Miller v. American Mut. Acc. Ins. Co.

• Decision Date: 26 January 1893
• Citation: 21 S.W. 39,92 Tenn. 167
• Parties: MILLER v. AMERICAN MUT. ACC. INS. CO.
• Court: Tennessee Supreme Court

21 S.W. 39

92 Tenn. 167

MILLER v. AMERICAN MUT. ACC. INS. CO.

Supreme Court of Tennessee.

January 26, 1893

Appeal from circuit court, Davidson county; W. K. McAlister, Judge.

Action by John S. Miller against the American Mutual Accident Insurance Company. Judgment for defendant. Plaintiff appeals. Reversed.

The other facts fully appear in the following statement by Lurton, C.J.:

This case was heard by the circuit judge without a jury, upon the following agreed statement of facts: "On the 11th day of February, 1890, the defendant issued an accident insurance policy to complainant, the original of which is hereto attached, marked 'Ex. A,' and is the policy mentioned in the declaration. On the 3d day of April, 1890, plaintiff with others, went snipe hunting in the country near Clarksville, Tenn., plaintiff using a gun which was the property of W P. Lawrence's father. Coming home in the evening, he placed the gun in the office of the Arlington Hotel, back of the clerk's desk. On Saturday, April 5th Miller left his home about 8 o'clock A. M., went direct to the hotel, found the gun where he had left it, and prepared to clean the gun, which was a breech-loading shotgun, in order to return it to Dr. Lawrence. He went into the billiard room of the hotel and procured a piece of billiard cloth, and went into the next house which was then occupied as an office by L. A. Ragsdale, and also by Miller. There was no one present but W. D. Sheldon, the bookkeeper of Ragsdale. Miller seated himself on a sofa, with his left side towards the door, with Sheldon near and in front of him. Miller began to clean the gun, which rested on his legs between his knees and hips, while Sheldon read an account of the floods in Mississippi. The muzzle of the gun was to his left side. While rubbing the gun with the cloth in his left hand, it was suddenly discharged, the entire load of shot passing through his left wrist, which necessitated the immediate amputation of his arm between elbow and wrist which amputation was performed that day by Dr. Lawrence. Miller states positively that he did not know the gun was loaded, and that he does not know who placed the cartridge in the gun. He was perfectly sober. He afterwards learned, on examining the gun, that one barrel was very easy on the trigger, and the hammer could be thrown by striking the butt on the floor. This defect was remedied by a gunsmith some time afterwards. He denies positively that he purposely discharged the gun, but claims it was purely an accidental discharge. He gave notice and made proofs of loss, as required by said association, which were receipted for by the defendant. All dues had been paid. The defendant, in 1887 procured and had properly executed, etc., a charter, of which Exhibit B, attached hereto, is agreed to be an exact copy. It organized under same, and solicited business, and issued policies of insurance against accidents up to and after April, 1890, using the form Ex. A. in their business, and said association undertook to do no other kind of business. It paid many losses on account of accidents, but has paid plaintiff nothing on account of his injury. It is agreed that Miller had no actual knowledge of want of power in defendant to issue and insure as provided by said policies, if such want of power exists. It is admitted that said association took no action, either to accept or reject the amendment passed by the legislature in 1889 to charters for insurance companies. See Acts 1889, c. 224, p. 445. Miller lives in Clarksville, Tenn., where the accident happened." The circuit judge, being of opinion that the contract of insurance, in so far as it undertook to insure against an injury occurring while the assured was not traveling, was beyond the power and authority of the defendant company under its charter, gave judgment for the defendant.

p>Page West & Burney, for appellant.

Baxter & Hutcheson, for appellee.

LURTON C.J.

