New York Life Insurance Company v. Deer Lodge County

• Decision Date: 15 December 1913
• Docket Number: No. 56,56
• Parties: NEW YORK LIFE INSURANCE COMPANY, Plff. in Err., v. DEER LODGE COUNTY
• Court: U.S. Supreme Court

231 U.S. 495

34 S.Ct. 167

58 L.Ed. 332

NEW YORK LIFE INSURANCE COMPANY, Plff. in Err.,

v DEER LODGE COUNTY.

No. 56.

Argued November 11, 1913.

Decided December 15, 1913.

Messrs. James H. McIntosh, Roscoe Pound, and Robert L. Clinton for plaintiff in error.

[Argument of Counsel from pages 496-498 intentionally omitted] Messrs. D. m. kelley and W. H. Poorman, and Mr. Albert J. Galen, Attorney General of Montana, for defendant in error.

Mr. Justice McKenna delivered the opinion of the court:

Plaintiff in error, called herein plaintiff, as it was such in the courts below, brought suit against the defendant in error, herein called defendant, to recover the sum of $209.79, with interest, the amount of taxes paid by plaintiff under protest to defendant.

The tax was levied under a law of the state requiring every insurance corporation or company transacting business in the state to be taxed upon the excess of premiums received over losses and ordinary expenses incurred within the state during the year previous to the year of listing in the county where the agent conducts the business, properly proportioned by the corporation or company at the same rate that all other personal property is taxed. It is provided that the agent shall render the list, and if he refuses, or to make affidavit that the same is correct to the best of his knowledge and belief, the amount may be assessed to the best knowledge and discretion of the assessor. The corporations and companies are subject to no other tax under the laws of the state except on real estate, and the fees imposed by law.

It was alleged in the complaint that the 'tax was and is illegal, unlawful, and void for that said defendant was without jurisdiction to levy or collect said tax, and the levy and collection thereof was and is a burden upon interstate commerce, contrary to § 8 of article 1 of the Constitution of the United States.'

A summary of the allegations of the complaint, which is very long, is as follows:

The plaintiff is a New York corporation, with its home office in New York city, and has transacted and does transact the business of life insurance on a large scale in all of the states of the United States, and with persons residing in every country of the civilized world. It commenced to transact its business with residents of Montana in 1869, and its business has progressively increased until its total insurance in force in that state amounts to $10,023,445, calling for premiums amounting to $343,664.93. This total insurance is made up of policies averaging $2,000 each, and these are subject to sale, assignment, and transfer, and are used for collateral security and other commercial purposes, and are valuable for such purpose and for other general purposes of trade and commerce.

The company transacts its business through agents, who solicit insurance, collect the first premium, and deliver the policy, which is prepared and transmitted from the home office to him for such purpose. The company also employs an agency director by contract in writing directly with the home office through the mails, who supervises the work of soliciting agents and recommends those who desire to become such. The company also employs medical examiners, with specified duties, their employment being negotiated through the mails, and their reports are made through the mails, and if further information is desired, the home office obtains it by correspondence through the mails. It has also a confidential employee called an inspector, whose employment is intended to be secret, and who transmits information through the mails. In Butte, in the state of Montana, the company maintains a cashier, appointed from the home office, whose authority, however, is limited to making and supervising such records as the business of the office requires, receiving from the soliciting agents and medical examiners applications for new insurance solely for transmission to the home office, receiving the reports of the home office of its action on such applications, and receiving policies, and the premiums which are paid on the new policies and not transmitted directly to the home office, mailing premium notices made out at the home office, and sent to him for that purpose; receiving renewal premiums when specially authorized; depositing the amount thereof in bank at Butte to the credit of the company and to be drawn upon by it, and not by him; keeping account of the insurance obtained by the soliciting agents and settling with such agents the commission. The company has never had any office or place of business except said office at Butte and one other at Helena, with like duties and authority.

Forms for the use of the several transactions are prepared at the home office and transmitted by mail to the company's employees. No agent is authorized to accept risks of any kind or make or modify contracts, nor have they ever done so. The officers of the company reside and have always resided in and near the city of New York, and had and have their offices and places of business at the home office. All risks are accepted and contracts made, modified, and discharged at the home office.

