J. R. Alsing Company, Appellant, v. New England Quartz and Spar Company, Respondent

J. R. Alsing Company, Appellant, v. New England Quartz and Spar Company, Respondent. A foreign corporation which has not obtained a certificate from the Secretary of State may, when sued, interpose a counterclaim— the Tax Law, chapter 240 of the Laws_ of 1895, is superseded by section 181 of chapter 908 of the Laws of 1896. The penalty imposed upon a foreign corporation for doing business within the State of New York without first obtaining a certificate from the Secretary of State is regulated solely by section 15 of the General Corporation Law (Laws, of 1892, chap. 687), while the penalty imposed upon such a corporation for a. failure to pay the license tax is regulated by section 181 of the Tax Law (Laws, of 1896, chap. 908), which supersedes, if it does not actually repeal, chapter 240 of the Laws of 1895, which provides: “No action shall be maintained or recovery had in any of the courts of this State by such foreign corporation doing business in this State without obtaining the certificate of authority prescribed by law and a receipt for the license fee hereby imposed.” Section 15 of the General Corporation Law, which provides, “No foreign stock corporation doing business in this State without such certificate shall maintain any action in this State upon any contract made by it in this State until it shall have procured such certificate,” does not prevent a foreign corporation, doing business in the State of New York without having procured the necessary certificate, from recovering in a suit brought against it in that State upon a counterclaim growing out of the transaction upon which the plaintiff sued. Appeal by the plaintiff, the J. R. Alsing Company, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of Kings on the 7th day of March, 1900, upon the verdict of a jury, and also from an order entered in said clerk’s office on the 6th day of March, 1900, denying the plaintiff’s motion for a new trial made upon the minutes. This appeal was transferred from the second department to the first department. The action- was brought to recover upon a promissory note given by the defendant, a West Virginia corporation, in part payment for a pulverizing machine, there having been a previous amount paid on account. The answer alleged that there was want of consideration for the note, owing to a breach of the plaintiff’s express warranty as to the efficiency and capacity of the machine; and a counterclaim was interposed to recover the sum which had already been paid. The reply, besides denying the alleged warranty, averred that the defendant, although a foreign corporation, had not obtained the certificate required by law to enable it to do business in the State of New York. Upon the trial the defendant gave evidence tending to- show that although the machine had been guaranteed as “ perfect in every respect,” the head had been put in at an angle with the result that a wobbling motion was produced, the capacity was not half what was represented and extra horse power was required; the machine discharged material at both ends instead of at one, and the product was not properly ground. It was also testified by the defendant’s treasurer that the machine “ could not be used by us for any purpose, in our factory. * * * It is worth nothing more to me than old junk. As old junk it would cost about as much, it is so heavy. It is absolutely worthless as far as we are concerned-; it is all lined with porcelain bricks and all that lining would have to be taken out * * * it is of no earthly use in the manufacture of silica. No use for anybody in the manufacture of silica.” This witness was asked, “ Did you make any effort to sell the machine ? ” and after objection was made to the materiality of the question and overruled and exception taken, he replied, “ I offered the machine in connection with these old machines to see if it could be sold ; to see what it was worth, but I couldn’t — the parties wouldn’t touch it at all. They said it wouldn’t run true and they didn’t want it.” No objection was made to the answer, nor was there any request to sti'ike it out. Another witness testified for the defendant that the machine was practically useless as made and could not be set right by any system of repairs. The plaintiff gave some testimony in opposition to that of the defendant as to the efficiency and value of the machine, and also offered proof that the defendant had not complied with the laws of the State as to obtaining- a certificate entitling it to do business here, and, when this was excluded, duly took exception. An exception was also taken by the plaintiff to that portion of the charge that if the defendant had shown an express warranty which was broken and the machine was worthless, then it was “ entitled to damages which may be measured by the amount of . money which it has already paid out on account of this machine; ” and the plaintiff’s counsel then requested the court to charge that “ the only measure of damage which can be fixed for the defendant in'case it should have proved its alleged claim is the difference between the value of that machine if it were perfect when delivered and its present value.” The learned trial judge, after remarking that there was authority on that line and it would be errdr not to so charge and that at the same time there was authority as indicated, said: “ I will charge your rule as being the correct rule of damages ; I will not decline it.” The j'ury returned a verdict in favor of the defendant for the full amount paid,- and from the j'udgment so entered and from an order •denying a motion for a new trial the plaintiff appeals. James C. Cropsey, for the appellant. George C. Lay, for the respondent. [MAJORITY — O’Brien, J.:] O’Brien, J.: The appellant relies upon four grounds for reversing the judgment, the principal one of which is that there was error in the exclusion of the evidence offered to show that the defendant had not complied with section 15 of chapter 687 of the Laws of 1892, The' plaintiff presented evidence which, if admitted, would have tended to prove that the defendant corporation doing business in the State of New York had not procured the certificate required by section 15, chapter 687 of the Laws of 1892, and by chapter 240 of the Laws of 1895. The former act, which is part of the General Corporation Law, required that a foreign corporation, before doing business in this State, shall obtain a certificate of authority so to do, and the penalty fixed by the statute for a failure to procure it is as follows: “ N o foreign stock corporation doing business in this State without sticli certificate shall maintain any action in this State upon any contract made by it in this State until it shall have procured such certificate.” Chapter 240 of the Laws of 