N.Y. Life Ins. Co. v. Sullivan

• Decision Date: 04 May 1937
• Citation: 192 A. 297
• Parties: NEW YORK LIFE INS. CO. v. SULLIVAN et al.
• Court: New Hampshire Supreme Court

192 A. 297

NEW YORK LIFE INS. CO.

v. SULLIVAN et al.

Supreme Court of New Hampshire. Merrimack.

May 4, 1937.

Transferred from Superior Court, Merrimack County; Johnston, Judge.

Declaratory judgment action by the New York Life Insurance Company against John E. Sullivan and others. The cause was transferred to the Supreme Court without ruling.

Judgment for defendants.

Petition for declaratory judgment to determine whether the receipts of foreign life insurance companies for annuity contracts are taxable. The petitioner has proceeded in its own behalf and in behalf of such other foreign insurance companies similarly situated as may join.

The petitioner is a New York corporation, it has done the business of life insurance in New Hampshire since 1862, and it has entered into annuity contracts with citizens of this state. The defendants are the insurance commissioner and the state treasurer, who are charged by law with the respective duties of assessing and collecting the tax of 2 per cent. upon premiums received by foreign life insurance companies.

There are 33 foreign life insurance companies licensed to do business in New Hampshire, of which 25 write annuity contracts. The volume of this class of business here was very light until 1931, when the premiums paid for annuities by residents of this state amounted to $79,283.93. In 1932 such receipts multiplied more than ten times, to $897,726.39, and they steadily increased thereafter to $2,264,419.47 in 1935.

The tax upon premiums is assessed upon the basis of annual statements made by the foreign companies to the insurance commissioner. In these statements there was no classification of premiums according to the. nature of the contracts upon which they were received, and the insurance commissioner gave no particular thought to the question whether the figures returned by the companies included premiums for annuities. But when the volume of annuity business reached considerable proportions, the insurance commissioner in 1934 called upon the companies for detailed information regarding 1931 and subsequent years.

The inquiry developed the fact that a few foreign companies were including premiums for annuities, but that the petitioner and most foreign life companies had failed to do so. Thereupon the commissioner ruled that such premiums were taxable under P.L., c. 275, § 60, assessed the taxes thereon for the years 1931, 1932, and 1933, and notified the companies and the state treasurer thereof.

The bill seeks determination of the questions whether (1) the premiums for annuities are taxable under the statute, and, if so, (2) whether the commissioner could rightfully assess such taxes in 1934 for years prior to 1933. The statute directs assessments to be made annually on or before April 1 on account of the business of the preceding year.

The defendants answered, and the presiding justice, Johnston J., transferred without ruling the questions raised. Other pertinent facts appear in the opinion.

Demond, Woodworth, Sulloway, Piper and Jones, of Concord (Jonathan Piper, of Concord, orally), for petitioner. Robert W. Upton, of Concord, for defendants.

PAGE, Justice.

While it will be necessary later to determine whether the payment annually of 2 per cent. of premiums received by foreign insurance companies is properly called a tax, it will be convenient to refer to the levy as such during a discussion of the legislative intent with respect to its scope.

There is a strong tendency in the decisions of other states, indeed they are virtually unanimous, to hold that a tax levied on life insurance premiums does not extend to receipts on account of annuity contracts. The decisions are based in part upon the theory that insurance cannot exist when the object of the contract is not indemnity or security against loss. Commonwealth v. Metropolitan, etc., Co., 254 Pa. 510, 514, 98 A. 1072. We are'not called upon to decide whether this definition is generally correct, though it might possibly exclude some contracts which in common understanding and legal significance are regarded as contracts of insurance.

Nor is it necessary to decide between the alternatives presented by the majority and minority of the justices in People ex rel. Metropolitan, etc., Co., v. Knapp, 193 App.Div. 413, 184 N.Y.S. 345, affirmed 231 N.Y. 630, 132 N.E. 916, where the decision of the question of taxability depended in large part upon whether emphasis were placed upon the differences between ordinary life policies and annuity contracts, or their likenesses. We think that the intent of our Legislature may be gathered without recourse to aiiy consideration mentioned.

