Metro. Life Ins. Co. v. State

• Decision Date: 13 June 1924
• Docket Number: No. 24024.,24024.
• Citation: 144 N.E. 420,194 Ind. 657
• Court: Indiana Supreme Court
• Parties: METROPOLITAN LIFE INS. CO. v. STATE.

194 Ind. 657

144 N.E. 420

METROPOLITAN LIFE INS. CO.

v.STATE.

No. 24024.

Supreme Court of Indiana.

June 13, 1924.

Appeal from Superior Court, Sitting as Court of Claims, Marion County; W. W. Thornton, Linn D. Hay, Solon J. Carter, Arthur Robinson and T. J. Moll, Judges.

Action by the Metropolitan Life Insurance Company against the State of Indiana. From the judgment rendered plaintiff appeals, defendant assigning cross-errors. Reversed, with directions.

Miller, Dailey & Thompson and Albert L. Rabb, all of Indianapolis, for appellant.

U. S. Lesh, Atty. Gen., for the State.

EWBANK, J.

Appellant recovered a judgment against the state of Indiana for $11,300.31, being the amount which, under protest, it had been compelled by the auditor of state to pay into the state treasury as taxes on the amount of “dividends” and “bonuses” with which it had credited its policy holders during certain years by way of a reduction of the premiums on their policies. But the trial court refused to allow interest on such taxes from the dates when the several installments were paid to the date of rendering judgment, which, at 6 per cent. would have amounted to $2,540.49. By exceptions to the overruling of its motion for a new trial, exceptions to the conclusion of law upon the special finding of facts, and exceptions to the overruling of its motion to modify the judgment, appellant challenged the refusal of the trial court to allow interest on the amount of taxes found to have been unlawfully exacted and paid under protest, and each ruling has been properly assigned as error.

[1] Appellee demurred to each paragraph of the complaint for alleged want of sufficient facts, and reserved an exception when the demurrer was overruled, and also excepted to the conclusion of law, and has assigned each of said rulings as a cross-error, under which it challenges the right of appellant to recover back any of the taxes paid.

The special finding recites the facts as alleged in the complaint with the addition of a few others put in issue by the answer and reply, and the same questions of law are presented by appellee's exception to the conclusion of law as by its demurrer. For convenience we will first consider the cross-errors. The court found, in substance, that the plaintiff is and since the 6th day of January, 1915, has been a mutual life insurance company, organized and operating under the laws of the state of New York, without capital stock, all of its assets and earnings, in excess of expenses and death losses, belonging solely to its policy holders, and has so regulated its premium charges for insurance as to leave in the hands of its policy holders that part of the premiums for each current half year, as estimated and fixed by the policy contract, which actual experience for the preceding half year has shown will not be needed to pay expenses and death losses in such period; that the premiums contracted for, as fixed by each policy, were intended to be large enough to meet the highest estimated expenses and death losses for any half year, and were in excess of such expenses and losses in some half years, and that under the law creating said mutual insurance company the policy holders were entitled to such reduction as matter of right; that from the time of its organization in 1866, down to the 6th day of January, 1915, appellant had been a life insurance corporation organized under the laws of the state of New York, having a capital stock; but on said date, under authority of and in conformity with the laws of New York, appellant purchased all of said capital stock, and canceled the same, and reorganized as a mutual company; that since 1871, appellant has been engaged in the life insurance business in the state of Indiana, having fully complied with the law and become authorized so to do, and in 1916, 1917, and 1918 had an established business in said state with more than $55,000,000 of insurance in force, on which it was collecting annually $2,500,000 or more of premiums, out of a still larger amount of annual premiums stipulated for by its policies; that at the end of each six months in 1916, 1917, and the first half of 1918, appellant made a sworn report to the auditor of state of the amounts actually paid to it by its policy holders as premiums, and of the amounts of death losses paid by it in the preceding half year within this state, and also the amounts in which the premiums stipulated for in the several policies were reduced by credits given to the respective holders thereof, by reason of the experience of the preceding six months having shown that such amounts would not he required to meet the expenses and death losses during such current half year; that appellant paid into the treasury of the state of Indiana at the time of making its report $3 of every $100 of the gross sum actually received as premiums, less death losses paid; but in each of the five half years (as alleged in the several paragraphs, respectively) the amounts credited under the name of “bonuses” or “dividends” on the premiums called for by the outstanding policies, which were never actually paid to nor received by appellant, amounted to a designated sum (the total exceeding $370,000); that the auditor of state demanded payment of a tax of 3 per cent. on the amounts of these “bonuses” or “dividends” with which the policy holders were so credited, although no part of them actually was paid to or received by appellant company, and by threats to revoke appellant's certificate of authority to do business in the state of Indiana, and threats to enforce against appellant a penalty of $100 per day for nonpayment, compelled appellant to pay the tax on the amounts of said credits, in a total sum for all the half years exceeding $11,000, which appellant did under protest; that of the “dividends” and “bonuses” with which appellant credited its policy holders some (in amounts stated) were used to purchase paid up insurance from appellant, the premiums on the policies for which they were credited being paid in full with money; that in the period from January 1, 1916, to June 30, 1918, appellant paid into the state treasury, under protest, as constituting a tax of 3 per cent. upon dividends credited to its policy holders and used in the reduction of their premiums, but not paid to appellant in money nor received by it, the full tax of 3 per cent. on all premiums actually paid to and received by it from policy holders, less losses paid by it within this state; that most of the policies on which such dividends were credited had been issued before appellant was changed to a mutual company, and no new contractual relations were entered into by appellant with its policy holders thereafter, except so far as its conversion into a mutual company imposed new obligations; and that premiums were collected and rebates were allowed thereon by way of dividends and bonuses in favor of policy holders in the same manner after it became a mutual company as before, but that the dividends so credited and used in the reduction of premiums were all allowed by reason of earnings of appellant after it became a mutual company; that the sum of $11,300.31 was made up of five payments of amounts, as stated, on dates named (from which interest may be calculated, if appellant be entitled to recover interest). The conclusion of law was “that plaintiff is entitled to recover the sum of $11,300.31, with costs.” The statute requires every foreign insurance company doing business in this state to report semiannually, under oath, “the gross amount of all receipts received in the state of Indiana on account of insurance premiums,” and “to pay into the treasury of the state the sum of $3.00 on every $100 of such receipts, less losses actually paid, within the state.” Section 10216, Burns' 1914, § 67, c. 99, Acts 1891, p. 222.

While appellant was still a stock company, the Supreme Court of Indiana held that it was not entitled to deduct from the premiums on which taxes must be paid the amount of bonuses or dividends credited to its policy holders by way of a reduction of the current premiums. Devoting half a dozen printed pages to drawing a distinction between stock companies and mutual companies, and stating that the weight of authority was to the effect that sums credited to its policy holders by a mutual...