Federated Mut. Ins. Co. v. DeKalb County, 70599

• Decision Date: 03 September 1985
• Docket Number: No. 70599,70599
• Citation: 176 Ga.App. 70,335 S.E.2d 873
• Parties: FEDERATED MUTUAL INSURANCE COMPANY v. DeKALB COUNTY.
• Court: Georgia Court of Appeals

Page 873

335 S.E.2d 873

176 Ga.App. 70

FEDERATED MUTUAL INSURANCE COMPANY v. DeKALB COUNTY.

No. 70599.

Court of Appeals of Georgia.

Sept. 3, 1985.

Rehearing Denied Sept. 18, 1985.

Certiorari Granted Oct. 30, 1985.

William A. Bagwell, Thomas M. Cole, Weymon H. Forrester, Gainesville, for appellant.

Gail S. Flake, Albert S. Johnson, Decatur, for appellee.

Stephen F. Gertzman, Alfred A. Lindseth, Richard L. Robbins, Atlanta, James M. Elliott, Jr., Joan E.W. Wooley, Macon, Robert M. Travis, James R. Schulz, Atlanta, amici curiae.

DEEN, Presiding Judge.

Federated Mutual Insurance Company brought an action under OCGA § 48-5-380 against DeKalb County, seeking a refund of gross premium taxes in the amount of $27,088.98 which were paid during the years 1981 through 1983 pursuant to DeKalb County Code § 7-1011(1). Federated Mutual moved for summary judgment, urging the retrospective application of Cotton States Mut. Ins. Co. v. DeKalb County, 251 Ga. 309, 304 S.E.2d 386 (1983), which declared § 7-1011(1) unauthorized and void. The county answered the complaint, admitted the taxes had been paid by the insurance company as required under the ordinance, but denied liability for a refund and moved for summary judgment, contending that the Cotton States decision had no retroactive effect.

The trial court granted the county's motion, finding that the taxes were assessed and collected under a 1958 local constitutional amendment (Ga.L.1958, p. 582) and the 1959 enabling legislation (Ga.L.1959, p. 2658-61); and that the Cotton States decision presented the first opportunity for the Supreme Court to address the effect of the enactment of the 1960 Insurance Code on local ordinances such as § 7-1011(1). After applying the tests set forth in Chevron Oil Co. v. Huson, 404 U.S. 97, 92 S.Ct. 349, 30 L.Ed.2d 296 (1971), the court held that the Cotton States decision would be given prospective application only. Federated Mutual appeals. Held:

In 1958 a local constitutional amendment authorized DeKalb County to levy license taxes "on all firms and corporations doing business in the unincorporated area of said county except businesses which are subject to regulation by the State Public Service Corporation," Ga.L.1958, pp. 582, 583. The implementing legislation amended Ga.L.1957, p. 3237, by adding a new paragraph at the end of section 12 to be designated as paragraph "(r)," which would enable the county to "[f]ix, levy, assess license fees, charges or taxes on all persons, firms and corporations engaging in or offering to engage in any trade, business, calling, avocation or profession" in the unincorporated area of the county. Ga.L.1959, pp. 2658, 2659. On July 1, 1959, the county enacted a business license ordinance which levied a tax on all such businesses within the county, including casualty insurance companies. It called for a percentage tax upon the gross premium receipts of all persons authorized or certified as insurance agents by an insurance company or companies doing business in the state. This ordinance was amended several times over the years, and at the time of the Cotton States decision, it levied a tax upon insurance companies (with the exception of life insurance companies) of three percent of the gross premiums received during the preceding license year.

Shortly after DeKalb County adopted its ordinance imposing a license tax on insurance companies, the General Assembly enacted the Georgia Insurance Code of 1960, which had an effective date of January 1, 1961, and which provided for a statewide gross premiums tax of 2.25% on all casualty companies doing business in the state and a $300.00 fee to be levied on all insurance companies. Ga.L.1960, pp. 289, 392, 507. The tax on gross premiums was not a new tax; it had been in existence since 1935, when a 1.5% tax was enacted. Ga.L.1935, pp. 11, 60-61. In 1945 the rate was increased to 2%. Ga.L.1945, pp. 419, 420. The language of the provision in the Insurance Code of 1960 first appeared in 1955 and authorized a tax of 2.25%. Ga.L.1955 (Extra Sess.) P. 45 et seq. The 1960 Insurance Code and prior provisions authorizing such a tax did not make reference to similar taxes that local governments could impose. In 1963 the General Assembly amended DeKalb County's 1959 local act and reenacted section 12(r), which pertained to the county's authority to impose business license taxes, by deleting the exception to businesses which are subject to regulation by the Public Service Commission and adding a provision pertaining to businesses operating buses upon county roads. No change was made referring to the county's authority to tax insurance companies. Ga.L.1963, pp. 3324-3325.

