JARMAN v. KNIGHTS TEMPLARS' & MASONS' LIFE INDEMNITY CO. (Circuit Court, W. D. Missouri, W. D. June 26, 1899.) 1. CONSTITUTIONAL LAW-IMPAIRMENT OF CONTRACTS-LIFE INSURANCE POLICIES. The statute of Missouri (Rev. St. 1889, § 5855), providing that suicide shall not be a defense to any policy of life insurance unless it was contemplated by the insured at the time of his application, is not one relating to the remedy, but enters into the consideration, and becomes a constituent part of every policy of insurance to which it applies; hence such policies are within the provision of the federal constitution against the impairment of contracts, and cannot be affected by a subsequent repeal of the statute. 2. LIFE INSURANCE-MISSOURI STATUTES. The act of 1887 (Rev. St. Mo. 1889, § 5869), relating to foreign insurance companies, which provided that life insurance companies doing business on the assessment plan, and which complied with the act, should not be subject to the general insurance laws of the state, did not repeal the prior statute (Rev. St. 1889, § 5855), cutting off defenses on the ground of suicide, nor was it retroactive, but it merely exempted assessment companies from the operation of such statute as to policies thereafter issued and while section 5869 remained in force. 8. SAME ASSESSMENT COMPANIES-EFFECT OF CHANGE IN CONSTITUTION. A policy of life insurance issued by an assessment company provided for the payment to the widow or heirs of the insured, on his death, of a certain sum, together with the amount of all assessments paid by him during his lifetime. The application, which was made a part of the policy, contained this provision: "I further agree, if accepted, to abide by the constitution, rules and regulations of the company as they now are or may by the constitution be changed hereafter." Held, that such provision could not be construed to authorize the company to reduce the amount payable, under the terms of the policy, by an amendment of its constitution striking out the provision for paying back the assessments paid by a policy holder on his death, but that such an amendment could have only a prospective operation. This was an action on a life insurance policy, tried to the court without a jury, by stipulation of the parties. Harber & Knight, for plaintiff. Saml. B. Huston, Alex. B. Huston, and Hervey B. Hicks, for defendant. PHILIPS, District Judge. This case was submitted to the court without the intervention of a jury, on the agreed statement of facts, with some additional evidence; and the controversy, briefly stated, grows out of substantially the following state of facts: The defendant is a life insurance company, doing business on what is known as the "assessment plan," by which it issues policies of insurance to Masons who become members of the company on application. In 1885 it issued a policy to John P. Jarman, whereby, in case of death and proof thereof, it promised to pay to his wife, or children, or heirs, in the order named, the sum of $5,000 and all assessments paid to the company by the assured. In 1898 the assured died by a gunshot wound inflicted by himself while insane. This suit is brought by his wife to recover on the policy. The principal matters of defense interposed by the defendant are: (1) That the policy exempts the defendant from liability for death resulting from an act of suicide; and (2) if it should be held by the court that said provision of the policy was void, under the statute of Missouri in force at the time of the issue of the policy declaring that the fact of suicide should be no defense to a suit on a life policy, then the defendant is not required to pay to the plaintiff the sum of all the assessments paid in by the assured during his lifetime, for reasons which fully appear in this opinion. The first question, therefore, for decision, arising on the facts and evidence submitted, is, does the fact that the insured died by his own hand defeat the right of recovery on this policy? At the time of the issue of the policy,-which, admittedly, was a Missouri contract,the foilowing provision of the Missouri statute was in force: "In all suits upon policies of insurance on life hereafter issued by any life insurance company authorized to do business in this state, it shall be no defense that the insured committed suicide, unless it shall be shown to the satisfaction of the court or jury trying the cause, that the insured contemplated suicide at the time he made his application for the policy, and any stipulation in the policy to the contrary shall be void." Section 5982, Rev. St. Mo. 1879; section 5855, Rev. St. Mo. 1889. The language of the statute is comprehensive. It applies to all "policies of insurance on life hereafter issued by any life insurance company doing business in this state." On a life policy issued by this same defendant tried in this court, it was distinctly held by Judge Caldwell, on the circuit (Berry v. Indemnity Co., 46 Fed. 439), that this company at the time in question was engaged essentially in life insurance business, and nothing else. This ruling was affirmed by the court of appeals. 