The Full Faith and Credit Clause requires states to recognize, among other things, the public acts and records of other states. However, the application of this clause has been unevenly applied in relation to actions on divorce, probate, and contracts. The states are not always required to subject their own laws to the laws of another state.
United States Library of Congress, The Constitution of the United States of America: Analysis and Interpretation
The most important class of cases related to the Full Faith and Credit Clause are those in which the respondent to a suit for divorce offers in defense an earlier decree from the courts of a sister state. By the almost universally accepted view prior to 1906, a proceeding in divorce was one against the marriage status, i.e., in rem, and hence might be validly brought by either party in any state where he or she was bona fide domiciled;1 and, conversely, when the plaintiff did not have a bona fide domicile in the state, a court could not render a decree binding in other states even if the nonresident defendant entered a personal appearance.2
In 1906, however, by a vote of five to four, the Court departed from its earlier ruling, rendered five years previously in Atherton v. Atherton,3 and in Haddock v. Haddock,4 it announced that a divorce proceeding might be viewed as one in personam. In the former case it was held, in the latter case denied, that a divorce granted a husband without personal service upon the wife, who at the time was residing in another state, was entitled to recognition under the full faith and credit clause and the acts of Congress; the difference between the cases consisted solely in the fact that in the Atherton case the husband had driven the wife from their joint home by his conduct, while in the Haddock case he had deserted her. The court that granted the divorce in Atherton was held to have had jurisdiction of the marriage status, with the result that the proceeding was one in rem and hence required only service by publication upon the respondent. Haddock's suit, on the contrary, was held to be as to the wife in personam and so to require personal service upon her or her voluntary appearance, neither of which had been had; although, notwithstanding this, the decree in the latter case was held to be valid in the state where obtained because of the state's inherent power to determine the status of its own citizens. The upshot was a situation in which a man and a woman, when both were in Connecticut, were divorced; when both were in New York, were married; and when the one was in Connecticut and the other in New York, the former was divorced and the latter married. In Atherton, the Court had earlier acknowledged that "a husband without a wife, or a wife without a husband, is unknown to the law."
The practical difficulties and distresses likely to result from such anomalies were pointed out by critics of the decision at the time. In point of fact, they have been largely avoided, because most of the state courts have continued to give judicial recognition and full faith and credit to one another's divorce proceedings on the basis of the older idea that a divorce proceeding is one in rem, and that if the applicant is bona fide domiciled in the state the court has jurisdiction in this respect. Moreover, until the second of the Williams v. North Carolina cases5 was decided in 1945, there had not been manifested the slightest disposition to challenge judicially the power of the states to determine what shall constitute domicile for divorce purposes. A few years before, the Court in Davis v. Davis6 rejected contentions adverse to the validity of a Virginia decree of which enforcement was sought in the District of Columbia. In this case, a husband, after having obtained in the District a decree of separation subject to payment of alimony, established years later a residence in Virginia and sued there for a divorce. Personally served in the District, where she continued to reside, the wife filed a plea denying that her husband was a resident of Virginia and averred that he was guilty of a fraud on the court in seeking to establish a residence for purposes of jurisdiction. In ruling that the Virginia decree, granting to the husband an absolute divorce minus any alimony payment, was enforceable in the District, the Court stated that in view of the wife's failure, while in Virginia litigating her husband's status to sue, to answer the husband's charges of willful desertion, it would be unreasonable to hold that the husband's domicile in Virginia was not sufficient to entitle him to a divorce effective in the District. The finding of the Virginia court on domicile and jurisdiction was declared to bind the wife. Davis is distinguishable from the Williams decisions in that in the former determination of the jurisdictional prerequisite of domicile was made in a contested proceeding whereas in the Williams cases it was not.
