Nevada Reports 1952 (69 Nev.).pdf

7/28/2019 Nevada Reports 1952 (69 Nev.).pdf

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69 Nev. 1, 1 (1952)

REPORTS OF CASES

DETERMINED BY

THE SUPREME COURT

OF THE

STATE OF NEVADA

_____________

VOLUME 69

____________

69 Nev. 1, 1 (1952) Nevada Industrial Commission v. Peck

NEVADA INDUSTRIAL COMMISSION, Appellant, v.

STANLEY W. PECK and BURTON V. WOOMACK, Respondents.

No. 3662

January 9, 1952. 239 P.2d 244.

Appeal from the Second Judicial District Court, Washoe County; Merwyn H. Brown,

presiding judge, department No. 1.

Action by Stanley W. Peck against Burton V. Woomack and William J. Heffler for

personal injuries. Defendant Heffler was dismissed from the action and the Nevada Industrial

Commission was joined as a defendant by court order. From a judgment decreeing thatplaintiff was entitled to all the benefits of the Nevada Industrial Insurance Act the Industrial

Commission appealed. The Supreme Court, Eather, J., held that failure of Woomack, as hotel

operator, to report plaintiff's name as an employee of hotel, did not constitute a rejection of

the Industrial Insurance Act by the hotel and plaintiff was therefore entitled to benefits

thereunder for personal injuries.

Affirmed.


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John R. Ross, of Carson City, and C. E. Horton, of Ely, for Appellant.

Martin Scanlan, of Reno, for Respondent Stanley W. Peck.

Woodburn, Forman and Woodburn, and Gordon Thompson, all of Reno, for Respondent

Burton V. Woomack.

1. Workmen's Compensation.Employer who accepts industrial insurance act is conclusively presumed to have accepted it for all

employees, regardless of their classification, and any rejection of act by employer is a rejection of the act in

its entirety. N.C.L.1929, sec. 2680.

2. Workmen's Compensation.

Failure of employer to list an employee on his payroll or to make proper segregation of employment doesnot show an intent to exclude that employee or class of employees from coverage of industrial insurance

act. N.C.L.1929, sec. 2680, et seq.

3. Workmen's Compensation.Failure of operator of hotel, which had accepted industrial insurance act, to report to industrial

commission name of employee of a workman engaged by hotel to install, reconstruct and encase flues of

hotel as an employee of hotel, did not constitute a rejection of industrial insurance act by hotel and

employee was therefore entitled to benefits thereunder for personal injuries. N.C.L.1929, secs. 2680, 2688,

2702, 2718.

4. Workmen's Compensation.A reasonable, liberal and practical construction of industrial insurance act is preferable to a narrow

construction. N.C.L.1929, sec. 2680, et seq.

OPINION

By the Court, Eather, J.:

This is an appeal from a judgment of the district court of the State of Nevada, in and for

the county of Washoe, Department No. 1, in an action tried to the court under the terms of the

Nevada industrial insurance act; also from an order denying appellant's motion for a new trial.

The action was instituted by Stanley W. Peck, plaintiff, for damages for personal LQMXULHVDJDLQVW%XUWRQ9


injuries against Burton V. Woomack and William J. Heffler, as defendants; thereafter

William J. Heffler was dismissed from the action. Subsequently and pursuant to an order of

the court the Nevada Industrial Commission was made a defendant in the case, and filed its

pleading pursuant to such order.


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Briefly stated the facts are as follows: In January, 1947, respondent Woomack was the

operator of the Pioneer Hotel in the city of Reno. He had employed one William J. Heffler to

install, reconstruct and encase terra cotta flues for the hotel building. Respondent Stanley W.

Peck was engaged as a workman in this operation, and on January 7, 1947, was struck by a

falling brick, seriously injuring him. The injury necessitated a delicate and dangerous

operation on his skull, forehead and brain, which required the placing of a metal plate oftentalum, which is an element with a consistency of silver.

Woomack had regarded Heffler as an independent contractor in the doing of this work and

had not reported to the Nevada Industrial Commission any of the workmen as employees of

the hotel. Following his injury Peck had communicated with the commission with respect to

compensation and had been advised that he was not covered inasmuch as the hotel had not

reported him as an employee. He thereupon brought this action against Woomack and Heffler

asking damages for negligence. After trial and submission of the matter, the trial court, on

September 23, 1949, found that a complete determination of the controversy could not be had

without the presence of the Nevada Industrial Commission, and ordered that the commission

be made a party defendant. This having been done, the matter was retried.

Upon submission after the second trial the court found that Heffler was not an independentcontractor and that Peck was an employee of Woomack; that Woomack had accepted the

provisions of the Nevada industrial insurance act and that Peck had not rejected the terms ofWKDWDFWDVSURYLGHGE\WKHDFWWKDWWKHRQO\UHDVRQZK\3HFNKDGQRWUHFHLYHGWKHEHQHILWVRIWKHDFWZDVGXHWRWKHUHIXVDORI:RRPDFNWRLQFOXGHWKHQDPHRQWKHSD\UROO

UHSRUWWRWKHFRPPLVVLRQDQGWRJLYHQRWLFHRILQMXU\


that act as provided by the act; that the only reason why Peck had not received the benefits of

the act was due to the refusal of Woomack to include the name on the payroll report to the

commission and to give notice of injury.

On November 27, 1950, judgment was entered in favor of Peck decreeing that he have all

the benefits of the Nevada industrial insurance act and that the Nevada Industrial Commission

pay him all the benefits to which he was entitled. The court further ordered that the defendant

Woomack under the name of the Pioneer Hotel file an amended payroll report for the month

of December, 1946, and the month of January, 1947, showing Peck as an employee for the

days he worked during those months. From this judgment and the subsequent order of the

trial court denying motion for a new trial the commission has appealed.

The only question raised by this appeal is whether the fact that Woomack had neverreported Peck as an employee nor any of the other workmen engaged in the installation of

flues, and had confined his payroll reports to ordinary hotel employees, the premiums for

whose coverage were substantially less than for workmen engaged in the installation of flues,

would preclude a finding that Peck was covered under the Nevada industrial insurance act.

No question is raised as to the failure to give notice of injury and no question is raised as to

whether Peck was in fact an employee of Woomack.


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Appellant has assigned to the trial court two errors, as follows: 1. Error in finding that the

plaintiff was covered by the provisions of the act at the time the accident occurred on January

7, 1947. 2. Error in adjudging that the plaintiff have all the benefits under the Nevada

Industrial Insurance Act for and as a result of the injuries received on the 7th day of January,

1947.

The first section to consider is section 2680, N.C.L. 1929, first paragraph: When as in thisact provided, an employer shall accept the terms of this act and be JRYHUQHGE\LWVSURYLVLRQVHYHU\VXFKHPSOR\HUVKDOOEHFRQFOXVLYHO\SUHVXPHGWRKDYHHOHFWHGWRSURYLGHVHFXUHDQGSD\FRPSHQVDWLRQDFFRUGLQJWRWKHWHUPVFRQGLWLRQVDQGSURYLVLRQVRIWKLVDFWIRUDQ\DQGDOOSHUVRQDOLQMXULHVE\DFFLGHQWVXVWDLQHGE\DQHPSOR\HHDULVLQJRXWRIDQGLQ

WKHFRXUVHRIWKHHPSOR\PHQW


governed by its provisions every such employer shall be conclusively presumed to haveelectedto provide, secure and pay compensation according to the terms, conditions and

provisions of this actfor any and all personal injuries by accident sustained by an employee

arising out of and in the course of the employment. * * * (Emphasis supplied.)

[Headnotes 1, 2]

This section is subject to only one interpretation in our opinion, and that is that the act is

intended to accomplish complete coverage for all employees of an employer. If the act be

accepted, then under the conclusive presumption provided, it is accepted as to all employees.

This would eliminate any possibility of construing an employer's conduct in failing to list an

employee on his payroll or in failing to make proper segregation of employment as an intent

or as demonstrating intent not to cover that employee or class of employees. The fact that in

this case it can be proved that the employer did not intend to cover Peck therefore cannot be

asserted against the conclusive statutory presumption.

In the case of Pershing Quicksilver Co. v. Thiers, 62 Nev. 382, 152 P.2d 432, the headnote

reads:

Employee who did not file notice of rejection of provisions of industrial insurance act

was conclusively presumed to have elected to take compensation in accordance with

provisions of act. Comp. Laws, sec. 2680(d).

Industrial insurance and workmen's compensation acts have for their purpose the putting

of an end to private litigation between employer and employee, and give to a workman the

right to compensation for injuries suffered in employment, regardless of negligence ofemployer. Comp. Laws, sec. 2680, et seq.

Where an injury is compensable under industrial insurance act and injured workman

accepts provisions of act, workman cannot choose as to whether he will sue at common law

or accept compensation under act, and KLVH[FOXVLYHUHPHG\LVXQGHUDFW


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his exclusive remedy is under act. Comp. Laws, secs. 2680, 2683, 2704, 2706, * * *.

