A federal question may not be imported into a record for the
first time by way of assignment of error made for the purpose of
review by this court.
As a general rule, for the purpose of review by this Court,
rights under the full faith and credit clause of the federal
Constitution are required to be expressly set up and claimed in the
court below.
Denial of full faith and credit to the statutes of another state
cannot be made the basis of review by this Court where it appears
that the court below reached the same result that plaintiff
contended for on grounds wholly independent of the federal question
and sufficient to sustain its action.
This Court has already decided that state statutes, such as that
of Texas, imposing a 12% penalty and an attorney's fee for damages
for delay in payment of proper claims are not unconstitutional
under the Fourteenth Amendment as depriving life insurance
companies of their property without due process of law or as
denying them the equal protection of the law.
A payment made by a life insurance company to one of two
claimants on receiving a bond of indemnity,
held, under
the circumstances of this case, not to have been the payment of a
stakeholder seeking to discharge his duty, but of a person
espousing the cause of one claimant against the other, and thereby
subjecting himself to the legal consequences arising from his
action.
This Court cannot review on its merits a case which it must
dismiss for want of jurisdiction.
The defendant in error was the plaintiff below, and sued the
Manhattan Life Insurance Company, which we shall speak of as the
company, on two policies on the life of Jacob Cohen in his own
favor, written in 1893 in Texas, where Cohen resided, the company
then doing business in that state through an agency. It was averred
that, although the company had admitted liability on the policies,
it had not paid the loss, and was therefore responsible
Page 234 U. S. 124
not only for the sum due insured, with interest, but also for 12
percent as statutory penalty or damages, and $1,000 attorneys'
fees.
The answer denied liability to the plaintiff. It admitted
issuing the policies, but averred that, in 1907, the insured,
Cohen, borrowed $875 on each, and pledged the policies as security,
which loans were unpaid. It was averred that, in July, 1907, Cohen
sold to Hilsman, of Atlanta, Georgia, his interest in the policies,
and executed assignments and orders on the company to deliver the
policies to him on payment of the debts for which they were
pledged. These documents were annexed to the answer. The origin and
course of the negotiation which ultimated in the assignments were
thus stated: Hilsman had an agent at San Antonio, Texas, where
Cohen lived. The transactions "were begun" and "definitely agreed
upon" between Cohen and the agent,
"the agreement being that Hilsman would pay Jacob Cohen $460 for
his equity in said policies, whereupon Cohen wired Hilsman to send
papers, and the following correspondence, by letter and telegram,
passed between them."
Hilsman, in answer to the first telegram from Cohen, wrote,
enclosing him assignments of the policy and necessary notices to
the company, with directions for their execution, and asking
besides for certain papers which he required to show Cohen's
ownership free from the claims of other persons, the letter ending
with the statement,
"Send all the papers that are herewith enclosed, duly executed,
in a sealed envelop, with this draft attached (evidently the draft
for the price), and upon arrival, if in good shape, we will duly
honor."
Cohen replied by letter, explaining that he did not have
particular papers which had been asked for, but had others which he
thought were their equivalent, and proposing to execute the
assignment and send these papers, the letter concluding with the
statement, "if this meets with your approval, please wire me upon
receipt of this letter, and I
Page 234 U. S. 125
shall forward papers." Hilsman answered by telegram favorably,
and confirmed it by letter, saying that, if the papers were sent,
"we will promptly honor the draft, provided the papers are in good
shape." On the day the telegram last referred to was received,
Cohen transmitted the executed papers with the accompanying
documents by mail, saying, "I beg to enclose all documents . . .
