U.S. Supreme Court HOME INS. CO. v. DICK, 281 U.S. 397 (1930)

[Page 281 U.S. 397, 403]

Mexican corporation in Texas, in personam, is not material, if a cause of action against it existed at the time of garnishment and there was within the state a res belonging to it. But they deny the existence of the cause of action or of the res.

Their defense rests upon the following facts: This suit was not commenced till more than one year after the date of the loss. The policy provided: 'It is understood and agreed that no judicial suit or demand shall be entered before any tribunal for the collection of any claim under this policy, unless such suits or demands are filed within one year counted as from the date on which such damage occurs.' This provision was in accord with the Mexican law to which the policy was expressly made subject. [Footnote 1] It was issued by the Mexican company in Mexico to one Bonner, of Tampico, Mexico, and was there duly assigned to Dick prior to the loss. It covered the vessel only in certain Mexican waters. The premium was paid in Mexico; and the loss was 'payable in the City of Mexico in current funds of the United States of Mexico, or their equivalent elsewhere.' [Footnote 2] At the time the policy was is-

[Page 281 U.S. 397, 404]

sued, when it was assigned to him, and until after the loss, Dick actually resided in Mexico, although his permanent residence was in Texas. The contracts of reinsurance were effected by correspondence between the Mexican company in Mexico and the New York companies in New York. Nothing thereunder was to be done, or was in fact done, in Texas.

In the trial court, the garnishees contended that, since the insurance contract was made and was to be performed in Mexico, and the one- year provision was valid by its laws, Dick's failure to sue within one year after accrual of the alleged cause of action was a complete defense to the suit on the policy; that this failure also relieved the garnishees of any obligation as reinsurers, the same defense being open to them, New York State Marine Ins. Co. v. Protection Ins. Co., 1 Story, 458, 460, Fed. Cas. No. 10,216; and that they, consequently, owed no debt to the Mexican company subject to garnishment. [Footnote 3] To this defense Dick demurred, on the ground that article 5545 of the Texas Revised Civil Statutes (1925) provides: 'No person, firm, corporation, association or combination of whatsoever kind shall enter into any stipulation, contract, or agree-

[Page 281 U.S. 397, 406]

the law of the place where it is made and is to be performed, matters which relate only to the remedy are unquestionably governed by the lex fori; and that, even if the Texas court erred in holding the statute applicable to this contract, the error is one of state law or of the interpretation of the contract, and is not reviewable here.

The contention is unsound. There is no dispute as to the meaning of the provision in the policy. It is that the insurer shall not be liable unless suit is brought within one year of the loss. Whether the provision be interpreted as making the commencement of a suit within the year a condition precedent to the existence of a cause of action, or as making failure to sue within the year a breach of a condition subsequent which extinguishes the cause of action, is not of legal significance here. [Footnote 4] Nor are we concerned with the question whether the provision is properly described as relating to remedy or to substance. However characterized, it is an express term in the contract of the parties by which the right of the insurer and the correlative obligation of the insurer are defined. If effect is given to the clause, Dick cannot recover from the Mexican corporation, and the garnishees cannot be compelled to pay. If, on the other hand, the statute is applied to the contract, it admittedly abrogates a contractual right

[Page 281 U.S. 397, 409]

See Atchafalaya Land Co. v. Williams Cypress Co., , 42 S. Ct. 284; National Surety Co. v. Architectural Decorating Co., 226 U.S. 276, 33 S. Ct. 17; Vance v. Vance, 108 U.S. 514, 2 S. Ct. 854. In those cases, the parties had not stipulated a time limit for the enforcement of their obligations. It is true that a state may extend the time within which suit may be brought in its own courts, if, in doing so, it violates no agreement of the parties. [Footnote 6] And, in the absence of a contractual provision, the local statute of limitation may be applied to a right created in another jurisdiction even where the remedy in the latter is barred. [Footnote 7] In such cases, the rights and obligations of the parties are not varied. When, however, the parties have expressly agreed upon a time limit on their obligation, a statute which invalidates the agreement and directs enforcement of the contract after the time has expired increases their obligation and imposes a burden not contracted for.

[Page 281 U.S. 397, 412]

ited to suits brought against them as defendants. For this objection was not made or considered below on constitutional grounds.

