MR. JUSTICE BURTON delivered the opinion of the Court.
This is an action in a circuit court of the State of South Dakota, brought by an Ohio citizen against a fraternal benefit society incorporated in Ohio, to recover benefits claimed to have arisen under the constitution of that society as a result of the death of an insured member who had been a citizen of South Dakota throughout his membership. The case presents the question whether the full faith and credit clause of the Constitution of the United States
We hold that, under such circumstances, South Dakota, as the state of the forum, was required, by the Constitution of the United States, to give full faith and credit to the public acts of Ohio under which the fraternal benefit society was incorporated, and that the claimant was bound by the six-month limitation upon bringing suit to recover death benefits based upon membership rights of a decedent under the constitution of the society. This has been the consistent view of this Court.
The record in the present case well illustrates both the practical effect of such a limitation as that contained in the constitution of this society and the need for the application of the full faith and credit clause to membership obligations in fraternal benefit societies.
The principal office of this society has been continuously in Columbus, Ohio. The society has established subordinate councils in many states and, at all times involved in this case, has been licensed to do business in South
The decedent, on July 31, 1920, applied for membership in the society through Rapid City Council No. 516, in Rapid City, South Dakota. He was 37 years old, a manager and salesman selling "packing products" on the road, in good physical condition and employed in an occupation of precisely the type contemplated for membership in this society.
In accordance with the procedure prescribed in the constitution of the society, the decedent's beneficiary promptly mailed to the society a notice of her son's death. On June 8, 1931, the Supreme Executive Committee, in Columbus, Ohio, reviewed and disallowed her claim on its merits and mailed to her notice of such action. On June 16, she filed a complaint against the society in a circuit court for the State of South Dakota to recover death benefits, amounting to $6,300, claimed under Article IV of the constitution of the society. The case was removed to the United States District Court for South Dakota because of diversity of citizenship. On September 2 it was tried, without a jury, and, on December 15, 1931, judgment was rendered for the mother with findings of fact and conclusions of law dealing with the merits of the case. This judgment, on February 27, 1933, was reversed, on its merits, by the United States Circuit Court of Appeals for the Eighth Circuit and judgment for costs was entered against Elizabeth Shane. 64 F.2d 55.
The present proceeding, however, resulted from the fact that, pursuant to stipulation of the parties, the District Court, on January 18, 1934, dismissed the case without prejudice to the filing of another suit. On June 15, 1934, the decedent's mother assigned her claim to Edward C. Wolfe, the present respondent, a citizen of Ohio, as trustee, to enforce collection of the claim. On the same day, the present action was filed in a circuit court of the State of South Dakota. An answer was entered and a stipulation was made to use the testimony which had been taken in the District Court in the previous case. There the case rested for six years. On October 19, 1940, an amended answer was filed raising, among others, the defense that this second action was in violation of the following Section of the constitution of the society:
It is not disputed that such provision has been in such constitution since before the decedent's first application for membership in the society, and that it was printed in full on the back of the certificate of membership originally issued to the decedent. It further was alleged that this provision was valid and binding upon the members of the society by and under the laws of Ohio; that the highest court of that State had held that a fraternal benefit society, by its constitution and by-laws, could limit the time within which suit must be brought to recover for benefits promised to members; and that to deny the binding effect of that limitation on the plaintiff in such suit would be a violation of the full faith and credit clause of the Constitution of the United States (Art. IV. § 1), and a violation of the society's rights thereunder. We decide that issue here in favor of the society. No claim is made here that the society is barred from this defense by any waiver purporting to have been made on its behalf in connection with the dismissal of the earlier action without prejudice to filing another. See Riddlesbarger v. Hartford Ins. Co.,
In 1942, the case was presented before a judge of a circuit court of the State of South Dakota. Upon the death of that judge before a decision in the case, it was heard, in 1943, by another judge of that court, largely upon the record made in 1931, in the United States District Court. The state court, on April 4, 1944, entered judgment in favor of the claimant, respondent herein. In 1945, the Supreme Court of the State of South Dakota, by a divided court, affirmed that judgment. 70 S.D. 452, 18 N.W.2d 755. Because of the constitutional issue presented and its relation to previous decisions of this Court, we granted certiorari. 326 U.S. 712. The case was argued here February 28, 1946. Later it was restored to the docket, assigned for reargument before a full bench and reargued here November 12, 1946.
This is a clear-cut case of a claim based solely upon membership rights and obligations contained in the constitution of an incorporated fraternal benefit society, the terms of which are subject to amendment through the processes of a representative form of government authorized by the law of the state of incorporation. There is no evidence in the records of the three trials, no suggestion in the opinions of the lower courts, and no claim in the arguments here that the decedent was not a bona fide active member of the society, or that the society was acting otherwise than as a fraternal benefit society. This case, therefore, is to be distinguished from a claim for death benefits under an ordinary contract of accident insurance, whether issued by a stock or a mutual insurance company.
We rely upon the character of the membership obligation sued upon. There is substantial evidence to support a contention that the contract of membership, including all insurance rights, was made in Ohio and that many
Although the respondent, suing as an Ohio citizen, has eliminated the South Dakota citizenship of the original beneficiary as a jurisdictional factor in this case, we do not hold that for that reason, he may not urge the courts to consider the continuous South Dakota residence and citizenship of the decedent and of the named beneficiary in determining whether the public policy of South Dakota should yield to the full faith and credit clause of the Constitution of the United States in giving recognition to the charter rights and obligations of the society as an Ohio corporation.
