1. A contract between a Connecticut and a Mississippi
corporation, whereby the former insured the latter against loss
through dishonesty of one of its employees "in any position
anywhere," was made in Tennessee, where both parties and the
Page 292 U. S. 144
present, and contained a condition that any claim under the
contract must be made within 15 months from the termination of the
suretyship. In an action for defalcations committed in Mississippi,
where also both corporations did business, the courts of
Mississippi held that the condition was contrary to the policy and
law of that State, and awarded judgment against the insurer,
although the condition had not been complied with. Held
that such extension of the Mississippi law was beyond the
jurisdiction of the State and void under the due process clause of
the Fourteenth Amendment. P. 292 U. S.
2. Obligations of a contract lawfully made in another
jurisdiction may not be enlarged by a State to accord with all its
own statutory policies upon the ground that one of the parties is
its own citizen. P. 292 U. S.
3. A legislative policy which attempts to draw to the the forum
control over the obligations of contracts elsewhere validly
consummated and to convert them for all purposes into contracts of
the forum, regardless of the relative importance of the interests
of the forum as contrasted with those created at the place of the
contract, conflicts with the guaranties of the Fourteenth
Amendment. P. 292 U. S.
169 Miss. 196 reversed.
Appeal from a judgment sustaining a recovery from the Indemnity
Company in an action on an indemnity bond.
MR. JUSTICE ROBERTS delivered the opinion of the Court.
This was an action instituted in a circuit court of Mississippi
by Delta & Pine Land Company, a corporation of that state, with
its principal place of business therein, against Hartford Accident
& Indemnity Company, a corporation of Connecticut, having its
principal place of business in Hartford in that state. The
declaration alleges that, on or about January 1, 1928, the
Page 292 U. S. 145
to the defendant for a fidelity bond and paid the agreed
premiums therefor, and the defendant executed and delivered to the
plaintiff such a bond, whereby it bound itself to pay the
plaintiff, within sixty days after satisfactory proof, pecuniary
loss sustained by the plaintiff through fraud or dishonesty or
willful misapplication by any employee "in any position, anywhere,"
from the time that the name of such employee should be placed upon
a schedule attached to the bond to and including the termination of
the suretyship for such employee by his dismissal, retirement from
service, discovery of loss, or cancellation of the bond by the
parties. It is alleged that the name of H. H. Harris, as treasurer
of the plaintiff, appears upon the schedule, and that the amount of
coverage for him is $25,000. Sundry defalcations by Harris between
May 9, 1929, and December 20, 1929, totaling $2,703.79, are set
forth, all of which and the resulting loss occurred in the First
Judicial District of Bolivar County, Miss. The further material
matters charged are that the defendant, throughout all the times
mentioned in the declaration and ever since, was and now is duly
qualified and licensed to do business in Mississippi; that the
dishonest acts of Harris were discovered on or about May 20, 1931,
immediate notice given to the defendant at its home office, and
affirmative proof of loss under oath, with full particulars, filed
with the defendant at its home office within three months after the
discovery. The declaration, in conclusion, asserts compliance by
plaintiff with all the terms of the bond and refusal of the
defendant, though requested, to make payment of the sum demanded.
Annexed to the declaration are copies of the bond and the
supplementary schedules forming part of it.