which I trust you will find correct, and will honor my draft for
$460 attached to these documents." The answer specifically alleges
that the draft was sent from San Antonio for collection through a
bank in that place, and as the answer states that the draft was
attached to the papers, and this conformed to the instructions
which we have seen were given by Hilsman to Cohen, the answer
therefore in effect averred that the papers and draft were
delivered to a bank in San Antonio, to be transmitted to Atlanta,
the papers to be delivered to Hilsman if, after examination, he
found the papers satisfactory and paid the draft. The answer then,
in paragraph 8, contained the following averments:
"Said Jacob Cohen, Hilsman, and his said agent were engaged in
speculative transactions, and said assignments were made as a part
of and in connection with a certain transaction in what is commonly
called 'cotton futures,' the money being paid to and received and
used by Jacob Cohen to speculate in the future price of cotton,
without its being contemplated that there would be actual delivery
thereof, or bargain and sale, and said Hilsman or his said agent,
being interested in the transaction, and the purpose of the
transaction being known by all the parties, which purpose was
carried into effect, through the said agency of J. H. Hilsman and
J. H. Hilsman, he being engaged in the brokerage business."
It was averred that, after the death of Cohen, both his executor
and Hilsman, as owners of the policies, made demand upon the
company for payment; that the company admitted liability to
someone, and simply professed its
Page 234 U. S. 126
desire to have the matter as to who was owner of the policies
settled, so that it might make payment with safety. To reach this
result, it was alleged that an unsuccessful effort was made to have
the parties agree to appear in a suit, where, as to both of them,
the company admitting liability, their rights might have been
determined, and that, failing in this respect, and being advised
that, under the law of Georgia, where the assignment to Hilsman was
made, it was legal, and therefore his claim was valid, as the most
expeditious way of clearing up the matter, the company paid
Hilsman, and took from him an indemnity bond. While admitting that,
before the assignment and at the time of its delivery, Hilsman had
no interest whatever in the life of Cohen, it was nevertheless
averred that the assignment of the policies was valid and
authorized under the laws of the States of Georgia and New York.
Averring, moreover, that all the acts of the company in the
premises had been in good faith, and arose not from any desire to
deny liability, but simply from an honest purpose to have it
determined who owned the claims under the policy, it was asserted
that there could be in no event any liability for interest by way
of damages and for the attorneys' fees as prayed.
By leave, the plaintiff amended his petition "in replication and
answer to . . . the answer of the defendant, Manhattan Life
Insurance Company," and asserted, among other things, that the
assignments of the policies alleged in the answer were void upon
two distinct grounds: (1) because,
"under and by virtue of the laws of the State of Texas, the
State of New York, and the State of Georgia, and each of them, an
assignment of a life insurance policy to a person without insurable
interest in the life of the insured is invalid and not binding upon
the assignor or his representative,"
(2) because
"said alleged assignments of the policies of insurance sued upon
herein are invalid and not binding upon it, and were without legal
consideration under
Page 234 U. S. 127
the laws of the State of Texas, the State of New York, and the
State of Georgia, for this: that, at the time that said assignments
and each of them were made, executed, and delivered, that the said
Jacob Cohen, J. H. Hilsman, and his said agent, were engaged in
speculative transactions, and that said assignments and each of
them were made as a part of and in connection with the said
transactions in what is commonly called 'cotton futures,' the money
being paid to and received and used by the said Jacob Cohen to
speculate in future prices of cotton without its being contemplated
that there would be actual delivery thereof, or bargain and sale,
the said Hilsman and his agent being interested in the transaction,
and the purpose of the transaction being at and before the time
known to and by all the parties, which said purpose was carried
into effect through the said agency, J. H. Hilsman and J. H.
Hilsman, he being engaged at that time in the brokerage business,
all of which said facts were well known to the defendant insurance
company at and before the time that it paid the said policies to
the said Hilsman, as in its said answer alleged and set forth."
