New York Life Insurance Company v. Cravens/Opinion of the Court
The plaintiff in error presents its contentions in many forms, but they are all reducible to one, to wit, that the statute of Missouri has been decided to supersede the terms of the policy, and to be the rule and measure of the rights and obligations of the parties, notwithstanding the application for the policy declares 'that the entire contract contained in the said policy and in this application, taken together, shall be construed and interpreted as a whole and in each of its parts and obligations, according to the laws of the state of new York, the place of the contract being expressly agreed to be the principal office of the said company, in the city of New York.'

What, then, is the meaning of the Missouri statute, or, rather, what meaning did the supreme court declare it to have?

It declared that the statute did not have the meaning the trial court decided it to have. n  other words, it declared that the policy did not come within the exception of the statute providing for paid-up insurance, in lieu of temporary insurance, which was one of the contentions of the plaintiff in error, and on account of which it had tendered the sum of $2,670, and sustaining which the trial court rendered its judgment.

With this part of the opinion, however, we have no concern. Our review is only invoked of that part of the opinion which decides that the Missouri statute is the law of the policy, and which annuls the provisions of the policy which contravene the statute. And even of this part our inquiry is limited. If we are bound by the interpretation of the statute we need not review the reasoning by which that interpretation was reached. And we think we are bound by it.

The court said, though more by inference than by direct expression, that the statute was a condition upon the right of insurance companies to do business in the state.

This conclusion it fortified by the citation of cases, and said:

'Foreign insurance companies which do business in this state do so, not by right, but by grace, and must in so doing conform to its laws; they cannot avail themselve of its benefits without bearing its burdens; moreover, the state may prescribe conditions upon which it will permit foreign insurance companies to transact business within its borders or exclude them altogether, and in so doing violates no contractual rights of the company. State v. Stone, 118 Mo. 388, 25 L. R. A. 243, 24 S. W. 164; Daggs v. Orient Ins. Co. 136 Mo. 382, 35 L. R. A. 227, 38 S. W. 85, S.C.. 172 U.S. 557, 43 L. ed. 552, 19 Sup. Ct. Rep. 281.'

'As the nonforfeiture clause in § 5983 does not come within the exceptions specified in § 5986, it would seem that the provision in the policy with respect to its forfeiture or lapse after being in force three full years, by the nonpayment of premiums, is void and of no effect, and that such statutory provision cannot be waived.

*  *  *  *  *

'It is well settled that the legislature of the state has the power to pass laws regulating and prescribing rules by which foreign insurance companies may do business in this state, and to prohibit them from doing so altogether if inclined. Paul v. Virginia, 8 Wall. 168, 19 L. ed. 357; State v. Stone, 118 Mo. 388, 25 L. R. A. 243, 24 S. W. 164; Hooper v. California, 155 U.S. 648, 39 L. ed. 297, 5 Inters. Com. Rep. 610, 15 Sup. Ct. Rep. 207; Daggs v. Orient Ins. Co. 136 Mo. 382, 35 L. R. A. 227, 38 S. W. 85. This case has recently been affirmed by the Supreme Court of the United States. [[[172 U.S. 557]], 43 L. ed. 552, 19 Sup. Ct. Rep. 281.]

'It logically follows that in passing the sections of the statute quoted the legislature did not exceed the powers conferred upon it by the state Constitution, and that such legislation is not in conflict with any provision of the Constitution of the United States.'

From the Missouri law as thus established, may the plaintiff in error claim exemption by virtue of the Constitution of the United States?

What the powers of a corporation are in relation to the state of its creation, what the powers of a corporation are in relation to a state where it is permitted to do business, was declared early in the existence of this court, and has been repeated many times since. What those powers are we took occasion to repeat in Waters-Pierce Oil Co. v. Texas, decided at the present term. 177 U.S. 28, 20 Sup. Ct. Rep. 518, 44 L. ed. --.

The case arose from a liberty of contract asserted by the Waters-Pierce Oil Company against certain statutes of the state of Texas prohibiting contracts in restraint of competition in trade. The statute was not only assailed because it took away the liberty of contract, but because it discriminated between persons and classes of persons. The latter ground we declined to consider, because it did not arise on the record. Of the former we said:

'The plainif f in error is a foreign corporation, and what right of contracting has it in the state of Texas? This is the only inquiry, and it cannot find an answer in the rights of natural persons. It can only find an answer in the rights of corporations and the power of the state over them. What those rights are and what that power is has often been declared by this court.

