Western Life Indemnity Company of Illinois v. Rupp/Opinion of the Court
In September, 1907, plaintiff in error, an Illinois corporation, organized under the general laws of that state applicable to life insurance, issued to one George McCormick, a resident of Louisville, Kentucky, two policies, each insuring his life in the sum of $1,000, for the benefit of his nephew, Clarence Rupp, if living, otherwise for the benefit of the executors of the insured. After the death of the insured, which occurred in the same year, the present action was brought by Rupp against the company in the Jefferson circuit court at Louisville. His petition set forth his relationship to the insured, and beyond this showed no insurable interest. It averred that the policies were issued upon McCormick's application, who also paid the premiums thereon, and this without plaintiff's instance, request, or knowledge. The summons was served upon the insurance commissioner of the state. Section 631, Kentucky Statutes [Ky. Stat. 1909, § 4279], provides: 'Before authority is granted to any foreign insurance company to do business in this state, it must file with the commissioner a resolution adopted by its board of directors, consenting that service of process upon any agent of such company in this state, or upon the commissioner of insurance of this state, in any action brought or pending in this state, shall be a valid service upon said company; and if process is served upon the commissioner it shall be his duty to at once send it by mail, addressed to the company at its principal office.'

The defendant company made a special appearance to the action, and moved the court, to quash the return upon the summons on the ground that it was a corporation organized and existing under the laws of the state of Illinois; that at the time the policies in question were issued it had applied to the superintendent of insurance of the state of Kentucky for a license to transact business in that state, and, in case such license was issued, to appoint said superintendent of insurance its agent for service of process; that the application for license was pending for some time, and that it was during this time that the policies sued on were issued, but that the application for license was afterwards rejected by the insurance department of the state; that the company never appointed the superintendent of insurance its agent for service of process, and never consented that he might be served with or accept such service on the company's behalf.

The motion was overruled, and the company thereafter filed an answer in which, without waiving its objection to the jurisdiction of the court over it, but reiterating that objection, it set up sundry defenses upon the merits, including an allegation of fraudulent representations in the application pursuant to which the policies were issued, and a denial that the plaintiff had an insurable interest in McCormick's life. To certain paragraphs of this answer plaintiff demurred, and the circuit court, upon the ground that this demurrer rendered it proper and necessary to determine the sufficiency of plaintiff's petition, reviewed that pleading, and reached the conclusion that, by the law of Kentucky, the relationship of uncle and nephew did not constitute an insurable interest, that one who could not take out a policy because of lack of interest could not hold it if assigned to him after its issuance, and that the same rule prevented a person from taking out a policy of insurance upon his own life in favor of another having no insurable interest. Therefore the court sustained the demurrer as against the petition, and, plaintiff having declined to plead further, judgment was rendered in favor of defendant.

Plaintiff appealed to the court of appeals, which held (138 Ky. 18, 29 L.R.A.(N.S.) 675, 127 S. W. 490) that while, according to the law of Kentucky, one who obtains a policy of insurance upon the life of another must have an insurable interest in that life, it is otherwise with respect to a policy taken out by a person upon his own life, he paying the premium for the benefit of another having no insurable interest, and that such a policy is not a wagering transaction, but is valid. The judgment of the circuit court was therefore reversed and the cause remanded for further proceedings. Thereafter defendant filed a 'second amended answer' in the circuit court, withdrawing by the court's leave 'each and every allegation of the original answer and the first amended answer herein,' and-'without waiving its plea to the jurisdiction of this court of the person of this defendant in this action'-set up that defendant was a corporation organized and incorporated under an act of the legislature of the state of Illinois approved June 22, 1893, entitled, 'An Act to Incorporate Companies to Do the Business of Life or Accident Insurance on the Assessment Plan, and to Control Such Companies of This State and of Other States Doing Business in This State,' etc., which contains in § 9 the following: 'No corporation doing business of life insurance under this act shall issue a certificate or policy upon . . . a life in which the beneficiary named has no insurable interest. Any assignment of the policy or certificate to a person having no insurable interest in the insured life shall render such a policy or certificate void.' It was further averred that under this act defendant had no power to issue any policy of insurance upon the life of any person in which the beneficiary named had no insurable interest; that the plaintiff Rupp was the nephew of the insured McCormick; that Rupp had no insurable interest by virtue of such relationship or otherwise in the life of the insured, and that the policies sued on were null and void. There was a tender of the amount of the premiums paid and a denial of further liability. The answer invoked the 'full faith and credit' clause of the Federal Constitution, averring that to compel defendant to pay the policies sued on would be a failure upon the part of the state of Kentucky to give full faith and credit to the act of the legislature of the state of Illinois.

