Lincoln Nat. Life Ins. Co. v. State

• Decision Date: 22 April 1982
• Docket Number: No. 13606,13606
• Citation: 632 S.W.2d 227
• Parties: LINCOLN NATIONAL LIFE INSURANCE COMPANY, Appellant, v. STATE of Texas, et al., Appellees.
• Court: Texas Court of Appeals

Page 227

632 S.W.2d 227

LINCOLN NATIONAL LIFE INSURANCE COMPANY, Appellant, v. STATE of Texas, et al., Appellees.

No. 13606.

Court of Appeals of Texas, Austin.

April 22, 1982.

Rehearing Denied May 12, 1982.

David C. Duggins, Clark, Thomas, Winters & Shapiro, Austin, for appellant.

Mark White, Atty. Gen., Catherine Fryer, Asst. Atty. Gen., Austin, for appellees.

PHILLIPS, Justice.

The question before us is whether appellant can recover 1976 gross-premiums-receipt taxes which it mistakenly overpaid. At all times relevant to this cause of action, appellant has been subject to the payment of gross-premiums-receipts taxes under Tex.Rev.Civ.Stat.Ann. art. 4769 (1981).

The trial court held these erroneously paid taxes were not recoverable. We reverse the judgment of the trial court and render judgment that appellant be reimbursed the monies paid in error.

This suit was authorized by the State and was instituted by appellant for the purpose of recovering an overpayment of gross-premiums-receipt taxes for the year 1976. It is undisputed appellant overpaid its 1976 taxes by $179,465.44. The overpayment arose out of the following circumstances: appellant is a foreign life insurance company doing business in Texas and, accordingly, is subject to the occupation tax imposed by article 4769. The tax is imposed on the gross amount of insurance premiums collected during the preceding year from Texas residents and domiciliaries. The rate of tax varies from a maximum of 3.3 per cent to a minimum of 1.925 per cent depending upon a formula which, in essence, lowers the amount of gross receipts a foreign company must pay as it invests more of its assets in Texas securities as compared to the state in which it has the highest percentage of its admitted assets invested.

Appellant is an Indiana corporation and erroneously assumed that its parent state, Indiana, was that in which it had the greatest amount of its admitted assets invested. Appellant later discovered that, in fact, it had invested the greatest amount of its admitted assets in Delaware and that Delaware, rather than Indiana, should have been compared with Texas in order to determine the appropriate rate of the Texas tax.

When its error was discovered, appellant had already filed its 1976 tax return. That return, using Indiana as the comparison state, showed a tax rate of 2.75 percent and a resulting tax of $597,272.12.

After discovery of the mistake, appellant filed an amended 1976 tax return using Delaware as the comparison state. This resulted in a tax rate of 1.925 percent and a tax for 1976 of $417,806.68. As Lincoln had forwarded payment simultaneously with the original return, it requested a refund of the difference between $597,272.12 and $417,806.68, or $179,465.44. Despite the fact the State's extensive review revealed appellant's amended tax return to be accurate, and the existence and amount of the overpayment were conceded by the State, the State refused to refund the excess. Consequently, Lincoln instituted suit.

Appellant is before us on a number of points; however, as we sustain its first point, we need not reach the remainder.

Appellant's first point of error is that of the trial court in concluding the overpayment of taxes in question did not constitute payment under duress since duress was established as a matter of law.

The sole question for decision arises from the general proposition of law, that one who voluntarily overpays a tax has no legal claim for its repayment, but one who pays more tax than the law requires, under duress, has such a claim. Austin National Bank v. Sheppard, 123 Tex. 272, 71 S.W.2d 242 (1934). See also San Antonio Independent School Dist. v. National Bank of Commerce, 626 S.W.2d 794 (Tex.Civ.App.1981, no writ).

In our judgment, disposition of the case on appeal is controlled by State v. Connecticut General Life Insurance Co., 382 S.W.2d 745 (Tex.1964), which requires reversal of the trial court's judgment. The trial court declined to follow Connecticut General due to the amendment of Tex.Ins.Code Ann. art. 1.14 in 1959, ¹ under which certificates of authority are now valid until revoked according to law, rather than subject to annual renewal.

Connecticut General Life Insurance Company obtained legislative permission to sue the State for recovery of overpayments of its gross receipt taxes under article 4769 for the years 1952 through 1957, inclusive, and for 1959. Rather than instituting an exhaustive accounting, Connecticut General simply paid its taxes at the maximum rate of 3.3 per cent for 1952 through 1957, and paid at the rate of 2.2 per cent for 1959. Based on stipulated facts, it was determined Connecticut General's actual tax rate for each year in controversy, using the correct determination of Texas securities, was the minimum rate of 1.925 per cent.

The Texas Supreme Court in Connecticut General commenced its discussion by noting article 4769 mandates that companies like Connecticut General (and appellant here) file an annual statement of its gross-Texas-premiums receipts on or before the first day of March of each year and requires the Insurance Commissioner to certify to the State Treasurer the amount of taxes due, which must be paid on or before the following March 15th.

The Texas Supreme Court noted Connecticut General had timely filed its returns and that the Insurance Commissioner had merely certified the taxes were due as shown on the face of the returns, with the taxes being paid as certified. The Court wrote:

These remittances by Respondent of the amounts certified by the Board were prerequisite to the right of Respondent to the issuance of a permit to continue its business in Texas. Article 4.05 of the Insurance Code, Vol. 14, V.A.T.S., provides, in part:

Upon the receipt of sworn statements showing the gross receipts of any insurance organization, the Board of Insurance Commissioners shall certify to the State Treasurer the amount of taxes due by such insurance organization for the preceding year, which taxes shall be paid to the State Treasurer for the use of the State, by such company. Upon his receipt of such certificate and the payment of such tax, the Treasurer shall execute a receipt therefor, which receipt shall be evidence of the payment of such taxes. No such life insurance company shall receive a certificate of authority to do business in this State until such taxes are paid. (382 S.W.2d at 746 (emphasis appearing in original)).

After thus outlining the facts and applicable statutes, the Court proceeded to discuss the governing law, remarking:

This Court has consistently held that the voluntary payment of an illegal tax will not support a claim for repayment; but that a payment under duress, which may be either express or implied, is not a voluntary payment and may be recovered. (citations...