The policy held by the plaintiff insured him "against external bodily injuries effected through external violent and accidental means." It is clear that, all other questions aside, the contract covers the injury sustained by him. The insistence of the defendant is that, under its charter, it had no authority to make so broad a contract, and that its power to insure the plaintiff by its organic law was limited to insurance against accidents sustained "in traveling," and that, inasmuch as he was not injured while traveling, there can be no recovery in his favor. The defendant corporation was organized in 1887 under the general act of 1875 providing for the creation of private corporations. The power conferred by that act upon insurance companies, in regard to insurance against accidental injuries, was limited to insurance against injuries to persons "in traveling." The constitution of the state provides that "no corporation shall be created, or its powers increased or diminished, by special laws, but that the general assembly shall provide by general laws for the organization of all corporations hereafter created, which laws may at any time be altered or repealed; and no such alteration or repeal shall interfere with or divest rights which have become vested." Article 11, § 8. The act of 1875 reserved the right to "repeal, annul, or modify" all charters obtained thereunder. Without stopping to criticise the weight of the words contained in this act concerning the power to alter a charter by adding to the powers therein granted, it is sufficient to say that the power existed under the constitution, and the legislature, without regard to the reservation in the act, had the right to amend any general law concerning the powers of corporations organized thereunder. Acting under its constitutional power, the legislature of 1889 so amended the act of 1875, in regard to the power of insurance companies, as to confer upon all such companies theretofore or thereafter organized under that act the power "to make insurance against disabilities to persons by sickness or disease or other bodily infirmities." A disability is defined as "a deprivation of ability," "state of being disabled," "incapacity." The power conferred by the amendment was to insure against disabilities, whether such disability resulted from sickness or disease or from "other bodily infirmity." One who loses a leg or arm or eye, or is otherwise disabled, whether temporarily or permanently, by external and violent means, is one suffering from an imperfection, and is to that extent disabled by a "bodily infirmity." But the defendant company insists that, inasmuch as it has taken no action in regard to this amendment, and as it is such an alteration in its charter as to be a fundamental amendment, under section 5 of the act of 1875 such an amendment is inoperative as to it until it has been submitted at a general stockholders' meeting, and adopted by a majority of its shareholders. For the plaintiff it is contended, in answer to this defense: (1) That the contract has been executed upon his part, and that it would be inequitable and unjust to permit the corporation to rely upon the doctrine of ultra vires, under such circumstances. (2) That by issuance of a policy in express terms insuring him against injury from external violent and accidental means, without any regard as to whether such injury was sustained "in traveling," it has assumed to exercise the power conferred by the amendment, and thereby represented to him that it had accepted and adopted the amendment in the manner necessary to obtain the power it had exercised; that it should therefore be estopped from showing that it had not in fact adopted the amendment. (3) That, if none of these answers be well taken, he then insists that the amendment was not fundamental, but merely auxiliary, and that it was not necessary that such an amendment should be accepted by the voluntary action of the shareholders.

We will consider these matters in the order in which they have been stated. We recognize a diversity of opinion in the courts of America as to the right of either party to rely upon the defense of ultra vires, when the contract is not expressly prohibited, and is not immoral, and has been fully executed upon one side. The theory upon which the cases rest which hold that the defense is not to be entertained when the act is one merely in excess of express authority seems to be that such a contract should be regarded as a mere breach of duty by the agents of the corporation, and that the state has ample remedy for such abuse, or for a usurpation of power, in a proceeding to annul the charter; that to permit such a defense is of no service to the state in preventing corporate usurpation, or in promoting the public interests, and only operates to encourage dishonesty and promote injustice. Resting upon one or more of these arguments, many cases might be cited. These are, then, a class of cases which make a distinction between acts merely in excess of authority and those which, in addition, are affirmatively forbidden, or immoral, or in contravention of some principle of public policy. It seems to us that the true foundation of the doctrine of ultra vires lies in the proposition that every act of a corporation in excess of its powers is an act in contravention of public policy, and, for that reason, to be held null and void. The ground upon which corporate privileges are conferred is that the public interests may be thereby subserved. If this is not so, then all such concessions are mere acts of legislative favoritism, and contravene the foundation upon which government is supposed to rest,-that all are to be protected in the enjoyment of equal rights and privileges. Charters must be supposed to be, therefore, granted upon the supposition that some...