Northwestern Mutual Life Insurance v. William McCue

• Decision Date: 19 February 1912
• Docket Number: No. 138,138
• Citation: 56 L.Ed. 419,223 U.S. 234,32 S.Ct. 220,56 L.Ed. 57
• Parties: NORTHWESTERN MUTUAL LIFE INSURANCE company, Petitioner, v. J. WILLIAM MCCUE, Samuel O. McCue, Harry M. McCue, and Ruby G. McCue, Infants, by Marshall Dinwiddie, Their Next Friend, et al
• Court: U.S. Supreme Court

223 U.S. 234

32 S.Ct. 220

56 L.Ed. 57

56 L.Ed. 419

NORTHWESTERN MUTUAL LIFE INSURANCE company, Petitioner,

v J. WILLIAM MCCUE, Samuel O. McCue, Harry M. McCue, and Ruby G. McCue, Infants, by Marshall Dinwiddie, Their Next Friend, et al.

No. 138.

Argued December 20 and 21, 1911.

Decided February 19, 1912.

Messrs. William H. White, William H. White, Jr., George H. Noyes, and John R. Dyer for petitioner.

[Argument of Counsel from page 235 intentionally omitted] Messrs. Daniel Harmon, G. B. Sinclair, and H. W. Walsh for respondents.

[Argument of Counsel from pages 236-243 intentionally omitted] Mr. Justice McKenna delivered the opinion of the court:

The question in the case is whether death by the hand of the law in execution of a conviction and sentence for murder is covered by a policy of life insurance, though such manner of death is not excepted from the policy, there being no question of the justness of the sentence.

The case was in equity, and brought in the corporation court for the city of Charlottesville, state of Virginia, by respondents, children and sole heirs of James S. McCue, by Marshall Dinwiddie, their next friend, upon a policy of life insurance issued to McCue by petitioner, named herein as the insurance company.

The main defense of the insurance company was (there were some technical defenses with which we are not concerned) that McCue came to his death by hanging after conviction and sentence for the murder of his wife.

The suit was brought under the laws of the commonwealth of Virginia against the insurance company, the People's National Bank of Charlottesville, as garnishee, and the executors of McCue's estate.

The case was removed on the petition of the insurance company, on the ground of a separable controversy, to the circuit court of the United States for the western district of Virginia. In that court there was a demurrer filed to the bill which raised the question as to the proper arrangement of the parties, and whether the heirs or the executors were the parties to recover on the policy, assuming that the insurance company was liable. In the answer the same questions were again raised and all liability of the insurance company denied, principally on the ground of the manner by which McCue came to his death.

At the trial the technical defenses were waived, and by agreement of the parties the heirs of McCue and his executors were treated as parties plaintiff. The court, considering the cause as one at law, and a jury having been waived by the parties, adjudged on the pleadings and an agreed statement of facts, 'that the plaintiffs take nothing by their bill, and that said defendant go without day,' with costs, the latter to be paid by a deposit made in the registry of the court in refund of the premium paid by McCue, as far as it would go. The judgment was reversed by the court of appeals and a new trial ordered. This certiorari was then petitioned for and allowed.

The facts as agreed are these: The insurance company is a corporation duly organized under the laws of Wisconsin, and a citizen and resident thereof. It is a mutual insurance company, with the power and obligations given to and imposed upon it by certain acts of the legislature of Wisconsin, which acts constitute its charter.

The People's National Bank of Charlottesville was made a party solely as garnishee, it having certain sums of money belonging to the insurance company in its possession.

McCue made written application to the insurance company in his own handwriting for the policy in suit, in pursuance of which the policy was issued for the sum of $15,000 on his life. He paid premiums as follows: When the policy was delivered to him he gave his note for the sum of $427.50 for the premium to E. L. Carroll and L. Fitzgerald, payable to their order, six months after date, at the Jefferson National Bank, Charlottesville, Virginia. Carroll & Fitzgerald at the time were soliciting insurance for T. A. Cary, the general agent of the insurance company in Virginia. The note was indorsed by Carroll &amp Fitzgerald to Cary, with the following memorandum attached: '$427.50. Hold this note in Mr. Cary's office (don't use bank.) Notify Mr. McC. about thirty days before due, and send it to E. L. Carroll for collection.' Carroll & Fitzgerald gave their individual notes to Mr. Cary, amounting to $427.50, on which he advanced the money to the company and held the notes for collection, with McCue's note as collateral.