For the purpose of the trial by the court without a jury, a
written statement of facts was agreed to by both parties in the
form of petitioner's case, the case of the defendant company, and
the reply of the petitioner. The statement of the plaintiff
admitted the issue of the policies, the lending of the money by the
company, and the pledging of the policies to secure it, the
transfer or assignment by Cohen for the consideration we have
stated, and under the circumstances which we have detailed, the
gambling nature of the transaction being expressly stated in
accordance with the averment of the answer of the company, and with
the allegation of the amended pleading of the plaintiff, the death
of Cohen, the claim of both parties on the insurance company, the
effort of the company to secure a suit to which both the claimants
should be parties in order to
Page 234 U. S. 128
relieve it from responsibility, its failure to secure that
result, and its payment to Hilsman of the amount upon the giving by
him of indemnity, all substantially as alleged in the pleadings we
have stated. The agreed facts contained this statement:
"It was not the purpose of the insurance company to contest or
delay payment, and the payment to Hilsman was made under the
circumstances above set out. It is not the purpose of this
agreement to determine how far, if at all, the facts in respect to
notice and good faith are material issues in this case, that being
deemed a question of law; nor is this agreement to be construed as
admitting as a matter of law that Hilsman had any right to said
policy or their proceeds, or that said payment, or any part
thereof, was rightfully made to him. It is, however, agreed as a
fact that Hilsman has not been repaid said sum of $460, and the
insurance company has not been repaid the amount of said loan,
except as above stated, and that nothing has yet been paid to the
plaintiff."
The company, as part of its case, introduced certain statutes of
the State of Georgia and decisions of the court of last resort of
that state interpreting the same for the purpose of showing that
Cohen had a right to sell and Hilsman to purchase in Georgia the
insurance policies, although Hilsman had no insurable interest in
Cohen's life. In rebuttal, the plaintiff introduced certain
decisions of the court of last resort of Georgia deemed to
establish the contrary result, and also offered statutes of that
state dealing with gambling transactions and the right to sue
concerning the same. The trial court found the facts substantially
as embodied in the statements referred to.
Page 234 U. S. 131
MR. CHIEF JUSTICE WHITE, after making the foregoing statement,
delivered the opinion of the Court.
Upon the pleadings which we have just stated and the facts
stipulated, the trial court gave judgment for the plaintiff, Cohen,
against the defendant company for the amount of the policies, less
the sums which had been loaned thereon by the company, with
interest, and with the statutory penalties and attorneys' fees
claimed.
To recapitulate, it suffices to say that the assignments of
error made by the company in the court below for the
Page 234 U. S. 132
purpose of the appeal by it taken but expressed the defenses
resulting from its answer and the stipulated facts which we have
stated. That is to say, reliance was placed (1) upon the
proposition that, in any event, the recourse of the plaintiff was
against Hilsman, and not against the company; (2) that the transfer
of the policies to Hilsman was a Georgia contract, and valid under
the law of that state because the existence of insurable interest
at the time of the transfer, although necessary under the Texas
law, was not necessary under the Georgia law; (3) that as, in any
event, the transaction out of which the assignment of the policies
from Cohen to Hilsman grew was admittedly a gambling one, the court
would not allow the executor of Cohen to derive any rights from
assailing that transaction, but would leave the parties where their
illegal contract had placed them -- that is, let the assignment to
Hilsman stand, and hence leave no right in Cohen, executor, to
recover; (4) that the court erred in giving judgment for the
statutory penalties and damages because, under the circumstances
stated, the liability to pay them was not embraced by the statute
under which they were imposed, and that, if the statute, as
construed, imposed the damages and attorney's fee which were
allowed, it was in violation of § 1 of the Fourteenth
Amendment.
In an elaborate opinion, the court disposed of all these
contentions. It held that the suit need not be brought against
Hilsman, but that it could be brought directly against the company.
It decided that the contract of assignment was a Texas contract,
and, for want of insurable interest in Hilsman, was invalid under
the laws of that state, although it was in substance admitted that
it would have been valid, so far as the question of insurable
interest was concerned, if it had been a Georgia contract. Coming
to consider the fact that both parties had conceded that the
transaction out of which the assignment of the policies grew was
purely of a gambling nature, and that that fact
Page 234 U. S. 133
had been stipulated, the court refused to sustain the following
proposition which was insisted upon by the defendant company:
"When an insurance policy is assigned as part of a gaming
transaction, the law will give no relief to either party, or to
their heirs, executors, or assigns, regardless of all other
questions, but will leave the parties where they have voluntarily
placed themselves."