In Williams I and Williams II, the husband of one marriage and the wife of another left North Carolina, obtained six-week divorce decrees in Nevada, married there, and resumed their residence in North Carolina where both previously had been married and domiciled. Prosecuted for bigamy, the defendants relied upon their Nevada decrees and won the preliminary round of this litigation, that is, in Williams I,7 when a majority of the Justices, overruling Haddock v. Haddock, declaring that in this case, the Court must assume that the petitioners for divorce had a bona fide domicile in Nevada and not that their Nevada domicile was a sham. "[E]ach State, by virtue of its command over the domiciliaries and its large interest in the institution of marriage, can alter within its own borders the marriage status of the spouse domiciled there, even though the other spouse is absent. There is no constitutional barrier if the form and nature of substituted service meet the requirements of due process." Accordingly, a decree granted by Nevada to one, who, it is assumed, is at the time bona fide domiciled therein, is binding upon the courts of other states, including North Carolina in which the marriage was performed and where the other party to the marriage is still domiciled when the divorce was decreed. In view of its assumptions, which it justified on the basis of an inadequate record, the Court did not here pass upon the question whether North Carolina had the power to refuse full faith and credit to a Nevada decree because it was based on residence rather than domicile or because, contrary to the findings of the Nevada court, North Carolina found that no bona fide domicile had been acquired in Nevada.8
Presaging what ruling the Court would make when it did get around to passing upon the latter question, Justice Jackson, dissenting in Williams I, protested that "this decision repeals the divorce laws of all the states and substitutes the law of Nevada as to all marriages one of the parties to which can afford a short trip there. . . . While a state can no doubt set up its own standards of domicile as to its internal concerns, I do not think it can require us to accept and in the name of the Constitution impose them on other states. . . . The effect of the Court's decision today – that we must give extraterritorial effect to any judgment that a state honors for its own purposes—is to deprive this Court of control over the operation of the full faith and credit and the due process clauses of the Federal Constitution in cases of contested jurisdiction and to vest it in the first state to pass on the facts necessary to jurisdiction."9
Notwithstanding that one of the deserted spouses had died since the initial trial and that another had remarried, North Carolina, without calling into question the status of the latter marriage, began a new prosecution for bigamy; when the defendants appealed the conviction resulting therefrom, the Supreme Court, in Williams II,10 sustained the adjudication of guilt as not denying full faith and credit to the Nevada divorce decree. Reiterating the doctrine that jurisdiction to grant divorce is founded on domicile,11 the Court held that a decree of divorce rendered in one state may be collaterally impeached in another by proof that the court that rendered the decree lacked jurisdiction (the parties not having been domiciled therein), even though the record of proceedings in that court purports to show jurisdiction.12
Fears registered by the dissenters in the second Williams case that it might undermine the stability of all divorces and that the court of each forum state, by its own independent determination of domicile, might refuse recognition of foreign decrees, were temporarily set at rest by Sherrer v. Sherrer,13 which required Massachusetts, a state of domiciliary origin, to accord full faith and credit to a 90-day Florida decree that the husband had contested. The husband, upon receiving notice by mail, retained Florida counsel who entered a general appearance and denied all allegations in the complaint, including the wife's residence. At the hearing, the husband, though present in person and by counsel, did not offer evidence in rebuttal of the wife's proof of her Florida residence, and, when the Florida court ruled that she was a bona fide resident, the husband did not appeal. Because the findings of the requisite jurisdictional facts, unlike those in the second Williams case, were made in proceedings in which the defendant appeared and participated, the requirements of full faith and credit were held to bar him from collaterally attacking such findings in a suit instituted by him in his home state of Massachusetts, particularly in the absence of proof that the divorce decree was subject to such collateral attack in a Florida court. Having failed to take advantage of the opportunities afforded him by his appearance in the Florida proceeding, the husband was thereafter precluded from relitigating in another state the issue of his wife's domicile already passed upon by the Florida court.
In Coe v. Coe,14 embracing a similar set of facts, the Court applied like reasoning to reach a similar result. Massachusetts again was compelled to recognize the validity of a six-week Nevada decree obtained by a husband who had left Massachusetts after a court of that state had refused him a divorce and had granted his wife separate support. In the Nevada proceeding, the wife appeared personally and by counsel filed a cross-complaint for divorce, admitted the husband's residence, and participated personally in the proceedings. After finding that it had jurisdiction of the plaintiff, defendant, and the subject matter involved, the Nevada court granted the wife a divorce, which was valid, final, and not subject to collateral attack under Nevada law. The husband married again, and on his return to Massachusetts, his ex-wife petitioned the Massachusetts court to adjudge him in contempt for failing to make payments for her separate support under the earlier Massachusetts decree. Inasmuch as there was no intimation that under Massachusetts law a decree of separate support would survive a divorce, recognition of the Nevada decree as valid accordingly necessitated a rejection of the ex-wife's contention.