(Emphasis supplied.)

[Headnote 3]The only question remaining, therefore, is whether by his conduct the employer is to be

deemed to have rejected the provisions of the act. The industrial commission apparently takes

the position that this was done at least so far as concerned Peck or so far as concerned all

employees of Woomack who did not fall within the general classification of hotel employees.

However, under our views with respect to the quoted portion of sec. 2680, it would not be

possible to accept the act in part. If the employer by his conduct rejected the terms of the act it

was rejected in toto and would result in a lack of coverage for any employee of Woomack

whether that employee had been reported or not.

In this connection we are concerned with the language of sections 2680 and 2702. Sec.

2680 provides, failure on the part of any such employer to pay the premiums as by theprovisions of this act required shall operate as a rejection of the terms of the act. Section

2702 provides failure on the part of any such employer to comply with the foregoing

provisions shall operate as a rejection of this act. * * * It is to be noted that in each instance

the rejection is not partial but is a complete rejection of the actor ofits terms and could only

accomplish the result that the employer was in the same position he would occupy had he

failed to accept the terms of the act originally.

Sec. 2702. Sec. 21. * * * Every employer electing to be governed by the provisions of this

act, who shall enter into business or resume operations subsequent to July 1, 1925, shall,

before commencing or resuming operations, as the case may be, notify the commission of

such fact, accompanying such notification with an estimate of his monthly pay-roll and shall

make payment of the premium on such pay-roll for the first two months of operations.


Every employer electing to be governed by the provisions of the act shall, on or before

the twenty-fifth day of each month, furnish the Nevada industrial commission with a true and

accurate pay-roll showing the aggregate number of shifts worked during the preceding

months, the total amount paid to employees for services performed during said month, and a

segregation of employment in accordance with the requirements of the commission, togetherwith the premium due thereon;provided, however, that any employer, by agreement in

writing with the commission, may arrange for the payment of premiums in advance for a

period of more than sixty days. Failure on the part of any such employer to comply with the

foregoing provisions shall operate as a rejection of this act, effective at the expiration of the

period covered by his estimate; and further provided, that if an audit of the accounts or actual

pay-roll of such employer shows the actual premium earned to have exceeded the estimated

advance premium paid, the commission may require the payment of a sum sufficientto cover


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such deficit, together with such amount as in its judgment would constitute an adequate

advance premium for the period covered by the estimate. * * * (Emphasis supplied.)

The foregoing provisions referred to in sec. 2702 are: (1) payment of the premiums, and

(2) the filing of a true and accurate payroll with the showing of facts as specified in that

section.

It is contended by the commission that failure on the part of an employer to list anemployee upon his payroll would have the effect of his failure to pay premiums as to that

employee and that this failure or neglect upon the employer's part would therefore result in a

rejection as to such employee under the terms of both sections 2680 and 2702. However,

under the provisions of sec. 2702 the premiums which are to be paid are: (1) those to be paid

for two months in advance pursuant to the employer's own estimate, (2) those payable on

filing the SD\UROOVDQGWKRVHSD\DEOHSXUVXDQWWRFRPPLVVLRQGHPDQGDIWHUDXGLWE\WKHFRPPLVVLRQRIWKHWUXHDQGDFFXUDWHSD\UROOVXEPLWWHGE\WKHHPSOR\HU


payrolls, and (3) those payable pursuant to commission demand after audit by the commission

of the true and accurate payroll submitted by the employer. Nowhere is there any

requirement that premiums be paid otherwise than as there specified. Should an employer

misrepresent the extent of his payroll as submitted he would still have paid the premiums

required by the provisions of the act and if he be in default in any regard under the terms of

the act it would not be a default in payment of premiums required.

The commission contends that failure to include an employee upon the payroll renders that

payroll not a true and accurate one and would result, therefore, in a failure on the part of the

employer to comply with the essential provision of the section for the filing of such a payroll.This raises the question as to whether the filing of a payroll which, as a matter of fact, is not

true and accurate would operate as an automatic rejection. In our view, this is not the

interpretation to be placed upon this section.

Sec. 2718, N.C.L., provides for the consequences of misrepresentation by an employer, as

follows:

Sec. 2718. Sec. 36. Any employer who shall misrepresent to the department the amount

of pay-roll upon which the premium under this act is based shall be liable to the Nevada

industrial commission in ten times the amount of the difference in premium paid and the

amount the employer should have paid. The liability to the Nevada industrial commission

shall be enforced in a civil action in the name of the Nevada industrial commission. All sumscollected under this section shall be paid into the accident fund.

Under the terms of this section the employer's liability for misrepresentation is a money

liability to the commission and is not an automatic rejection.

Sec. 2702, then, should be construed to read: [the employer shall] furnish the Nevada

industrial commission with a * * * payroll [which he shall, subject to WKHOLDELOLW\SURYLGHGE\VHF


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the liability provided by sec. 2718, represent to be a true and accurate payroll] showing, etc.

In our view the only alternative to such an interpretation would be to hold that everyuntruth or inaccuracy contained in a payroll would accomplish a complete automatic rejection

by the employer. Under our interpretation of the first paragraph of sec. 2680, as we have

quoted it, there would be no room under the act's language to hold that the act is rejected only

as to the employees who are not reported. The employer has either accepted or rejected the

actin its entirety.

Certainly the legislature cannot have intended such a harsh result to follow from

inaccuracies in the payroll. Had it intended partial rejection to follow from the elimination of

an employee's name it would have been extremely simple for the legislature so to provide

expressly and clearly.

The commission argues that under such interpretation the commission would be undulyburdened with the task of auditing and policing its accounts; that the provisions of sec. 2718

do not adequately protect the commission against deliberate fraud on the part of the

employers. Our problem in this respect remains one of statutory construction and the

ascertaining of legislative intent. Can it be said that the burden placed upon the commission

of auditing and policing its accounts to prevent the fraudulent misrepresentation of payrolls is

so great a burden that the legislature cannot be deemed to have intended the provisions of sec.

2718 to be the full consequences of the filing of a false payroll? In our opinion the burdens

are not so great as to result in such a construction. The Nevada industrial insurance act differs

from the acts of most states providing workmen's compensation. Under the more usual form

of act the insurance is written by private carriers and the form of contract there provided

grants full coverage to all employees injured in the course of their employment. Under suchan act the burden of auditing and policing LVDEVRUEHGE\WKHFDUULHULQWKHSUHPLXPZKLFKLWFKDUJHV


is absorbed by the carrier in the premium which it charges. Failure to file an accurate payroll

under such circumstances is no defense to the insurance company's obligation to provide

compensation. Certainly, if under such an act the private insurance company can assume theburden of auditing and policing its accounts there is no reason why the legislature of this state

could not assume that the industrial commission could assume a similar burden. To hold

otherwise would be to hold that the Nevada Industrial Commission cannot be expected to act

with the same degree of efficiency as a private insurance carrier, and also would be to assume

an intent on the part of the legislature to provide a workmen's compensation act which does

not provide the same degree of employee coverage as other types of acts in existence in other

states. We do not feel that such an intent in either respect can be attributed to the legislature.


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The commission argues that failure of an employer to make the segregation of employment

required by the act with the result that no employee in the particular class of employment is

reported upon the payroll, results in the employer's failure to accept the act as to that

classification of employee. Again we refer to our construction of the first paragraph of sec.

2680. Regardless of the classification, all employees are conclusively presumed to be covered

by their employer's acceptance of the act. In the absence of any rejection of the act by theemployer the only question would be whether the employee was in fact an employee under

the definition of the term contained in sec. 2688. Under that section the only exception to the

general definition: Every person in the service of an employer, is a person whose

employment is both casual and not in the course of the trade, business, profession or

occupation of his employer. It is conceded that Peck's employment was not casual within

the meaning of the act.

[Headnote 4]

Unquestionably, compensation laws were enacted as a KXPDQLWDULDQPHDVXUH


humanitarian measure. The modern trend is to construe the industrial insurance acts broadly

and liberally, to protect the interest of the injured worker and his dependents. A reasonable,

liberal and practical construction is preferable to a narrow one, since these acts are enacted

for the purpose of giving compensation, not for the denial thereof.

The Workmen's Compensation Act, including matters of procedure, is liberally construed,

having due regard to remedial and salutary purposes of the act.

Nevada Industrial Commission v. Adair, 67 Nev. 259, 217 P.2d 348.See, also: Costley v. Nevada Industrial Commission, 53 Nev. 219, 296 P. 1011; Virden v.

Smith, 46 Nev. 208, 210 P. 129; English v. Industrial Commission, et al., (Arizona) 237 P.2d

815.

We have carefully considered the assignments of error and find them to be without merit.

We think the district court reached a correct result in this case, and finding no error in the

record, the judgment and order appealed from are affirmed.

Badt, C. J., and Merrill, J., concur.

____________

69 Nev. 12, 12 (1952) Howard v. Howard

FRED ALLEN HOWARD, Appellant, v. LOUISE


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ALICE HOWARD, Respondent.