In order however to appreciate the nature of the obligation here relied upon, it is essential to see how completely its terms are interwoven with the enabling legislation authorizing the corporate charter and with the constitution and by-laws of the society, as well as with the member's application for and his certificate of membership in such society.
The enabling legislation corporate charter and certificate of membership have been described. The application for membership contributes nothing further to the issue except to emphasize the integration which it demonstrates between the member and the articles of incorporation, constitution and by-laws of his society. There was no application for insurance separate from the application
There remain to be considered the constitution and by-laws of the society. These set forth the main body of the member's rights and obligations, including those of a fraternal and procedural nature as well as those relating to financial benefits and liabilities. The principal part of the record consists of printed copies of the charter, constitution and by-laws of the society, one as generally effective September 1, 1922, and the other as effective September 1, 1930. A comparison of these copies shows that many changes were made in the rights and obligations of members during the decedent's membership in the society.
The 1930 constitution, in pamphlet form, filled 90 closely printed pages. Its subject matter is outlined in the margin.
The relationship thus established between a member and his fraternal benefit society differs from the ordinary contractual relationship between a policyholder and a separately owned corporate or "stock" insurance company. It differs also from that between and insured member of the usual business form of a mutual insurance company and that company. The fact of membership in the Ohio fraternal benefit society is the controlling and central feature of the relationship. As long as he remains a member, the terms of his membership, including obligations and benefits relating to the insurance funds of the society, are subject to change without his individual consent. The control over those terms is vested by him and his fellow members in the elected representative government of their society as authorized and regulated by the law of Ohio. Upon that law the continued existence of the society depends. The foundation of the society is the law of Ohio. It provides the unifying control over the rights and obligations of its members. Sovereign Camp v. Bolin, 305 U.S. 66, 75, discussed infra. It is this dependence of membership rights upon the public acts of the domiciliary state, supported by the requirement that
The decisions passing upon this comparatively narrow issue are to be distinguished from those which deal only with the well-established principle of conflict of laws that "If action is barred by the statute of limitations of the forum, no action can be maintained though action is not barred in the state where the cause of action arose." Restatement, Conflict of Laws § 603 (1934). It is to that general principle that such early cases as Hawkins v. Barney's lessee, 5 Pet. 457, and M'Elmoyle v. Cohen, 13 Pet. 312, have reference. The decisions here reviewed are to be distinguished, likewise, from those supporting the converse general principle that "If action is not barred by the statute of limitations of the forum, an action can be maintained, though action is barred in the state where the cause of action arose." Restatement, Conflict of Laws § 604 (1934). Neither of these general statements is here questioned. An obvious need for modification of the latter statement, however, has led many states to place a limitation upon it through the adoption of the so-called "borrowing statutes" of limitations. The result is that today "Statutes frequently provide that an action may not be maintained if it has been barred by the statute of limitations at the place where the action accrued or, in some cases, at the domicil of the defendant." Id. § 604, comment b. These numerous "borrowing statutes" demonstrate the general recognition of the sound public policy of limiting, under some circumstances, the application of the general statute of limitations of the state of the forum. The full faith and credit clause applied, as in the present case, is but another limitation voluntarily imposed, by the people of the United States, upon the sovereignty of their respective states in applying the law of the forum. See Broderick v. Rosner, 294 U.S. 629, 643, and Milwaukee
Even without the compelling force of statutory or constitutional provisions, the courts have recognized other restrictions on the law of the forum. For example, it is well established that, in the absence of a controlling statute to the contrary, a provision in a contract may validly limit between the parties, the time for bringing an action on such contract to a period less than that prescribed in the general statute of limitations, provided that the shorter period itself shall be a reasonable period.
The instant case presents additional facts which distinguish it from the cases governed by the foregoing general rules. The principal distinguishing feature of this case is the membership of the decedent in the Ohio fraternal benefit society, which South Dakota made available to him through the license issued to it to do business in South Dakota. Even conceding, for purposes of argument,
The respondent's claim to benefits is based upon Item (12) of § 4 of Article IV of this constitution which specifies
Underlying the defense of the society is the requirement that § 11 be valid under the law of Ohio as the State of incorporation. Such validity was admitted by the Supreme Court of South Dakota in its opinion below. 70 S.D. 452, 18 N.W.2d 755, 756. "The parties to a contract of insurance may, by a provision inserted in the policy, lawfully limit the time within which suit may be brought thereon, provided the period of limitation fixed be not unreasonable." Appel v. Cooper Ins. Co., 76 Ohio St. 52 (Syllabus, No. 1, by the court), 80 N.E. 955. The court there enforced a clause in a fire insurance policy providing that no action for recovery of any claim shall be sustainable in any court unless commenced within six months after the fire itself, even though such actions were prohibited during most of the first three of those six months. In Bartley v. National Business Men's Assn., 109 Ohio St. 585, 143 N.E. 386, the Supreme Court of Ohio approved the Appel case and applied it to a two-year
Starting with the recognized validity under the law of Ohio, of Article IV, § 11 of the constitution of the petitioning society, that society has a complete defense to the present action unless such § 11 is not enforcible in the courts of South Dakota because of a contrary public policy of that State. We examine first the claim that such a contrary policy exists, and then show why, on the principles established by this Court, the full faith and credit clause of the Constitution of the United States requires the courts of South Dakota to give effect to the public acts of Ohio as expressed in such § 11.