1 C. C. A. 561, 50 Fed. 511. It was as distinctly further held in this case that said section of the Missouri statute applied to such policies, and cut off the defense of death by suicide. The policy sued on in that case was issued in 1885, and the act of suicide was committed in November, 1889. As in the case at bar, the act of suicide was subsequent to the enactment of the statute of 1887, now section 5869, Rev. St. Mo. 1889, relied on by defendant to avoid the operation of said section 5855. Said act of 1887, after directing that all insurance companies doing business in the state should make certain returns to the insurance department touching the state of its affairs, and subjecting it to visitation and examination, contained the following clause: "And all such foreign companies are hereby declared to be subject to, and required to conform to, the provisions of section 5912 of the Revised Statutes of Missouri of 1889: provided, always, that nothing herein contained shall subject any corporation doing business under this article to any other provisions or requirements of the general insurance laws of this state, except as distinctly herein set forth." The only feature which, in this respect, differentiates the Berry Case from this, is the fact that in the former it did not appear from the evidence that the defendant company had ever complied with the provisions of the act of 1887, or that it was doing business in Missouri under the requirements and liabilities imposed by the act; while in the case at bar it does appear that, in 1888, the company com plied with said statute, attempting to do business in the state on the assessment plan. It is to be conceded to defendant that, as to policies issued on the assessment plan, subsequent to the statute of 1887 and prior to 1897, said section 5855, denying the defense of suicide, does not apply. Haynie v. Indemnity Co., 139 Mo. 416, 41 S. W. 461. The policy in the Haynie Case was issued in 1888, and the insured committed suicide in 1893. It is on said act of 1887 that the defendant's counsel have builded a most elaborate argument, on the assumption that this act superseded and repealed the provisions of said section 5855 in respect of assessment companies, and therefore the rights of the parties in this action are to be determined as if said section 5855 had been expunged from the statutes at the time the cause of action arose in this case. In support of this contention, reliance is placed upon rulings akin to that in Ewell v. Daggs, 108 U. S. 143, 2 Sup. Ct. 408, which was, in effect, that when the right of a party to a given contract to avoid it on the ground of a statutory enactment based upon the declared public policy of the state, where such right pertains rather to the remedy than an essential element of the contract, inducing its execution, may, by subsequent act of the legislature, be entirely taken away, the parties are remitted to the terms of the contract as expressed on its face. Judge Shiras, who wrote the opinion of the court of appeals in the Berry Case, declined to pass affirmatively upon the correctness of this contention, because it did. not appear from the record before him that the company had complied with the provisions of the act of 1887, entitling it to plead exemption from the operation of said section 5855. But it is quite apparent from the trend of his observations that the inclination of his mind was against the contention of the defendant, if the requisite facts had appeared. In that connection he said: "Before this question can arise, it must be made clear that the legislature of the state intended to repeal, by the act of 1887, the provisions of section 5982 (now section 5855), in its applications to policies previously issued by companies doing business under the assessment plan; and, in our judgment, the intention to repeal the section in this particular is not made clear. In the first place, the legislature of Missouri has not repealed section 5982 (now section 5855). It is still the law of the state that companies engaged in the business of life insurance shall not be permitted to exempt themselves from liability for death by suicide, not contemplated when the application for its insurance is made." His assertion was correct. The act of 1887 only exempted assessment companies from the operation of section 5855. In other words, it only suspended its operation in its application to assessment insurance companies; and, in view of the general law, and especially of the constitution of Missouri, the act of 1887 only had, and could only have, a prospective operation, and in no degree affected antecedent policies issued by such companies. Counsel misconceive the character of section 5855. It is something more than a mere declaration of the state as to its public policy prohibiting such contracts, and affecting merely the remedy, which the legislature might at will revoke, leaving in force the provisions of a policy that an act of suicide could be pleaded to defeat recovery thereon. On the contrary, this statute became a constituent element of the contract itself between the parties, constituting a part of the consideration for entering into the contract. In contemplation of law, it was the same as if it had been written into the face of the policy, that, in case of suit to enforce the payment of a stipulated sum, the defendant should not plead thereto that the insured committed suicide, unless it should be shown that the insured contemplated suicide at the time he made his applicataion for the policy, and any stipulation in the policy to the contrary should be void. Judge Dillon, in White v. Insurance Co., 4 Dill. 177, Fed. Cas. No. 17,545, speaking of another section of this same statute respecting the effect of misrepresentations made in obtaining or securing the policy, said: * * * "We are of opinion that policies of insurance issued and delivered in Missouri, after that act took effect, fall within its prospective operation, and, as to such policies, the act is to be treated as if incorporated therein. The general rule is that the laws in existence are necessarily referred to in all contracts made under such laws, and that no contracts can change the law." This same principle was announced by Chief Justice Sherwood in State