Opinion — Northwestern Mut. Life Ins. Co. v. McCue

OCTOBER TERM, 1911.

Syllabus. 223 U. 8.

NORTHWESTERN MUTUAL LIFE INSURANCE

COMPANY v. McCUE, ET AL.

CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE

FOURTH CIRCUIT.

No. 138. Argued December 20, 21, 1911.—Decided February 19, 1912.

The obligation of a contract depends .»on the law of the State where

made. .

A life insurance policy which by its terms does not become a com-

pleted contract until delivery on payment of first premium is to be

construed as a contract made in the State where the first premium

is paid and the policy delivered, notwithstanding a recital that/it is

to be construed as though made in another State. Equitable Life

Society v. Clements, 140 U. 8. 226.

In this case, held, that a policy issued by a Wisconsin company on the

life of a resident of Virgimia, to whom it was delivered in that State

on payment of the first premium, is a Virginia contract.

Even though a policy in a mutual life insurance company be a prop-

erty right, it is the measure of rights of every one thereunder, and if

the owner thereof cannot recover because it would be against public

policy to permit a recovery, either can the innocent heirs of that

person recover.

A policy of life insurance, silent on the point, does not cover death by

the hand of the law. This is consonant with the rulings of the

Virginia courts.

Quere: Whether in a case of this nature this court would have to

yield to the determination of what a state court has declared to be

its public policy.

Quere: What the public policy of the State of Wisconsin is on the lia-

bility of an insurance company for death of the insured by the hand

of the law.

167 Fed. Rep. 435, reversed.

TuE facts, which involve the liability of a life insurance

company on a policy on the life of one who came to his

death by hanging after conviction and sentence for mur-

g

es

NORTHWESTERN LIFE INS. CO. v. McCUE. 235

223 U.S. Argument for Petitioner.

der, and the construction of the policy itself, as well as by

what law it is to be construed,are stated in the opinion.

Mr. William H. White, Jr., and Mr. William H. White,

with whom Mr. George H. Noyes and Mr. John R. Dyer

were on the brief, for petitioner:

The policy was not a Wisconsin contract but a Virginia

contract, because the application was made, the premium

paid, and the policy delivered in Virginia. Equitable Life

Assur. Soc. v. Clements, 140 U.S. 226; Mutual Life Ins. Co.

of New York v. Cohen, 179 U. S. 262; Northwestern Life

Ins. Co. v. Elliott, 5 Fed. Rep. 225, 228. See also Knights

of Pythias v. Meyer, 198 U.S. 508; Ritter v. Mut. Life Ins.

Co., 169 U. S. 139.

The business of insurance is not commerce, and the mak-

ing of a contract of insurance is a mere incident of com-

mercial intercourse in which there is no difference whatever

between insurance against fire, insurance against the perils

of the sea, or insurance of life. New York Life Ins: Co. v.

Cravens, 178 U. S. 389; St. Johns v. The Amer. Mut. Life

Ins. Co., 13 N. Y. 31-38; Rosenplanter v. Prov. Sav. Life

Assur. Soc., 96 Fed. Rep. 721; Mutual Life v. Cohen, 179

U. S. 262; Hicks v. National Life Ins. Co., 60 Fed. Rep.

690; 25 Cyc. 748; Minor on the Conflict of Laws, 399; and

see Cravins v. N. Y. Life Ins. Co., 148 Missouri, 600; Wall

v. Equitable Life Assur. Soc., 32 Fed. Rep. 273; Mutual Life

Ins. Co. v. Robinson, 54 Fed. Rep. 580; Equitable Life Ins.

Co. v. Winning, 58 Fed. Rep. 541; McMaster v. N. Y. &c.

Co., 78 Fed. Rep. 33, 37; Assurance Society v. Clements, 140

U. S. 226.

The contract is one to be construed by the general com-

mercial law of the country as enforced by the Federal

Courts regardless of that of the State where it was made.

Swift v. Tyson, 16 Pet. 1, 18; Oates v. First Nat. Bank, 100

U. S. 239, 246; Railroad Co. v. Lockwood, 17 Wall. 357;

Manhattan Life Ins. Co. v. Boughion, 109 U. 8S. 121;

236 OCTOBER TERM, 1911.

Argument for Respondents. 223 U.S.

Pleasant Township v. Aftna Life Insurance Co., 138 U. 8.

67; Lake Shore &c. R. R. Co. v. Prentice, 147 U.S. 101,

106.

A policy of insurance is a contract, the construction of

which should come within the general commercial law.

