New York Life Insurance Company v. Mary Head

• Decision Date: 08 June 1914
• Docket Number: No. 254,254
• Citation: 58 L.Ed. 1259,34 S.Ct. 879,234 U.S. 149
• Parties: NEW YORK LIFE INSURANCE COMPANY, Plff. in Err., v. MARY E. HEAD
• Court: U.S. Supreme Court

234 U.S. 149

34 S.Ct. 879

58 L.Ed. 1259

NEW YORK LIFE INSURANCE COMPANY, Plff. in Err.,

v MARY E. HEAD.

No. 254.

Argued March 10, 1914.

Decided June 8, 1914.

Messrs. James H. McIntosh, Gardiner Lathrop, Cyrus Crane, O. W. Pratt, and S. W. Moore for plaintiff in error.

[Argument of Counsel from page 150 intentionally omitted] Messrs. Bucker F. Deatherage, James S. Botsford, Goodwin Creason, W. P. Borland, and

[Argument of Counsel from page 151 intentionally omitted] James A. Reed for defendant in error.

[Argument of Counsel from pages 152-154 intentionally omitted] Mr. Chief Justice White delivered the opinion of the court:

In March, 1894, Richard G. Head, a citizen and resident of New Mexico, being temporarily in Kansas City, Missouri, made application at a branch office of the New York Life Insurance Company for two policies of insurance for $10,000 each on his own life, for the benefit of his minor son, Richard G. Head, Jr. The application stated the residence of Head in New Mexico, and it was stipulated that the policy applied for when issued should be considered as having been issued in New York, and be treated as a New York contract. When Head made the application he handed a note for the premium to the agent with instructions, when the policies came, to turn them over to a friend to hold for him. The policies were issued, were delivered as directed, and were subsequently turned over to Head when he again came to Kansas City. All the premiums but the first, with perhaps one exception, were paid in New Mexico or at an agency of the company in Colorado. Nine years after the issue of the policies, that is, in 1903, in New Mexico, Head transferred one of the policies to his daughter, Mary E. Head, the transfer having been either by way of original authority or ratification duly sanctioned by the proper probate court in the county of New Mexico where Head was domiciled. In 1904, Mary E. Head, under the policy of which she thus became the beneficiary, borrowed from the New York Life Insurance Company the sum of $2,270. The loan was requested by a letter written from Las Vegas, New Mexico, to New York, and accompanied by the policy and an executed loan agreement in the form usually required by the company, and which conformed to the requirements of the New York law. The loan bore 5 per cent interest and the agreement provided that it should be payable at the home office in New York, and that if any premium on the policy or any interest on the loan were not paid when due, 'settlement of said loan and of any other indebtedness under said policy shall be made by continuing said policy without further notice as paid-up insurance of reduced amount in accordance with § 88, chapter 690, of the Laws of 1892 of the state of New York.'

There was default in April, 1905, in the payment of the interest on the loan and the premium on the policy, and pursuant to the terms of the loan agreement and the law of New York the policy was settled, the sum remaining from the accumulated surplus after paying the loan and the past-due premium being applied to the purchase of paid-up insurance, and the policy was, at the request of Head and his daughter, sent to them in New Mexico in May, 1905, and was in the possession of the daughter when Head died in April, 1906.

In September, 1906, this suit was commenced in a court of the state of Missouri, by Mary E. Head, the beneficiary, to recover the full amount of the policy. Stating the grounds for relief which were relied upon not as literally expressed in the pleadings, but with reference to the ultimate assumption upon which the right to recover was essentially based, it was as follows: That although it was true that if the face of the policy was adhered to and the terms of the loan agreement were considered and the law of New York applied, the settlement of the policy would be binding, it was not so binding, but, on the contrary, was void, because at the time the policy was written there were statutes in force in the state of Missouri which made it the duty of the company to retain from the accumulated suplus a given percentage thereof, and in case it was necessary to save forfeiture, to apply the sum of such retained percentage to the payment of premium on temporary insurance as far as it would go, and if this duty had been discharged when the failure to pay took place, the sum of the retained percentage would have been adequate to extend the insurance to such a period as would have caused the full amount of the policy to be a valid and existing risk at the death of Head. Resting thus upon the Missouri statutes, of course the fundamental assumption upon which the right to recover was based was the controlling operation and effect of the Missouri law upon the policy, upon the terms of the loan agreement, and upon the law of the state of New York which would otherwise govern, as New York was the place where the loan agreement was made and the adjustment of the policy took place. As there is no controversy concerning the meaning of the Missouri statutes if they were controlling, we content ourselves with referring to the sections of the Revised Statutes of Missouri which are relied upon as having produced the consequences stated: Sections 5856-5859 and 7897-7900 of the Revised Statutes of Missouri of 1899. And the defense, considered also in its ultimate aspect, but asserted the validity of the settlement made in New York under the loan agreement, denied the applicability of the statutes of Missouri to that settlement, and expressly insisted that such statutes could not be applied to the situation without violating the due process clause of the 14th Amendment, and depriving of the right of freedom of contract guaranteed by that Amendment, and giving rise to the impairment of the obligation of a contract, contrary to the provisions of § 10, article 1 of the Constitution of the United States.