Appearing to review Williams II, and significant for the social consequences produced by the result it decreed, is Rice v. Rice.15 To determine the widowhood status of the party litigants in relation to inheritance of property of a husband who had deserted his first wife in Connecticut, had obtained an ex parte divorce in Nevada, and after remarriage, had died without ever returning to Connecticut, the first wife, joining the second wife and the administrator of his estate as defendants, petitioned a Connecticut court for a declaratory judgment. After having placed upon the first wife the burden of proving that the decedent had not acquired a bona fide domicile in Nevada, and after giving proper weight to the claims of power by the Nevada court, the Connecticut court concluded that the evidence sustained the contentions of the first wife, and in so doing, it was upheld by the Supreme Court. Sherrer v. Sherrer and Coe v. Coe, previously discussed, were declared not to be in point, because no personal service had been made upon the first wife, nor had she in any way participated in the Nevada proceedings. She was not, therefore, precluded from challenging the findings of the Nevada court that the decedent was, at the time of the divorce, domiciled in that state.16
In Esenwein v. Commonwealth,17 decided on the same day as the second Williams case, the Supreme Court also sustained a Pennsylvania court in its refusal to recognize an ex parte Nevada decree on the ground that the husband who obtained it never acquired a bona fide domicile in the latter state. In this instance, the husband and wife had separated in Pennsylvania, where the wife was granted a support order; after two unsuccessful attempts to win a divorce in that state, the husband departed for Nevada. Upon the receipt of a Nevada decree, the husband thereafter established a residence in Ohio and filed an action in Pennsylvania for total relief from the support order. In a concurring opinion, in which he was joined by Justice Black, Justice Douglas stressed the "basic difference between the problem of marital capacity and the problem of support," and stated that it was "not apparent that the spouse who obtained the decree can defeat an action for maintenance or support in another State by showing that he was domiciled in the State which awarded him the divorce decree," unless the other spouse appeared or was personally served. "The State where the deserted wife is domiciled has a deep concern in the welfare of the family deserted by the head of the household. If he is required to support his former wife, he is not made a bigamist and the offspring of his second marriage are not bastardized." Or, as Justice Rutledge succinctly stated in a concurring opinion, "the jurisdictional foundation for a decree in one state capable of foreclosing an action for maintenance or support in another may be different from that required to alter the marital status with extraterritorial effect."18
Three years later, but on this occasion speaking for a majority of the Court, Justice Douglas reiterated these views in Estin v. Estin.19 In this case, a New York court had granted a wife a decree of separation and awarded her alimony. Subsequently, in Nevada, her husband obtained an ex parte divorce decree, which made no provision for alimony. He ceased paying the New York-awarded alimony, and the wife sued him in New York. The husband argued that the Nevada decree had wiped out the alimony claim, but Justice Douglas found that "Nevada had no power to adjudicate [the wife's] rights in the New York judgment, [and] New York need not give full faith and credit to that phase of Nevada's judgment. . . . . The result in this situation is to make the divorce divisible—to give effect to the Nevada decree insofar as it affects marital status and to make it ineffective on the issue of alimony."20 Accordingly, the Nevada decree could not prevent New York from applying its own rule of law which, unlike that of Pennsylvania,21 does permit a support order to survive a divorce decree.22
Such a result was justified as "accommodat[ing] the interests of both Nevada and New York in this broken marriage by restricting each State to the matters of her dominant concern,"23 the concern of New York being that of protecting the abandoned wife against impoverishment. In Simons v. Miami National Bank,24 the Court held that a dower right in the deceased husband's estate is extinguished even though a divorce decree was obtained in a proceeding in which the nonresident wife was served by publication only and did not make a personal appearance.25 The Court found the principle of Estin v. Estin26 inapplicable. In Simons, the Court rejected the contention that the forum court, in giving recognition to the foreign court's separation decree providing for maintenance and support, has to allow for dower rights in the deceased husband's estate in the forum state.27 Full faith and credit is not denied to a sister state's separation decree, including an award of monthly alimony, where nothing in the foreign state's separation decree could be construed as creating or preserving any interest in the nature of or in lieu of dower in any property of the decedent, wherever located and where the law of the forum state did not treat such a decree as having such effect nor indicate such an effect irrespective of the existence of the foreign state's decree.28
