Union Guaranty & Trust Co. v. Craddock

Bunn, C. J., (after stating the facts). The first contention of the appellant is that the service of summons on the defendant insurance company by Boyd & Shelby as its agents was insufficient to compel its attendance, and that no valid judgment could, therefore, be rendered against it, and that the judgment rendered herein is void ; and that for that reason the summons, served upon the appellant in Pulaski county to appear in the said Sebastian circuit court is also void—in other words, is not such service as is authorized by statute to be binding upon it. 1. Service of process on foreign insurance company. First, then, as to the service of summons upon the defendant insurance company, the principal in the bond sued on. At common law the courts of one State have no jurisdiction over the corporations of other States, for the simple reason that there is no way by which service of summons may be made; for, as stated in Angelí & Ameson Corporations (10th ed.), sec. 402 : “It has been, thought that as a corporation can sue within a foreign jurisdiction, there is no reason why it should not be liable to be sued without its (own) jurisdiction, in the' same manner, and under the same regulations, as domestic corporations. ' The technical difficulty which is said to stand in the way is, that the process against a. corporation must, by the common law, be served on its head or principal officer, within the jurisdiction of the sovereignty where this artificial body exists. In Bushel v. Commonwealth Insurance Co., 15 Serg. & R. 176, it is said: “The process against a corporation, by the common law, must be served on its head or principal officer, within the jurisdiction of the sovereignty where this artificial body exists. If the president, of a bank of another State were to come within this State, he would not represent the corporation here; his. functions and his character would not accompany him when he moved beyond the jurisdiction of the government under whose laws he derived his character, That this would be the case where he was in the State on business unconnected with the corporation, there can be no question, but where a corporation locates the president or other officer within the State, for the express-purpose of malting contracts here, whether process-served on him would not be sufficient is a question which I shall not undertake to determine, because it does not necessarily arise. There is nothing, then, in the nature of a corporation to exempt it from suit. The difficulty arises from there being no person within the limits of the State on whom you can serve your process.” To-the same effect is City Fire Ins. Co. v. Carrugi, 41 Ga. 660. And these cases are samples of cases in those courts which have gone farthest in seeking, by judicial rule, to-acquire jurisdiction of foreign corporations. This is enough to say, to make the point that, for the courts of a State to acquire jurisdiction of the person of a foreign corporation, they must look, and look alone, to the statutes of their own State. In practical application of the rule of common law, and as aided by statute, the Supreme Court of the United States, in St. Clair v. Cox, 106 U. S. 350, says : “In Pennoyer v. Neff we had occasion to consider at length the manner in which State courts can acquire jurisdiction to render personal judgments againfet non-residents which would be received as evidence in the Federal courts ; and we held that personal citation (summons), on the party or his voluntary appearance was, with some exceptions, essential to the jurisdiction of the court. ■ “The doctrine of that case applies, in all its force, to personal judgments of the State courts against foreign corporations. The courts rendering them must have acquired jurisdiction over the party by personal service or voluntary appearance, whether the party be a corporation or a natural person. There is only this difference : a corporation, being an artificial being, can act only through agents, and only through them can be reached, and process must, therefore, be served upon them. In the State where a corporation is formed it is. not difficult to ascertain who are authorized to represent and act for it. Its charter or the statutes of the State will indicate in whose hands the control and management of its affairs are placed. Directors are readily-found, as also the officers appointed by them to manage its business. But the moment the boundary of the State, is passed, the difficulties arise; it is not so easy to determine who represents the corporations there, and under ' what circumstances service on them will bind it. “Formerly, it was held that a foreign corporation ■could not be sued in an action for the recovery of a personal demand outside of the State by which it was chartered.” And again: “The State may, therefore, impose, as a condition upon which a foreign corporation shall be permitted to do business within her limits, that it shall stipulate that, in any litigation arising out of its transactions in the State, it will accept as sufficient the service ■of process on its agents or persons specially designated ; and the condition would be eminently fit and just. And such condition may be implied as well as expressed.” That was a case from Michigan, where foreign corporations