Northwestern Mut. Life Ins. Co. v. Murphy

• Decision Date: 09 March 1937
• Docket Number: 43711.
• Citation: 271 N.W. 899,223 Iowa 333
• Parties: NORTHWESTERN MUT. LIFE INS. CO. v. MURPHY et al.
• Court: Iowa Supreme Court

271 N.W. 899

223 Iowa 333

NORTHWESTERN MUT. LIFE INS. CO. v. MURPHY et al.

No. 43711.

Supreme Court of Iowa.

March 9, 1937

Appeal from District Court, Polk County; Russell Jordan, Judge.

Suit in equity involving construction of section 7022, Code of 1931. From decree for plaintiff, defendants appealed.

Reversed and remanded.

Gross premium tax imposed on insurance companies is not a property tax. Code 1931, § 7022.

Edward L. O'Connor, Atty. Gen., and Lehan T. Ryan, Asst. Atty Gen., for appellants.

Stipp Perry, Bannister & Starzinger and Henry & Henry, all of Des Moines, for appellee.

RICHARDS, Chief Justice.

There is presented on this appeal a controversy as to the extent of the liability of plaintiff insurance company for taxes for the year 1934. During that year numerous residents of Iowa paid to plaintiff varying amounts in consideration of receiving plaintiff's written undertakings to pay annually to such persons, respectively, while living, an agreed sum of money. The aggregate amount so paid to plaintiff was $209,362.62. During 1934 plaintiff also realized a further sum of $3,828,770.08, which was due plaintiff upon contracts that both parties concede were life insurance policies. Upon this larger amount plaintiff admits and has satisfied, its tax liability. The specific question is whether the item of $209,362.62 derived as above indicated should have been included in computation of the tax for 1934 imposed by section 7022, Code 1931, the material portions of which are the following:

" 7022. Foreign companies-tax on gross premiums . Every insurance company incorporated under the laws of any state of the United States other than the state of Iowa * * * shall, at the time of making the annual statements as required by law, pay into the state treasury as taxes two and one-half per cent of the gross amount of premiums received by it for business done in this state, including all insurance upon property situated in this state and upon the lives of persons resident in this state during the preceding year."

At all times that are material plaintiff was incorporated under the laws of Wisconsin with power granted in its articles of incorporation to make and offer insurance pertaining to or connected with life risk, and to grant and purchase annuities. Plaintiff admits it is amenable to the provisions of section 7022, but contends that there is nothing in this statute to justify defendants' demand for payment of the tax upon the item of $209,362.62. Plaintiff denominates the contracts from which the $209,362.62 was derived as contracts for annuities, and says they are to be distinguished from contracts for life insurance. So distinguishing, plaintiff's claim is that section 7022 exhibits a legislative intent that there be taxed only premiums received from the business of insurance, and that consequently revenues received as considerations for annuity contracts are not taxable. The contrary contention of defendants is that the legislative intent was to tax the gross amount of all premiums received by plaintiff for business done in this state and that the making of annuity contracts was a part of the business done in this state and that the amounts received in consideration for such contracts were premiums within the intendment of section 7022.

The contracts for which the $209,362.62 was paid to plaintiff were quite simple in their terms, plaintiff undertaking in each such contract to pay to the other party to the contract an agreed sum annually during the then remaining lifetime of such other party, the latter paying at the time of the execution of the contract an agreed amount as the full consideration for plaintiff's such undertaking. There were but two parties to each of these contracts, no third party being named as entitled to any recovery in event of a cessation of a human life. We are not here confronted with a form of contract in which the terms may appear to contemplate both life insurance and provisions for annuities. We think it is obvious, without discussion, that it should be conceded to plaintiff that these contracts, from which the $209,362.62 was derived, lacked some of the essentials of, and in other respects differed from, life insurance contracts in the ordinary usage of those words and were in fact undertakings for the payment of annuities, and were not life insurance contracts. See Hult v. Home Life Ins. Co., 213 Iowa 890, 240 N.W. 218.

Such concession opens the way to plaintiff's next proposition. It is based on the premise that the word " premiums" in this statute has such a definite and restricted meaning that the word is applicable solely to considerations paid for contracts of insurance. Therefrom plaintiff concludes that, because the word " premiums" is used, there is no intention expressed in the statute that considerations realized from annuity contracts be taxed. To establish such premise plaintiff cites several cases in which it is said in substance that the definition of the word " premium" as used in the law and business of insurance is the consideration paid for a contract of insurance. Plaintiff relies on this definition. But a mere definition is not always a safe foundation for correct conclusions. One reason is that, except in mathematics, it is difficult to frame exhaustive definitions of words. Local Bd. v. Lee, 1 Ex. D. 336, loc. cit. 343. Consequently, unless the authority offering the definition has undertaken the difficult task of framing a definition that is exhaustive, and has succeeded in such undertaking, error may result if there be reliance upon the element of exhaustiveness. Plaintiff's point depends on acceptance of these definitions as being exhaustive. But such they were not in our opinion. To illustrate, among cases cited are State ex rel. Sheets v. Pittsburgh, C., C. & L. Ry. Co., 68 Ohio St. 9, 67 N.E. 93, 64 L.R.A. 405, 96 Am.St.Rep. 635, and Northwestern Life Ass'n v. Stout, 32 Ill.App. 31, which are cited by plaintiff

because in each case the definition, in substance, is found. But in neither case does there appear any reason that the court should have attempted an exhaustive definition. On the contrary, the issue was whether an insurance business was being conducted. Upon that issue there was discussion of the fact that premiums are considerations for insurance contracts and if shown are material on the question whether an insurance business is being carried on. Such was the subject-matter being considered in these authorities at the time of the pronouncements. Definitions differ in their character according to the nature of the thing defined. Warner v. Beers, 23 Wend.(N.Y.) 103, loc. cit. 142. Looking upon these definitions as having been pronounced primarily for application to the issues and facts these courts had in hand, we are unable to agree with plaintiff that these courts intended to go any further, or to consider a question not in issue, that is whether the word " premium" may not in fact also be applied to contracts other than those for insurance. We think the definitions in the two above cases were intended to be used in pointing out the obvious, that is, that amounts paid for life insurance are premiums.

But if we could be in accord with plaintiff that the definitions from other jurisdictions were undertakings to frame exhaustive definitions, nevertheless there is still the question, in view of the conceded facts before us whether we can agree that such courts successfully did so. This is because it is the record in this case that the word " premium" is in fact used in a more general sense than that urged by plaintiff. The forms of the annuity contracts issued by plaintiff, the contracts that are the subject to this controversy, are in evidence. In all of these contracts is found the recital of the parties that " in consideration of the payment of a single premium of (the agreed amount) the receipt of which is hereby acknowledged, the Northwestern Mutual Life Insurance Company promises to pay * * * a life annuity * * *" (Italics ours.) In argument plaintiff frankly admits that it does so use the word " premium" in its annuity contracts. Plaintiff further concedes that " most other companies" do likewise. From this record it is our opinion that in interpreting the words chosen by the Legislature for use in this statute, it would be hardly within reason to hold that there was an impossibility that the Legislature could adopt and intend to use the word " premiums" in the same manner in which it was concededly and commonly used by the insurance companies themselves upon whom the tax is imposed. It might well be that in taxing insurance companies the Legislature sought to talk their language. To hold that the alleged definition is in fact exhaustive of the uses of the word " premium" would be arbitrary and inconsistent with the facts in this case. We are unable to adopt plaintiff's premise that the word "...