Carpenter v. The Providence Ins. Co., 16 Pet. 495, 511;

Washburn & Moen Mjg. Co. v. Reliance Marine Ins. Co.,

106 Fed. Rep. 116-7; aff’d 179 U. S. 1; The Barnstable, 181

U. 8. 464, 470; Northwestern Nat'l Life Ins. Co. v. Riggs,

203 U. S. 255.

The laws of Wisconsin do not authorize a recovery in

this case: Patterson v. Natural Premium &c. Ins. Co., 100

Wisconsin, 118; McCoy v. Northwestern Relief Ass’n, 92

Wisconsin, 577; Whitfield v. Atina Life Ins. Co., 205 U. S.

489. ;

There can be no recovery on a life insurance policy

where the insured is legally executed, the policy being

silent on the subject. Amicable Society v. Bolland, 4

Bligh (N. 8.), 194; Burt v. Union Central Ins. Co., 187

U. S. 362, 365; Ritter v. Mutual Life Ins. Co., 169 U. S.

139.

To permit a recovery when death has resulted from a

violation of law is contrary to public policy. Hatch v.

Mutual Life, 120 Massachusetts, 550; Wells v. New Eng.

Mut. Life Ins. Co., 191 Pa. St. 207; Murray v. N. Y. Life

Ins. Co., 96 N. Y. 614; Bloom v. Franklin Life Ins. Co., 97

Indiana, 478.

Mr. Daniel Harmon, with whom Mr. H. W. Walsh and

Mr. G. B. Sinclair were on the brief, for respondents:

The contract upon which this suit has been brought is

not void as against public policy. Richardson v. Mellish,

2 Bing. 229, 252; Steamship Co. v. McGregor (1892), App.

Cas. 25, 45; Ramboll v. Soojurinull, 6 Moore, P. C. 310;

Printing Co. v. Sampson L. R., 19 Eq. 465; Moore v.

Woolsey, 4 E. & B. Q. B. 243; Smith v. DuBose, 78 Georgia,

> =

NORTHWESTERN LIFE INS. CO. ». McCUE. 287

223 U.S. Argument for Respondents.

413; Richmond v. Dubuque R. R. Co., 26 Iowa, 190; Kellogg

v. Larkin, 3 Pinn. 123; S. C., 56 Am. Dee. 164, 168; Swann

v. Swann, 21 Fed. Rep. 299; Equitable Life Co. v. Waring,

117 Georgia, 599; The Homestead Case, 22 Gratt. 301;

License Tax Case, 5 Wall. 462; Vidal v. Girard, 2 How. 128;

citing Pierce v. Randolph, 12 Texas, 200; Houlton v.

Nichols, 96 Wisconsin, 393.

Courts are careful not to encroach unduly upon the

liberty of contract. Contracts are not interfered with ex-

cept where they clearly appear to be prejudicial to the

public interest. No person can seriously believe that, if a

life policy is paid in case of death by hanging, it has a

tendency to encourage murder in order to mature the

policy by being hung. If benefit to one’s heirs by reason of

death is an encouragement to crime to accomplish death,

then the laws of descent, and the statutes abolishing at-

tainder are equally incentives to crime. The benefit in

heirs by execution of the ancestor cannot be said to be

subversive of public interest.

There is nothing in the contract which in terms or by

necessary implication amounts to an agreement to do an

illegal act, or which requires the performance of such an

act. If the policy were payable upon the sole condition

of death by hanging, there might be some plausibility in

such a contention.

There is nothing on the face of the policy which would

render it void.

Where the consideration and the matter to be per-

formed are both legal, plaintiff is not precluded from recov-

ering. by an infringement of the law not contemplated by

the contract. Wethrell v. Jones, 3 Barn. and Adolph. 221;

Waugh v. Morris, 42 L. J. Q. B. 57; Brier v. Dozier (Va.),

24 Gratt. 1; McDonald v. Triple Alliance, 57 Mo. App. 87;

Fitch v. Ins. Co., 59 N. Y. 557; Mills v. Rebstock, 29

Minnesota, 380. The validity of this contract is to be

determined by the law of Wisconsin.”

238 OCTOBER TERM, 1911.

Argument for Respondents. 223 U. 8..:

The law governing the obligation of this contract does

not avoid it. May on Insurance, 402.

The inquiry in the Federal courts is not general, inde-

pendent of any specific law, but specific as to the law of

the State of the obligation.

Whether or not this contract is valid or is to be held void

must be determined by the law of the State creating the

obligation.

The rule that in matters of general commercial law or

general jurisprudence Federal courts are not bound by

state decisions does not apply to this case. Wheaton v.

Peters, 8 Pet. 591; Bucher v. Cheshire R. R. Co., 125 U. S.

