Opposition Brief — Griffin v. McCoach

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st GROPLEY

CLERK

SUPREME COURT OF THE UNITED STATES

| „October Term, 1940

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No. 755

J. Ros Gamrnt, Administrator with Will Annered of the

Estate of Robert D. Gordon, Deceased, Petitiuner,

vs.

Joun D. McGoacn, Trustee. 0

_ BRIEF FOR THE RESPONDENT IN OPPOSITION TO

THE PETITION FOR WRIT OF CERTIORARI

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8 B. CALLAWAY,

Attorney for Respondent.

Frank C. Brooks, 36

Of Counsel.

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Table of Cases Cited

9 Page

American National Ins. Co. v. Smith, 13 S. W. Boys

RRA iran ta car ok ea Cac Pe Es pe ee

Bond v. Hume, 243 U. S. ee eae eee 5 11

Cheeves v. Anders, 87 Tex. 28ù)7777ß 8

Equitable Life Ass. Soc. of the U. S. v. Aaron, 108

%%%%%%¼S ͤ Sead ventlgnnverntioten

Erie Railway Co. v. Tompkins, 304 U. S. 64 5, 6,

Giant-Powder Co. v. Oregon Pacific Ry. Co., 42 F. 470

Grigsby v. Russell, 222 U. S. 149 f

Kansas City Life, Ins. Co. v. N 21 F. S. 159 — 4

Malloy v. New Vork Life Ins. Co „ 103 Fed. (2d) 439

Manhattan Life Ins. Co. v. Cohen, 139 S. W. 51 5,

Merrielles v. State Bank of Keokuk, 24 S. W. 564.

Midland Nat'l Bank of Minneapolis v. DeSoto Life

Fee, Si eet. Be BO .. 7.

Mutual Benefit, Health and Accident Ass’n v. Bow-

1 ag te I ia diva sc sesaesack Snide recta enetensstaeyess

New York Life Ins. Co. v. English, 95 Tex. een

Pendleton v. Great Southern Life Ins. Co., 273 Pace.

NE Sete eb hak ⁵mwm ... ean een iieee

. Restatement of the Law of Conflict of Laws, Sec. 332

Restatement of the Law of Conflict of hb Sec. 347

© contre ona

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S O G

Seiders v. ere Life 2 of the United States,

%%

Sharp v. American Nat'l Ins. Co., 126 8. W. (2d) 50 11

Steinback v. Diepenbrock, 37 N. X. S. 279; 158 N. V.

Ir 22222 eee. 11

Walker v. Goetz, 218 8. W. 569 . . .. . . . 10

Warnock v. Davis, 104 U. S. 77 9 11

Wilke v. Finn, 39 S. W. (2d) 836 8 e 8

SUPREME COURT OF THE UNITED STATES

7 es October Term, 1940

No. 755

Estate of Robert D. Gordon, Deceased, Petitioner,

vs.

JohN D. Moos, Trustee.

BRIEF FOR THE RESPONDENT IN OPPOSITION TO

THE PETITION FOR WRIT OF CERTIORARI

I.

STATEMENT OF THE case

The following facts should be considered in connection

with the summary statement of the case made by petitioner.

the Prudential Insurance Company in their answer asked

that the proceeds of the policy be adjudged in favor of

John D. McCoach, Trustee (R. 2), and the assignees of

the defendants named asked that judgment be rendered

in favor of John. D., McCoach, ‘Trustee. (R. 9.) The rec-

ord does not show that McCoach; Trustee, claimed as trus-

tee for the three assignees instead of the original members

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J. Ros Cairn, Administrator with Will Annexed of *

John D. McCoach, Trustee, was the named beneficiary |

“of the policy of insurance, whose proceeds are in contro-

versy. The defendants in the bill of interpleader filed by

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zof the syndicate, but only that in the event he recovered

the proceeds, that he intended to pay over to each of the

assignees their pro rata share. (R. 9.) This is not a suit

‘filed by a citizen of one state against a citizen of another,

but an interpleader suit (R. 2), arising out of an action

filed by petitioner, :

ish I.

ARGUMENT

Petitioner’s six points fall into two classifications: (a)

That the contract involved in this proceeding is a Texas

contract; and (b) that regardless of where the contractual

rights arose, that the trial court by virtue of sitting in

Texas, must apply an alleged public policy of the State

of Texas. They will be answered in that form:

THE CONTRACT IN CONTROVERSY IS NOT A

TEXAS CONTRACT .

