331 U.S. 586 (1947), 32, Order of United Commercial Travelers of America v. Wolfe

Docket Nº:No. 32
Citation:331 U.S. 586, 67 S.Ct. 1355, 91 L.Ed. 1687
Party Name:Order of United Commercial Travelers of America v. Wolfe
Case Date:June 09, 1947
Court:United States Supreme Court
 
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Page 586

331 U.S. 586 (1947)

67 S.Ct. 1355, 91 L.Ed. 1687

Order of United Commercial Travelers of America

v.

Wolfe

No. 32

United States Supreme Court

June 9, 1947

Argued February 28, 1946

Reargued November 12, 1946

CERTIORARI TO THE SUPREME COURT OF SOUTH DAKOTA

Syllabus

1. An Ohio citizen brought an action in a state court in South Dakota against a fraternal benefit society, incorporated in Ohio and licensed to do business in South Dakota, to recover benefits claimed to have arisen under the society's constitution as a result of the death of an insured member who had been a citizen of South Dakota throughout his membership. The society's constitution, which was valid in Ohio, prohibited the bringing of an action on such a claim more than six months after its disallowance by the society. The action was brought after expiration of this time, but before the expiration of the period prescribed by South Dakota law for commencing suits on contracts. A statute of South Dakota declared void every stipulation or condition in a contract which limits the time within which a party thereto may enforce his rights by usual legal proceedings in the ordinary tribunals.

Held: the federal Constitution requires South Dakota to give full faith and credit to the public acts of Ohio under which the society was incorporated, and the claimant was bound by the six-month limitation upon bringing such an action. Pp. 588-589, 624-625.

2. A claim based on membership rights under the constitution of an incorporated fraternal benefit society, the terms of which are subject to amendment through the processes of a representative form of government authorized by the law of the state of incorporation, differs from a claim for benefits under an ordinary contract of accident insurance, whether issued by a stock or a mutual insurance company. Pp. 600, 606.

3. It is of primary significance from the legal point of view in this case that the society is a voluntary fraternal association organized and carried on not for profit, but solely for the mutual benefit of its members and their beneficiaries, and has a representative form of government which shall make provision for the payment of benefits in accordance with certain statutory requirements. P. 605.

4. Relationships between the members of fraternal benefit societies are contractual, in that they are undertaken voluntarily in consideration of the like obligations of others; but, interwoven with their

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financial rights and obligations, they have other common interests incidental to their memberships which give them a status toward one another that involves more interdependence than arises from purely business and financial relationships. Pp. 605-606.

5. Membership in a fraternal benefit society is governed by the law of the state of incorporation; control over its terms is vested in the elected representative government of the society as authorized and regulated by that law. P. 606.

6. By virtue of the full faith and credit clause, the people of the United States have imposed upon the general rules governing conflicts of laws respecting statutes of limitations on claims arising out of ordinary contracts another limitation, giving effect to a limitation contained, as in the present case, in the constitution of a fraternal benefit society. P. 607.

7. Fraternal benefit societies exist by virtue of the laws of the states of their incorporation, and the rights and obligations incident to membership in them are as much entitled to full faith and credit as the statutes upon which they depend. P. 609.

8. To permit recovery in this case would fail to give full faith and credit to the terms of membership authorized by Ohio by placing an additional liability on the society beyond that authorized by Ohio or accepted by the society. P. 610.

9. The weight of public policy behind the general statute of South Dakota, which seeks to avoid contractual limitations upon rights to sue on ordinary contracts, does not equal that which makes necessary the recognition of the same terms of membership for members of fraternal benefit societies wherever their beneficiaries may be, especially where the State, with full information as to those terms of membership, has permitted such societies to do business and secure members within its borders. P. 624.

10. If a state gives some faith and credit to the laws of another state by permitting its own citizens to become members of, and benefit from, fraternal benefit societies organized by such other state, it must give full faith and credit to those laws, and must recognize the burdens and limitations which are inherent in such memberships. P. 625.

