1. An Ohio citizen brought an action in a state court in South
Dakota against a fraternal benefit society, incorporated in Ohio
and licensed to do business in South Dakota, to recover benefits
claimed to have arisen under the society's constitution as a result
of the death of an insured member who had been a citizen of South
Dakota throughout his membership. The society's constitution, which
was valid in Ohio, prohibited the bringing of an action on such a
claim more than six months after its disallowance by the society.
The action was brought after expiration of this time, but before
the expiration of the period prescribed by South Dakota law for
commencing suits on contracts. A statute of South Dakota declared
void every stipulation or condition in a contract which limits the
time within which a party thereto may enforce his rights by usual
legal proceedings in the ordinary tribunals.
Held: the federal Constitution requires South Dakota to
give full faith and credit to the public acts of Ohio under which
the society was incorporated, and the claimant was bound by the
six-month limitation upon bringing such an action. Pp.
331 U. S.
588-589,
331 U. S.
624-625.
2. A claim based on membership rights under the constitution of
an incorporated fraternal benefit society, the terms of which are
subject to amendment through the processes of a representative form
of government authorized by the law of the state of incorporation,
differs from a claim for benefits under an ordinary contract of
accident insurance, whether issued by a stock or a mutual insurance
company. Pp.
331 U. S. 600,
331 U. S.
606.
3. It is of primary significance from the legal point of view in
this case that the society is a voluntary fraternal association
organized and carried on not for profit, but solely for the mutual
benefit of its members and their beneficiaries, and has a
representative form of government which shall make provision for
the payment of benefits in accordance with certain statutory
requirements. P.
331 U. S.
605.
4. Relationships between the members of fraternal benefit
societies are contractual, in that they are undertaken voluntarily
in consideration of the like obligations of others; but, interwoven
with their
Page 331 U. S. 587
financial rights and obligations, they have other common
interests incidental to their memberships which give them a status
toward one another that involves more interdependence than arises
from purely business and financial relationships. Pp.
331 U. S.
605-606.
5. Membership in a fraternal benefit society is governed by the
law of the state of incorporation; control over its terms is vested
in the elected representative government of the society as
authorized and regulated by that law. P.
331 U. S.
606.
6. By virtue of the full faith and credit clause, the people of
the United States have imposed upon the general rules governing
conflicts of laws respecting statutes of limitations on claims
arising out of ordinary contracts another limitation, giving effect
to a limitation contained, as in the present case, in the
constitution of a fraternal benefit society. P.
331 U. S.
607.
7. Fraternal benefit societies exist by virtue of the laws of
the states of their incorporation, and the rights and obligations
incident to membership in them are as much entitled to full faith
and credit as the statutes upon which they depend. P.
331 U. S.
609.
8. To permit recovery in this case would fail to give full faith
and credit to the terms of membership authorized by Ohio by placing
an additional liability on the society beyond that authorized by
Ohio or accepted by the society. P.
331 U. S.
610.
9. The weight of public policy behind the general statute of
South Dakota, which seeks to avoid contractual limitations upon
rights to sue on ordinary contracts, does not equal that which
makes necessary the recognition of the same terms of membership for
members of fraternal benefit societies wherever their beneficiaries
may be, especially where the State, with full information as to
those terms of membership, has permitted such societies to do
business and secure members within its borders. P.
331 U. S.
624.
10. If a state gives some faith and credit to the laws of
another state by permitting its own citizens to become members of,
and benefit from, fraternal benefit societies organized by such
other state, it must give full faith and credit to those laws, and
must recognize the burdens and limitations which are inherent in
such memberships. P.
331 U. S.
625.
70 S.D. 452, 18 N.W.2d 755, reversed.
In an action brought in a state court in South Dakota, an Ohio
citizen obtained a judgment against a fraternal benefit society
incorporated in Ohio for benefits claimed to have arisen under the
society's constitution as a result
Page 331 U. S. 588
of the death of an insured member who was a citizen of South
Dakota. The Supreme Court of South Dakota affirmed. 70 S.D. 452, 18
N.W.2d 755. This Court granted certiorari. 326 U.S. 712.
Reversed, p.
331 U. S.
625.
MR. JUSTICE BURTON delivered the opinion of the Court.
This is an action in a circuit court of the South Dakota,
brought by an Ohio citizen against a fraternal benefit society
incorporated in Ohio, to recover benefits claimed to have arisen
under the constitution of that society as a result of the death of
an insured member who had been a citizen of South Dakota throughout
his membership. The case presents the question whether the full
faith and credit clause of the Constitution of the United States
[
Footnote 1] required the court
of the forum, South Dakota, to give effect to a provision of the
constitution of the society prohibiting the bringing of an action
on such a claim more than six months after the disallowance of the
claim by the Supreme Executive Committee of the society, [
Footnote 2]
Page 331 U. S. 589
when that provision was valid under the law of the state of the
society's incorporation, Ohio, but when the time prescribed
generally by South Dakota for commencing actions on contracts was
six years, [
Footnote 3] and
when another statute of South Dakota declared that
"Every stipulation or condition in a contract by which any party
thereto is restricted from enforcing his rights under the contract
by the usual legal proceedings in the ordinary tribunals, or which
limits the time within which he may thus enforce his rights, is
void. [
Footnote 4]"
We hold that, under such circumstances, South Dakota, as the
state of the forum, was required, by the Constitution of the United
States, to give full faith and credit to the public acts of Ohio
under which the fraternal benefit society was incorporated, and
that the claimant was bound by the six-month limitation upon
bringing suit to recover death benefits based upon membership
rights of a decedent under the constitution of the society. This
has been the consistent view of this Court. [
Footnote 5]
The record in the present case well illustrates both the
practical effect of such a limitation as that contained in the
constitution of this society and the need for the application of
the full faith and credit clause to membership obligations in
fraternal benefit societies.
Page 331 U. S. 590
The petitioner, The Order of United Commercial Travelers of
America, was incorporated in 1888 under the general corporation
laws of Ohio. [
Footnote 6] By
1920, when the decedent, Ford Shane, of Rapid City, South Dakota,
became
Page 331 U. S. 591
a member, this fraternal benefit society was in active operation
in many states. Then, and at his death in 1931, it was regulated in
detail by the General Code of Ohio. That Code included public acts
of Ohio on such subjects as the following: § 9462, Fraternal
benefit society defined; [
Footnote
7] § 9463, Lodge system; § 9464, Representative form of
government, including restrictions on amendments to its
constitution; § 9465, Exemption from general insurance laws of the
State; § 9466, Benefits; § 9467, To whom benefits shall be paid,
stating limitations on the degrees of family relationship permitted
to exist between a member and those whom he may designate to
receive benefits as a result of his death; § 9468, Age limits for
admission to membership; § 9469, Certificate shall constitute
agreement; [
Footnote 8] §
9469-1, Exception as to commercial
Page 331 U. S. 592
travelers; [
Footnote 9] §
9470, Investment, disbursement, and application of funds; § 9481,
Laws of society shall be binding on members and beneficiaries, and
the society may provide, as here, that no subordinate body,
officers or members may waive any of the provisions of the laws and
constitution of the society. [
Footnote 10] These public acts have created and regulated
the society and the rights and obligations of its members. They are
reflected in its articles of incorporation, constitution, and
bylaws. They make possible uniformity of rights and obligations
among all members throughout the country, provided full faith and
credit are given also to the constitution and bylaws of the society
insofar as they are valid under the law of the state of
incorporation. If full faith and credit are not given to these
provisions, the mutual rights and obligations of the members of
such societies are left subject to the control of each state. They
become unpredictable, and almost inevitably unequal.
The principal office of this society has been continuously in
Columbus, Ohio. The society has established subordinate councils in
many states, and, at all times involved in this case, has been
licensed to do business in South
Page 331 U. S. 593
Dakota as a foreign fraternal benefit society. [
Footnote 11] In accordance with the
requirements for maintaining such license in good standing, the
society has kept on file with the Commissioner of Insurance of
South Dakota a copy of the society's constitution, including § 11
of Article IV, here
Page 331 U. S. 594
in controversy, limiting the time for bringing suits to recover
claims for benefits based upon that Article. The state of the
forum, thus, has been continuously in a position to revoke or
refuse to renew the society's license to do business in that State
if it had good reason to do so. There is no evidence that South
Dakota has attempted or suggested such action. The favorable,
rather than hostile, attitude of South Dakota towards such
societies is evidenced by its own authorization of their
incorporation in that State on terms identical, word for word, with
those prescribed in Ohio. [
Footnote 12]
The decedent, on July 31, 1920, applied for membership in the
society through Rapid City Council No. 516, in Rapid City, South
Dakota. He was 37 years old, a manager and salesman selling
"packing products" on the road, in good physical condition, and
employed in an occupation of precisely the type contemplated for
membership in this society. [
Footnote 13] He named his wife as his beneficiary in case
of
Page 331 U. S. 595
his death from accidental means. On August 19, 1920, he was
accepted by the Supreme Council as an insured member of the society
under "Class A." The certificate, No. 169655, evidencing this
acceptance was executed at Columbus, Ohio, by the Supreme Counselor
and Supreme Secretary. In 1922, following a brief suspension, he
applied for reinstatement in what was then Black Hills Council No.
516 in Rapid City, South Dakota, and, on December 21, 1922, was
reinstated as an insured member of the society under "Class A." In
his application for this renewal, he referred to himself as a
traveling salesman, selling meat to dealers, and named his mother,
Elizabeth Shane of Mt. Vernon, South Dakota, as his beneficiary.
[
Footnote 14]
Page 331 U. S. 596
Thereafter, he remained in good standing, and it is upon his
membership, evidenced by this certificate, also executed in Ohio,
that this action depends. On May 8, 1931, he visited a physician's
office in Rapid City, South Dakota, to be examined for stricture.
The doctor applied a local anesthetic preliminary to introducing an
instrument known as a "sound" for exploratory purposes. The local
anesthetic was a drug known as "butyn." The record shows that butyn
commonly was used by physicians for such a purpose; that it was
properly administered in the usual and proper amount, and was of
the usual and proper strength, but that the decedent, unknown to
anyone, was subject to a
Page 331 U. S. 597
rare idiosyncrasy, as a result of the presence of which he
suffered convulsions immediately following the administration of
the anesthetic and died within two minutes.
In accordance with the procedure prescribed in the constitution
of the society, the decedent's beneficiary promptly mailed to the
society a notice of her son's death. On June 8, 1931, the Supreme
Executive Committee, in Columbus, Ohio, reviewed and disallowed her
claim on its merits, and mailed to her notice of such action. On
June 16, she filed a complaint against the society in a circuit
court for the South Dakota to recover death benefits, amounting to
$6,300, claimed under Article IV of the constitution of the
society. The case was removed to the United States District Court
for South Dakota because of diversity of citizenship. On September
2, it was tried without a jury, and, on December 15, 1931, judgment
was rendered for the mother with findings of fact and conclusions
of law dealing with the merits of the case. This judgment, on
February 27, 1933, was reversed on its merits by the United States
Circuit Court of Appeals for the Eighth Circuit, and judgment for
costs was entered against Elizabeth Shane.
Order of United
Commercial Travelers v. Shane, 64 F.2d 55. [
Footnote 15] Upon remand
Page 331 U. S. 598
of the case to it, the District Court, on April 18, 1933,
ordered
"that the Judgment of the United States Circuit Court of Appeals
in this matter be made the Judgment of this Court, and that all
costs of this Court relating to such Mandate and Judgment be taxed
and allowed the defendant."
(Unreported.) Thus, within less than two years, the case had
been completely presented and heard by the District Court and the
Circuit Court of Appeals and disposed of, on its merits, in favor
of the society, with full recognition of the diversity of
citizenship of the parties and in compliance with the time limits
prescribed by the constitution of the society.
The present proceeding, however, resulted from the fact that,
pursuant to stipulation of the parties, the District Court, on
January 18, 1934, dismissed the case without prejudice to the
filing of another suit. On June 15, 1934, the decedent's mother
assigned her claim to Edward C. Wolfe, the present respondent, a
citizen of Ohio, as trustee, to enforce collection of the claim. On
the same day, the present action was filed in a circuit court of
the South Dakota. An answer was entered, and a stipulation was made
to use the testimony which had been taken in the District Court in
the previous case. There the case rested for six years. On October
19, 1940, an amended answer was filed raising, among others, the
defense that this second action was in violation of the following
Section of the constitution of the society:
Page 331 U. S. 599
"
ARTICLE IV. INSURANCE"
* * * *
WAIVERS
"SEC. 11. No suit or proceeding, either at law or in equity,
shall be brought to recover any benefits under this Article after
six (6) months from the date the claim for said benefits is
disallowed by the Supreme Executive Committee."