There are three contracts or agreements . in

this controversy:

1. The principal contract and the one in controversy _

is the insurance policy issued by the Prudential Insur-

ance Comp&ny of America, and this is conceded to be a

‘New York contract: (This will hereafter be referred to

as the insurance contract.)

2. The second contract which is considered is the agree- |

ment made between Robert D. Gordon and Alfred D.

Leonard, Max I. Brenwasser, George B. Cody, Nathan

Schweiger, John D. McCoach, Frederick W. Mead, and

Julius A. Bates. This is the contract which appellant con-

tends is a Texas contract. ( This will 5 be referred

to as the agreement.)

8. The third contract is in reality three contracts, being

the assignments from Max I. Brenwasser to Harry G. Nel-

. ge, from Julius Ay Bates to George E. Bradnack, and

from Alfred D. Leonard to his son, LeRoy E. Leonard. It

is conceded that all of these assignments were made in the

State of New York, and that all parties involved in the

assignments were citizens of the State of New York. (These

will hereafter be referred to as the assignments.)

The fund which is the subject of controversy in this

cause was paid into the registry of the court by virtue

of the insurance contract issued on the life of Robert D.

Gordon. Any recovery of the fund must be based on the

terms of that contract. Petitioner does not base any of

his rights of recovery upon the terms of this contract.

His contention is that the agreement which was made

by virtue ef correspondence between Gordon in Texas and

the parties in New York, was a contract made in Texas.

This may or may not be true, but he is not claiming any

right of recovery by virtue of the terms of this agreement.

This is not an action to enforce the agreement but to

determine the proper party to recover under the insurance

Contract.

Petitioner clajms no right of recovery by virtue of the in-

surance contract nor by virtue of the agreement, but only

by virtue of the assignments to which he was not a party.

His contention, briefly, is that when the agreement was

made, which is possibly governed by the laws of the State of

Texas, in regard to the New York insurance contract, that

this agreement so affected the original insurance contract

that when subsequent to the agreement, assignments of

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interest under the insurance contract were vee that these

ents would vest in him some interest.

) : Petitioner contends that the assignments would have been

Ws ed if made in Texas, but e does not contend that any-

ö ing was done within the State of Texas which is for-

„ bidden by or frowned upon by the legislative enactments

* bol this State or the decisions of the State Courts. Every

4 ee _ act complained of by ‘petitioner is not only proper under

ö the laws of the State where performed, but is sanctioned

be by the laws of that State. His contentions are based upon

the assumption that it ‘was necessary to adjudicate the

issues of this case by virtue of the agreement, and not

by virtue of the terms of the insurance contract. All of

the funds in eontroversy wére derived from the insur-

ance contract, and this is admittedly a New York con-

tract and governed by the laws of that State. All that the

Circuit Court of Appeals has decided in this case is that

i where the rights of the parties.in a gontroversy are fixed

| by virtue of a contract entered into under the laws of the

| State of New York, that the rights of the parties under

that contract will, be enforced in accordance with the laws

of the State of New York. : 8

| There is no question involved in this proceeding as to

g the right of the parties to enforce the agreement which

‘is contended to have been made in Texas..The only point

in controversy is who is entitled to receive the proceeds

of the insurance policy. The only thing that was ever done

in Texas in regard to the insurance policy was that while

the insured was living in the State of Texas, he agreed

with the beneficiaries living in the State of New York

that the beneficiary of the policy should be changed. A

ayy Mae

a new contract but only an amendment to the pre-existing

contract, and does not Kons the situs of the original

contract. Pendleton v. Great Southern Life Insurance Co.

(Sup. Ct. of Oklahoma), 278 Pac. 1007. The agreement to

change the beneficiary or to assign part of the proceeds

of the property are separate and independent contracts

. and are governed by the laws of the State where made.

Manhattan Life Insurance Co. v. Cohen, 189 S. . 1.

The fact that some separate independent contract may be

governed by the laws of the State of Texas does not affect

the fact that the principal insurance contract is governed

by the laws of the State of New York.

The assignments made in New York are New York con-

tracts and are valid. They are independent of the agree-

ment claimed to be made in Texas and add en. to that

agreement.

