[369] unless otherwise agreed in writ- | Life Insurance Company on the life of ing, but may be paid to an agent pro- Josiah B. Dodge, the undersigned has ducing receipts signed by one of the this day obtained a cash loan from said above-named officers and countersigned company of the sum of thirteen hundred by the agent. If any premium is fifty dollars ($1,350), the receipt of not paid on or before the day when which is hereby acknowledged, condidue, or within the month of grace, tioned upon pledging as collateral said the liability of the company shall be policy with said company as sole secuonly as hereinbefore provided for such rity for said loan and giving assent to case." "Any indebtedness to the com- the terms of this Policy Loan Agreepany, including any balance of the ment; therefore, premium for the insurance year remaining unpaid, will be deducted in any settlement of this policy or of any benefit thereunder." By an application addressed to the company at New York, accompanied by a loan agreement, both signed at St. Louis and "forwarded from Missouri Clearing House, branch office, August 29, 1903," together with pledge of the policy, all received and accepted at the home office in New York city, the assured obtained from the company a loan of $490. Its check for the proceeds, drawn on a New York bank and payable to his order, was sent to him at St. Louis by mail. Annually thereafter the outstanding loan was settled and a larger one negotiated, all in substantial accord with plan just described. The avails were applied partly to premiums; the balance went directly to assured by the company's check on a New York bank. Copies of last application, loan agreement, and instruction, which follow, indicate the details of the transaction. [Application] Nov. 9, 1906. New York Life Insurance Company, 346 & 348 Broadway, New York. Re Policy No. 2,054,961. Application is hereby made for a cash loan of $1,350 on the security of the above policy, issued by the New York Life Insurance Company on the life of Josiah B. Dodge, subject to the terms of said company's Loan Agreement. [370] Said policy is forwarded herewith for deposit with said company as collateral security, together with said company's Loan Agreement duly signed in duplicate. Josiah B. Dodge. Leo F. Dodge. Forwarded from Missouri Clearing House, branch office, Nov. 9, 1906. M. F. Bayard, Cashier. Policy Loan Agreement. Pursuant to the provisions of Policy No. 2,054,961 issued by the New York In consideration of the premises, the undersigned hereby agree as follows: 1. To pay said company interest on said loan at the rate of 5 per cent per annum, payable in advance from this date to the next anniversary of said policy, and annually in advance on said anniversary and thereafter. 2. To pledge, and do hereby pledge, said policy as sole security for the payment of said loan and interest, and herewith deposit said policy with said company at its home office. 3. To pay said company said sum when due, with interest, reserving, however, the right to reclaim said policy by repayment of said loan with interest at any time before due, said repayment to cancel this agreement without further action. 4. That said loan shall become due and payable (a) Either if any premium on said policy or any interest [371] on said loan is not paid on the date when due, in which event said pledge shall, without demand or notice of any kind, every demand and notice being hereby waived, be foreclosed by satisfying said loan in the manner provided in said policy; (b) Or, (1) on the maturity of the policy as a death claim or an endowment; (2) on the surrender of the policy for a cash value; (3) on the selection of a discontinuing option at the end of any dividend period. In any such event the amount due on said loan shall be deducted from the sum to be paid or allowed under said policy. 5. That the application for said loan was made to said company at its home office in the city of New York, was accepted, the money paid by it, and this agreement made and delivered there; that said principal and interest are payable at said home office; and that this contract is made under and pursuant to the laws of the state of New York, the place of said contract being said home office of said company. In witness whereof, the said parties hereto have hereunto set their hands and By a loan agreement executed on the 8th day of November, 1906, the above policy on the life of Josiah B. Dodge was pledged to and deposited with the New York Life Insurance Company as collateral security for a cash loan of $1,350. The premium and interest due on said policy on the 20th day of October, 1907, not having been paid, the principal of said loan became due and has been settled according to the terms of the policy, and the policy has no further value. Yours truly, John C. McCall, Secretary, This was received by assured December 19, 1907, and neither he nor the beneficiary, during his life, offered objection to the action taken. That the policy, when issued to Dodge, became a Missouri contract, subject to its statutes, so far as valid and applicable, is undisputed and clear. The