Kansas City Life Ins. Co. v. Hammett

• Decision Date: 07 July 1933
• Docket Number: 32353,32355,32354
• Court: Louisiana Supreme Court
• Parties: KANSAS CITY LIFE INS. CO. v. HAMMETT, Tax Assessor, et al.; GUARDIAN LIFE INS. CO. OF AMERICA v. SAME. GREAT SOUTHERN LIFE INS. CO. v. SAME

149 So. 525

177 La. 930

KANSAS CITY LIFE INS. CO. v. HAMMETT, Tax Assessor, et al.;

GUARDIAN LIFE INS. CO. OF AMERICA v. SAME.

GREAT SOUTHERN LIFE INS. CO. v. SAME

Nos. 32353, 32354, 32355

Supreme Court of Louisiana

July 7, 1933

Appeal from First Judicial District Court, Parish of Caddo; Robert Roberts, Judge.

Separate suits by the Kansas City Life Insurance Company, by the Guardian Life Insurance Company of America and by the Great Southern Life Insurance Company, against A. G. Hammett, Tax Assessor, and another, which were consolidated for trial. From judgments for defendants, plaintiffs appeal.

Reversed and rendered.

Wilkinson Lewis & Wilkinson, of Shreveport, for appellants.

A. M Pyburn, City Atty., and Robert J. O'Neal, both of Shreveport (G. L. Porterie, Atty. Gen., of counsel), for appellees.

OPINION

ODOM, Justice.

As the issues in these cases are identical, the cases were consolidated for the purpose of trial in the lower court and were argued together here. The only question involved is whether uncollected premiums on life insurance policies falling due during the current year are property and are taxable as "credits" as that term is defined by section 91, Act No. 170 of 1898, which reads in part as follows:

"The term 'credit' includes every claim and demand for money, labor, merchandise and other valuable things."

These cases were submitted on an agreed statement of facts, which shows that each of the plaintiffs is a life insurance company authorized to do business in this state, and that in the manner required by law filed with the assessor of Caddo parish for the year 1932 a sworn statement of its taxable property on forms furnished by the assessor for that purpose. The rendition as made was approved by the assessor and submitted to the Louisiana tax commission, which added to each assessment certain amounts as "credits." These so-called "credits" were arrived at by taking the total of premiums, including both those which were paid for the issuance of policies and those paid under the terms of existing policies to continue the contracts of insurance in force for another year, and after deducting 25 per cent. allowance for agents' commissions and collection, the remainder was divided by twelve in order to determine the "average" of all premiums collected for the year 1931. This average was assessed to plaintiffs by the tax commission as "credits" on which ad valorem taxes were to be levied and collected for the year 1932. In other words, the tax commission added to the assessments as "credits" the anticipated collections in the way of premiums of each of the companies.

Plaintiffs appeared before the police jury and protested the assessment of these so-called "credits." Their protests were sustained by the police jury, which recommended that the tax commission cancel them. The tax commission refused to concur in the recommendations and ordered the assessor to include them on the list of property to be assessed.

Plaintiffs then brought the present suits to cancel the assessment of these "credits," coupled with a prayer for an injunction restraining the tax collectors for the parish of Caddo and the city of Shreveport from collecting the taxes so assessed. There was judgment for defendants rejecting plaintiffs' demands and ordering their suits dismissed. Plaintiffs appealed.

1. The admitted facts are that these life insurance companies issue policies only upon the payment in advance of the premium for the first year and that the policies lapse, according to their precise terms, at the end of the year, or within a stipulated number of days of grace, unless the premiums for an additional year are paid in advance; that throughout the life of the policies, all premiums are payable in advance; that the payment of these premiums is purely optional with the policyholders; and that the companies cannot enforce the payment of either the first or any subsequent premium by an action at law.

Counsel for these defendants say in their brief:

"And we might agree that an uncollected life insurance premium is not such an obligation as may be enforced by suit against the insured."

Under the agreed statement of facts, counsel could ill afford to do otherwise than make the above admission. And yet that admission is utterly fatal to their case.

The reason is that these so-called "credits" are assessed as property when as a matter of fact they are not property. If they are not property there is no basis for the assessment. The word "property," as that term is used in the statutes relating to assessment and taxation, refers to every species of valuable right or interest which is subject to ownership, or that which has an exchangeable value or which goes to make up one's wealth or estate; all things which have a pecuniary value. "Property," says Webster, "in a broad sense, is any valuable right or interest considered primarily as a source or element of wealth."

As defined by section 91, Act No. 170 of 1898, par. 2, "personal property" means and includes "all things other than real estate, which have any pecuniary value, and monies, credits, investments," etc. The term "credit" includes "every claim and demand for money." Paragraph 4. The term "property" as defined in section 1 of said act includes "promissory notes, open accounts, and other obligations," as well as the "cash value of all judgments, suits and causes in action."

"The term 'property' is sufficiently comprehensive to include every species of estate, real and personal, and everything which one person can own and transfer to another. It extends to every species of right and interest capable of being enjoyed as such upon which it is practicable to place a money value." 22 R. C. L. 43, § 10.

Act No. 109 of 1921 (Ex. Sess.) provides that taxes shall be assessed on all property situated in the state of Louisiana, except such as is especially exempted by law, and the term "property" is defined in section 2 of the act. It provides that the term "property," as used in the act, includes, among other things, "bonds, notes, judgments, credits, accounts, or other evidence of indebtedness, and every other thing of value, in possession, on hand, or under the control, at any time during the calendar year for which taxes are levied."

According to the agreed statement of facts, policyholders in these life insurance companies get nothing except what they pay for in advance. They buy insurance for stated periods and pay for it before they get it. They never owe the companies for the premiums, but are always required to pay them in advance. When a policy is issued, the holder is under no obligation to pay future premiums, but is granted the privilege of keeping the policy alive and in force by paying in advance the premiums year by year or at such stated intervals as may be agreed upon. If the premiums are not paid in advance the policy becomes void. In other words, when he secures insurance by the issuance of the policy to him, he buys and pays in advance for protection for a stated period, and at the end of that period he has the option of buying in the same manner the same amount of protection for an additional period. He does not obligate himself to pay future premiums and the companies have no claim against him for them.

The policies recite that "this contract is made in consideration of the payment of the first annual premium (or installments thereof). * * * The receipt of said premium or installment thereof is hereby acknowledged," and that "all premiums on this policy shall be paid in advance."

These companies have no right to claim or demand these premiums and have no right or cause of action to...