The contract for life insurance in this case, made by a New York
insurance company in the State of Missouri with a citizen of that
state, is subject to the laws of that state regulating life
insurance policies, although the policy declares
"that the entire contract contained in the said policy and in
this application, taken together, shall be construed and
interpreted as a whole and in each of its parts and obligations,
according to the laws of the New York, the place of the contract
being expressly agreed to be the principal office of the said
company in the City of New York."
The power of a state over foreign corporations is not less than
the power of a state over domestic corporations.
The business of insurance is not commerce, and the making of a
contract of insurance is a mere incident of commercial intercourse
in which there is no difference whatever between insurance against
fire, insurance against the perils of the sea, or insurance of
life.
The controversy in this case is as to the amount due upon a
policy of insurance issued by the plaintiff in error upon the life
of John K. Cravens, husband of the defendant in error.
The contention of the plaintiff in error is that there is only
due on the policy, if anything, the sum of $2,670; that of
defendant in error is that she is entitled to the full amount of
the policy, to-wit, $10,000, less unpaid premiums.
These contentions depend chiefly for solution on the statute of
Missouri, inserted in the margin,
* Missouri
Rev.Stat. 1879,
Page 178 U. S. 390
c. 119, Art. 2, and the issue arising is whether the defendant
in error, as beneficiary in the policy, because of the payment
of
Page 178 U. S. 391
four annual premiums, and notwithstanding the omission to pay
the fifth and sixth annual premiums, is entitled to extended
insurance as provided in section 5983 -- that is, to the full
amount of the policy less unpaid premiums -- or is entitled to the
amount of commuted insurance tendered by plaintiff in error.
The case was submitted upon an agreed statement of facts
substantially as follows:
That the defendant is a corporation organized and existing under
the laws of the State of New York as a mutual life insurance
company, without capital stock, having its chief office in the City
of New York, and was at the date of issuing the policy in question,
and since has been, engaged in the business of insuring lives
through branch offices in the different states and territories of
this country and certain foreign countries, and that it maintains
agents and examiners in the State of Missouri.
On May 2, 1887, the local agent of the company solicited John K.
Cravens, at his residence in Missouri, to insure his life in
the
Page 178 U. S. 392
company, and thereupon Cravens signed and delivered to the local
agent a written application for the policy in suit. The application
was made a part of the policy, and contained the following
provisions:
"That inasmuch as only the officers of the home office of the
said company in the City of New York have authority to determine
whether or not a policy shall issue on any application, and as they
act on the written statements and representations referred to, no
statements, representations, promises, or information made or given
by or to the person soliciting or taking this application for a
policy, or by or to any other person, shall be binding on said
company, or in any manner affect its rights, unless such
statements, representations, or information be reduced to writing
and presented to the officers of said company at the home office,
in the application. . . ."
"That the entire contract contained in said policy and in this
application shall be construed according to the laws of the State
of New York, the place of said contract being agreed to be the home
office of said company in the City of New York."
The application was signed by the agent of the company and
forwarded to the latter's home office in New York, and thereupon
the policy in suit was issued and transmitted to Kansas City by the
company to its agent, who there received the same, and there
delivered it to Cravens on the 20th or May, 1887, and collected the
first premium provided to be paid.
Four annual premiums of $589.50 each were paid in Missouri. The
fifth and sixth premiums were not paid. Cravens died November 2,
1892, in Missouri, and proof thereof was duly made.
The company had different forms of policies, and Cravens
selected a nonforfeiting limited tontine policy, fifteen years
endowment, with the limited premium return plan of insurance. This
plan is described in the policy as follows:
"This policy is issued on the nonforfeiting limited tontine
policy plan, the particulars of which are as follows:"
"That the tontine dividend period for this policy shall be
completed on the 11th day of May in the year nineteen hundred and
two."
"That no dividend shall be allowed or paid upon this policy
Page 178 U. S. 393
unless the person whose life is hereby insured shall survive
until completion of its tontine dividend period, and unless this
policy shall then be in force."
