Davenport v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 15 August 1988
• Citation: 756 S.W.2d 678
• Parties: Dorothy DAVENPORT, Surviving Spouse of Clifton Davenport, Deceased, Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellee.
• Court: Tennessee Supreme Court

Page 678

756 S.W.2d 678

Dorothy DAVENPORT, Surviving Spouse of Clifton Davenport Deceased, Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellee.

Supreme Court of Tennessee at Jackson.

Aug. 15, 1988.

As Amended Oct. 31, 1988.

James S. Cox, Janice M. Holder, James S. Cox & Associates, Memphis, for appellant.

J. Kimbrough Johnson, Robert L. Moore, Thomason, Hendrix, Harvey, Johnson, Mitchell, Blanchard & Adams, Memphis, for appellee.

OPINION

FONES, Justice.

In this case the trial court dismissed plaintiff's action for breach of contract for lack of subject matter jurisdiction pursuant to T.C.A. § 20-2-201. The Court of Appeals affirmed, and this Court granted plaintiff's Rule 11 application. The sole issue is whether T.C.A. § 20-2-201 applies to foreign corporations that have qualified with the Secretary of State and appointed a registered agent for service of process in this State, or applies only to foreign corporations that are found to be doing business in Tennessee but have not qualified or appointed an agent for service of process in this State.

We find the latter to be the case, reverse and remand for trial on the merits.

I.

On 25 June 1986, plaintiff filed this action for breach of contract against defendant, State Farm Mutual Automobile Insurance Company, a foreign corporation qualified to do business and having a registered agent in Tennessee, appointed pursuant to T.C.A. § 48-1-1201. Process was served upon that agent. In her complaint plaintiff alleged that she is a resident of Shelby County, Tennessee, and the surviving spouse of Clifton Davenport. Plaintiff further alleged that Clifton Davenport, while covered by an insurance policy issued by defendant, suffered an accidental death by fire of which defendant had notice; that the insurance policy included a provision for payment of monthly benefits to the surviving spouse upon the death of the insured; and that defendant made three such payments to plaintiff, but then ceased making monthly payments. Plaintiff further pled that at the time of her husband's death, the filing of her claim with defendant, the receipt of partial benefits under the policy and the wrongful termination thereof, she was a resident citizen of Shelby County, Tennessee. Plaintiff prayed for an award of damages for breach of contract along with the penalty provided by T.C.A. § 56-7-105 for bad faith refusal to pay.

In response, defendant filed a motion to dismiss plaintiff's action for lack of subject matter jurisdiction. In its motion, defendant asserted that it is a foreign corporation qualified to do business in Tennessee and that the subject matter jurisdiction of Tennessee courts over actions is limited by T.C.A. § 20-2-201 to any transaction had, in whole or in part, within this State or any cause of action arising here. Defendant asserted that plaintiff's cause of action did not satisfy either requirement as the insurance policy was issued in Michigan to a Michigan resident who subsequently died in Michigan.

The trial court found that plaintiff's action did not satisfy the requirements of T.C.A. § 20-2-201 and dismissed the case for lack of subject matter jurisdiction. The Court of Appeals affirmed for the same reason advanced by the trial judge.

II.

The proper adjudication of the controlling issue in this case requires that we examine the origin and trace the history of chapter 226, Public Acts of 1887. That legislation was enacted as a direct response to this Court's decision in Chicago & Alton Railroad Co. v. Walker, 77 Tenn. (9 Lea) 475 (1882). A brief reference to the status of foreign corporation law at the time of that decision is appropriate.

During the nineteenth century corporations were considered to be present only in the state in which they were chartered, and under the prevailing view could only be sued in that state. See Bank of Augusta v. Earle, 38 U.S. (13 Pet.) 519, 588, 10 L.Ed. 274 (1839). To overcome the obvious problems created by this limitation, the courts developed a theory upon which to base in personam jurisdiction over foreign corporations. Under this theory, a foreign corporation was deemed to have consented to the jurisdiction of the courts of a state as a condition to doing business in that state. Lafayette Insurance Co. v. French, 59 U.S. (18 How.) 404, 15 L.Ed. 451 (1856); Developments in the Law: State-Court Jurisdiction, 73 Harv.L.Rev. 909, 920 (1960); Note, "Doing Business:"--Defining State Control Over Foreign Corporations, 32 Vand.L.Rev. 1105, 1108 (1979).