"No Grand or Subordinate Council, officer, member, or agent of
any Subordinate, Grand, or the Supreme Council of the Order is
authorized or permitted to waive any of the provisions of the
Constitution of this Order relating to insurance as the same are
now in force or may be hereafter enacted."
It is not disputed that such provision has been in such
constitution since before the decedent's first application for
membership in the society, and that it was printed in full on the
back of the certificate of membership originally issued to the
decedent. It further was alleged that this provision was valid and
binding upon the members of the society by and under the laws of
Ohio; that the highest court of that State had held that a
fraternal benefit society, by its constitution and bylaws, could
limit the time within which suit must be brought to recover for
benefits promised to members, and that to deny the binding effect
of that limitation on the plaintiff in such suit would be a
violation of the full faith and credit clause of the Constitution
of the United States, art. IV, § 1, and a violation of the
society's rights thereunder. We decide that issue here in favor of
the society. No claim is made here that the society is barred from
this defense by any waiver purporting to have been made on its
behalf in connection with the dismissal of the earlier action
without prejudice to filing another.
See
Riddlesbarger v.
Hartford Ins. Co.,
Page 331 U. S. 600
7 Wall. 386. In this view of the case, it is not necessary to
consider the other defenses.
In 1942, the case was presented before a judge of a circuit
court of the South Dakota. Upon the death of that judge before a
decision in the case, it was heard, in 1943, by another judge of
that court, largely upon the record made, in 1931, in the United
States District Court. The state court, on April 4, 1944, entered
judgment in favor of the claimant, respondent herein. In 1945, the
Supreme Court of the South Dakota, by a divided court, affirmed
that judgment. 18 N.W.2d 755. Because of the constitutional issue
presented and its relation to previous decisions of this Court, we
granted certiorari. 326 U.S. 712. The case was argued here February
28, 1946. Later it was restored to the docket, assigned for
reargument before a full bench, and reargued here November 12,
1946.
This is a clear-cut case of a claim based solely upon membership
rights and obligations contained in the constitution of an
incorporated fraternal benefit society, the terms of which are
subject to amendment through the processes of a representative form
of government authorized by the law of the state of incorporation.
There is no evidence in the records of the three trials, no
suggestion in the opinions of the lower courts, and no claim in the
arguments here that the decedent was not a
bona fide
active member of the society, or that the society was acting
otherwise than as a fraternal benefit society. This case,
therefore, is to be distinguished from a claim for death benefits
under an ordinary contract of accident insurance, whether issued by
a stock or a mutual insurance company.
We rely upon the character of the membership obligation sued
upon. There is substantial evidence to support a contention that
the contract of membership, including all insurance rights, was
made in Ohio, and that many
Page 331 U. S. 601
acts in connection with the contract were required to be
performed in Ohio, and were so performed. However, we do not rely
upon the place of concluding the contract of membership or upon the
place prescribed for its performance. We rely, rather, upon its
character as something created, regulated, and subject to change
through a fraternal and representative form of intra-corporate
government, dependent for its terms, continuity, and unity upon
public acts of Ohio creating and regulating fraternal benefit
societies.
Although the respondent, suing as an Ohio citizen, has
eliminated the South Dakota citizenship of the original beneficiary
as a jurisdictional factor in this case, we do not hold that, for
that reason, he may not urge the courts to consider the continuous
South Dakota residence and citizenship of the decedent and of the
named beneficiary in determining whether the public policy of South
Dakota should yield to the full faith and credit clause of the
constitution of the United States in giving recognition to the
charter rights and obligations of the society as an Ohio
corporation.
In order, however, to appreciate the nature of the obligation
here relied upon, it is essential to see how completely its terms
are interwoven with the enabling legislation authorizing the
corporate charter and with the constitution and bylaws of the
society, as well as with the member's application for and his
certificate of membership in such society.
The enabling legislation, corporate charter, and certificate of
membership have been described. The application for membership
contributes nothing further to the issue except to emphasize the
integration which it demonstrates between the member and the
articles of incorporation, constitution, and bylaws of his society.
There was no application for insurance separate from the
application
Page 331 U. S. 602
for membership. Benefits derived from membership flowed solely
from the decedent's membership status.
There remain to be considered the constitution and bylaws of the
society. These set forth the main body of the member's rights and
obligations, including those of a fraternal and procedural nature,
as well as those relating to financial benefits and liabilities.
The principal part of the record consists of printed copies of the
charter, constitution, and bylaws of the society, one as generally
effective September 1, 1922, and the other as effective September
1, 1930. A comparison of these copies shows that many changes were
made in the rights and obligations of members during the decedent's
membership in the society. [
Footnote 16]
The 1930 constitution, in pamphlet form, filled 90 closely
printed pages. Its subject matter is outlined in the margin.
[
Footnote 17] It is obvious
how vital these terms, both in detail and as a whole, were to each
member. The bylaws filled six pages. They consisted of 29
paragraphs
Page 331 U. S. 603
dealing with the conduct of meetings of the Subordinate (or
local) Councils, Grand (or regional) Councils and the Supreme
(national or international) Council. Under such a constitution, it
is impossible to separate the member's
Page 331 U. S. 604
insurance rights and obligations from his other rights and
obligations. While the statute authorizing the incorporation of
fraternal benefit societies calls for "a lodge system with
ritualistic form of work," and this is a natural
Page 331 U. S. 605
expression of a close community of interest among members of a
fraternal benefit society, yet it is not the formality of any
ritual that is of primary significance from the legal point of view
in this case. The more critical factors are that the society is a
voluntary fraternal association
"organized and carried on solely for the mutual benefit of its
members and their beneficiaries, and not for profit, and having a .
. . representative form of government, and which shall make
provision for the payment of benefits"
in accordance with certain statutory requirements. [
Footnote 18] Historically, many
groups of people have been drawn together naturally into fraternal
organizations for social and economic reasons. Some of these have
developed into those forms of fraternal benefit societies now
officially recognized by many states. The relationships between the
members of such societies are contractual, in that they are
voluntarily undertaken in consideration of the like obligations of
others. However, interwoven with their financial rights and
obligations, they have other common interests incidental to their
memberships, which give them a status toward one another that
involves more mutuality of interest and more interdependence than
arises
Page 331 U. S. 606
from purely business and financial relationships. This
creates
"The indivisible unity, between the members of a corporation of
this kind in respect of the fund from which their rights are to be
enforced and the consequence that their rights must be determined
by a single law. . . . The act of becoming a member is something
more than a contract; it is entering into a complex and abiding
relation, and, as marriage looks to domicil, membership looks to
and must be governed by the law of the State granting the
incorporation. [
Footnote
19]"
The relationship thus established between a member and his
fraternal benefit society differs from the ordinary contractual
relationship between a policyholder and a separately owned
corporate or "stock" insurance company. It differs also from that
between an insured member of the usual business form of a mutual
insurance company and that company. The fact of membership in the
Ohio fraternal benefit society is the controlling and central
feature of the relationship. As long as he remains a member, the
terms of his membership, including obligations and benefits
relating to the insurance funds of the society, are subject to
change without his individual consent. The control over those terms
is vested by him and his fellow members in the elected
representative government of their society as authorized and
regulated by the law of Ohio. Upon that law, the continued
existence of the society depends. The foundation of the society is
the law of Ohio. It provides the unifying control over the rights
and obligations of its members.
Sovereign Camp v. Bolin,
305 U. S. 66,
305 U. S. 75,
discussed
infra. It is this dependence of membership
rights upon the public acts of the domiciliary state, supported by
the requirement that
Page 331 U. S. 607
full faith and credit shall be given in each state to those
public acts, that has been recognized by this Court in the unbroken
line of decisions reviewed in this opinion.
The decisions passing upon this comparatively narrow issue are
to be distinguished from those which deal only with the well
established principle of conflict of laws that,
"If action is barred by the statute of limitations of the forum,
no action can be maintained though action is not barred in the
state where the cause of action arose."
Restatement, Conflict of Laws § 603 (1934). It is to that
general principle that such early cases as
Hawkins v.
Barney's Lessee, 5 Pet. 457, and
McElmoyle
v. Cohen, 13 Pet. 312, have reference. The
decisions here reviewed are to be distinguished likewise from those
supporting the converse general principle -- that,
"If action is not barred by the statute of limitations of the
forum, an action can be maintained though action is barred in the
state where the cause of action arose."
Restatement, Conflict of Laws § 604 (1934). Neither of these
general statements is here questioned. An obvious need for
modification of the latter statement, however, has led many states
to place a limitation upon it through the adoption of the so-called
"borrowing statutes" of limitations. The result is that, today,
"Statutes frequently provide that an action may not be
maintained if it has been barred by the statute of limitations at
the place where the action accrued or, in some cases at the domicil
of the defendant."
Id. § 604, comment
b. These numerous
"borrowing statutes" demonstrate the general recognition of the
sound public policy of limiting, under some circumstances, the
application of the general statute of limitations of the state of
the forum. The full faith and credit clause applied, as in the
present case, is but another limitation voluntarily imposed, by the
people of the United States, upon the sovereignty of their
respective states in applying the law of the forum.
See
Broderick v. Rosner, 294 U. S. 629,
294 U. S. 643,
and
Milwaukee
Page 331 U. S. 608
County v. White Co., 296 U. S. 268,
296 U. S.
276-277, discussed
infra.
Even without the compelling force of statutory or constitutional
provisions, the courts have recognized other restrictions on the
law of the forum. For example, it is well established that, in the
absence of a controlling statute to the contrary, a provision in a
contract may validly limit, between the parties, the time for
bringing an action on such contract to a period less than that
prescribed in the general statute of limitations, provided that the
shorter period itself shall be a reasonable period. [
Footnote 20] Such shorter periods, written
into private contracts, also have been held to be entitled to the
constitutional protection of the Fourteenth Amendment under
appropriate circumstances.
See Home Ins. Co. v. Dick,
281 U. S. 397, and
Hartford Accident & Indemnity Co. v. Delta Pine Land
Co., 292 U. S. 143,
mentioned again
infra.
The instant case presents additional facts which distinguish it
from the cases governed by the foregoing general rules. The
principal distinguishing feature of this case is the membership of
the decedent in the Ohio fraternal benefit society, which South
Dakota made available to him through the license issued to it to do
business in South Dakota. Even conceding, for purposes of
argument,
Page 331 U. S. 609
that the decedent's membership contract was entered into in
South Dakota, rather than where it was accepted at the society's
home office in Ohio, it is the character of that fraternal benefit
membership, created and defined by the laws of Ohio and fostered by
the fraternal benefit laws of South Dakota, that is at issue.
Conceding further that, as interpreted in this case by the Supreme
Court of South Dakota, the provision of § 897 of the South Dakota
Code (quoted near the beginning of this opinion), generally
outlawing contractual time limits on the enforcement of contractual
rights by legal proceedings, is an attempt to make void the time
limit included in § 11 of Article IV of the constitution of this
Ohio fraternal benefit society, we then are brought face to face
with the full faith and credit clause of the Constitution of the
United States. It is here that we reach the line of decisions of
this Court, extending from
Royal Arcanum v. Green,
237 U. S. 531, to
Pink v. A.A.A. Highway Express, 314 U.
S. 201,
314 U. S.
207-208,
314 U. S.
210-211, discussed
infra. These decisions are
directly in point. Without questioning this Court's recognition of
the common law principle of conflict of laws as to the control by
each state over the application of its own statutes of limitations,
this line of decisions demonstrates this Court's simultaneous
recognition of the necessary scope of the full faith and credit
clause in this field. These cases unwaveringly safeguard, in each
state, the effectiveness of the public acts of every other state as
expressed in the rights and obligations of members of fraternal
benefit societies. Such societies exist by virtue of such state
legislation, and the rights and obligations incident to membership
therein are as much entitled to full faith and credit as the
statutes upon which they depend.