"That surplus or profits derived from such policies on the
nonforfeiting limited tontine policy plan as shall not be in force
at the date of the completion of their respective tontine dividend
periods, shall be apportioned among such policies as shall complete
their tontine dividend periods."
At the end of the tontine period, certain benefits were to be
allowed which are stated in the policy but which need not be
repeated.
The policy also contained the following provision:
"That if the premiums are not paid, as hereafter provided, on or
before the days when due, then this policy shall become void, and
all payments previously made shall be forfeited to the company,
except that if this policy, after being in force three full years,
shall lapse or become forfeited for the nonpayment of any premium,
paid-up policy will be issued on demand within six months after
such lapse, with the surrender of this policy, under the same
conditions as this policy except as to payments of premiums, but
without participation in profits, for an amount equal to as many
fifteenth parts of the sum above insured as there shall have been
complete annual premiums paid hereon when said default in the
payment of premium shall be made, and all right, claim, or interest
arising, under statute or otherwise, to or in any other paid-up
policy or surrender value, and to or in any temporary insurance,
whether required or provided for by the statutes of any state, or
not, is hereby expressly waived and relinquished."
The total number of policies, of the plan of the policy in suit,
issued in the year 1887 to the residents of all states and
countries where the company was doing business was 5,172, covering
an aggregate of insurance of $20,154,981.
The amount of paid-up insurance to which the policy was entitled
at the date of lapsing was $2,670. No demand was made for it within
six months after default, or at any time. Upon the death of
Cravens, the company offered to waive the failure to make such
demand, and tendered defendant in error,
Page 178 U. S. 394
and still tenders her, the amount of such paid-up policy, which
she declined, and still declines.
On the 11th of May, 1891, Cravens was fifty-three years old,
"and the term of temporary insurance procured at that date by
three-fourths of the net value of the policy, taken as a single
premium for the amount written in the policy, was six years and
forty-six days from the 11th day of May, 1891, making said policy,
if subject to said extended insurance, in force at the death of the
said Cravens."
The defendant in error claims under the policy $10,000, less the
amount of unpaid premiums, with interest thereon, which left a
balance of $8,749.21, with interest at six percent from November
30, 1892. The plaintiff in error admitted and offered to pay the
sum of $2,670, which plaintiff in error declined to receive.
The trial court rendered a judgment for the plaintiff (defendant
in error) for the sum of $2,670.
On appeal to the supreme court of the state, the case was
remanded with directions to enter judgment for plaintiff (defendant
in error) for the sum of $8,749.21, with interest at six percent
from November 30, 1892.
The case was then brought here.
It is urged as error against the judgment of the supreme court
of the state that it makes the law of Missouri, and not the law of
New York, the law of the contract, as provided in the application
for the policy, thereby denying to the plaintiff in error a
contractual liberty without due process of law, in violation of the
Fourteenth Amendment of the Constitution of the United States, and
that the statute of Missouri is an attempted regulation of
interstate commerce.
Page 178 U. S. 395
MR. JUSTICE McKENNA, after stating the case, delivered the
opinion of the Court.
The plaintiff in error presents its contentions in many forms,
but they are all reducible to one, to-wit, that the statute of
Missouri has been decided to supersede the terms of the policy, and
to be the rule and measure of the rights and obligations of the
parties, notwithstanding the application for the policy
declares
"that the entire contract contained in the said policy and in
this application, taken together, shall be construed and
interpreted as a whole and in each of its parts and obligations,
according to the laws of the State of new York, the place of the
contract being expressly agreed to be the principal office of the
said company, in the City of New York."
What, then, is the meaning of the Missouri statute, or rather,
what meaning did the supreme court declare it to have?