On the contrary, the court, relying upon the Texas law upon that
subject, the Georgia law on the same subject, and the principles of
general law applicable thereto, held that, instead of leaving the
assignment growing out of the gambling transaction enforceable in
the hands of Hilsman, it would, in consequence of the illegality,
strike down the whole transaction, and therefore leave the policy
in the hands of Cohen, the insured, to whom it belonged before the
assignment had been made. And for this reason also, the court
decided that the sum paid by Hilsman for the transfer need not be
repaid by Cohen in order to recover. On the subject of the
penalties, the court, referring to the cases of
Fidelity Mut.
Life Association v. Mettler, 185 U. S. 308, and
Farmers' & Merchants Insurance Company v. Dobney,
189 U. S. 301,
held that the statute under which they were imposed was not
repugnant to the Fourteenth Amendment, and said:
"The action of the insurance company in paying the money due on
the policies was not, as in
Insurance Co. v. Woods Nat.
Bank, 107 S.W. 119, an offer of the insurance company to pay
to the one of the two real claimants when it should be determined
who he was, but a voluntary payment to the rival claimant, who had
no right whatever to the amount due on the policy. The company has
indemnified itself against its act in paying the money due on the
policy to one who was not entitled to receive it; now let it resort
to its indemnity."
At the threshold, we must dispose of a motion to dismiss. It is
apparent from the statement of the case that the only express
assertion of federal right had reference to
Page 234 U. S. 134
the statutory penalty and the attorney's fee. The assignments of
error, however, assert violations of rights under the Constitution
in many particulars, but more especially with reference to the
action of the court in treating the sales of the policies as Texas
contracts, and refusing to apply the Georgia law, which admittedly
differed fundamentally from that of Texas. It is elementary that a
federal question may not be imported into a record for the first
time by way of assignments of error made for the purposes of review
by this Court. Moreover, as a general rule, it is true that, for
the purposes of review by this Court, rights under the full faith
and credit clause, § 1, Article IV, of the Constitution, come
within that class which are required to be expressly set up and
claimed in the court below.
Johnson v. New York Life Ins.
Co., 187 U. S. 491;
El Paso and Southwestern R. Co. v. Eichel, 226 U.
S. 590,
226 U. S. 597;
Chicago, Ind. & L. R. Co. v. Hackett, 228 U.
S. 559,
228 U. S. 565.
Let it be conceded, as we think it must be, where the record leaves
no doubt that rights under the full faith and credit clause were
essentially involved and were necessarily passed upon, there would
be jurisdiction to review even although such rights had not been
expressly asserted below (
see Tilt v. Kelsey, 207 U. S.
