Elwell v. Adder Machine Co.

Foreign corporations: Licensing: Interstate commerce: Contract of agency for intrastate business: Fraud: Nonperformance: Remedies. 1. See. 17705, Stats. (1898), requiring foreign corporations to obtain a license before transacting business -or acquiring, holding, or disposing of property in this state, does not apply to such business as constitutes interstate commerce or to such property as is acquired, held, or disposed of in this state in carrying on interstate commerce; and from the provision declaring that contracts by an unlicensed foreign corporation shall be void on its behalf but enforceable against it there must be excepted such contracts as relate to interstate commerce. 2. A complaint alleges that defendant, an unlicensed foreign corporation engaged in the business of selling adding machines, fraudulently induced plaintiff to enter into a contract to act as its selling agent for such machines in this state; that the fraud consisted in representing, by its conduct in making such contract, that it was a licensed corporation, and in concealing the fact that it was not licensed to do business in this state; that in execution of the contract, before discovering the facts, plaintiff had incurred certain expenses; and that upon such discovery he ceased to transact the business of the agency. Held, that if the contract set forth he construed to relate to' interstate commerce and to .he capable of being carried out by acts constituting such commerce, plaintiff shows himself in default and has no cause of action; while if the contract relates to intrastate commerce defendant would be unable to perform on its part until it should obtain a license to do business in this state, and for failure of performance by defendant the plaintiff has a right of action on the contract, the existence of which right excludes any right of action for deceit or upon any quasi-contract liability.

Appeal from an order of tbe circuit court for Milwaukee ■ county: J. C. Ludwio, Circuit Judge. Tbe appeal is from an order overruling a demurrer to tbe complaint. Tbe complaint averred tbat tbe respondent was at all times therein mentioned a citizen and resident of Wisconsin and tbat tbe appellant was a foreign corporation organized and existing under the laws of tbe state of Pennsylvania and engaged in tbe business of selling and repairing a machine called tbe Wales adding machine. January 22, 190Y, in tbe state of Wisconsin, tbe parties entered into a contract in writing which is set forth in full in the complaint. This contract recites that tbe appellant is a corporation of Pennsylvania, and tbe appellant therein expressly appoints tbe respondent its selling agent for tbe sale of said machine for three years, with tbe privilege on tbe part of tbe respondent of a renewal for two years if bis handling of tbe business is satisfactory to the appellant. Tbe respondent is designated in every paragraph of tbe contract as selling agent. Respondent takes over and assumes a lease of certain premises in Milwaukee and also indebtedness for office furniture and equipment, has tbe.exclusive right to sell in tbe state of Wisconsin and northern Michigan, and agrees to devote bis time and best endeavors to sell the said Wales adding machine throughout said territory. All machines received by the selling agent or sold are to remain tbe property of the appellant until fully paid for. The machines axe to be billed by the appellant to its customers in the name of the appellant, and payments therefor to be made by check or draft direct to the order of the appellant. Respondent should adopt such forms and terms in connection with the sales as might be required by the appellant, no machine to be sold except in the described territory without written permission from the home office of the appellant or from that agent of the appellant in whose territory the machine is to be placed. In that case the respondent should receive only part commission. The respondent was not allowed to sell the machines for less than the full list or invoice price, except by written permission of the appellant, and the respondent was to furnish a bond to the appellant in the sum of $5,000 if required. The respondent was required to bear all expenses in connection with the sale of said machines, except those provided by appellant in its general rules or policy governing its agency contracts. The compensation of the respondent was a commission of thirty-five per cent, of the selling price of the machine, which was to be in full and become due only after the appellant had received full payment for the machine. No machines could be left by the respondent on trial with any one person for a period exceeding sixty days without written permission from the appellant. No second-hand machine or other property could be accepted in exchange or as part payment without written authority from the appellant. Supplies used in the operation of the adding machine, including paper and ribbons, were required to be paid for by the respondent in cash, but at the close of the term of the selling agency or upon cancellation