The obligation of a contract depends upon the law of the state
where made.
A life insurance policy which, by its terms, does not become a
completed contract until delivery on payment of first premium is to
be construed as a contract made in the state where the first
premium is paid and the policy delivered, notwithstanding a recital
that it is to be construed as though made in another state.
Equitable Life Society v. Clemens, 140 U.
S. 226.
In this case,
held that a policy issued by a Wisconsin
company on the life of a resident of Virginia, to whom it was
delivered in that state on payment of the first premium, is a
Virginia contract.
Even though a policy in a mutual life insurance company be a
property right, it is the measure of rights of everyone thereunder,
and if the owner thereof cannot recover because it would be against
public policy to permit a recovery, neither can the innocent heirs
of that person recover.
A policy of life insurance, silent on the point, does not cover
death by the hand of the law. This is consonant with the rulings of
the Virginia courts.
Quaere whether, in a case of this nature, this Court
would have to yield to the determination of what a state court has
declared to be its public policy.
Quaere what the public policy of the Wisconsin is on
the liability of an insurance company for death of the insured by
the hand of the law.
167 F. 435 reversed.
The facts, which involve the liability of a life insurance
company on a policy on the life of one who came to his death by
hanging after conviction and sentence for murder,
Page 223 U. S. 235
and the construction of the policy itself, as well as by what
law it is to be construed, are stated in the opinion.
Page 223 U. S. 243
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,
Page 223 U. S. 244
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 &
Page 223 U. S. 245
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 Central
Life Insurance Company, 187 U. S. 362. 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
Page 223 U. S. 246
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 Life
Insurance Company, 169 U. S. 139.
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
Page 223 U. S. 247
the law under which it is made. In which state, then, Virginia
or Wisconsin, was the policy made? In
Equitable Life Assurance
Society v. Clements, 140 U. S. 226, 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 first
premium in Missouri, and consequently that the policy is a Missouri
contract, and governed by the laws of Missouri."
In
Mutual Life Insurance Company v. Cohen, 179 U.
S. 262, the insurance policy contained a stipulation
that it should not be binding until the first premium had been paid
and the policy delivered. The premium was paid and the policy
delivered in Montana. It was held that, "under these circumstances,
under the general rule, the contract was a Montana contract, and
governed by the laws of that state." Citing
Equitable Life
Assurance Society v. Clements, supra.
The same conditions existed in
Mutual Life Insurance Company
of New York v. Hill, 193 U. S. 551, and
it was decided, the two cases above mentioned being cited, that the
policy of insurance involved was a Washington contract, not a New
York contract.
Page 223 U. S. 248
In the case at bar, the application was made by McCue at
Charlottesville, Virginia, February 25, 1904, and the policy was
delivered to him there on March 15, 1904, when he gave his note for
the premium which was payable at that place and subsequently paid
there. And it is provided in the policy that it should not take
effect until the first premium should be actually paid. Following
that provision is this:
"In witness whereof, the Northwestern Mutual Life Insurance
Company, at its office in Milwaukee, Wisconsin, has by its
president and secretary signed and delivered this contract, this
fifteenth day of March, one thousand nine hundred and four."
But manifestly this was not intended to affect the preceding
provision, fixing the time when the policy should go into effect,
nor the legal consequences which followed from it. In
Equitable
Life Assurance Society v. Clements, the policy was executed at
the company's office in New York. The exact conditions therefore
existed which made, in the cases cited, the policies involved
therein not New York contracts, but, respectively, Missouri,
Montana, and Washington contracts. The policy, therefore, in the
case at bar, must be held to be a Virginia, and not a Wisconsin,
contract.
Respondents, however, contend that "the right asserted is a
property right, vested by the special statute of incorporation,
which is not divested by crime;" and that "the charter controls the
rights of members irrespective of the place where such rights may
have been acquired." To support the contention that the right
asserted is a property right, respondents adduce §§ 1, 4, 7, and 20
of the charter. Their argument is brief and direct, and we may
quote it. It is as follows:
"Under the charter of the company, McCue occupied the relation
of a member of the company. This was a valuable property right.
Upon his death, this membership passed to his executors."
And further:
"The charter of the company, § 1, provided that certain
persons
Page 223 U. S. 249
named 'and all other persons who may hereafter associate with
them in the manner hereinafter prescribed shall be, and are,
declared a body politic and corporate.' Section 4 prescribes that
persons who shall hereafter insure with the company 'shall thereby
become members thereof.' And section 7 prescribes the manner in
which this membership is to be perfected. 'Every person who shall
become a member of this association, by effecting insurance
therein, shall, the first time he effects insurance, pay the rates
fixed by the trustees,' etc. There can be no doubt, then, that
McCue was a member of this corporation. He insured with the
company, and thereby he became a member. His interest in the
company was fixed by the amount of his insurance. This membership
constituted a vested property right. He was eligible as an officer,
and entitled to vote in the management of the company (§ 20);
entitled to the dividends on the surplus and profits (§ 2, § 13),
and was a joint owner of the assets of the company."
But this is assuming what is to be proved. It may be true that a
person who insures with the company becomes a member thereof, and
that his interest is fixed at the amount of his insurance. But what
constitutes his title or right? Necessarily, his policy. What
entitles him to a realization of the benefits of his membership?