No. 3678

January 17, 1952. 239 P.2d 584.

Appeal from judgment of the Eighth Judicial District Court, Clark County; A. S.

Henderson, Judge, department No. 2, setting aside a decree of divorce on account of a false

and fraudulent affidavit for service of summons by publication, and appeal from order

denying new trial.

Louise Alice Howard brought action against Fred Allen Howard to have a divorce

judgment set aside on ground of alleged fraud. From a judgment for the plaintiff, the

defendant appealed. The Supreme Court, Badt, C. J., held that action was barred by three-year

limitations.

Reversed and remanded with instructions.

Hawkins & Cannon, of Las Vegas, andA. Brigham Rose, of Los Angeles, Calif., for

Appellant.

Jones, Wiener & Jones, of Las Vegas, for Respondent.

1. Limitation of Actions.A statute of limitations commences to run from date of discovery of facts which, in exercise of proper

diligence, would have enabled plaintiff to learn of fraud of defendant, and not from date when fraud is

actually discovered.

2. Limitation of Actions.

Where first wife in seeking to press bigamy complaint against husband on ground of his marriage tosecond wife, discovered in August, 1945, that husband had divorced first wife on March 25, 1943, and she

knew where the divorce had been obtained, and she knew that she had never been notified of the

commencement or pendency of such divorce action, she was barred by three-year limitation statute from

maintaining on August 31, 1949, in action to set aside the divorce, on ground of fraud, though she did not

actually discover the alleged fraud until 1949. N.C.L.1929, sec. 8524.

OPINION

By the Court, Badt, C. J.:

Louise Alice Howard obtained a judgment in the court EHORZVHWWLQJDVLGHDGHFUHHRI

GLYRUFHWKHUHWRIRUHREWDLQHGLQWKHVDPHFRXUWE\)UHG$OOHQ+RZDUGDSSHOODQW


below setting aside a decree of divorce theretofore obtained in the same court by Fred Allen

Howard, appellant. This appeal is from the judgment setting aside the divorce decree and


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from the order denying new trial. To avoid confusion, the parties are referred to by their given

names.

Louise and Fred were married in 1912. Two sons and a daughter, all of whom have

obtained their majority, were the issue of the marriage. Louise and Fred separated in 1925 or

1926, since which time they appear to have made litigation their chief avocation. In 1926

Fred returned with his three children, then minors, from a fishing trip and found his wife goneand the furniture sold. He commenced an action for divorce in Los Angeles but later

dismissed it. In 1923 Louise had commenced an action in Los Angeles County, California,

against Fred for divorce. She dismissed this action but immediately thereafter filed a second

divorce action, which also sought to set aside a property settlement agreement alleged to have

been obtained by fraud. This action was likewise dismissed by her.

In January, 1936, Louise commenced an action in the superior court of California, in and

for the City and County of San Francisco, against Fred for separate maintenance. In that case

the record indicates an order made in February, 1936, ordering Fred to pay Louise $50 a

month alimony pendente lite. Arrears of several thousand dollars are said to have accrued and

to remain unpaid under this order.

During the period of their separation Fred commenced an action against Louise to evict herfrom certain premises occupied by her. The details of this action are lacking, although it is

indicated that it resulted in a judgment evicting her from the premises.

In 1924 or 1925 Fred obtained a Mexican divorce from Louise, but thereafter decided that

the same was ineffective. On August 14, 1945, Fred married one Winifred Davis, and on

November 10, 1949, he obtained an interlocutory decree of divorce from her in the superior

court RI/RV$QJHOHV&RXQW\&DOLIRUQLDEXWWKHGLVWULFWFRXUWRIDSSHDORIWKDWVWDWHRQ-XQHUHYHUVHGWKHMXGJPHQWIRUZDQWRIWKHSODLQWLIIVFRPSOLDQFHZLWKWKH

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of Los Angeles County, California, but the district court of appeal of that state on June 25,

1951, reversed the judgment for want of the plaintiff's compliance with the statutory

requirement for corroboration. Howard v. Howard, 105 Cal.App.2d 126, 232 P.2d 530.

Winifred also had a divorce action pending against Fred. The cited case affirmed the

judgment denying her a divorce. After Louise discovered that Fred had married Winifred,

Louise caused a criminal complaint to be filed against Fred, charging him with bigamy. She

learned in 1945 that the bigamy charge had been dismissed by the California court upon

submission to that court of Fred's decree of divorce from LouiseFred's marriage to

Winifred therefore appearing not to be bigamous. Fred filed his first Nevada action for

divorce from Louise in the Eighth judicial district court, in and for Clark County, July 6,

1942, being action No. 14405. That action came on for trial on October 6, 1942 before

Honorable George E. Marshall, then district judge of that court. At that time Judge Marshall

cross-examined Fred with reference to the latter's knowledge of his wife's residence and his

attempts to locate her for the purpose of service. Judge Marshall indicated considerable


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impatience with the conflicting answers given by the witness, and denied the decree on the

ground that he had not made sufficient effort to locate Louise. On October 20, 1942, just 14

days after Judge Marshall denied the decree in Fred's action No. 14405, Fred filed another

action in the same court, also seeking a divorce from Louise, being action No. 15266. Service

was again ordered by publication, which was completed November 12, 1942, and no

appearance was made by the defendant within 30 days after completion of that publication.The matter was however not called up for hearing before Honorable Geo. E. Marshall, the

judge of the Eighth judicial district court, but was called up over three months thereafter on

March 25, 1943, when Honorable Harry M. Watson, judge of the Seventh judicial district

court in White Pine County, was occupying the bench temporarily in Clark County, on ZKLFK

GDWHWKHFDVHZDVKHDUGDQGDGHFUHHRIGLYRUFHIURP/RXLVHHQWHUHG


which date the case was heard and a decree of divorce from Louise entered. Nothing appeared

in the record that might have alerted Judge Watson to the former proceedings before Judge

Marshall or to anything unusual or improper in the service by publication. On August 31,

1949, some six years and five months thereafter, Louise filed her complaint to set aside the

judgment of divorce obtained by Fred, March 25, 1943. This was action No. 46173 in the

Eighth judicial district court of Clark County, and was tried by Honorable A. S. Henderson on

May 18 to 20, 1950. It was submitted on written briefs, and Judge Henderson on March 9,

1951 filed a written decision, pursuant to which findings and judgment setting aside the

former divorce decree were filed on April 20, 1951. On the same date Fred's objections to

Louise's proposed findings were overruled and his motion for new trial denied. The judgment

setting aside the divorce decree ordered that Louise have to and including May 15, 1951within which to serve and file her answer or otherwise plead to Fred's complaint for divorce.

Louise failed to take advantage of this right, which she had continuously and consistently

sought throughout the proceedings, her default was entered, and on September 15, 1951 Fred

called up his divorce complaint for hearing (being in the same action, case No. 15266) in

which his earlier decree of 1943 had been set aside by the judgment now being considered on

appeal. On the last-named date, Honorable A. S. Henderson again presiding, a decree was

entered granting Fred a divorce from Louise. In the meantime, on June 20, 1951, Fred had

filed his notice of appeal from the judgment here involved which had set aside his 1943

divorce decree. Whether Judge Henderson knew on September 15, 1951 (when he granted

Fred his divorce) that Fred had taken an appeal from Judge Henderson's judgment vacatingFred's decree granted by Judge Watson, and which appeal, if successful, would have left Fred

with two divorce decrees in the same court against his wife on the identical cause of action

and the identical statement of facts, does not appear. We are justified in FRQFOXGLQJWKDWDWWKLVSRLQWDOWKRXJK)UHGZDVLQKLVDSSHDOVWLOOLQVLVWLQJRQWKHYDOLGLW\RIKLVGHFUHH

ERWKSDUWLHVZHUHHQWLUHO\DJUHHDEOHWRWKHJUDQWLQJRI)UHGVGHFUHH


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concluding that at this point, although Fred was in his appeal still insisting on the validity of

his 1943 decree, both parties were entirely agreeable to the granting of Fred's 1951 decree.

If we should reverse the judgment now before us therefore, Fred will be left (at least as a

matter of record) with his 1943 divorce and his 1951 divorce in the same court. If we affirmthe judgment, he will have a divorce decree from Louise as of 1951 instead of as of 1943.

