Slanderous statements made to one arrested and brought to the office of a justice of the peace upon a warrant ALICE M. UTTERBACK, Exrx., etc., et al. eharging a crime, outside such office and before he had been before the justice to answer such charge, by the attorney for the prosecuting witness, are privileged, where the facts negative express malice. Craig v. Burris (1912) 4 Penn. (Del.) 156, 55 Atl. 353.

any defenses available to prior parties | unaltered." First State Bank v. Williams, among themselves.

For other cases, see Bills and Notes, V. a, 2,
in Dig. 1-52 N. S.
Pleading -answer - failure to allege

facts.

2. An answer attempting to raise the question whether an indorsee of a corporation not entitled to do business in the state could enforce the note is demurrable if it does not show that the corporation was in fact not so entitled.

For other cases, see Pleading, VII. c, in Dig. 1-52 N. S.

The only question raised on this appeal is whether or not the failure of a payee in a negotiable promissory note to comply with $ 1996 and 571, Kentucky Statutes, without which it could not do business in the state, before the execution of the note, renders it uncollectable in the hands of an

164 Ky. 143, 175 S. W. 10. "The act, however, covers the entire subject of negotiable instruments, and must be treated as a complete body of law upon that subject, and controlling in all cases to which it is applicable." Elsey v. People's Bank, 168 Ky. 701, 182 S. W. 873.

Subsection 60 of the act provides: "The maker of a negotiable instrument, by making it, engages that he will pay it according to its tenor, and admits the existence of the payee, and his then capacity to indorse."

And in subsection 57 we find: "A holder in due course holds the instrument free from any defect of title of prior parties, and free from defenses available to private parties among themselves, and may enforce payment

of the instrument for the full amount there

of against all parties liable thereon."

Clearly, under these provisions the defendant could not deny either the existence of the original payee or its capacity to indorse, as against a holder in due course, and the trial court erred in overruling the demurrer to the amended answer and in dis

missing the petition. To permit the maker

of such an instrument to assert that the

note is void and unenforceable because the original payee had not complied with a statute, without which it could not legally do business in this state, would be to authorize him to deny the legal capacity of the payee to negotiate the instrument, whereas the act says in plain language that the maker of the instrument, by making it, admits the capacity of the payee to indorse it. The act does not say, however, that the maker admits the payee's capacity to make the contract for which the note was executed, and hence he may have the right to urge such defense against the original payee, with which question we are not now concerned; but it does, in plain language, take from him the right to deny the capacity of the payee to indorse and negotiate the note free from defense available against the payee, even though, as between the original parties, the note was void and unenforce

owner in due course. Granting, for the
purposes of this opinion only, but express-
ing no opinion upon the question because
it is not here, that such failure would have
been a complete defense against an original
payee, who is amenable to either § 571 or
199b, which is the most that could be in-
ferred from the case of Oliver Co. v. Louis-
ville Realty Co. 156 Ky. 637, 51 L.R.A.
(N.S.) 293, 161 S. W. 570, Ann. Cas. 1915C,
565, relied upon by appellees, the question
remains, which is not involved in the Oliver
Co. Case, whether or not it is a defense
against an owner in due course; and that
question is clearly controlled by the Nego-able for any reason.
tiable Instruments Act (Ky. Stat. § 3720b)
which became a law in this state July 13,
1904. The scope of this law has been de-
fined by this court in two recent opinions as
follows: "The Negotiable Instruments Act
was adopted by the several states for the
purpose of establishing uniformity in the law
regulating negotiable instruments. The
act was intended to embody in a Code a
particular branch of the law. Where the
act speaks, it controls, and its meaning
should be ascertained by interpreting the
language used, and not by assuming that the
former law on the subject should remain

render negotiable paper, after negotiation, The plain intention of the statute is to free from all defenses available to prior parties among themselves, and at the same time, it would seem, preserve to the maker all defenses against the original payee. Upon the precise question raised here, it was decided in Colorado and North Dakota that a note to a foreign corporation that had not complied with the local law, without which it could not do business in the state, is valid against the maker in the McMann hands of a holder in due course.

v. Walker, 31 Colo. 261, 72 Pac. 1055; Na- | statutes referred to before it was authorized tional Bank v. Pick, 13 N. D. 74, 99 N. W. to do business in this state, but that fact is not made to appear, and for that reason alone the demurrer to the amended answer should have been sustained.