555; Hudson Furniture Co. v. Harding, 17 C. C. A. 203;

Chi., M. & St. P. Ry. Co. v. Solan (1897), 169 U. S. 133;

Gatton v. Chi., R. I. & P. Ry. Co. (Iowa), 28 L. R. A. 556;

Transportation Co. v. Parkersburg, 107 U. S. 691; McClaine

v. Prov. L. Ins. Soc., 49 C. C. A. 31; Burgess v. Seligman,

107 U.S. 20.

In the enforcement of statutes or the construction of

statutes, the Federal courts make no extrinsic inquiry.

William v. Gaylord, 186 U. S. 157; Flash v. Connecticut,

109 U.S. 37; Whitfield v. Hina Life Ins. Co., 205 U. S. 489.

In questions of policy, the statutes and decisions of the

state courts are controlling. Vidal v. Girard, 2 How. 127;

License Tax Case, 5 Wall. 462; N. Y. Life Ins. Co. v.

Craven, 178 U. S. 389.

In determining the public policy of a State as affecting

an obligation arising in that State, the Federal courts not

only give great consideration to the decisions on the ques-

tion by state tribunals, but they are constrained to adopt

those rulings as definitive of the policy of the State.

The law of this obligation is the law of Wisconsin, the

place of execution of the contract, of payment of the first

premium, and of performance.

Where the application is made is immaterial unless that

is the place where the final contract was closed. M asneger

AEE S 2 IHRE LIE EP ghas PIRRS S CRS URSA SR ah tn RAP VEN TOS ae eet Sst PSY RAHI SF ee: ie iG

NORTHWESTERN LIFE INS. CO. v. McCUE. 239

223 U.S. Argument for Respondents.

v. Hamilton, 101 California, 532; Brown v. Westerfield, 47

Nebraska, 399; Nicholson v. Cosmos, 90 Indiana, 515.

The legislature of Wisconsin has expressly authorized

this company to undertake this risk, and the court should

refuse to narrow or limit it. The breadth of this statute

cannot be limited by consideration of public policy. A

statute is the authoritative and final declaration of public

policy. Carpenter’s Estate, 170 Pa. St. 203; Hadden v.

Barney, 5 Wall. 518; Shellenberger v. Ransom (Neb.), 25

L. R. A. 565; Owens v. Owens, 100 N. Car. 242; In re Runk

(Ia.), 101 N. W. Rep. 151; see also McKinnon v. Lundy,

24 Ontario, 132; In re Gollnik’s Estate, 128 N. W. Rep.

292 (Minn.).

The decisions of Wisconsin support the recovery in this

case. Patterson v. Premium Ins. Co., 100 Wisconsin, 118.

The right asserted is a property right vested by the

special statute of incorporation which is not divested by

crime. This rule controls this case.

The charter controls the rights of members irrespective

of the place where such rights may have been acquired.

Glenn v. Liggett, 135 U. S. 583; Smith v. Kernochen, 7 How.

198; Jellenik v. Huron Copper Co., 177 U. S. 1; Flash v.

Connecticut, 109 U. S. 371.

Under the charter of the company McCue occupied

the relation of a member of the company. This was a

valuable property right. Upon his death this membership

passed to his executors. 21 Am. & Eng. Ency., 269;

Condon v. Mutual Reserve Assn., 89 Maryland, 73, 99;

Huber v. Martin, 3 L. R. A. 653.

The charter provides for devolution of the right on

death. McCoy v. Northwestern Relief Association, 92 Wis-

consin, 577; Angell and Ames Corp., § 410.

Where the law provides a method of devolution, that

method controls and the courts do not inquire further.

Broom Leg. Max., 289; Shellenberger v. Ransom (Neb.),

25 L. R. A. 565; Ownes v. Ownes, 100 N. C. 242; Holden

ae, ES ee re ine ih ses

FPS RAIS Heme

et eS,

_ OCTOBER TERM, 1911.

Argument for Respondents. 223 U.S.

v. Ancient Order (Tll.), 31 L. R. A. 70; Deem v. Milliken,

6 Ohio C. Ct. Rep. 357; Carpenter’s Estate, 170 Pa. St.

203; McKinnon v. Lundy, 24 Ont. Rep. 132; Riggs v.

Palmer, 115 N. Y. 506 has been expressly disapproved by

Schellenberger v. Ransom, supra, by. Carpenter’s Estate,

supra, and the New York court refused to follow it in

Ellerson v. Westcott, 148 N. Y. 149.

In Collins v. Metropolitan Life Ins. Co., 93 N. W. Rep.

542, decided by the Supreme Court of Illinois a few days

after this case was submitted in the Circuit Court of Ap-

peals, a recovery was allowed. '

Death on the gallows is not impliedly excepted from

the risks undertaken. Public policy does not except.

The terms of the policy cover the risk.

