Kenton Ins. Co. v. City of Covington

• Decision Date: 27 October 1887
• Citation: 86 Ky. 213,5 S.W. 461
• Parties: KENTON INS. CO. OF KENTUCKY v. CITY OF COVINGTON.
• Court: Kentucky Court of Appeals

5 S.W. 461

86 Ky. 213

KENTON INS. CO. OF KENTUCKY v. CITY OF COVINGTON.

Court of Appeals of Kentucky.

October 27, 1887

Appeal from chancery court, Kenton county.

J. F. &amp C. H. Fisk, for appellant.

W. K Benton, for appellee.

PRYOR C.J.

This action was instituted in the court below to enjoin the collection of what was claimed to be delinquent taxes, assessed against the insurance company for the years 1879, 1880, 1881, 1882, and 1883. The injunction was sustained as to the collection for the entire period, except as to the year 1883; the chancellor below holding that the remedy by distress as to those years had been lost by the failure of the council to place the delinquent bills or tax-bills in the hands of the collector at least once in each year, as required by the provisions of the charter of the city. The failure to do this lost to the city the particular remedy, as was held in the case of City of Covington v. Gas-Light Co., 2 S.W. 326. The taxes for the year 1883 are alone involved on this appeal.

The insurance company asserts an exemption from taxation on its reserved fund, or what is termed unearned premiums, on two grounds. The first is that, being required to pay into the treasury the sum of 50 cents upon each $100 of its capital stock by or on a named day, it was the legislative intent to exempt it from any other burden in the way of taxation, state or municipal; and the cases of Johnson v. Com., 7 Dana, 338, and Bank v. Com., 6 Bush, 127, are relied on as settling this question. An examination of these cases will show that, in considering the charter of the two banks, it was held that the legislature had manifested an intention to exempt the banks from any additional taxation in providing that the tax imposed "shall be in lieu, or in full, of all other taxes." There is nothing in the charter of the appellant expressly exempting its property from municipal taxation, nor can a reasonable implication arise from any provision of its charter that such was the legislative will; on the contrary, the company has been listing its property for taxation from year to year with the assessor of the city, and paying taxes thereon for municipal purposes, placing upon the language of its charter the only reasonable construction that can well be applied to it.

It is insisted, however, by the city, that the reinsurance revenue, or what has been termed "unearned premiums," is liable to taxation; and as the company has failed to list this money under the equalization law, or had deducted the amount from its assets, it is not bearing its share of the municipal burden.

The general statute regulating the assessment of property provides that, after the assessment of the specific property described, each person shall fix the amount he is worth from all other sources, after deducting his indebtedness. Section 6 provides: "The indebtedness which may be deducted as aforesaid must be just and honest debts owing as principal, and not as surety, and created for a valuable consideration, which the person intends to pay," etc. The fifteenth section of an act approved March 12, 1870, entitled "An act for the incorporation of, and regulation of, fire, marine, health, accident, etc., insurance companies," provides as follows: "It shall not be lawful for the directors, trustees, or managers of any insurance company to make any dividend except from the surplus profits arising from their business; and in estimating such profits there shall be reserved therefrom a sum equal to the amount received for premiums on unexpired risks and policies, which are hereby declared to be unearned premiums; and, also, there shall be reserved all sums due the corporation on bonds and mortgages, bonds and book-accounts, or other securities, of which no part of the principal or interest thereon has been paid during the last year, and for which foreclosure or suit has not been commenced for collection, or which, after judgment obtained thereon, shall have remained more than two years unsatisfied, and on which interest shall not have been paid; and, also, there shall be reserved all interest due or accrued and remaining unpaid. Any dividend made contrary to these provisions shall subject the company making the same to a forfeiture of its charter," etc.

We find no provision of the general law with reference to taxation that exempts this or like corporations from the payment of municipal taxes, and no provision of appellant's charter from which it may be inferred that such an exemption exists and, if no such burden can be imposed, it must arise from the obligation of the company to pay losses sustained out of this reserved fund, denominated "unearned premiums," or its contingent liability to policy-holders to refund to them a portion of the premiums paid when presenting their policies for cancellation. If the right on the part of policy-holders to demand pay for losses, or to reclaim premiums paid upon a cancellation of the insurance contract, can be regarded as an indebtedness on the part of the company, then such indebtedness may be deducted from the assets of the corporation when listing its property for taxation....