The general statutes of limitations which have been in effect in South Dakota throughout the period involved in this case have prescribed limits varying from 20 years
Both the alleged prohibition by South Dakota of such a contractual limitation as is contained in § 11 and the public policy of South Dakota against such limitations depend entirely upon its statute directed generally against contractual limitations upon rights to sue on contracts
The public policy so declared is not directed specifically against fraternal benefit societies or their insurance membership requirements. In this very case, however, the Supreme Court of South Dakota, in its decision below, expressly held that this statute applies to and renders void in South Dakota § 11 of Article IV of this society's constitution. We thus are confronted with an inescapable issue as to the unconstitutionality of an attempt, through this statute, to declare void in South Dakota a provision of the constitution of an incorporated fraternal benefit society which comes within the authorization of a public act of the State of Ohio and is valid under the laws of that State. This is not a new issue in this Court. It falls squarely within a line of decisions consistently upholding the applicability of the full faith and credit clause in support of comparable provisions in the constitution of such a society.
In Royal Arcanum v. Green, 237 U.S. 531, Mr. Chief Justice White, writing on behalf of a unanimous Court, pointed out that the full faith and credit clause there required the state of the forum (New York) to give effect to a law of the state of incorporation (Massachusetts) pursuant to which a fraternal benefit society had amended its constitution so as to increase the assessment rate upon the complaining members, although the trial court had found that their contract of membership was entered into, made and completed in the State of New York, and that under the law of that State, the member would not be bound by
In Modern Woodmen v. Mixer, 267 U.S. 544, this Court unanimously followed the same reasoning and Mr. Justice Holmes, in language previously quoted supra, emphasized the "complex and abiding relation" of a membership in a fraternal benefit society. He said, "as marriage looks to domicil, membership looks to and must be governed by the law of the State granting the incorporation." Id. at 551. In that case, the Court held that the full faith and credit clause required the state of the forum (Nebraska) to give effect to the law of the state of incorporation (Illinois) pursuant to which a by-law of the fraternal benefit society had been enacted requiring that the continued absence of any member, although unheard from for ten years, should not give his beneficiary the right to recover death benefits until the full term of the member's expectancy of life had expired. This was so held in the face of a rule of law in the state of the forum that seven years of unexplained absence was sufficient to establish death for purposes of such a recovery. This Court stated that neither the public policy of the forum nor the opinion of the Supreme Court of that State that the by-law was
In Broderick v. Rosner, 294 U.S. 629, this Court, with Mr. Justice Cardozo noting dissent, applied this principle to a suit brought in a New Jersey court against certain citizens of New Jersey to recover unpaid assessments levied upon them as stockholders in a bank incorporated under the laws of New York. A New Jersey statute sought to prohibit, in the courts of New Jersey, proceedings for the enforcement of any stockholder's statutory personal liability imposed by the laws of another state, except in suits for equitable accounting, to which the corporation, its legal representatives, and all of its creditors and stockholders were to be necessary parties. Practically, this amounted to an attempt to bar such suits from the New Jersey courts. This Court, however, said "It is sufficient to decide that, since the New Jersey courts possess general jurisdiction of the subject matter and the parties, and the subject matter is not one as to which the alleged public policy of New Jersey could be controlling, the full faith and credit clause requires that this suit be entertained [without compliance with the special New Jersey statute]." Id. at 647.
Mr. Justice Brandeis, in stating the reasoning of the Court in the Broderick case, said:
In Sovereign Camp v. Bolin, 305 U.S. 66, this Court unanimously approved the foregoing principles and authorities and applied them to a case that goes even beyond the issue presented by the instant case. In that case, Bolin joined a Missouri lodge of a fraternal benefit society incorporated in Nebraska. His certificate of membership was delivered to him in Missouri, and he paid his dues and assessments in Missouri. He was over 43 when he joined the society in June, 1896. At that time, one of its by-laws provided that a member joining at an age greater than 43 was entitled to life membership without payment of further dues or assessments after his certificate had been outstanding 20 years. On his certificate were endorsed the words "Payments to cease after 20 years," and it stated that, if in good standing, he would be entitled to participate in the beneficial fund up to $1,000 payable to his beneficiaries and to $100 for placing a monument at his grave. He paid his dues and assessments for the required 20 years but ceased doing so in July, 1916. Upon his death, his beneficiaries sued in a state court of Missouri to recover on his certificate. They were met by the defense that, in Trapp v. Sovereign Camp of the Woodmen of the World, 102 Neb. 562, 168 N.W. 191, the Supreme Court of Nebraska, in 1918, in a representative
Mr. Justice Roberts, writing for the Court said:
". . . The beneficiary certificate was not a mere contract to be construed and enforced according to the laws of the State where it was delivered. Entry into membership of an incorporated beneficiary society is more than a contract; it is entering into a complex
"The court below was not at liberty to disregard the fundamental law of the petitioner and turn a membership beneficiary certificate into an old line policy to be construed and enforced according to the law of the forum. The decision that the principle of ultra vires contracts was to be applied as if the petitioner were a Missouri old line life insurance company was erroneous in the light of the decisions of this court which have uniformly held that the rights of members of such associations are governed by the definition of the society's powers by the courts of its domicile.
This pronouncement as to the uniform holdings of this Court has not been repudiated or modified. In the present case, the decisions relied upon by the court below, in reaching a contrary result, deal with related but distinguishable situations.