Unless petitioner can show. that the agreement in Texas

makes both the insurance contract and the assignments

subject to the law of the State of Texas his contentions

fail. This he has not neal : :

THE ISSUES SHOULD BE DETERMINED BY THE

LAW OF THE STATE OF NEW YORK :

Petitioner has misinterpreted the decision of the Circuit

Court and the rule laid down i in Erie Railway Company v.

Tompkins, $04 U. S. 64. The Courts of the United States

are required to regard the laws of the several ‘States as

rules of decision in cases where they apply but this does

not require the Courts of the United States to necessarily

apply the laws of the States where they are sitting. Ordi-

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change of beneficiary in a life insurance policy is not

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| ‘warily this will be so because the cause a: action arose

1 in that jurisdietion, but it is not the rule set up to guide

the Courts. As a general rule, a contract is governed by

the law of the State where made, and the law of the State

where made determines. all questions in regard to the ca-

pacity to contract, the illegality of the contract, ete. (Re-

statement of the Law of Conflict of Laws, Sec. 332, 3

= and the forum applies the law of the State wher€ the con-

N tract is made. This Is the Texas rule. This is also the

. Texas rule in regard to insurance contracts. A |

4 : National Insurance Co. v. Smith (writ of error refused),

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18 S. W. (2d) 720-722.

In Seiders v. Merchants Life Association of the United

1 States (Sup. Ct. of Texas), 98 Ter. 194, the Court applied

te law of the State of Missouri when it found that the

i insurance contract inyolved was a Missouri contract, re-

i gardless of the fact th the insured and beneficiary re-

4 sided in Austin, Texas, 5 the company had a permit

and was doing business in the State of Texas. In New

York Life Insurance Co. v. English (Sup. Ct. of Texas), 95

Tex. $91, the Court applied the statutory law of the State of

New York when it found that the policy was a New York

i : contract, even though the policy was issued on the i of

a citizen of the State of Texas.

As stated by this Court in the Erie case, the statute

1 under consideration (Section 34, Federal Judiciary Act

15 ii . olf September 24, 1789), attempts to promote uniformity

at ok law throughout the United States. The position taken

3 by the petitioner results in the very ‘antithesis of this

aim. If the Courts sitting in each of the other 47 States

a: are to be forced or allowed to wholly disregard the law of

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the State of New Vork dealing with an admitted New

Vork contract, and apply the law of the States in Which c

they are sitting, instead of there merely being disharmony

between the decisions of a State Court and tle Federal

Court sitting in that State, there is a possibility of 47

different interpretations of the laws of the State of New-

Vork. Such a contention is neither within the spirit nor

the letter of the Erie case. The Courts of the United States

since the decision in the Erie case have consistently held

that regardless of where the Court is sitting, when a con-

tract is involved which arose and is governed by the laws

of one State, that the law of the State which begot the

contract ‘will be applied. Mutual Benefit, Health and Acci-

dent Association v. Bowman, 304 U. S. 549.

- Whenever policies of insurance are issued and delivered

in certain States they become contracts of that State and

are governed’by the laws of that State. Equitable Life As-

surance Society of the United States v. Aaron, 108 Fed.

(2d) 777, 778; Malloy v. New York Life Insurance Co.

(writ of certiorari denied, $08 U. S. 572), 108 Fed. (ad)

439, 448.

There is no a between what was done by the

Cireuit Court and what would have been done in the Courts

of the State of Texas. The only contention that petitioner

raises that would take the instant case out of the Texas

Conflict. of Law rule, as announced above, is on the basis

of public

Petitioner insists that certain actions in this cause are

against the public policy of the State of Texas.

“It is easy to say a thing is against public policy,

but that does not make it so. Public alien qs manifest-

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4a by public acts, legislative and judicial, and not pri-

ate opinions, however-eminent.” (Giant-Powder Com-

pany v. Oregon Pacific Railway Co., 42 F. 470, 474.)

There has been no statute enacted by the Legislature of

the State of Texas which would prohibit a recovery by

the respondent in this cause. The only thing which can :

be used to determine if there is a public policy, as stated

by the petitioner, are the decisions of the Courts of the

State of Texas. ae ; =

“Petitioner does not cite a single Texas case which holds

that in a situation of this sort that the Texas Courts would

not allow this respondent to recover as beneficiary under

the policy. As shown above the cere, Texas rule is con-

trary to this contention. ee

~Petitioner relies upon Wilke v. Finn, $9 S. W. (2d) 836,

and Cheeves v. Anders, 87 Tex. 287. Those.cases deal, how-

ever, only with Texas contracts, and do not discuss the

point involved in this cause.