To this answer plaintiff demurred, and the circuit court sustained the demurrer, with leave to amend the answer. Defendant declined to further amend, and elected to rely only upon the answer to which the demurrer had been sustained. Judgment having been thereupon rendered in favor of plaintiff for the amount of the two policies with interest, defendant prosecuted its appeal to the court of appeals, and to review the decision of that court affirming the judgment (147 Ky. 489, 144 S. W. 743), the present writ of error is sued out.

There are two Federal questions. The first is raised by the contention that under the Kentucky statute already quoted a foreign insurance company sued in a state court cannot lawfully be summoned by a substituted service upon the state insurance commissioner unless the company has been licensed to do business in the state, and has, by resolution of its board of directors, assented to such substituted service; and that to sustain a judgment rendered in the absence of such service is violative of the 'due process' clause of the 14th Amendment. To this contention the court of appeals responded thus: 'It is too late now to raise the question that the process was not properly served. This question should have been presented on the first appeal. On that appeal the case was heard here on the merits, and it is too late after a reversal on the merits to raise any question as to the sufficiency of the process.' [147 Ky. 490.] Citing McDowell v. Chesapeake, O. & S. W. R. Co. 90 Ky. 346, 14 S. W. 338, and Illinois C. R. Co. v. Glover, 24 Ky. L. Rep. 1447, 71 S. W. 630. That it is and long has been the practice of the courts of Kentucky to treat the appearance of a party in the appellate court as a submission to the jurisdiction so as to dispense with the service of process in the court below, and that this rule is applied even where a judgment against the defendant is reversed because of a defect in process, will appear from an examination of the cases. Grace v. Taylor, 1 Bibb, 430; Graves v. Hughes, 4 Bibb, 84; Wharton v. Clay, 4 Bibb, 167; Bradford v. Gillespie, 8 Dana, 67, 68; Salter v. Dunn, 1 Bush, 311, 317; Chesapeake, O. & S. W. R. Co. v. Heath, 87 Ky. 651, 660, 9 S. W. 832.

It is contended that where, as here, the first appeal is prosecuted by plaintiff, the defendant's objection to the jurisdiction of the trial court over its person is not thereby waived, because no other question could properly be submitted to the appellate court except that raised by the plaintiff's appeal. But, by § 755 of the Kentucky Civil Code, 'The appellee may obtain a cross appeal at any time before trial, by an entry on the records of the court of appeals.' And under this section it is held that 'when either party appeals from a final judgment, his adversary may have a cross appeal from that judgment, for the purpose of correcting any errors in the judgment to his prejudice, or any interlocutory judgment or order which has influenced or controlled the final judgment to his prejudice.' Brown v. Vancleave, 86 Ky. 381, 386, 6 S. W. 25.

The provisions of the Code and the course of previous decisions fairly sustain the decision of the court of appeals in the present case to the effect that the now plaintiff in error, by permitting the first judgment to be reviewed at the instance of the plaintiff in the action without interposing a cross appeal to call into question the decision of the trial court upon the motion to quash the return upon the process, waived its objection to the jurisdiction of the court over it, and could not have any benefit of that objection upon the second appeal.