controlling doctrine in that regard was announced and applied in Equitable Life Assur. Soc. v. Clements (Equitable Life Assur. Soc. v. Pettus), 140 Ŭ. S. 226, 35 L. ed. 497, 11 Sup. Ct. Rep. 822; New York L. Ins. Co. v. Cravens, 178 U. S. 389, 44 L. ed. 1116, 20 Sup. Ct. Rep. 962; and Northwestern Nat. L. Ins. Co. v. Riggs, 203 U. S. 243, 51 L. ed. 168, 27 Sup. Ct. Rep. 126, 7 Ann. Cas. 1104. [373] In each of those cases the controversy related to the interpretation and effect of an original policy,-not a later good-faith agreement between the parties. We held that, to the extent there stated, the state had power to control insurance contracts made within its borders. With those conclusions we are now entirely content; but they do not rule the question presently presented. Here the controversy concerns effect of the state statute upon agreements between the parties made long after date of the policy, and action taken thereunder; their essential fairness and accordance with New York laws are not challenged. Considering the circumstances recited above, we think competent parties consummated the loan contract now relied upon in New York, where it was to be performed. And, moreover, that it is one of a kind which ordinarily no state by direct action may prohibit a citizen within her borders from making outside of them. It should be noted that the clause in the policy providing "eash loans can be obtained by the insured on the sole security of this policy on demand, etc.," certainly imposed no obligation upon the company to make such a loan if the Missouri statute applied and inhibited valid hypothecation of the reserve as security therefor, as defendant in error maintains. She cannot, therefore, claim anything upon the theory that the loan contract actually consummated was one which the company had legally obligated itself to make up on demand. In Allgeyer v. Louisiana, 165 U. S. 578, 41 L. ed. 832, 17 Sup. Ct. Rep. 427, we held a Louisiana statute invalid which undertook to restrict the right of a citizen, while within that state, to place insurance upon property located there by contract made and to be performed beyond its borders. We said: "The mere fact that a citizen may be within the limits of a particular state does not prevent his making a contract outside its limits while he himself remains within it," and ruled [374] that under the 14th Amendment the right to contract outside for insurance on arising in other ways. The court below rested its judgment denying full effect to the loan agreement upon Smith v. Mutual Ben. L. Ins. Co. 173 Mo. 329, 72 S. W. 935, and Burridge v. New York L. Ins. Co. 211 Mo. 158, 109 S. W. 560. In them the supreme court distinctly held § 7897 controlling and the insurer liable upon policies actually issued in Missouri, notwithstanding any subsequent stipulation directing different disposition of reserve after default. In the latter it expressly approved the doctrine of the first, and, among other things (p. 171), said: Treating the loan to Dodge as made under a New York agreement which Missouri lacked power directly to control, the question presented becomes similar in principle to the one decided in New York L. Ins. Co. v. Head, 234 U. S. 149, 58 L. ed. 1259, 34 Sup. Ct. Rep. 879. There suit was instituted in Missouri upon a policy personally applied for and received while in that state by a citizen of New Mexico. Nine years afterwards, having duly acquired the policy in New Mexico, the transferee wrote from there to the insurer in New York and effected a loan under an agreement like the one now before us. The state courts held the policy a Missouri contract and the loan agreement controlled by its nonforfeiture statute. "Attending to that section [No. 7897] as it read when the policy issued and Assuming the policy to be a Missouri when the insured died, it will be ob-contract, we declared that state without served that the net value of the policy | power to extend its authority ever citis to be computed. Then from three izens of New Mexico and into New York fourths of such net value there is to be and forbid the later agreement there taken away-what? All indebtedness? made simply because it modified the first Not at all. There shall be taken away, one. We said: "It would be impossible 'any notes or other evidence of indebted to permit the statutes of Missouri to ness to the company, given on account operate beyond the jurisdiction of that of past premium payments on said pol-state and in the state of New York, icies.' The residue, if any, then goes automatically to the purchase of temporary or extended insurance. In that [the Smith] case, therefore, the scope and meaning of that clause of our nonforfeiting insurance statute was held in judgment in the stiffest sense, and this court decided that the statute was mandatory; that the character of the indebtedness to be deducted from the net value before applying the residue to the purchase of temporary or extended insurance [375] must be looked to, and was limited by the clear words of the statute 'to notes or other evidences of indebtedness to the company, given on account of past premium payments' on