Court Opinion

ID: 9639799
Source: CourtListenerOpinion
Date Created: 2023-08-22 16:48:24.464662+00
Date Added: 2024-06-11T18:10:21.622692
License: Public Domain

CLARK, Circuit Judge
(dissenting).
In this case we have a simple contract by an insurance company to pay money to a married woman on the happening of an event, namely, the death of her husband. *668Husband and wife were residents of New York, while the insurance company was located in Massachusetts; whether the contract was made in Massachusetts or in New York is immaterial, since the law is the same in each state. The event has happened, and by the terms of the contract the money should be paid to the woman, now a resident of New York. It is so payable by the law of the place of contract, the place of performance, the forum. Sal-vin v. Salvin, 165 App.Div. 362, 151 N.Y.S. 60; Mutual. Life Ins. Co. v. Allen, 138 Mass. 24, 52 Am.Rep. 245; Connecticut Mutual Life Ins. Co. v. Schaefer, 94 U.S. 457, 24 L.Ed. 251. The promisor offers no objection. What is to prevent the carrying out of this contract as agreed?
The course which leads my brothers to -an obstacle they consider insurmountable seems to me tortuous. In 1922, three years after making the contract, husband and wife moved to Texas; she returned to New York after her divorce in 1925; he remarried and stayed in Texas until he died in 1937. By the peculiar law of' Texas- — said in the anthologies, 52 A.L.R. 386-454 at pp. 397-399, 59 A.L.R. 172, to obtain only in Texas and Quebec— a divorced wife cannot recover insurance on her husband’s life, because Texas insurance law requires a continuing insurable interest to maintain a beneficiary’s rights in a policy. So my brothers find that an involuntary transfer of the wife’s chose in action has taken place in Texas.
Now this idea of an involuntary transfer seems to me only a fiction, and not an apt fiction at that; though once it is uttered, the case is irrevocably decided. No one really made any transfer, nor is there any act which signifies it. The divorce decree did not; it did deal with community property, but no one seems to have thought of this policy in connection with the decree. And the cited case of Hatch v. Hatch, 35 Tex.Civ.App. 373, 80 S.W. 411, holds specifically that the divorce decree does not itself operate as a transfer and is not res judicata as to the policy, and hence the wife is entitled to a later adjudication returning to her the amount she has paid upon the policy. Indeed, an assignment by the husband to the wife of the cash surrender value of a policy in contemplation of divorce is valid. Shoemaker v. American Nat. Insurance Co., Tex. Com. App., 48 S.W.2d 612. The truth is that the peculiar Texas law is not one concerning divorce or property transfers, but is the law of insurance — a strange development of the ancient insurance doctrine of insurable interest.
The necessity of an insurable interest in contracts for insurance was originally developed as a way to save such contracts from judicial disapproval as wagering agreements. Vance, Insurance, 2d Ed., 118-123, 147-164. The idea survived with some moralistic twists in life insurance that otherwise a beneficiary might have an incentive to do away with his insured. But everywhere except in Texas and Quebec, it was held that there need be an insurable interest only at the initiation of the contract; the cessation of that interest does not render the policy invalid. Vance, op. cit. 149-151, 596-597, and cases cited above. The opposite rule applied in Texas is stated in the leading case of Cheeves v, Anders, 87 Tex. 287, 28 S.W. 274, 47 Am. St.Rep. 107, which was not a divorce case at all, but was a case where the assured assigned the policy to his partner at the time the partnership was dissolved. The decisions are based directly on the moralistic rationalization that the other rule would afford inducement to destroy human life. Cheeves v. Anders, supra; Northwestern Mutual Life Ins. Co. v. White-sell e, Tex.Civ.App., 188 S.W. 22, Id., Tex. Com.App., 221 S.W. 575, cited in the opinion.
Hence here is not the case of an assignment, voluntary or involuntary. It is merely the case of not being able to make proof in the Texas courts that one comes within the terms of Texas insurance contracts as construed by their courts. A divorced wife cannot do so; neither can a former partner. The same rule would apply to other relationships, such as a former creditor with the former debtor. Goldbaum v. Blum, 79 Tex. 638, 15 S.W. 564. One must assume that a like result would follow if one took out insurance in favor of his fiancée and later the engagement was broken. Taylor v. Travellers’ Ins. Co., 15 Tex.Civ.App. 254, 39 S.W. 185. . The fact that the proceeds are paid to the insured’s estate does not mean that they go there by transfer. As in the somewhat analogous case of the beneficiary who forfeits his rights by murdering the insured, it is foolish to allow the insurance company to profit by this, to it, fortuitous circumstance. So a resulting trust in favor of the insured’s estate is recognized to take *669this windfall from the insurer to the remaining most likely candidate for it. Vance, Insurance, 598-603. Cf. Cheeves v. Anders, supra; Mayher v. Manhattan Life Ins. Co., 87 Tex. 169, 27 S.W. 124.