v. Berning, 74 Mo. 87: "For whatsoever the law annexes as the incident of a contract, whether granting a privilege or announcing a prohibition, is as much part and parcel thereof as though written therein or indorsed thereon." See, also, Reed v. Painter, 129 Mo. 680, 31 S. W. 919. Again, in the recent case of Cravens v. Insurance Co., 50 S. W. 519-524, the supreme court say: "Being a Missouri contract, the statute then in force, with respect to the subject-matter of the contract, entered into and became a part thereof as much so as if copied therein." We may conclude this part of the discussion by the application of the appropriate language of Mr. Justice Gray in Society v. Clements, 140 U. S. 233, 11 Sup. Ct. 825, which went from this court: "The statute is not directory only, or subject to be set aside by the company with the consent of the assured, but it is mandatory, and controls the nature and terms of the contract into which the company may induce the assured to enter." The provisions of section 5855 being a constituent part of the contract of insurance, it would not have been competent, even had it so attempted, for the legislature to destroy the protecting provisions of this statute by a subsequent repeal thereof (which it does not attempt to do), as it relates to antecedent policies of insurance; this, for the obvious reason that the constitution of the United States prohibits the states from passing any law impairing the obligation of contracts. As said in McCracken v. Hayward, 2 How. 612: ** * "The obligation of a contract consists in its binding force on the party who makes it. This depends on the laws in existence when it is made. These are necessarily referred to in all contracts, and forming a part of them, as the measure of obligation to perform them by the one party and the right acquired by the other. * If any subsequent law affect to diminish the duty, or to impair the right, it necessarily bears on the obligation of the contract, in favor of one party to the injury of the other; hence any law which in its operation amounts to a denial or obstruction of the rights accruing by the contract, though professing to act only on the remedy, is directly obnoxious to the prohibition of the constitution." The act of 1887 was not retrospective in its operation. "It is a sound rule of construction that a statute should have a prospective operation only, unless its terms show clearly a legislative intention that it should operate retrospectively. And some states have deemed it just and wise to forbid such laws altogether by their constitution." Cooley, Const. Lim (5th Ed.) 456. The constitution of Missouri (article 2, § 15) declares "that no ex post facto law, nor law impairing the obligation of contracts, or retrospective in its operation," etc., "can be passed by the general assembly." But what is still more fatal to the position of defendant is the fact that in March, 1897, the legislature of Missouri (Laws Mo. 1897; p. 130) repealed said act of 1887 (section 5869 aforesaid of the Revised Statutes of Missouri of 1889), and expressly subjected insurance companies on the assessment plan to the provisions of said section 5855; thus clearly showing the legislative construction that, by the act of 1887, said section 5855 was not repealed, but such companies were only for the time being exempted from its operation. Clearly enough, the mere repeal of said act of 1887 would have remitted such insurance companies, and such policies of insurance as the one in question, to the operation of section 5855, without the affirmative provision expressly applying it to such companies. The effect, therefore, of this act of 1897, was to place this contract of insurance in the precise attitude in which it stood in 1885, when the policy was issued, and would avail this plaintiff, the death of the assured occurring subsequent to the act of 1897. At all events, it effectually meets the argument of counsel. If the act of 1887 was a recall of the public policy of the state respecting such companies, as declared in said. section 5855, this public policy was reasserted by the act of 1897. In this respect the facts of the case are essentially different from that class of cases cited by counsel in which the statutes in question had been repealed. The result is that the first question arising on this record must be answered in the negative. The remaining question for consideration is as to the amount of recovery on this policy. On its face, the policy provides that, within 60 days after notice and proof of death, the company will pay the widow, children, etc., in the order named, the sum of $5,000, and all money paid by the assured in assessments, subject to the limitation as to the amount of such payment provided in section 1 of article 7 of the constitution of the company, printed on the back of the policy, which section is as follows: "Upon due notice and satisfactory proof of death of a member of this company, the board of directors shall, within 60 days, pay the widow, children, or heirs of the deceased member (and in the order named, unless otherwise ordered by the member during his lifetime or in his will) the amount set forth in the deceased member's policy of membership: provided, that the policy or membership for $5.000 shall be good for all money in the death fund arising from one assessment, provided it shall not exceed $5,000, and all money paid on the policy in assessments." It is admitted by the agreed statement of facts that, at the time of the death of the deceased, he held a policy in the company for $5,000, and that the assessments paid by him amounted to $811.83. Clearly enough, therefore, without something more, the amount of recovery on |