1895 provides : “ No. action shall be maintained or recovery had in any of the courts of this State by such foreign corporation doing business in this State without obtaining the certificate of authority prescribed by law and a receipt for the license fee hereby imposed.” In the earlier statute the language is that the corporation may not “maintain any action;” while the statute of 1895 provides that “ no action shall be maintained or recovery had in any of the. courts of this State.” The later enactmentUs thus more comprehensive, and it requires not only the obtaining of a certificate'but also a receipt for a license fee. Under the act of 1892 it is clear, we think, that a foreign corporation which has been made a party in an action in our courts has a right, in addition to contesting the claim made against it, to recover upon a counterclaim based upon the same transaction. The defendant, having been brought into court and thus made to defend, should be allowed, unless there is a distinct provision to the contrary, not only to defend but also to litigate any question arising out of the transaction that has been made the basis of the plaintiff’s complaint. There is no such prohibitive provision in this Statute, and, therefore, the obtaining of the certificate would not be a prerequisite to a recovery upon the counterclaim in question.. The act of 1892 prohibits a foreign corporation from doing business in this State without obtaining the permit prescribed by the act; and for refusal to comply, the.penalty referred to is attached, that no action can be maintained in the courts of this State. The act of 1895, it will be noticed, however, is in effect a tax law, and imposes a-penalty upon the foreign corporation which fails to pay the license fee therein prescribed. It is true that in fixing the penalty the language was not limited to the mere failure to pay the license fee, there being a reiteration of the same penalty to be imposed for a failure to obtain the certificate as prescribed by law. This latter provision, however, need not be considered further, because it must be regarded as superseded by section 181 of chapter 908 of the Laws of 1896, which is the general law affecting corporations, and Which upon this subject of the license tax to he imposed upon foreign corporations prescribes the penalty in entirely different language, as follows : “ No action shall be maintained or recovery had in any of the coiirts in this State by such foreign corporation Without obtaining a receipt for the license fee hereby imposed, within thirteen months after beginning such business within the State.” It will, therefore, be noticed that, in determining the question of what is the penalty imposed upon the foreign corporation for doing business in this State without first obtaining the certificate from the Secretary of State, resort must be had to the act of 1892, which regulates that subject; Whereas, when the question is as to the penalty for a failure to pay the license tax, resort must be had to the law just quoted (Laws of 1896, chap. 908, § 181) which supersedes, if it does not actually repeal, the act of 1895. It follows that the only act which applies in this case is that of 1892, because the proof offered was not for the purpose of showing a failure to- pay the license tax under the acts of 1895 and 1896, but was directed merely to showing that the defendant had not obtained from the Secretary of State a certificate entitling it to do business in this State. As our construction of the act of 1892 is that it would not prevent a recovery by a foreign corporation upon a counterclaim growing out of the same transaction upon which the plaintiff sued, it follows that there was no error in excluding the proof offered'. The second error alleged by the plaintiff is, that- evidence of offers to sell the machine was improperly admitted as proof of its value. The objection, however, which is the basis of the exception was that the question itself of whether the defendant had made “ any effort to sell the machine ” was. immaterial. Had the answer been “ yes ” or “ no,” the effect would have been to show the good faith of the defendant, and there was no inquiry as to what if any -offers Avere received. Although it is true that the witness did not-properly respond to the question and in his ansAver stated that certain parties said the machine “ Avouldn’t run true and they didn’t want it,” no objection was made to this ansAver nor was there any request to strike it out, and this exception, therefore, is not good. Another alleged error upon which the plaintiff relies is presented by the exception to the charge relating to the measure of damages; and there are two reasons why the exception cannot be sustained. The first is that the court, after charging the jury that if the defendant had shoAvn that there was a warranty which was broken and that the machine Avas worthless the money paid on account might be recovered (which was the rule of damages to which the plaintiff objected), subsequently, upon plaintiff’s request, charged that the “correct rule” was “the difference between the value of that machine if it were perfect when delivered and its present value ; ” thus curing any error in the charge previously made. The second reason is, that although the rule formulated and charged at the plaintiff’s request is the correct one, yet in the present instance, upon the facts appearing, the rule which had been charged by the court and that which was subsequently charged as requested by the plaintiff are identical, since the defendant’s evidence tended to show that the machine was worthless, and the court had said that the jury before applying the rule first stated should so find> If the machine were worthless, then, its present value being nothing, the difference would be the sum which the defendant had paid. The plaintiff insists, however, that there is nothing to show that the machine was worthless; and we thus come to the final contention that the verdict was contrary to the evidence. In this connection, it is asserted that the defendant gave no proof that the machine had no actual value, the testimony of its officers merely being that the machine had no value in the factory. We think, however; that the evidence is sufficient to give rise to the inference that the machine was of no. value whatever., for it is testified that it was built for a special purpose upon order and that it was faulty and useless to any one for that purpose, that it could not be repaired, and that even as old junk it was lined with porcelain bricks which would have to be removed, so that it was “ absolutely worthless.” Our conclusion, therefore, upon the whole case, is that the judgment appealed from must be affirmed, with costs. Van Brunt, P. J., Patterson, McLaughlin .and Laughlin, JJ., concurred. Judgment affirmed, with costs.