The respondent's claim to benefits is based upon Item (12) of §
4 of Article IV of this constitution, which specifies
Page 331 U. S. 610
the death benefits derived from the membership of "Class A"
members. The prohibition limiting the time for suing on this claim,
which is relied upon as the defense of the society, appears as § 11
of the same Article IV. Section 11 deals with the decedent's
membership relationship to the society no less than does § 4. The
limitation, resulting from § 4, on the amount of the benefit to be
paid to beneficiaries, and the limitation, resulting from § 11, on
the time when litigation may be brought by beneficiaries, are of
comparable character. To permit recovery here would be to permit
recovery on a special and unauthorized type of membership more
favorable to decedent than was available to other members. This
would fail to give full faith and credit to the terms of membership
authorized by Ohio by placing an additional liability on the
society beyond that authorized by Ohio or accepted by the
society.
Underlying the defense of the society is the requirement that §
11 be valid under the law of Ohio as the State of incorporation.
Such validity was admitted by the Supreme Court of South Dakota in
its opinion below. 70 S.D. 452, 18 N.W.2d 755, 756.
"The parties to a contract of insurance may, by a provision
inserted in the policy, lawfully limit the time within which suit
may be brought thereon, provided the period of limitation fixed be
not unreasonable."
Appel v. Cooper Ins. Co., 76 Ohio St. 52 (Syllabus, No.
1, by the court), 80 N.E. 955. The court there enforced a clause in
a fire insurance policy providing that no action for recovery of
any claim shall be sustainable in any court unless commenced within
six months after the fire itself, even though such actions were
prohibited during most of the first three of those six months. In
Bartley v. National Business Men's Assn., 109 Ohio St.
585, 143 N.E. 386, the Supreme Court of Ohio approved the
Appel case and applied it to a two-year
Page 331 U. S. 611
contractual limitation for suing an Ohio mutual protective
association on a claim for accidental death.
See also Modern
Woodmen v. Myers, 99 Ohio St. 87, 124 N.E. 48, upholding a
strict adherence to limitations stated in the bylaws of fraternal
benefit societies;
Portage County Mutual Fire Ins. Co. v.
West, 6 Ohio St. 599, emphasizing the reasonableness of short
periods for commencing suits on claims against mutual companies;
Young v. Order of United Commercial Travelers, 142 Neb.
566, 7 N.W.2d 81, recognizing the validity in Ohio of the precise
provision of the constitution of the society here at issue, and
sustaining its effectiveness in Nebraska by force of the full faith
and credit clause of the Constitution of the United States, and
Roberts v. Modern Woodmen, 133 Mo. App. 207, 113 S.W. 726,
sustaining, in Missouri, a one-year limitation in the insurance
contract of an Illinois fraternal benefit society in the face of a
contrary local policy as to Missouri contracts limiting the time
within which suits may be instituted.
See also Riddlesbarger v. Hartford Ins.
Co., 7 Wall. 386.
Starting with the recognized validity, under the law of Ohio, of
Article IV, § 11 of the constitution of the petitioning society,
that society has a complete defense to the present action unless
such § 11 is not enforceable in the courts of South Dakota because
of a contrary public policy of that State. We examine first the
claim that such a contrary policy exists, and then show why, on the
principles established by this Court, the full faith and credit
clause of the Constitution of the United States requires the courts
of South Dakota to give effect to the public acts of Ohio as
expressed in such § 11.
The general statutes of limitations which have been in effect in
South Dakota throughout the period involved in this case have
prescribed limits varying from 20 years
Page 331 U. S. 612
to one year according to the subject of the action. [
Footnote 21] "An action upon a
contract, obligation, or liability, express or implied," was
required to be commenced within six years. [
Footnote 22] On the other hand, the State
required the insertion in every health or accident policy issued in
the State of a standard contractual provision limiting to two years
the time for bringing an action upon it. [
Footnote 23] Throughout this period, the South Dakota
statutes, moreover, have expressed no hostility toward domestic or
foreign fraternal benefit societies. In fact, they have provided
for the incorporation, licensing, and supervision of such societies
in terms closely comparable to those of the statutes of Ohio.
[
Footnote 24]
Both the alleged prohibition by South Dakota of such a
contractual limitation as is contained in § 11 and the public
policy of South Dakota against such limitations depend entirely
upon its statute directed generally against contractual limitations
upon rights to sue on contracts
Page 331 U. S. 613
which is quoted,
supra, from § 897 of the Revised Code
of South Dakota, 1919. [
Footnote
25]
The public policy so declared is not directed specifically
against fraternal benefit societies or their insurance membership
requirements. In this very case, however, the Supreme Court of
South Dakota, in its decision below, expressly held that this
statute applies to and renders void in South Dakota § 11 of Article
IV of this society's constitution. We thus are confronted with an
inescapable issue as to the unconstitutionality of an attempt,
through this statute, to declare void in South Dakota a provision
of the constitution of an incorporated fraternal benefit society
which comes within the authorization of a public act of the Ohio
and is valid under the laws of that State. This is not a new issue
in this Court. It falls squarely within a line of decisions
consistently upholding the applicability of the full faith and
credit clause in support of comparable provisions in the
constitution of such a society.
In
Royal Arcanum v. Green, 237 U.
S. 531, Mr. Chief Justice White, writing on behalf of a
unanimous Court, pointed out that the full faith and credit clause
there required the state of the forum (New York) to give effect to
a law of the state of incorporation (Massachusetts) pursuant to
which a fraternal benefit society had amended its constitution so
as to increase the assessment rate upon the complaining members,
although the trial court had found that their contract of
membership was entered into, made, and completed in the New York,
and that, under the law of that State, the member would not be
bound by
Page 331 U. S. 614
such increase. 206 N.Y. 591, 597, 100 N.E. 411. In terms which
have not been overruled or modified by it in later decisions, this
Court there explained why the full faith and credit clause requires
controlling effect to be given to the law of the state of
incorporation in interpreting and determining the enforceability of
the rights and obligations of members contained in the constitution
and bylaws of such societies. It said:
". . . as the charter was a Massachusetts charter and the
constitution and bylaws were a part thereof, adopted in
Massachusetts, having no other sanction than the laws of that
state, it follows by the same token that those laws were integrally
and necessarily the criterion to be resorted to for the purpose of
ascertaining the significance of the constitution and bylaws.
Indeed, the accuracy of this conclusion is irresistibly manifested
by considering the intrinsic relation between each and all the
members concerning their duty to pay assessments and the resulting
indivisible unity between them in the fund from which their rights
were to be enjoyed. The contradiction in terms is apparent which
would rise from holding, on the one hand, that there was a
collective and unified standard of duty and obligation on the part
of the members themselves and the corporation, and saying, on the
other hand, that the duty of members was to be tested isolatedly
and individually by resorting not to one source of authority
applicable to all, but by applying many divergent, variable, and
conflicting criteria. In fact, their destructive effect has long
since been recognized.
Gaines v. Supreme Council of the Royal
Arcanum, 140 F. 978;
Royal Arcanum v. Brashears, 89
Md. 624, 43 A. 866. And, from this, it is certain that, when
reduced to their last analysis, the contentions relied upon in
effect destroy the rights which they are advanced to support, since
an
Page 331 U. S. 615
assessment which was one thing in one state and another in
another, and a fund which was distributed by one rule in one state
and by a different rue somewhere else, would in practical effect
amount to no assessment and no substantial sum to be distributed.
It was doubtless not only a recognition of the inherent unsoundness
of the proposition here relied upon, but the manifest impossibility
of its enforcement which has led courts of last resort of so many
states in passing on questions involving the general authority of
fraternal associations and their duties as to subjects of a general
character concerning all their members to recognize the charter of
the corporation and the laws of the state under which it was
granted as the test and measure to be applied."
Id. at
237 U. S.
542-543.
In
Modern Woodmen v. Mixer, 267 U.
S. 544, this Court unanimously followed the same
reasoning, and Mr. Justice Holmes, in language previously quoted
supra, emphasized the "complex and abiding relation" of a
membership in a fraternal benefit society. He said, "as marriage
looks to domicil, membership looks to and must be governed by the
law of the State granting the incorporation."
Id. at
267 U. S. 551.
In that case, the Court held that the full faith and credit clause
required the state of the forum (Nebraska) to give effect to the
law of the state of incorporation (Illinois) pursuant to which a
bylaw of the fraternal benefit society had been enacted requiring
that the continued absence of any member, although unheard from for
10 years, should not give his beneficiary the right to recover
death benefits until the full term of the member's expectancy of
life had expired. This was so held in the face of a rule of law in
the state of the forum that seven years of unexplained absence were
sufficient to establish death for purposes of such a recovery. This
Court stated that neither the public policy of the forum, nor the
opinion of the Supreme Court of that State that the bylaw was
Page 331 U. S. 616
unreasonable, nor the fact that the membership contract had been
made in South Dakota, nor the fact that the bylaw itself had been
adopted several years after the membership relation had commenced
could affect this result. This Court said:
"We need not consider what other States may refuse to do, but we
deem it established that they cannot attach to membership rights
against the Company that are refused by the law of the domicil. It
does not matter that the member joined in another State."
Id. at
267 U. S.
551.
In
Broderick v. Rosner, 294 U.
S. 629, this Court, with Mr. Justice Cardozo noting
dissent, applied this principle to a suit brought in a New Jersey
court against certain citizens of New Jersey to recover unpaid
assessments levied upon them as stockholders in a bank incorporated
under the laws of New York. A New Jersey statute sought to
prohibit, in the courts of New Jersey, proceedings for the
enforcement of any stockholder's statutory personal liability
imposed by the laws of another state, except in suits for equitable
accounting, to which the corporation, its legal representatives,
and all of its creditors and stockholders were to be necessary
parties. Practically, this amounted to an attempt to bar such suits
from the New Jersey courts. This Court, however, said:
"It is sufficient to decide that, since the New Jersey courts
possess general jurisdiction of the subject matter and the parties
and the subject matter is not one as to which the alleged public
policy of New Jersey could be controlling, the full faith and
credit clause requires that this suit be entertained [without
compliance with the special New Jersey statute]."
Id. at
294 U. S.
647.
Mr. Justice Brandeis, in stating the reasoning of the Court in
the
Broderick case, said:
". . . the full faith and credit clause does not require the
enforcement of every right which has ripened into
Page 331 U. S. 617
a judgment of another state or has been conferred by its
statutes.
See Bradford Electric Light Co. v. Clapper,
286 U. S.
145,
286 U.S.
160;
Alaska Packers Assn. v. Industrial Accident Comm'n,
ante, p.
294 U. S. 532, at p.
294 U. S. 546. But the room
left for the play of conflicting policies is a narrow one. . . .
For the States of the Union, the constitutional limitation imposed
by the full faith and credit clause abolished, in large measure,
the general principle of international law by which local policy is
permitted to dominate rules of comity."
"Here, the nature of the cause of action brings it within the
scope of the full faith and credit clause. The statutory liability
sought to be enforced is contractual in character. The assessment
is an incident of the incorporation. Thus, the subject matter is
peculiarly within the regulatory power of New York, as the State of
incorporation. 'So much so,' as was said in
Converse v.
Hamilton, 224 U. S. 343,
224 U. S.
260, 'that no other state property can be said to have
any public policy thereon. . . .' . . . In respect to the
determination of liability for an assessment, the New Jersey
stockholders submitted themselves to the jurisdiction of New York.
For"
"the act of becoming a member [of a corporation] is something
more than a contract, it is entering into a complex and abiding
relation, and as marriage looks to domicil, membership looks to and
must be governed by the law of the State granting the
incorporation."
"
Modern Woodmen of America v. Mixer, 267 U. S.
544,
267 U. S. 551. [
Footnote 26]"
Id. at
294 U. S.
642-644.
Page 331 U. S. 618
In
Milwaukee County v. White Co., 296 U.
S. 268, Mr. Justice Stone, speaking for the Court,
said:
"The very purpose of the full faith and credit clause was to
alter the status of the several states as independent foreign
sovereignties, each free to ignore obligations created under the
laws or by the judicial proceedings of the others, and to make them
integral parts of a single nation throughout which a remedy upon a
just obligation might be demanded as of right, irrespective of the
state of its origin."