The other case relied upon is Manhattan Life Ins. Co.

v. Cohen, 139 S. W. 51, and that case deals with the as-

signment of a policy of insurance. It recognizes that the

assignment of a policy is separate and distinct from the

original contract, and petitioner's only rights in this cause

arise out of such a separate and independent contract

which does not affect the principal contract, and in addi-

tion that case specifically decides that the contract there

under consideration was a Texas contract.

It is apparent that no Texas Court has held as contend-

ed by the petitioner. There is no general public policy

against the assignment of an interest in a life insurance

paliey, and, in fact, it has been held by this Court on sev-

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eral occasions that such assignments are proper. Midland

National Bank of Minneapolis v. DeSoto Life Insurance

Co., 277 U. S. 846, 350. The effect of holding otherwise

is pointed out in Grigsby v. Russell, 222 U. S. 149.

On other questions of public policy, the Courts of Texas

have not held in conformity with petitioner’s contention. |

The State of Texas has established a public, policy by

a statute which forbids a common carrier from placing

ifi its bill of lading stipulations restricting its liability and

declaring ‘Such stipulations null and void. In the early case

of Ryan and Company v. M. K. & T. Railway Co. (Sup. Ct.

of Tewas), 65 Tex. 18, a contract of carriage had been made

in Missouri by a resident of Texas. The goods were to be

transported from Missouri to Texas. In the contract was

a sStipulation that the carrier was exempt from liability

for loss or damage to the goods by destruction by fire.

The Court, after deciding that the. contract of carriage

was a Missouri contract, even though it would have to be

partially performed in Texas, applied the Missouri law,

disregarding the Texas public policy.

There are numerous statutory enactments in the State

of Texas protecting pfoperty of married women. These

enactments are definite statements of public policy on this

subject. In Merrielles v. State Bank of Keokuk, 24 S. W.

564, an attachment lien had been foreclosed upon the sepa-

rate property of a married woman. In disposing of the

case upon appeal the Court said (page 565, paragraph 4):

„Appellant, in her fourth assignment, complains

that ‘the Court erred in submitting to the jury the

laws of Iowa to create a liability against the separate

real estate of a married woman situated in Texas, con-

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trary to the Constitution, laws and public policy of

Texas, and in overruling the motion for a new trial.

based on this ground.’ Without undertaking an extend-

ed ‘discussion of this question, we express the conclu-

sion that the Court correctly applied the law of lowa—

the ‘lex loci @ontractus’—in the enforcement of the ob-

ligations in suit. This action, we think, was justified by

the views of our Supreme Court in Ryan v. Railway

Co., 65 Tex. 13, et seq.” . 7 .

In a similar case where the parties resided in Arizona,

the law of the State of Arizona was applied and execu-

tion was allowed to be had upon the separate property of

a married woman even though it was located in Texas.

Walker v. Goetz, 218 S. W. 569. Thus in this proceeding

we have the Court of the United States applying the iden-

tical rule that would have been applied by the Courts of

the State of Texas, and, therefore, a different situation .

from that presented in Sampson b. Channell, 110 Fed. (2d)

7564. ;

In connection with petitioner’s contention about public

policy, it should be borne in mind that in this cause the

respondent was not attempting to enforce any rights as

against the citizens of the State of Texas. An interpleader

suit is nothing more than where two or more persons are

suing a stakeholder, claiming the funds, and the stakehold- .

er confesses liability for the amount sued for and refuses

to pass upon the merits of the claim. The mere fact that

‘the insurance company in the instant case has tendered

the funds into Court does not make this a suit by the

petitioner against the respondent or vice versa. Neither is

asking for a judgment against the other, and no judgment

could be rendered which would decree that one party must

pay to the other so much money. The only judgment that

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could be entered is to award one party the 22527 on 5

posit in the * of the Court.

It has long been recognized that “the filing of this inter-

pleader and payment into Court by the insurer does not

affect the rights of the claimed beneficiaries.” ( Kansas

City Life Insurance Co. v. Jones, 21 Fed. Sup., 159, 160)

and that in interpleader situations, even though they in-

volve claimants residing in. different States, the decision

in the interpleader suit should be the same whether the

interpleader is filed in New Vork or Texas. There is no

question as to what the decision in this case would have

been if the interpleader suit had been filed in New Vork.

