92 Tenn. 167 | Tenn. | 1893
This case was heard by the Circuit Judge, without a jury, upon the following-agreed statement of facts:
“ On the eleventh day of Febi'uary, 1890, the-defendant issued an accident insurance policy to-complainant, the original of which is hereto attached, marked ‘Exhibit A,’ and is the policy mentioned in the declaration. On the third 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.
*170 “ On Saturday, April 5, Miller left his home about eight 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; 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. H. Sheldon, the bookkeeper of Ragsdale. Miller seated himself on a sofa, with his left side toward 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 the elbow and wrist, which amputation was performed that day by Hr. 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.
*171 “ He denies positively that he purposely discharged the gun, hut 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, ‘Exhibit 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 of 1889, Ch. 224, p. 445.
“Miller lives in Clarksville, Tennessee, 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 au
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 authoi’ity to make so broad a contract, and that its power to insure the plaintiff, by its oi’ganic law, was limited to insurance! against accidents sustained “m traveling,” and that,, inasmuch as he was not injured while traveling, there can be no recovery • in his favor.
The defendant corporation was oi’ganized in 1887,. under the general Act of 1875 pi’oviding for the creation of private corporations. The power conferred by that Act upon insurance companies, in regal’d to insurance against accidental injuries, was limited to insurance against iujui’ies to persons “ in traveling.” The Constitution of the State provides-that “ no corporation shall he 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 cox’poi’ations hereafter created, which laws may, at any time, he-altered or repealed, and no such alteration or repeal shall interfere with, or divest, lights which have become vested.” Art. XI., Sec. 8. The Act of. 1875 reserved the right to repeal, annul, or modify all charters obtained thereunder. 'Without
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 the issuance of a policy in express terms insuring him against injury by external, violent, and accidental means, without any regard as-to whether such injury was sustained “ in traveling,” that 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
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 power 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 free
It must be,, therefore, that any ^.ct in excess of these granted powers is an act contrary to public policy, and, upon that ground, illegal and void. Any other view, by which such . acts are to be •supported because executed, would operate as an •enormous practical extension of the power of corporations. The view this Court has taken has therefore been that, “all acts outside the object of its creation, as defined in the law of its organization, and, therefore, beyond the powers conferred upon it,” are acts not voidable only, but wholly void. Buckeye Marble Co. v. Harvey, ante, p. 115; Elevator Co. v. M. & C. R. R. Co., 85 Tenn., 705; Mallory v. Oil Works, 86 Tenn., 598.
The rule, and the foundation upon which it rests, as held by the English Courts, is identical with our own. The English doctrine is summarized by Mr. Beach in these words: “ Corporations . are created for . fixed purposes, with certain specified powers. It is deemed to be public policy to keep them strictly within- bounds so defined. There is an implied prohibition to go beyond such limits,
The remedy, in case one of the parties has received a benefit under such a contract, which, ex cequo et bono, it ought not to retain, ‘ is a suit in disaffirmance and for an accounting. Buckeye Marble Co. v. Harvey, supra.
The plaintiff’s suit is upon the contract, and in affirmance of it, and, if there he nothing else in the case, could not be maintained.
But is the defendant company, for any reason, estopped to show that this amendment had not been adopted? The provisions of the Act of 1875, concerning legislative amendments of charters obtained under the general law, is in these words: “ The right is reserved to repeal, annul, or modify this charter. If it is repealed, or if the amend-
It is to be observed that the State does not by this Act undertake to arbitrarily impose a fundamental1 alteration, and require the corporation to continue in business under the amendment. It does, however, demand that the corporation shall accept the amendment, however radical it may be, or continue its existence only for the purpose of winding up its business. In other words, the State says to every corporation to be organized under this law, “ I reserve the right to repeal or amend this charter at any time. . If the amend
Under this'Act, if the alteration be fundamental, the corporation must do one of two things — accept the offered amendment, or wind up.
The defendant says that it did neither. The law conclusively presumes that every officer, agent, and stockholder of this company knows the general law of the State affecting its powers and its business. The corporation, regarded as an entity, must be taken to have known of the right reserved by the State to amend its charter. This right was written in its very face. It must be taken to' have known that the State, by the Act of 1889,. had proposed an amendment. It must be taken to have known that it must accept this added power or it must cease to do . business. It knew that every such corporation which should thereafter be found engaged in the doing of new business-would be regarded .by all who dealt with it as-having all the powers. conferred by the Act of
“ If a person deal with an agent of a corporation within the scope of his apparent authority, and without notice of the non-performance of any formality prescribed by the charter or by-laws as a condition precedent to the agent’s authority to act, he will be entitled to assume that the formality has been complied with, and the corporation will be estopped from showing that the agent had no authority to bind it by reason of a failure to comply with the prescribed condition.” Mor. on Corp., Sec. 610, 686.