The canon of construction, expressio unius, etc., forbids

a construction excepting this risk. Hawkins v. United

States, 96 U.S. 689; Schmidt v. Life Assn. (Ia.), 51 L. R. A.

141; McDonald v. Triple Alliance, 57 Mo. App. 87; Har-

per’s Admr. v. Ins. Co., 19 Maine, 506; Supreme Lodge v.

Menkhausen, supra; Clever v. Mutual etc. Co., 1 Q. B. D.

147.

In excepting death from certain causes, the company

has undertaken to pay in case of death from all other

causes.

An insurance policy will be construed most strongly

against the company, because the words are its words.

Royal Ins Co. v. Martin, 192 U.S. 149.

A clause excepting similar contingencies to those under

which the insured died in this case is very common in life

insurance policies. The fact that this policy contains no

such exception when such exception is common shows

that none were intended. Patterson v. Premium Ins. Co.,

100 Wisconsin, 118; Moore v. Woolsey, 4 E. &. B. I. B.

243.

_ This was a risk actually covered by the policy; the

premium paid was regulated from mortality tables which

Pea eee

NORTHWESTERN LIFE INS. CO. ». McCUE. 241

223 U.S. Argument for Respondents.

are made up from statistics of deaths—all deaths in a

given length of time, not deaths from certain causes,

Campbell v. Supreme Conclave, 54 L. R. A. 576,—an aver-

age expectancy of life derived from experience tables em-

bracing suicide as well as all other causes of mortality.

Lange v. Royal Highlanders (Neb.), 110 N. W. Rep. 1110.

McCue had other insurance on his life. The fact that

other companies paid shows their view of the contract.

That so many paid shows a general custom in insurance

circles that this is a risk actually covered by the policy.

The company by paying the premium into court has

admitted for purposes of this action that risk of death

at the hand of the law was a risk covered by this policy.

1 Hughes on Procedure, §§ 93, 202; Greenleaf Ev. (15th

Ed.), 282.

If the McCue estate cannot recover, the innocent par-

ties interested will be admitted as claimants. Cleaver v.

Mult. Reserve Fund L. Assn.,1 Q. B. 147.

In this case the infant plaintiffs, the children, do not

take under McCue in this aspect of the case, by inherit-

ance; it would be misnomer to speak of heirs inheriting

personal property; their claim is directly against the

company; they are persona designata. Miller v. Reed, 64

Connecticut, 240; Hodge’s Appeal, 8 W. N. C. (Pa.) 209;

Mullins v. Thompson, 51 Texas, 7; Thompkins v. Levy,

87 Alabama, 263; 4 Words & Phrases, p. 3254, “‘ Heirs.”

Where the assured makes a policy payable to his chil-

dren, the law of Wisconsin is stated in Patterson v. Pre-

mium Ins. Co., 100 Wisconsin, 118; Palmer v. Welch, 132

Illinois, 141; Alexandria v. Parker, 144 Illinois, 355.

Payment must be made in every case where there is

any hand to receive it, and forfeiture is not to be toler-

ated. Fuller v. Linzee, 135 Massachusetts, 469; Bancroft

v. Russell, 157 Massachusetts, 47 ; 31 N. E. Rep. 10; Haskins

v. Kendall, 158 Massachusetts, 224; 33 N. E. Rep. 495;

Newman v. Covenant Mutual Ins. Asso.,.76 Iowa, 56; 1 L.

VOL. ccxx11I—16

BREEN SSS (aS SYS En ec 8 ese tata

OCTOBER TERM, 1911.

Argument for Respondents. 223 U.S.

R. A. 659; Schmidt v. Northern Life Asso. (Ia.), 51 L. R. A.

141; Supreme Lodge v. Menkhausen, 209 Illinois, 277; N. Y.

L. Ins. Co. v. Davis, 96 Virginia, 737; Cooley, Briefs on In-

surance, 3226.

The cases cited do not militate against recovery on the

principles above set out. Fauntleroy’s Case, 4 Bligh, 194,

relied on in Burt v. Union Central L. Ins. Co., 187 U. S.

372, does not establish any principle controlling this case,

certainly as far as the infant plaintiffs are concerned; and

see Dowley v. Shiffer, 36 N. Y. Supp. 869; Moore v. Wool-

sey, supra; Lodge v. Menkhausen, 101 A. S. Rep. 239;

Sun Life Ins. Co. v. Taylor (Ky.), 56 S. W. Rep. 668;

Harper v. Ins. Co., 19 Maine, 506; McDonald v. Triple

Alliance, 57 Mo. App. 87.

In Burt v. Union Central, 187 U. S. 362, it did not ap-

pear that there had been any legislative pronouncement

of public policy nor had the courts defined the public

policy governing contracts of this order, and that case

can be distinguished on other grounds also. See Halch v.