It declared that the statute did not have the meaning the trial
court decided it to have. In other words, it declared that the
policy did not come within the exception of the statute providing
for paid-up insurance in lieu of temporary insurance, which was one
of the contentions of the plaintiff in error, and on account of
which it had tendered the sum of $2,670, and sustaining which the
trial court rendered its judgment.
With this part of the opinion, however, we have no concern. Our
review is only invoked of that part of the opinion which decides
that the Missouri statute is the law of the policy, and which
annuls the provisions of the policy which contravene the statute.
And even of this part, our inquiry is limited. If we are bound by
the interpretation of the statute, we need not review the reasoning
by which that interpretation was reached. And we think we are bound
by it.
The court said, though more by inference than by direct
expression, that the statute was a condition upon the right of
insurance companies to do business in the state.
This conclusion it fortified by the citation of cases, and
said:
"Foreign insurance companies which do business in this state do
so not by right, but by grace, and must in so doing
Page 178 U. S. 396
conform to its laws; they cannot avail themselves of its
benefits without bearing its burdens; moreover, the state may
prescribe conditions upon which it will permit foreign insurance
companies to transact business within its borders or exclude them
altogether, and in so doing violates no contractual rights of the
company.
State v. Stone, 118 Mo. 388;
Daggs v. Orient
Ins. Co., 136 Mo. 382;
s.c., 172 U. S.
172 U.S. 557."
And further:
"As the nonforfeiture clause in section 5983 does not come
within the exceptions specified in section 5986, it would seem that
the provision in the policy with respect to its forfeiture or lapse
after being in force three full years, by the nonpayment of
premiums, is void and of no effect, and that such statutory
provision cannot be waived."
"
* * * *"
"It is well settled that the legislature of the state has the
power to pass laws regulating and prescribing rules by which
foreign insurance companies may do business in this state, and to
prohibit them from doing so altogether if inclined.
Paul v.
Virginia, 8 Wall. 168;
State v. Stone, 118
Mo. 388;
Hooper v. California, 155 U. S.
648;
Daggs v. Insurance Co., supra. This case
has recently been affirmed by the Supreme Court of the United
States."
"It logically follows that, in passing the sections of the
statute quoted, the legislature did not exceed the powers conferred
upon it by the state constitution, and that such legislation is not
in conflict with any provision of the Constitution of the United
States."
From the Missouri law as thus established, may the plaintiff in
error claim exemption by virtue of the Constitution of the United
States?
What the powers of a corporation are in relation to the state of
its creation, what the powers of a corporation are in relation to a
state where it is permitted to do business, was declared early in
the existence of this Court, and has been repeated many times
since. What those powers are we took occasion to repeat in
Waters-Pierce Oil Co. v.
Texas, decided at the present term.
177 U. S.
28.
Page 178 U. S. 397
The case arose from a liberty of contract asserted by the
Waters-Pierce Oil Company against certain statutes of the State of
Texas prohibiting contracts in restraint of competition in trade.
The statute was not only assailed because it took away the liberty
of contract, but because it discriminated between persons and
classes of persons. The latter ground we declined to consider
because it did not arise on the record. Of the former, we said:
"The plaintiff in error is a foreign corporation, and what right
of contracting has it in the State of Texas? This is the only
inquiry, and it cannot find an answer in the rights of natural
persons. It can only find an answer in the rights of corporations
and the power of the state over them. What those rights are and
what that power is has often been declared by this Court."
"A corporation is the creature of the law, and none of its
powers is original. They are precisely what the incorporating act
has made them, and can only be exerted in the manner which that act
authorizes. In other words, the state prescribes the purposes of a
corporation and the means of executing those purposes. Purposes and
means are within the state's control. This is true as to domestic
corporations. It has even a broader application to foreign
corporations."
And as the state court had held that the statute was a condition
imposed upon the oil company doing business within the state, we
said of the statute that,
"whatever its limitations were upon the power of contracting,
whatever its discriminations were, they became conditions of the
permit and were accepted with it."