The Legislature early required each foreign insurance company doing business here to report annually its assets and liabilities, "the amount of premiums received during the year" in New Hampshire, and "the amount of losses paid therein." Laws 1868, c. 1, § 48. The last two items were understood by the insurance commissioner to mean "all receipts and losses in the state." Report of Insurance Commissioner for 1871, page 141.

Under this act the New York Life Insurance Company, as well as others, reported the "Amount of premiums received during the past year in New Hampshire." Report for 1868, page 56. While acts passed prior to 1868 required similar returns, it would seem that they had not been fully complied with. Report for 1867, page 33. Nor did the companies at once fully comply with the act of 1868, as the reports for that year indicate. The returns that were complete, however, indicated that the foreign companies were taking much money out of the state.

"It has been suggested by many of our people that so large a sum of money as is drawn from this State by fire and life insurance companies for premiums * * * should be subject to some light taxation; and the Commissioners would recommend some legislation imposing a small tax upon the premiums of both fire and, life insurance companies * * *." Report for 1868, page 123.

The immediate result was the enactment of Laws 1869, c. 13. By section 1 of this act, each foreign insurance company was required to report "the whole amount of premiums received in money * * * or anv other substitute for mnnev * * * for any insurance made by it on persons or property in this state," and to pay a tax of one per cent. "on the amount so received by it."

This is substantially the language of the act of 1870, later to be noted, and of the present statute. If it be suggested that the language is different from that of the earlier act, and not so inclusive as to premiums, or that the act of 1869 was of narrower scope than the recommendation of the commissioners, it may be replied that the contemporary understanding indicates no thought of exclusion of any premium received in this state. Thus, the insurance commissioner wrote the year after the passage of the act of 1869: "It will be recollected that the Legislature of last year imposed a tax of one per cent. on the receipts of insurance companies of other states in this state." Report for 1869, page 142. And such, as we shall later see, appears to have been the practical construction.

The tax now in question originated when the act of 1869 was repealed and the similar act of 1870 was passed. Laws 187Q, c. 1, § 7. This provided that each foreign insurance company doing business in this state should pay an annual tax of one per cent. on the whole amount of premiums received, in money or any substitute therefor, for insurance made by it on persons or property in this state during the preceding calendar year. By section 6 of the same act, every such company was required to report annually the full amount of premiums received by it during the preceding calendar year "for any insurance made by it on persons or property in this state."

The statute remained unchanged until 1889, when the Legislature required the annual report to state the "whole amount of premiums received * * * for any insurance made by it on property located, or persons resident, in this State." For the moment, no change was made in the section imposing the tax. Laws 1889, c. 86, § 3.

But in the revision of 1891 the Legislature amended the tax so that it was imposed upon the premiums received by foreign insurance companies "upon business done within the state" during the preceding calendar year. Pub.St.1891, c. 169, § 14. In its ordinary sense, the new language would naturally be taken to include annuity premiums. The petitioner argues, however, that the commissioners who made the revision regarded the change in language as merely verbal, hence that the statute remained as exclusive as it interprets the act of 1870 to have been.

The argument will work the other way. Those who made the revision may have interpreted the act of 1870 as inclusive, not exclusive. In that case a change of language in form inclusive would indeed be merely verbal, and the commissioners and the Legislature could not better express their understanding that the legislative intent had been inclusive for over 20 years. Which view we shall take of the "verbal" change must depend upon the circumstances surrounding the enactment of the laws of 1869 and 1870, already suggested, and upon what will later appear as to the practical construction of those acts prior to the amendment of 1889.

Since 1889 the levy upon its face has applied to contracts made by foreign companies upon property located here or with persons resident here, without respect, of course, to the place where the contracts were made. If this inclusive view be taken, the more limited language of the section as to reports must be interpreted to require returns of all premiums received by foreign life insurance companies upon all contracts with persons resident here.

Taking words in their natural meaning, the amendments to the section prescribing the levy have consistently and increasingly made evident an inclusive legislative intent. In 1899, the...