The defendant's plea was, in substance: the plaintiff, before
and at the date of the contract of suretyship, was doing business
in Tennessee, with its principal office at Memphis in that state,
and defendant also was then and
Page 292 U. S. 146
is now doing business in Tennessee, having an agency at Memphis;
plaintiff, through its office at Memphis, applied to defendant
through its agency there for the bond, rider, and schedules
containing the name of the defaulting employee, Harris,
constituting the contract of suretyship; defendant through its
agency at Memphis executed and delivered the bond and schedules to
plaintiff at its office in that city; the contract is a Tennessee
contract and governed by the laws of Tennessee, and full faith and
credit must be given to it in the courts of Mississippi in
accordance with the requirements of Article IV, § 1, Article I, §
10, and § 1 of the Fourteenth Amendment of the Constitution of the
United States; there was not at the time of delivery of the
contract, and is not now, any statute in Tennessee prohibiting or
invalidating the condition or limitation in the contract to the
effect that any claim thereunder must be duly made upon the
defendant as surety within fifteen months after the termination of
the suretyship for the defaulting employee, and the plaintiff did
not make claim upon the defendant for the loss within fifteen
months after the termination of the suretyship for Harris, as the
contract was cancelled and terminated December 31, 1929, and the
plaintiff made no claim until June 22, 1931.
To this plea the plaintiff demurred, assigning these causes of
demurrer: (1) the construction and validity of the provision of the
contract relied upon in the plea is to be determined by the laws of
Mississippi, and not by the laws of Tennessee; (2) the statute of
limitations of the state where suit is brought is the statute which
governs the time for bringing this action, and the provision in the
contract requiring that any claim thereunder must be made upon the
defendant within fifteen months after the termination of the
suretyship for the defaulting employee is in violation of § 2294 of
the Mississippi Code of 1930 and in violation of the public policy
of Mississippi, and
Page 292 U. S. 147
its courts are not required to give full faith and credit to
this provision of the contract by Article IV, § 1, Article I, § 10,
or § 1 of the Fourteenth Amendment of the Constitution.
The cause came on for hearing upon the pleadings, and the court
sustained the demurrer. The defendant declined to plead further,
whereupon judgment was entered by default in favor of the
plaintiff, a jury was impaneled and assessed damages at the amount
claimed, and final judgment was accordingly entered.
Upon appeal by the defendant, the Supreme Court of Mississippi
affirmed the judgment. 150 So. 205. Conceding that, under the
decisions of the Supreme Court of Tennessee, the provision for
notice within fifteen months of the termination of the suretyship
is a valid limitation of liability, and not a limitation of action,
the court said the converse is true in Mississippi. Although the
bond was executed and delivered and the agreement consummated in
Tennessee, where the plaintiff and the defendant's agent had their
respective offices, and where, in the absence of proof of a
contrary intent, the contract was to be performed, the court
concluded that the statutes of Mississippi made the instrument a
Mississippi contract, and annulled the contractual limitation of
the time for giving of notice of claim.
The Mississippi statutes relied upon were the following:
"A contract of insurance is an agreement by which one party for
a consideration promises to pay money or its equivalent, or to do
some act of value to the assured, upon the destruction, loss or
injury of something in which the assured or other party has an
interest, as an indemnity therefor, and it shall be unlawful for
any company to make any contract of insurance upon, or concerning
any property or interest or lives in this state, or with any
resident thereof; or for any person as insurance agent or insurance
broker to make, negotiate, solicit, or in any manner aid in the
transaction of such insurance unless and
Page 292 U. S. 148
except as authorized under the provisions of this chapter. All
contracts of insurance on property, lives or interests in this
state shall be deemed to be made therein."
§ 5131 of the Mississippi Code, 1930.
"The limitations prescribed in this chapter shall not be changed
in any way whatsoever by contract between parties, and any change
in such limitations made by any contract stipulation whatsoever
shall be absolutely null and void, the object of this statute being
to make the period of limitations for the various causes of action
the same for all litigants."
§ 2294 of the Mississippi Code, 1930.