We stated the exceptions of the rule to be
"only cases where a corporation created by one state rests its
right to enter another and engage in business therein upon the
federal nature of its business."
Is the plaintiff in error within the exception? If not, the
pending controversy must be determined against it.
It is difficult to give counsel's contentions briefly and at the
same time clearly, nor are we sure that we can distinguish by
precise statement the arguments directed to the invalidity of
Page 178 U. S. 398
the statute of Missouri as an unconstitutional interference with
the contractual liberty of the plaintiff in error, from the
arguments which assail the statute as an attempted regulation of
commerce between the states. This, however, not on account of any
want of clearness in counsel's argument, but on account of the many
ways in which they have presented and illustrated the argument, and
which cannot be noticed in detail without making this opinion too
long. We realize the propositions are not the same and should not
be confused, though made somewhat dependent upon a common
reasoning.
(1) A policy of mutual life insurance, it is contended, is an
interstate contract, and the parties may choose its "applicatory
law." Instances under the law of usury, instances under private
international law, are cited as examples of authority. But if such
cases apply at all, they necessarily have limitation in the policy
of the state. This is not denied, but it is contended that
contracting for New York law to the exclusion of Missouri law was
"in no wise prejudicial to the interests of the State of Missouri
or violative of its public policy."
But the interests of the state must be deemed to be expressed in
its laws. The public policy of the state must be deemed to be
authoritatively declared by its courts. Their evidence we cannot
oppose by speculations or views of our own. Nor can such interests
and policy be changed by the contract of parties. Against them no
intention will be inferred or be permitted to be enforced.
In passing on the statute in controversy, we said, by MR.
JUSTICE GRAY, in
Equitable Life Assurance Society v.
Clements, 140 U. S. 226:
"The manifest object of this statute, as of many statutes
regulating the form of policies of insurance on lives or against
fires, is to prevent insurance companies from inserting in their
policies conditions of forfeiture or restriction except so far as
the statute permits. The statute is not directory only, or subject
to be set aside by the company with the consent of the assured, but
it is mandatory, and controls the nature and terms of the contract
into which the company may induce the assured to enter. This
clearly appears from the unequivocal words of command
Page 178 U. S. 399
and of prohibition above quoted, by which, in section 5983, 'no
policy of assurance' issued by any life insurance company
authorized to do business in this state"
"shall, after the payment of two full annual premiums, be
forfeited or become void by reason of the nonpayment of premium
thereon, but it shall be subject to the following rules of
commutation,"
and in section 5985, that if the assured dies within the term of
temporary insurance, as determined in the former section, "the
company shall be bound to pay the amount of the policy," "anything
in the policy to the contrary notwithstanding."
And after stating the cases in which the terms of the policy are
permitted to differ from the plan of the statute, it was further
said:
"It follows that the insertion in the policy of a provision for
a different rule of commutation from that prescribed by the
statute, in case of default of payment of premium after three
premiums have been paid, as well as the insertion in the
application of a clause by which the beneficiary purports to 'waive
and relinquish all right or claim to any other surrender value than
that so provided, whether required by a statute of any state or
not,' is an ineffectual attempt to evade and nullify the clear
words of the statute."
In
Orient Insurance Company v. Daggs, 172 U.
S. 557, the insurance company contended it had the
constitutional right to limit by contract its liability to actual
damages caused by fire against the provision of the statute which
made, in case of total loss, the amount for which the property was
insured the measure of damages. We sustained the statute
independently of the ground that it was a condition of the
permission of the company to do business in the state. We sustained
it on the ground of the clear right of the state to pass it, and to
accomplish its purpose by limiting the right of the insurer and
insured to contract in opposition to its provisions.
Further comment on this head may not be necessary, and we only
continue the discussion in deference to the insistence of counsel
upon the interstate character of the policy in suit. It is the
basis of every division of their argument, and an immunity from
control is based upon it for plaintiff in error, which, it
Page 178 U. S. 400
seems to be conceded, the state can exert over corporations of
its own creation.