In Pink v. A.A.A. Highway Express, 314 U.S. 201, this Court, in a unanimous opinion written by Mr. Chief Justice Stone, held that the full faith and credit clause does not apply to an action brought in the courts of Georgia
These recent references to the principle which is involved in the instant case constitute a significant recognition of its consistency with the decisions of this Court in related but distinguishable situations. The Pink case appropriately emphasized the distinction between, on the one hand, a sound local public policy which closely scrutinizes the proof of the entry into a certain relationship and, on the other hand, a local public policy which, in the face of the full faith and credit clause, would seek to eliminate important terms from that relationship after it has been entered into.
Without reliance upon the full faith and credit clause, a somewhat similar result has been recognized in the protective effect of the Fourteenth Amendment of the Constitution of the United States, prohibiting the deprivation of any person of his property without due process of law. A like policy underlies § 10 of Article I of the Constitution, prohibiting a state from passing any law impairing the obligation of contracts. Accordingly, in Home Ins. Co. v. Dick, 281 U.S. 397, in an opinion by Mr. Justice Brandeis, this Court relied upon the Fourteenth Amendment in dealing with ordinary insurance policies. It upheld unanimously the effectiveness of a contractual one-year limitation upon the right to sue for recovery of a loss under a marine fire insurance policy, where such limitation was good in Mexico (in which country the insurance was written and was to be performed), as against a two-year general statute of limitations of the state of
In a related but readily distinguishable series of cases dealing with conflicting claims arising under Workmen's Compensation Acts, emphasis has been placed upon the rule stated by Mr. Justice Stone, for a unanimous Court, in Alaska Packers Assn. v. Comm'n, 294 U.S. 532, 547. He there said:
In Pacific Ins. Co. v. Industrial Accident Comm'n, 306 U.S. 493, again speaking for the Court, he added at p. 502:
The language quoted from the Pacific Ins. Co. case, supra, also was quoted with approval in Williams v. North Carolina, 317 U.S. 287, at p. 296. In the latter case, on the basis of the full faith and credit clause, this Court gave effect to the law of the domicil in upholding the validity of a divorce, as against the law of the forum.
We find no conflict between the position taken in the instant case and that taken in the foregoing cases or in Griffin v. McCoach, 313 U.S. 498, Hoopeston Co. v. Cullen, 318 U.S. 313, or in other decisions of this Court upon which reliance has been placed to support an opposite conclusion.
Accepting the view, expressed in these related cases, that this Court should not give what Mr. Justice Stone called a mere "automatic effect to the full faith and credit clause,"
MR. JUSTICE BLACK, with whom MR. JUSTICE DOUGLAS, MR. JUSTICE MURPHY, and MR. JUSTICE RUTLEDGE join, dissenting.
The Order of United Commercial Travelers is a corporation chartered under the laws of Ohio with power to do a fraternal insurance business. It sells contracts of insurance in Ohio. South Dakota has licensed the corporation to sell fraternal insurance policies in that state. Under this permission, the corporation has an office, called a local council, in Black Hills, South Dakota, vested with
The insured, a citizen and resident of South Dakota, applied to the Black Hills office for membership and an insurance policy. After the application had been accepted and an insurance certificate signed at the petitioner's home office in Ohio, it was "forwarded by the said Defendant corporation to South Dakota for delivery to the insured." From then until his death in South Dakota, the insured paid his premiums to the corporation's Black Hills office. During all that period his beneficiary lived in that state. This action was brought in a court of that state on behalf of the beneficiary after the corporation had refused to pay the claim.
The association denied liability because this suit had not been commenced within six months after the association had disallowed the beneficiary's claim. This is required by the corporation's constitution which is incorporated by reference into its contracts of insurance. And in a series of cases, cited in the Court's opinion, the Supreme Court of Ohio has held that suits brought in Ohio courts on mutual, stock company, or fraternal insurance contracts, may be barred by contractual arrangements between the parties which require that suit be brought within a shorter period than that provided by the Ohio limitations statutes.
But the South Dakota Supreme Court has held that a statute of that state which provides that "every provision in a contract restricting a party from enforcing his rights under it by usual legal proceedings in ordinary tribunals or limiting his time to do so, is void," S.D. Code § 10. 0705 (1939), renders the limitation provision in this contract unenforceable in her courts. This Court today reverses the South Dakota decision on the ground that its refusal to enforce the private contract is a denial of full faith and credit to the "public Acts, Records, and judicial Proceedings" of Ohio. U.S. Const., Art. IV, § 1.
The constitutional force of the M'Elmoyle refusal to require a forum state to give full faith and credit to a foreign state's statute of limitations is not weakened in the slightest by the fact that some states have seen fit to adopt "borrowing statutes." See Cope v. Anderson, ante, p. 461, at note 3. For other states, notably South Dakota here, have adopted statutes with purposes quite opposite to that of borrowing statutes. And under the M'Elmoyle rule, whichever limitations policy a forum state chooses to follow — to borrow or to refuse to borrow — it is free, so far as the full faith and credit clause is concerned, to do so.