were permitted to do business by statute, and by the same it was provided thát service could be had on “any officer, member,' clerk or agent of such corporation” within the State, and that this service should operate as personal service. The court further says: “ The transaction of business by the corporation in the State, general or special, appearing, a certificate of service by the proper officer on a person who is its agent there would, in our opinion, be sufficient prima facie ■evidence that the agent represented the company in the business. It would then be open, when the record is offered as evidence in another State, to show that the agent stood in no representative character to the company, that his duties were limited to those of a subordinate employee, or to a particular transaction, or that his agency had ceased when the matter in suit arose. In the record, a copy of which was offered as evidence in. this case, there is nothing to show, so far as we can see,, that the Winthrop Mining Company was engaged in business in the State when service was made on Colwell.. The return of the officer, on which alone reliance was. placed to sustain the jurisdiction of the State court, gave no information on the subject. It did not, therefore, appear, even firima facie, that Colwell stood in any such representative character to the company as would justify the service of a copy of the writ on him. The certificate of the sheriff, in the absence of this fact in the record, was insufficient to give the court jurisdiction to render a personal judgment against the foreign corporation.” It is plainly to be seen that the difficulty in that, case grew out of the imperfection of the Michigan statute, in this, that it designated too many classes of agents and representatives of the company, and too' many individuals of some of the classes, upon whom service might be had in order to bind the company. In fact, the statute, in effect, designated any and all officers and agents of the company in the State. That necessarily left it so that a very indefinite sheriff’s return might be made the indisputable foundation of a judgment by default. The court held, however, that while' service on one named as “agent” would authorise judgment, yet that it must first be made to appear, as a jurisdictional fact under that law, that the company was doing business in the State at the time of the service, or the service would be void. None of the difficulties confronting the court in that case could possibly confront a court under the laws of' Arkansas, for here we have only one agent named upon whom process may be served to bind the company, and,, in case of his absence, the Auditor stands in his place, .and this agency is practically irrevocable, and it does not make any difference whether the company is doing ■business or not in the State at the time of the issuance .and service of the process. The record—the sheriff’s return—need only show definitely the summons to have been served on the designated agent, and that he in fact is such designated agent, or in his absence that it has ■been served on the Auditor of the State. Nothing more may be said in the latter case as to official description, .as there is but one Auditor of State. This brings üs to the question of whether or not ■service upon this designated agent is the only and exclusively legal service to be had in order to bind a foreign insurance company. A majority of the court are of the .opinion, from what has been said, and from the language .of the constitution and laws of this State pertaining to the subject, that such is the only legitimate mode of obtaining service upon a foreign insurance company, so as 'to authorize a valid personal judgment against it; and this opinion, we think, is in just accord with the true ■sense and meaning of the opinion of the United States Supreme Court from which we have so largely quoted. It is also in harmony with the true sense and meaning of the case of Ehrman v. Teutonia Ins. Co. 1 McCrary, 123. As early as 1873, what is known as an “insurance bureau” was established by the legislature of this State, by and through which the whole subject of insurance, domestic and foreign, was regulated and managed. Among the provisions of that statute, which forms a separate chapter in our digest, is one imposing duties upon foreign corporations upon which they would fee permitted to do business in this State at all. Among these duties are that of appointing the agent referred to and agreeing that service upon him or the Auditor shall he .held to be personal service upon the company. There was already in existence, as part of the code of pleading and practice, a provision whereby service was to be had upon foreign corporations generally, but the provision in the insurance bureau, under a well known rule ■of construction, was the one, and the only one, applicable to foreign insurance corporations. The present con* stitution provides, in a general way, how foreign corporations may be permitted to do business in the State. See ■sec. 11, art. 12. The bureau act of 1873 was re-enacted in 1875 after the adoption of the present constitution, and the only change made was in this: instead of the separate bureau being managed by an insurance commissioner, the Auditor was substituted as head of the bureau, and so