Id. at
296 U. S.
276-277.
In
Sovereign Camp v. Bolin, 305 U. S.
66, this Court unanimously approved the foregoing
principles and authorities and applied them to a case that goes
even beyond the issue presented by the instant case. In that case,
Bolin joined a Missouri lodge of a fraternal benefit society
incorporated in Nebraska. His certificate of membership was
delivered to him in Missouri, and he paid his dues and assessments
in Missouri. He was over 43 when he joined the society in June,
1896. At that time, one of its bylaws provided that a member
joining at an age greater than 43 was entitled to life membership
without payment of further dues or assessments after his
certificate had been outstanding 20 years. On his certificate were
endorsed the words "Payments to cease after 20 years," and it
stated that, if in good standing, he would be entitled to
participate in the beneficial fund up to $1,000 payable to his
beneficiaries and to $100 for placing a monument at his grave. He
paid his dues and assessments for the required 20 years, but ceased
doing so in July, 1916. Upon his death, his beneficiaries sued in a
state court of Missouri to recover on his certificate. They were
met by the defense that, in
Trapp v. Sovereign Camp of the
Woodmen of the World, 102 Neb. 562, 168 N.W. 191, the Supreme
Court of Nebraska, in 1918, in a representative
Page 331 U. S. 619
suit binding all members, had held that the bylaw of the society
which had purported to authorize the "payments to cease"
certificates was
ultra vires and void. In the suit by
Bolin's beneficiaries, the Supreme Court of Missouri then held
that, from 1889 to 1897, including the time when Bolin joined the
society, there had been no Missouri statute providing for the
registration and filing of reports in Missouri by foreign fraternal
benefit societies, and that there had been no provision exempting
them from the operation of the general insurance laws of Missouri.
The Supreme Court of Missouri accordingly applied what it
considered to be the Missouri law and public policy. On this basis,
it disregarded the special status of the claim as one derived from
the decedent's membership in a Nebraska fraternal benefit society
and disregarded the Nebraska law, as interpreted by the Supreme
Court of Nebraska, which had held the decedent's purported
exemption from payments after 1916 to be
ultra vires and
void. The Missouri court treated his membership as a Missouri
contract, subject to the general insurance laws of Missouri,
interpreted his certificate as an ordinary Missouri contract, not
ultra vires under the law of Missouri, and held the
society liable upon it. This Court, however, reversed that judgment
on the ground that, under the full faith and credit clause, the
Missouri courts were required to accept the Nebraska law as to the
validity of the corporate bylaw.
Mr. Justice Roberts, writing for the Court said:
"We hold that the judgment denied full faith and credit to the
public acts, records, and judicial proceedings of the
Nebraska."
". . . The beneficiary certificate was not a mere contract to be
construed and enforced according to the laws of the state where it
was delivered. Entry into membership of an incorporated beneficiary
society is more than a contract; it is entering into a complex
Page 331 U. S. 620
and abiding relation, and the rights of membership are governed
by the law of the state of incorporation. Another state, wherein
the certificate of membership was issued, cannot attach to
membership rights against the society which are refused by the law
of the domicile."
"
* * * *"
"The court below was not at liberty to disregard the fundamental
law of the petitioner and turn a membership beneficiary certificate
into an old line policy to be construed and enforced according to
the law of the forum. The decision that the principle of
ultra
vires contracts was to be applied as if the petitioner were a
Missouri old line life insurance company was erroneous in the light
of the decisions of this court which have uniformly held that the
rights of members of such associations are governed by the
definition of the society's powers by the courts of its
domicile."
"
* * * *"
"Under our uniform holdings, the court below failed to give full
faith and credit to the petitioner's charter embodied in the
statutes of Nebraska as interpreted by its highest court."
Id. at
305 U. S. 75,
305 U. S. 78-79
(citing
Modern Woodmen v. Mixer, supra, and
Royal
Arcanum v. Green, supra).
This pronouncement as to the uniform holdings of this Court has
not been repudiated or modified. In the present case, the decisions
relied upon by the court below, in reaching a contrary result, deal
with related but distinguishable situations.
In
Pink v. A.A.A. Highway Express, 314 U.
S. 201, this Court, in a unanimous opinion written by
Mr. Chief Justice Stone, held that the full faith and credit clause
does not apply to an action brought in the courts of Georgia
Page 331 U. S. 621
to collect assessments against an alleged member of an insolvent
mutual insurance company, according to the terms of his contract of
membership, unless such membership first be proved. The Court,
however, recognized that corporate procedure in conformity with the
statutes of the state of incorporation is entitled to full faith
and credit so far as the necessity and amount of the assessment of
stockholders' liability is concerned, and said at pp.
314 U. S.
207-208: "The like principle has been consistently
applied to mutual insurance associations, where the fact that the
policyholders were members was not contested," citing
Royal
Arcanum v. Green, 237 U. S. 531;
Modern Woodmen v. Mixer, 267 U. S. 544. And
further:
"Where a resident of one state has, by stipulation or stock
ownership, become a member of a corporation or association of
another, the state of his residence may have no such domestic
interest in preventing him from fulfilling the obligations of
membership as would admit of a restricted application of the full
faith and credit clause. But it does have a legitimate interest in
determining whether its residents have assented to membership
obligations sought to be imposed on them by extra-state law to
which they are not otherwise subject"
Id. at
314 U. S.
210-211.
These recent references to the principle which is involved in
the instant case constitute a significant recognition of its
consistency with the decisions of this Court in related but
distinguishable situations. The
Pink case appropriately
emphasized the distinction between, on the one hand, a sound local
public policy which closely scrutinizes the proof of the entry into
a certain relationship and, on the other hand, a local public
policy which, in the face of the full faith and credit clause,
would seek to eliminate important terms from that relationship
after it has been entered into.
Page 331 U. S. 622
Contemporaneously with this development of the policy of this
Court applying the full faith and credit clause in support of
membership obligations in fraternal benefit societies, it has
considered the same clause in several related situations. For
example, it has applied it in requiring the Minnesota courts to
recognize the obligation of members of the safety fund department
of a Connecticut life insurance company to meet assessments levied
upon them pursuant to a mutual assessment plan valid under the laws
of Connecticut.
Hartford Life Ins. Co. v. Ibs,
237 U. S. 662.
This was a unanimous opinion written by Mr. Justice J. R. Lamar. In
another unanimous opinion in
Hartford Life Ins. Co. v.
Barber, 245 U. S. 146, at
245 U. S. 150,
Mr. Justice Holmes said,
"The powers given by the Connecticut charter are entitled to the
same credit elsewhere as the judgment of the Connecticut court.
Supreme Council of the Royal Arcanum v. Green,
237 U. S.
531,
237 U. S. 542."
See also John Hancock Ins. Co. v. Yates, 299 U.
S. 178,
299 U. S.
182-183.
Without reliance upon the full faith and credit clause, a
somewhat similar result has been recognized in the protective
effect of the Fourteenth Amendment of the Constitution of the
United States, prohibiting the deprivation of any person of his
property without due process of law. A like policy underlies § 10
of Article I of the Constitution, prohibiting a state from passing
any law impairing the obligation of contracts. Accordingly, in
Home Ins. Co. v. Dick, 281 U. S. 397, in
an opinion by Mr. Justice Brandeis, this Court relied upon the
Fourteenth Amendment in dealing with ordinary insurance policies.
It upheld unanimously the effectiveness of a contractual one-year
limitation upon the right to sue for recovery of a loss under a
marine fire insurance policy where such limitation was good in
Mexico (in which country the insurance was written and was to be
performed), as against a two-year general statute of limitations of
the state of
Page 331 U. S. 623
the forum (Texas). In
Hartford Accident & Indemnity Co.
v. Delta & Pine Land Co., 292 U.
S. 143, in an opinion by Mr. Justice Roberts, the Court
again relied upon the Fourteenth Amendment. There, it upheld
unanimously a 15-month contractual limitation upon the right to sue
upon a fidelity bond. This limitation was valid in Tennessee, where
such bond was entered into, and it was here upheld against the
local policy of the state of the forum (Mississippi).
In a related but readily distinguishable series of cases dealing
with conflicting claims arising under workmen's compensation acts,
emphasis has been placed upon the rule stated by Mr. Justice Stone,
for a unanimous Court, in
Alaska Packers Assn. v. Comm'n,
294 U. S. 532,
294 U. S. 547.
He there said:
". . . the conflict is to be resolved not by giving automatic
effect to the full faith and credit clause, compelling the courts
of each state to subordinate its own statutes to those of the
other, but by appraising the governmental interests of each
jurisdiction and turning the scale of decision according to their
weight."
In
Pacific Employers Ins. Co. v. Industrial Accident
Comm'n, 306 U. S. 493, at
306 U. S. 502,
again speaking for the Court, he added:
"And in the case of statutes the extra-state effect of which
Congress has not prescribed, as it may under the constitutional
provision, we think the conclusion is unavoidable that the full
faith and credit clause does not require one state to substitute
for its own statute, applicable to persons and events within it,
the conflicting statute of another state, even though that statute
is of controlling force in the courts of the state of its enactment
with respect to the same persons and events. "
Page 331 U. S. 624
See also Magnolia Petroleum Co. v. Hunt, 320 U.
S. 430, in which, as Chief Justice, he upheld the
controlling effect of the full faith and credit clause as against
the law of the forum.
The language quoted from the
Pacific Ins. Co. case,
supra, also was quoted with approval in
Williams v. North
Carolina, 317 U. S. 287, at
317 U. S. 296.
In the latter case, on the basis of the full faith and credit
clause, this Court gave effect to the law of the domicil in
upholding the validity of a divorce as against the law of the
forum.
We find no conflict between the position taken in the instant
case and that taken in the foregoing cases or in
Griffin v.
McCoach, 313 U. S. 498,
Hoopeston Canning Co. v. Cullen, 318 U.
S. 313, or in other decisions of this Court upon which
reliance has been placed to support an opposite conclusion.
Accepting the view, expressed in these related cases, that this
Court should not give what Mr. Justice Stone called a mere
"automatic effect to the full faith and credit clause," [
Footnote 27] this Court consistently
has upheld, on the basis of evaluated public policy, the law of the
state of incorporation of a fraternal benefit society as the law
that should control the validity of the terms of membership in that
corporation. The weight of public policy behind the general statute
of South Dakota which seeks to avoid certain provisions in ordinary
contracts does not equal that which makes necessary the recognition
of the same terms of membership for members of fraternal benefit
societies wherever their beneficiaries may be. This is especially
obvious where the state of he forum, with full information as to
those terms of membership, has permitted such societies to do
business and secure members within its borders. There would be
little sound public policy in permitting the courts of South Dakota
to recognize an action to collect
Page 331 U. S. 625
the full benefits to be derived from a membership in the
petitioner society, while at the same time nullifying other
integral terms of that same membership which limit certain rights
of beneficiaries to enforce collection of such benefits. It is of
the essence of the full faith and credit clause that, if a state
gives some faith and credit to the public acts of another state by
permitting its own citizens to become members of, and benefit from,
fraternal benefit societies organized by such other state, then it
must give full faith and credit to those public acts, and must
recognize the burdens and limitations which are inherent in such
memberships. In this case, the state of the forum has licensed the
society to do business within its borders. It is concerned as much
with the validity and fairness of the obligations to be enforced by
assessments against its citizens who become members of the society
as it is with the benefits to be claimed by those who become its
beneficiaries. In this case, the full faith and credit clause
therefore requires that effect be given to the six-month limit,
prescribed by the society and authorized by Ohio, upon the right to
commence this action. Such limit expired before this action was
commenced, and the judgment of the Supreme Court of South Dakota in
favor of the respondent accordingly is
Reversed.
[
Footnote 1]
"Full Faith and Credit shall be given in each State to the
public Acts, Records, and Judicial Proceedings of every other
State. And the Congress may, by general Laws prescribe the Manner
in which such Acts, Records and Proceedings shall be proved, and
the Effect thereof."
U.S.Const. Art. IV, § 1.
See also Act of May 26, 1790,
1 Stat. 122, Act of Mar. 27, 1804, 2 Stat. 298, Rev.Stat. §§ 905,
906, 28 U.S.C. §§ 687, 688.