The plain effect of today's decision is to overrule the M'Elmoyle case. And it does so, despite the fact that the holding of that case has never before been cited with disapproval; in fact, that holding has been repeatedly
But more than that, the "state of vassalage" to which the Court's decision here reduces South Dakota is not even in subordination to the laws of another state. The Court's opinion means that South Dakota must yield to a "law" adopted by the members of an Ohio-created private fraternal insurance association. That "law," appearing only in the private association's constitution, provides in the same kind of language that legislatures ordinarily use in their statutes of limitation that "No suit or proceeding, either at law or in equity, shall be brought to recover any benefits under this Article after six (6) months from the date of the claim for said benefits is disallowed by the Supreme Executive Committee."
The nearest that this private association's "law" comes to being a law of Ohio is that Ohio permits but does not require it. Because the private association's constitution was incorporated by reference in the policy contract, including the constitution's "statute of limitations," the Court now holds that this corporate "statute of limitations" prohibits application of South Dakota's statute of limitations. Thus the Court's holding is that an Ohio
It should come as quite a surprise to Ohio that its state policy can supplant South Dakota's statute of limitations, since Ohio's highest Court follows the M'Elmoyle rule that "Statutes of limitation relate to the remedy, and are, and must be, governed by the law of the forum; for it is conceded, that a court which has power to say when its doors shall be opened, has also power to say when they shall be closed." Kerper v. Wood, 48 Ohio St. 613, 622, 29 N.E. 501, 502. And the principle there announced was followed by the Ohio Supreme Court as late as 1943. Payne v. Kirchwehm, 141 Ohio St. 384, 48 N.E.2d 224; cf. Cope v. Anderson, ante, p. 461.
Second. Leaving aside the sui generis features of a forum state's power over limitations of actions in its courts, the present holding violates other established rules concerning a state's power to govern its own local affairs and to protect from overreaching contracts persons in whom the state has a legitimate interest. See Griffin v. McCoach, 313 U.S. 498; Pink v. A.A.A. Highway Express, 314 U.S. 201. I had considered it well settled that if an insurance company does business at all in a state, its contracts are "subject to such valid regulations as the
The Court's opinion in the present case is apparently inconsistent with the foregoing cases which have established that state courts have a continuing authority to execute the public policy of the state by refusing to enforce contract provisions of foreign corporations permitted by the state to do business there — even though those corporations do business with members only. Today's opinion does imply, however, that South Dakota officials could have excluded this corporation from doing business in the state or could have revoked its license upon discovery of the foreign corporation's violation of the laws of the state. I cannot believe that the full faith and credit clause stays the hands of the state courts as instruments of state power in private litigation any more than it could forestall state authorities from revoking the association's license for persisting in making unlawful contracts.
Third. Another handle of South Dakota's power over this corporation derives, not from the corporation's acceptance of South Dakota law as a continuing condition of doing business, but from the number and importance of the incidents involved in the making and the performance of the specific contract here which occurred in South Dakota. Unless the Court's decision overrules
Before today, contentions that the full faith and credit clause overcomes the power of a state over a contract made and operative there have been flatly rejected by this Court. Thus in American Fire Ins. Co. v. King Lbr. & Mfg. Co., 250 U.S. 2, an insurance company was authorized by Pennsylvania, the state of its incorporation, to write fire insurance on property outside that state. It was not licensed to do business by Florida, but accepted insurance applications through independent brokers there. Under the law of Pennsylvania where the applications were accepted and the policies written, brokers were apparently not authorized to waive contract
Fourth. In interpreting the full faith and credit clause this Court has repeatedly insisted that it would weigh all the interests of each state involved before holding that the full faith and credit clause qualified one state's power to govern its own affairs. See Pink v. A.A.A. Highway Express, supra, 210-211, and cases there cited; Magnolia Petroleum Company v. Hunt, 320 U.S. 430, 436-437. I have recited the many bases for South Dakota's legitimate interest. What is the interest of Ohio to which the Court holds South Dakota must give full faith and credit?
It may be that the Court's view is that Ohio has an interest in securing uniformity of rights and obligations among all the policyholder-members throughout the country. For, says the Court, "If full faith and credit are not given . . ., the mutual rights and obligations of the members of such societies are left subject to the control of each state. They become unpredictable and almost inevitably unequal."
It seems apparent from these authorities that Ohio's interest in uniform administration of a corporation's contract obligations for the funds of a company created under its laws is not entitled to full faith and credit merely because of the communal interest of policyholder-members in that fund. And the fact, so heavily stressed by the Court, that the corporation was incorporated under the laws of Ohio so that its continued existence depends upon that law is plainly insufficient basis for a contention that, therefore, Ohio's interest demands full faith and credit for this contract provision.
The conclusion reached by the Court that fraternal insurance companies are entitled to unique constitutional protection is not justified by the language of the Constitution nor by the nature of their enterprise. And our
As I have pointed out, those cases which hold that assessments against fraternal policyholders in their capacity as stockholders are governed by the law of the company's domicil, have no relation to a fraternal company's obligation to a beneficiary of an insurance contract. Moreover, in Sovereign Camp W.O.W. v. Bolin, 305 U.S. 66, heavily relied on by the Court, the fraternal association was freed from liability in a state in which it was not authorized to do business because a judgment of the highest court of the state which had chartered the association had declared, in a class suit to which the claimant had been, in effect, a party, that the policy sued on had been issued ultra vires. Thus the Bolin case is merely a familiar example of enforcement of res judicata under the full faith and credit clause. A judgment of any state, whether chartering state or not, would be entitled to the same respect. Here, of course, there is no judgment to which the claimant was a party which is entitled to full faith and credit. And the power of the Ohio corporation, so far as Ohio law is concerned, to make a contract consistent with South Dakota policy is unquestioned.
