Aachen & Munich Fire Insurance Company v. City of Omaha

• Decision Date: 20 October 1904
• Docket Number: 13,824
• Citation: 101 N.W. 3,72 Neb. 518
• Parties: AACHEN & MUNICH FIRE INSURANCE COMPANY, APPELLANT, v. CITY OF OMAHA ET AL., APPELLEES
• Court: Nebraska Supreme Court

101 N.W. 3

72 Neb. 518

AACHEN & MUNICH FIRE INSURANCE COMPANY, APPELLANT, v. CITY OF OMAHA ET AL., APPELLEES

No. 13,824

Supreme Court of Nebraska

October 20, 1904

APPEAL from the district court for Douglas county: ALEXANDER C TROUP, JUDGE. Reversed.

REVERSED.

Greene Breckenridge & Kinsler, for appellant.

C. C Wright and W. H. Herdman, contra.

OPINION

BY THE COMMISSION.

This is a proceeding in error from a judgment of the district court for Douglas county sustaining a general demurrer to the petition and dismissing the action. The action was brought by the Aachen & Munich Fire Insurance Company, a foreign corporation, for the purpose of restraining the city of Omaha and August H. Hennings, the city treasurer, from enforcing and collecting a tax which was assessed for municipal purposes by the tax commissioner of that city upon the gross premium receipts within the city of Omaha of the plaintiff for the preceding calendar year, under section 58 of the revenue law (article I, chapter 77, Compiled Statutes, 1903; Annotated Statutes, 10457). The grounds upon which the plaintiff seeks to declare the tax void are as follows: Discrimination between fire insurance companies organized under the laws of other states or countries and domestic fire insurance corporations; also discrimination between foreign life, accident and surety companies and foreign fire insurance companies; and further, that section 58, which provides for the assessment and taxation as property of the gross premium receipts during the preceding year of foreign fire insurance companies, is void because it lays a property tax on incomes for a previous year without regard to the actual existence in the state of any taxable property. That section 58 is void by reason of the discriminations, privileges and immunities in sections 59, 60 and 61 in favor of other insurance companies; and that the act is broader than its title.

In the brief of plaintiff and in the oral argument our attention has mainly been directed to the following propositions: First, that the tax is void because it is a tax on money not within the jurisdiction of the state or taxing districts at the time it was levied. Second, that section 58 of the revenue law, under which the tax commissioner and the city treasurer of Omaha are seeking to proceed, authorizes all taxing districts within the state to assess and tax the gross receipts of foreign fire insurance as items of property, the same as property and franchises are assessed and taxed under the provisions of the first clause of section 1, article IX of the constitution, and is therefore void. Third, the tax is void because section 58 authorizes the taxing districts mentioned therein to impose a larger burden upon the property of foreign fire insurance than it authorizes them to impose upon the property of other insurance companies doing business in this state, and, in this respect, provides for an unjust and arbitrary discrimination upon the property of foreign companies for the purpose of taxation. Fourth, that section 58 does not operate uniformly upon all insurance companies which are members of the same class within the meaning of the constitution.

The question which lies at the very threshold of the investigation in this case is under which, if either, of the two clauses of section 1, article IX of the constitution, can such a tax as this be upheld? Section 1, article IX of the constitution of the state of Nebraska, is as follows: "The legislature shall provide such revenue as may be needful, by levying a tax by valuation, so that every person and corporation shall pay a tax in proportion to the value of his, her or its property and franchises, the value to be ascertained in such manner as the legislature shall direct, and it shall have power to tax peddlers, auctioneers, brokers, hawkers, commission merchants, showmen, jugglers, innkeepers, liquor dealers, toll bridges, ferries, insurance, telegraph and express interests or business, venders of patents, in such manner as it shall direct by general law, uniform as to the class upon which it operates." By the first clause of this section it is directed that "the legislature shall provide such revenue as may be needful, by levying a tax by valuation, so that every person and corporation shall pay a tax in proportion to the value of his, her or its property and franchises, the value to be ascertained in such manner as the legislature shall direct." A tax laid under this subdivision is imperatively required to be levied by valuation, so that the tax shall be in proportion to the value of "property and franchises." Under these provisions there can be no discrimination between persons or classes. Every person and every corporation must be taxed alike by valuation. The law knows no distinction between persons or corporations, or between foreign or domestic corporations, under the powers granted by this clause. This court said, by SULLIVAN, C. J., in State v. Fleming, 70 Neb. 523, in speaking of foreign insurance corporations:

"Such companies have no authority to transact business in this state without the consent of the state, and, when they seek the privilege, they must comply with the conditions imposed. After coming here, their property must be dealt with on terms of equality with the property of the citizen. It is subject to no further burden in the way of taxation than is imposed upon the resident, but, for the privilege of doing business here, they must submit to such conditions as the legislature sees fit to impose."

The legislature has no power to impose a tax by valuation upon the property of foreign fire insurance companies within this state, and at the same time exempt domestic fire insurance companies from a like burden. If such a discrimination were made, it could not be upheld. If the tax of which complaint is made in this case, therefore, is a tax upon property, there is a manifest discrimination made between the property of foreign and domestic fire insurance companies. But is it a tax upon property? Under the facts stated in the petition and admitted by the demurrer, much the greater part of the money received for premiums during the preceding calender year was not in the state when the assessment was made. The money received for premiums had been sent out of the state, and only a small amount was actually within manual reach of the taxing officers. It is an elementary proposition that the state has power to tax all property within its limits, but it cannot reach outside and lay its hands on the property of nonresidents not within its sovereignty. Clother v. Maher, 15 Neb. 1, 16 N.W. 902; Finch v. York County, 19 Neb. 50, 26 N.W. 589; Judson, Taxation, secs. 391, 431. The theory of taxation is that each individual shall contribute to the state a fair proportion of his substance within its limits in return for the protection to his person and his property afforded him while within its jurisdiction. This excludes the idea of tangible property lying within the confines of another state which belongs to residents of the foreign state, and which may properly be and usually is taxed for the support of the government of that state, being subject to taxation in this state. The general rule is that the domicile of the owner is the situs of personal property for the purpose of taxation. This rule has its exceptions, and the legislature has the power, where personal property is actually within this state, to separate it from the domicile of a nonresident owner for the purpose of taxation. When, however, both the residence of the owner and his tangible personal property are outside of the limits of the state, no power exists in the legislature to make such property a subject of taxation.

It is strongly urged by the plaintiff that the language of the law reciting that such gross receipts are "to be taken as an item of property of that value, to be assessed and taxed on the same percentage of such value as other property," clearly and irrefutably shows that the tax is a tax upon property and therefore void. But we think we are not driven to this conclusion, and that the language, "to be taken as an item of property of that value," may be reasonably construed as a direction to the assessing officer as to how it is to be listed in his schedules, and is not an authoritative declaration and classification of the tax as a property tax. Even if it were such a declaration, the fact that the legislature called that a property tax which was not a property tax, and that the name was a misnomer, would not invalidate the tax if it were otherwise valid as a proper exercise of the taxing power under the authority conferred by the constitution. It is never presumed that the legislature enacted a law with the intention of violating the constitution, and it is a sound rule that if two reasonable constructions of a statute may be made, one of which will not violate the organic law while the other will, that construction is to be preferred which is in accordance with constitutional provisions. The tax in question is not a license tax imposed upon this corporation as a condition precedent to being allowed to do business in this state; no element of police power enters into it; its purpose is merely to raise revenue; it is a tax upon the business of transacting fire insurance by a class of fire insurance companies who are incorporated in other states and foreign countries. It is not a property tax, but it is a tax on insurance interests which is a business tax, and is not authorized by the first subdivision of section 1, article IX of the constitution.

It is true that in the case of Phoenix Ins. Co. v. City of Omaha, 23 Neb. 312, 36 N.W. 522, the gross premiums received by every insurance company,...