Necessarily, again, his policy, if the manner of his death be not a
violation of it. We need not follow counsel, therefore, through
their argument as to the rights of property and the rules of its
devolution, which, it is contended, must obtain whatever be the act
or guilt of the person producing it. The question before us, and
the only question, is what rights did McCue's estate and children
get by his policy? And we are brought back to the simple dispute as
to whether the policy covers death by the hand of the law. This
Court has pronounced on that dispute, and its ruling must prevail
in the federal courts of Virginia, in which state the contract was
made. And it is consonant with the ruling in the
Page 223 U. S. 250
state courts. In
Plunkett v. Supreme Conclave Improved Order
of Heptasophs, 105 Va. 643, a certificate of membership in the
Conclave which was issued to one Charles W. Plunkett, his wife
being beneficiary, was considered. One of the conditions was that
Plunkett comply with the laws, rules, and regulations then
governing the Conclave or that might in the future be enacted.
There was no provision against suicide in the laws, rules, or
regulations when the certificate was issued. Such a provision was
subsequently enacted. Plunkett committed suicide, and the Order
refused to pay benefits. Plunkett's wife brought suit to recover
them, and asserted a vested interest in the benefits under the
certificate. The contention was rejected. The trial court held that
the forfeiture of the rights under the certificate if the insured
while sane committed suicide was valid because (1) it involved no
vested right of the insured, and (2) because it was a fundamental,
though unexpressed, part of the original contract that the insured
should not intentionally cause his own death. And the court
added:
"Inasmuch as the original contract and bylaws were silent upon
the subject of suicide by the insured while sane, the new bylaw is
valid, because there can be no such thing as a vested right for a
sane man to commit suicide, and for the further reason that it is
nothing more than the written expression of the provision which the
law had read into the contract at its inception."
The Supreme Court of Appeals affirmed the judgment, quoting the
reasoning of the trial court, and added to it the considerations of
public policy expressed in the
Burt case and
Ritter case,
supra, and other cases. If the
public policy of Virginia were the same as, it is contended, that
of Wisconsin is, whether this Court should have to yield it we are
not called upon to decide.
Being of opinion that McCue's policy was a Virginia contract, it
may be unnecessary to review the cases relied
Page 223 U. S. 251
on by the respondents, which they contend declare the public
policy of the State of Wisconsin. It may, however, be said that the
cases are not absolutely definite.
Two cases only are cited,
McCoy v. Northwestern Mutual
Relief Association, 92 Wis. 577, and
Patterson v. The
Natural Premium Ins. Co., 100 Wis. 118. We will not consider
the facts in the first case. It is enough to say that the court,
following a ruling that it had pronounced in other cases, said: "If
a contract for life insurance does not provide against death by
suicide or self-destruction, then such cause of death does not
constitute a defense," citing four cases. The second also presented
one of suicide, the insured being sane. It was contended that the
policy did not cover such a risk, because (1) an incontestable
clause (there being one) in the contract did not cover such a
death; (2) if it could be held so in terms, it would be void, as
against public policy; (3) suicide was a crime, and hence within a
stipulation against death in violation of law.
The reliance of the insurance company to support its contentions
was upon the
Ritter case,
supra. The court,
however, reiterated its former ruling as to death by suicide,
though it recognized the cogency of the reasoning of the
Ritter case, that the insured should do nothing to
accelerate the contingency of the policy, saying (p. 122):
"Were the question a new one in the law, the argument would be
well nigh irresistible, especially where, as in the
Ritter
case, the policy runs in favor of the estate of the insured, and
the proceeds will go to the enrichment of such estate, instead of
to other beneficiaries."
There were other beneficiaries in the case, the policy having
been assigned, with the consent of the company, to the children of
the insured. Commenting further on that fact, the court said it
brought the case within the principle of certain cases which were
cited, but added,
"nor would the application of that principle to this case
necessarily
Page 223 U. S. 252
conflict with the
Ritter case, where the policy was in
favor of the estate of the insured. It may well be in such a case
that the intentional suicide of the insured while sane would
prevent a recovery by his personal representatives and yet not
prevent a recovery in case of a policy in favor of beneficiaries
who had a subsisting vested interest in the policy at the time of
the suicide, and who could not, if they would, prevent the act of
the insured."
McCue's policy was in favor of his estate, and comes within the
concession made by the supreme court to the reasoning of the
Ritter case.
The court did not discuss considerations of public policy, but
we may assume it found nothing offensive to such policy in a
contract of insurance which covered death by suicide, and it may be
supposed that the court would find nothing repugnant to public
policy in a contract which did not except death for crime. However,
we need not speculate, as the Wisconsin law does not control the
policy in suit.
One other contention of respondents remains to be noticed. It is
contended that, if the McCue estate cannot recover, the innocent
parties, his children, will be admitted as claimants. To this
contention we repeat what we have said above -- the policy is the
measure of the rights of everybody under it, and, as it does not
cover death by the law, there cannot be recovery either by McCue's
estate or by his children.
Judgment of the court of appeals is reversed, and that of
the Circuit Court is affirmed.