The other case relied on heavily by this Court is Modern Woodmen of America v. Mixer, supra. In that case Mixer, the beneficiary, lived in Nebraska. While the record was not wholly clear, the insured had apparently previously lived in South Dakota, and the certificate seems to have been "issued" there. A by-law of the Woodmen, an Illinois association, provided that its certificate should insure against death but that "long continued absence of any member unheard of shall not . . . give any right to recover on any benefit certificate."
This reversal can be justified on the facts of the Mixer case, which are clearly different from the facts in the case before us. There was no conflict in Mixer between the policy of the state where the contract was made, and Illinois, the state of the association's domicil. For the contract apparently had been made in a third state, South Dakota, consistently with the laws of that state. Nor does it appear from the record of that case that the association had been licensed to do business so as to accept either the law of the state where the contract was made, or that of Nebraska where the suit was brought. Finally, as I have already indicated, no statute of limitations was involved in the Mixer case.
But it is said that language of the Mixer case means that the obligations of a fraternal insurance corporation are to be governed by the law of its domicil. If this language means that such an association is privileged to live above the law of the state where it does business, makes contracts, and is sued, I think that language should be repudiated. The purported differences between fraternal insurance companies and other reciprocal, co-operative
Neither in the Mixer case nor in the present one does the Court attempt to demonstrate, and I seriously question that a demonstration is possible, that the insurance business of a fraternal company is conducted differently in any important way from that of a mutual, reciprocal, or joint stock company. The insurance phase of this company is set apart from the fraternal phase after election to membership, even though payment of assessments levied for insurance purposes is made compulsory. The provisions of its constitution show that insurance terms and conditions are precisely like those of non-fraternal companies. Insurance funds are administered on a business basis, and they cannot be used for fraternal purposes. In short, the insurance program and activities reveal that this is an insurance company, run like other insurance companies. The only non-paper difference is that insurance is sold only to members of the fraternity.
Nor is it apparent to me that an individual policyholder-member in a remote community exercises any significant influence on the technical insurance aspects of a fraternal company's business. Certainly, he can no more control the policy contract provisions than could a mutual policyholder or a member of a membership loan association. And the individual member would share as much and no more in the fraternal company's gains from overreaching contracts as would participants in these indistinguishable associations.
That fraternal-order insurance businesses such as petitioner's are of a magnitude to move each state to regulate them so as to protect its citizens can hardly be doubted. The best information obtainable shows that in 1944 fraternal
Fifth. I fear that it may be significant that the Court has conspicuously refrained from stating in unmistakable terms that its new doctrine applies only to fraternal insurance companies. If, as the Court holds, the interest of Ohio or of its corporate creature does outweigh the interest of every state in which that creature does business, I see no sound basis in the facts or in the authorities cited by the Court for declining to apply this formula to almost every type of business corporation created in one state and doing business in another.
The effect of such a doctrine on the rights of states to govern themselves is graphically demonstrated by the insurance business. The five largest legal reserve life insurance companies in the United States, with total assets of approximately $15,000,000,000, have their home offices in or near New York and Connecticut. United States v. South-Eastern Underwriters Assn., 322 U.S. 533, 541. The result of the Court's opinion, if later carried to its logical conclusion, would be that the policy obligations of all of these companies, in whatever state assumed, would be governed by New York or Connecticut law or that of nearby states, and that all of the other states would be deprived of power to pass legislation believed by them to be necessary to protect their own citizens against unconscionable
Such a doctrine is not only novel; it is revolutionary. I think the doctrine violates the very Constitution that it is our duty to interpret. For the Court today, in part, nullifies a great purpose of the original Constitution, as later expressed in the Tenth Amendment, to leave the several states free to govern themselves in their domestic affairs. Hereafter, if today's doctrine should be carried to its logical end, the state in which the most powerful corporations are concentrated, or those corporations themselves, might well be able to pass laws which would govern contracts made by the people in all of the other states.
I would affirm this judgment.
"WITNESSETH: That we, the undersigned, all of whom are citizens of the State of Ohio, desiring to form a corporation, not for profit, under the general corporation laws of said State, do hereby certify:
"FIRST. The name of said corporation shall be THE ORDER OF UNITED COMMERCIAL TRAVELERS OF AMERICA.
"SECOND. Said corporation shall be located, and its principal business transacted at Columbus, in Franklin County, Ohio.
"THIRD. The purpose for which said corporation is formed is:
"1st. To unite fraternally all Commercial Travelers, Wholesale Salesmen and such other persons of good moral character as are now or may hereafter become eligible to membership, under the provisions of the Constitution of the Order.
"2nd. To give all moral and material aid in its power to its members and those dependent upon them. Also to assist the widows and orphans of deceased members.
"3rd. To establish funds to indemnify its members for disability or death resulting from accidental means.
"4th. To secure just and equitable favors for Commercial Travelers and Wholesale Salesmen as a class.
"5th. To elevate the moral and social standing of its members.
"6th. Said corporation shall be a secret Order.
"7th. To establish a Widows' and Orphans' Reserve Fund."