An interstate character is claimed for the policy, as we
understand the argument, because plaintiff in error is a New York
corporation and the insured was a citizen of Missouri, and because,
further, the plaintiff in error did business in other states and
countries. Does not the argument prove too much? Does it depend
upon the residence of plaintiff in error in New York? If so, it
would seem that every contract between citizens of different states
becomes at once an interstate contract, and may be removed from the
control of the laws of the state at the choice of parties. If the
argument does not depend on the residence of the plaintiff in
error, but on the other elements, a Missouri insurance corporation
can have the same relation to them as plaintiff in error, and can
be, as much as plaintiff in error claims to be, "the administrator
of a fund collected from the policy holders in different states and
countries for their benefit" -- the condition which plaintiff in
error claims demonstrates the necessity of a uniform law to be
stipulated by the parties exempt from the interference or the
prohibition of the state where the insurance company is doing
business. And yet plaintiff in error seems to concede that such
power of stipulation Missouri corporations do not have, while it, a
foreign corporation, and because it is a foreign corporation, does
have.
After stating the necessity of a uniform law and an equal
necessity that parties may stipulate for it, counsel for plaintiff
in error say:
"It necessarily follows, therefore, that the insurance policy
contracts of foreign insurance companies, as contracts of other
foreign corporations, made by them with the citizens of a state,
when doing business in that state through the comity of the state,
are like the contracts of natural persons, subject to the
limitations of their own charters, and the situs of such contracts
is to be determined by the fundamental rules of 'universal
law.'"
"As will be hereafter seen, this status as foreign corporations
does not mean that they were not subject to the laws of the state
enacted in the full plenitude of the police power of the state. The
state doubtless could limit their contractual power by prohibiting
the making of certain contracts. But unless the
Page 178 U. S. 401
foreign corporation is reincorporated as a domestic corporation,
it remains a foreign corporation, and its contracts with citizens
of the state are interstate contracts, subject to the right of
choice of law thereof, which is inherent in the law of interstate
contracts."
A foreign corporation undoubtedly is not a domestic corporation,
and the distinction must often be observed, but the deduction from
it by plaintiff in error cannot be maintained.
The power of a state over foreign corporations is not less than
the power of a state over domestic corporations. No case declares
otherwise. We said in
Orient Ins. Co. v. Daggs, supra:
"That which a state may do with corporations of its own creation
it may do with foreign corporations admitted into the state. This
seems to be denied, if not generally, at least as to plaintiff in
error. The denial is extreme, and cannot be maintained. The power
of a state to impose conditions upon foreign corporations is
certainly as extensive as the power over domestic corporations, and
is fully explained in
Hooper v. California, 155 U. S.
648, and need not be repeated."
2. Is the statute an attempted regulation of commerce between
the states? In other words, is mutual life insurance commerce
between the states?
That the business of fire insurance is not interstate commerce
is decided in
Paul v.
Virginia, 8 Wall. 168;
Liverpool
Ins. Co. v. Massachusetts, 10 Wall. 566;
Philadelphia Fire Association v. New York, 119 U.
S. 110. That the business of marine insurance is not is
decided in
Hooper v. California, 155 U.
S. 648. In the latter case, it is said that the
contention that it is "involves an erroneous conception of what
constitutes interstate commerce."
We omit the reasoning by which that is demonstrated, and will
only repeat:
"The business of insurance is not commerce. The contract of
insurance is not an instrumentality of commerce. T he making of
such a contract is a mere incident of commercial intercourse, and
in this respect there is no difference whatever between insurance
against fire and insurance against 'the perils of the sea.'"
And we add, or against the uncertainty of man's mortality.
Judgment affirmed.
