Western Life Indemnity Company of Illinois v. Clarence Rupp

• Decision Date: 30 November 1914
• Docket Number: No. 50,50
• Parties: WESTERN LIFE INDEMNITY COMPANY OF ILLINOIS, Plff. in Err., v. CLARENCE RUPP
• Court: U.S. Supreme Court

235 U.S. 261

35 S.Ct. 37

59 L.Ed. 220

WESTERN LIFE INDEMNITY COMPANY OF ILLINOIS, Plff. in Err.,

v CLARENCE RUPP.

No. 50.

Submitted November 5, 1914.

Decided November 30, 1914.

[Syllabus from pages 261-263 intentionally omitted] Messrs. Henry Burnett, Pendleton Beckley, H. W. Batson, Graddy Cary, John M. Scott, and Thomas J. Graydon for plaintiff in error.

Messrs. J. M. Chilton, James P. Edwards, Charles F. Ogden, and R. F. Peak for defendant in error.

[Argument of Counsel from pages 264-266 intentionally omitted.]

Mr. Justice Pitney delivered the opinion of the court:

In September, 1907, plaintiff in error, an Illinois corporation, organized under the general laws of that state applicable to life insurance, issued to one George McCormick, a resident of Louisville, Kentucky, two policies, each insuring his life in the sum of $1,000, for the benefit of his nephew, Clarence Rupp, if living, otherwise for the benefit of the executors of the insured. After the death of the insured, which occurred in the same year, the present action was brought by Rupp against the company in the Jefferson circuit court at Louisville. His petition set forth his relationship to the insured, and beyond this showed no insurable interest. It averred that the policies were issued upon McCormick's application, who also paid the premiums thereon, and this without plaintiff's instance, request, or knowledge. The summons was served upon the insurance commissioner of the state. Section 631, Kentucky Statutes [Ky. Stat. 1909, § 4279], provides: 'Before authority is granted to any foreign insurance company to do business in this state, it must file with the commissioner a resolution adopted by its board of directors, consenting that service of process upon any agent of such company in this state, or upon the commissioner of insurance of this state, in any action brought or pending in this state, shall be a valid service upon said company; and if process is served upon the commissioner it shall be his duty to at once send it by mail, addressed to the company at its principal office.'

The defendant company made a special appearance to the action, and moved the court, to quash the return upon the summons on the ground that it was a corporation organized and existing under the laws of the state of Illinois; that at the time the policies in question were issued it had applied to the superintendent of insurance of the state of Kentucky for a license to transact business in that state and, in case such license was issued, to appoint said superintendent of insurance its agent for service of process; that the application for license was pending for some time, and that it was during this time that the policies sued on were issued, but that the application for license was afterwards rejected by the insurance department of the state; that the company never appointed the superintendent of insurance its agent for service of process, and never consented that he might be served with or accept such service on the company's behalf.

The motion was overruled, and the company thereafter filed an answer in which, without waiving its objection to the jurisdiction of the court over it, but reiterating that objection, it set up sundry defenses upon the merits, including an allegation of fraudulent representations in the application pursuant to which the policies were issued, and a denial that the plaintiff had an insurable interest in McCormick's life. To certain paragraphs of this answer plaintiff demurred, and the circuit court, upon the ground that this demurrer rendered it proper and necessary to determine the sufficiency of plaintiff's petition, reviewed that pleading, and reached the conclusion that, by the law of Kentucky, the relationship of uncle and nephew did not constitute an insurable interest, that one who could not take out a policy because of lack of interest could not hold it if assigned to him after its issuance, and that the same rule prevented a person from taking out a policy of insurance upon his own life in favor of another having no insurable interest. Therefore the court sustained the demurrer as against the petition, and, plaintiff having declined to plead further, judgment was rendered in favor of defendant.