That a state, without violence to the 'due process' clause of the 14th Amendment, may declare that one who voluntarily enters one of its courts to contest any question in an action there pending shall be deemed to have submitted himself to the jurisdiction of the court for all purposes of the action, and may attach consequences of this character even to a special appearance entered for the purpose of objecting that the trial court has not acquired jurisdiction over the person of the defendant, is settled by the decision of this court in York v. Texas, 137 U.S. 15, 34 L. ed. 604, 11 Sup. Ct. Rep. 9; followed in Kauffman v. Wootters, 138 U.S. 285, 34 L. ed. 962, 11 Sup. Ct. Rep. 298.

It is true that in Harkness v. Hyde, 98 U.S. 476, 25 L. ed. 237, on review of the judgment of a territorial court, it was held that the right of the defendant to insist upon an objection to the illegality of the service of process was not waived by the special appearance of his counsel to move the dismissal of the action or the setting aside of the service upon that ground, nor, when that motion was overruled, by his answering to the merits; and that the objection was available here as a ground for reversal. To the same effect are the decisions on review of judgments and decrees of the Federal courts. Southern P. Co. v. Denton, 146 U.S. 202, 206, 36 L. ed. 942, 13 Sup. Ct. Rep. 44; Mexican C. R. Co. v. Pinkney, 149 U.S. 194, 209, 37 L. ed. 699, 705, 13 Sup. Ct. Rep. 859; Goldey v. Morning News, 156 U.S. 518, 39 L. ed. 517, 15 Sup. Ct. Rep. 559; Davis v. Cleveland, C. C. & St. L. R. Co. 217 U.S. 157, 174, 54 L. ed. 708, 718, 27 L.R.A.(N.S.) 823, 30 Sup. Ct. Rep. 463, 18 Ann. Cas. 907. And a standing rule of a Federal court, requiring a party appearing specially for any purpose to declare at the same time that if the purpose for which the special appearance was made should not be sanctioned or sustained by the court, he would appear generally, was held inconsistent with the laws of the United States and therefore invalid. Davidson Bros. Marble Co. v. United States, 213 U.S. 10, 18, 53 L. ed. 675, 679, 29 Sup. Ct. Rep. 324. But the recognition and enforcement of this right on the part of defendants in the Federal courts is a matter quite apart from the authority of the states to establish a different rule of practice within their jurisdictions, as was expressly recognized in York v. Texas, 137 U.S. 17, 20, 34 L. ed. 604, 605, 11 Sup. Ct. Rep. 9; Southern P. Co. v. Denton, 146 U.S. 202, 208, 36 L. ed. 942, 945, 13 Sup. Ct. Rep. 44; Mexican C. R. Co. v. Pinkney, 149 U.S. 194, 207, 37 L. ed. 699, 704, 13 Sup. Ct. Rep. 859; McLaughlin Bros. v. Hallowell, 228 U.S. 278, 289, 57 L. ed. 835, 840, 33 Sup. Ct. Rep. 465.

The 14th Amendment declares that no state shall 'deprive any person of life, liberty, or property, without due process of law.' This prohibition has regard not to matters of form, but to substance of right. Since its adoption, whatever was the rule before, a nonresident party against whom a personal action is instituted in a state court without service of process upon him may, if he please, ignore the proceeding as wholly ineffective, and set up its invalidity if and when an attempt is made to take his property thereunder, or when he is sued upon it in the same or another jurisdiction. Pennoyer v. Neff, 95 U.S. 714, 732, 733, 24 L. ed. 565, 572; York v. Texas, 137 U.S. 15, 21, 34 L. ed. 604, 605, 11 Sup. Ct. Rep. 9. But if he desires to raise the question of the validity of the proceeding in the court in which it is instituted, so as to avoid even the semblance of a judgment against him, it is within the power of the state to declare that he shall do this subject to the risk of being obliged to submit to the jurisdiction of the court to hear and determine the merits, if the objection raised to its jurisdiction over his person shall be overruled. This prevents a defendant from doing what plaintiff in error has attempted to do in the present case; that is, to secure, if possible, the benefit of a binding adjudication in its favor upon the merits, through the exercise of the court's jurisdiction, while depriving its adversary of any possibility of success by reserving an objection to the jurisdiction of the court to render any judgment against it. As appears from Southern P. Co. v. Denton, and other cases of the same class above cited, the distribution of original and appellate jurisdiction in the Federal courts is such as to sometimes give an advantage of this kind to defendants; but it is not indispensable to 'due process of law.'

