Connecticut Mut. Life Ins. Co. v. Spratley

• Decision Date: 03 April 1897
• Citation: 42 S.W. 145,99 Tenn. 322
• Parties: CONNECTICUT MUT. LIFE INS. CO. v. SPRATLEY.
• Court: Tennessee Supreme Court

42 S.W. 145

99 Tenn. 322

CONNECTICUT MUT. LIFE INS. CO. v. SPRATLEY.

Supreme Court of Tennessee.

April 3, 1897

Appeal from chancery court, Shelby county; John L. T. Sneed Chancellor.

Bill by the Connecticut Mutual Life Insurance Company against Linda Y. Spratley for an injunction restraining the enforcement of a judgment. From a decree in favor of complainant, defendant appeals. Reversed.

Turley & Wright, for appellant.

Estes & Fentrees, for appellee.

BEARD J.

The complainant is a corporation organized under the laws of the state of Connecticut to carry on a life insurance business and has its principal situs in Hartford, in that state. For many years prior to the year 1894 it actively prosecuted its work in the state of Tennessee, soliciting applications for life insurance, and issuing policies upon such applications as were approved by its officers. In the year 1889, and afterwards in 1893, an agent of this company was in the state of Tennessee, and by his solicitations induced one B. R Spratley, a citizen of this state, to apply for insurance on his own life, and upon these applications the complainant issued two policies, one of which was for $5,000 and the other for $3,000, payable, at his death, to his wife, the defendant, Linda Y. Spratley. Both policies were delivered in this state. In the year 1896, B. R. Spratley died, and proof of his death was forwarded to the company. Very soon thereafter complainant sent O. N. Chaffee, one of its employés, into the state, to investigate this claim, and the conditions under which this death occurred. He came, and had interviews with the beneficiary, Mrs. Spratley, her brother and other parties, of all which he made report to his home company. Upon receiving this report, the complainant, through its vice president, wired the agent as follows: "We think case [referring to Spratley's death claim] should be settled for reserve or thereabouts." After receiving this telegram, Chaffee visited Mrs. Spratley, and submitted an offer to settle on the terms indicated in it. This offer was, however, rejected. While he was in this state on the business and occasion referred to, suit was instituted by the beneficiary against the insurance company for the amount alleged to be due on these policies in the circuit court of Shelby county, and process was served on Chaffee as the agent of the company. At the same time all the requirements of chapter 226 of the Session Acts of 1887, with regard to giving other and further notice of the bringing and pendency of this suit, were complied with. The insurance company ignoring this action, in due time judgment by default was taken against it, upon which an execution was subsequently issued. Thereupon the bill in this cause attacking the judgment upon the ground that it was taken without valid service of process; the complainant alleging that it had not, at the time of the institution of the suit in the circuit court, nor had it had for several years prior thereto, any office or agency in Tennessee; that Chaffee, upon whom service was attempted, was a special agent, for a special purpose, only temporarily in Memphis, and that as such special agent he was not amenable to process issued against the complainant company; and, further, that chapter 226 of the acts of the legislature of 1887, upon which the circuit court procedure rested, was void, because it violated article 5 of the amendment to the constitution of the United States, and also the fourteenth amendment to the constitution of the United States, in that, under the provisions of this act, a defendant was "deprived of property without due process of law"; and it also violated so much of section 17 of the first article of the constitution of the state of Tennessee as provides that "every man *** shall have remedy by due course of law." The first ground of attack will be hereafter noticed. We will at once examine the question raised upon the constitutionality of this act. Sections 2831-2834 of the Code, corresponding with sections 4539-4542 of Shannon's New Code, regulate the mode of suing corporations, and apply equally to foreign and domestic corporations. Railroad Co. v. Walker, 9 Lea, 475; Peters v. Neely, 16 Lea, 280. But they did not cover the case of a foreign corporation having a resident agent in the state. Railroad Co. v. Walker, supra. This defect in the law disclosed by this last-named case led to the passage of the act which is assailed for unconstitutionality by the complainant. The provisions of this act are embedled in sections 4543-4546 of Shannon's New Code. By the first section it is provided that "any corporation claiming existence under the law of any other state, found doing business in this state, shall be subject to suit here to the same extent that corporations