Plaintiff appealed to the court of appeals, which held (138 Ky. 18, 29 L.R.A.(N.S.) 675, 127 S. W. 490) that while, according to the law of Kentucky, one who obtains a policy of insurance upon the life of another must have an insurable interest in that life it is otherwise with respect to a policy taken out by a person upon his own life, he paying the premium for the benefit of another having no insurable interest, and that such a policy is not a wagering transaction, but is valid. The judgment of the circuit court was therefore reversed and the cause remanded for further proceedings. Thereafter defendant filed a 'second amended answer' in the circuit court, withdrawing by the court's leave 'each and every allegation of the original answer and the first amended answer herein,' and—'without waiving its plea to the jurisdiction of this court of the person of this defendant in this action'—set up that defendant was a corporation organized and incorporated under an act of the legislature of the state of Illinois approved June 22, 1893, entitled, 'An Act to Incorporate Companies to Do the Business of Life or Accident Insurance on the Assessment Plan, and to Control Such Companies of This State and of Other States Doing Business in This State,' etc., which contains in § 9 the following: 'No corporation doing business of life insurance under this act shall issue a certificate or policy upon . . . a life in which the beneficiary named has no insurable interest. Any assignment of the policy or certificate to a person having no insurable interest in the insured life shall render such a policy or certificate void.' It was further averred that under this act defendant had no power to issue any policy of insurance upon the life of any person in which the beneficiary named had no insurable interest; that the plaintiff Rupp was the nephew of the insured McCormick; that Rupp had no insurable interest by virtue of such relationship or otherwise in the life of the insured, and that the policies sued on were null and void. There was a tender of the amount of the premiums paid and a denial of further liability. The answer invoked the 'full faith and credit' clause of the Federal Constitution, averring that to compel defendant to pay the policies sued on would be a failure upon the part of the state of Kentucky to give full faith and credit to the act of the legislature of the state of Illinois.

To this answer plaintiff demurred, and the circuit court sustained the demurrer, with leave to amend the answer. Defendant declined to further amend, and elected to rely only upon the answer to which the demurrer had been sustained. Judgment having been thereupon rendered in favor of plaintiff for the amount of the two policies with interest, defendant prosecuted its appeal to the court of appeals, and to review the decision of that court affirming the judgment (147 Ky. 489, 144 S. W. 743), the present writ of error is sued out.

There are two Federal questions. The first is raised by the contention that under the Kentucky statute already quoted a foreign insurance company sued in a state court cannot lawfully be summoned by a substituted service upon the state insurance commissioner unless the company has been licensed to do business in the state, and has, by resolution of its board of directors, assented to such substituted service; and that to sustain a judgment rendered in the absence of such service is violative of the 'due process' clause of the 14th Amendment. To this contention the court of appeals responded thus: 'It is too late now to raise the question that the process was not properly served. This question should have been presented on the first appeal. On that appeal the case was heard here on the merits, and it is too late after a reversal on the merits to raise any question as to the sufficiency of the process.' Citing McDowell v. Chesapeake, O. & S. W. R. Co. 90 Ky. 346, 14 S. W. 338, and Illinois C. R. Co. v. Glover, 24 Ky. L. Rep. 1447, 71 S. W. 630. That it is and long has been the practice of the courts of Kentucky to treat the appearance of a party in the appellate court as a submission to the jurisdiction so as to dispense with the service of process in the court below, and that this rule is applied even where a judgment against the defendant is reversed because of a defect in process, will appear from an examination of the cases. Grace v. Taylor, 1 Bibb, 430; Graves v. Hughes, 4 Bibb, 84; Wharton v. Clay, 4 Bibb, 167; Bradford v. Gillespie, 8 Dana, 67, 68; Salter v. Dunn, 1 Bush, 311, 317; Chesapeake, O. & S. W. R. Co. v. Heath, 87 Ky. 651, 660, 9 S. W. 832.

It is contended that where, as here, the first appeal is prosecuted by plaintiff, the defendant's objection to the jurisdiction of the trial court over its person is not thereby waived, because no other question could properly be submitted to the appellate court except that raised by the plaintiff's appeal. But, by § 755 of the Kentucky Civil Code, 'The appellee may obtain a cross appeal at any time before trial, by an entry on the records of the court of appeals.' And under this section it is held that 'when either party appeals from a final judgment, his adversary may have a cross appeal from that judgment, for the purpose of correcting any errors in the judgment to his prejudice, or any interlocutory judgment or order which has influenced or controlled the final...