the policy issued to the insured; and did not include notes and evidences of indebtedness [376] and there destroy freedom of contract without throwing down the constitutional barriers by which all the states are restricted within the orbits of their lawful authority and upon the preservation of which the government, under the Constitution, depends." The reasoning advanced by the Missouri supreme court to support its ruling was thus summarized: "As foreign insurance companies have no right to come into the state and there do business except as the result of a license from the state, and as the state exacts as a condition of a license that all foreign insurance companies shall be subject to the laws of the state as if they were domestic corporations, it follows that the limitations of the state law resting upon domestic corporations ALA also rest upon foreign companies, and therefore deprive them of any power which a domestic company could not enjoy, thus rendering void or inoperative any provision of their charter or condition in policies issued by them or contracts made by them inconsistent with the Missouri law." And this argument we declared unsound since the "proposition cannot be maintained without holding that because a state has power to license a foreign insurance company to do business within its borders and the authority to regulate such business, therefore a state has power to regulate the business of such company outside its borders and which would otherwise be beyond the state's authority, a distinction which brings the contention right back to the primordial conception upon which alone it would be possible to sanction the doctrine contended for; that is, that because a state has power to regulate its domestic concerns, therefore it has the right to control the domestic concerns of other states." Under the laws of New York, where the parties made the loan agreement now before us, it was valid; also it was one which the Missouri legislature could not destroy or prevent a citizen within its borders from making [377] beyond them by direct inhibition; and applying the principles accepted and enforced in New York L. Ins. Co. v. Head, we think the necessary conclusion is that such a contract could not be indirectly brought into subjection to statutes of the state and rendered ineffective through a license authorizing the insurance company there to do business. As construed and applied by the Springfield court of appeals, $ 7897 transcends the power of the state. To hold otherwise would permit destruction of the right-often of great valuefreely to borrow money upon a policy from the issuing company at its home office, and would, moreover, sanction the impairment of that liberty of contract guaranteed to all by the 14th Amendment. Reversed. Mr. Justice Brandeis, dissenting: A statute of Missouri, Rev. Stat. 1899, § 7897, prohibited life insurance companies authorized to do business within the state from forfeiting a policy for default in the payment of premiums, if three full years' premiums had been paid thereon. The act provided further that, in case of such default, the policy should be automatically extended and commuted into paid-up term insurance. And it determined mathematically the length of the term, as that for which insurance could, at a rate prescribed, be purchased with a single premium equal in amount to three fourths of the reserve or net value less any indebtedness to the company "on account of past premium payments." The obligation imposed upon the company by this statute, as construed by the highest court of the state, could not be modified by contract with the insured, whether entered into at the time the policy was written or subsequently. Equitable Life Assur. Soc. v. Clements (Equitable Life Assur. Soc. v. Pettus) 140 U. S. 226, 35 L. ed. 497, 11 Sup. Ct. Rep. 822; Smith v. Mutual Ben. L. Ins. Co. 173 Mo. 329, 72 S. W. 935. Such nonforfeiture laws are an exercise [378] of the police power; and, as insurance is not interstate commerce, the state's power in this respect is as great over foreign as over domestic corporations. Orient Ins. Co. v. Daggs. 172 U. S. 557, 566, 43 L. ed. 552, 555, 19 Sup. Ct. Rep. 281; New York L. Ins. Co. v. Cravens, 178 U. S. 389, 401, 44 L. ed. 1116, 1124, 20 Sup. Ct. Rep. 962; Northwestern Nat. L. Ins. Co. v. Riggs, 203 U. S. 243, 51 L. ed. 168, 27 Sup. Ct. Rep. 126, 7 Ann. Cas. 1104. In 1900 Dodge, a citizen and resident of Missouri, applied in that state to the New York Life Insurance Company, a New York corporation, for a policy on his life in favor of his wife. The policy was delivered to the assured in Missouri, where the company had an office and was authorized by the Missouri statute to do business; and there the first and later premiums were paid, and, until his death, Dodge and the beneficiary lived and the company continued so to do business. the In 1906 Dodge entered into a supplemental agreement with the company by which he nominally borrowed $1,350, pledged his policy as collateral, and agreed that, in case of default in repaying the loan, the company might discharge it by applying thereto reserve of