What will happen to his divorce suit against Winifred, apparently still pending in California,

is a matter for the consideration of the California courts. And whatever further litigation may

spring from the fertile minds of the litigants in California, Nevada or elsewhere, or from the

ingenuity of their several attorneys, is likewise a matter for conjecture.1 :KHQWKLVDFWLRQZDVWULHGDQGVXEPLWWHGWR-XGJH+HQGHUVRQLQ0D\-XGJH+HQGHUVRQZDVHQWLUHO\MXVWLILHGLQEHOLHYLQJDQGDSSDUHQWO\GLGEHOLHYHWKDW/RXLVHGHVLUHGDQGLQWHQGHGLQJRRG

IDLWKWRDSSHDUDQGGHIHQGWKHGLYRUFHDFWLRQLIJLYHQDQRSSRUWXQLW\VRWRGR

____________________

1

Although both the record and the testimony are confusing, the litigation appears to include the following

actions:

1. Fred's 1926 suit for divorce from Louise.

2. Louise's 1923 suit for divorce from Fred.

3. Louise's second 1923 suit for divorce from Fred.

4. Louise's 1926 suit for separate maintenance.

5. Fred's eviction suit against Louise.

6. Fred's Mexican divorce suit against Louise.

7. Fred's divorce suit against Winifred.

8. Winifred's divorce suit against Fred.

9. Louise's prosecution of Fred for bigamy.10. Fred's first Las Vegas divorce suit against Louise. (Denied by Judge Marshall.)

11. Fred's second Las Vegas divorce suit against Louise. (Granted by Judge Watson.)

12. Fred's second Las Vegas divorce suit against Louise. (Granted by Judge Henderson.)

13. Louise's action to vacate Fred's Las Vegas decree.

14. (Pending) Fred's California divorce suit (on retrial after remand) against Winifred.

15. (Right asserted by Louise) Contemplated suit in California by Louise, for divorce and settlement of

property rights.

It will be seen that Fred and Louise have been at bat about the same number of times, with Winifred

occasionally pinch-hitting. Each may be credited with several hits and both are justly chargeable with many

errors. The rules of the game have apparently meant nothing to either of them. To the infinite patience of the

umpires must be credited the fact that both parties have not long since been sent to the showers.


When this action was tried and submitted to Judge Henderson in May, 1950, Judge

Henderson was entirely justified in believing, and apparently did believe, that Louise desired

and intended in good faith to appear and defend the divorce action if given an opportunity so


13/270

to do. Her initial attack on Fred's divorce decree was by way of a motion in that suit to open

up the default, set aside the judgment and permit her to answer and defend. Repeatedly in the

notice of motion and the affidavit supporting the same she begged the court for leave to

answer, stated that she had been fraudulently deprived of an opportunity to defend the action

on the merits, that she had a valid defense and that if she had been served or notified she

would have filed an answer and cross complaint. In connection with her motion, shesubmitted a proposed answer. Fred appeared specially to oppose the motion on the ground

that more than six months, namely, some four years or more, had elapsed since the entry of

the decree. The record does not clearly indicate what disposition was made of the motion, but

it apparently either was abandoned or properly denied. Lauer v. District Court, 62 Nev. 78,

140 P.2d 953. In her complaint in the separate suit to set aside the decree, the case involved in

this appeal, she again recites that she was fraudulently deprived of an opportunity to defend

the action on the merits, and that had she had notice she would have filed an answer, and that

she had a good and valid defense. As an exhibit, she attached a copy of her complaint for

divorce against Fred in the superior court of Los Angeles County, California, verified June

15, 1923, charging extreme cruelty, with many detailed acts of cruelty set forth, and praying

for a decree of divorce; also a copy of her second 1923 Los Angeles complaint allegingadultery as well as cruelty.

She annexed as an exhibit to her second divorce complaint in Los Angeles County,

California, a property settlement agreement dated July 20, 1923, which purported to be a

full, final and complete settlement of all their SURSHUW\ULJKWVEXWZKLFKVKHPDLQWDLQHGDWWKDWWLPHZDVH[HFXWHGE\KHUXSRQWKHUHSUHVHQWDWLRQRI)UHGWKDWWKHEDQNUHTXLUHGVDPHEHIRUHLWZRXOGPDNHDORDQWRKLPZKLFKORDQZDVQHFHVVDU\WRVXSSO\IXQGVIRUKLVDSDUWPHQWKRXVHEXVLQHVVDQGWKDW)UHGDVVXUHGKHUDWWKHWLPHWKDWWKHLQVWUXPHQW

ZRXOGKDYHQRIRUFHRUHIIHFWDVEHWZHHQWKHP


property rights, but which she maintained at that time was executed by her upon the

representation of Fred that the bank required same before it would make a loan to him, which

loan was necessary to supply funds for his apartment house business, and that Fred assured

her at the time that the instrument would have no force or effect as between them.

In her answering brief in this court, Louise maintains in support of the judgment setting

aside the divorce decree that by reason of Fred's false statements as to his knowledge of her

residence, she was not notified of the pendency of the divorce proceeding and that she was

otherwise precluded from the opportunity to present her defenses. Supporting Louise'scomplaint to set aside the divorce decree, she relies upon her allegations that she had a good

and meritorious defense to Fred's divorce action, and that the record shows that she had in

fact a good and meritorious defense; that she herself might have obtained a decree against the

plaintiff on the ground of three years' separation if she had had an opportunity to defend; that

she now seeks nothing except her day in court; that she should not be denied the right to

be heard in court. Elsewhere in her brief she is purposely vague, insisting that if her

judgment setting aside Fred's decree is sustained, then the entire matter as to grounds for


14/270

divorce between the parties is reopened and can be litigated in subsequent procedures.

(Italics supplied.) In oral argument Louise's counsel insisted, while supporting the judgment

setting aside Fred's divorce decree, that the trial court was in error in its provision that she be

allowed certain time to appear, answer or otherwise plead to Fred's divorce complaint; that

she had a right, by reason of Fred's false and fraudulent affidavit for publication, to have the

divorce decree set aside, leaving her free to choose her own forum for prosecuting her ownaction for divorce and possibly for other forms of relief. These are apparently the subsequent

procedures she now contemplates. This too apparently accounts for her refusal to exercise

the right given to KHUE\WKHORZHUFRXUWDWKHURZQUHTXHVWWRDSSHDULQWKHGLYRUFHDFWLRQ

DQGGHIHQGWKHVDPH


her by the lower court at her own request to appear in the divorce action and defend the same.

She tendered to the lower court no issue as to any demands for alimony and no issue as to a

division of property rights. Under questioning by the court in her action to set aside the

divorce decree, after stating that she would not again live with her husband if the court set

aside his decree, she answered the court's inquiry as to why she wanted the decree set aside by

saying: I want a California divorce. I do not recognize this divorce because I think I have

property rights. I wasn't consulted whenI was consulted when I was married and I think I

should be consulted when I am divorced.

The written opinion of the trial judge recites Louise's averment that by reason of the

fraudulent affidavit and resultant service by publication she was deprived of an opportunity to

appear and defend, and that had she been served or notified of the pendency of the divorce

action she would have filed an answer, and her further allegation that she had a good andvalid defense. He held that the public interest required that a plaintiff seeking a divorce from

an absent spouse should be confined to the strictest rules and that leniency should be

extended in granting an absent defendant an opportunity to be heard. After signing findings

to the effect that the affidavit for publication of summons was false and fraudulent, his

conclusions of law were that Louise was entitled to judgment setting aside Fred's divorce

decree and permitting plaintiff herein [Louise] to file an answer or otherwise plead to said

complaint. This was followed by formal judgment setting aside the decree and giving Louise

to May 15, 1951, within which to file an answer or otherwise plead to said complaint on file

in action No. 15266.

The record shows that the findings of fact and conclusions of law above referred to weredrawn and submitted by counsel for Fred, and we may assume that the formal judgment was

likewise drawn by his attorneys.

Yet amazingly enough (although Louise took no cross DSSHDOKHUDWWRUQH\HDUQHVWO\PDLQWDLQVWKDWWKHWULDOFRXUWZDVLQHUURULQGHHGWKDWLWKDGQRMXULVGLFWLRQLQWKHPDWWHU

RILWVRUGHUSHUPLWWLQJKHUWRDQVZHUDQGGHIHQGWKHGLYRUFHDFWLRQ


15/270


appeal) her attorney earnestly maintains that the trial court was in error, indeed that it had no

jurisdiction, in the matter of its order permitting her to answer and defend the divorce action.

During the course of the oral argument, members of this court directed the attention of

Louise's counsel to the fact that she affirmatively sought such permission, that sherepresented to the district court that such was the primary purpose of her having the divorce

decree set aside, that she had stoutly manifested the same purpose in her prior motion in the

divorce suit to vacate the decree, that she developed and crystallized the same theory in the

findings of fact, conclusions of law and judgment prepared and submitted to the trial judge by

her own counsel and that she could have set up and litigated in the court below any question

of alimony and property rights involved between the parties. Counsel's response was that

even despite these circumstances, the court in the fraud action had no jurisdiction to make any

orders governing Louise's appearance in the divorce action, and that Louise should be

permitted to litigate all matters as to marital and property rights in the courts of California.

Whether or not, as a matter of law, there is any merit to this contention, it was no less animposition upon the trial court.

Nor is the attitude of Fred any less amazing. Fred's main concern in this appeal deals more

with his probable relationship to Winifred than to Louise. Unless the judgment setting aside

his divorce decree from Louise is reversed, it would follow that his 1945 marriage to

Winifred was void. This, he asserts, would give her an undue advantage in asserting property

rights as against Fred, though just how this would follow has not been explained. Apparently

he would like a reversal of the judgment vacating his divorce from Louise, thus establishing

that he had legally married Winifred, in order that he may again legally divorce Winifred.