[
Footnote 2]
"No suit or proceeding, either at law or in equity, shall be
brought to recover any benefits under this Article after six (6)
months from the date the claim for said benefits is disallowed by
the Supreme Executive Committee."
From § 11 of Article IV, "Insurance," of the constitution of The
Order of United Commercial Travelers of America, as printed on the
back of the original certificate of membership issued to decedent
August 19, 1920, and as in effect at the filing of this action June
15, 1934.
[
Footnote 3]
§ 2298, S.D.Rev.Code 1919.
[
Footnote 4]
§ 897, S.D.Rev.Code 1919.
[
Footnote 5]
Supreme Council of Royal Arcanum v. Green, 237 U.
S. 531;
Modern Woodmen v. Mixer, 267 U.
S. 544;
Broderick v. Rosner, 294 U.
S. 629;
Sovereign Camp v. Bolin, 305 U. S.
66.
See also Pink v. A.A.A. Highway Express,
314 U. S. 201,
314 U. S. 207,
314 U. S.
210-211.
[
Footnote 6]
As in effect September 1, 1930, and presumably at the member's
death, May 8, 1931, the articles of incorporation contained only
the following provisions:
"WITNESSETH: That we, the undersigned, all of whom are citizens
of the Ohio, desiring to form a corporation, not for profit, under
the general corporation laws of said State, do hereby certify:"
"FIRST. The name of said corporation shall be The Order of
United Commercial Travelers of America."
"SECOND. Said corporation shall be located, and its principal
business transacted at Columbus, in Franklin County, Ohio."
"THIRD. The purpose for which said corporation is formed
is:"
"1st. To unite fraternally all Commercial Travelers, Wholesale
Salesmen, and such other persons of good moral character as are now
or may hereafter become eligible to membership, under the
provisions of the Constitution of the Order."
"2d. To give all moral and material aid in its power to its
members and those dependent upon them. Also to assist the widows
and orphans of deceased members."
"3d. To establish funds to indemnify its members for disability
or death resulting from accidental means."
"4th. To secure just and equitable favors for Commercial
Travelers and Wholesale Salesmen as a class."
"5th. To elevate the moral and social standing of its
members."
"6th. Said corporation shall be a secret Order."
"7th. To establish a Widows' and Orphans' Reserve Fund."
This society is strikingly similar in form to the "fraternal
beneficiary association," incorporated in Massachusetts in 1877 and
described in the leading case on this subject,
Supreme Council
of Royal Arcanum v. Green, 237 U. S. 531. As
to that association, it was said by the Supreme Court of
Massachusetts that:
"The fraternal plan, with mutuality and without profit,
distinguishes the work of such an association from a commercial
enterprise. It is a charitable and benevolent organization, with a
limitation of membership to a special class, and a limitation upon
the choice of beneficiaries."
Reynolds v. Royal Arcanum, 192 Mass. 150, 155, 78 N.E.
129, 131.
[
Footnote 7]
"SEC. 9462. . . . Any corporation, society, order, or voluntary
association, without capital stock, organized and carried on solely
for the mutual benefit of its members and their beneficiaries, and
not for profit, and having a lodge system with ritualistic form of
work and representative form of government, and which shall make
provision for the payment of benefits in accordance with section 5
(G.C. § 9466) hereof, is hereby declared to be a fraternal benefit
society."
Ohio Gen.Code 1931.
[
Footnote 8]
"SEC. 9469. . . . Every certificate issued by any such society
shall specify the amount of benefit provided thereby, and shall
provide that the certificate, the charter or articles of
incorporation of, if a voluntary association, the articles of
association, the constitution and laws of the society and the
application for membership and medical examination, signed by the
applicant, and all amendments to each thereof shall constitute the
agreement between the society and the member, and copies of the
same certified by the secretary of the society, or corresponding
officer, shall be received in evidence of the terms and conditions
thereof, and any changes, additions or amendments to such charter
or articles of incorporation, or articles of association, if a
voluntary association, constitution, or laws duly made or enacted
subsequent to the issuance of the benefit certificate shall bind
the members and his beneficiaries, and shall govern and control the
agreement in all respects the same as though such changes,
additions or amendments had been made prior to and were in force at
the time of the application for membership."
Ohio Gen.Code 1931.
[
Footnote 9]
"SEC. 9469-1. The provisions of section ninety-four hundred and
sixty-nine of the General Code, requiring the certificate to
specify the maximum amount of benefit provided thereby and the
conditions governing the payment thereof, shall not apply to the
certificates of a fraternal beneficiary association organized under
the laws of Ohio, whose membership consists of commercial travelers
and which does not obligate itself to pay stipulated amounts of
benefits in case of natural death."
Ohio Gen.Code 1930.
[
Footnote 10]
"SEC. 9481. The constitution and laws of the society may provide
that no subordinate body, nor any of its subordinate officers or
members, shall have the power or authority to waive any of the
provisions of the laws and constitution of the society, and the
same shall be binding on the society and each and every member
thereof, and on all beneficiaries of members."
Ohio Gen.Code 1931.
[
Footnote 11]
S.D.L.1919, c. 232, § 16, authorized the issuance of such a
license --
"upon filing with the Commissioner a duly certified copy of its
charter or articles of association; a copy of its constitution and
laws, certified by its secretary or corresponding officers; a power
of attorney to the Commissioner [to accept service of process] . .
. ; a statement of its business under oath of its president and
secretary, or corresponding officers, in the form required by the
Commissioner, duly verified by an examination made by the
supervising insurance official of its home State or other State
satisfactory to the Commissioner of Insurance of this State; a
certificate from the proper official in its home State, province or
country, that the society is legally organized; a copy of its
contract, which must show that benefits are provided for by
periodical, or other payments by persons holding similar contracts,
and, upon furnishing the Commissioner such other information as he
may deem necessary to a proper exhibit of its business and plan of
working, and upon showing that its assets are invested in
accordance with the laws of the State, territory, district,
province, or country where it is organized, he shall issue a
license to such society to do business in this State until the
first day of the succeeding March, and such license shall, upon
compliance with the provisions of this Act, be renewed annually,
but in all cases to terminate on the first day of the succeeding
March; provided, however, that license shall continue in full force
and effect until the new license be issued or specifically refused.
Any foreign society desiring admission to this State shall have the
qualifications required of domestic societies organized under this
Act, upon a valuation by any one of the standards authorized in
Section 23a of this Act, and have its assets invested as required
by the laws of the State, territory, district, country, or province
where it is organized. For each such license or renewal, the
society shall pay the Commissioner Two ($2.00) Dollars. When the
Commissioner refuses to license any society, or revokes its
authority to do business in this State, he shall reduce his ruling,
order, or decision to writing and file the same in his office, and
shall furnish a copy thereof, together with a statement of his
reason, to the officers of the society, upon request, and the
action of the Commissioner shall be reviewable by proper
proceedings in any court of competent jurisdiction within the
State. . . ."
See also §§ 31.2124-31.2126, 31.2139, S.D.Code of 1939.
The Ohio has similar provisions in its Code. § 9477, Ohio Gen.Code
1931.
[
Footnote 12]
"An Act Providing for the Regulation and Control of All
Fraternal Benefit Societies," approved Mar. 11, 1919, S.D.L.1919,
c. 232, pp. 240-253. For example, § 1 defines them as follows:
"Any corporation, society, order, or voluntary association,
without capital stock, organized and carried on solely for the
mutual benefit of its members and their beneficiaries, and not for
profit, and having a lodge system with ritualistic form of work and
representative form of government, and which shall make provision
for the payment of benefits in accordance with Section 5 hereof, is
hereby declared to be a Fraternal Benefit Society."
See also c. 31.21, "Fraternal Benefit Societies,"
S.D.Code of 1939,
and cf. with Ohio definition in
note 6 supra.
[
Footnote 13]
"SEC. 2. Any white male citizen of the United States or British
possessions in North America of good moral character and good
general health, not under eighteen (18) and not over sixty (60)
years of age, who has been actively and actually engaged for a term
of not less than six months immediately preceding the date of his
application as a commercial traveler, city salesman, wholesale
house salesman, sales manager or merchandise broker, selling goods
at wholesale or selling office, store, factory, railroad, mill, or
municipal equipment for a manufacturer or wholesale dealer, or one
who has had at least six months' experience in either of the
occupations named herein, and is thus engaged at the date of filing
the application, and who is in good mental and physical condition,
may become a member of this Order if found acceptable."
Art. II, Constitution of the Society, 1922.
[
Footnote 14]
The certificate, No. 169655, then issued to him, and which is
the primary basis for the respondent's claim, is as follows:
"
I
NCORPORATED UNDER THE GENERAL LAWS"
"
OF THE STATE OF OHIO "
"
CLASS A"
"
I
NSURANCE CERTIFICATE"
"
THE ORDER OF"
"
UNITED COMMERCIAL TRAVELERS"
"
OF AMERICA"
"
COLUMBUS, OHIO"
"An Association incorporated under the laws of the state of
Ohio, hereby certifies that Ford Shane, a member of The Order of
United Commercial Travelers of America, in consideration of the
statements contained in his application for insurance and the
application fee paid by him, is hereby accepted as an Insured
Member of said Order under 'Class A,' beginning at twelve (12)
o'clock noon, Standard time, on the day this certificate is dated,
and is entitled to all the rights and benefits which may be
provided for such 'Class A' Insured Members in and by the
Constitution of said Order in force and effect at the time any
accident occurs subsequent to said time and date."
"This Certificate, the Constitution, By-Laws, and Articles of
Incorporation of said Order, together with the application for
insurance signed by said Insured Member, shall constitute the
contract between said Order and said Insured Member, and shall
govern the payment of benefits, and any changes, additions, or
amendments to said Constitution, By-Laws, or Articles of
Incorporation hereafter duly made shall bind said Order and said
Insured Member and his beneficiary or beneficiaries, and shall
govern and control the contract in all respects."
"IN WITNESS THEREOF, we have affixed our signatures and the seal
of the Supreme Council at Columbus, Ohio, this 21st day of
December, A.D. 1922."
"This certificate supersedes all insurance certificates issued
of a prior date bearing this number."
"s/ FRANK J. ROSSER"
"
Supreme Counselor"
"s/ WALTER J. MURPHY "
"
Supreme Secretary"
"SEAL"
[
Footnote 15]
The Circuit Court of Appeals evidently relied, in part, on
Article IV, § 7, of the constitution of the society, which
stated
"Nor shall benefits under this Article be payable unless
external, violent, and accidental means, producing bodily injury,
is the proximate, sole, and only cause of death, disability or
loss,"
and said:
"There were no accidental means, but simply an unexpected or
accidental result. The administration of the drug did not cause the
idiosyncrasy, and, if the bodily injury which resulted in death was
produced by the idiosyncrasy as a cause or means, then the
administration of the drug was not the sole cause, and there would
be no liability under the policy."
64 F.2d 55, 59.
Relating to a provision in the same section that
"This Order shall not be liable to any person for any benefit
for any death, . . . resulting from . . . medical, mechanical, or
surgical treatment (except where the surgical treatment is made
necessary by the accident), the intentional taking of medicine or
drugs,"
the Circuit Court of Appeals said:
"We think the administering of the drug must be placed in the
category of medical or surgical treatment."
"
* * * *"
"If the administering of the drug in the case at bar did not
constitute medical or surgical treatment, we should be at a loss
how to classify such act."
Id. at 59, 60 of 64 F.2d.
[
Footnote 16]
Typical of these changes were those relating to the
distribution, on a changed percentage basis, of funds raised by
calls to meet insurance and other needs; changes in the
classification of employments to be treated as hazardous enough to
require the lowering of rates of disability benefits to be paid to
members employed in them, and a new provision expressly recognizing
the rights of uninsured members to continue as members of the
society, although disqualified physically from taking advantage of
insurance benefits. There also was a change in the procedure
governing future amendments.
[
Footnote 17]
The 1930 constitution dealt with the following subjects, and it
is in them, as amended from time to time, that there can be found
the rights and obligations of the members:
ARTICLE I. Name, Objects, Provision for Subordinate Councils,
Grand Councils and The Supreme Council.