A by-product of divorce litigation are decrees for the payment of alimony, judgments for accrued and unpaid installments of alimony, and judicial awards of the custody of children, all of which necessitate application of the Full Faith and Credit Clause when extrastate enforcement is sought for them. Thus, a judgment in State A for alimony in arrears and payable under a prior judgment of separation that is not by its terms conditional nor subject by the law of State A to modification or recall, and on which execution was directed to issue, is entitled to recognition in the forum state. Although an obligation for accrued alimony could have been modified or set aside in State A prior to its merger in the judgment, such a judgment, by the law of State A, is not lacking in finality.29 As to the finality of alimony decrees in general, the Court had previously ruled that where such a decree is rendered, payable in future installments, the right to such installments becomes absolute and vested on becoming due, provided no modification of the decree has been made prior to the maturity of the installments.30 However, a judicial order requiring the payment of arrearages in alimony, which exceeded the alimony previously decreed, is invalid for want of due process, the respondent having been given no opportunity to contest it.31 "A judgment obtained in violation of procedural due process," said Chief Justice Stone, "is not entitled to full faith and credit when sued upon in another jurisdiction."32
An example of a custody case was one involving a Florida divorce decree that was granted ex parte to a wife who had left her husband in New York, where he was served by publication. The decree carried with it an award of the exclusive custody of the child, whom the day before the husband had secretly seized and brought back to New York. The Court ruled that the decree was adequately honored by a New York court when, in habeas corpus proceedings, it gave the father rights of visitation and custody of the child during stated periods and exacted a surety bond of the wife conditioned on her delivery of the child to the father at the proper times,33 it having not been "shown that the New York court in modifying the Florida decree exceeded the limits permitted under Florida laws. There is therefore a failure of proof that the Florida decree received less credit in New York than it had in Florida."
Answering a question left open in the preceding holding as to the binding effect of the ex parte award, the Court more recently acknowledged that, in a proceeding challenging a mother's right to retain custody of her children, a state is not required to give effect to the decree of another state's court, which had never acquired personal jurisdiction over the mother of her children, and which awarded custody to the father as the result of an ex parte divorce action instituted by him.34 In Kovacs v. Brewer,35 however, the Court indicated that a finding of changed circumstances rendering observance of an absentee foreign custody decree inimical to the best interests of the child is essential to sustain the validity of the forum court's refusal to enforce a foreign decree, rendered with jurisdiction over all the parties but the child, and revising an initial decree by transferring custody from the paternal grandfather to the mother. However, when, as is true in Virginia, agreements by parents as to shared custody of a child do not bind the state's courts, the dismissal by a Virginia court of a habeas corpus petition instituted by a father to obtain custody was not res judicata in that state; therefore, even if the Full Faith and Credit Clause were applicable to child custody decrees, it would not require a South Carolina court, in a custody suit instituted by the wife, to recognize a court order not binding in Virginia.36
The doctrine of divisible divorce, as developed by Justice Douglas in Estin v. Estin,37 may have become the prevailing standard for determining the enforceability of foreign divorce decrees. If this is the case, then it may be that an ex parte divorce, founded upon acquisition of domicile by one spouse in the state that granted it, is effective to destroy the marital status of both parties in the state of domiciliary origin and probably in all other states. The effect is to preclude subsequent prosecutions for bigamy but not to alter rights as to property, alimony, or custody of children in the state of domiciliary origin of a spouse who neither was served nor appeared personally.
