In re Insurance Tax Cases

• Citation: 161 P.2d 726,160 Kan. 300
• Decision Date: 15 September 1945
• Docket Number: 36445,36491.,36478,36421-36429,36466,36448,36418,36449
• Parties: In re INSURANCE TAX CASES. v. HOBBS, Com'r of Insurance, and fifteen other cases. AETNA INS. CO.
• Court: United States State Supreme Court of Kansas

161 P.2d 726

160 Kan. 300

In re INSURANCE TAX CASES.

AETNA INS. CO. v. HOBBS, Com'r of Insurance, and fifteen other cases.

Nos. 36418, 36421-36429, 36445, 36448, 36449, 36466, 36478, 36491.

Supreme Court of Kansas

September 15, 1945

Syllabus by the Court.

1. Our statutes pertaining to insurance, G.S.1935, 40-252, subd. B 40-253, 40-1701, and G.S.1943 Supp. 40-1702 and 40-1703, were not rendered void by the decision of the Supreme Court of the United States in United States v. Southeastern Underwriters Ass'n, 322 U.S. 533, 64 S.Ct. 1162, 88 L.Ed. 1440.

2. Congress did not exceed its powers in passing Public Law No 15 of the 79th Congress, first session, 15 U.S.C.A. § 1011 et seq.

3. Mandamus will not be allowed to compel an executive officer to do something contrary to a statute unless it is clear that the statute is void.

HOCH WEDELL, and BURCH, JJ., dissenting.

George M. Brewster, of Topeka (John L. Hunt, Lester M. Goodell, and Margaret McGurnaghan, all of Topeka, on the brief), for plaintiffs Aetna Ins. Co., Century Indemnity Co., American Indemnity Co., and Commercial Standard Insurance Co.

Robert Stone, of Topeka (James A. McClure, Robert L. Webb, Beryl R Johnson, and Ralph W. Oman, all of Topeka, on the brief), for plaintiffs Central Life Assur. Soc. (Mutual), Trinity Universal Ins. Co., Security National Fire Ins. Co., Bankers Life Co., National Life & Accident Ins. Co., Standard Accident Ins. Co., Pacific Mutual Life Ins. Co., Columbian National Life Ins. Co., and National Life Ins. Co., J. P. Lorentzen, of Des Moines, Iowa, on the brief for Bankers' Life Co., and Leslie J. Cooper, of Los Angeles, Cal., on the brief for Pacific Mutual Life Ins. Co.

W. E. Stanley, of Wichita (Claude I. Depew, Lawrence Weigand, and William C. Hook, all of Wichita, on the brief), for plaintiffs Prudential Ins. Co. of America and Equitable Life Ins. Co. of Iowa.

M. F. Cosgrove, Clayton E. Kline, Balfour S. Jeffrey, and Robert E. Russell, all of Topeka, on the brief for plaintiff Employers Casualty Co.

A. B. Mitchell, Atty. Gen., and Harry W. Colmery, of Topeka (L. P. Brooks and C. H. Hobart, Asst. Attys. Gen., and Irwin Snattinger and Peter F. Caldwell, both of Topeka, on the brief), for defendant, Charles F. Hobbs, Commissioner of Insurance, in each of the cases.

C. W. Burch, B. I. Litowich, LaRue Royce, E. S. Hampton, and H. H. Dunham, Jr., all of Salina, amicus curiae.

HARVEY Chief Justice.

Each of sixteen insurance companies, incorporated under the laws of a state other than Kansas and previously admitted to do business in this state, brought mandamus proceedings in this court seeking an order compelling the commissioner of insurance of this state to issue to them respectively a certificate of authority to do business in this state during 1945 without payment on their part of the premium taxes on their 1944 business (and some of them without payment of the license fees for their agents), which payments our statutes, G. S. 1935, 40-252, subd. B, 40-253, require as conditions precedent to the issuance of such certificates; and in addition thereto the fire insurance companies seek such certificates without the payment of the firemen's relief fund tax which our statutes, G. S. 1935, 40-1701, and G. S. 1943 Supp. 40-1702, 40-1703, require as a condition precedent to the issuance of such certificates. Other insurance companies similarly situated have intervened. Only three of the cases, Nos. 36,428, 36,445 and 36,448, are fully abstracted. The other plaintiffs and the intervenors have stipulated to abide the result in some one of the three cases. (See Note 1 for more detailed statement. ^[1]) Plaintiffs contend that our statutes above cited, though previously regarded as valid and complied with by plaintiffs, were rendered void by the decision of the Supreme Court of the United States, June 5, 1944, in United States v. Southeastern Underwriters Ass'n, 322 U.S. 533, 64 S.Ct. 1162, 88 L.Ed. 1440. They further contend that by Public Law No. 15 of the 79th Congress, first session, 15 U.S.C.A. § 1011 et seq. (set out in Note 2 ^[2] ), Congress exceeded its powers, and that in any event the law has no effect upon the questions here involved.

