Montana Life Ins. Co. v. Shannon

• Citation: 78 P.2d 946,106 Mont. 500
• Decision Date: 30 April 1938
• Docket Number: 7781.
• Parties: MONTANA LIFE INS. CO. v. SHANNON State Treasurer.
• Court: United States State Supreme Court of Montana

78 P.2d 946

106 Mont. 500

MONTANA LIFE INS. CO. v. SHANNON State Treasurer.

No. 7781.

Supreme Court of Montana

April 30, 1938

Appeal from District Court, Lewis and Clark County, First District George W. Padbury, Jr., Judge.

Action by the Montana Life Insurance Company, a corporation, against Ray Shannon, as State Treasurer of the State of Montana, to recover taxes paid under protest. Judgment on the pleadings for plaintiff, and defendant appeals.

Affirmed.

Harrison J. Freebourn, Atty. Gen., John A. Matthews, Sp. Asst. Atty Gen., and John J. Greene, of Helena, for appellant.

Gunn Rasch, Hall & Gunn, of Helena, for respondent.

ANDERSON Justice.

This action was brought to recover taxes paid under protest. Plaintiff is a life insurance company organized under the laws of, and with its principal place of business within, the state. It conducted its business within and without the state during the year 1932. Plaintiff made its return to the State Board of Equalization for the year 1932, and paid on that basis its corporate license tax. In this return it omitted interest on bonds, notes, and other interest-bearing obligations of nonresidents of the state held and kept within the state. These interest payments were collected during the year without the state and transmitted to and received by the plaintiff within the state. The Board of Equalization made another return for the plaintiff, including these omitted items of interest. An additional corporation license tax was then computed and assessed against plaintiff on the basis of these additional items, which was paid under protest. This suit followed.

The foregoing facts were set forth in the complaint and admitted by the answer. In the original answer defendant affirmatively alleged that the board found it difficult to segregate the Montana expenses of the plaintiff from the total expenses and apportioned to Montana 61.98 per cent. of the net income, and on this percentage basis determined the net income for Montana. These affirmative allegations were stricken on motion. An amended answer was filed, containing the same admissions as the original answer. It affirmatively alleged that these items of interest accrued to plaintiff as a result of the investment of its capital and assets in the course of its usual business activities; that these items of interest were payable to plaintiff at its principal office and place of business within the state, and were so paid either directly or through authorized agents, who, in turn, after collection, remitted to the plaintiff within the state; and that these obligations were owned and held within the state. A motion by plaintiff for judgment on the pleadings was sustained. Judgment was accordingly entered. The appeal is from the judgment.

The pertinent portion of section 2296, Revised Codes 1921, under which plaintiff was to be taxed, reads as follows: "Every corporation, except as hereinafter provided, organized and existing under the laws of the state of Montana and engaged in business therein, shall annually pay to the state treasurer, as a license fee for carrying on business in said state of Montana, two (2) per centum upon the total net income received by such corporation in the preceding fiscal year from all sources within the state of Montana, including interest on bonds, notes or other interest bearing obligations of residents, corporate or otherwise." This act has been amended (chapter 92, Laws of 1937), but the amendment is not applicable here.

The principal question raised on this appeal may be stated as follows: Was the interest collected by the plaintiff on bonds, notes, and other interest-bearing obligations of nonresidents of the state a part of the income received by plaintiff from sources within the state within the meaning of this statute?

In the circumstances of the case, it was within the power of the Legislature to tax the net income from these interest-bearing obligations of nonresidents. New York ex rel. Cohn v. Graves, 300 U.S. 308, 57 S.Ct. 466, 81 L.Ed. 668, 108 A.L.R. 721; United States Glue Co. v. Oak Creek, 247 U.S. 321, 38 S.Ct. 499, 62 L.Ed. 1135, Ann.Cas.1918E, 748. No question is here involved of want of legislative power. Hence, we must determine the extent of the power exercised by the Legislature. In other words, we must construe the quoted portion of section 2296 to determine whether the Legislature has authorized a tax on these items of interest as a part of the net income of the plaintiff.

Where a taxing statute is susceptible of two constructions and the legislative...