the law stands to this day. Whatever the courts may choose to say about the matter, the legislative department of the State government has treated foreign insurance corporations of so much importance, and so independent of domestic control, that it has required, as a condition of their being permitted to do business in the State at all, that they (each and every one of them) shall agree that service upon a designated agent shall be personal service upon the company. It is somewhat a matter of doubt, as we have seen, whether, without this agreement, a valid personal judgment could be rendered against one of them at all. At all events, not unless the very act of doing business in the State through an agent may be judicially ■construed to mean an acceptance of the terms imposed by statute so as to become binding, as was held by Judge Caldwell in the case above cited from 1 McCrary. See, however, Rothrock v. Dwelling-House Ins. Co. 23 L. R. A. 863. The bureau act provided for the protection of policy holders in case of inability or unwillingness of foreign insurance companies to redeem their pledges, and since then bond and security have been required as part of the conditions.imposed (and the sureties on these bonds must, be largely citizens of the State), as in the present instance. These bondsmen, as well as the foreign corporations, have a vital interest in the law being confined in its administration to the exact terms and provisions of the bureau act—the law under and in view of which they entered into their obligations. All of them have a right, to demand, when they (principals and sureties) are sued on the bonds, that no obscure, incompetent or careless, agent shall represent the corporation in this particular matter, but the chosen agent, the confidential representative, shall be notified of the institution of all suits, and they all, by. the State’s sacred contract and treaty with them, have the right to enjoy the benefit of this-agent’s promptness and efficiency. We think that the law, when construed in the light of surrounding circumstances, the objects to be attained, and the great interest to be subserved, can mean nothing else than that the service upon the agreed and designated agent is the only service that can authorize a judgment in such cases. 2. piea in waiTedbypiea The next question to be considered is, whether or not, having answered as it did, the trust company entered its appearance, and is bound by the judgment, or, in other words, was the answer a waiver of the service of summons upon it ? In the first place, a liberal construction of sections 5008 and 5009, Mansfield’s Digest, might determine this-question in favor of the defendant, but, since there are decisions that might be considered as militating against, this summary disposition of the question, we will consider it without reference to those particular sections of the statute. Under the old practice, a plea in abatement had to be disposed of before presenting a plea in bar. Hence, after such a plea overruled, when the defendant interposed a plea in bar, he was considered as having waived defects of service, if that were his plea in abatement, and entered his appearance. Under the new or the code practice, the rule is different, for the defendant is required to make all his defenses in the one paper denominated his answer. In Grider v. Apperson, 32 Ark. 332, it is said: “Under our code practice, pleas in abatement, as such, have been abolished, and matter in abatement may be interposed in connection with pleas in bar, under a most liberal provision for amendments, intended to prevent delay, and to bring the parties to issue upon the merits of the case.” In the case of Erb v. Perkins, 32 Ark. 428, the defendant filed his answer containing two paragraphs as defenses, the first in the nature of a plea in abatement as to the insufficiency of notice, and the second a plea in bar, as in the case now under consideration. It was there objected by the plaintiff that, by presenting the plea in bar, the defendant had waived his defense contained in the first paragraph, or plea in abatement. On appeal, however, this court said: “Appellant submits, however, that the defense set up by the first paragraph of the answer, being a matter in abatement, was waived by the second paragraph, which was in bar. By the common law system of pleading, matter in abatement was waived by pleading in bar, but such is not the rule under our code system of pleading, but, on the contrary, in the same answer matter in abatement and matter in bar of the action may be pleaded in separate paragraphs.” If the defendant is to enjoy the benefit of his plea in abatement, notwithstanding his simultaneous plea in bar, even when he makes no special reservation of his right to do so, as in the case of Erb v. Perkins, just cited, how much clearer is the right when he has asserted and reserved it at every step, even when driven by the force of circumstances to do that which the plaintiff was seeking all along to compel him to do—answer without being legally brought into court. We think his plea in abatement—the first paragraph of his answer—-was good, and should have been sustained, and that the cause should have been dismissed without prejudice for want of proper service upon either of the defendants, and it is now so ordered.