In any event, the accuracy of these conclusions has not been impaired by any decision of the Court since 1948. Thus, in Armstrong v. Armstrong,38 an ex parte divorce decree obtained by the husband in Florida was deemed to have been adequately recognized by an Ohio court when, with both parties before it, it disposed of the wife's suit for divorce and alimony with a decree limited solely to an award of alimony.39 Similarly, a New York court was held not bound by an ex parte Nevada divorce decree, rendered without personal jurisdiction over the wife, to the extent that it relieved the husband of all marital obligations, and in an ex parte action for separation and alimony instituted by the wife, it was competent to sequester the husband's property in New York to satisfy his obligations to the wife.40
Many judgments, enforcement of which has given rise to litigation, embrace decrees of courts of probate respecting the distribution of estates. In order that a court have jurisdiction of such a proceeding, the decedent must have been domiciled in the state, and the question whether he was so domiciled at the time of his death may be raised in the court of a sister state.41 Thus, when a court of State A, in probating a will and issuing letters, in a proceeding to which all distributees were parties, expressly found that the testator's domicile at the time of death was in State A, such adjudication of domicile was held not to bind one subsequently appointed as domiciliary administrator c.t.a. in State B, in which he was liable to be called upon to deal with claims of local creditors and that of the State itself for taxes, he having not been a party to the proceeding in State A. In this situation, it was held, a court of State C, when disposing of local assets claimed by both personal representatives, was free to determine domicile in accordance with the law of State C.42
Similarly, there is no such relation of privity between an executor appointed in one state and an administrator c.t.a. appointed in another state as will make a decree against the latter binding upon the former.43 On the other hand, judicial proceedings in one state, under which inheritance taxes have been paid and the administration upon the estate has been closed, are denied full faith and credit by the action of a probate court in another state in assuming jurisdiction and assessing inheritance taxes against the beneficiaries of the estate, when under the law of the former state the order of the probate court barring all creditors who had failed to bring in their demand from any further claim against the executors was binding upon all.44 What is more important, however, is that the res in such a proceeding, that is, the estate, in order to entitle the judgment to recognition under Article IV, 1, must have been located in the state or legally attached to the person of the decedent. Such a judgment is accordingly valid, generally speaking, to distribute the intangible property of the decedent, though the evidences thereof were actually located elsewhere.45 This is not so, on the other hand, as to tangibles and realty. In order that the judgment of a probate court distributing these be entitled to recognition under the Constitution, they must have been located in the state; as to tangibles and realty outside the state, the decree of the probate court is entirely at the mercy of the lex rei sitae.46 So, the probate of a will in one state, while conclusive in that state, does not displace legal provisions necessary to its validity as a will of real property in other states.47
That a statute legitimizing children born out of wedlock does not entitle them by the aid of the Full Faith and Credit Clause to share in the property located in another state is not surprising, in view of the general principle (to which there are exceptions) that statutes do not have extraterritorial operation.48 For the same reason, adoption proceedings in one state are not denied full faith and credit by the law of the sister state that excludes children adopted by proceedings in other states from the right to inherit land in the sister state.49
Garnishment proceedings combine some of the elements of both an in rem and an in personam action. Suppose that A owes B and B owes C, and that the two former live in a different state from C. A, while on a brief visit to C's state, is presented with a writ attaching his debt to B and also a summons to appear in court on a named day. The result of the proceedings thus instituted is that a judgment is entered in C's favor against A to the amount of his indebtedness to B. Subsequently A is sued by B in their home state and offers the judgment, which he has in the meantime paid, in defense. It was argued on behalf of B that A's debt to him had a situs in their home state and furthermore that C could not have sued B in this same state without formally acquiring a domicile there. Both propositions were, however, rejected by the Court, which held that the judgment in the garnishment proceedings was entitled to full faith and credit as against B's action.50
Although the language of section one suggests that the same respect should be accorded to "public acts" that is accorded to "judicial proceedings" ("full faith and credit shall be given in each State to the public acts, records, and judicial proceedings of every other State"), and the Court has occasionally relied on this parity of treatment,51 the Court has usually differentiated "the credit owed to laws (legislative measures and common law) and to judgments."52 The current understanding is that the Full Faith and Credit Clause is "exacting" with respect to final judgments of courts, but "is less demanding with respect to choice of laws."53