Mut. L. Ins. Co., 120 Massachusetts, 550.

The present policy of the law is to require of insurance

companies a strict liability for their losses. Lord v. Dall,

12 Massachusetts, 115; Fidelity and Casualty Co. v. Erch-

leiss, 30 L. R. A. 587; A. R. R. v. M. T. & D. Co., 38

L. R. A. 116; Trenton P. R. R. Co. v. Guarantors L. I.

Co., 44 L. R. A. 213. See Water v. Merchants &c. Ins. Co.,

11 Pet. 213; Phenix Ins. Co. v. Erie Trans. Co., 117 U.S.

312; Courtemanches v. Supreme Court, I. O. of O., 136

Michigan, 30; Supreme Lodge v. Gelbke, 64 N. E. Rep.

1058; S. C., 198 Illinois, 365; Gootzman v. C. Mut. Ins. Co.,

3 Hun (N. Y.), 515; Griffin v. Western Mut. Asso., 20 Ne-

braska, 620; Cluff v. Mut. Life Ins. Co., 99 Massachusetts,

317; Wareck v. Mutual Reserve, 62 Minnesota, 39; Simp-

son v. Life Ins. Co., 115 N. Car. 393; Mutual Reserve Asso.

v. Payne, 32 8. W. Rep. (Tex.) 1036; Supreme Court of

Honor v. Updegraff, 68 Kansas, 474.

NORTHWESTERN LIFE INS. CO. ». McCUE. 243

223 U.S. Opinion of the Court.

r The legislatures also have made provision for the pro-

tection of persons contracting with insurance companies.

See Penna. Stat., Laws, 1881, p. 20; Kentucky Stat., § 679;

New York, 3 Rev. Stat. (8th Ed.), p. 1688; 2 Cooley

Briefs on Ins. 1189; Mo. Rev. Stat., § 5982.

rn HES 8s hal stato aiattneid art a

Mr. Justice McKenna delivered the opinion of the

court.

The question in the case is whether death by the hand

i of the law in execution of a conviction and sentence for

\ murder, is covered by a policy of life insurance though

such manner of death is not excepted from the policy,

there being no question of the justness of the sentence.

The case was in equity and brought in the Corporation

Court for the city of Charlottesville, State of Virginia,

by respondents, children and sole heirs of James S. McCue,

by Marshall Dinwiddie, their next friend, upon a policy

of life insurance issued to McCue by petitioner, named

herein as the insurance company.

The main defense of the insurance company was (there

were some technical defenses with which we are not con-

cerned) that McCue came to his death by hanging after

conviction and sentence for the murder of his wife.

The suit was brought under the laws of the Common-

wealth of Virginia against the insurance company, the

People’s National Bank, of Charlottesville, as garnishee,

and the executors of McCue’s estate.

The case was removed on the petition of the insurance

company on the ground of a separable controversy to the

Circuit Court of the United States for the Western Dis-

trict of Virginia. In that court there was a demurrer

filed to the bill which raised the question as to the proper

arrangement of the parties and whether the heirs or the

executors were the parties to recover on the policy, assum-

ing that the insurance company was liable. In the answer

ee oe

PBI SS TS A De inte aera

OCTOBER TERM, 1911.

Opinion of the Court. 223 U. 8.

the same questions were again raised and all liability of

the insurance company denied, principally on the ground

of the manner by which McCue came to his death.

At the trial the technical defenses were waived and by

agreement of the parties the heirs of McCue and his ex-

ecutors were treated as parties plaintiff. The court con-

sidering the cause as one at law, and a jury having been

waived by the parties, adjudged on the pleadings and an

agreed statement of facts, ‘‘that the plaintiffs take nothing

by their bill, and that said defendant go without day,”

with costs, the latter to be paid by a deposit made in the

registry of the court in refund of the premium paid by

McCue, as far as it would go. The judgment was reversed

by the Court of Appeals and a new trial ordered. This

certiorari was then petitioned for and allowed.

The facts as agreed are these: The insurance company is

a corporation duly organized under the laws of Wisconsin

and a citizen and resident thereof. It is a mutual insur-

ance company, with the power and obligations given to

and imposed upon it by certain acts of the legislature of

Wisconsin, which acts constitute its charter.

The People’s National Bank of Charlottesville was

made a party solely as garnishee, it having certain sums

of money belonging to the insurance company in its pos-

session.

McCue made written application to the insurance com-

pany in his own handwriting for the policy in suit, in pur-

suance of which the policy was issued for the sum of

$15,000 on his life. He paid premiums as follows: When

the policy was delivered to him he gave his note for the

sum of $427.50 for the premium to E. L. Carroll and L.