of the contract the appellant agreed to accept all supplies of the respondent which were then on hand and in good condition and repay the respondent the amount paid to the appellant therefor. It was averred that the appellant at a lime prior to the execution. of said contract was, ever since bas been, and now is subject to tbe conditions and provisions of sec. 1770b., Stats. (1898), and acts amendatory thereof, and sec. 1770(L State. (Supp. 1906; Laws of 1901, ch. 399, sec. 3), and at the time of the execution of said contract and for a long time prior thereto the appellant was, ever since has been, and now is doing business in the state of Wisconsin without in any way complying with the requirements of sec. 1770 b and acts amendatory thereof, and was, is, and has been engaged unlawfully in carrying on business in the state of Wisconsin, in violation of said sec. 1770b and acts amendatory thereof, and without the license mentioned in said statutes; that the appellant was and is engaged in displaying, demonstrating, repairing, and selling said machines in said state of Wisconsin contrary to said statutes; that at the time said contract was entered into, by the terms thereof and by the construction thereafter placed on said contract by the parties thereto, it was contemplated and intended by the appellant that the respondent should assume the lease of the premises formerly occupied by appellant and should maintain an office at such premises within the state of Wisconsin for the transaction of said company’s business, and should display, advertise, and demonstrate said machines by leaving them on trial with persons, firms, and corporations within the state of Wisconsin, and should sell said machine by contracts of sale entered into and fully consummated within said state; and that it was further intended by said appellant that this should be done in violation of said statutes. After other averments it was pleaded ^that by the making of said contract and by the manner in which said defendant had theretofore conducted its business within said state of Wisconsin, and by the course it pursued in conducting its business in said state thereafter, said defendant fraudulently, falsely, and deceitfully represented to this plaintiff that it had complied with the foreign corporation laws of the said state of Wisconsin hereinbefore mentioned and tbat it was authorized to transact business within said state; and said defendant also falsely, fraudulently, and deceitfully concealed from said plaintiff the fact that it had not complied with said foreign corporation laws and was not authorized to transact business within said state of Wisconsin; that said representations were false and were made by said defendant with knowledge of their falsity and with intent on the part of said defendant, by means thereof and by means of the fraudulent concealment of facts hereinbefore mentioned, to deceive said plaintiff and cause him to act thereon and to execute the contract hereinbefore mentioned; that at the time of the execution of said contract as aforesaid plaintiff had no knowledge of the fact that said defendant was not authorized to do business within said state of Wisconsin, but said plaintiff, in good faith, relied on the representations of said defendant above mentioned and acted thereon and was deceived thereby, and on the faith of said representations and by reason of the fraudulent concealment above mentioned executed said contract and entered upon the performance of the conditions of said contract on his part to be performed.” It was then averred that the respondent, pursuant to said contract and in good faith, incurred expenses to the amount of $1,412.10 in renting an office, advertising and displaying appellant’s machines and placing them on trial, and in traveling expenses, etc., all in the hope and expectation of being reimbursed therefor by commissions on sales; that the respondent was unable to make sales under said contract, for the reason that he would thereby be aiding the appellant to evade and violate the foreign corporation laws of the state of Wisconsin; that this expenditure was made before the respondent discovered that the appellant had not complied with said foreign corporation laws; and that as soon as the respondent acquired that knowledge he ceased to transact the business of the agency, to his damage in the sum aforesaid. Among other refexences' upon the part of the appellant were the following: See. 1770b, Stats. (1898); Qreele-Am. 8. Co. v. Richardson T). Co. 124 Wis. 469, 102 N. W. 888; Holder v. AuUman, 169 U. S. 81, 18 Sup. Ct. 269; LcCim v. Pac. Mid. L. Ins. Co. 131 Wis. 555, 111 N. W. 660. Among other references upon the part of the respondent were the following: U. 8. v. Robbins, 157 Fed. 999; Corbett v. Physicians’ Cas. Asso. 135 Wis. 505, 115 N. W. 365; Kie-wert v. Rindslcopf, 46 Wis. 481, 1 N. W. 163; Melchoir v. McCarty, 31 Wis. 252; Wells v. McGeoch, 71 Wis. 196, 35 N. W. 769; Miller v. C. ‘£ N. W. R. Co. 133 Wis. 183, 113 N. W. 384; Celia C. Co. v. Bohlinger, 147 Fed. 419; U. 8. v. Reese, 92 U. S. 214; Trade-Marie Cases, 100 U. S. 82.