The state Supreme Court said:
"But clearly, under § 5131, Code 1930, defining insurance, this
indemnity bond is a contract of insurance within the purview of
that statute; and, further, it being expressly provided therein
that all contracts of insurance on property, lives, or interests in
this state shall be deemed to be made therein, in our judgment,
makes the contract herein under review a Mississippi contract and
solvable under the laws of this state. The contract here provided
or stipulated that the appellee should be indemnified from loss by
the defalcation of H. H. Harris in any position anywhere, and when
he, the employee and the insured herein, removed to Mississippi and
there defaulted, so far as the appellee is concerned, its interest
was insured or indemnified by the appellant in Mississippi, and,
under the provision quoted from the above statute, became
operative, and this state is obligated to enforce it, as a
Mississippi contract, although it contained all the elements
necessary to make it a Tennessee contract, but for the
"* * * *"
"When the statute declares that such a contract shall be deemed
to be made in this state, it means that the conflict of law between
the two states is eliminated, and
Page 292 U. S. 149
thereby, . . . a contract for fifteen months' notice was a
limitation of the action unenforceable as such in this state."
The Mississippi statutes, so construed, deprive the appellant of
due process of law. A state may limit or prohibit the making of
certain contracts within its own territory (Hooper v.
California, 155 U. S. 648
Orient Insurance Co. v. Daggs, 172 U.
, 172 U. S.
-566; New York Life Ins. Co. v. Cravens,
178 U. S. 389
178 U. S.
-399), but it cannot extend the effect of its laws
beyond its borders so as to destroy or impair the right of citizens
of other states to make a contract not operative within its
jurisdiction, and lawful where made (New York Life Ins. Co. v.
Head, 234 U. S. 149
Aetna Life Ins. Co. v. Dunken, 266 U.
, 266 U. S.
). Nor may it in an action based upon such a contract
enlarge the obligations of the parties to accord with every local
statutory policy solely upon the ground that one of the parties is
its own citizen. Home Ins. Co. v. Dick, 281 U.
, 281 U. S.
It is urged, however, that, in this case, the interest insured
was in Mississippi when the obligation to indemnify the appellee
matured, and it was appellant's duty to make payment there, and
these facts justify the state in enlarging the appellant's
obligation beyond that stipulated in the bond, to accord with local
public policy. The liability was for the payment of money only, and
was conditioned upon three events -- loss under the policy, notice
to the appellant at its home office, and presentation of claim
within fifteen months of the termination of the suretyship. All of
these conditions were of substantial importance, all were lawful in
Tennessee, and all go to the obligation of the contract. It is true
the bond contemplated that the employee whose faithfulness was
guaranteed might be in any state. He was in fact in Mississippi at
the date of loss, as were both obligor and obligee. The contract
Page 292 U. S. 150
a Tennessee contract and lawful in that state, could
Mississippi, without deprivation of due process, enlarge the
appellant's obligations by reason of the state's alleged interest
in the transaction? We think not. Conceding that ordinarily a state
may prohibit performance within is borders even of a contract
validly made elsewhere, if the performance would violate its laws
(Home Ins. Co. v. Dick, supra,
p. 281 U. S.
), it may not, on grounds of policy, ignore a right
which has lawfully vested elsewhere if, as here, the interest of
the forum has but slight connection with the substance of the
contract obligations. Here, performance, at most, involved only the
casual payment of money in Mississippi. In such a case, the
question ought to be regarded as a domestic one, to be settled by
the law of the state where the contract was made. A legislative
policy which attempts to draw to the state of the forum control
over the obligations of contracts elsewhere validly consummated and
to convert them for all purposes into contracts of the forum,
regardless of the relative importance of the interests of the forum
as contrasted with those created at the place of the contract,
conflicts with the guaranties of the Fourteenth Amendment.
Aetna Life Ins. Co. v. Dunken, supra; Home Ins. Co. v. Dick,
Cases may occur in which enforcement of a contract as
made outside a state may be so repugnant to its vital interests as
to justify enforcement in a different manner. Compare Bond v.
Hume, 243 U. S. 15
243 U. S. 22
But clearly this is not such a case.
Our conclusion renders unnecessary a consideration of the claims
made under the full faith and credit and contract clauses of the
The judgment is reversed, and the cause is remanded for further
proceedings not inconsistent with this opinion.