Fitzgerald, payable to their order, six months after date,

at the Jefferson National Bank, Charlottesville, Virginia.

Carroll & Fitzgerald at the time were soliciting insurance

for T. A. Cary, the general agent of the insurance com-

pany in Virginia. The note was endorsed by Carroll &

NORTHWESTERN LIFE INS. CO. ». McCUE. 245

223 U.S. Opinion of the Court.

np Fitzgerald to Cary, with the following memorandum at-

{ tached: ‘‘$427.50. Hold this note in Mr. Cary’s office

(don’t use bank.) Notify Mr. McC. about thirty days

before due, and send it to E. L. Carroll for collection.”

Carroll & Fitzgerald gave their individual notes to

Mr. Cary, amounting to $427.50, on which he advanced

the money to the company and held the notes for collec-

tion, with McCue’s note as collateral.

The company received, at its home office in Milwaukee,

the amount of the premium in cash from Cary on May 2,

1904, but had no knowledge of the note arrangement be-

‘ tween McCue, Carroll & Fitzgerald and Cary. The note

was paid by McCue by checks after he had been arrested,

he protesting his innocence, ‘‘which facts were known to

Cary.” The note arrangement was a general custom

among soliciting agents for the company. Other facts

will be noted hereafter.

we) A lah EAA he ae

The main question in the case is, as we said, the liability

of the company under the circumstances. Or, to put it

more abstractly for the present purpose of our discussion,

whether a policy of life insurance insures against death by

a legal execution for crime?

The question was before this court in Burt v. Union

Central Life Insurance Company, 187 U. 8. 362. In the

policy passed on, as in the policy in the case at bar, there

was no provision excluding death by the law. It was de-

cided, however, that such must be considered its effect,

though the policy contained nothing covering such con-

tingency. These direct questions were asked: ‘Do in-

surance policies insure against crime? Is that a risk which

enters into and becomes a part of the contract?” And

answering, after discussion, we said (p. 365): “It cannot

be that one of the risks covered by a contract of insurance

is the crime of the insured. There is an implied obligation

on his part to do nothing to wrongfully accelerate the

; maturity of the policy. Public policy forbids the inser-

246 OCTOBER TERM, 1911.

Opinion of the Court. 223 U.S.

tion in a contract of a condition which would tend to in-

duce crime, and as it forbids the introduction of such a

stipulation it also forbids the enforcement of a contract

under circumstances which cannot be lawfully stipulated

for.” Cases were cited, among others Ritter v. Mutual

Life Insurance Company, 169 U. 8. 139. There it was

held that a life insurance policy taken out by the insured

for the benefit of his estate was avoided when one of

sound mind intentionally took his life, irrespective of the

question whether there was a stipulation in the policy or

not. And the conclusion was based, among other con-

siderations, upon public policy, the court saying (p. 154)

that ‘“‘a contract, the tendency of which is to endanger the

public interests or injuriously affect the public good, or

which is subversive of sound morality, ought never to re-

ceive the sanction of a court of justice or be made the

foundation of its judgment.”

These cases must be accepted as expressing the views of

this court as to the public policy which must determine

the validity of insurance policies, and which they cannot

transcend even by explicit declaration, much less be held

to transcend by omissions or implications, and we pass by,

therefore, the very interesting argument of counsel for

respondents as to the indefinite and variable notions

which may be entertained of such policy according to

times and places and the temperaments of courts, and the

danger of permitting its uncertain conceptions to control

or supersede the freedom of parties to make and to be

bound by contracts deliberately made. We come, there-

fore, immediately to the special contention of respondents,

that the contract in controversy is a Wisconsin contract,

and is not offensive to the public policy of that State or to

its laws, but was indeed, as it is contended, made in con-

formity to the laws of that State, and carries all of their

obligations.

The obligation of a contract undoubtedly depends upon

on

NORTHWESTERN LIFE INS. CO. v. McCUE. 247

223 U.S. Opinion of the Court.

the law under which it is made. In which State, then,

Virginia or Wisconsin, was the policy made? In Equitable

Life Assurance Society v. Clements, 140 U. S. 226, the

question arose whether the contract of insurance sued on

was made in New York or Missouri. The assured was a

resident of Missouri, and the application for the policy

was signed in Missouri. The policy, executed at the office

of the company, provided that the contract between the

parties was completely set forth in the policy and the

application therefor, taken together. The application

; declared that the contract should not take effect until the

‘ fiy st premium should have been actually paid during the

life of the person proposed for assurance. Two annual

‘ premiums were paid in Missouri, and the policy, at the

request of the assured, was transmitted to him in Mis-

souri, and there delivered to him. The court said (p. 232):

) “Upon this record, the conclusion is inevitable that the

Sour eateeets mtr

policy never became a completed contract, binding either

i party to it, until the delivery of the policy and the pay-

ment of the first premium in Missouri; and consequently

that the policy is a Missouri contract and governed by

the laws of Missouri.”