ARTICLE II. Subordinate Councils, Membership, Withdrawals,
Transfer Cards, Delinquency, Suspensions, Reinstatement, Uninsured
Membership, Officers and Elections, Duties of Officers, Vacancies
in Office, Honorary Titles, Meetings and Quorum, Special Sessions,
Reports, Per Capita Tax to Council having control and jurisdiction
over the Subordinate Council, and Representation of Subordinate
Councils in the Grand Council.
ARTICLE III. Funds, Provision for Widows' and Orphans' Fund,
Assessment Fund, Distribution of Assessment Fund, Death Fund,
Disability Fund, General Expense Fund, and Reserve Funds. The
Assessment Fund is created by assessments on insured members, in
good standing, to provide a basis for meeting assessment calls.
When calls are made upon such members, the proceeds are apportioned
30% to the Death Fund, 40% to the Disability Fund, 5% to the
Reserve Funds and 25% to the General Expense Fund.
ARTICLE IV. Insurance. Members in good standing are subject to
regular quarterly calls of $3 per insured member, and the Supreme
Counselor has the right to make as many calls, in an amount not to
exceed $3 each, as may be required to pay in full all valid claims,
together with expenses incurred in maintaining the society and
conducting its business. Based on their physical condition, members
become insured members of Class A or Class B. Those providing the
poorer risk are put in Class B, and are entitled to benefits of but
one-half the amount of those provided for Class A members. The
benefits are in the nature of indemnities against the result of
bodily injuries "effected through external, violent and accidental
means, . . . which shall be occasioned by the said accident alone
and independent of all other causes." There are many limitations
upon this liability and, in case of certain changes in the
occupation or physical condition of a member, his right to benefits
may be reduced or canceled. There are double indemnities for
injuries resulting from accidents on passenger trains, etc., and
the coverage generally is related to risks normally encountered by
commercial travelers. Specific exemptions are made of injuries
resulting from engaging in certain hazardous sports or from being
under the influence of liquor, etc. Those who may be named as
beneficiaries are limited to specified degrees of family
relationship. (The form of application makes express reference to
the limitations as to beneficiaries contained in the statutes of
Ohio.) Provision is made for notices and proofs of claims, for
surgical examinations, etc. There is a strict prohibition in § 11
(quoted
supra) against the waiver of provisions of the
constitution and, in the same Section, there appears the six-month
limitation here in controversy upon the time within which to bring
suits to recover benefits after a claim has been disallowed by the
Supreme Executive Committee.
ARTICLE V. Grand Councils, Charters for Subordinate Councils,
Per Capita Tax payable to Grand Councils and detailed provisions
for the operation of Grand Councils.
ARTICLE VI. Supreme Council, Charters for Grand Councils,
Officers and Elections and detailed provisions for the conduct of
the business of the Supreme Council, including the establishment of
the Supreme Executive Committee. This committee is to consist of
seven members, including the Supreme Counselor, Supreme Secretary,
Supreme Treasurer, and four specially elected members. It has large
powers over the business and activities of the society. Among these
provisions are those of examining insurance claims, deciding upon
their validity, and adjusting them.
ARTICLE VII. Prohibition of the use of malt or spirituous
liquors in connection with meetings of the society.
ARTICLE VIII. Memorial Day in honor of the society's first
Supreme Secretary.
ARTICLE IX. Special duty of every member to report the name of
any member who is an extra-hazardous, physical, or moral risk.
ARTICLE X. Prohibition against donations of funds of the
society.
ARTICLES XI, XII and XIII. Trials, Penalties, and Appeals
relating to violations of the Constitution, By-Laws and Rules, and
the divulging of secrets of the society or conduct unbecoming a
gentleman.
"ARTICLE XIV. Amendments. Section 1. Proposed amendments to this
Constitution, By-Laws, and Articles of Incorporation shall be
submitted in writing and filed with the Supreme Secretary of the
Order at least six (6) months before the convening of the annual
session of the Supreme Council."
"The Supreme Secretary of the Order shall at least four (4)
months before the convening of such annual session, forward to all
Grand and Subordinate Councils a copy of the proposed
amendments."
"SEC. 2. No amendment to the Constitution, By-Laws or Articles
of Incorporation shall be adopted unless it receives the
affirmative vote of at least two-thirds (2-3) [2/3] of the members
of the Supreme Council present, entitled to vote at the session
when such amendment is voted upon."
"SEC. 3. All amendments to this Constitution, By-Laws and
Articles of Incorporation shall take effect on the first day of
September following the session of the Supreme Council at which
they were adopted, unless the date for becoming effective is
otherwise specified by the Supreme Council."
"SEC. 4. All recommendations or resolutions adopted by the
Supreme Council which adds [add] to or conflict with this
Constitution or By-Laws shall be presented to the Supreme Council
at its next annual session as an amendment to the Constitution or
By-Laws, and shall not become effective until such amendments have
been approved by a two-thirds vote of the members present entitled
to vote."
(Section 4 was added between 1922 and 1931.)
[
Footnote 18]
See note 7
supra.
[
Footnote 19]
Modern Woodmen v. Mixer, 267 U.
S. 544,
267 U. S.
551.
[
Footnote 20]
"The policy of these statutes [of limitation] is to encourage
promptitude in the prosecution of remedies. They prescribe what is
supposed to be a reasonable period for this purpose, but there is
nothing in their language or object which inhibits parties from
stipulating for a shorter period within which to assert their
respective claims."
Riddlesbarger v. Hartford Ins.
Co., 7 Wall. 386,
74 U. S. 390;
approved, Thompson v. Phenix Ins. Co., 136 U.
S. 287,
136 U. S. 298.
See also Appel v. Cooper Ins. Co. infra; Bartley v. National
Business Men's Assn, infra; Young v. Order of United Commercial
Travelers, infra; Burlew v. Fidelity & Casualty Co. of
N.Y., 276 Ky. 132, 122 S.W.2d 990;
see note, 121
A.L.R. 758; 29 Am.Jur. 1039.
[
Footnote 21]
§§ 2294-2305, S.D.Rev.Code 1919, § 33.0232, S.D.Code of
1939.
[
Footnote 22]
§ 2298, S.D.Rev.Code, 1919, § 33.0232(4), S.D.Code of 1939.
[
Footnote 23]
"No action at law or in equity shall be brought to recover on
this policy prior to the expiration of sixty days after proof of
loss has been filed in accordance with the requirements of this
policy, nor shall such action be brought at all unless brought
within two years from the expiration of the time within which proof
of loss is required by the policy."
§ 3(14), c. 229, S.D.L.1919 at 235.
See also §
31.1702(14), S.D.Code of 1939. This section is indicative of a
state policy approving the shortening of the general statute as
applied to accident policies, but it does not apply directly to or
affect transactions of fraternal benefit societies, because they
are excluded from the general insurance statutes and are placed
under the licensing provisions quoted in
note 10 supra. The petitioner's constitution,
filed under that requirement, fully disclosed its provision on this
subject. § 12(3), c. 229, S.D.L.1919, § 31.1708(3), S.D.Code of
1939.
[
Footnote 24]
Notes 11 and 12
supra.
[
Footnote 25]
The present counterpart of that statute appears in § 10.0705 of
the South Dakota Code of 1939:
"10.0705.
Restraint of legal proceedings void. Every
provision in a contract restricting a party from enforcing his
rights under it by usual legal proceedings in ordinary tribunals or
limiting his time to do so, is void."
[
Footnote 26]
Citing also for comparison,
Royal Arcanum v. Green,
237 U. S. 531;
Hancock National Bank v. Farnum, 176 U.
S. 640;
McDermott v. Woodhouse, 87 N.J.Eq. 615,
618, 619, 101 A. 375, and for reference,
Canada Southern R Co.
v. Gebhard, 109 U. S. 527,
109 U. S.
537-538;
Hawkins v. Glenn, 131 U.
S. 319,
131 U. S. 329;
Nashua Savings Bank v. Anglo-American Co., 189 U.
S. 221,
189 U. S.
229-230;
Harrigan v. Bergdoll, 270 U.
S. 560,
270 U. S.
564.
[
Footnote 27]
Alaska Packers Assn. v. Comm'n, supra, 294 U.S. at
294 U. S.
547.
MR. JUSTICE BLACK, with whom MR. JUSTICE DOUGLAS, MR. JUSTICE
MURPHY, and MR. JUSTICE RUTLEDGE join, dissenting.
The Order of United Commercial Travelers is a corporation
chartered under the laws of Ohio with power to do a fraternal
insurance business. It sells contracts of insurance in Ohio. South
Dakota has licensed the corporation to sell fraternal insurance
policies in that state. Under this permission, the corporation has
an office, called a local council, in Black Hills, South Dakota,
vested with
Page 331 U. S. 626
power to administer "the business and fraternal affairs of the
Order."
The insured, a citizen and resident of South Dakota, applied to
the Black Hill's office for membership and an insurance policy.
After the application had been accepted and an insurance
certificate signed at the petitioner's home office in Ohio, it was
"forwarded by the defendant corporation to South Dakota for
delivery to the insured." From then until his death in South
Dakota, the insured paid his premiums to the corporation's Black
Hills office. During all that period, his beneficiary lived in that
state. This action was brought in a court of that state on behalf
of the beneficiary after the corporation had refused to pay the
claim.
The association denied liability because this suit had not been
commenced within six months after the association had disallowed
the beneficiary's claim. This is required by the corporation's
constitution, which is incorporated by reference into its contracts
of insurance. And, in a series of cases cited in the Court's
opinion, the Supreme Court of Ohio has held that suits brought in
Ohio courts on mutual, stock company, or fraternal insurance
contracts may be barred by contractual arrangements between the
parties which require that suit be brought within a shorter period
than that provided by the Ohio limitations statutes.
But the South Dakota Supreme Court has held that a statute of
that state which provides that
"every provision in a contract restricting a party from
enforcing his rights under it by usual legal proceedings in
ordinary tribunals or limiting his time to do so, is void,"
S.D.Code 1939, § 10.0705, renders the limitation provision in
this contract unenforceable in her courts. This Court today
reverses the South Dakota decision on the ground that its refusal
to enforce the private contract is a denial of full faith and
credit to the "public Acts, Records, and Judicial Proceedings" of
Ohio. U.S.Const. art. IV, § 1.
Page 331 U. S. 627
First. More than 100 years ago, this Court said that to
require a state to apply the "limitation laws" of another state
rather than its own would reduce it "to a state of vassalage,"
presenting the anomaly "of a sovereign state governed by the laws
of another sovereign."
Hawkins v. Barney's
Lessee, 5 Pet. 457,
30 U. S.
466-467. A few years later, the Court was asked to hold
that the full faith and credit clause barred a state from applying
its own statute of limitations in a suit brought on a cause of
action which had arisen in another state. On that question, the
Court did not "entertain a doubt;" the holding was that it could
not "be even plausibly inferred" that the state in which the suit
was brought was denied that power by the full faith and credit
clause.
McElmoyle v.
Cohen, 13 Pet. 312,
38 U. S. 324,
38 U. S. 328.
While the case then under consideration involved a suit on a
judgment rendered in another state, the broad ruling was that, so
far as the full faith and credit clause is concerned, a state has
power to apply its own statute of limitations in every kind of
action and without regard to where the cause of action arose.
The constitutional force of the
McElmoyle refusal to
require a forum state to give full faith and credit to a foreign
state's statute of limitations is not weakened in the slightest by
the fact that some states have seen fit to adopt "borrowing
statutes."
See Cope v. Anderson, ante, p.
331 U. S. 461, at
note 3 For other states,
notably South Dakota here, have adopted statutes with purposes
quite opposite to that of borrowing statutes. And, under the
McElmoyle rule, whichever limitations policy a forum state
chooses to follow -- to borrow or to refuse to borrow -- it is
free, so far as the full faith and credit clause is concerned, to
do so.
The plain effect of today's decision is to overrule the
McElmoyle case. And it does so despite the fact that the
holding of that case has never before been cited with disapproval;
in fact, that holding has been repeatedly
Page 331 U. S. 628
approved and reaffirmed throughout the years since it was
decided. [
Footnote 2/1] The Court
distinguishes the
McElmoyle rule, and in fact relies
generally for its decision upon the line of decisions in which
Modern Woodmen of America v. Mixer, 267 U.