The Court has explained that, where a statute or policy of the forum state is set up as a defense to a suit brought under the statute of another state or territory, or where a foreign statute is set up as a defense to a suit or proceedings under a local statute, the conflict is to be resolved, not by giving automatic effect to the Full Faith and Credit Clause and thus compelling courts of each state to subordinate their own statutes to those of others, but by weighing the governmental interests of each jurisdiction.54 That is, the Full Faith and Credit Clause, in its design to transform the states from independent sovereigns into a single unified nation, directs that a state, when acting as the forum for litigation having multistate aspects or implications, respect the legitimate interests of other states and avoid infringement upon their sovereignty. But because the forum state is also a sovereign in its own right, in appropriate cases it may attach paramount importance to its own legitimate interests.55
As such, a state need not "substitute for its own statute, applicable to persons and events within it, the statute of another state reflecting a conflicting and opposed policy," so long as the state does not adopt a "policy of hostility to the" public acts of that other state in so doing.56 In recent years, the Court has, in protracted litigation by a Nevada citizen in a Nevada court over alleged abusive practices by a California state agency, twice interpreted the "policy of hostility" standard.57 In 2003, in Franchise Tax Board of California v. Hyatt, the Supreme Court held that the Nevada Supreme Court did not exhibit "hostility" in declining to apply a California law affording complete immunity to state agencies, because the state high court had, in considering "comity principles with a healthy regard for California's sovereign status," legitimately relied on "the contours of Nevada's own sovereign immunity from suit as a benchmark for its analysis."58 Thirteen years later, after the case had been remanded and the Nevada Supreme Court had crafted a "special rule" for damages in the matter wherein the California state agency could not rely on the Nevada sovereign immunity statute limiting liability to $50,000, the Supreme Court reviewed whether the Nevada court's ruling conflicted with the Full Faith and Credit Clause.59 In contrast to the 2003 ruling, the 2016 ruling held that the Nevada Supreme Court had acted in violation of the Full Faith and Credit Clause. Specifically, the High Court concluded that upholding the Nevada Supreme Court's "special rule"—which was supported by a "conclusory statement" respecting California's lack of oversight of its own agencies and was viewed by the Court as reflecting a "policy of hostility to the public Acts' of a sister State"—would allow for a "system of special and discriminatory rules" that conflicted with the Constitution's "vision of 50 individual and equally dignified States."60 While the Franchise Tax Board litigation demonstrates that the "policy of hostility" standard still exists as a threshold inquiry into whether a state is providing full faith and credit to the public acts of a sister state, ordinarily a state has significant discretion in applying their own choice of law provisions in matters arising in that state's courts, and the Court will not engage in any broad "balancing-of-interests" approach to determine the appropriate application of a given state law.61
The initial effort in this direction was made in connection with transitory actions based on statute. Earlier, such actions had rested upon the common law, which was fairly uniform throughout the states, so that there was usually little discrepancy between the law under which the plaintiff from another jurisdiction brought his action (lex loci) and the law under which the defendant responded (lex fori). In the late 1870s, however, the states, abandoning the common law rule on the subject, began passing laws that authorized the representatives of a decedent whose death had resulted from injury to bring an action for damages.62 The question at once presented itself whether, if such an action was brought in a state other than that in which the injury occurred, it was governed by the statute under which it arose or by the law of the forum state, which might be less favorable to the defendant. Nor was it long before the same question presented itself with respect to transitory action ex contractu, where the contract involved had been made under laws peculiar to the state where made, and with those laws in view.
In Chicago & Alton R.R. v. Wiggins Ferry Co.,63 the Court indicated that it was the law under which the contract was made, not the law of the forum state, that should govern. Its utterance on the point was, however, not merely dictum, but was based on an error, namely, the false supposition that the Constitution gives "acts" the same extraterritorial operation as the Act of 1790 does judicial records and proceedings. Notwithstanding which, this dictum is today the basis of the settled rule that the defendant in a transitory action is entitled to all the benefits resulting from whatever material restrictions the statute under which plaintiff's rights of action originated sets thereto, except that courts of sister states cannot be thus prevented from taking jurisdiction in such cases.64