the policy. In 1907 Dodge made default in payment both of the premium and of the loan. The reserve of the policy was then less than the amount due on the whole loan; but three fourths of the reserve exceeded that part of the loan which had been applied to the payment of past premiums by $275.79. This excess, if applied in commutation for term insurance, would have extended the policy to December 23, 1912. The company claimed the right the Missouri Clearing House, branch ofto use the whole of the reserve to satis- fice, were examined and filed in the fy the whole of the loan, so applied it, home office, and [380] certain calcuand notified the assured, on December lations and appropriate entries in the 17, 1907, that its obligation on the policy books and on the papers were made ceased. Dodge died February 12, 1912. there. No money was paid then to The beneficiary, insisting that, by rea- Dodge. The nominal advance was less son of the Missouri statute the policy than the amount, including accrued was still in force when her husband premium, then due by him to the comdied, brought suit thereon in a state pany; and Dodge balanced the accourt of Missouri and recovered judg- count by paying in Missouri $116.40. ment, which was affirmed by the Spring-In 1903, when a similar loan agreefield court of appeals (Mo. App. -, ment was made, the nominal amount 189 [379] S. W. 609); and the su- of the loan exceeded the sum due preme court of the state refused a for premiums by $486.91; and a check review. The case comes here on writ for that sum was drawn by the of error under § 237 of the Judi- company in New York and sent by mail cial Code [36 Stat. at L. 1156, chap. from there to Dodge in Missouri. In 231, Comp. Stat. 1916, § 1214]. The 1904 a further check for $92.10 was sent company asserts that the loan agree- from New York by the company to ment was made in New York; and, Dodge under a similar loan agreement. relying upon New York L. Ins. Co. Under the 1903 agreement the policy was v. Head, 234 U. S. 149, 58 L. ed. 1259, delivered to the company and it had 34 Sup. Ct. Rep. 879, contends that the remained in the company's possession at state court, in denying full effect to the home office. But when the loan that contract, deprived it of liberty, agreement here in question was made, property, and equal protection of the nothing was done in New York except laws, in violation of the 14th Amend- to examine and file the papers and to ment. make the calculations and entries. No First: Was the loan agreement in fact discretion was exercised there by the made in New York? company's official. By the terms of the policy the company had already assented to the amount nominally advanced as a loan and to the rate of interest to be charged. The functions exercised by the officials at New York were limited to determining whether the calculations were correct and whether papers were properly executed and filed. These acts so done by the company at its home office in connection with the loan agreement were similar in character to those performed when the policy was written. The application for the policy, addressed to the company at its home office, was likewise delivered at the Missouri Clearing House and forwarded to the home office. The application was considered and accepted in New York. The policy was executed there. It provided that the premiums and the insurance should be payable there. But such acts did not prevent the policy being held to be a Missouri contract. Equi The policy was confessedly a Missouri contract. Dodge, so far as appears, was never out of Missouri. Physically every act done by Dodge and the beneficiary in connection with the loan agreement, as with the policy, was done in Missouri: (a) They signed there the application for the loan; (b) they signed there the loan agreement; (c) they signed there the request upon the company to pay itself, out of the $1,350 nominally borrowed, the amount of an earlier loan with interest to October, 1907, and of the premium; (d) he delivered there (at the Missouri Clearing House, branch office) the policy given as collateral and these three papers, which were forwarded by that office November 9, 1906, and received in New York three days later; (e) he paid there the balance of the premium, $116.40 in cash; for the sum of $1,350, nominally advanced then, was insufficient to pay off the then-existing loan with interest and the accrued pre-table Life Assur. Soc. v. [381] Clements mium. Throughout these transactions (Equitable Life Assur. Soc. v. Pettus) the company was authorized to do business in Missouri, and was, in these transactions, actually doing business there. International Harvester Co. v. Kentucky, 234 U. S. 579, 58 L. ed. 1479, 34 Sup. Ct. Rep. 944. Nothing was done in New York, then, except this: The papers received from 140 U. S. 226, 35 L. ed. 497, 11 Sup. Ct. Rep. 822; Northwestern Mut. L. Ins. Co. v. McCue, 223 U. S. 234, 56 L. ed. 419, 38 L.R.A. (N.S.) 57, 32 Sup. Ct. Rep. 220. Even if the loan agreement be treated as an independent contract, it should, if facts are allowed to contro!, be held to have been made in Missouri. |