*
"SEC. 5983. Policies nonforfeitable, when. -- No polices of
insurance on life hereafter issued by any life insurance company
authorized to do business in this state on and after the first day
of August, A.D. 1879, shall, after payment upon it of two full
annual premiums, be forfeited or become void by reason of the
nonpayment of premium thereon, but it shall be subject to the
following rules of commutation, to-wit: the value of the policy
when the premium becomes due and is not paid shall be computed upon
the American experience table of mortality, with four and one-half
percent interest per annum, and after deducting from three-fourths
of such net value any notes or other indebtedness to the company,
given on account of past premium payments on said policy issued to
the insured, which indebtedness shall then be cancelled, the
balance shall be taken as a net single premium for temporary
insurance for the full amount written in the policy, and the term
for which such temporary insurance shall be in force shall be
determined by the age of the person whose life is insured at the
time of default of premium, and the assumption of mortality and
interest aforesaid; but if the policy shall be an endowment,
payable at a certain time, or at death if it should occur
previously, then if what remains as aforesaid shall exceed the net
single premium of temporary insurance for the remainder of the
endowment term for the full amount of the policy, such excess shall
be considered as a net single premium, for a pure endowment of so
much as such premium will purchase, determined by the age of the
insured at date of defaulting the payment of premium on the
original policy, and the table of mortality and interest as
aforesaid, which amount shall be paid at end of the original term
of endowment, if the insured shall then be alive."
"SEC. 5984. A paid-up policy may be demanded, when. -- At any
time after the payment of two or more full annual premiums, and not
later than sixty days from the beginning of the extended insurance
provided in the preceding section, the legal holder of the policy
may demand of the company, and the company shall issue, its paid-up
policy, which, in case of an ordinary life policy, shall be for
such an amount as the net value of the original policy at the age
and date of lapse, computed according to the American experience
table of mortality, with interest at the rate of four and a half
percent per annum, without deduction of indebtedness on account of
said policy, will purchase, applied as a single premium upon the
table rates of the company, and in case of a limited payment life
policy, or of a continued payment endowment policy payable at a
certain time, or of a limited payment endowment policy, payable at
a certain time, or at death, it shall be for an amount bearing such
proportion to the amount of the original policy as the number of
complete annual premiums actually paid shall bear to the number of
such premiums stipulated to be paid: Provided, that from such
amount the company shall have the right to deduct the net
reversionary value of all indebtedness to the company on account of
such policy, and provided further that the policy holder shall, at
the time of making demand for such paid-up policy, surrender the
original policy, legally discharged at the parent office of the
company."
"SEC. 5985. Rule of payment on commuted policy. -- If the death
of the insured occur within the term of temporary insurance covered
by the value of the policy as determined in section 5983, and if no
condition of the insurance other than the payment of premiums shall
have been violated by the insured, the company shall be bound to
pay the amount of the policy, the same as if there had been no
default in payment of premiums, anything in the policy to the
contrary notwithstanding; Provided, however, that notice of the
claim and proof of the death shall is submitted to the company, in
the same manner as provided by the terms of the policy, within
ninety days after the decease of the insured; and, provided, also,
that the company shall have the right to deduct from the amount
insured in the policy the amount compounded at six percent interest
per annum of all the premiums that had been forborne at the time of
the decease, including the whole of the year's premium in which the
death occurs, but such premiums shall in no case exceed the
ordinary life premium for the age at issue, with interest as last
aforesaid."
"SEC. 5986. The foregoing provisions not applicable, when. --
The three preceding sections shall not be applicable in the
following cases, to-wit: if the policy shall contain a provision
for an unconditional cash surrender value at least equal to the net
single premium for the temporary insurance provided hereinbefore,
or for the unconditional commutation of the policy to
nonforfeitable paid-up insurance for which the net value shall be
equal to that provided for in section 5984, or if the legal holder
of the policy shall, within sixty days after default of premium,
surrender the policy and accept from the company another form of
policy, or if the policy shall be surrendered to the company for a
consideration adequate in the judgment of the legal holder thereof,
then, in any of the foregoing cases, this act shall not be
applicable."