Steinback v. Diepenbrock, 37 N. F. Sup. 279, 158 N. .

Warnock v. Davis, 104 U. S. 775.

The Courts of the State of N have recognized that

an interpleader suit is not the same as an ordinary cause

of action, and that neither party is attempting to assert

a right against the other, but only to establish a claim

to a fund. Sharp v. American National Insurance Co., 126 ö

8. W. (2d) 50, 52. 3 ghee

At most, the public policy of a State will only protect

the citizens of that State and claims made against them.

It will not reach out and intérfere with the rights of per-

sons of another State as against each other. 8

In this connection, the language of this Court in Bond

v. Hume, 2270 U. S. 15, is peculiarly applicable when it says:

“It is obvious on the face of the pleadings, as stated

in the certificate, that the contract the enforcement of

which was sought was valid under the laws of the State

of New York, the place where it was entered into and

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where it was executed, and this validity was not and

could not be affected by the laws of the State of Texas,

as, in the nature of things, such laws could have no

extraterritorial operation.”

As heretofore pointed out, petitioner’s rights koala only

arise by virtue of contracts made in the State of New York,

and his attempt to inflict upon those contracts the ‘laws

of the State of Texas is an attempt to give those aa extra-

territorial effect.

It is misleading to say that the opinion of the Circuit

Court holds that an assignment of a life insurance policy

is governed by the laws of the State where the policy was

issued, when this contract of assignment was made in an-

other State. The Circuit Court has correctly held that an

independent contract which incidentally affects a principal

contract. does not change the situs of the principal contract.

ae ay ah CONCLUSION A

‘We submit that the decision of the Circuit Court of

Appeals has correctly decided the issues involved in this

_ controversy in accordance with the applicable. rules of law

of both this Court and the Courts of the State of Texas,

and there is no necessity for the granting of a writ of

certiorari and a review of this case by this Honorable

Court.

Respectfully submitted,

Cart B. CALLAWAY,

Attorney for Respondent.

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FRANK c. BROOKS,

Of Counsel.

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SUPREME COURT ‘OF THE UNITED STATES.

No. 755.—OcTopEr Term, 1940.

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J. Rob Griffin, Administrator With) 8

Will Annexed of the Estate of On Writ of Certiorari to

Robert D Gordon, nn Pe- the United States Cireuit

tioner, : : Court of Appeals for the

vs. Fifth Cireuit.

John D. McCoach, Trustee. ]

[June 2, 1941.]

Mr. Justice REEp „ Fvered the opinion of the Court.

This is an action, begun in the United States Distriet Court for

the Northern Distriet of Texas, by the personal representatives

substituted for the heirs at law of Colonel Robert D. Gordon, who

died a citizen and resident of Texas, against the Prudential In-

surance Company of America to collect an insurance policy on

the life of the decedent. The Company filed a bill of interpleader

(49 Stat. 1096; 28 U. S. C. A. §41(26)) making the respondent

John D. MeCoach, Trustee, and other alleged claimants parties and

, tendering the net amount due under the policy. The interpleader

6 was allowed, the Company discharged from the litigation and the

interests of all parties to the suit other than petitioner and re-

spondent disposed of by the decree in a manner to which no one

objects here. The controversy still to be decided is as to whether

the estate or the Trustee is entitled to certain portions of the in-

surance. The circumstances giving rise to the issue follow.

Colonel Gordon, the insured, interested seven persons in Texas

oil developments, including McCoach, the Trustee, in his individual

capacity. They operated as a New common law association

called the Middleton Tex Oil Syndi The record here shows

that Prior to the issuing of the policy A thereafter, the members

advanced considerable money to Gordon, and the premiums on the

poliey were paid by the members of the syndicate at Gordon's re-

quest, upon his agreement to repay the syndicate. Premiums were

paid on the policy by the syndicate, in accordance with this agree-

ment and were never repaid by Gordon.“ A term insurance policy

was taken out by Gordon with the Syndicate named as beneficiary.