Counsel for Louise too state that there are important property rights to be determined as

between her and Fred, but MXVWZKDWWKH\DUHDQGKRZWKH\ZLOOEHDIIHFWHGE\RXUDFWLRQKDVQRWEHHQSRLQWHGRXW


just what they are and how they will be affected by our action has not been pointed out.

In view of this most bewildering situation, it is not surprising that at the oral argument the

members of the court pressed counsel for some reasonable explanation as to just what either

of the parties sought to accomplish. The responses of counsel simply added to the uncertainty

and the confusion. This court will not take upon itself the task of measuring the degree or theextent to which either party has exceeded the other in imposing upon the trial court. It is

enough that we make such disposition of the appeal as the record warrants.

Appellant's first eight assignments of error we find to be without merit. His ninth

assignment is that Louise's action to set aside Fred's divorce decree on the ground of extrinsic

fraud is barred by our statute of limitations reading in part: Actions * * * can only be

commenced as follows: * * * Within three years: * * * An action for relief on the ground of

fraud or mistake; the cause of action in such case not to be deemed to have accrued until the


16/270

discovery by the aggrieved party of the facts constituting the fraud or mistake. N.C.L., 1929,

sec. 8524.

The fraudulent affidavit filed by Fred resulted in the entry of his divorce decree against

Louise March 25, 1943. Louise alleges in her complaint simply that she did not discover the

fraud till August 10, 1949. The learned district judge found this to be true and held that the

statute did not commence to run until that date. He therefore apparently felt compelled to takecognizance of Louise's cause of action, and in this, we feel, overlooked some well-recognized

principles of law particularly applicable to the facts of this case. It was obligatory on her

affirmatively to excuse her failure to discover the fraud within three years after it took place

by establishing facts showing that she was not negligent in failing to make the discovery

sooner and that she had no DFWXDOQRUSUHVXPSWLYHNQRZOHGJHRIIDFWVVXIILFLHQWWRSXWKHURQLQTXLU\


actual nor presumptive knowledge of facts sufficient to put her on inquiry. Hobart v. Hobart

Estate Co., 26 Cal.2d 412, 159 P.2d 958. Such has long been the rule in California under sec.

338 of its code of civil procedure from which the Nevada section was taken. This indeed is

the general rule not only under similar statutes but in equity practice. See 54 C.J.S. 175,

Limitations of Actions, sec. 184, id. 188, sec. 189, where it is said that knowledge by the

defrauded person of facts which in the exercise ofproper prudence and diligence would

enable him to learn of the fraud is usually deemed equivalent to discovery.

[Headnote 1]

In August, 1945, when Louise sought to press a bigamy complaint against Fred on accountof the latter's marriage to Winifred, she discovered that Fred had divorced her (Louise) on

March 25, 1943. She knew that this decree had been obtained in the Eighth judicial district

court of the State of Nevada, in and for the county of Clark, sitting at Las Vegas, with the

clerk's office in said city. She knew then that she had never been notified of the

commencement or the pendency of such action. She knew, as she claims, that Fred knew at

the time where she was living. She was no stranger to litigation and was no stranger to

lawyersboth her own and adverse counsel. She waited until 1949, when it apparently suited

her purposes, to send her Los Angeles attorney to Las Vegas to check the 1943 decree and the

proceedings leading up to it. She had had knowledge of those proceedings continuously since

1945. The opportunity for checking them was as available in 1945 as it was in 1949. She

makes no explanation and offers no excuse for the delay. The books are replete with cases

holding, under much less convincing facts, that the statute of limitations commenced to run

from the date of the discovery of facts which in the exercise of proper diligence would have

enabled the plaintiff to learn of the fraud. The learned district judge commented that it was

significant that at the time Louise learned RIWKHGHFUHHVKHGLGQRWLQYHVWLJDWHWKH1HYDGDGLYRUFHEXWKHJDYHQRHIIHFWWRWKLVVLJQLILFDQFHKROGLQJRQO\WKDWVKHGLGQRWGLVFRYHUWKHDFWXDOIUDXGSHUSHWUDWHGE\WKHIDOVHDIILGDYLWIRUSXEOLFDWLRQRIVXPPRQVXQWLO$XJXVWDQGWKDWIRUWKDWUHDVRQWKHVWDWXWHGLGQRWFRPPHQFHWRUXQXQWLO


17/270

WKDWGDWH


of the 1943 decree, she did not investigate the Nevada divorce, but he gave no effect to this

significance, holding only that she did not discover the actual fraud perpetrated by the false

affidavit for publication of summons until August, 1949, and that for that reason the statute

did not commence to run until that date.

It is not necessary for us to determine whether or not the court, in order to purge its record

of the fraud, might not have had the authority so to do despite the fact that Louise's action

was barred by the statute. In Smith v. Smith, 68 Nev. 10, 226 P.2d 279, we approved the

action of the same district court in purging its record of an order, fraudulently obtained,

setting aside a prior divorce decree, although the matter was brought to the court's attention

by complaint of a plaintiff whose actions were likewise tainted with fraud. We there refused

to tie the hands of the court by the fraud of the person seeking the relief, holding that such

person merely constituted the instrument which brought the fraud to the court's attention.

However, we have no means of knowing whether the court would have so acted unless it felt

compelled so to do upon Louise's complaint. We do know that the very purpose of the court's

vacating of the 1943 decree obtained by Fred was to grant Louise's further prayer that she be

permitted to appear in that action and defend it. We do know that the district court could not

have had the slightest conception of the attitude or position that Louise would take in this

court, namely, that although she asked leave of the district court to permit her to appear and

defend the divorce action and stated many times that such was the purpose of desiring the

vacating of the decree, the district court was in error in granting her request and had no

authority to go any farther than to set aside the divorce decree. The learned district judge,though granting the relief sought by Louise, stated: The court is not in sympathy with the

motives of the plaintiff in bringing this action. We are aware of the rule accepted by this

court in Nevada Con. Mining Co. v. Lewis, 34 Nev. 500, 126 P. 105, 111: $FRXUWRIHTXLW\ZLOOQRWDVDJHQHUDOUXOHVHWDVLGHRUHQMRLQWKHHQIRUFHPHQWRIDMXGJPHQWUHJXODUO\REWDLQHGE\GHIDXOWLQWKHDEVHQFHRIDVKRZLQJRIDJRRGDQGPHULWRULRXVGHIHQVHWRWKH

RULJLQDODFWLRQ


A court of equity will not as a general rule set aside or enjoin the enforcement of a

judgment regularly obtained by default in the absence of a showing of a good and meritorious

defense to the original action.

An exception to this rule appears to be recognized where fraud is practiced in the very

matter of obtaining the judgment. In such cases the fraud is regarded as having been practiced

on the court as well as upon the injured party. (Black on Judgments, sec. 321; 23 Cyc. 1025.)


18/270

However, as we have seen, the district court was impressed throughout the entire

proceedings with Louise's insistence that she had a good and meritorious defense and desired

to press it in the divorce action itself. Although the court did set aside Fred's decree obtained

by his false affidavit, it has up to this time had no opportunity to do anything about Louise's

imposition upon it. One thing the court did do. It subsequently considered Fred's divorce

complaint, in the same action, after Louise refused to appear and defend, and granted Fred hisdivorceand that, during the pendency of the appeal to this court from the judgment vacating

the divorce decree and which appeal was apparently never called to the district judge's

attention.2

[Headnote 2]

We do not find it necessary to speculate upon the courses of action that may still be open

to the district court. Our holding is simply to the effect that Louise's action for fraud was

barred by the statute of limitations, but that the courtwas, and by our present order still is,IUHHWRWDNHVXFKDFWLRQDVPLJKWVHHPDSSURSULDWHXQGHUDOOWKHIDFWVZLWKUHIHUHQFHWR

WKHVWDWXVRIWKHIUDXGXOHQWDIILGDYLWDQGWKHGHFUHHWKHUHE\REWDLQHG

____________________

2

As part of the record on appeal there was filed in this court by stipulation of the parties a certified copy of

the record in action No. 15266. Although this contains the reporter's transcript of the first divorce hearing

(before Judge Watson) it does not contain the transcript of the second hearing (before Judge Henderson) or any

of the clerk's minutes. Hence we do not know what transpired. The formal judgment of divorce recites that the

court took judicial notice of its judgment setting aside the first divorce decree. It significantly omits any

statement of notice or knowledge of the pendency of the appeal.


free to take such action as might seem appropriate under all the facts, with reference to the

status of the fraudulent affidavit and the decree thereby obtained.

Reversed, and cause remanded to the district court for such further proceedings as to it in

its discretion may seem proper in accordance with the views herein expressed. Each party will

pay his own costs on this appeal.

Eather and Merrill, JJ., concur.