This society is strikingly similar in form to the "fraternal beneficiary association," incorporated in Massachusetts in 1877 and described in the leading case on this subject, Royal Arcanum v. Green, 237 U.S. 531. As to that association it was said by the Supreme Court of Massachusetts that:
"The fraternal plan, with mutuality and without profit, distinguishes the work of such an association from a commercial enterprise. It is a charitable and benevolent organization, with a limitation of membership to a special class, and a limitation upon the choice of beneficiaries." Reynolds v. Royal Arcanum, 192 Mass. 150, 155, 78 N.E. 129, 131.
"upon filing with the Commissioner a duly certified copy of its charter or articles of association; a copy of its constitution and laws, certified by its secretary or corresponding officers; a power of attorney to the Commissioner [to accept service of process] . . .; a statement of its business under oath of its president and secretary, or corresponding officers, in the form required by the Commissioner, duly verified by an examination made by the supervising insurance official of its home State or other State satisfactory to the Commissioner of Insurance of this State; a certificate from the proper official in its home State, province or country, that the society is legally organized; a copy of its contract, which must show that benefits are provided for by periodical, or other payments by persons holding similar contracts; and upon furnishing the Commissioner such other information as he may deem necessary to a proper exhibit of its business and plan of working, and upon showing that its assets are invested in accordance with the laws of the State, territory, district, province or country where it is organized, he shall issue a license to such society to do business in this State until the first day of the succeeding March, and such license shall, upon compliance with the provisions of this Act, be renewed annually, but in all cases to terminate on the first day of the succeeding March; provided, however, that license shall continue in full force and effect until the new license be issued or specifically refused. Any foreign society desiring admission to this State, shall have the qualifications required of domestic societies organized under this Act, upon a valuation by any one of the standards authorized in Section 23a of this Act, and have its assets invested as required by the laws of the State, territory, district, country, or province where it is organized. For each such license or renewal the society shall pay the Commissioner Two ($2.00) Dollars. When the Commissioner refuses to license any society, or revokes its authority to do business in this State, he shall reduce his ruling, order or decision to writing and file the same in his office, and shall furnish a copy thereof, together with a statement of his reason, to the officers of the society, upon request, and the action of the Commissioner shall be reviewable by proper proceedings in any court of competent jurisdiction within the State, . . . ."
See also, §§ 31. 2124-31. 2126, 31. 2139, S.D. Code of 1939. The State of Ohio has similar provisions in its Code. § 9477, Ohio Gen. Code, 1931.
"Any corporation, society, order, or voluntary association, without capital stock, organized and carried on solely for the mutual benefit of its members and their beneficiaries, and not for profit, and having a lodge system with ritualistic form of work and representative form of government, and which shall make provision for the payment of benefits in accordance with Section 5 hereof, is hereby declared to be a Fraternal Benefit Society."
See also, c. 31.21, "Fraternal Benefit Societies," S.D. Code of 1939, and cf. with Ohio definition in note 6, supra.
"INCORPORATED UNDER THE GENERAL LAWS OF THE STATE OF OHIO.
THE ORDER OF UNITED COMMERCIAL TRAVELERS OF AMERICA
"An Association incorporated under the laws of the state of Ohio, hereby certifies that Ford Shane, a member of The Order of United Commercial Travelers of America, in consideration of the statements contained in his application for insurance and the application fee paid by him, is hereby accepted as an Insured Member of said Order under `Class A,' beginning at twelve (12) o'clock, noon, Standard time, on the day this certificate is dated, and is entitled to all the rights and benefits which may be provided for such `Class A' Insured Members in and by the Constitution of said Order in force and effect at the time any accident occurs subsequent to said time and date.
"This Certificate, the Constitution, By-Laws and Articles of Incorporation of said Order, together with the application for insurance signed by said Insured Member, shall constitute the contract between said Order and said Insured Member and shall govern the payment of benefits, and any changes, additions or amendments to said Constitution, By-Laws or Articles of Incorporation, hereafter duly made, shall bind said Order and said Insured Member and his beneficiary or beneficiaries, and shall govern and control the contract in all respects.
"IN WITNESS WHEREOF, we have affixed our signatures and the seal of the Supreme Council, at Columbus, Ohio, this 21st day of December A.D. 1922.
"This certificate supersedes all insurance certificates issued of a prior date bearing this number.
"There were no accidental means, but simply an unexpected or accidental result. The administration of the drug did not cause the idiosyncrasy, and, if the bodily injury which resulted in death was produced by the idiosyncrasy as a cause or means, then the administration of the drug was not the sole cause, and there would be no liability under the policy." 64 F.2d 55, 59.
Relating to a provision in the same section that "This Order shall not be liable to any person for any benefits for any death,. . . resulting from . . . medical, mechanical or surgical treatment (except where the surgical treatment is made necessary by the accident), the intentional taking of medicine or drugs"; the Circuit Court of Appeals said:
"We think the administering of the drug must be placed in the category of medical or surgical treatment.
"If the administering of the drug in the case at bar did not constitute medical or surgical treatment, we should be at a loss how to classify such act." Id. at 59-60.
Article I. Name, Objects, Provision for Subordinate Councils, Grand Councils and The Supreme Council.
Article II. Subordinate Councils, Membership, Withdrawals, Transfer Cards, Delinquency, Suspensions, Reinstatement, Uninsured Membership, Officers and Elections, Duties of Officers, Vacancies in Office, Honorary Titles, Meetings and Quorum, Special Sessions, Reports, Per Capita Tax to Council having control and jurisdiction over the Subordinate Council, and Representation of Subordinate Councils in the Grand Council.