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Sa Griffin vs. McCoach. - 2

When the policy was issued, and at all times subsequent until his

death, Gordon was a citizen of Texas. The Syndicate originally

had physical possessién of the policy. Two years after its issuance ©

the Syndicate ceased operations. In 1924 due to financial reverses

it ceased to do business and the members formed a new association

called the Protection Syndicate. MeCoach became and continues

as Trustee of the Syndicate. It was organized ‘‘for the sole pur-

pose of paying the premiums on the policy and receiving and dis-

tributing the proceeds among the members. This it did until the

insured’s death. The beneficiary in the policy was changed to make

the members of the Protection Syndicate the beneficiaries. By ar-

rangement between the decedent and the members of the Protection

Syndicate in 1934 a further change of beneficiaries was made by

which, in consideration of the insured’s release of the right to

change beneficiaries on presentation of the policy for endorsement,

hitherto retained, one-eighth of the disability proceeds of the policy

were to be paid the insured and one-eighth of the death proceeds

to his wife and the remaining seven-eighths to the Trustee for the

members of the Protection Syndicate.

„The application for the poliey was ee by Gordon in the

State of New York, and forwarded to the home office of the Pru-

dential Insurance Company in the State of New Jersey, and there

acted upon, and the policy was delivered in the State of New

Vork.“ The later arrangement by which Gordon and his wife

became beneficiaries of one-eighth of the proceeds was consummated

by certain forms furnished by the Prudential and ‘‘transmitted

from Middletown, N. Y., to Tyler, Texas, for Colonel

Gordon’ s signature. They were there executed by Colonel Gordon

before a notary public in Tyler, Texas, and returned to Middle-

town, N. Y., where they were executed by the parties ‘residing there,

from wheine they were sent by Schweiger l agent of the Pru-

dential and a member of the Syndicate], wi the poliey, to the

home office at Newark, N. J., and subsequently the forms were in-

dorsed on the poliey and it was returned directly from New J *

to the beneficiaries in New Vork.

- Thereafter three of the members of the Protection Syndicate sep-

arately assigned their interests in the policy to three individuals not

previously interested in the transaction. These assignees paid their

proportion of the premiums after the respective assignments.

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Griffin vs. McCoach. 3

The District Court decreed that Mrs, Gordon should receive her

one-eighth and that the balance of the proceeds should be paid the

Trustee for the benefit of the eross-defendants, members of the Pro-

_ tection Syndicate. The decree was based on a finding that the

policy was a New York contract and that the subsequent changes

were made in New Jersey and delivered in New York, Further the

District..Court concluded that the relation of debtor and creditor

existed between the members of the Syndicate and their assignees -

upon the one hand and the insured upon the other that there-

fore all the cestuis que trustent had an insurable intgrest i in Cones

Gordon's life.

An appeal limited to the ee of the judgment of the trial

court concerning the. persons entitled to receive the assigned in-

terests was prosecuted on an agreed statement of the record under

Rule 76 of the Rules of Civil Procedure. In the statement peti-

tioner sets out two points now relied upon for reversal. First: That

the assignment and change of beneficiary was governed by the law

of Texas; that the Trustee claimed only under the assignment ; that

beneficiaries must have an insurable interest under Texas law and

that the assignees had none. Hence the personal representativ was

entitled to recover their portions of the policy for ‘the estate. Wilke

v. Finn, 39 S. W. (2d) 836. Second: That if the whole transaction

was governed by the law of another state than Texas, in which other

state an insurable interest was not required, the United States

District Court sitting i in Texas was bound by the public policy of

Texas which forbids persons without ‘an-insurable interest to col -

leet in Texas, as beneficiaries, the proceeds of insurance policies.

The Cireuit Court of Appeals affirmed. 116 F. (2d) 261. It

held too that the policy was a New York policy, governed by the law

of that state, and that as the subsequent changes were made pursu-

ant to agreements contained in the original policy, they did not

amount to new contracts or change the governing law. Cf. Aetna

Life Insurance Company v. Dunken, 266 U. S. 389. The Court said:

Under the terms of the policy, a New York contract, no restrie-

tions were placed upon assignments relating to insurable interest.

None was created by the laws of New York. Each of the assign-

ments was executed and delivered in New York by residents of that

state to other residents, They were New York contracts and valid

under its laws. To apply the laws of Texas to the New York con-

tracts would constitute an unwarranted extra-territorial control of

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‘2: | Griffin vs. McCoach.

contracts and regulation of business outside of Texas i in

of the laws of New York; this is not changed by the trial of the suit

in a court sitting in Texas.”

As to the violation of the claimed Bublic poliey of Texas against

beneficiaries with non-insurable interests, the Court of Appeals de-

cided that the rule could not be applied where, as here, a fair

and proper insurable in ’? existed when the policy was issued.

