had no place of business in Alabama and no agent or agents therein. It was held that this was not a good defense to the action: the mortgagor was estopped from setting up these facts to defeat the mortgagee after having received the benefits of the contract. Sherwood v. Alvis, 83 Ala. 115; s. c. 3 Am. St. Rep. 695.
in avoidance of its contracts otherwise fairly made.' instance, although a foreign insurance company enters the domestic jurisdiction, and there does business by writing policies upon the property or lives of domestic citizens in violation of such a restrictive statute, it will not be able to defend on this ground, when an action is brought against it to recover the amount assured in the policy. The reason is that the plaintiff and the defendant are not in pari delicto. The plaintiff may rightfully presume that the defendant has complied with the statutes entitling it to do business within the State. It has been observed that one of the objects of such statutes is the protection of the people against worthless foreign companies; and that, as the domestic citizen is not required to see that the foreign corporation has observed the laws before he enters into a contract with it, there is no reason, founded in public policy, which will enable a solvent foreign corporation which has violated the domestic law in making contracts and receiving the consideration therefor from an innocent citizen, to escape liability for its performance by setting up its own turpitude. "Such defense will not avail for merit of him who pleads it. Against an innocent party no man shall set up his own iniquity as a defense any more than as a cause of action.'"'
§ 7961. Whether Agent of Foreign Corporation can Defend on This Ground against an Action by the Corporation on his Bond. Some of the cases hold that where a foreign corporation enters a State by means of its agent, and does
1 Lasher v. Stimson, 145 Pa. St. 30; s. c. 23 Atl. Rep. 522.
'Pennypacker v. Capital Ins. Co., 80 Iowa, 56; s. c. 20 Am. St. Rep. 395; 45 N. W. Rep. 408; 8 L. R. A. 230; Union Mutual Life Ins. Co. v. McMillen, 24 Ohio St. 67; Behler v. German Mut. Fire Ins. Co., 68 Ind. 347; Swan v. Watertown Fire Ins. Co., 96 Pa. St. 37; Watertown Fire Ins. Co. v. Simons, 96 Pa. St. 520;
Hartford Live Stock Ins. Co. v. Mat-
Watertown Fire Ins. Co. v. Simons, 96 Pa. St. 520, 526.
business there, in violation of restrictive statutes such as those under consideration, it cannot maintain an action against its agent upon the bond given by him to the corporation to secure, the faithful fulfillment of his duties, for the reason that, the doing of the business by the agent being expressly prohibited by the local statute, no recovery can be had without proving that both the plaintiff and the defendant have violated the law.1
§ 7962. Non-compliance with Such Statutes Prevents Agent from Recovering Commissions. On the same ground, it has been held that an agent who does business within a State for a foreign corporation, which is there in violation of the laws of the State, cannot maintain an action against a citizen of the State to recover his commission for a loan of money procured for such citizen from the foreign corporation.2
§ 7963. Legislature may Validate Such Contracts. Moreover, it has been held competent for the legislature by a retrospective statute to validate contracts made between domestic
1 Thorne v. Travelers' Ins. Co., 80 Pa. St. 15; s. c. 21 Am. Rep. 89; Mutual Benefit Life Ins. Co. v. Bates, 92 Pa. St. 352; Dudley v. Collier, 87 Ala. 431; s. c. 13 Am. St. Rep. 55; United States Life Ins. Co. v. Adams, 7 Biss. (U. S.) 30. Concurring with these decisions see Lemon v. Grosskopf, 22 Wis. 447; s. c. 99 Am. Dec. 58,where the plaintiff was not allowed to recover of his agent money collected by the latter in running a lottery scheme. Similarly, see Hunt v. Knickerbocker, 5 Johns. (N. Y.) 326. Some of the cases suggest a distinction between the right to recover money collected by the agent, and the right to recover back money paid into his hands by the principal, allowing a recovery in the latter case. See Lemon v. Grosskopf, 22 Wis. 447, 453; s. c. 99 Am. Dec. 58. For an action on the bond of an agent
of a foreign insurance company, where the question was whether the agent acted without a license, and the case was determined on the theory that his license was not shown to have expired, see Scottish Commercial Ins. Co. v. Plummer, 70 Me. 540. Other courts hold that in such a case the agent will not be allowed to set up his own violation of the law as a reason why he should not keep the contract which he has made with his principal (Penn Mut. Life Ins. Co. v. Bradley, 21 N. Y. Supp. 876); and that, as his sureties have no better rights in this respect than himself, they cannot set up such a defense. Manhattan Ins. Co. v. Ellis, 32 Ohio St. 388.
Dudley v. Collier, 87 Ala. 431; 8. c. 13 Am. St. Rep. 55; 27 Am. & Eng. Corp. Cas. 440; 6 South. Rep. 304.
citizens and foreign corporations in violation of a previous prohibitory statute; since such curative legislation does not have the effect of divesting vested rights, or of impairing the obligation of contracts, but merely of preventing men, upon reasons which concern the State alone, from repudiating the honest engagements into which they have entered.1
8 7964. Foreign Corporation can Acquire and Transmit Valid Titles without Complying with Local Law. - We have already had occasion to note the principle that, although a corporation has no power, except upon a principle of comity, to acquire and hold lands within the limits of another sovereignty, yet if it does acquire such lands, it may hold them until the State intervenes and escheats them, and consequently that, prior to such intervention by the State, it may transmit a good title to such lands to a third person. This principle operates in respect to the question we are considering; so that, although the constitution of Colorado provided that no foreign corporation should do business in that State without having a known place of business and an agent upon whom process might be served; and although a statute of that State provided for the filing by such corporation with the Secretary of State, of a certificate showing their place of business, and designating such agent, or agents, and also a copy of their charter or certificate of incorporation, and providing that, in case of their failure to do so, their officers and stockholders should be jointly and severally liable on their contracts made while in default; and although another statute provided that "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," - yet, where a resident of Colorado conveyed real estate to a corporation organized under the law of Missouri, which had not taken the steps above prescribed to entitle it to do business in Colorado, and such corporation afterwards conveyed the land to another, its
1 United States Mortgage Co. v. Gross, 93 Ill. 483, 494.
⚫ Ante, § 7918.