Aetna Life Ins Co v. Dunken

• Citation: 45 S.Ct. 129,266 U.S. 389,69 L.Ed. 342
• Decision Date: 15 December 1924
• Docket Number: No. 62,62
• Parties: AETNA LIFE INS. CO. et al. v. DUNKEN
• Court: U.S. Supreme Court

266 U.S. 389

45 S.Ct. 129

69 L.Ed. 342

AETNA LIFE INS. CO. et al.

v DUNKEN.

No. 62.

Argued and Submitted Oct. 14, 1924.

Decided Dec. 15, 1924.

Mr. W. J. Moroney, of Dallas, Tex., for plaintiffs in error.

Messrs. C. A. Boynton, W. E. Spell, and J. A. Stanford, all of Waco, Tex., for defendant in error.

Mr. Justice SUTHERLAND delivered the opinion of the Court.

This is an action brought by the defendant in error upon a policy of insurance issued by the insurance company on the life of W. J. Dunken. The insurance company is a Connecticut corporation. When it issued the policy it was doing business in Texas under the laws of that state, of which Dunken then was a citizen and inhabitant.

The Texas statute provides:

'Any contract of insurance payable to any citizen or inhabitant of this state by any insurance company or corporation doing business within this state shall be held to be a contract made and entered into under and by virtue of the laws of this state relating to insurance, and governed thereby, notwithstanding such policy or contract of insurance may provide that the contract was executed, and the premiums and policy (in case it becomes a demand) should be payable without this state, or at the home office of the company or corporation issuing the same.' Article 4950, Rev. Civ. Stats. 1911.

The statute further provides that where loss occurs failure to make payment within 30 days after demand shall render the company liable to pay the holder of the policy in addition to the amount of loss twelve per cent. damages on the amount of such loss, together with reasonable attorney fees for the prosecution and collection thereof. Article 4746.

These provisions, together with others, are declared to be conditions upon which foreign insurance companies shall be permitted to do business within the state and any such corporation engaged in issuing insurance policies within the state is deemed to have assented thereto as a condition precedent to the right to engage in such business. Article 4972.

The policy in question was issued under the following circumstances: On December 17, 1910, H. D. Alexander, manager for the insurance company in the state of Tennessee, took the application of Dunken, then a resident of Tennessee, for a seven-year term policy. The policy was duly issued in Connecticut and delivered in Tennessee to Dunken. By its terms, at the sole option of the insured, upon any anniversary of its date, without medical re-examination, it was convertible, among other forms of insurance, into a 20-payment life commercial policy, bearing the same date and issued at the same age, on payment of the difference between the premiums already paid and those required under the converted policy. On February 19, 1916, the seven-year policy still being in force, Dunken, in the meantime having moved to Texas, exercised his option and applied to the company for a conversion 'in accordance with the conditions' of that policy just stated. His application stipulated that the statements and answers in the original application for the seven-year term policy should be the basis of the new policy and form a part of the same. The application was mailed to the Tennessee manager and by him forwarded to the home office of the company in Connecticut. There the old policy was canceled, stamped 'Surrendered; new number, 152,755; $10,000,' and a 20 payment life commercial policy, bearing the new number and conforming to the express terms of the agreement in the original policy, was issued and forwarded to Alexander in Tennessee for delivery. Alexander sent the policy by mail to Dunken at Waco, Texas, together with a loan note and a form authorizing the company to deduct the 1916 premium from the proceeds of the loan to be signed by him and returned. Dunken received these documents in due course of mail and retained the policy, but did not answer Alexander's letter, pay the premiums or execute the loan papers. Three months later he died. In the letter transmitting the policy Alexander fixed no time for the execution and return of the loan note and authority to deduct the 1916 premium; nor did he suggest that the delivery of the policy was in any way qualified. There was no further correspondence or notice of any kind from the company. It was agreed that the demand required by article 4746 of the Texas statute, heretofore cited, was made by defendant in error. Judgment was rendered against the company for the amount of the policy less certain offsets, together with the statutory penalty of 12 per cent. and an attorney's fee of $3,000, which judgment was duly affirmed by the Court of Civil Appeals. 248 S. W. 165. The Supreme Court of the state having dismissed an application for a writ of error for want of jurisdiction, the writ of error here was issued to the intermediate court. Randall v. Commissioners, 261 U. S. 252, 43 S. Ct. 252, 67 L. Ed. 637.

