Connecticut Mut. Life Ins. Co. v. Rogers

• Decision Date: 06 April 1931
• Citation: 154 A. 246,113 Conn. 14
• Court: Connecticut Supreme Court
• Parties: CONNECTICUT MUT. LIFE INS. CO. v. ROGERS et al.

154 A. 246

113 Conn. 14

CONNECTICUT MUT. LIFE INS. CO. v. ROGERS et al.

Supreme Court of Errors of Connecticut.

April 6, 1931

Case Reserved from Superior Court, Hartford County; Carl Foster Judge.

Proceeding by the Connecticut Mutual Life Insurance Company against Ernest E. Rogers and others. From the action of the Board of Equalization of the State of Connecticut in correcting the plaintiff's tax return, plaintiff's appeal was taken to the superior court and reserved by the court for the advice of the Supreme Court of Errors.

Question answered.

HINMAN and BANKS, JJ., dissenting.

Argued before MALTBIE, HAINES, HINMAN, BANKS, and AVERY, JJ.

Lucius F. Robinson and John C. Parsons, both of Hartford, for appellant.

Ernest L. Averill, Deputy Atty. Gen., H. Roger Jones, of Hartford, and Benjamin W. Alling, Atty. Gen., for appellees.

MALTBIE C.J.

In 1928 the statute provided that every mutual life insurance company should, on or before the 1st day of March in each year, deliver to the tax commissioner 'a sworn statement specifying the total amount of interest dividends, rents and all other investment income, and also the rents from real estate situated and taxed in this state actually received by such company during the year ended on the thirty-first day of December next proceding" ; and that each such company should pay to the state treasurer annually a tax equal to a certain " percentage of the total amount of interest, dividends, rents and other investment income actually received by it during the year ended on the thirty-first day of December next preceding exclusive of rents from real estate situated and taxed in this state and interest on evidences of indebtedness owned by it and exempted from taxation." Public Acts of 1919. c. 337, §§ 1, 2, 3; Public Acts of 1925, c. 184 (General Statutes, Revision of 1930. §§ 1278, 1279). It was the duty of the board of equalization to examine and correct the statements so returned. Public Acts of 1919, c. 337, § 5 (General Statutes, Revision of 1930, § 1113). The appellant is a mutual life insurance company. In February, 1928, it made to the tax commissioner a sworn statement purporting to specify the various matters required by the statute, and stating as the amount upon which the tax was to be paid $6,313,376,41. This statement the board of equalization amended by adding as an item of investment income the sum of $545,106. From its action in making this addition, the appellant took an appeal to the superior court, and the case has been reserved for our advice.

The respondent does not attack the right of the appellant to bring the appeal, but does claim that, under the act of 1919, it is not within the power of the court to grant relief against the addition made by the board, because its action is made conclusive by the terms of the act. Section 5 of the act (section 1113 of the General Statutes, Revision of 1930) provides that the board shall examine and correct the statements and returns made to the tax commissioner by mutual life insurance companies; that, if any company fails to file a return, the board shall make out a statement for it upon the best information it can obtain; and that " such statement or return so corrected or made shall be conclusive as to the facts required to be specified in the statement." We had before us in State v. New York, N.H. & H. R. Co., 60 Conn. 326, 22 A. 765, a very similar provision of an act for the taxation of railroad companies, except that the word " final" was used in place of the word " conclusive." We held that, where the board had acted upon the statements, the state could not thereafter recover a larger amount than would be due under them; but we were careful to point out (page 334 of 60 Conn., 22 A. 765, 767) that, as the only way to collect the tax was by suit, the company making the return could " contest the whole tax as to its validity or amount, or any part of it" in that suit; " the valuation of railroad property under these statutes, and the assessment of taxes thereon, is not final, in the sense that it constitutes a charge upon the property subjected to the tax or a liability fixed on the corporation owning it." At that time the statute provided for no appeal from the board of equalization to the courts. The statute concerning the taxation of mutual life insurance companies which preceded the Act of 1919 had an almost identical provision as that quoted above from the Act. General Statutes, 1902, § 2449. In 1917, an act was adopted which provided that " any town, corporation or national banking association claiming to be aggrieved by the action of the board of equalization" might appeal to the court. Public Acts of 1917, c. 186. In the Revision of 1918, the provision in the law as to the conclusiveness of the action of the board in correcting a return made by a mutual life insurance company, or in making one for it, was retained, although the broad right of appeal from the board then existed, as it still does. General Statutes, Revision of 1918, §§ 1247, 1343; General Statutes, Revision of 1930, § 1124. When the act of 1919 was adopted, the provision as to the conclusiveness of the action by the board was again retained.