S. 544, is the leading case. But the statute of
limitations was not in issue in the
Mixer case, the case
on which it relied, or the cases which have since relied on it. The
McElmoyle case was not even cited in the Court's
Mixer opinion; nor does anything said in it detract from
the rule of the
McElmoyle case that states can, despite
the full faith and credit clause, apply their own statutes of
limitation. [
Footnote 2/2] Yet the
Court now treats the
Mixer case as controlling, and holds
that the full faith and credit
Page 331 U. S. 629
clause deprives South Dakota of power to apply its own statute
of limitations. [
Footnote 2/3]
But, more than that, the "state of vassalage" to which the
Court's decision here reduces South Dakota is not even in
subordination to the laws of another state. The Court's opinion
means that South Dakota must yield to a "law" adopted by the
members of an Ohio-created private fraternal insurance association.
That "law," appearing only in the private association's
constitution, provides, in the same kind of language that
legislatures ordinarily use in their statutes of limitation,
that
"No suit or proceeding, either at law or in equity, shall be
brought to recover any benefits under this Article after six (6)
months from the date of the claim for said benefits is disallowed
by the Supreme Executive Committee."
The nearest that this private association's "law" comes to being
a law of Ohio is that Ohio permits, but does not require, it.
Because the private association's constitution was incorporated by
reference in the policy contract, including the constitution's
"statute of limitations," the Court now holds that this corporate
"statute of limitations" prohibits application of South Dakota's
statute of limitations. Thus, the Court's holding is that an
Ohio
Page 331 U. S. 630
private corporation's laws have a higher constitutional standing
than an Ohio law or judgment would have -- unless, as seems to be
true,
McElmoyle v. Cohen, supra, and subsequent cases
approving it are now being overruled. It would be quite a radical
departure from this Court's previous authorities to hold that the
full faith and credit clause bars a government from applying its
own statutes of limitations to suits brought in its courts, a power
which, this Court said, in its
McElmoyle decision,
governments have exercised since remote antiquity.
Id. at
38 U. S. 327.
It is a far greater departure to hold that a state's limitation
statute must take second place to the limitations rules adopted by
a privately operated corporation.
It should come as quite a surprise to Ohio that its state policy
can supplant South Dakota's statute of limitations, since Ohio's
highest Court follows the
McElmoyle rule that
"[s]tatutes of limitation relate to the remedy, and are, and
must be, governed by the law of the forum, for it is conceded that
a court which has power to say when its doors shall be opened has
also power to say when they shall be closed."
Kerper v. Wood, 48 Ohio St. 613, 622, 29 N.E. 501, 502.
And the principle there announced was followed by the Ohio Supreme
Court as late as 1943.
Payne v. Kirchwehm, 141 Ohio St.
384, 48 N.E.2d 224;
cf. Anderson v. Helmers, supra.
Second. Leaving aside the
sui generis features
of a forum state's power over limitations of actions in its courts,
the present holding violates other established rules concerning a
state's power to govern its own local affairs and to protect from
overreaching contracts persons in whom the state has a legitimate
interest.
See Griffin v. McCoach, 313 U.
S. 498;
Pink v. A.A.A. Highway Express,
314 U. S. 201. I
had considered it well settled that, if an insurance company does
business at all in a state, its contracts are "subject to such
valid regulations as the
Page 331 U. S. 631
state may choose to adopt."
See Whitfield v. Aetna Life Ins.
Co., 205 U. S. 489,
205 U. S. 495;
Knights Templars' & Masons Life Indemnity Co. v.
Jarman, 187 U. S. 197,
187 U. S. 202;
Hancock Mutual Life Ins. Co. v. Warren, 181 U. S.
73,
181 U. S. 75.
This conception of broad state power has not been limited to
particular kinds of laws or particular kinds of contracts of
special kinds of insurance companies. Thus, in regard to a mutual
insurance company, the Court has held the terms of a policy
governed by the law of Missouri where the contract was made in the
face of a contract stipulation that they were to be governed by the
laws of New York, the mutual company's domicil.
New York Life
Ins. Co. v. Cravens, 178 U. S. 389. For
this Court concluded from inferences it found in the Missouri
Court's opinion that compliance with Missouri law "was a condition
upon the right of insurance companies to do business in the state."
Id. at
178 U. S. 395.
It further held that Missouri had the same continuing power to
regulate the business contracts of a foreign corporation permitted
to do business there as it had over the contracts of domestic
corporations.
Id. at
178 U. S.
400-401. And when a foreign building and loan
association which did business with its members only [
Footnote 2/4] sought to avoid Mississippi
usury laws by specifying that a loan contract with a Mississippi
member was made in New York where the interest charged was not
usurious, this Court held that Mississippi law governed, and voided
the contract.
National Mutual Bldg. & Loan Assn. v.
Brahan, 193 U. S. 635. The
Court approved the conclusion of the Supreme Court of Mississippi
that the association, by qualifying to do business in
Mississippi,
"had become 'localized' in the state, had accepted the laws of
the state
Page 331 U. S. 632
as a condition of doing business there, and could not, nor could
[the Mississippi member], 'abrogate, by attempted contract
stipulations,' those laws.
See Hancock Mutual Life Ins. Co. v.
Warren, 181 U. S. 73."
Id. at
193 U. S. 650.
Because the contract was thus controlled by Mississippi rather than
New York law, the Court held that "there is no foundation for the
contention that full faith and credit were not given to the public
acts and records of New York."
Id. at
193 U. S.
647.
The Court's opinion in the present case is apparently
inconsistent with the foregoing cases which have established that
state courts have a continuing authority to execute the public
policy of the state by refusing to enforce contract provisions of
foreign corporations permitted by the state to do business there --
even though those corporations do business with members only.
Today's opinion does imply, however, that South Dakota officials
could have excluded this corporation from doing business in the
state, or could have revoked its license upon discovery of the
foreign corporation's violation of the laws of the state. I cannot
believe that the full faith and credit clause stays the hands of
the state courts, as instruments of state power, in private
litigation any more than it could forestall state authorities from
revoking the association's license for persisting in making
unlawful contracts.
Third. Another handle of South Dakota's power over this
corporation derives not from the corporation's acceptance of South
Dakota law as a continuing condition of doing business, but from
the number and importance of the incidents involved in the making
and the performance of the specific contract here which occurred in
South Dakota. Unless the Court's decision overrules [
Footnote 2/5] the long
Page 331 U. S. 633
line of cases cited in the margin, [
Footnote 2/6] this insurance contract was "made" and to
be performed in South Dakota, and its validity is governed by the
law of that state. Thus, in
Hartford A. & I. Co. v. Delta
& Pine Land Co., 292 U. S. 143,
292 U. S. 150,
Mississippi was required to enforce an insurance contract, unlawful
in that state, although both the parties did business there, and
although the suit on the contract was brought there, because the
contract was valid in Tennessee, the state where the contract was
held to have been made and which had the major connection with the
whole transaction. For, said the Court, Mississippi
"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."
Id. at
292 U. S.
149.
Before today, contentions that the full faith and credit clause
overcomes the power of a state over a contract made and operative
there have been flatly rejected by this Court. Thus, in
American Fire Ins. Co. v. King Lbr. & Mfg. Co.,
250 U. S. 2, an
insurance company was authorized by Pennsylvania, the state of its
incorporation, to write fire insurance on property outside that
state. It was not licensed to do business by Florida, but accepted
insurance applications through independent brokers there. Under the
law of Pennsylvania, where the applications were accepted and the
policies written, brokers were apparently not authorized to waive
contract
Page 331 U. S. 634
provisions. But, under Florida law, the brokers were deemed
agents of the Pennsylvania company, with power to bind it by
waivers. In answer to the contention that the Florida ruling denied
full faith and credit to the law of Pennsylvania, this Court said
that the case does not
". . . present an attempt of the Florida law to intrude itself
into . . . Pennsylvania and control transactions there; it presents
simply a Pennsylvania corporation having the permission of that
state to underwrite policies on property outside of the state and
the exercise of the right in Florida. And, necessarily, it had to
be exercised in accordance with the laws of Florida. There was no
law of Pennsylvania to the contrary -- no law of Pennsylvania would
have power to the contrary. There is no foundation, therefore, for
the contention that full faith was not given to a law of
Pennsylvania. . . ."
Id. at
250 U. S. 10.
Fourth. In interpreting the full faith and credit
clause, this Court has repeatedly insisted that it would weigh all
the interests of each state involved before holding that the full
faith and credit clause qualified one state's power to govern its
own affairs.
See Pink v. A.A.A. Highway Express, supra, at
314 U. S.
210-211, and cases there cited;
Magnolia Petroleum
Company v. Hunt, 320 U. S. 430,
320 U. S.
436-437. I have recited the many bases for South
Dakota's legitimate interest. What is the interest of Ohio to which
the Court holds South Dakota must give full faith and credit?
It may be that the Court's view is that Ohio has an interest in
securing uniformity of rights and obligations among all the
policyholder members throughout the country. For, says the
Court,
"If full faith and credit are not given . . . , the mutual
rights and obligations of the members of such societies are left
subject to the control of each state. They become unpredictable and
almost inevitably unequal. "
Page 331 U. S. 635
It is true that, in situations involving the liability of
stockholders for assessment obligations imposed by a corporate
charter or the laws of a chartering state, the assessment
obligation has been held to be governed by the laws of the
chartering state.
Converse v. Hamilton, 224 U.
S. 243;
Broderick v. Rosner, 294 U.
S. 629. And assessments against fraternal, as well as
mutual, insurance policyholders based on ownership rights and
obligations which their insurance policies, like stockholdings,
represent have been similarly held to be controlled by the law of
the state of the corporation's domicil.
Royal Arcanum v.
Green, 237 U. S. 531;
Hartford Life Ins. Co. v. Barber, 245 U.
S. 146;
Hartford Life Ins. Co. v. Ibs,
237 U. S. 662.
For, insofar as a mutual or fraternal insurance policyholder
assumes the assessment obligation which a stockholder may bear in
other companies, he underwrites the risk that the corporation of
which he is an owner might become insolvent. And that insolvency,
particularly of an insurance company, would occur, and generally
become a responsibility of the chartering state where the principal
business is conducted. The contingency of insolvency has been
thought to give the chartering state greater and more direct
interest in the extraterritorial collection of assessments against
stockholders of corporations than a state has in the day-to-day
business transactions in which a corporation chartered by it
engages in other states. [
Footnote
2/7]
Page 331 U. S. 636
This line of distinction has been clearly marked by the contrary
result this Court has reached in cases concerning day-to-day
business contracts made by foreign nonfraternal mutual insurance
and membership loan companies with their policyholders and
member-borrowers. In
New York Life Ins. Co. v. Cravens,
supra, at
178 U. S. 400,
it was urged that the fact that the mutual insurance company there
was "the administrator of a fund collected from the policyholders
in different states and countries for their benefit"
demonstrated
"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."
This contention was emphatically rejected. And, in
National
Mutual Bldg. & Loan Assn. v. Brahan, supra, at
193 U. S. 636,
193 U. S. 650,
this Court, placing considerable reliance upon its previous
Craven decision, held that contracts of a membership loan
association whose controlling and central purpose, like the
distinguishing "feature" relied upon by the Court here, was "to
make loans only to its members and for . . . accumulating a fund to
be returned to its members," were, despite the full faith and
credit clause, subject to the law of a state in which the
association was doing business as a foreign corporation.
It seems apparent from these authorities that Ohio's interest in
uniform administration of a corporation's contract obligations for
the funds of a company created under its laws is not entitled to
full faith and credit merely because of the communal interest of
policyholder-members in that fund. And the fact, so heavily
stressed by the Court, that the corporation was incorporated under
the laws of Ohio, so that its continued existence depends upon that
law, is plainly insufficient basis for a contention that,
therefore, Ohio's interest demands full faith and credit for this
contract provision.