Thus, as against bona fide holders, a corporation was held estopped to show that its bonds were
.So, when the power is given to a county to issue bonds upon terms prescribed in the Act, and the duty of determining when the conditions have been complied with is imposed upon certain officers or a •particular Court, and the bonds are afterwards issued, and recite upon their face that these conditions have been complied with, the county is es-topped from setting up any irregularities in their issue, and contrary to the recital on the bonds, as between it and an innocent purchaser. Nelson v. Haywood County, 3 Pickle, 781; Town of Cohoma v. Eaves, 92 U. S., 484.
The case of the Royal British Bank v. Turquand, 6 El. & Bl., 327, is in point. The directors, by the charter, called the deed of settlement, were only authorized to borrow money upon obtaining a resolution at a general meeting of the company. The directors having borrowed, without such a resolution, from one who loaned in good faiths on suit, the bank was held liable.
Jervis, C. J., said: “We may take it for granted that the dealings, with these companies are not like dealings with other partnerships, and that the par
To the same efiect is the case In re County Life Ass. Co., L. R., 5 Ch. App., 293. In that case Gifford, L. J., said: “ A stranger must be taken to have read the general Act under which the company is incorporated, arid also to have read the articles of association; but he is not to be taken to have read any thing more, and, if he knows nothing to the contrary, he has a right to assume, as against the company, that all matters of internal management have been duly complied with.”
The well-known general rule applicable to one dealing with a company purporting to be a corporation seems to be applicable where the inquiry is as to whether an amendment has or has not been accepted, and the company, by acts of user, has represented itself as having the power conferred by the amendment. That rule is, that as against all persons who have entered into contracts with bodies assuming to act in a corporate capacity, it is 'sufficient for such bodies to show themselves to be corporations de facto.
So in Alabama, where the rule concerning the defense of ultra vires is identical with our own, it has been held that “if one contract with a corporation in a matter within its corporate power, the mere making of the contract estops the promisor from disputing the corporation’s regular and complete organization.” Lehmon v. Warner, 61 Ala., 465. In the later case of Sherwood v. Alvis, 83 Ala., 118, Stone, C. J., said: “The distinction is between the entire absence of authority in the organic law itself and a failure to comply with some prerequisite which the law has made a condition precedent to the exercise of corporate functions. In the one case there is a want of power, and in the other only an abuse of power conferred.”
Let us apply this principle to the case in hand. One dealing with this corporation is bound to take notice of the statute and its amendments under which it was doing business. He was not bound to go any further. When he found this company engaging in new business after the amendment of its charter undér the Act of 1889, he was bound
“ If a portion of the share-holders undertake to accept a new charter or to adopt new articles of association on behalf of the whole company, their acts may he ratified by the remaining members of the company, and ratification may he implied from mere acquiescence or a neglect on the part of the dissenting share-holders to restrain , the company from departing from its original constitution.’’ Mor. on Corp., Sec. 623.
Ratification by all the share-holders of an act void as in excess of the powers of the company, under any circumstances, would not effectually charge the corporation. But when the question is, as here, as to the adoption or non-adoption by share-holders of an amendment to the' charter, and
"Was this amendment fundamental, or merely auxiliary? The Act does not, and in the nature of the question could not, define the two classes of amendments. "With respect to the distinction between the two classes of amendments we must look to the common law for the principles which distinguish them. "Whether the Act is to be construed as arbitrarily imposing amendments not fundamental, or as requiring their acceptance by a majority of the corporation, or by the directors, as is admissible upon some of the authorities, it is not necessary for us to determine.
With reference to what are auxiliary amendments, the cases seem in hopeless conflict. There are cases going so far as to hold that any alteration, no matter how immaterial, which in any way affects the contract between the corporation and its stockholders is to he regarded as fundamental. The case of Zabriskie v. Hackensack, 18 N. J. Eq., 185, is a leading case for this doctrine. See also Potter
In view of the consequences imposed by our Act, when an amendment is proposed, both to the cor-poi’ation itself as well as to stockholders incapable of consenting, it would seem to be the sounder rule that -only very material amendments, radical and vital in their character, should be regarded as requiring unanimous adoption.
In the view we take of the case in hand, it. is unnecessary to decide whether the amendment proposed by the Act of 1889 was fundamental or only auxiliary. For the purposes of this case, we have assumed it to have been fundamental, and> hence, to require the unanimous consent of all who should continue share-holders, this being the position assumed by the learned counsel for the defendant corporation.
The next defense presented is that the plaintiff’s injury resulted “from voluntary exposure to unnecessary danger.”
Judgment reversed, and judgment here according to the declaration, with costs.