Tennessee adopted the consent theory as a basis of in personam jurisdiction over foreign corporations in Chicago & Alton Railroad Co. v. Walker, supra. In that case the plaintiff sued an Illinois railroad which had its principal office in Chicago, and had track only in Missouri and Illinois. The defendant did not have an office in Tennessee and had not appointed an agent in Tennessee for service of process. However, defendant had a "travelling agent" in this State whose duties included the solicitation of travel over the railway line. This agent operated in Tennessee, and received mail in Tennessee, though he did not have a fixed office or residence in Tennessee. In the course of his business activities in Tennessee the travelling agent induced the plaintiff to utilize defendant's railroad during a trip from St. Louis to Kansas City. Upon his return, plaintiff filed an action for breach of contract against defendant alleging that the railroad had failed to provide reclining seats equal to a sleeping car as promised. Service of process was had on the travelling agent in Chattanooga.

On appeal to this Court, defendant argued that service of process upon the travelling agent could not give Tennessee courts jurisdiction over the defendant. The Walker Court noted that since plaintiff's action was transitory, the action could be brought wherever the defendant was found. Id. 77 Tenn. at 478. The Walker Court then acknowledged the general principle that "[a] corporation is ... supposed to be located at its principal office." Id. However, the Court stated that "it may be that a corporation can be said to be situated, for the purpose of being sued, wherever it has an established place of business ..." Id. As an example, the court noted that one Tennessee statute required foreign corporations as a condition to doing business in this State to have an agent authorized to acknowledge service of process in Tennessee. Id. The Court then held that even where the provision for an agent for service of process did not apply, a foreign corporation could not escape the jurisdiction of Tennessee courts.

[T]here is no doubt that foreign corporations may be held subject to the general provisions of our statutes with respect to service of process on corporations, and it is perfectly legitimate to construe these provisions as applicable to foreign as well as domestic corporations, where the language employed will allow this construction. Foreign corporations doing business in this State, with a knowledge of these provisions, cannot complain that they are made to apply to them.

Id. 77 Tenn. at 478-79.

The Court then examined the railroad's contention that service of process upon its "travelling agent" was not sufficient to bring the defendant before the courts of this State. The Court noted that the statutes on service of process provided for service on corporations with an office or agency within this State, but did not provide for service of process upon a travelling agent. Id. 77 Tenn. at 482. Since the defendant did not have an office or agency in Tennessee the court held that service of process upon the travelling agent was not sufficient to bring the defendant before the courts of this State and dismissed the action.

In response to Walker the legislature enacted chapter 226, Public Acts of 1887. The act, which became effective upon its passage 28 March 1887 reads as follows:

AN ACT to subject foreign corporations to suit in this State.

SECTION 1. Be it enacted by the General Assembly of the State of Tennessee, That any corporation claiming existence under the laws of any other State, or of any country foreign to the United States 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 be sued 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.

SEC. 2. Be it further enacted, That 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 the state shall be held to be doing business here within the meaning of this Act.

SEC. 3. Be it further enacted, 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 arises took place, or if the agency through which the transaction was had be itself a corporation, then upon any agent of that corporation upon whom process might have been served if it were the defendant. The officer serving the process shall state the facts, upon whom issued, etc., in his return, and service of process so made shall be as effectual as if a corporation of this State were sued, and the process has been served as required by law; but in order that defendant corporation may also have effectual notice, it shall be the duty of the Clerk to immediately mail a copy of the process to the home office of the corporation by registered letter, the postage and fees for which shall be taxed as other costs. The Clerk shall...