Bankers Life Ins. Co. v. Laughlin, Aetna Life Ins. Co., Intervener

• Decision Date: 27 May 1955
• Docket Number: No. 33718,33718
• Citation: 70 N.W.2d 474,160 Neb. 480
• Parties: BANKERS LIFE INSURANCE COMPANY (of Des Moines, Iowa), Appellant, v. Loren H. LAUGHLIN, Director of Insurance, etc., Appellees, Aetna Life Insurance Company et al., Interveners-Appellants. In the Matter of Texation of Annuities, Appeal of Bankers Life Insurance Company (of Des Moines, Iowa), etc.
• Court: Nebraska Supreme Court

Page 474

70 N.W.2d 474

160 Neb. 480

BANKERS LIFE INSURANCE COMPANY (of Des Moines, Iowa), Appellant, v. Loren H. LAUGHLIN, Director of Insurance, etc., Appellees, Aetna Life Insurance Company et al., Interveners-Appellants.

In the Matter of Texation of Annuities, Appeal of Bankers Life Insurance Company (of Des Moines, Iowa), etc.

No. 33718.

Supreme Court of Nebraska.

May 27, 1955.

Syllabus by the Court.

1. The rulings of executive officers who have practically construed a law are not conclusive, nevertheless the ruling of an executive officer upon a point where it is his sworn duty to act, especially where the rulings have been acquiesced in by those whose financial interests were involved, are always given considerable weight in the courts, and when the power is doubtful the uniform rulings in an executive office will ordinarily be followed.

2. The Legislature is presumed to know the construction of its statutes by the executive departments of the state.

3. Considerations received for annuity contracts by life insurance companies licensed to do business in this state are included within the provisions of sections 77-908 and 77-909, R.S.Supp., 1953.

Fraizer & Fraizer, Lincoln, for appellant and interveners-appellants.

Clarence S. Beck, Atty. Gen., Ralph D. Nelson, Asst. Atty. Gen., for appellees.

Heard before SIMMONS, C. J., and CARTER, MESSMORE, YEAGER, CHAPPELL, WENKE and BOSLAUGH, JJ.

SIMMONS, Chief Justice.

This is an appeal from an order of the Director of Insurance holding that considerations received from annuities by life insurance companies licensed to do business in this state are to be reported and are subject to the tax provided in sections 77-908 and 77-909, R.S.Supp., 1953. The matter was appealed to the district court where the order was sustained. On appeal here, we affirm.

On March 10, 1952, the director issued an order that all life insurance companies licensed to do business in this state should compute and remit the premium tax based on considerations received from annuities on forms provided for that purpose. He set the matter for hearing so that all parties aggrieved could show cause why their licenses should not be rescinded or not be reissued if they failed to comply. A hearing was had and appearances were made by the Life Insurance Association of America and American Life Convention. These parties filed a written showing reciting the problem presented by the statutes involved, contending that there is a difference between annuity considerations and insurance premiums, and attacking the policy of such a tax.

After the hearing the director issued his final order requiring the computing and remitting of the tax; providing for the payment of the tax under protest; and providing for an appeal by one or more of the licensed companies on behalf of all such companies as a class. Bankers Life Insurance Company of Des Moines, Iowa, perfected the appeal under the authority of section 44-154, R.R.S.1943. In the district court other life insurance companies intervened. All companies took the concluding position that they were entitled to a reissuance of their certificates of authority upon the payment of a tax upon the gross amount of direct writing premiums, excluding all annuity considerations. The appellant and interveners by supplemental pleadings show the payment of the tax under protest for the years 1952 and 1953.

A demurrer was filed on the ground that the petitions did not state a cause of action. The trial court sustained the demurrer. The insurance companies elected to stand upon their petitions. The action was dismissed, and this appeal followed.

The insurance companies do not plead the terms of their annuity contracts nor furnish the forms of those contracts. They rest their position on the broad base that considerations received for annuity contracts are not taxable under the statutes. This prevents our consideration of the terms of the contracts as was done by the courts in State ex rel. Gully v. Mutual Life Ins. Co. of New York, 189 Miss. 830, 196 So. 796, 198 So. 763; Equitable Life Assur. Soc. v. Johnson, 53 Cal.App.2d 49, 127 P.2d 95; and Northwestern Mutual Life Ins. Co. v. Murphy, 223 Iowa 333, 271 N.W. 899, 109 A.L.R. 1054.

