1. A law of the state where a life insurance policy was
executed, directing temporary continuance of the full insurance by
application of a proportion of the net value in case of default in
payment of premiums, controls the parties' later loan agreement,
made in the
Page 259 U. S. 210
same state on security of the policy and stipulating for
cancellation of the policy in case of default in repaying the loan.
P. 259 U. S.
2. Where a life insurance policy, executed in Missouri,
contained a positive promise by the insurance company to lend upon
security of the policy within the limits of its cash surrender
value, and a loan agreement was made and consummated through an
application delivered to the insurance company's Missouri agency,
its transmission to and approval at the company's home office in
New York, discharge there of a past due premium and issuance of a
receipt therefor, transmission of the receipt and the company's
check for the balance of the loan to the company's Missouri agent,
and their delivery in Missouri by such agent to the insured, who
cashed the check, held
that the agreement was made in
Missouri and governed by the Missouri law. P. 259 U. S. 214
New York Life Insurance Co. v. Dodge, 246 U.
226 S.W. 897 affirmed.
Error to a judgment against the plaintiff in error recovered in
an action upon a life insurance policy.
Page 259 U. S. 212
MR. JUSTICE HOLMES delivered the opinion of the Court.
This is a suit to recover upon a policy insuring the life of one
Blees, issued to him and subsequently assigned by him to his wife,
now Mrs. Liebing, the plaintiff (defendant in error). The contract
was made on September 29, 1901, by the defendant (the plaintiff in
error) in Missouri by a delivery of the policy to Blees in Macon,
Missouri, where he lived. Three annual premiums were paid. After
the fourth was due, within the time allowed, Blees and his wife
signed an application for a loan of $9,550 and sent it with the
policy to the defendant's agency at St. Louis, by which it was
forwarded to New York. The application followed the terms of the
policy, which agreed that, after it had been in force three years,
the company would lend amounts within the cash surrender value,
upon certain conditions, the policy being assigned as security.
Following these terms, the application deducted from the cash to be
received the fourth annual premium and an adjustment of interest,
leaving the balance to be paid $4,790.50. The loan was to be for
one year, and the application authorized the company upon default
to cancel the policy and apply the customary cash surrender
consideration to the payment of the loan. The application was
approved in New York, and a check for $4,790.50 to the order of Mr.
and Mrs. Blees, with a receipt for the fourth premium, was
Page 259 U. S. 213
sent from New York to the company's manager in St. Louis, and by
him forwarded to a local agent, who delivered the documents to
Blees. The check was endorsed and paid. A year later, when
repayment was due, it was not made. Thereupon, on December 4, 1905,
the company cancelled the policy and applied the surrender value to
the loan, which was of equal amount, leaving a deficit of $74.57
interest. Blees died on September 8, 1906, and, upon inquiry from
Mrs. Blees, the company notified her of what had been done. Its
action had been in accordance with the terms of its contract and
the law of New York. But some years later, Mrs. Blees, now Mrs.
Liebing, brought the present action, relying upon the Revised
Statutes of Missouri 1899, § 7897, set forth and considered in
New York Life Insurance Co. v. Dodge, 246 U.
, and, after a previous decision the other way,
she recovered by the final judgment of the supreme court of the
state. 226 S.W. 897.
The Missouri statute provided that such policies as the present,
after three annual payments, should not become void for nonpayment
of premiums, but that three-fourths of the net value of the policy
after deducting certain liabilities should be taken as a premium
for temporary insurance for the full amount written in the policy.
It is not disputed that, if this statute governs the case, the
plaintiff stood as having a policy for the original amount at the
death of Mr. Blees. In New York Life Insurance Co. v.
Dodge, 246 U. S. 357
was held that, when the later transaction was consummated in New
York, Missouri could not prohibit a citizen within her borders from
executing it. But if the later contract was made in Missouri, then,
by the present and earlier decisions, notwithstanding any contrary
agreement, the statute does govern the case. See
246 U. S.
The policy now sued upon contained a positive promise to make
the loan if asked, whereas in the one last mentioned,
Page 259 U. S. 214
it might be held that some discretion was reserved to the
company. For here, the language is "the company will . . . loan
amounts within the limits of the cash surrender value," etc.,
whereas there, it was "cash loans can be obtained." On this
distinction, the Missouri court seems to have held that, as soon as
the application was delivered to a representative of the company in
Missouri, the offer in the policy was accepted and the new contract
complete, and therefore subject to Missouri law. If, however, the
application should be regarded as only an offer the effective
acceptance of it did not take place until the check was delivered
to Blees, which again was in Missouri, where he lived. In whichever
way regarded, the facts lead to the same conclusion, and although
the circumstances may present some temptation to seek a different
one by ingenuity, the Constitution and the first principles of
legal thinking allow the law of the place where a contract is made
to determine the validity and the consequences of the act.