116 F. (2d) 261, 264. Certiorari was sought and allowed, 312

V. S. —, on the ground among others of a conflict between the

instant ease and Sampson v. Channell, 110 F. (2d) 754, 759-62,

where the First Circuit held that a United States court must apply.

the conflict of laws ruleg of the state where it sits. :

For the reasons give in /Klaxon Company v. Stentor Electric

Manufacturing Company, o. 741 this term, decided today, we are

_of the view that the federal courts in diversity of citizenship cases

“are governed by the conflict of laws rules of the courts of the states

in which they: sit. In deciding that the changes made in the insur-

ance contract left its governing law unaffected! and that the laws

of Texas could not be applied to a foreign contract in Texas courts,”

the federal courts were applying rules of ylaw in a way which may

or may not have been consistent with Texas decisions. Likewise it

is for Texas to say whether its public policy pe. mits a beneficiary of

an insurance policy on the life of a Texas citizen to recover where no

insurable interest in the decedent exists in the beneficiary. The

opinion does not rest its conclusions upon its appraisal of Texas law

or Texas decisions but upon decisions of this Court inapplicable to

this situation in the light of Erie Railroad v. Tompkins, 304 U. S. 64,

and Ruhlin v. Nei York Life Insurance Company, 304 U. S. 202,

205. The statement in the opinion that it is immaterial, in so far

as the decision of this case is concerned, whether the law of Texas or

the law of New York be applied we understand, from a reading of

the whole opinion, to mean that while an insurable interest is re-

quired in Texas and not in New Vork, the lack of insurable interest

is immaterial in this case even in Texas because „the insurer ac-

1 Or. Miller v. Campbell, 140 N. L. 457. ;

2 Cf. Union Trust Co. v. Grosman, 245 U. S. 412.

Compare Grigsby v. Russell, 222 U. S. 149; Connecticut Mutual Life Ins.

Co. v. Schaefer, 94 U. S. 457, Felied leans below.

Rar „ 4

$4 *

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— e UU ae 12 —— ee 1 ** .

. Grifin vB. McCoach. 8 5

Lsowledged liability and paid the money into court. This being so, 5

not only does the objeetion of wagers disappear, but als the claimed .

principle of public policy.’’ But this is something to be decided

according to Texas decisions to none of which the opinion refers.

Cf. Wilke v. Finn, 39 8. W. (2d) 836; Cheeves v. Anders, 87 Texas

287. The deeision must be reversed and remanded to the Cireuit

Court of Appeals for determination of the law of Texas as —

o the circumstances of this case,

In view of the holding quoted from the opinion below, ‘page 3,

supra, that to apply the laws of Texas to New York contracts when

Texas citizens were ies would constitute an unwarranted extra-

territorial control of contracts and regulation of business, it seems

necessary to fn that position as it may be determined upon

E

remand that these are foreign contracts and under Texas law unen-

forceable as ontrary to the public policy of Texas because the as-

signees have no insurable interest. It would then be necessary to

decide whether the courts of Texas could constitutionally apply;

Texas law to a foreign contract, valid where made, because such con-

tract is contrary to the state’s public policy.* If the Cireuit Court

of Appeals was correct in its view that tag Donstitution foreclosed °

application of such a Texas public policy to this case, the only ques-

tion open on remand would be whether ; - contract sued upon was

& Texas contract.

But the cases relied upon in the Court of Appeals to support its

holding® do not in our opinion decide this question. Overby v.

Gordon. holds that the adjudication of a probate court of Georgia

that the decedent was a resident of that state was a proceeding in

rem and did not bind the courts of the District of Columbia in a °

suit to determine anew decedent’s domicile. New York Life Insur-

ance Company v. Head passed upon the application, by Missouri

courts, of Missouri statutes providing for an extension of insurance

on default of premium to an insurance contract assumed as of

- Missouri, though the insured at the time of issue and thereafter

was a citizen of New Mexico. A New York loan agreement subse-

quent to the issuance of the policy between the insured and the

Company, a citizen of New York, provided: for extension after de-

4Cf. Sampson v. Channell, 110 F. (2d) 754, 759.

s Overby v. Gordon, 177 U. S. 214, 222; New York Life Insurance Co, v.

Dunken, 266 U. 8. 389, 399.