In 1903 the Legislature, in a bill providing for the public revenues, provided that foreign life and accident insurance companies doing business in this state should pay into the state treasury 'two per cent of the gross amount of premiums received by it * * * for business done in this state * * *.' Laws 1903, c. 73, § 59, p. 404. In section 61, page 405, it provided that life and other companies organized under the laws of this state should be taxed 'upon the gross amount of premiums received by it for all Nebraska business done within the state * * *,' with exceptions not important here.

The Legislature in 1921 in an act relating to the public revenue (chapter 133, page 545) in article X, section 2, page 588, re-enacted substantially the provisions relating to foreign insurance companies above quoted, and then provided that insurance companies organized under the laws of this state (with exceptions not important here) should pay 'four (4) mills upon the gross premiums collected in this state * * * less reinsurance paid on Nebraska business and dividends paid policyholders in Nebraska * * *.' Section 4, p. 589. This latter provision was amended in Laws 1933, c. 156, § 7, p. 597, and in Laws 1935, c. 154, § 3, p. 569. The amendments are not pertinent here.

The administrative construction of the acts prior to 1937 is not shown. It does appear in the showing made by the insurance companies before the director that, as a result of an opinion of the Attorney General, the Department of Insurance ruled that annuity considerations received after 1937 were subject to the premium tax, and that thereafter foreign life insurance companies doing business in Nebraska paid the tax upon annuity considerations. We find no statement as to what was done by domestic companies.

In this connection, consistent with our holdings (see 10 Nebraska Digest, Statutes, k219), we quote with approval from State v. Equitable Life Assur. Soc., 68 N.D. 641, 282 N.W. 411, 416, as follows: 'While it is true that the rulings of executive officers who have practically construed a law are not conclusive, nevertheless 'the ruling of an executive officer upon a point where it is his sworn duty to act, especially where the rulings have been acquiesced in by those whose financial interests were involved, are always given considerable weight in the courts, and when the power is doubtful the uniform rulings in an executive office would be followed, and allowed to turn the scale. Cooley, Const.Lim. (3d. Ed.) marg. pages 69, 70.''

The Legislature is presumed to know the construction of its statutes by the executive departments of the state. John Hancock Mutual Life Ins. Co. v. Lookingbill, 218 Iowa 373, 253 N.W. 604: State v. Equitable Life Assur. Soc., supra.

The provisions of the 1921 act above cited became section 77-902, R.S.1943.

In 1949 the Legislature enacted Laws 1949, c. 228, p. 633. This act was an amendment of section 77-902, R.S.1943, and was entitled an act 'to provide which insurance companies shall pay the tax as provided in this section * * *.' It provided that every insurance company organized under the laws of any other state or country and transacting business in Nebraska 'as defined in subsections (2) or (3) of section 44-201' or both shall pay 'two per cent of the gross amount of premiums received by it during the preceding calendar year for business done in this state * * *.' Subsection (2) of section 44-201, R.S.1943, provided: 'Life Insurance--Upon lives of persons, including endowments and annuities, and every insurance pertaining thereto and disability benefits.' The 1949 Legislature re-enacted that provision also. See Laws 1949, c. 138, § 1, p. 358.

This appears to be a clear legislative recognition that the 'business' of foreign life insurance companies done in this state, upon which the two percent of the gross premiums was to be paid, included the business of 'endowments and annuities.' The showing here is that the foreign companies so accepted the construction of the act and paid the tax.

It should also be pointed out that in 1913 the Legislature adopted a comprehensive insurance code (Laws 1913, c. 154, p. 393), in which it was provided that 'No policy of life or endowment insurance * * * shall be issued or delivered in this state unless it contains in substance the following provisions: * * * Thirteenth--In case the proceeds of a policy are payable in installments or as an annuity a table showing the amounts of the installments or annuity payments * * *.' Section 101, p. 446. This provision became section 44-602, Comp.St.1929; section 44-502, R.S.1943; and is now section 44-502, R.R.S.1943. It is clear that the Legislature has considered that annuities were a part of a life insurance policy and business.

That conclusion does not appear to have been questioned by the insurance industry doing business in this state subsequent to 1938 and prior to the 1951 amendments that produced this controversy.

When the 1951 Legislature convened, Chapter 77, article 9, page 86, R.R.S.1943, contained six sections: Section 77-901 provided for a tax on foreign fire insurance companies based on gross premiums (less certain items), and as tangible property. Section 77-902 was the 1949 act, above discussed, dealing with foreign life and accident companies. Section 77-903 provided for a tax on foreign insurance companies doing lines of insurance business not involved here, and provided for the payment 'as a tax on such business, two per cent of such gross receipts,' less the tax, if any, on workmen's compensation insurance. Section 77-904 provided that domestic insurance companies other than fire and certain fraternal and mutual companies 'shall pay four...