Shortly stated, our statute, G. S. 1935, 40-252, subd. B, provides that insurance companies organized under the laws of any other state, territory or country shall pay the following annual fees; For filing annual statement, $50; for state school fund, $50; for renewal of certificate of authority, $1, and $2 for each agent's license issued or renewed, and in addition thereto shall pay a tax upon all premiums received during the proceding year at the rate of two percent; and G. S. 1935, 40-253 provides that when the laws of a state under which the insurance company was incorporated require the payment of greater taxes, etc. from insurance companies of other states than is required by the existing laws of this state, then such companies shall pay the taxes, etc. which would be required by a company organized in this state in order to do business in such other state. These provisions were first put into our law in 1871, Laws of 1871, Ch. 93, § 17, and with slight amendments, not necessary to note, have continued to be a part of the laws of this state. That portion of the law of 1871 which is now G. S. 1935, 40-253, was attacked in the case of Phoenix Insurance Co. v. Welch, 29 Kan. 672 (opinion by Brewer), as being unconstitutional upon the grounds, (1) that its validity depends upon the legislation of some other state, and (2) that it conflicts with section 1 of Article 11 of our Constitution relating to equality of taxation. The court held the legislature has authority to pass a law the operation of which is by its terms made to depend upon a contingency, even though that contingency be some action of the legislature of another state; and further held that the fees and charges required by the statute are in the nature of licenses, and as such are not subject to the constitutional provision of equality of taxation. On the first point the decision was cited and followed in City of Pittsburg v. Robb, 143 Kan. 1, 53 P.2d 203, where one of our statutes was made contingent upon an act of Congress. In the opinion (29 Kan. 674, 675) the court took note of the fact that the provision in question is referred to in insurance circles as 'a retailiatory' clause, and said:

'It seems to us more justly to be deemed a provision for reciprocity. It says, in effect, that while we welcome all insurance corporations of other states to the transaction of business without our limits, we insist upon a like welcome elsewhere, and that if other states shall attempt, directly or indirectly, to debar our corporations from the transaction of insurance business within their borders, we shall meet their corporations with the same restrictions and disability. It is, in brief, an appeal for comity; a demand for equality. As such, it is manifestly fair and just. It arouses no sence of injustice, and simply says to every other state in the Union: 'We will meet you on the basis of equality and comity, and will treat you as you treat us.''

This decision has stood throughout the years. Our later cases dealing with this statute have involved its application to the facts involved or to methods of computation of the tax. State ex rel. v. Wilson, 105 Kan. 752, 172 P. 41, L.R.A.1918D, 955; Employers Casualty Co. v. Hobbs, 149 Kan. 774, 89 P.2d 923; Pacific Mutual Life Ins. Co. v. Hobbs, 152 Kan. 230, 103 P.2d 854; Employers Casualty Co. v. Hobbs, 152 Kan. 815, 107 P.2d 715; Equitable Life Assurance Society v. Hobbs, 154 Kan. 1, 114 P.2d 871, 135 A.L.R. 1234; Equitable Life Assurance Society v. Hobbs, 155 Kan. 534, 127 P.2d 477, and State ex rel. v. Hobbs, 158 Kan. 320, 147 P.2d 721. In some of these cases the court had occasion to quote from Phoenix Ins. Co. v. Welch, supra, and reaffirmed the purpose and validity of the statute.

These fees and taxes were first used only to support the insurance department, Laws 1871, Ch. 93, § 17, but that was soon changed, Laws 1875, Ch. 112, § 3, and now they are turned into the state's general revenue fund. The insurance department is maintained by appropriation from the general fund. The amount has increased irregularly from less than $6,000 for 1871 to $1,480,884.68 in 1943 (74th Annual Report of the Commissioner of Insurance, p. 19), of which amount $1,210,709.17 was premium taxes. For many years these receipts have been and still are a substantial source of income for the conduct of the state's business. Most other states have similar laws, some older than ours, and have used the fees and taxes collected much as we have used those collected in this state. Under these statutes the gross premium taxes on insurance companies yielded to the states approximately $123,000,000 in 1943 (State Tax Collection of 1943, published by Bureau of Census). These state laws for the collection of fees and taxes from insurance companies consistently have been held valid by the state and federal courts for almost one hundred years. This is conceded by plaintiffs. The validity of none of them was specifically involved or held invalid by the Supreme Court in United States v. Southeastern Underwriters Ass'n, supra.

Our firemen's relief fund statute was first enacted in 1895 Ch. 363, Laws 1895, embodied in our insurance code of 1927, Ch. 231, Laws 1927, and amended in 1941, Ch. 257, Laws 1941, and appears now as G.S.1935, 40-1701 and G.S.1943 Supp. 40-1702 to 40-1707. Shortly stated, it requires fire insurance companies organized under the laws of any other state or country authorized to do business in this state and doing business in an incorporated city or township maintaining a fire department to pay...