The judgment below is challenged upon these grounds: (1) The policy as shown by the undisputed evidence never became a completed or binding contract; (2) it was a Tennessee or Connecticut contract, and, since under the laws of those states no penalty or attorney's fee was recoverable, the Texas statute, as construed and applied, violates the contract impairment clause, the full faith and credit clause, and the several clauses of section 1 of the Fourteenth Amendment of the federal Constitution; and (3) assuming it to be a Texas contract, plaintiff having demanded and sued for substantially more than she recovered, the suit was rightfully defended and the statute as construed and applied to that situation violates the same provisions of the federal Constitution.

Defendant in error moves to dismiss the writ of error or affirm the judgment of the state court upon the ground that the asserted federal questions are so lacking in substance as to be frivolous. This motion must be denied. Other matters aside, the contention that the contract is controlled by the law of Tennessee or Connecticut—in which event the Texas statute in respect of penalty and attorney's fee as construed and applied, is unconstitutional—clearly presents a substantial question under the full faith and credit clause of the Constitution. Royal Arcanum v. Green, 237 U. S. 531, 540, 541, 35 S. Ct. 724, 59 L. Ed. 1089, L. R. A. 1916A, 771. See, also, New York Life Ins. Co. v. Head, 234 U. S. 149, 159, 160, 34 S. Ct. 879, 58 L. Ed. 1259. And the cause is properly here on writ of error, under section 237 of the Judicial cial Code, as amended September 6, 1916, c. 448, 39 Stat. 726 (Comp. St. § 1214). Kans. City So. Ry. v. Road Imp. Dist. No. 6, 256 U. S. 658, 41 S. Ct. 604, 65 L. Ed. 1151.

First. Coming then to the merits, the first contention to be considered presents a pure question of fact, which was decided against plaintiffs in error by the jury in response to specially submitted issues. Upon these issues the jury found that the new policy was delivered by an agent of the insurance company as a completed contract with the intention that it should become effective and binding from the time of its receipt by Dunken, and that such delivery as a completed contract was acquiesced in by an executive officer of the company. This verdict met with the concurrence of the trial court, and after a full review of the evidence, of the appellate court. The rule is settled that the decision of a state court upon a question of fact ordinarily cannot be made the subject of inquiry here. See for example, Missouri, K. & T. R. Co. v. Haber, 169 U. S. 613, 639, 18 S. Ct. 488, 42 L. Ed. 878; Smiley v. Kansas, 196 U. S. 447, 453, 454, 25 S. Ct. 289, 49 L. Ed. 546. To this general rule there are two equally well settled exceptions:

'(1) Where a federal right has been denied as the result of a finding shown by the record to be without evidence to support it, and (2) where a conclusion of law as to a federal right and findings of fact are so intermingled as to make it necessary, in order to pass upon the federal question, to analyze the facts.' Nor. Pac. Ry. v. North Dakota, 236 U. S. 585, 593, 35 S. Ct. 429, 432 (59 L. Ed. 735, L. R. A. 1917F, 1148, Ann. Cas. 1916A, 1), and cases cited.

See, also, Truax v. Corrigan, 257 U. S. 312, 324, 325, 42 S. Ct. 124, 66 L. Ed. 254, 27 A. L. R. 375.

This case comes within the general rule and not within either of the exceptions. The fact decided is that the policy sued upon was delivered as a completed and binding contract. The federal question presented arises from the ruling of the court that the Texas and not the Tennessee statute controls this contract. The asserted federal right was not denied as a result of the finding of fact; nor are the conclusion in respect of the federal right and the finding interdependent or so intermingled as to cause it to be necessary to consider the latter in order to pass upon the former. That the contract was effective is a fact equally consistent with the determination of the federal question either way.

Second. The argument that the policy was not a Texas contract proceeds upon two grounds: (a) That the converted policy became effective, if it ever did, when it was mailed by the company's agent in Tennessee; (b) that the original policy was clearly a Tennessee or Connecticut contract, and the converted policy, being executed under the optional privilege granted...