Head, 234 U. S. 149; Bond v. Hume, 243 U. S. 15; Aetna Life Insurance Co. v. 1

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6 Griffin vs. McCoach.

fault which was contrary to the Missouri statutes. This Court held

the Missouri statutes were ineffective because the New York loan

agreement was beyond Missouri’s jurisdiction. The point that

‘Missouri might refuse enforcement because the agreement, valid in

New. York, was contrary to the public policy of the former was not

discussed. In Bond v. Hume, a few years later, this Court reserved

the principle here in question.“ The Aetna case denied the con-

stitutional power of the Texas courts to apply a Texas statute allow-

ing a penalty and attorneys’ fees against the company in a suit on

an insurance contract made in a foreign jurisdiction with a person

then a citizen of Tennessee because the effect of such application

would be to regulate business outside the State of Téxas and control

contracts made by citizens of other States in disregard of their laws

under which penalties and attorney’s fees are not recoverable.’’

266 U. S. at 399% The freedom from penalty and fee was deemed

a part of the foreign contract and its effect on the public policy

of Texas was/not appraised.’

If upon ¢xamination of the Texas law it 8 that the .

of Texas would refuse enfoptement of an insurance éontract where

the beneficiaries have no insurable interest on the ground of its in.

terference with local law, such refusal would be, in our opinion,

within the constitutional power of the Texas courts. Rights ac-

quired by contract outside a state are enforced within a state, cer.

tainly where its o own citizens are concerned, but that principle ex-

cepts claimed rights so contrary to the law of the forum as to sub-

vert the forum’s view of public policy. Cf. Loucks v. Standard Oi

Co., 224 N. V. 99, 110. It is ‘“‘rudimentary’’ that a state will not

3 lend the aid of its courts to enforce a contract | founded upon a for:

éign law‘where to do so would be repugnant to good morals, would

* lead to disturbance and disorganization of the local municipal law, or

in other words, violate the public policy of the State where the en.

0 243 u. 8. at 25: „And of course we must not be understood

whether the mere existence of a state statute punishing one who

and because of such bad faith, had made an agreement to delivef in a contract

of sale which would be otherwise valid, could ‘become the b of a public

policy preventing the enforcement in Texas of contracts for safe and delivery

made in another State which were there valid N one of tiſe parties might

have made the agreement to deliver in po faith.’’

7 Before Erie Railroad v. Lr 8. N, this Court decided as 2

matter of general law that where time of u iee/is important the foreign law

governs. Boseman v. Insurance Co., 301 U. S. 196, 202. ‘

2 Griffin vs. McCoach. 7

3 of the foreign contract is sought. Bond v. Hume, 243

U. S. 15, 21. Applying that reasoning this Court affirmed the fed-

— eral court in following Texas’ decisions which refused to enforce a

valid foreign contract of guarantyship against a married woman.

Union Trust Co. v. Grosman, 245 U. S. 412. Likewise state courts

have been upheld in refusing to lend their aid to enforce valid

foreign contracts which required the doing of prohibited acts

within the state of the forum. Bothwell v. Buckbee, Mears Com-

pany, 275 U. S. 274, 278. Where this Court has required the

state of the forum to apply the foreign law under the full faith

and credit clause or under the Fourteenth Amendment it has

_recognized that a state is not required to enforce a law obnoxious

to its public policy. Bradford Electric ae Clapper, 286 U. S.

145, 160, 161; Hartford Indemnity Co. v. Delta Co., 292 U. S. 143,

150. The rule was not applied where the parties to the contract ac-

quired rights beyond the state’s borders with no relation to any-

thing done or to be done within the borders. Home Insurance

Company v. Dick, 281 U. S. 397, 410.

In the Head case the foreign and local law differed as to the

manner of extending insurance; in the Aetna case the difference

arose from a local provision for attorney’s fees and penalty; in

the Delta case the time for notice varied in the two jurisdictions.

In New York Life Insurance Company v. Dodge, 246 U. S. 357, it

was said that a statute of the state of the forum, regulating the

- application of insurance reserves in case of default of premium was

not effective, even while the insurance contract was a local con-

tract and the insured a citizen of the state, to govern rights under

a loan agreement made in a foreign jurisdiction. But these fall

short of a public policy which protects citizens against the assumed.

dangers of insurance on their lives held by strangers. It-is for the

state to say whether a contract contrary to such a statute or rule

of law is so offensive to its view ow of public welfare as to require its

4 ecourts to close their doors to its enforcement.

Roveveed.

Mr. Justice FRANKFURTER concurs in the result.

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