Michigan Millers' Mut. Fire Ins. Co. v. McDonough

• Decision Date: 17 December 1934
• Docket Number: 21990.,Nos. 21989,s. 21989
• Citation: 193 N.E. 662,358 Ill. 575
• Parties: MICHIGAN MILLERS' MUT. FIRE INS. CO. v. McDONOUGH, County Collector. CENTRAL MFRS'. MUT. INS. CO. v. BOARD OF COM'RS OF COOK COUNTY et al.
• Court: Illinois Supreme Court

358 Ill. 575

193 N.E. 662

MICHIGAN MILLERS' MUT. FIRE INS. CO.

v.McDONOUGH, County Collector.

CENTRAL MFRS'. MUT. INS. CO.

v.BOARD OF COM'RS OF COOK COUNTY et al.

Nos. 21989, 21990.

Supreme Court of Illinois.

Dec. 17, 1934.

Suits by the Michigan Millers' Mutual Fire Insurance Company against Joseph B. McDonough, County Collector, and by the Central Manufacturers' Mutual Insurance Company against the Board of Commissioners of Cook County and others. From adverse decrees, complainants appeal.

Reversed and remanded, with directions.

Appeals from Circuit Court, Cook County; George Fred Rush, judge.

Walter F. Dodd, Clarence W. Glover, and Nicholas S. Kiefer, all of Chicago, for appellants.

Thomas J. Courtney, State's Atty., of Chicago (William H. Sexton, Corporation Counsel,Hayden N. Bell, Robert S. Cushman, Philip H. Treacy, Leon Hornstein, Joseph F. Grossman, and Ruth Nelson, all of Chicago, of counsel), for appellees.

DE YOUNG, Justice.

The Michigan Millers' Mutual Fire Insurance Company filed a bill of complaint in the circuit court of Cook county against Joseph B. McDonough, the treasurer and ex officio collector of Cook county, by which it prayed that the assessment made against its net receipts for the year 1930 be declared void, and that the collection of the taxes extended on the assessment be enjoined. The Central Manufacturers' Mutual Insurance Company filed an amended bill in the same court against the board of commissioners and the treasurer and ex officio collector of Cook county for like relief from the same taxes and for an injunction pendente lite restraining the prosecution of an action of debt to recover them. Demurrers were interposed to the bills by the respective defendants and the demurrers were sustained. The complainants elected to abide by their bills and decrees were entered dismissing them for the want of equity. From these decrees, the complainants prosecute the present appeals and, for the purposes of a hearing, the causes are consolidated.

By their bills, the Michigan Millers' Mutual Fire Insurance Company and the Central Manufacturers' Mutual Insurance Company allege that they are organized under the laws of the states of Michigan and Ohio, respectively; that they are licensed to transact business in this state under the provisions of the Mutual Insurance Act of 1915 (Smith-Hurd Ann. St. c. 73, § 376 et seq.); that each maintains and operates and agency in the city of Chicago; that through these agencies they hold themselves out as qualified to write fire insurance, motor vehicle insurance against theft, collision, and property damage, and hail, windstorm, cyclone, tornado, earthquake, use and occupancy, and sprinkler-leakage insurance; that the Central Manufacturers' Mutual Insurance Company also announces itself qualified to write insurance against damage to aircraft or resulting from riot, civil commotion, and explosion; that during the year ending April 30, 1930, both companies, through their respective agencies, wrote fire, tornado, windstorm, cyclone, and sprinklerleakage insurance; and that the Central Manufacturers' Mutual Insurance Company, during that year, also wrote motor vehicle insurance against fire, theft, collision, and property damage.

Additional allegations of the bills are that the board of assessors of Cook county required returns of net premium receipts collected by the appellants' agencies during the taxable year ending April 30, 1930; that in requiring these returns the board acted under the purported authority of section 30 of the Fire, Marine and Inland Navigation Insurance Companies Act of 1869, as amended in 1879 (Smith-Hurd Ann. St. c. 73, § 46); that they filed their returns, under protest; and that upon the basis of these returns the taxes for which liability is denied were extended. Both appellants charge that section 30 of the act of 1869, as amended, is not applicable to mutual insurance companies governed by and operating under the Mutual Insurance Act of 1915, and that if section 30 does apply to mutual insurance companies, the assessments against the appellants, under the terms of that section, should have allowed deductions for the operating expenses of their local agencies and the proportions of their general operating expenses attributable to these agencies.