Reversed. Footnotes

Footnote 1 The policy contained also the provision: 'The present policy is subjected to the disposition of the Commercial Code, in that it does not alter or modify the stipulations which that same contains.' The dispositions of the Commercial Code thus incorporated are: 'Article 1038. The rights of action derived from commercial acts shall be subject to prescription in accordance with the provisions of this Code. Article 1039. The periods fixed for the enforcement of rights of action arising out of commercial acts shall be fatal except restitution against same is given. Article 1043. One year shall prescribe actions derived from contracts of life insurance, sea and land.'

Footnote 2 The loss was made payable to Dick and the Texas & Gulf Steamship Company as their interests might appear. The steamship company and Suderman & Young, Inc., assignee of part of the cause of action, intervened as plaintiffs, and are joined with Dick as appellees. As there are no rights peculiar to them, they need not be further referred to. Dick contends that, since the policy was payable to the Texas & Gulf Steamship Company, the contract was performable in Texas. The contention is in conflict with the quoted language of the policy, and there is no provision otherwise lending support to the argument. Texas is nowhere mentioned in the policy. Moreover, there is nothing in the record to show that the steamship company's sole place of business was in Texas. The state courts made no findings on this claim.

Footnote 3 Besides the defense here discussed the answers both of the Mexican corporation and of the garnishees alleged: (2) That the suit was not brought within the period provided by the Commercial Code of Mexico, and that thereby the right of action was completely barred upon the expiration of one year; (3) that the policy was void because of plaintiff's misrepresentations as to the value of the vessel; (4) that the vessel was not a total loss, and was abandoned, in violation of the terms of the policy. None of these defense needs to be considered.

Footnote 4 That a provision requiring notice of loss within a fixed period and one requiring the bringing of suit stand upon the same footing was held in Riddlesbarger v. Hartford Insurance Co., 7 Wall. 386, 390. Compare Semmes v. Hartford Insurance Co., 13 Wall. 158, 161. The validity and effectiveness of a clause limiting the time for suit, in the absence of a controlling statute, was recognized also in Texas, Suggs v. Travelers' Insurance Co., 71 Tex. 579, 9 S. W. 676, 1 L. R. A. 847. In that case, decided before the enactment of article 5545, the Texas court upheld a similar provision in an insurance policy against the claim of an infant without capacity to sue. The court described the nature of the provision thus at page 581 of 71 Tex., 9 S. W. 676, 677: 'It is said to differ from the statutory limitation in this: that it does not merely deny the remedy, but forfeits the liability, when the suit is not brought within the stipulated time.'

Footnote 5 The division of this court in the Tabacos and Dodge Cases was not on the principle here stated, but on the question of fact whether there were in those cases things done within the state of which the state could property lay hold as the basis of the regulations there imposed. Compare Bothwell v. Buckabee, Mears Co., 275 U.S. 274, 48 S. Ct. 124; Palmetto Fire Ins. Co. v. Conn, 272 U.S. 295, 47 S. Ct. 88. In the absence of any such things, as in this case, the Court was agreed that a state is without power to impose either public or private obligations on contracts made outside of the state and not to be performed there. Compare Mutual Life Insurance Co. v. Liebing, 259 U.S. 209, 42 S. Ct. 407; E. Merick Dodd, Jr., 'The Power of the Supreme Court to Review State Decisions in the Field of Conflict of Laws,' 39 Harv. L. Rev. (1926) 533, 548.

Footnote 6 The state courts placed some reliance on Campbell v. Holt, 115 U.S. 620, 6 S. Ct. 209. Whether, as there held, a statute of limitations may also be lengthened so as to affect liabilities already barred is not here pertinent. There is a clear difference between the revival of a liability which is unenforceable only because a statute has barred the remedy regardless of the will of the parties, and the extension of a liability beyond the limit expressly agreed upon by the parties. Compare National Surety Co. v. Architectural Decorating Co., 226 U.S. 276, 282, 33 S. Ct. 17; William Danzer & Co. v. Gulf Island R. R. Co., 268 U.S. 633, 636, 45 S. Ct. 612.

Footnote 7 Whether a distinction is to be drawn between statutes of limitation which extinguish or limit the right and those which merely bar the remedy, we need not now determine. Compare Davis v. Mills, , 24 S. Ct. 692, and Texas Portland Cement Co. v. McCord, 233 U.S. 157, 34 S. Ct. 550, with Canadian Pac. Ry. Co. v. Johnston ( C. C. A.) 61 F. 738, 25 L. R. A. 470.