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Home Ins. Co. v. *** - 281 U.S. 397, 50 S. Ct. 338 (1930)

Rule:

Tex. Rev. Civ. Stat. art. 5545 (1925) deprives out-of-state garnishees of property without due process of law. A state may, of course, prohibit and declare invalid the making of certain contracts within its borders. Ordinarily, it may prohibit performance within its borders, even of contracts validly made elsewhere, if they are required to be performed within the state and their performance would violate its laws. The statute's attempt to impose a greater obligation than that agreed upon and to seize property in payment of the imposed obligation violates the guaranty against deprivation of property without due process of law.

Facts:

A contract of fire insurance issued by a Mexican company, made and to be performed in Mexico, and covered in part by reinsurance effected there or in New York with New York companies licensed to do business in Texas, was assigned by the insured, Mr. ***, a citizen of Texas who was present in Mexico when the policy issued and continued to reside there until after a loss had occurred. *** then returned to Texas and sued on the policy in a Texas Court naming the Mexican company, which was never present in Texas and did not appear, as principal defendant, and the two New York companies, because of their reinsurance liability, as garnishees. The policy stipulated that no suit should be brought under it unless within one year of the loss; but a defense based on this was over-ruled by the Texas Supreme Court and recovery against the garnishees affirmed, by applying a Texas statute which forbade any agreement limiting the time for suit to a shorter period than two years and declared that no agreement for such shorter limitation should ever be valid in that State. The garnishees appealed, arguing that he statute, as construed and applied, violated their rights under the Federal Constitution.

Issue:

Did the Texas statute, which forbade any agreement limiting the time for suit to a shorter period than two years, violate the garnishees’ rights under the Federal Constitution?

Answer:

Yes.

Conclusion:

The United States Supreme Court reversed the judgment. It found that the statute attempted to impose a greater obligation than that agreed upon and to seize property in payment of the imposed obligation, in violation of the guaranty against deprivation of property without due process of law. Moreover, the statute attempted to abrogate the rights of parties beyond its borders.

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