Annotation-Bona fide purchaser of negotiable paper from a foreign corporation which has not complied with the conditions of doing business in the state.

foreign corporation which has not complied with the laws of the state was held entitled to recover thereon against the maker, where the statute made contracts of a corporation which has not complied with the requirements of the statute "wholly void on behalf of such corporation, association, or joint stock company, and its assigns," but provided that any such contract might be enforced against such corporation, association, or joint stock company. The court does not expressly denominate the contract as either void or voidable. A foreign corporation, payee in negotiable paper, can transfer the same so as to make of the indorsee a holder in due course under such a statute.5

laws of the state could not be enforced | bona fide holder of a note payable to a by the payee, states that such note can be enforced by an innocent indorsee, and continues: "Why should not the ordinary rules which govern the transfer of negotiable paper apply? Why should the plaintiff, who has expressly promised to pay the indorsee, escape on the defense set up? If the notes were wrongfully given in violation of the statute, the wrong was his. Why, therefore, should he be allowed to cast the consequences upon another? If the payee's right to transact business in this state was questionable, he should have investigated it. He could as readily have discovered the lack of authority before drawing the notes as after. The indorsee knew nothing of such question. He did not know even that the notes grew out of a transaction here. It is urged that public policy forbids a recovery; that to hold otherwise will nullify the statute. We do not think so. If the legislature intended the consequences claimed, we would expect it to say so. It has not; and we think justly, for otherwise the drawer of such paper might cast the consequences of his misconduct or carelessness on others who rely on his promises without means of protecting themselves. The public interests require that persons dealing with foreign corporations shall inform themselves of the authority to transact business here in advance, instead of aiding violations of the statute, and then repudiating their promises to the injury of innocent persons. Public policy requires that the circulation of negotiable paper shall be free from unnecessary trammels." It has been held that the use of the term "void" in the statute does not necessarily mean that the contract is "void" in the sense that it is altogether invalid. Where it appears from the context that a "voidable" contract is meant rather than a "void" one, such meaning will be given it. Thus, a statute making every contract entered into by or on behalf of a foreign corporation before it shall have complied with the provisions of the statute "void on its behalf and on behalf of its assigns," but providing that such contract shall be enforceable against the corporation or its assigns, makes the contract voidable merely.

A

3 Commercial Nat. Bank v. Jordan (1916) 71 Fla. 566, 71 So. 760.

4 National Bank v. Pick (1904) 13 N. D. 74. 99 N. W. 63.

5 Ibid.

This is the necessary result of the decision in Mooney v. Williams (1900) 9 N. D.

|

The use of the word "assigns" in a statute declaring that the contract "shall be void on its behalf and on behalf of its assigns," but shall be enforceable against it or them, does not show that the legislature intended that the note should be unenforceable in the hands of a bona fide indorsee. The Florida court argues that "the word 'assigns,' when used to designate those that have acquired ownership of a negotiable instrument from the payee or prior indorser, is not synonymous with the word 'indorsees.' Where a bill or note payable to order' is transferred without indorsement, the transferee takes by the law only such right which the payee had, and therefore subject to any defense the payer may rightfully assert as against the payee. The instrument may be transferred without indorsement, it is true, but in such case the assignment is not in the usual course of business in accordance with mercantile custom; consequently only such title passes to the assignee as the assignor had, and subject to any defense the payer may rightfully assert against the assignor.

One who takes the instrument as an indorsee, however, in good faith before maturity, and for value, becomes the owner of the instrument, and it is not subject in his hands to such defenses as may have been available against the payee. The word assigns,' therefore, does not mean 'indorsees' in the connection used in the statute, nor is there any indication in 329, 83 N. W. 237, but that case is discussed almost wholly from the standpoint of fraud as a defense.