In fact, the question really turns upon contract law. The policy ordinarily covers the matter of change of beneficiary; here, indeed, no power to change the beneficiary was reserved. Texas desires to override that contractual provision for reasons of her public policy. She can do so if she has power to determine the meaning and validity of the contract But it is well settled law that the place of contracting governs the terms of an insurance contract — unless, indeed, there is something in the agreement which so definitely outrages the law of the place of performance that the latter would refuse to enforce it. Mutual Life Ins. Co. of New York v. Johnson, 293 U.S. 335, 55 S.Ct. 154, 79 L.Ed. 398; Peoples Life Ins. Co. v. White-side, 5 Cir., 94 F.2d 409, certiorari denied, 304 U.S. 567, 58 S.Ct. 949, 82 L.Ed. 1533; Vance, Insurance, 238; Restatement of Conflict of Laws, § 348; cases collected in 52 L.R.A.,N.S., 275-286; 23 L.R.A.,N.S., 968-982; and 63 L.R.A. 833-869. Hence the statement of Professor Beale in his Conflict of Laws, § 346.4 (quoted in Judge Hand’s opinion as contrary to the result there reached), is quite justified, as is the supporting decision in Pendleton v. Great Southern Life Ins. Co., 135 Old. 40, 273 P. 1007. Indeed, I believe it is a real question whether Texas would go so far as to apply this rule of public policy against a suitor in its courts On a non-Texas contract. All of the cases cited to us dealt with Texas contracts. Ordinarily Texas, too, applies the law of the place of contract. Seiders v. Merchants’ Life Ass’n, 93 Tex. 194, 54 S.W. 753; Fidelity Mutual Life Ins. Co. v. Harris, 94 Tex. 25, 57 S.W. 635, 86 Am. St.Rep. 813; Cowen v. Equitable Life Assur. Soc., 37 Tex.Civ.App. 430, 84 S.W. 404; cf. Manhattan Life Ins. Co. v. Cohen, Tex.Civ.App., 139 S.W. 51. But where neither the place of performance nor the place of suit is in Texas, I can see no reason at all for not allowing the place of contract to govern. All the more should that be the case when otherwise a perfectly normal contract will be set' aside.
It is true that the situation here somewhat suggests the analogy of a transfer because by the Texas rule rights end in one party and begin in another; but it is awkward and not significant to apply the term thus generally, as though we were to say that a public official defeated for reelection transfers his official rights to his successor. Once we get away from a consensual transaction, there is no need of giving extraterritorial effect to this peculiar local doctrine. Even as to voluntary transfers, not all these may be wholly subject to the local law of their situs. While, as the opinion point out, details as to the making of a voluntary assignment — capacity of the parties, form, whether the assignor has an assignable right, and so on — are, like other contracts, subject to the law of the place of contract (Restatement of Conflicts, §§ 348 and 350 with Comment), yet restrictions on an assignment made by an earlier prior contract would surely govern except as against an overriding public policy. Here, since the insured had not reserved power to change the beneficiary, the original contract in that respect should control in determining whether even a voluntary assignment is operative, unless the place of performance has a strong policy to the contrary. The chance happening that the parties were for a time in another jurisdiction with a peculiar rule cannot affect this question of contract law. See Boseman v. Connecticut General Life Ins. Co., 301 U.S. 196, 57 S.Ct. 686, 81 L.Ed. 1036, 110 A.L.R. 732.
What are the limits of the rule here announced by my brothers ? The existence of a divorce decree is not determinative, for the Texas law is not limited to this situation alone. Indeed, the rule logically must extend to all persons lacking insurable interest who have the right to sue in Texas courts on insurance contracts. A New York divorcee, paid-up creditor, former partner, or former fiancee, going into Texas, may find her or his rights under existing insurance policies jeopardized not merely in Texas, but thereafter in all other states. And if this seems absurd, is there any other stopping point, once we start on the rule?
Of course, the law must grow by fictions, by applying analogies persuasive to us, however remote, to concrete cases. 1 do not question the process, but think we must always decide whether the destination is the one we wish to reach. Here we come out With an admittedly antiquated, but heretofore local, doctrine of insurance law now given a wide and uncertain area of operation. And we have reached this *670end at the expense of a woman who received, not alimony, but the burden - of a minor child, and to the advantage of the husband’s estate — or undoubtedly, ultimately to that of the second wife. One may' conclude, too, that the first wife helped to keep the policy alive during her marriage, while the second. one had no interest or expectation in it, for it lapsed soon after the divorce, and this suit concerns only the proceeds. The concept of an involuntary transfer when none was actually contemplated or had should not be employed to such an end. The judgment below should be affirmed.