The second Federal question is raised by the insistence of plaintiff in error that the Kentucky court of appeals failed to give such credit to the Illinois statute as it was required to give under article 4, § 1, of the Constitution of the United States, and the act of Congress passed to carry it into effect (§ 905, Rev. Stat. U.S.C.omp. Stat. 1901, p. 677).

Upon an examination of the record, we are unable to perceive that the Kentucky court failed to accord to the Illinois statute the credit to which it was entitled under the Federal system. The court recognized the existence of the statute and its validity, as pleaded by defendant and as admitted by plaintiff's demurrer. It also recognized the relevancy of the statute to the question in controversy, and either admitted or assumed that it had the effect of limiting the powers of defendant with respect to issuing policies of insurance, so far as the terms of the statute extended. Thereupon it became necessary for the court, in the due performance of its judicial function, to interpret the meaning of the enactment, in order to determine whether it evidenced the purpose of the lawmaking body to limit the powers of the corporations with respect to business conducted beyond the confines of the state of its origin. So doing, the court held as follows (147 Ky. 490, 491, 144 S. W. 744):

'Upon an inspection of the whole act we are satisfied that the section above quoted was not intended by the legislature of Illinois to have an extraterritorial effect. It was only intended to regulate the business done in Illinois. The act is a general one governing this character of business and evidently refers to business done in Illinois. . . . When in a charter of an incorporated company restrictions are imposed as to the kind of business it may do, such limitations upon the power of the company ordinarily follow it wherever it goes; that is, when such a company comes into another state, it has only the powers which its charter confers. But that is not this case. The act in question is a general law regulating insurance companies and was evidently designed as a regulation of the business in the state of Illinois. It has no application to the business done in Kentucky.'

It does not appear that the court's attention was called to any decision by the courts of Illinois placing a different construction, or, indeed, any construction, upon the section in question. If such decision existed, it was incumbent upon defendant to plead and prove it as matter of fact. We are referred to no authoritative judicial construction of the statute in the state of its origin, nor have we searched for any, for what is matter of fact in the state court is matter of fact in this court upon review; and this applies where foreign law is in question in the state court as well as to any other issue of fact. Hanley v. Donoghue, 116 U.S. 1, 6, 29 L. ed. 535, 537, 6 Sup. Ct. Rep. 242; Chicago & A. R. Co. v. Wiggins Ferry Co. 119 U.S. 615, 622, 30 L. ed. 519, 522, 7 Sup. Ct. Rep. 398.

It is earnestly argued that the court erred in its construction of the Illinois statute. We do not pass upon this question, deeming it to be outside of the limits of our jurisdiction; for it is settled that where, in a state court, the validity of an act of the legislature of another state is not in question, and the controversy turns merely upon its interpretation or construction, no question arises under the 'full faith and credit' clause of the Federal Constitution. Glenn v. Garth, 147 U.S. 360, 37 L. ed. 203, 13 Sup. Ct. Rep. 350; Lloyd v. Matthews, 155 U.S. 222, 227, 39 L. ed. 128, 130, 15 Sup. Ct. Rep. 70; Banholzer v. New York L. Ins. Co. 178 U.S. 402, 406, 44 L. ed. 1124, 1126, 20 Sup. Ct. Rep. 972; Allen v. Alleghany Co. 196 U.S. 458, 464, 49 L. ed. 551, 555, 25 Sup. Ct. Rep. 311; Louisville & N. R. Co. v. Melton, 218 U.S. 36, 51, 54 L. ed. 921, 927, 47 L.R.A.(N.S.) 84, 30 Sup. Ct. Rep. 676; Texas & N. O. R. Co. v. Miller, 221 U.S. 408, 416, 55 L. ed. 789, 796, 31 Sup. Ct. Rep. 534.

Judgment affirmed.

Mr. Chief Justice White concurs in the result. 

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