In Mutual Life Insurance Company of New York v.

Cohen, 179 U. S. 262, the insurance policy contained a

stipulation that it should not be binding until the first

premium had been paid and the policy delivered. The

premium was paid and the policy delivered in Montana.

It was held (p. 264) that ‘‘under those circumstances,

under the general rule, the contract was a Montana con-

tract, and governed by the laws of that State.” Citing

Equitable Life Assurance Society v. Clements, supra.

The same conditions existed in Mutual Life Insurance

Company v. Hill, 193 U. 8. 551, and it was decided, the

two cases above mentioned being cited, that the policy of

insurance involved was a Washington contract, not a New

York contract.

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248 OCTOBER TERM, 1911.

Opinion of the Court. 223 U.S.

In the case at bar the application was made by McCue

at Charlottesville, Virginia, February 25, 1904, and the

policy was delivered to him there on March 15, 1904,

when he gave his note for the premium which was payable

at that place and subsequently paid there. And it is pro-

vided in the policy that it should not take effect until the

first premium should be actually paid. Following that

provision is this: “In witness whereof the Northwestern

Mutual Life Insurance Company, at its office in Mil-

waukee, Wisconsin, has by its president and secretary

signed and delivered this contract, this fifteenth day of

March, one thousand nine hundred and four.” But man-

ifestly this was not intended to affect the preceding pro-

vision fixing the time when the policy should go into

effect, nor the legal consequences which followed from it.

In Equitable Life Assurance Society v. Clements the policy

was executed at the company’s office in New York. The

exact conditions therefore existed which made, in the

cases cited, the policies involved therein not New York

contracts but, respectively, Missouri, Montana and

Washington contracts. The policy, therefore, in the case

at bar, must be held to be a Virginia and not a Wisconsin

contract.

Respondents, however, contend that “‘the right asserted

is a property right vested by the special statute of incor-

poration which is not divested by crime,”’ and that “‘the

charter controls the rights of members irrespective of the

place where such rights may have been acquired.”’ To

support the contention that the right asserted is a property

right, respondents adduce §§ 1, 4, 7 and 20 of the charter.

Their argument is brief and direct, and we may quote

it. It is as follows: ‘‘Under the charter of the company

McCue occupied the relation of » member of the company.

This was a valuable property mn * . Upon his death this

membership passed to his executors.’’ And further: ‘The

charter of the company, § 1, provided that certain persons

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NORTHWESTERN LIFE INS. CO. ». McCUE. 249

223 U.S. Opinion of the Court.

named ‘and all other persons who may hereafter associate

with them in the manner hereinafter prescribed shall be,

and are, declared a body politic and corporate.’ Section 4

prescribes that persons who shall hereafter insure with the

company ‘shall thereby become members thereof.’ And

section 7 prescribes the manner in which this membership

is to be perfected. ‘Every person who shall become a

member of this association, by effecting insurance therein,

shall, the first time he effects insurance, pay the rates

fixed by the trustees,’ etc. There can be no doubt, then,

that McCue was a member of this corporation. He insured

with the company, and thereby he became a member.

His interest in the company was fixed by the amount of

his insurance. This membership constituted a vested

property right. He was eligible as an officer, and entitled

to vote in the management of the company (s. 20); en-

titled to the dividends on the surplus and profits (§ 2, § 13)

and was a joint owner of the assets of the company.” But

this is assuming what is to be proved. It may be true

that a person who insures with the company becomes a

member thereof and that his interest is fixed at the amount

of his insurance. But what constitutes his title or right?

Necessarily his policy. What entitles him to a realization

of the benefits of his membership? Necessarily, again, his

policy, if the manner of his death be not a violation of it.

We need not follow counsel, therefore, through their argu-

ment as to the rights of property and the rules of its dev-

olution, which, it is contended, must obtain, whatever

be the act or guilt of the person producing it. The ques-

tion before us, and the only question, is: What rights did

McCue’s estate and children get by his policy? And we

are brought back to the simple dispute as to whether the

policy covers death by the hand of the law. This court has —

pronounced on that dispute, and its ruling must prevail

in the Federal courts of Virginia, in which State the con-

tract was made. And it is consonant with the ruling in the

250 OCTOBER TERM, 1911.

Opinion of the Court. 223 U.S.