70 S.D. 452, 18 N.W.2d 755, reversed.

In an action brought in a state court in South Dakota, an Ohio citizen obtained a judgment against a fraternal benefit society incorporated in Ohio for benefits claimed to have arisen under the society's constitution as a result

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of the death of an insured member who was a citizen of South Dakota. The Supreme Court of South Dakota affirmed. 70 S.D. 452, 18 N.W.2d 755. This Court granted certiorari. 326 U.S. 712. Reversed, p. 625.

BURTON, J., lead opinion

MR. JUSTICE BURTON delivered the opinion of the Court.

This is an action in a circuit court of the South Dakota, brought by an Ohio citizen against a fraternal benefit society incorporated in Ohio, to recover benefits claimed to have arisen under the constitution of that society as a result of the death of an insured member who had been a citizen of South Dakota throughout his membership. The case presents the question whether the full faith and credit clause of the Constitution of the United States1 required the court of the forum, South Dakota, to give effect to a provision of the constitution of the society prohibiting the bringing of an action on such a claim more than six months after the disallowance of the claim by the Supreme Executive Committee of the society,2

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when that provision was valid under the law of the state of the society's incorporation, Ohio, but when the time prescribed generally by South Dakota for commencing actions on contracts was six years,3 and when another statute of South Dakota declared that

Every stipulation or condition in a contract by which any party thereto is restricted from enforcing his rights under the contract by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights, is void.4

We hold that, under such circumstances, South Dakota, as the state of the forum, was required, by the Constitution of the United States, to give full faith and credit to the public acts of Ohio under which the fraternal benefit society was incorporated, and that the claimant was bound by the six-month limitation upon bringing suit to recover death benefits based upon membership rights of a decedent under the constitution of the society. This has been the consistent view of this Court.5

The record in the present case well illustrates both the practical effect of such a limitation as that contained in the constitution of this society and the need for the application of the full faith and credit clause to membership obligations in fraternal benefit societies.

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The petitioner, The Order of United Commercial Travelers of America, was incorporated in 1888 under the general corporation laws of Ohio.6 By 1920, when the decedent, Ford Shane, of Rapid City, [67 S.Ct. 1357] South Dakota, became

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a member, this fraternal benefit society was in active operation in many states. Then, and at his death in 1931, it was regulated in detail by the General Code of Ohio. That Code included public acts of Ohio on such subjects as the following: § 9462, Fraternal benefit society defined;7 § 9463, Lodge system; § 9464, Representative form of government, including restrictions on amendments to its constitution; § 9465, Exemption from general insurance laws of the State; § 9466, Benefits; § 9467, To whom benefits shall be paid, stating limitations on the degrees of family relationship permitted to exist between a member and those whom he may designate to receive benefits as a result of his death; § 9468, Age limits for admission to membership; § 9469, Certificate shall constitute agreement;8 § 9469-1, Exception as to commercial

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travelers;9 § 9470, Investment, disbursement, and application [67 S.Ct. 1358] of funds; § 9481, Laws of society shall be binding on members and beneficiaries, and the society may provide, as here, that no subordinate body, officers or members may waive any of the provisions of the laws and constitution of the society.10 These public acts have created and regulated the society and the rights and obligations of its members. They are reflected in its articles of incorporation, constitution, and bylaws. They make possible uniformity of rights and obligations among all members throughout the country, provided full faith and credit are given also to the constitution and bylaws of the society insofar as they are valid under the law of the state of incorporation. If full faith and credit are not given to these provisions, the mutual rights and obligations of the members of such societies are left subject to the control of each state. They become unpredictable, and almost inevitably unequal.

The principal office of this society has been continuously in Columbus, Ohio. The society has established subordinate councils in many states, and, at all times involved in this case, has been licensed to do business in South

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Dakota as a foreign fraternal benefit society.11 In accordance with the requirements for maintaining such license in good standing, the [67 S.Ct. 1359]...

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