However, the modern doctrine permits a forum state with sufficient contacts with the parties or the matter in dispute to follow its own law. In Allstate Ins. Co. v. Hague,65 the decedent was a Wisconsin resident who had died in an automobile accident within Wisconsin near the Minnesota border in the course of his daily employment commute to Wisconsin. He had three automobile insurance policies on three automobiles, each limited to $15,000. Following his death, his widow and personal representative moved to Minnesota, and she sued in that state. She sought to apply Minnesota law, under which she could "stack" or aggregate all three policies, permissible under Minnesota law but not allowed under Wisconsin law, where the insurance contracts had been made. The Court, in a divided opinion, permitted resort to Minnesota law, because of the number of contacts the state had with the matter. On the other hand, an earlier decision is in considerable conflict with Hague. There, a life insurance policy was executed in New York, on a New York insured, with a New York beneficiary. The insured died in New York, and his beneficiary moved to Georgia and sued to recover on the policy. The insurance company defended on the ground that the insured, in the application for the policy, had made materially false statements that rendered it void under New York law. The defense was good under New York law, impermissible under Georgia law, and Georgia's decision to apply its own law was overturned, the Court stressing the surprise to the parties of the resort to the law of another state and the absence of any occurrence in Georgia to which its law could apply.66
The protections of the Full Faith and Credit Clause extend beyond transitory actions. Some legal relationships are so complex, the Court holds, that the law under which they were formed ought always to govern them as long as they persist.67 One such relationship is that of a stockholder and his corporation. Hence, if a question arises as to the liability of the stockholders of a corporation, the courts of the forum state are required by the Full Faith and Credit Clause to determine the question in accordance with the constitution, laws and judicial decisions of the corporation's home states.68 Illustrative applications of the latter rule are to be found in the following cases. A New Jersey statute forbidding an action at law to enforce a stockholder's liability arising under the laws of another state and providing that such liability may be enforced only in equity, and that in such a case the corporation, its legal representatives, all its creditors, and stockholders, should be necessary parties, was held not to preclude an action at law in New Jersey by the New York superintendent of banks against 557 New Jersey stockholders in an insolvent New York bank to recover assessments made under the laws of New York.69 Also, in a suit to enforce double liability, brought in Rhode Island against a stockholder in a Kansas trust company, the courts of Rhode Island were held to be obligated to extend recognition to the statutes and court decisions of Kansas whereunder it is established that a Kansas judgment recovered by a creditor against the trust company is not only conclusive as to the liability of the corporation but also an adjudication binding each stockholder therein. The only defenses available to the stockholder are those which he could make in a suit in Kansas.70
The same principle applies to the relationship that is formed when one takes out a policy in a fraternal benefit society. Thus, in Royal Arcanum v. Green,71 in which a fraternal insurance association chartered under the laws of Massachusetts had been sued in the courts of New York by a citizen of the latter state on a contract of insurance made in that state, the Court held that the defendant company was entitled under the full faith and credit clause to have the case determined in accordance with the laws of Massachusetts and its own constitution and by-laws as these had been construed by the Massachusetts courts.
Nor has the Court manifested any disposition to depart from this rule. In Sovereign Camp v. Bolin,72 it declared that a state in which a certificate of life membership of a foreign fraternal benefit association is issued, which construes and enforces the certificate according to its own law rather than according to the law of the state in which the association is domiciled, denies full faith and credit to the association's charter embodied in the status of the domiciliary state as interpreted by the latter's court. "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 and abiding relation and the rights of membership are governed by the law of the State of incorporation. [Hence] another State, wherein the certificate of membership was issued, cannot attach to membership rights against the society which are refused by the law of domicile." Consistent with that, the Court also held, in Order of Travelers v. Wolfe,73 that South Dakota, in a suit brought therein by an Ohio citizen against an Ohio benefit society, must give effect to a provision of the constitution of the society prohibiting the bringing of an action on a claim more than six months after disallowance by the society, notwithstanding that South Dakota's period of limitation was six years and that its own statutes voided contract stipulations limiting the time within which rights may be enforced. Objecting to these results, Justice Black dissented on the ground that fraternal insurance companies are not entitled, either by the language of the Constitution, or by the nature of their enterprise, to such unique constitutional protection.
Whether or not distinguishable by nature of their enterprise, stock and mutual insurance companies and mutual building and loan associations, unlike fraternal benefit societies, have not been accorded the same unique constitutional protection; with few exceptions,74 they have had controversies arising out of their business relationships settled by application of the law of the forum state. In National Mutual B. & L. Ass'n v. Brahan,75 the principle applicable to these three forms of business organizations was stated as follows: where a corporation has become localized in a state and has accepted the laws of the state as a condition of doing business there, it cannot abrogate those laws by attempting to make contract stipulations, and there is no violation of the Full Faith and Credit Clause in instructing a jury to find according to local law notwithstanding a clause in a contract that it should be construed according to the laws of another state.