of this state are by the laws thereof liable to the same, so far as relates to any transaction had in whole or in part within this state, or any cause of action arising here but not otherwise." Section 2 defines what is meant by the term "found doing business in this state," in these words: "Any corporation having any transaction with persons or having any transaction concerning any property situated in this state, through any agency whatever acting for it within this state shall be held to be doing business within the meaning of section one." Section 3 provides that "process may be served upon any agent of said corporation found within the county where the suit is brought, no matter what character of agent such person may be and in the absence of such an agent, it shall be sufficient to serve the process upon any person, if found within the county where the suit is brought, who represented the corporation at the time the transaction out of which the suit arising took place," etc. In Telephone Co. v. Turner, 88 Tenn. 265, 12 S.W. 544, it is held that this act did not apply to any foreign corporation having resident agents in the county where the suit is brought; but that the case presented in this record was one within its provisions we think is clear. The question is, is it constitutional? It may be said that in this legislation Tennessee is only following in the footsteps of many other states of the Union. So diversified and widespread have been the operations of corporations that possibly every state has, for the protection of its own citizens, found it necessary to adopt similar laws. In Insurance Co. v. French, 18 How. 404, with regard to a judgment obtained in a court of Ohio against an Indiana corporation in a suit where service was had on a resident agent in Ohio, the supreme court of the United States said: "It cannot be deemed unreasonable that the state of Ohio should endeavor to secure to its citizens a remedy in their domestic forum upon this important class of contracts made and to be performed within that state, and fully subject to its laws; nor that proper means should be used to compel foreign corporations, transacting their business of insurance within the state for their benefit and profit, to answer there for the breach of their contracts of insurance there made and to be performed." For a long period it has been settled that a corporation created in one state has no right, under the constitution of the United States, to transact business in another state, save by the consent, expressed or implied, of that state; and this consent may be given on such terms as the state may see proper to impose, and the terms so imposed are binding on the corporation. Paul v. Virginia, 8 Wall. 168. The only limitation upon this right is that the conditions imposed must not be repugnant to the constitution or laws of the United States, or to that principle of natural justice which forbids condemnation without opportunity for defense. Insurance Co. v. French, supra. So that, if a state permits a foreign corporation to do business within her limits, and at the same time provides that in suits against it for business there done process shall be served upon its agent, the provision is to be deemed a condition of the permission; and corporations that subsequently do business in the state are to be deemed to assent to such condition as fully as though they had specially authorized their agent to waive service of process. St. Clair v. Cox, 106 U.S. 350, 1 S.Ct. 354. Continuing in that case, the court said: "Such condition must not, however, encroach upon that principle of natural justice which requires notice of a suit to a party before he can

be bound by it. It must be reasonable, and the service provided should be only upon such agents as may be properly deemed representatives of the foreign corporation." As illustrating the length to which the courts have gone in subjecting foreign corporations to actions or demands which arise in the state of the forum, by service of process on some representative within its territorial limits, the cases of Coleman Iron Works v. Mining Co., 15 Cal. 433, Shickle, H. & H. Iron Co. v. Wiley Const. Co., 61 Mich. 226, 28 N.W. 77, and Pope v. Manufacturing Co., 87 N.Y. 137, may be referred to. These cases carry the doctrine of representation far beyond the case presented in this record, and much beyond what is required of us in order to sustain the judgment here complained of. In Pope v. Manufacturing Co., supra, the foreign corporation, in a suit by a citizen of New York on a demand growing out of a transaction in that state, was brought into court by service on its president, who was passing through to a seaside resort, and war in no sense there in his official capacity, or upon any business connected with his corporation; and yet it was held that this service would sustain a judgment against a corporation. While not feeling it necessary to agree to the conclusion reached, yet the...