Article III. Funds, Provision for Widows' and Orphans' Fund, Assessment Fund, Distribution of Assessment Fund, Death Fund, Disability Fund, General Expense Fund and Reserve Funds. The Assessment Fund is created by assessments on insured members, in good standing, to provide a basis for meeting assessment calls. When calls are made upon such members, the proceeds are apportioned 30% to the Death Fund, 40% to the Disability Fund, 5% to the Reserve Funds and 25% to the General Expense Fund.
Article IV. Insurance. Members in good standing are subject to regular quarterly calls of $3 per insured member and the Supreme Counselor has the right to make as many calls, in an amount not to exceed $3 each, as may be required to pay in full all valid claims, together with expenses incurred in maintaining the society and conducting its business. Based on their physical condition, members become insured members of Class A or Class B. Those providing the poorer risk are put in Class B and are entitled to benefits of but one-half the amount of those provided for Class A members. The benefits are in the nature of indemnities against the result of bodily injuries "effected through external, violent and accidental means, . . . which shall be occasioned by the said accident alone and independent of all other causes." There are many limitations upon this liability and, in case of certain changes in the occupation or physical condition of a member, his right to benefits may be reduced or canceled. There are double indemnities for injuries resulting from accidents on passenger trains, etc., and the coverage generally is related to risks normally encountered by commercial travelers. Specific exemptions are made of injuries resulting from engaging in certain hazardous sports or from being under the influence of liquor, etc. Those who may be named as beneficiaries are limited to specified degrees of family relationship. (The form of application makes express reference to the limitations as to beneficiaries contained in the statutes of Ohio.) Provision is made for notices and proofs of claims, for surgical examinations, etc. There is a strict prohibition in § 11 (quoted supra) against the waiver of provisions of the constitution and, in the same Section, there appears the six-month limitation, here in controversy, upon the time within which to bring suits to recover benefits after a claim has been disallowed by the Supreme Executive Committee.
Article V. Grand Councils, Charters for Subordinate Councils, Per Capita Tax payable to Grand Councils and detailed provisions for the operation of Grand Councils.
Article VI. Supreme Council, Charters for Grand Councils, Officers and Elections and detailed provisions for the conduct of the business of the Supreme Council, including the establishment of the Supreme Executive Committee. This committee is to consist of seven members, including the Supreme Counselor, Supreme Secretary, Supreme Treasurer and four specially elected members. It has large powers over the business and activities of the society. Among these provisions are those of examining insurance claims, deciding upon their validity and adjusting them.
Article VII. Prohibition of the use of malt or spirituous liquors in connection with meetings of the society.
Article VIII. Memorial Day in honor of the society's first Supreme Secretary.
Article IX. Special duty of every member to report the name of any member who is an extra hazardous, physical or moral risk.
Article X. Prohibition against donations of funds of the society.
Articles XI, XII and XIII. Trials, Penalties and Appeals relating to violations of the Constitution, By-Laws and Rules, and the divulging of secrets of the society or conduct unbecoming a gentleman.
"ARTICLE XIV. AMENDMENTS. Section 1. Proposed amendments to this Constitution, By-Laws and Articles of Incorporation shall be submitted in writing and filed with the Supreme Secretary of the Order at least six (6) months before the convening of the annual session of the Supreme Council.
"The Supreme Secretary of the Order shall, at least four (4) months before the convening of such annual session, forward to all Grand and Subordinate Councils a copy of the proposed amendments.
"SEC. 2. No amendment to the Constitution, By-Laws or Articles of Incorporation shall be adopted unless it receives the affirmative vote of at least two-thirds (2-3) [2/3] of the members of the Supreme Council present, entitled to vote, at the session when such amendment is voted upon.
"SEC. 3. All amendments to this Constitution, By-Laws and Articles of Incorporation shall take effect on the first day of September following the session of the Supreme Council at which they were adopted, unless the date for becoming effective is otherwise specified by the Supreme Council.
"SEC. 4. All recommendations or resolutions adopted by the Supreme Council which adds [add] to or conflict with this Constitution or By-Laws shall be presented to the Supreme Council at its next annual session as an amendment to the Constitution or By-Laws and shall not become effective until such amendments have been approved by a two-thirds vote of the members present entitled to vote." (Section 4 was added between 1922 and 1931.)
See also, Appel v. Cooper Ins. Co., 76 Ohio St. 52, 80 N.E. 955; Bartley v. National Business Men's Assn., 109 Ohio St. 585, 143 N.E. 386; Young v. Order of United Commercial Travelers, 142 Neb. 566, 7 N.W.2d 81; Burlew v. Fidelity & Casualty Co. of N.Y., 276 Ky. 132, 122 S.W.2d 990; see note, 121 A.I.R. 758; 29 Am. Jur. 1039.
See also, § 31. 1702 (14), S.D. Code of 1939. This section is indicative of a state policy approving the shortening of the general statute as applied to accident policies, but it does not apply directly to or affect transactions of fraternal benefit societies because they are excluded from the general insurance statutes and are placed under the licensing provisions quoted in note 10, supra. The petitioner's constitution, filed under that requirement, fully disclosed its provision on this subject. § 12 (3), c. 229, S.D.L., 1919; § 31. 1708 (3), S.D. Code of 1939.
"10. 0705. Restraint of legal proceedings; void. Every provision in a contract restricting a party from enforcing his rights under it by usual legal proceedings in ordinary tribunals or limiting his time to do so, is void."