____________

69 Nev. 25, 25 (1952) State v. Koontz

THE STATE OF NEVADA on the Relation of THE TEXAS COMPANY,

A Corporation, Relator, v. JOHN KOONTZ, as Secretary of State of the


19/270

State of Nevada, Respondent.

No. 3682

January 29, 1952. 240 P.2d 525.

The State of Nevada on the relation of The Texas Company filed a petition against John

Koontz, as Secretary of State of the State of Nevada, for writ of mandate requiring respondent

to file without fee or charge copies of amendments to relator's articles of incorporation. The

Supreme Court, Merrill, J., held that charge provided by statute was unconstitutional as

applied to relator as violating commerce and due process clauses of federal constitution.

Writ granted.

John S. Sinai andJohn S. Belford, of Reno, for Relator.

W. T. Mathews, Attorney General, George P. Annand, Robert L. McDonald, Thomas A.

Foley, Deputy Attorneys General, of Carson City, for Respondent.

1. Mandamus.Where judgment, if recovered by relator foreign corporation in action to recover fees paid under statute

requiring payment of fees for filing copies of amendments to articles of LQFRUSRUDWLRQZKLFKZHUH

UHTXLUHGWREHILOHGXQGHUVWDWXWHFRXOGQRWEHSDLGIRURYHU\HDUVLQYLHZRIVWDWXWRU\SURYLVLRQDSSURSULDWLQJRQO\DQQXDOO\WRSD\VWDWHVSRUWLRQRIUHIXQGVVXFKUHPHG\ZDVQHLWKHUVSHHG\QRUDGHTXDWHDQGSHWLWLRQIRUZULWRIPDQGDWHUHTXLULQJVHFUHWDU\RIVWDWHWRILOHFRSLHVRIDPHQGPHQWVZLWKRXWIHHRUFKDUJHFRXOGEHPDLQWDLQHG


incorporation which were required to be filed under statute, could not be paid for over 97 years in view of

statutory provision appropriating only $1,000 annually to pay state's portion of refunds, such remedy was

neither speedy nor adequate and petition for writ of mandate requiring secretary of state to file copies of

amendments without fee or charge could be maintained. N.C.L.1929, secs. 6637-6644.

2. Courts.In determining whether statutory requirement that foreign corporation doing local business in state pay a

fee for required filing of copies of amendments to articles of incorporation, which fee was computable

under statute upon total authorized capital stock of corporation, was invalid as constituting a burden upon

interstate commerce as applied to relator foreign corporation, and as being a tax upon property beyondjurisdiction of state, state supreme court was bound by holdings of United States Supreme Court.

N.C.L.1943-1949 Supp., sec. 1841.

3. Commerce.While a state may not prohibit a foreign corporation from engaging in interstate commerce, state has

inherent power to prohibit foreign corporation from engaging in intrastate or local commerce within its

boundaries.

4. Corporations.


20/270

In admitting foreign corporations to do local business state may impose such conditions as it chooses.

5. Commerce.Fact that foreign corporation is carrying on interstate commerce within state does not carry with it rights

to engage in intrastate commerce in connection therewith, and such rights remain for state to grant.

6. Commerce.A state may, as a condition of entrance of a foreign corporation into state to engage in local business,

require payment of a filing fee reckoned upon total authorized capital stock, and even though thecorporation be engaged in interstate commerce, such requirement does not constitute a burden upon such

commerce nor a tax upon property beyond jurisdiction of state.

7. Corporations.A payment of a charge as a condition of entrance of foreign corporation into state to engage in local

business may be imposed as condition subsequent or as to future, provided such condition was imposed

when corporation originally entered state, and thus in fact constituted condition of original entrance.

8. Commerce; Constitutional Law.Generally once a foreign corporation is admitted to a state and is engaged therein in both local and

interstate business, a tax by state upon total authorized capital stock of corporation is invalid as violating

both commerce clause and due SURFHVVFODXVHRIIHGHUDO&RQVWLWXWLRQ


process clause of federal Constitution. U.S.C.A.const. art. 1, sec. 8, cl. 3; amend. 14.

9. Constitutional Law.Once a foreign corporation has been permitted to enter state to do local business, and corporation

thereafter engages in local and interstate business, a fee purporting to be entrance fee, provided by a statute

subsequently enacted and based upon its total authorized capital stock, cannot constitutionally be

demanded of it by what would in effect be a retroactive application. U.S.C.A.const. art. 1, sec. 8, cl. 3;

amend. 14.10. Commerce; Constitutional Law.

Where foreign corporation engaged in interstate commerce was admitted to state to do local business

when state did not require foreign corporation to file copies of amendments to articles of incorporation, and

state thereafter enacted statute requiring filing of such amendments and required payment of filing fee

reckoned upon total authorized capital stock of corporation, such condition to engaging in local business

was unconstitutional as applied to such corporation as violating commerce and due process clauses of

federal constitution. N.C.L.1931-1941 Supp., secs. 7421.01, as amended, laws 1951, chap. 275;

N.C.L.1943-1949 Supp., sec. 1841; U.S.C.A.const. art. 1, sec. 8, cl. 3; amend. 14.

OPINION

By the Court, Merrill, J.:The Texas Company is a Delaware corporation engaged, generally, in the business of

manufacture and sale of petroleum products and development of petroleum resources. It is

engaged in business in every state of the United States. As hereinafter related, it was admitted

to do local business in the State of Nevada in 1941. The business since then and now carried

on by the company in this state consists of the distribution and sale of products shipped into

the state from outside points. None of its products is produced, manufactured or processed

within the state. Assets of the company located within the state consist solely of products or


21/270

merchandise brought into the state and of facilities, such as bulk sales plants and service

stations, used in the local distribution and sale of such products and merchandise.

Nine bulk sales plants located within the state receive SURGXFWVGLUHFWWKURXJKLQWHUVWDWHVKLSPHQWVDQGGLVWULEXWHWKHPORFDOO\WRUHVHOOHUVDQGFRQVXPHUVLQWKHLUUHVSHFWLYH

DUHDV


products direct through interstate shipments and distribute them locally to resellers and

consumers in their respective areas. One of these plants is owned and operated by the

company itself. Of the remaining plants, two purchase the products direct from the company.

The rest operate as consignees of the products received, with title to the products remaining in

the company until delivery by the consignee to the purchaser and with proceeds of sales

collected for the company by the consignee. Of its business in this state, over 97 percent

consists of sales made directly or through consignees. The remaining income is derived fromthe operation and leasing of properties within the state.

The business done in Nevada and the assets here located constitute an exceedingly small

percentage of the company's total business and assets. The figures for 1950 (which company

officials estimate will substantially represent the figures for 1951) show that business done in

Nevada (of a total volume of $1,490,277.69) constitutes one-tenth of 1 percent of the

company's total business. Assets owned by the company and here located constitute 2 1/2

hundredths of 1 percent of the company's total assets.

It is clear from the record before us that the greater portion of the business done in this

state constitutes interstate commerce and that such business as is purely local in character is

so closely connected with the interstate operations as practically to constitute an extension ofthose operations.

On October 24, 1941, the company's total authorized capital stock was in the sum of

$350,000,000. On that date it qualified itself to do local business within the State of Nevada

by filing with the secretary of state of Nevada a copy of its articles of incorporation pursuant

to the provisions of sec. 1841 N.C.L. 1929. Sec. 1842 N.C.L. 1929 (then as now) required

payment of filing fees by foreign corporations in the same amount as fees paid by domestic

corporations. Sec. 7421.01 N.C.L. 1929, Supp. 1931-1941, provided fees (for the filing byGRPHVWLFFRUSRUDWLRQVRIDUWLFOHVDQGRIDPHQGPHQWVWRDUWLFOHVLQFUHDVLQJDXWKRUL]HG

FDSLWDOVWRFNIL[HGE\DJUDGXDWHGVFDOHEDVHGXSRQWRWDODXWKRUL]HGFDSLWDO


domestic corporations of articles and of amendments to articles increasing authorized capital

stock) fixed by a graduated scale based upon total authorized capital. Upon the filing of its

articles the company accordingly paid the statutory fee of $7,350 computed upon its then total


22/270

authorized capital. At that time sec. 1841 N.C.L. 1929 contained no requirements that foreign

corporations file with the secretary of state copies of any amendments which might

subsequently be made of their articles.

Effective March 29, 1949, sec. 1841 N.C.L. was amended to require that:

Any foreign corporation qualified to transact business in this state shall, upon the filing in

the state of its creation of any paper, document or instrument amendatory of, supplemental to,or otherwise related to the instrument of its creation, and which, pursuant to the laws of the

place of its creation are to be filed or recorded therein shall forthwith file with the secretary of

state of this state a copy thereof, * * *.

At the same time, the amounts of filing fees provided by sec. 7421.01 were substantially

increased by amendment of that section.