There was recovery in the court of first instance for the amount claimed under the policy, the court maintaining the supremacy of the Missouri statutes. In the supreme court to which the case was taken after a hearing in a division thereof the judgment below was affirmed on an opinion which expressly held that the policy of insurance was a Missouri contract, controlled by the Missouri law, and that, by the operation and effect of that law, the loan agreement made in the state of New York, and the settlement effected in that state in accordance with that agreement, conformably to the laws of New York, was controlled by the Missouri statute and was void. And the opinion so holding was in express terms adopted by the court in banc where the case was reheard.

The rights under the contract clause of the Constitution of the United States and the 14th Amendment, which, as we have stated, were asserted below, form the basis of the assignments of error. As the conflicting contentions concerning these constitutional questions advanced to refute, on the one hand, and to sustain, on the other, the reasons which led the court below to its conclusion, involve the whole case, to briefly state at the outset the propositions upheld below will concentrate the issues and serve to give bold relief to the questions which require to be decided. (a) Determining whether the contract was a Missouri contract, made in that state and governed by its laws, the court held that the express stipulation in the contract to the effect that the policy was to be considered as issued from the home office, and be treated as a New York contract, was overborne by the fact that the application for the policy was made to the Kansas City agency, that the policy was sent there for delivery, and that the first premium was there paid. (b) In deciding that this view was not modified by the fact that the insured was a nonresident of Missouri, and by the further fact that, on the face of the policy, it was clearly manifest that it was executed not for the purpose of having effect in Missouri, but to be operative outside of that state, the court said:

'It has been repeatedly ruled in this state since the enactment of §§ 5856 et seq. of the Revision of 1889 (now Rev. Stat. 1909, § 6946) and the act of 1891 (Laws 1891, p. 75), Rev. Stat. 1899, §§ 1024 and 1026 (now Rev. Stat. 1909, §§ 3037, 3040), that foreign insurance companies admitted to carry on their business in this state can only contract within the limits prescribed by our statutes, and that, in the conduct of the business under the license granted by this state, they 'shall be subjected to all the liabilities, restrictions, and duties which are or may be imposed upon corporations of like character organized under the general laws of this state, and shall have no other or greater powers.' The effect of these decisions is to write into every insurance contract made by a foreign insurance company, so licensed, in this state, all of the provisions of the statutes of this state appurtenant to the making of such contract, and which define and measure the reciprocal rights and duties of the parties thereto. These statutes are declaratory of the public policy of this state, and inhibit the doing of the business of insurance in this state by any corporation contrary to their regulations by annulling all the stipulations which offend the provisions of the statutes. Horton v. New York L. Ins. Co. 151 Mo. 604, 52 S. W. 356; Smith v. Mutual Ben. L. Ins. Co. 173 Mo. 329, 72 S. W. 935; Burridge v. New York L. Ins. Co. 211 Mo. 158, 109 S. W. 560; Cravens v. New York L. Ins. Co. 148 Mo. 583, 53 L.R.A. 305, 71 Am. St. Rep. 628, 50 S. W. 519; New York L. Ins. Co. v. Cravens, 178 U. S. 389, 44 L. ed. 1116, 20 Sup. Ct. Rep. 962; Whitfield v. AEtna L. Ins. Co. 205 U. S. 489, 51 L. ed. 895, 27 Sup. Ct. Rep. 578, affirming Keller v. Travelers' Ins. Co. 58 Mo. App. 557.' [241 Mo. 413, 147 S. W. 827.]

(c) In disposing of the contention that, as the loan agreement was made in New York by persons not...