Thus, the Court held in Brahan, when a Mississippi borrower, having repaid a mortgage loan to a New York building and loan association, sued in a Mississippi court to recover, as usurious, certain charges collected by the association, the usury law of Mississippi rather than that of New York controlled. In this case, the loan contract, which was negotiated in Mississippi subject to approval by the New York office, did not expressly state that it was governed by New York law. Similarly, when the New York Life Insurance Company, which had expressly stated in its application and policy forms that they would be controlled by New York law, was sued in Missouri on a policy sold to a resident thereof, the court of that state was sustained in its application of Missouri, rather than New York law.76 Also, in an action in a federal court in Texas to collect the amount of a life insurance policy which had been made in New York and later changed by instruments assigning beneficial interest, it was held that questions (1) whether the contract remained one governed by the law of New York with respect to rights of assignees, rather than by the law of Texas, (2) whether the public policy of Texas permits recovery by one named beneficiary who has no beneficial interest in the life of the insured, and (3) whether lack of insurable interest becomes material when the insurer acknowledges liability and pays the money into court, were questions of Texas law, to be decided according to Texas decisions.77 Similarly, a state, by reason of its potential obligation to care for dependents of persons injured or killed within its limits, is conceded to have a substantial interest in insurance policies, wherever issued, which may afford compensation for such losses; accordingly, it is competent, by its own direct action statute, to grant the injured party a direct cause of action against the insurer of the tortfeasor, and to refuse to enforce the law of the state, in which the policy is issued or delivered, which recognizes as binding a policy stipulation which forbids direct actions until after the determination of the liability of the insured tortfeasor.78
Consistent with the latter holding are the following two involving mutual insurance companies. In Pink v. A.A.A. Highway Express,79 the New York insurance commissioner, as a statutory liquidator of an insolvent auto mutual company organized in New York, sued resident Georgia policyholders in a Georgia court to recover assessments alleged to be due by virtue of their membership in it. The Supreme Court held that, although by the law of the state of incorporation, policyholders of a mutual insurance company become members thereof and as such liable to pay assessments adjudged to be required in liquidation proceedings in that state, the courts of another state are not required to enforce such liability against local resident policyholders who did not appear and were not personally served in the foreign liquidation proceedings but are free to decide according to local law the questions whether, by entering into the policies, residents became members of the company. Again, in State Farm Ins. Co. v. Duel,80 the Court ruled that an insurance company chartered in State A, which does not treat membership fees as part of premiums, cannot plead denial of full faith and credit when State B, as a condition of entry, requires the company to maintain a reserve computed by including membership fees as well as premiums received in all states. Were the company's contention accepted, "no State", the Court observed, "could impose stricter financial standards for foreign corporations doing business within its borders than were imposed by the State of incorporation." It is not apparent, the Court added, that State A has an interest superior to that of State B in the financial soundness and stability of insurance companies doing business in State B.
Finally, the relationship of employer and employee, insofar as the obligations of the one and the rights of the other under worker's compensation acts are concerned, has been the subject of differing and confusing treatment. In an early case, the injury occurred in New Hampshire, resulting in death to a workman who had entered the defendant company's employ in Vermont, the home state of both parties. The Court required the New Hampshire courts to respect a Vermont statute which precluded a worker from bringing a common-law action against his employer for job related injuries where the employment relation was formed in Vermont, prescribing a constitutional rule giving priority to the place of the establishment of the employment relationship over the place of injury.81 The same result was achieved in a subsequent case, but the Court promulgated a new rule, applied thereafter, which emphasized a balancing of the governmental interests of each jurisdiction, rather than the mere application of the statutory rule of one or another state under full faith and credit.82 Thus, the Court held that the clause did not preclude California from disregarding a Massachusetts's workmen's compensation statute, making its law exclusive of any common law action or any law of any other jurisdiction, and applying its own act in the case of an injury suffered by a Massachusetts employee of a Massachusetts employer while in California in the course of his employment.83 It is therefore settled that an injured worker may seek a compensation award either in the state in which the injury occurred or in the state in which the employee resided, his employer was principally located, and the employment relation was formed, even if one statute or the other purported to confer an exclusive remedy on the workman.84
Less settled is the question whether a second state, with interests in the matter, may supplement a workers' compensation award provided in the first state. At first, the Court ruled that a Louisiana employee of a Louisiana employer, who was injured on the job in Texas and who received an award under the Texas act, which did not grant further recovery to an employee who received compensation under the laws of another state, could not obtain additional compensation under the Louisiana statute.85 Shortly, however, the Court departed from this holding, permitting Wisconsin, the state of the injury, to supplement an award pursuant to the laws of Illinois, where the worker resided and where the employment contract had been entered into.86 Although the second case could have been factually distinguished from the first,87 the Court instead chose to depart from the principle of the first, saying that only if the laws of the first state making an award contained "unmistakable language" to the effect that those laws were exclusive of any remedy under the laws of any other state would supplementary awards be precluded.88 Although the overwhelming number of state court decisions since follow McCartin, and Magnolia has been little noticed, all the Justices expressed dissatisfaction with the former case as a rule of the Full Faith and Credit Clause, although a majority of the Court followed it and permitted a supplementary award.89
The Full Faith and Credit Clause is not violated by a state statute providing that all suits upon foreign judgments shall be brought within five years after such judgment shall have been obtained, where the statute has been construed by the state courts as barring suits on foreign judgments, only if the plaintiff could not revive his judgment in the state where it was originally obtained.90