Effective April 28, 1949, the company's articles were amended to increase its authorized

capital to $500,000,000, such amendment being accomplished under the laws of Delaware by

filing a copy of such amendment with the secretary of state of Delaware. On October 6, 1949,

the company tendered to respondent secretary of state a copy of said amendment and

demanded that the same be filed without exaction of a fee. Respondent refused to file the

same unless the then statutory fee in the sum of $15,000 were paid.Effective March 22, 1951, sec. 7421.01 was again amended to increase the amounts of

fees payable by corporations. Effective April 24, 1951, the company's articles again were

amended pursuant to Delaware law to increase its authorized capital to $1,000,000,000. On

June 11, 1951, the company made tender to respondent VHFUHWDU\RIVWDWHRIDFRS\RILWVVHFRQGDPHQGPHQWZLWKGHPDQGWKDWLWEHILOHGZLWKRXWH[DFWLRQRIIHH


secretary of state of a copy of its second amendment with demand that it be filed without

exaction of fee. Respondent refused to file unless the then statutory fee in the sum of $97,500

be paid.

The company's demand on both occasions was based upon its contention that the statutory

fee, under the circumstances, was invalid as a violation of the commerce clause of the United

States constitution, art. 1, sec. 8, cl. 3, and of the due process clause of the fourteenth

amendment. Based upon these same contentions the company as relator has now applied to

this court for a writ of mandate requiring respondent to file copies of both amendments

without fee or charge therefor.

Respondent has interposed a demurrer to relator's petition and has also responded upon themerits. The demurrer challenges the propriety of mandamus in such a case.

Respondent's first contention in this regard is that the duty the performance of which

relator here seeks to compel, that of filing the corporate amendments, cannot be separated

from the obligation to collect the statutory fees for such filing; that the law does not enjoin

any duty upon him such as that relator would impose: a duty to file without collection of fees.

The statutes, however, secs. 1841 and 7421.01, respectively, impose two distinct duties:

that of filing and that of collection of fees. If the filing fee be constitutional, then the


23/270

collection thereof properly could be made a condition to the performance of the duty of filing.

On the other hand, if it be held unconstitutional, then its collection could not be regarded as a

proper condition. The duty to file would nevertheless remain: a ministerial act the

performance of which could be compelled by mandamus. We therefore regard this proceeding

as a proper method of determining the constitutionality of the statute requiring the payment of

the fees in question.Respondent next contends that relator has a plain, speedy and adequate remedy at law

through payment RIWKHVWDWXWRU\IHHVDQGWKHUHDIWHUEULQJLQJVXLWWRUHFRYHUWKHPXQGHU

WKHSURYLVLRQVRIVHFV


of the statutory fees and thereafter bringing suit to recover them under the provisions of secs.

6637-6644 N.C.L. 1929. Relator points out that even should judgment eventually be secured,

the recovery of such judgment would still remain somewhat of a problem. Our attention is

directed to the provisions of sec. 6644 N.C.L. 1929 which states:

For the purpose of paying the state's proportion of any refund of money which may be

made to claimants under this act, the sum of one thousand dollars annually is hereby

appropriated out of any moneys in the general fund of the state treasury not otherwise

appropriated, any surplus therefrom to revert to the general fund.

[Headnote 1]

Even without regard to other demands upon the fund thus provided and assuming its

continued existence out of moneys not otherwise appropriated and that the whole thereof

might annually be applied to payment of relator's claim, it would still appear that over 97years would be required for relator to recover the amount paid by it. Aside from questions

whether the remedy thus provided be plain and adequate in other respects, relator contends

that the time element alone would preclude it from being regarded as adequate and that it can

hardly be characterized as speedy. With this view we are constrained to agree.

The demurrer of respondent is overruled.

We come, then, to the question of the validity of our statutory requirement of a fee for the

filing by foreign corporations of amendments to their articles of incorporation, so far as that

requirement applies to the relator. Relator's contentions are that, computed as the fee is upon

its total authorized capital stock, it constitutes a burden upon interstate commerce and a tax

upon property beyond the jurisdiction of the state; that accordingly, the requirement violates

both the commerce clause of the United States constitution and the due process clause of the

fourteenth amendment.



24/270

[Headnote 2]

In dealing with questions of this federal character we are, of course, bound by the holdings

of the United States supreme court. Charges upon foreign corporations computed upon their

total authorized capital stock have been the subject of an extensive series of decisions by that

court, throughout which the law applying to such charges has developed. Neither the course

of that development, however, nor the rationale of its controlling principles can be said to beclear and consistent throughout. As was stated by Mr. Justice Van Devanter in the course of

one of the pertinent decisions:1

Cases involving the validity of state legislation of this character often have been before

this court. The statutes considered have differed greatly, as have the circumstances in which

they were applied, and the questions presented have varied accordingly. In disposing of these

questions there has been at times some diversity of opinion among the members of the court,

and some of the decisions have not been in full accord with others.

Mr. Justice Frankfurter, more recently has made this enlightening comment:2

Constitutional provisions are often so glossed over with commentary that imperceptibly

we tend to construe the commentary rather than the text.

As a result much confusion has existed among the state courts faced with the necessity for

determining the current state of the law. Many have been the occasions when state courts,

confronted with a new and clarifying federal opinion, have been compelled to overrule their

earlier decisions as erroneous interpretations of the significance of the supreme court's prior

holdings.

Venturing, as we are for the first time, into this uncertain field, we feel justified in

indulging in a more comprehensive discussion of the applicable rules and SULQFLSOHVWKDQZRXOGRUGLQDULO\EHRXUSUDFWLFH

____________________

1

International Paper Co. v. Massachusetts, 246 U.S. 135, 38 S.Ct. 292, 293, 62 L.Ed. 624, 629,

Ann.Cas.1918C, 617.

2

State of Wisconsin v. J. C. Penney Co., 311 U.S. 435, 61 S.Ct. 246, 250, 85 L.Ed. 267.


principles than would ordinarily be our practice. For purposes of clarity, our opinion properwill be confined to a comparatively brief recital of the pertinent rules and principles (as we

construe them to have emerged from their course of development to date) and shall leave

statements of authoritative source and more detailed explanatory matter to footnotes.

These principles, then, we deem to have been established:

[Headnotes 3-5]

First: While a state may not prohibit a foreign corporation from engaging in interstate


25/270

commerce within its boundaries,3 it does have inherent power to prohibit such a corporation

from engaging in intrastate or local commerce within its boundaries. Accordingly, it may, in

admitting such corporations to do local business, impose upon their admission such

conditions as it may choose.4 Further, the fact that interstate commerce is already being

carried on within the state, does not carry with it any right to engage in intrastate commerce in

connection therewith. That right remains for the state to grant.

[Headnote 6]

Second: A state may, as a condition of entrance of a foreign corporation to the state for the

purpose of engaging in local business, require payment of a filing fee UHFNRQHGXSRQWRWDODXWKRUL]HGFDSLWDOVWRFN

____________________

3

Alpha Portland Cement Co. v. Massachusetts, 268 U.S. 203, 45 S.Ct. 477, 69 L.Ed. 916, 44 A.L.R. 1219.

4

This venerable rule is traceable back through countless decisions of the supreme court to Bank of Augusta

v. Earle, 13 Pet. 519, 10 L.Ed. 274, and Paul v. Virginia, 8 Wall. 168, 19 L.Ed. 357, 360. In the latter case it was

stated: Having no absolute right of recognition in other States, but dependent for such recognition and the

enforcement of its contracts upon their assent, it follows, as a matter of course, that such assent may be granted

upon such terms and conditions as those States may think proper to impose. They may exclude the foreign

corporation entirely; they may restrict its business to particular localities, or they may exact such security for the

performance of its contracts with their citizens as in their judgment will best promote the public interest. The

whole matter rests in their discretion.


reckoned upon total authorized capital stock. Even though the corporation be engaged in

interstate commerce, this does not constitute a burden upon such commerce nor a tax upon

property beyond the state's jurisdiction.5 Indeed, a charge imposed as a condition RIRULJLQDOHQWUDQFHFDQQRWEHVDLGWREXUGHQFRPPHUFHLQDQ\UHVSHFWQRWLQWHUVWDWHFRPPHUFHVLQFHHQWUDQFHWRWKHVWDWHIRUWKHSXUSRVHRIGRLQJORFDOEXVLQHVVLVQRWQHFHVVDU\WRWKHHQJDJLQJLQVXFKFRPPHUFHLQWKHVHQVHWKDWSHUPLVVLRQRIWKHVWDWHLVUHTXLUHGQRUXSRQLQWUDVWDWHFRPPHUFHVLQFHXQWLOHQWUDQFHVXFKFRPPHUFHGRHVQRWH[LVW

____________________

5

Atlantic Refining Co. v. Virginia, 302 U.S. 22, 58 S.Ct. 75, 77, 82 L.Ed. 24, 28. The language of Mr.

Justice Brandeis in this opinion casts considerable light upon the reasons for such a rule.