The manner of taking applications for insurance and the final issue of policies is alleged, which shows that the ultimate judgment of their character and acceptance is reserved for the home office. The manner of paying premiums is alleged to be either directly to the home office through the mails, or to the cashier of the company at its office in Butte, and that the several policies provide for advances, and that the company has outstanding advances or loans to its policy holders in the state, aggregating the sum of $432,878. The loan is made by transmitting an application to the home office, where it is considered and acted upon, and, if accepted, a loan agreement is transmitted to the applicant, who, after executing it, returns it to the home office, and the proceeds of the loan are forwarded by mail to the policy holder by the company's check on its bank account in New York. And the use of the mails is alleged in payment of premiums and proofs of death.

On account of this manner of doing business it is alleged on information and belief to be interstate commerce and within the meaning of the commerce clause of the Constitution of the United States.

The laws of the state by virtue of which the tax was imposed are set out. They finally became § 4073 of the Revised Codes, 1907.

The company did not have any property within Deer Lodge county at any time during the year 1910. It paid without protesting the tax imposed by § 4017 of the Revised Codes for the year 1909, amounting to $3,496.85. It also, during said year, paid to the state licenses and fees aggregating the sum of $234. In 1909 it received from policy holders residing in the county, premiums aggregating the sum of $14,233.41. Its losses and expenses amounted to the sum of $8,888.41. The excess of premiums over losses for said year was the sum of $5,345, upon which there was imposed the sum sued for. The company paid the tax under protest.

A demurrer was sustained to the complaint and a judgment entered dismissing the action. It was sustained by the supreme court of the state.

The same contention is made here as in the state courts; that is, that the tax is a burden on interstate commerce; and an elaborate argument is presented to distinguish this case from those in which this court has decided that insurance is not commerce. These cases are: Paul v. Virginia, 8 Wall. 168, 19 L. ed. 357 (1868); Ducat v. Chicago, 10 Wall. 410, 19 L. ed. 972; Liverpool & L. Life & F. Ins. Co. v. Massachusetts (Liverpool & L. Life & F. Ins. Co. v. Oliver) 10 Wall. 566, 19 L. ed. 1029; Fire Asso. of Philadelphia v. New York, 119 U. S. 110, 30 L. ed. 342, 7 Sup. Ct. Rep. 108; Hooper v. California, 155 U. S. 648, 39 L. ed. 297, 5 Inters. Com. Rep. 610, 15 Sup. Ct. Rep. 207; Noble v. Mitchell, 164 U. S. 367, 41 L. ed. 472, 17 Sup. Ct. Rep. 110; New York L. Ins. Co. v. Cravens, 178 U. S. 389, 44 L. ed. 1116, 20 Sup. Ct. Rep. 962; and Nutting v. Massachusetts, 183 U. S. 553, 46 L. ed. 324, 22 Sup. Ct. Rep. 238.

If we consider these cases numerically, the deliberation of their reasoning, and the time they cover, they constitute a formidable body of authority and strongly invoke the sanction of the rule of stare decisis. This we especially emphasize, for all of the cases concerned, as the case at bar does, the validity of state legislation, and under varying circumstances the same principle was applied in all of them. For over forty-five years they have been the legal justification for such legislation. To reverse the cases, therefore, would require us to promulgate a new rule of constitutional inhibition upon the states, and which would compel a change of their policy and a readjustment of their laws. Such result necessarily urges against a change of decision. In deference, however, to the earnestness of counsel, we will consider more particularly (1) what the cases decide, and (2) whether they are wrong in principle.

Paul v. Virginia is the progenitor case A law of Virginia precluded any insurance company not incorporated under the laws of the state, doing business in the state without previously obtaining a license for that purpose, which could only be obtained by a deposit with the state treasury of bonds of a specified character to an amount varying from thirty to fifty thousand dollars. A subsequent law required the agent of a foreign insurance company to take out a license.

Paul was appointed the agent of several fire insurance companies incorporated in the state of New York. He applied for a license, offering to comply with all the provisions of the law excepting the deposit of bonds. The license was refused and he, notwithstanding, undertook to act as agent for the companies, offered to issue policies in their behalf, and in one instance did issue a policy in their name to a...