The company received, at its home office in Milwaukee, the amount of the premium in cash from Cary on May 2, 1904, but had no knowledge of the note arrangement between McCue, Carroll & Fitzgerald, and Cary. The note was paid by McCue by checks after he had been arrested, he protesting his innocence, 'which facts were known to Cary.' The note arrangement was a general custom among soliciting agents for the company. Other facts will be noted hereafter.

The main question in the case is, as we said, the liability of the company under the circumstances. Or, to put it more abstractly for the present purpose of our discussion, whether a policy of life insurance insures against death by a legal execution for crime.

The question was before this court in Burt v. Union Cent. L. Ins. Co. 187 U. S. 362, 47 L. ed. 216, 23 Sup. Ct. Rep. 139. In the policy passed on, as in the policy in the case at bar, there was no provision excluding death by the law. It was decided, however, that such must be considered its effect, though the policy contained nothing covering such contingency. These direct questions were asked: 'Do insurance policies insure against crime? Is that a risk which enters into and becomes a part of the contract?' And answering, after discussion, we said: 'It cannot be that one of the risks covered by a contract of insurance is the crime of the insured. There is an implied obligation on his part to do nothing to wrongfully accelerate the maturity of the policy. Public policy forbids the insertion in a contract of a condition which would tend to induce crime, and as it forbids the introduction of such a stipulation, it also forbids the enforcement of a contract under circumstances which cannot be lawfully stipulated for.' Cases were cited, among others Ritter v. Mutual L. Ins. Co. 169 U. S. 139, 42 L. ed. 693, 18 Sup. Ct. Rep. 300. There it was held that a life insurance policy taken out by the insured for the benefit of his estate was avoided when one of sound mind intentionally took his life, irrespective of the question whether there was a stipulation in the policy or not. And the conclusion was based, among other considerations, upon public policy, the court saying that 'a contract, the tendency of which is to endanger the public interests or injuriously affect the public good, or which is subversive of sound morality, ought never to receive the sanction of a court of justice, or be made the foundation of its judgment.'

These cases must be accepted as expressing the views of this court as to the public policy which must determine the validity of insurance policies, and which they cannot transcend even by explicit declaration, much less be held to transcend by omissions or implications, and we pass by, therefore, the very interesting argument of counsel for respondents as to the indefinite and variable notions which may be entertained of such policy according to times and places and the temperaments of courts, and the danger of permitting its uncertain conceptions to control or supersede the freedom of parties to make and to be bound by contracts deliberately made. We come, therefore, immediately to the special contention of respondents, that the contract in controversy is a Wisconsin contract, and is not offensive to the public policy of that state or to its laws, but was indeed, as it is contended, made in conformity to the laws of that state, and carries all of their obligations.

The obligation of a contract undoubtedly depends upon the law under which it is made. In which state, then, Virginia or Wisconsin, was the policy made? In Equitable Life Assur. Soc. v. Clements (Equitable Life Assur. Soc. v. Pettus), 140 U. S. 226, 35 L. ed. 497, 11 Sup. Ct. Rep. 822, the question arose whether the contract of insurance sued on was made in New York or Missouri. The assured was a resident of Missouri, and the application for the policy was signed in Missouri. The policy, executed at the office of the company, provided that the contract between the parties was completely set forth in the policy and the application therefor, taken together. The application declared that the contract should not take effect until the first premium should have been actually paid during the life of the person proposed for assurance. Two annual premiums were paid in Missouri, and the policy, at the request of the assured, was transmitted to him in Missouri, and there delivered to him. The court said: 'Upon this record the conclusion is inevitable that the policy never became a completed contract, binding either party to it, until the delivery of the policy and the payment of the...