By the amended bill of the Central Manufacturers' Mutual Insurance Company, it is further charged that section 30, if appplicable to the company, deprives it of due process of law in violation of the Federal and State Constitutions (Const. Ill. art. 2, § 2; Const. U. S. Amend. 14), and denies it the equal protection of the laws guaranteed by the Fourteenth Amendment to the Federal Constitution. The basis of the charge is that the company, as a foreign corporation authorized to write fire insurance, is subjected to taxes upon its net receipts derived from automobile insurance other than fire and from tornado and sprinkler-leakage insurance, whereas other foreign insurance companies and particularly casualty insurance corporations are exempt from taxation upon their net receipts from the same types of insurance for the sole reason that they are not foreign fire insurance corporations.

The amended bill of the Central Manufacturers' Mutual Insurance Company also charges that it, as a foreign fire insurance corporation, is subjected to taxes upon its net receipts derived from fire and all other insurance, whereas the net receipts of competing unincorporated foreign insurers, whether partnerships, associations, individuals, or aggregations of individuals, are not subjected to the same taxes or to any other tax in lieu thereof, and that the sole basis for this discrimination is the fact that the appellant is a foreign corporation, while the other insurersmentioned are foreign unincorporated bodies or individuals.

Concluding allegations of the Michigan Millers' Mutual Fire Insurance Company's bill are that the treasurer and ex officio collector has threatened to levy a distress warrant upon its personal property for the purpose of effecting collectionof the challenged taxes, and that, because of its failure to pay them, its license to do business in this state may be subjected to cancellation. The Central Manufacturers' Mutual Insurance Company charges that some of the issues presented by it with respect to claimed deductions cannot be determined in an action of debt, and that, unless it invokes the interposition of a court of equity, its authority to transact business in the state may be revoked.

The Michigan Millers' Mutual Fire Insurance Company reported net premium receipts of $16,856.97, but claimed a deduction of $5,996.27 for its local agency's proportion of the expenses of the home office. Taxes amounting to $429.11 were extended against the company. By its return, the Central Manufacturers' Mutual Insurance Company reported net receipts aggregating $44,879.67. Of this sum, $9,463.70 represented premiums derived from motor vehicle theft, collision, and property damage, tornado, and sprinkler-leakage insurance, and $5,689.21, the share of the expenses of the home office incurred in writing fire insurance and charged to the local agency. The assessed value was fixed at $16,607 which represented substantially 37 per cent. of $44,879.67, the total reported. The taxes extended against this company amounted to $1,142.57.

Five contentions are urged by the appellants to obtain a reversal of the decrees. Of these, three require consideration. The first is that section 30 of the act entitled, ‘An Act to incorporate and to govern fire, marine and inland navigation insurance companies doing business in the state of Illinois,’ approved March 11, 1869 (Laws 1869, p. 209), as amended (Smith-Hurd Ann. St. c. 73, § 46, Cahill's Rev. St. 1933, c. 73, par. 159), cannot be applied to those receiptsof foreign fire insurance companies which are produced by risks incurred for insurance other than against fire when such other types of insurance may be written by foreign casualty companies without being subjected to the same taxes or to any tax in lieu thereof; that the application of section 30 to the net receipts of foreign fire insurance companies, without regard to their source, results in discrimination, confers a special privilege or immunity upon foreign casualty insurance corporations, and deprives foreign fire insurance corporations of due process of lawl in violation of the state Constitution; and that such application of section 30 also violates the due process of law and the equal protection of the law provisions of the Fourteenth Amendment to the Federal Constitution.

A tax on the receipts of insurance companies was first imposed by section 22 of the Revenue Act of 1853 and applied to the gross receipts of all foreign insurance companies. Laws 1853, p. 46. In 1869 (Laws 1869, p. 228), the provision was removed from the Revenue Act and inserted as section 30 of the Fire, Marine and Inland Navigation Insurance Companies Act and limited to the net receipts derived from insurance authorized to be written by foreign insurance companies operating under that act. The risks originally included only those arising out of fire and marine and inland navigation and transportation. Since 1869, the General Assembly, both by amendments to the Fire, Marine and Inland Navigation Insurance Companies Act and by independent statutes, has extended the powers of fire insurance companies enabling them to incur risks against lightning, tornadoes, windstorms, hailstorms, cyclones, the leakage of sprinklers, pumps, and other fire apparatus, and the theft of automobiles as well as their damage by fire and collision. All present powers of fire insurance companies, stock and mutual, to write insurance other than fire, marine, and inland navigation, rest upon an independent act approved June 30 and effective July 1, 1925. Laws 1925, p. 436. (Smith-Hurd Ann. St. c. 73, § 149, Cahill's Rev. St. 1933, c. 73, par....