The decision in the case of State v. New York, N.H. & H. R. Co., supra, makes it clear that the provision that action by the board shall be " conclusive" does not mean that it is not open to attack by any company adversely affected by it. Indeed, as such additions as the board may make to the statement returned by a company are made without notice to it or any opportunity to be heard, the statute would be, to say the least, open to serious question upon constitutional grounds, if the word " conclusive" were given the meaning claimed by the respondent. 3 Cooley, Taxation (4th Ed.) § 1224. What the Legislature evidently intended was that the action of the board should be final and conclusive, unless upon direct attack by some established procedure. When in 1917 a broad right of appeal was given from any action by the board, it afforded a direct means to attack its conclusions; and, when in the Revision of 1918 this right, and also the provision as to the conclusiveness of the action of the board, were both retained, the Legislature put its stamp of approval upon the meaning which we have given to the latter provision. It follows that upon this appeal we may review the action of the board so far as to determine whether it acted arbitrarily, illegally, or so unreasonably as to constitute an abuse of discretion. Holley v. Sunderland, 110 Conn. 80, 83, 147 A. 300.

The amount added by the board to the statement of the appellant was based upon certain entries which appeared in the annual statement made by it, in compliance with the statutes, to the insurance commissioner of the state for the year 1927. Public Acts of 1927, c. 271 (General Statutes. Revision of 1930, § 4138). In this statement, under " Income," was an item " Gross profit on sale or maturity of ledger assets," $726,901.44; under " Disbursements," two items, " Gross loss on sale or maturity of ledger assets," $1,264.74 and " Gross decrease by adjustment, in book value of ledger assets, (a) Real estate," $180,531.23; and the board arrived at the amount it added to the appellant's statement by deducting from the item listed under income the two items listed under disbursements. Admittedly the subject-matter of these items does not fall within the meaning of the words " interest, dividends, rents" as used in the statute. The question is, Are they included within the words " other investment income" as there used?

To answer that question, it is first necessary to see what was included in those items. Taking first, the item from the statement as to income, " Gross profit on sale or maturity of ledger assets," it might seem from a casual reading that this represented profit made either upon the sale of assets of the company or from the payment of maturing securities which were bought for a sum below their face value. As a matter of fact, that is not necessarily so. The next item in the statement to the insurance commissioner is " Gross increase, by adjustment, in book value of ledger assets, viz: (a) Real estate, per Schedule A; (b) Bonds, per Schedule D (including $ for accrual of discount); (c) Stocks, per Schedule D." Of these items (b) is the only one which in the year in question the appellant found it necessary to fill out. This represented the amortization of various bonds held by it that is, an adjustment of their book value where they had been purchased below their face value, made each year, so that, at maturity, their book value would equal the sum due upon them. Items (a) and (c) were intended to permit the statement of adjustments made in the book value of real estate and stock so that it would fairly reflect their fair market value. From the nature of these items it follows that, in order to make the statement to the insurance commissioner truly represent the financial condition of the company, the amount to be entered under the head of " gross profit on sale or maturity of ledger assets" would have to represent, as it did in the statement before us with reference to the bonds, the difference between the amount actually received on such sale or maturity and the adjusted book value. A similar situation exists with reference to the items entered under " Disbursements" in the appellant's statement to the insurance commissioner. The item " Gross decrease, by adjustment, in book value of ledger assets," which, as far as it applied to real estate, was used by the board in arriving at the amount to be added to the return of the appellant, was designed to afford an opportunity to enter an adjustment of the book value of real...