'A corporation is the creature of the law, and none of its powers are original. They are precisely what the incorporating act has made them, and can only be exerted in the manner which that act authorizes. In other words, the state prescribes the purposes of a corporation and the means of execting those purposes. Purposes and means are within the state's control. This is true as to domestic corporations. It has even a broader application to foreign corporations.'

And as the state court had held that the statute was a condition imposed upon the oil company doing business within the state, we said of the statute that, 'whatever its limitations were upon the power of contracting, whatever its discriminations were, they became conditions of the permit and were accepted with it.'

We stated the exceptions of the rule to be 'only cases where a corporation created by one state rests its right to enter another and engage in business therein upon the Federal nature of its business.'

Is the plaintiff in error within the exception? If not, the pending controversy must be determined against it.

It is difficult to give counsel's contentions briefly and at the same time clearly, nor are we sure that we can distinguish by precise statement the arguments directed to the invalidity of the statute of Missouri as an unconstitutional interference with the contractual liberty of the plaintiff in error, from the arguments which assail the statute as an attempted regulation of commerce between the states. This, however, not on account of any want of clearness in counsel's argument, but on account of the many ways in which they have presented and illustrated the argument, and which cannot be noticed in detail without making this opinion too long. We realize the propositions are not the same and should not be confused, though made somewhat dependent upon a common reasoning.

(1) A policy of mutual life insurance, it is contended, is an interstate contract, and the parties may choose its 'applicatory law.' Instances under the law of usury, instances under private international law, are cited as examples of authority. But if such cases apply at all, they necessarily have limitation in the policy of the state. This is not denied, but it is contended that contracting for New York law to the exclusion of Missouri law was 'in no wise prejudicial to the interests of the state of Missouri or violative of its public policy.'

But the interests of the state must be deemed to be expressed in its laws. The public policy of the state must be deemed to be authoritatively declared by its courts. Their evidence we cannot oppose by speculations or views of our own. Nor can such interests and policy be changed by the contract of parties. Against them no intention will be inferred or be permitted to be enforced.

In passing on the statute in controversy we said, by Mr. Justice Gray, in Equitable Life Assur. Soc. v. Clements, 140 U.S. 226, 35 L. ed. 497, 11 Sup. Ct. Rep. 822:

'The manifest object of this statute, as of many statutes regulating the form of policies of insurance on lives or against fires, is to prevent insurance companies from inserting in their policies conditions of forfeiture or restriction, except so far as the statute permits. The statute is not directory only, or subject to be set aside by the company with the consent of the assured; but it is mandatory, and controls the nature and terms of the contract into which the company may induce the assured to enter. This clearly appears from the unequivocal words of command and of prohibition above quoted, by which, in § 5983, 'no policy of insurance' issued by any life insurance company authorized to do business in this state 'shall, after the payment of two full annual premiums, be forfeited or become void by reason of the nonpayment of premium thereon; but it shall be subject to the following rules of commutation;' and in § 5985, that if the assured dies within the term of temporary insurance, as determined in the former section, 'the company shall be bound to pay the amount of the policy,' 'anything in the policy to the contrary notwithstanding."

And after stating the cases in which the terms of the policy are permitted to differ from the plan of the statute, it was further said:

'It follows that the insertion in the policy of a provision for a different rule of commutation from that prescribed by the statute, in case of default of payment of premium after three premiums have been paid, as well as the insertion in the application of a clause by which the beneficiary purports to 'waive and relinquish all right or claim to any other surrender value than that so provided, whether required by a statute of any state or not,' is an ineffectual attempt to evade and nullify the clear words of the statute.'

In Orient Ins. Co. v. Daggs, 172 U.S. 557, 43 L. ed. 552, 19 Sup. Ct. Rep. 281, the insurance company contended it had the constitutional right to limit by contract its liability to actual damages caused by fire against the provision of the statute which made, in case of total loss, the amount for which the property was insured the measure of damages. We sustained the statute independently of the ground that it was a condition of the permission of the company to do business in the state. We sustained it on the ground of the clear right of the state to pass it, and to accomplish its purpose by limiting the right of the insurer and insured to contract in opposition to its provisions.