6 Commercial Nat. Bank v. Jordan (Fla.) and National Bank v. Pick (N. D.) supra. 7 Commercial Nat. Bank v. Jordan (Fla.)

supra.

pressly or by necessary implication de-
clare the note to be void as well as the
13 it is
contract which constitutes the consid-
eration for it." In another case
stated that, "where only the contract is
declared void, and there is no declaration
of nullity against securities, it is held
that, while as between the parties and
those taking with notice or after ma-
turity, no recovery can be had, a bona
fide holder will be protected."

the statute that the word was intended | says one court,12 "the statute must exto include indorsees. To give the word 'assigns' that meaning would be to read into the statute a purpose which, from the ordinary meaning of the words used, The use the legislature did not have." of the word "assigns" in the North Dakota statute is held not to show an intention to include indorsees of negotiable instruments. It is stated by the court that the term "assign" has acquired a well-established meaning limited to transferees by assignment of choses in action, as distinguished from holders in due of negotiable paper.

A statute declaring the contract void at the option of the other party thereto does not make the contract void ab initio. But a statute expressly declaring such contracts void has been given that effect,10 although a contrary decision appears under such a statute.11

It is the doctrine of some cases that not only must the contract be declared void, but also the note. "To enable the maker to escape liability upon his note when held by a bona fide purchaser," 8 National Bank v. Pick (N. D.) supra. 9 Citizens Nat. Bank v. Buckheit (1916) 14 Ala. App. 511, 71 So. 82, certiorari denied in (1916) 196 Ala. 700, 72 So. 1019; Ala. App. —, 74 Jones v. Martin (1917) So. 761.

10 The Alabama statute consists of two parts. First, there is a provision penalizing a foreign corporation for doing business in the state without filing certain papers, and requiring it to pay in the treasury a franchise tax, and providing that all contracts made in the state by any foreign corporation which has not first complied with the provisions of the two preceding sections "shall, at the option of the other party to the contract, be wholly void." Under this provision a bona fide holder of a note given by a foreign corporation doing business within the state before it had complied with the provisions of the statute was held, both in Citizens Nat. Bank v. Buckheit (Ala.) and Jones v. Martin (Ala.) supra, entitled Another provision of to enforce the note. the Alabama statute requires a foreign corporation to procure a permit or license authorizing it to do business within the state, and prohibits such corporation from transacting any business within the state, and expressly makes "all contracts, engagements, or undertakings, or agreements with, by, or to such corporation, made without obtaining such permit," null and void. The court in Citizens Nat. Bank v. Buckheit (Ala.) supra, held that this provision of the statute did not make such contract void. It expressed the opinion, however, that, if the case were one of first impression, it would be held that such statute made the contract void, but the court regarded it

The general question whether the contract of a foreign corporation doing business in a state without having complied with the laws thereof is void or only voidable is a question much broader than the scope of this discussion, as the principles which determine the answer to that question are involved in contracts other than notes; no general discussion of that question is intended herein.14

15

The fact that the statute was violated in making the contract is no defense as even though against a bona fide holder,' such violation was an offense punishable by fine and imprisonment.16

self as bound by some previous decisions of the supreme court. In the subsequent case of Jones v. Martin (Ala.) supra, the court disapproved the holding in Citizens Nat. Bank v. Buckheit, and held that this statute made such contract void where the permit was not obtained.

11 Citizens Nat. Bank v. Buckheit (Ala.) supra. But see discussion of Alabama cases in note 10, supra.

12 Finseth v. Scherer (1917) 165 N. W. 124.

Minn.,

13 Hart v. Livermore Foundry & Mach. Co. (1895) 72 Miss. 809, 17 So. 769.

14 The general question of the validity of contracts made by a foreign corporation which has not complied with the statutory conditions of the right to do business in a state is discussed in the note to Edison GenSee also the note to eral Electric Co. v. Canadian Pacific Nav. Co. 24 L.R.A. 315. State v. American Book Co. 1 L.R.A. (N.S.) 1041.

The statutory provision for a penalty, as affecting validity or enforceability of contracts made by a foreign corporation without complying with conditions for doing business, is discussed in the note to TriState Amusement Co. v. Forest Park Highlands Amusement Co. 4 L.R.A. (N.S.) 688. and the supplementary note thereto follow. ing the case of Fruin-Colnon Contracting Co. v. Chatterson, 40 L.R.A. (N.S.) 857.

15 Citizens Nat. Bank v. Buckheit (1916) 14 Ala. App. 511, 71 So. 82, certiorari denied in (1916) 196 Ala. 700, 72 So. 1018; Commercial Nat. Bank v. Jordan (1916) 71 Fla. 566, 71 So. 760.

16 Commercial Nat. Bank v. Jordan (Fla.) supra.