state courts. In Plunkett v. Supreme Conclave Improved

Order of Heptasophs, 105 Virginia, 643, a certificate of

membership in the conclave, which was issued to one

Charles W. Plunkett, his wife being beneficiary, was con-

sidered. One of the conditions was that Plunkett comply

with the laws, rules and regulations then governing the

conclave or that might in the future be enacted. There

was no provision against suicide in the laws, rules or regu-

lations when the certificate was issued. Such a provision

was subsequently enacted. Plunkett committed suicide,

and the Order refused to pay benefits. Plunkett’s wife

brought suit to recover them and asserted a vested interest

in the benefits under the certificate. The contention was

rejected. The trial court held that the forfeiture of the

rights under the certificate, if the insured while sane com-

mitted suicide, was valid, because (1) it involved no vested

right of the insured, and (2) because it was a fundamental,

though unexpressed, part of the original contract that the

insured should not intentionally cause his own death.

And the court added (p. 646): ‘Inasmuch as the original

contract and by-laws were silent upon the subject of

suicide by the insured while sane, the new by-law is valid,

because there can be no such thing as a vested right for a

sane man to commit suicide, and for the further reason

that it is nothing more than the written expression of the

provision which the law had read into the contract at its

inception.”

The Supreme Court of Appeals affirmed the judgment,

quoting the reasoning of the trial court, and added to it

the considerations of public policy expressed in the Burt

Case and Ritter Case, supra, and other cases. If the public

policy of Virginia were the same as, it is contended, that of

Wisconsin is, whether this court should have to yield it,

we are not called upon to decide.

Being of opinion that McCue’s policy was a Virginia

contract, it may be unnecessary to review the cases relied

NORTHWESTERN LIFE INS. CO. ». McCUE. 251

223 U. 8. Opinion of the Court.

on by the respondents, which they contend declare the

public policy of the State of Wisconsin. It may, however,

be said that the cases are not absolutely definite.

Two cases only are cited, McCoy v. Northwestern Mutual

Relief Association, 92 Wisconsin, 577, and Patterson v.

The Natural Premium Ins. Co., 100 Wisconsin, 118. We

will not consider the facts in the first case. It is enough

to say that the court, following a ruling that it had pro-

nounced in other cases, said (p. 582), “if a contract for

life insurance does not provide against liability in case of

death by suicide or self-destruction, then such cause of

death does not constitute a defense,” citing four cases.

The second also presented one of suicide, the insured be-

ing sane. It was contended that the policy did not cover

such a risk, because (1) an incontestable clause (there

being one) in the contract, did not cover such a death;

(2) if it could be held so in terms it would be void as against

public policy; (3) suicide was a crime and hence within a

stipulation against death in violation of law.

The reliance of the insurance company to support its

contentions was upon the Ritter Case, supra. The court,

however, reiterated its former ruling as to death by sui-

cide, though it recognized the cogency of the reasoning of

the Ritter Case, that the insured should do nothing to ac-

celerate the contingency of the policy, saying (p. 122):

“were the question a new one in the law” the argument,

“‘would be well nigh irresistible especially where, as in the

Ritter Case, the policy runs in favor of the estate of the

insured, and the proceeds will go to the enrichment of such

estate, instead of to other beneficiaries.”

There were other beneficiaries in the case, the policy

having been assigned with the consent of the company to

the children of the insured. Commenting further on that

fact, the court said it brought the case within the principle

of certain cases which were cited, but added “nor would

the application of that principle to this case necessarily

SSSR ARS TS RIRE I ee

252 OCTOBER TERM, 1911.

Opinion of the Court. 223 U. 8.

conflict with the Ritter Case, where the policy was in favor

of the estate of the insured. It may well be in such a case

that the intentional suicide of the insured while sane would

prevent a recovery by his personal representatives, and

yet not prevent a recovery in case of a policy in favor of

beneficiaries who had a subsisting vested interest in the

policy at the time of the suicide, and who could not, if

they would, prevent the act of the insured.” MeCue’s

policy was in favor of his estate and comes within the con-

cession made by the Supreme Court to the reasoning of the

Ritter Case.

The court did not discuss considerations of public pol-

icy, but we may assume it found nothing offensive to such

policy in a contract of insurance which covered death by

suicide, and it may be supposed that the court would find

nothing repugnant to public policy in a contract which did

not except death for crime. However, we need not specu-

late, as the Wisconsin law does not control the policy in

suit.

One other contention of respondents remains to be no-

ticed. It is contended that if the McCue estate cannot re-

cover, the innocent parties, his children, will be admitted

as claimants. To this contention we repeat what we have

said above, the policy is the measure of the rights of every-

body under it, and as it does not cover death by the law

there cannot be recovery either by McCue’s estate or by

his children.

Judgment of the Court of Appeals is reversed, and that

of the Circuit Court is Affirmed.