Further comment on this head may not be necessary, and we only continue the discussion in deference to the insistence of counsel upon the interstate character of the policy in suit. It is the basis of every division of their argument, and an immunity from control is based upon it for plaintiff in error, which, it seems to be conceded, the state can exert over corporations of its own creation.

An interstant character is claimed for the policy, as we understand the argument, because plaintiff in error is a New York corporation and the insured was a citizen of Missouri, and because, further, the plaintiff in error did business in other states and countries. Does not the argument prove too much? Does it depend upon the residence of plaintiff in error in New York? If so, it would seem that every contract between citizens of different states becomes at once an interstate contract, and may be removed from the control of the laws of the state at the choice of parties. If the argument does not depend on the residence of the plaintiff in error, but on the other elements, a Missouri insurance corporation can have the same relation to them as plaintiff in error, and can be, as much as plaintiff in error claims to be, 'the administrator of a fund collected from the policy holders in different states and countries for their benefit'-the condition which plaintiff in error claims demonstrates the necessity of a uniform law to be stipulated by the parties exempt from the interference or the prohibition of the state where the insurance company is doing business. And yet plaintiff in error seems to concede that such power of stipulation Missouri corporations do not have, while it, a foreign corporation, and because it is a foreign corporation, does have.

After stating the necessity of a uniform law and an equal necessity that parties may stipulate for it, counsel for plaintiff in error say:

'It necessarily follows, therefore, that the insurance policy contracts of foreign insurance companies, as contracts of other foreign corporations, made by them with the citizens of a state, when doing business in that state through the om ity of the state, are like the contracts of natural persons, subject to the limitations of their own charters, and the situs of such contracts is to be determined by the fundamental rules of 'universal law.'

'As will be hereafter seen, this status as foreign corporations does not mean that they were not subject to the laws of the state enacted in the full plenitude of the police power of the state. The state doubtless could limit their contractual power by prohibiting the making of certain contracts. But unless the foreign corporation is reincorporated as a domestic corporation, it remains a foreign corporation, and its contracts with citizens of the state are interstate contracts, subject to the right of choice of law thereof, which is inherent in the law of interstate contracts.'

A foreign corporation undoubtedly is not a domestic corporation, and the distinction must often be observed, but the deduction from it by plaintiff in error cannot be maintained.

The power of a state over foreign corporations is not less than the power of a state over domestic corporations. No case declares otherwise. We said in Orient Ins. Co. v. Daggs, 172 U.S. 557, 43 L. ed. 552, 19 Sup. Ct. Rep. 281:

'That which a state may do with corporations of its own creation it may do with foreign corporations admitted into the state. This seems to be denied; if not generally, at least as to plaintiff in error. The denial is extreme and cannot be maintained. The power of a state to impose conditions upon foreign corporations is cortainly as extensive as the power over domestic corporations, and is fully explained in Hooper v. California, 155 U.S. 648, 39 L. ed. 297, 5 Inters. Com. Rep. 610, 15 Sup. Ct. Rep. 207, and need not be repeated.'

2. Is the statute an attempted regulation of commerce between the states? In other words, is mutual life insurance commerce between the states?

That the business of fire insurance is not interstate commerce is decided in Paul v. Virginia, 8 Wall, 168, 19 L. ed. 357; liverpool & L. L. & F. Ins. Co. v. Massachusetts, 10 Wall, 566, 19 L. ed. 1029; Philadelphia Fire Asso. v. New York, 119 U.S. 110, 30 L. ed. 342, 7 Sup. Ct. Rep. 108. That the business of marine insurance is not is decided in Hooper v. California, 155 U.S. 648, 39 L. ed. 297, 5 Inters. Com. Rep. 610, 15 Sup. Ct. Rep. 207. In the latter case it is said that the contention that it is 'involves an erroneous conception of what constitutes interstate commerce.'

We omit the reasoning by which that is demonstrated, and will only repeat: 'The business of insurance is not commerce. The contract of insurance is not an instrumentality of commerce. The making of such a contract is a mere incident of commercial intercourse, and in this respect there is no difference whatever between insurance against fire and insurance against 'the perils of the sea." And we add, or against the uncertainty of man's mortality.

Judgment affirmed. 

Notes