In 1964 the Insurance Code was amended to add a new section expressly preempting the field of imposing taxes, except ad valorem and real property taxes, upon life insurance companies. Municipalities, but not counties, were permitted to impose a gross premiums tax not to exceed one percent upon life insurance companies. Ga.L.1964, p. 122 et seq. Similar express preemption language applying to all insurance companies, including casualty insurers, was not added until 1983. Ga.L.1983, pp. 1595, 1596. A new section, Ga.L.1983, p. 1600 (OCGA § 33-8-8.2), was added and authorizes cities and counties to levy a tax "at a rate not to exceed 2.5 percent upon the gross direct premiums of all foreign, alien, and domestic insurance companies doing business in this state other than life insurance companies." Section 3 of this Act (OCGA § 33-8-8.2)(d) authorizes cities and counties which were levying a tax on gross premiums on January 1, 1983, at a rate in excess of 2.5 percent to continue to levy the tax provided the rate is reduced to 2.5 percent by January 1, 1986. The Insurance Commission, however, is now authorized to collect the taxes imposed on behalf of the counties and municipalities. OCGA § 33-8-8.2(b)(3)(C). This Act was further amended in 1984 by the addition of two sections, denominated OCGA §§ 33-8-8.5 and 33-8-8.6, to provide for the reimbursement of illegally assessed and collected insurance premiums by a county or municipality and to require that a written protest accompany payment of the tax as a condition precedent to recovery. Ga.L.1984, p. 1294.

We must next consider the case law in determining the application of the Cotton States decision. "The overruling of a decision is generally retroactive, but retroactive application of a decision overruling a prior decision may be declined where unjust results would accrue to those who justifiably relied upon the prior rule." Preston Carroll Co. v. Morrison Assur. Co., 173 Ga.App. 412, 326 S.E.2d 486 (1985); reversed on other grounds 254 Ga. 608, 331 S.E.2d 520 (1985). This general rule was recently noted in Solem v. Stumes, 465 U.S. 638, 104 S.Ct. 1338, 79 L.Ed.2d 579 (1984), and the court noted that "retroactive application is not compelled constitutionally or otherwise." Where retroactive application is determined to be inappropriate, any such application must be based on the "interest of justice" and "the exigencies of the situation." 465 U.S. at ---- - ----, 104 S.Ct. at 1341-1342, 79 L.Ed.2d at 586-587. In Flewellen v. Atlanta Cas. Co., 250 Ga. 709, 712, 300 S.E.2d 673 (1983), the court adopted the test set forth in Chevron Oil Co. v. Huson, 404 U.S. 97, 92 S.Ct. 349, 355, 30 L.Ed.2d 296 (1971) and held that in deciding whether a decision should be applied retroactively the court should: "(1) Consider whether the decision to be applied nonretroactively established a new principle of law, either by overruling past precedent on which litigants relied, or by deciding an issue of first impression whose resolution was not clearly foreshadowed. (2) Balance of the merits and demerits in each case by looking to the prior history of the rule in question, its purpose and effect, and whether retrospective operation would further or retard its operation. (3) Weigh the inequity imposed by retroactive application, for, if a decision could produce substantial inequitable results if applied retroactively, there is ample basis for avoiding the injustice or hardship by a holding of non-retroactivity."

In applying the first prong of the test set forth in Chevron Oil, we find that the Insurance Code enacted in 1960 contains no preemption language as to either casualty or life insurance companies. This fact was obviously considered by the Supreme Court, which held that the 1960 enactment repealed by implication DeKalb County's statutory authority to impose a gross premium tax on casualty insurance companies. As discussed previously, the 1963 Act amended the local enabling legislation and reenacted section 12(r) of the 1959 act (which pertained to the authority of the county to impose business and license taxes) without containing any preemption language as to insurance companies. Such language did not appear until the 1964 amendment to the Insurance Code to expressly preempt the taxing of life insurance companies. No mention was made of other types of insurers. In 1983, prior to the decision in Cotton States, the General Assembly preempted all insurance companies, but authorized the cities and counties to levy a 2.5% tax and permitted existing taxes to continue at a scaled-down rate. We therefore find on the basis of the statutory history of the Insurance Code and the local enabling legislation, that the county could reasonably believe its ordinance was valid.

We must next turn to the case history of the DeKalb County ordinance to determine whether the Cotton States decision established a new principle of law by overruling past precedents or deciding an issue of first impression. The court points out that "[t]hese acts are no strangers to this court." 251 Ga. at 310, 304 S.E.2d 386, as it had been asked on at least five previous occasions to review the validity of the county's taxing attempts, which the county claimed were authorized under the constitutional a...