Page 331 U. S. 637
Actually, it is not Ohio's interest in the uniform
administration of the company's funds to which the Court gives full
faith and credit. For, otherwise, I should think, the opinion would
cite and distinguish these cases which establish that this interest
is not one entitled to full faith and credit. It is the limitations
"law" of the corporate constitution enacted to protect its own
interest, not the statutes of Ohio, which are held to bar this suit
because it was not filed within six months. Thus, it seems manifest
that the Court is giving full faith and credit to the "laws" and
the interest of the Ohio corporation. And the Court does this on
the theory that the fraternal corporation's constitution which
governs the terms of its contracts is "subject to amendment through
the processes of a representative form of government authorized by
the law of the state of incorporation." Apparently, it is felt that
the individual South Dakota policyholder-member can protect himself
from overreaching contracts within the framework of this
"representative" intracorporate government which is subject to
whatever regulation Ohio chooses to impose. Until today, I had
never conceived of the Federal Constitution as requiring the 48
states to give full faith and credit to the laws of private
corporations on the theory that a policyholder-member's ability to
protect himself through intra-corporate politics makes state
protection of him unnecessary and unconstitutional. It is a naive
assumption that a policyholder-member of a fraternal corporation
like this does not need protection from his state. Moreover, if
valid, this assumption would apply with equal logic to immunize
these fraternal corporations from the laws of their domicils.
The conclusion reached by the Court -- that fraternal insurance
companies are entitled to unique constitutional protection -- is
not justified by the language of the Constitution, nor by the
nature of their enterprise. And our
Page 331 U. S. 638
previous decisions concerning fraternal insurance companies do
not support the conclusion which the Court draws from the
superficial distinguishing characteristics which these companies
possess.
As I have pointed out, those cases which hold that assessments
against fraternal policyholders in their capacity as stockholders
are governed by the law of the company's domicil have no relation
to a fraternal company's obligation to a beneficiary of an
insurance contract. Moreover, in
Sovereign Camp W.O.W. v.
Bolin, 305 U. S. 66,
heavily relied on by the Court, the fraternal association was freed
from liability in a state in which it was not authorized to do
business because a judgment of the highest court of the state which
had chartered the association had declared, in a class suit to
which the claimant had been, in effect, a party, that the policy
sued on had been issued
ultra vires. Thus, the
Bolin case is merely a familiar example of enforcement of
res judicata under the full faith and credit clause. A
judgment of any state, whether chartering state or not, would be
entitled to the same respect. Here, of course, there is no judgment
to which the claimant was a party which is entitled to full faith
and credit. And the power of the Ohio corporation, so far as Ohio
law is concerned, to make a contract consistent with South Dakota
policy is unquestioned.
The other case relied on heavily by this Court is
Modern
Woodmen of America v. Mixer, supra. In that case, Mixer the
beneficiary, lived in Nebraska. While the record was not wholly
clear, the insured had apparently previously lived in South Dakota,
and the certificate seems to have been "issued" there. A bylaw of
the Woodmen, an Illinois association, provided that its certificate
should insure against death, but that "long continued absence of
any member unheard of shall not . . . give any right to recover on
any benefit certificate."
Page 331 U. S. 639
Nebraska, where Mixer brought the suit, but in which state the
contract had not been made, had a rule of evidence that a
presumption of death arises from seven years' unexplained absence.
Apparently considering the bylaw "unreasonable," the Supreme Court
of Nebraska enforced its long continued absence rule of evidence,
and held the association liable. The Supreme Court of Illinois,
where the association was chartered, had held the bylaw reasonable
in that it merely showed a purpose of the association to limit its
insurance to death, rather than to extend it to long continued
absences.
Steen v. Modern Woodmen of America, 296 Ill.
104, 129 N.E. 546. It was on this record that this Court reversed
the Nebraska court's decision in the
Mixer case.
This reversal can be justified on the facts of the
Mixer case, which are clearly different from the facts in
the case before us. There was no conflict in
Mixer between
the policy of the state where the contract was made and Illinois,
the state of the association's domicil. For the contract apparently
had been made in a third state, South Dakota, consistently with the
laws of that state. Nor does it appear from the record of that case
that the association had been licensed to do business to as to
accept either the law of the state where the contract was made or
that of Nebraska, where the suit was brought. Finally, as I have
already indicated, no statute of limitations was involved in the
Mixer case.
But it is said that language of the
Mixer case means
that the obligations of a fraternal insurance corporation are to be
governed by the law of its domicil. If this language means that
such an association is privileged to live above the law of the
state where it does business, makes contracts, and is sued, I think
that language should be repudiated. The purported differences
between fraternal insurance companies and other reciprocal,
cooperative,
Page 331 U. S. 640
and mutual insurers are too fragmentary and inconsequential to
justify any Constitutional difference in treatment.
Cf.
Hoopeston Canning Co. v. Cullen, 318 U.
S. 313.
Neither in the
Mixer case nor in the present one does
the Court attempt to demonstrate, and I seriously question that a
demonstration is possible, that the insurance business of a
fraternal company is conducted differently in any important way
from that of a mutual, reciprocal, or joint stock company. The
insurance phase of this company is set apart from the fraternal
phase after election to membership even though payment of
assessments levied for insurance purposes is made compulsory. The
provisions of its constitution show that insurance terms and
conditions are precisely like those of nonfraternal companies.
Insurance funds are administered on a business basis, and they
cannot be used for fraternal purposes. In short, the insurance
program and activities reveal that this is an insurance company,
run like other insurance companies. The only nonpaper difference is
that insurance is sold only to members of the fraternity.
Nor is it apparent to me that an individual policyholder-member
in a remote community exercises any significant influence on the
technical insurance aspects of a fraternal company's business.
Certainly he can no more control the policy contract provisions
than could a mutual policyholder or a member of a membership loan
association. And the individual member would share as much and no
more in the fraternal company's gains from overreaching contracts
as would participants in these indistinguishable associations.
That fraternal order insurance businesses such as petitioner's
are of a magnitude to move each state to regulate them so as to
protect its citizens can hardly be doubted. The best information
obtainable shows that, in 1944, fraternal
Page 331 U. S. 641
life insurance businesses in the United States had aggregate
assets of almost $1,500,000,000; income of $255,600,000;
$6,794,300,000 insurance in force, and 7,582,000 outstanding
certificates. During 1944, they spent $43,300,000 for agents and
management. [
Footnote 2/8] There is
thus every reason for giving the same force and effect to state
regulation of fraternal insurance companies as is given regulation
of all other insurance businesses.
Fifth. I fear that it may be significant that the Court
has conspicuously refrained from stating in unmistakable terms that
its new doctrine applies only to fraternal insurance companies. If,
as the Court holds, the interest of Ohio or of its corporate
creature does outweigh the interest of every state in which that
creature does business, I see no sound basis in the facts or in the
authorities cited by the Court for declining to apply this formula
to almost every type of business corporation created in one state
and doing business in another.
The effect of such a doctrine on the rights of states to govern
themselves is graphically demonstrated by the insurance business.
The five largest legal reserve life insurance companies in the
United States, with total assets of approximately $15,000,000,000,
have their home offices in or near New York and Connecticut.
United States v. South-Eastern Underwriters Assn.,
322 U. S. 533,
322 U. S. 541.
The result of the Court's opinion, if later carried to its logical
conclusion, would be that the policy obligations of all of these
companies, in whatever state assumed, would be governed by New York
or Connecticut law, or that of nearby states, and that all of the
other states would be deprived of power to pass legislation
believed by them to be necessary to protect their own citizens
against unconscionable
Page 331 U. S. 642
contracts. By permitting its insurance corporations,
particularly mutual companies, to make contracts barring an
insured's access to state courts, New York, for example, could thus
render all the other states helpless to provide a judicial haven
for their own wronged citizens.
Such a doctrine is not only novel; it is revolutionary. I think
the doctrine violates the very Constitution that it is our duty to
interpret. For the Court today, in part, nullifies a great purpose
of the original Constitution, as later expressed in the Tenth
Amendment, to leave the several states free to govern themselves in
their domestic affairs. Hereafter, if today's doctrine should be
carried to its logical end, the state in which the most powerful
corporations are concentrated, or those corporations themselves,
might well be able to pass laws which would govern contracts made
by the people in all of the other states.
I would affirm this judgment.
[
Footnote 2/1]
Townsend v.
Jemison, 9 How. 407, 410 [argument of counsel --
omitted];
Bank of Alabama v.
Dalton, 9 How. 522,
50 U. S. 528;
Bacon v.
Howard, 20 How. 22,
61 U. S. 25;
Christmas v.
Russell, 5 Wall. 290,
72 U. S. 300;
Amy v. Dubuque, 98 U. S. 470,
98 U. S. 471;
Campbell v. Holt, 115 U. S. 620,
115 U. S. 626;
Campbell v. Haverhill, 155 U. S. 610,
155 U. S. 618.
See also Chase Securities Corp. v. Donaldson, 325 U.
S. 304;
Michigan Ins. Bank v. Eldred,
130 U. S. 693;
Bank of United States v.
Donnally, 8 Pet. 361;
McCluny v.
Silliman, 3 Pet. 270.
[
Footnote 2/2]
The Court also refers to
Hartford A. & I. Co. v. Delta
& Pine Land Co., 292 U. S. 143, and
Home Ins. Co. v. Dick, 281 U. S. 397. The
Court does not rest its decision on the due process clause. But the
decisions in those cases went on the due process clause, and, far
from supporting the holdings here, are actually inconsistent with
it. If they are to be followed, they stand for the propositions
that a state which has no interest at all, or only a minor
interest, in the transaction sued on cannot, because of the mere
accident of supplying the judicial forum, apply its own statute of
limitations so as to defeat the terms of a contract valid in the
jurisdiction where the obligation was initiated, negotiated, and
completed. The two cases cast considerable doubt on Ohio's power to
have applied its limitation statute had this suit been filed there;
conversely, they provide rather persuasive argument to support a
contention that South Dakota's statute should control liability
here in view of that state's considerable interest, even beyond
that of providing the forum of this action.
[
Footnote 2/3]
The Court takes the view that it is well established that a
contract provision limiting the time within which suit can be
brought may override a state's statute of limitations providing a
longer period. For this proposition, it cites
Riddlesbarger v. Hartford Ins.
Co., 7 Wall. 386. That case came from a Federal
Circuit Court in Missouri where the sole problem posed or decided
was whether, under Missouri law or general federal law, a contract
limitation violated the policy of Missouri expressed in its statute
of limitations.
But see Guaranty Trust Co. v. York,
326 U. S. 99. There
was no full faith and credit question, due process question, or any
other constitutional question.
McElmoyle v. Cohen, supra,
was not cited in the
Riddlesbarger case. Nor was it
relevant, because no foreign law was put forward which might
require Missouri to give full faith and credit to it.
[
Footnote 2/4]
"The purpose of the association is to make loans only to its
members, and for the further purpose of accumulating a fund to be
returned to its members who do not receive advances on their
shares."
National Mutual Bldg. & Loan Assn. v. Brahan,
193 U. S.
635-636.
[
Footnote 2/5]
The Court purports not to overrule these cases, for it states: "
. . . [W]e do not rely upon the place of concluding the contract of
membership or upon the place prescribed for its performance."
[
Footnote 2/6]
Hoopeston Canning Co. v. Cullen, 318 U.
S. 313;
Osborn v. Ozlin, 310 U. S.
53;
Mutual Life Ins. Co. v. Johnson,
293 U. S. 335,
293 U. S. 339;
Northwestern Mutual Life Ins. Co. v. McCue, 223 U.
S. 234,
223 U. S.
246-248;
Whitfield v. Aetna Life Ins. Co.,
supra, at
205 U. S. 495;
Knights Templars' and Masons' Life Indemnity Co. v. Jarman,
supra; Chattanooga National Bldg. & Loan Assn. v. Denson,
189 U. S. 408;
National Bldg. & Loan Assn. v. Brahan, supra; Wall v.
Equitable Life Ins. Co., 32 F. 273,
aff'd sub nom.
Equitable Life Society v. Clements, 140 U.
S. 226.
[
Footnote 2/7]
This contrast is dramatized by the consequences to Ohio's
interest in the injury which would flow from South Dakota's
disregard for this contract limitation which violates South
Dakota's public policy. It is certainly a tenuous thread which
would link South Dakota's refusal to enforce this and similar
limitations to the undue depletion of the corporate funds. For it
is unlikely that, in calculating rates and risks, actuaries took
into account the chance that the company might escape paying just
claims because of company-imposed limitations on the time for
bringing suit. On the other hand, recovery of insurance claims
often saves insurance beneficiaries from becoming public charges of
the state of their residence.
[
Footnote 2/8]
Statistical Abstract of the United States, Dept. of Commerce,
Bureau of the Census (1946) 442.