* * * Whether the privilege [of engaging in intrastate commerce in Virginia] shall be granted to a foreign

corporation is a matter of state policy. Virginia might refuse to grant the privilege for any business or might

grant the privilege for some kinds of business and deny it to others. [A footnote at this point discloses that

Virginia does, in fact, refuse to foreign corporations the privilege of doing any intrastate public service


26/270

business.] It might grant the privilege to all corporations with small capital while denying the privilege to those

whose capital or resources are large. It might grant the privilege without exacting compensation; or it could

insist upon a substantial payment as a means of raising revenue.

As the entrance fee is not a tax, but compensation for the privilege applied for and granted, no reason

appears why the State is not as free to charge $5,000 for the privilege as it would be to charge that amount for a

franchise granted to a local utility, or for a parcel of land which it owned.

* * * The payment required is a single, non-recurrent chargea payment in advance for a privilegeextending into the long future.

No matter how large the company's local business may be, no matter how much, or how often, its issued

capital may be increased, no additional entrance fee is payable. * * * Nor is it unreasonable to base the fee upon

the amount of capital authorized at the time of the application, instead of charging a fee based upon the amount

of the capital then issued, or upon the amount of assets then owned, and exacting later additional fees if, and

when, more capital stock is issued or more assets are acquired. By fixing the fee in accordance with the capital

authorized at the time of the application for admission, the State relieves itself of the necessity of keeping watch

of changes in the future in these respects.

It is contended that a fee measured solely by the amount of the corporation's authorized capital stock

necessarily burdens interstate commerce. In support of that contention it is said that the authorized capital stock

represents property located in forty-seven States and several foreign countries used in both interstate and foreign

commerce. But this is not true. Authorized capital has no necessary relation to the property actually owned or

used by the corporation; furthermore, the fee for which it is the measure represents simply the privilege of doinga local business. Because the entrance fee does not represent either property or business being done, it is

immaterial that in fixing its amount no apportionment is made


of original entrance cannot be said to burden commerce in any respect: not interstate

commerce, since entrance to the state for the purpose of doing local business is not

necessary to the engaging in such commerce (in the sense that permission of the state is

required); nor upon intrastate commerce, since until entrance, such commerce does not exist.

____________________

between the property owned or the business done within the State and that owned or done elsewhere.

The entrance fee is obviously not a charge laid upon interstate commerce; nor a charge furtively directed

against interstate commerce; nor a charge measured by such commerce. Its amount does not grow or shrink

according to the volume of interstate commerce or the amount of the capital used in it. The size of the fee would

be exactly the same if the company did no interstate commerce in Virginia or elsewhere. The entrance fee is

comparable to the charter, or incorporation, fee of a domestic corporationa fee commonly measured by the

amount of the capital authorized. It has never been doubted that such a charge to a domestic corporation

whatever the amount is valid, although the company proposes to engage in interstate commerce and to acquireproperty also in other states. * * *

* * * As has been shown, the amount of the entrance fee is not measured by property, either within or

without the jurisdiction; and it is not a tax upon property. It is payment for an opportunity granted.

Nor is it a charge arbitrary in amount. The value of the privilege acquired is obviously dependent upon the

financial resources of the corporationnot only upon the capital possessed at the time of its admission to do

business, but also upon the capital which it will be in a position to secure later through its existing authority to

issue additional stock. Obviously the power inherent in the possession of large financial resources is not

dependent upon, or confined to, the place where the assets are located. * * * Great power may be exerted by the


27/270

company in Virginia although it has little property located there. And the value to it of the privilege to exert that

power is not necessarily measured by the amount of the property located, or by the amount of the local business

done, in Virginia.

Dealing with what Mr. Justice Brandeis characterized as the privilege of exerting great financial power, the

court stated in Ford Motor Co. v. Beauchamp, 308 U.S. 331, 336, 60 S.Ct. 273, 276, 84 L.Ed. 304, 306:

In a unitary enterprise, property outside the state, when correlated in use with property within the state,

necessarily affects the worth of the privilege within the state. Financial power inherent in the possession of assetsmay be applied, with flexibility, at whatever point within or without the state the managers of the business may

determine. For this reason it is held that in entrance fee may be properly measured by capital wherever located.


[Headnote 7]

Third: It is not necessary that such a condition of entrance be wholly precedent to

entrance.6 Such conditions may be imposed as conditions subsequent or as to the future,

provided they were so imposed at the time of the corporation's original entrance to the stateand thus in fact constituted conditions of original entrance.7 The effect of the occurrence

of circumVWDQFHVEULQJLQJVXFKFRQGLWLRQVVXEVHTXHQWLQWRSOD\LVWKHRUHWLFDOO\WRSODFHWKHFRUSRUDWLRQRXWVLGHWKHVWDWHDQGRQFHDJDLQVHHNLQJHQWUDQFH

____________________

6

The language and implications of Hanover Fire Insurance Co. v. Carr, 272 U.S. 494, 47 S.Ct. 179, 71 L.Ed.

372, to the contrary notwithstanding.

7

Lincoln National Life Insurance Co. v. Read, 325 U.S. 673, 65 S.Ct. 1220, 89 L.Ed. 1861; MontgomeryWard & Co. v. Corporation & Securities Commission, 312 Mich. 117, 20 N.W.2d 127; See also: Asbury

Hospital v. Cass County, 326 U.S. 207, 66 S.Ct. 61, 90 L.Ed. 6. The Lincoln National Life Insurance Co. case

and the Hanover Fire Insurance Co. case dealt with a different type of tax and involved a different constitutional

provision: the equal protection clause. They where, however, concerned with the matter of entrance fees. In the

latter case it was stated: (47 S.Ct. 183)

In subjecting a law of the state which imposes a charge upon foreign corporations to the test whether such a

charge violates the equal protection clause of the Fourteenth Amendment, a line has to be drawn between the

burden imposed by the state for the license or privilege to do business in the state and the tax burden which,

having secured the right to do business, the foreign corporation must share with all the corporations and other

taxpayers of the state. With respect to the admission fee, so to speak, which the foreign corporation must pay to

become a quasi citizen of the state and entitled to equal privileges with citizens of the state, the measure of the

burden is in the discretion of the state and any inequality as between the foreign corporation and the domestic

corporation in that regard does not come within the inhibition of the Fourteenth Amendment; but after itsadmission, the foreign corporation stands equal and is to be classified with domestic corporations of the same

kind.

In this class of cases, therefore, the question of the application of the equal protection clause turns on the

stage at which the foreign corporation is put on a level with domestic corporations in engaging in business within

the state.* * * the question * * * whether the law complained of is a part of the condition upon which admission

to do business of the state is permitted and is merely a regulating license by the state to protect the state and its

citizens in dealing with such corporation, or whether it is a tax law for the purpose of securing contributions to

the revenue of the state as they are made by other taxpayers of the state.


28/270

The court held the tax in question was not a condition upon which admission to do business in the state was

permitted and consequently held it invalid as a violation of the equal protection clause.


stances bringing such conditions subsequent into play is, theoretically, to place the

corporation outside the state and once again seeking entrance. It once again, theoretically, is

in its original position of seeking the initial right to engage in local business. Thus such

conditions subsequent cannot be said to burden interstate commerce or constitute

unconstitutional conditions of entrance any more than upon the corporation's original

entrance to the state. The position of the corporation is deemed to remain the same.8

>+HDGQRWH@

>+HDGQRWH@

____________________

In the Lincoln National Life Insurance Co. case, the court considered an Oklahoma statute providing an

entrance fee of $200 for foreign insurance companies and thereafter annual entrance fees computed on the

gross premiums received during the preceding calendar year. Domestic corporations were exempt from this fee.

The tax was attacked as violating the equal protection clause. The supreme court upheld the tax. The Hanover

Fire Insurance Co. case was distinguished, the court pointing out that there the foreign corporation, upon being

admitted to the state, had received an unequivocal license to do business. In the present case each annual

license, pursuant to the provisions of the Oklahoma constitution, was granted on condition.* * * The court

quoted from Fire Association of Philadelphia v. New York, 119 U.S. 110, 119, 7 S.Ct. 108, 113, 30 L.Ed. 342,

347, as follows:

The State, having the power to exclude entirely, has the power to change the conditions of admission at any

time, for the future, and to impose as a condition the payment of a new tax, or a further tax, as a license fee. If itimposes such license fee as a prerequisite for the future, the foreign corporation, until it pays such license fee, is

not admitted within the State or within its jurisdiction. It is outside, at the threshold, seeking admission, with

consent not yet given.

8

Application to the fee involved in the case at bar of this principle and of the law of the Lincoln National Life

Insurance Co. case, involves the determination that such a filing fee constitutes a valid condition subsequent to

the original admission of the corporation to the state: a condition as to the future upon which the corporation's

admission to do business was permitted. Such is the clear inference of the language of Mr. Justice Brandeis in

the Atlantic Refining Co. case as quoted in footnote 5. If one accepts the propriety of the fee there involved as a

condition precedent to original entrance, and the compelling reasons for its propriety as there set forth, it must

follow that a state properly may protect itself as to the future in such respects by the requirement that

amendments to articles be filed and that fees be paid therefor computed upon the increase

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