43,
207 U. S. 51),
the right to review under such condition being in effect but a
result of the elementary rule that it is irrelevant to inquire how
and when a federal question was raised in a court below when it
appears that such question was actually considered and decided. But
these concessions are irrelevant, even although it be further
conceded that the ruling of the court below as to the necessity for
an insurable interest, and its governing the case by the law of
Texas instead of by the law of Georgia, bring this case within the
doctrines just stated. We say this because of the existence of
another and fundamental question which causes the concessions
stated to be immaterial. Both parties, as we have seen, wholly
independent of the existence of an insurable
Page 234 U. S. 135
interest, affirmed the illegality of the transaction out of
which the assignments of the policies grew because of the alleged
gambling nature of the transaction, and the admitted facts without
dispute established that situation. There being thus an admission
by both parties, and no dispute concerning the illegality of the
transaction, and a difference only as to the consequences to arise
from such illegality, it follows that the case reduces itself to a
consideration of that subject. But, on coming to its consideration,
it is plain that no question concerning the full faith and credit
clause was involved in any contention made below by the plaintiff
in error in that regard, since the rights deduced from the admitted
illegality of the transaction were placed solely on considerations
of the local law of the State of Texas and of the State of Georgia,
deemed to be applicable to such condition of things, or upon what
was deemed to be the controlling principles of general law on the
subject. Indeed, so absolutely is this the case that, as we have
seen, the company itself insisted on the illegality and based
rights upon it. And it was only on behalf of the defendant in error
that considerations involving the full faith and credit clause were
suggested as controlling the results in consequence of the admitted
illegality of the transaction as a gambling one. A condition which
is illustrated by the fact that the reply petition of the
plaintiff, while accepting and reiterating the averment of
illegality made in the answer of the defendant company, in addition
specially alleged that the illegality resulting from the gambling
transaction caused the assignment of the policies to be void under
the law of New York, where the company was organized, and under the
law of Texas, as well as under the law of Georgia. And it was for
this reason that the proof which was offered as to the statute law
of Georgia on the subject of gambling transactions and the decision
or decisions of that state, which it was deemed made the statute
applicable, were tendered on behalf of the plaintiff,
Page 234 U. S. 136
and not by the defendant company. It would be indeed anomalous
when the parties had both relied upon the illegality of the
transaction upon grounds wholly independent of any federal right,
and the case had been decided upon that ground, which, in and of
itself, is sufficient to sustain the action of the court below, to
permit one of the parties, because of his dissatisfaction with the
application of such principles, to assert the existence of
jurisdiction because the case rested on a federal issue. It
becomes, hence, obvious that the assignments of error outside of
the one referring to the repugnancy to the Fourteenth Amendment of
the statute imposing damages and penalties affords not the
slightest pretext for the exercise of jurisdiction, and they
therefore may be put out of view.
Coming to consider the latter subject, it may not be doubted
that the nonrepugnancy of the assailed statute to the Constitution
of the United States has been directly determined by this Court in
the cases upon which the lower court based its ruling.
Fidelity
Mut. Life Ass'n v. Mettler, 185 U. S. 308;
Farmers' & Merchants' Ins. Co. v. Dobney, 189 U.
S. 301. But it is said that, as previously upheld, the
statute, as construed by the state court, contemplated a liability
for the penalties or damages and attorneys' fees only in case there
was a willful refusal to pay, and therefore those decisions have no
application here, since the statute, as applied in this case,
enforces a liability against the company in spite of its action in
the utmost good faith, taken solely for the purpose of determining
to whom it must pay the sum due, liability as to which was frankly
conceded. But the deduction simply disregards the basis upon which
the court below rested its conclusion, and invites us upon a
conception of injustice to commit a wrong by reviewing a matter of
purely local concern which is not within our cognizance. We say
this because clearly the court below rested its conclusion as to
liability for the penalty and damages not upon the construction of
the
Page 234 U. S. 137
statute suggested, but upon the premise that the payment to
Hilsman by the insurance company of the sum of the policies under
the circumstances stated was a payment which took it out of the
category of a mere stakeholder seeking to discharge his duty in
good faith, and placed it in the position of a person espousing the
cause of one as against the other, and thereby subjecting himself
to the legal consequences arising from such action. And the
considerations which we have stated also dispose of the contention
concerning the wrong which it was insisted was done in declaring
the assignment of the policies void because of the gambling nature
of the contract, and yet permitting the assignor to hold on to the
price paid for such assignment. That question was involved in and
controlled by the court's ruling concerning the illegal nature of
the transaction and the principles applicable thereto, and
therefore it is beyond our competency to review.
As the repugnancy of the statute concerning the damages and
attorney's fee was the only semblance of ground for invoking our
jurisdiction, and as that ground was conclusively established to be
without merit when the writ of error was sued out, it follows that
there is nothing upon which to base jurisdiction, and the writ of
error must be dismissed.
Dismissed for want of jurisdiction.
