Bronson v. Glander
| Decision Date | 04 February 1948 |
| Docket Number | 31071. |
| Citation | 149 Ohio St. 57,77 N.E.2d 471 |
| Parties | BRONSON v. GLANDER. |
| Court | Ohio Supreme Court |
Syllabus by the Court.
Where after the death of an insured in a life insurance policy, the named beneficiary, pursuant to the terms of the policy elects to receive the proceeds thereof in installments and surrenders the policy to the insurer which then issues to the beneficiary a certificate embodying the terms of the election, such installment payments are not proceeds of 'annuities' subject to taxation, but are proceeds of 'contracts of insurance' within the meaning of that expression as used in Section 5323, General Code, which exempts such contracts from taxation.
Appeal from Board of Tax Appeals.
The Tax Commissioner of Ohio made an order determining that the property rights of Adelbert E. Bronson, Jr., the appellee herein, resulting in the receipt of certain monthly installments for life from two life insurance companies, were taxable as 'annuities' in accordance with the formula contained in Section 5389, General Code.
On appeal, the Board of Tax Appeals reversed such order, and the Tax Commissioner is now asking this court to reverse the decision of the board on the ground that such decision is unreasonable or unlawful.
No dispute exists as to the facts. Adelbert E. Bronson, Sr. between the years 1916 and 1927, inclusive, acquired seven policies of life insurance, one from one company and the remaining six from another.
He died in 1943, at which time all seven policies were in full force and effect.
Bronson, Jr., hereinafter called Bronson, son of the insured, was a named beneficiary in each policy. All such policies contained clauses giving the insured the right to designated the manner in which the proceeds of the policies should be paid to the beneficiary; if the insured failed to make an election, that right was extended to the beneficiary.
The insured made no election during his lifetime and Bronson, as beneficiary, elected, as provided by the policies, to take the maturity values thereof in monthly installments for life, with the further stipulation that if he did not live long enough to receive the minimum of 240 monthly installments, the payment of the same was to continue to another designated by him.
After the election was made, the policies were surrendered and Bronson received a certificate from each of the companies embodying the terms of such election, in conformity with the provisions of the policies.
Hugh S. Jenkins, Atty. Gen., and Daronne R. Tate and Joseph S. Gill, both of Columbus, for appellant.
Squire, Sanders & Dempsey and George D. Webster, all of Cleveland, for appellee.
It is contention of the Tax Commissioner that when the insured died, the policies terminated; that the issuance of the certificates, upon the consideration of the surrender of the policies, constituted new agreements embracing different rights between Bronson, as beneficiary, and the companies, by which he might be paid, if he survived for a sufficient length of time, an aggregate sum greater than the maturity values of the policies; and that the property rights thereby created in Bronson are subject to taxation as annuities.
In support of this argument, the Tax Commissioner relies on the definition of an annuity, contained in Chisholm v. Shields, Treas., 67 Ohio St. 374, 378, 66 N.E. 93, 94, which is as follows: 'An annuity * * * is an obligation by a person or company to pay to the annuitant a certain sum of money at stated times during life or a specified number of years, in consideration of a gross sum paid for such obligation * * *.'
The quoted definition of an annuity has been approved in the recent cases of Fuller v. Glander, Tax Com'r, 146 Ohio St. 283, 286, 65 N.E.2d 713, 715, and McNally v. Evatt, Tax Com'r, 146 Ohio St. 443, 446, 66 N.E.2d 663, 635.
However, as pointed out by several authorities, the ordinary annuity contract and the ordinary contract of life insurance are different in essential respects. The former is distinguishable from the latter in that a life insurance contract constitutes an agreements to pay a specified sum of money on the death of the insured or on his reaching a certain age, whereas an annuity contract is one in which there is an agreement to pay a certain sum to the annuitant annually during life or for a given number of years. The consideration for an insurance contract is denoted a premium and is payable annually or at fixed intervals during the year; the consideration for an annuity contract is not regarded as or denominated a premium and is usually represented by a single payment. Succession of Rabouin, 201 La. 227, 235, 9 So.2d 529, 531, 142 A.L.R. 605, 608; Commonwealth v. Metropolitan Life Ins. Co., 254 Pa....
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