Northwestern Mut. Life Ins. Co. v. Lewis & Clarke County

• Decision Date: 15 July 1903
• Citation: 72 P. 982,28 Mont. 484
• Parties: NORTHWESTERN MUT. LIFE INS. CO. v. LEWIS AND CLARKE COUNTY.
• Court: Montana Supreme Court

72 P. 982

28 Mont. 484

NORTHWESTERN MUT. LIFE INS. CO. v. LEWIS AND CLARKE COUNTY.

Supreme Court of Montana

July 15, 1903

Commissioners' Opinion. Appeal from District Court, Lewis and Clarke County J. M. Clements, Judge.

Action by the Northwestern Mutual Life Insurance Company against the county of Lewis and Clarke. Judgment for plaintiff. Defendant appeals. Modified.

Milburn J., dissenting in part.

Jas Donovan, Atty. Gen., for appellant.

M. S Gunn, for respondent.

POORMAN C.

This action was commenced in the district court on the 21st day of May, 1902, by the filing of an agreed case, and was instituted for the purpose of determining the validity of a tax claimed to be due from the plaintiff to the defendant "upon the excess of premiums received over losses and ordinary expenses incurred within the state" during the previous year. The name of the plaintiff expresses the character of business transacted. Judgment was rendered for plaintiff, and from this judgment the defendant appeals.

The agreed case complies with the provisions of section 2050 et seq. of the Code of Civil Procedure, and the record shows that all steps have been taken and all proceedings had necessary to present for determination the questions involved in the error assigned. The points of controversy upon which the decision of the Supreme Court is asked are as follows: (1) Does section 681 of the Civil Code of the state of Montana apply to foreign mutual life insurance companies? (2) Is any authority given by said section 681 to assess taxes against a foreign mutual life insurance company? (3) Has said section 681 been repealed, or is it still in force? (4) Is said section 681 constitutional?

Section 681 of the Civil Code reads as follows: "Each and every insurance corporation or company transacting business in this state must be taxed upon the excess of premiums received over losses and ordinary expenses incurred within the state during the year previous to the year of listing in the county where the agent conducts the business, properly proportioned by the corporation or company at the same rate that all other personal property is taxed, and the agent shall render the list, and be personally liable for the tax; and if he refuse to render the list or to make affidavit that the same is correct, to the best of his knowledge and belief, the amount may be assessed according to the best knowledge and discretion of the assessor. Insurance companies and corporations are subject to no other taxation under the laws of this state, except taxes on real estate and the fees imposed by law."

1. Does this provision apply to foreign life insurance companies? This section is a part of chapter 1, tit. 4, pt. 4, div. 1, of the Civil Code, and is entitled "Stock and Mutual Insurance Companies." The agreed case contains the statement that the respondent was doing the business of a foreign mutual life insurance company. Sections 650 to 668, both inclusive, of this chapter, provide for the formation and regulation of domestic mutual insurance companies. Section 669 to 680, inclusive, apply to foreign insurance companies and societies. Section 681, as will be seen, applies to "each and every insurance corporation or company transacting business in this state." The conclusion must be that it was the intention of the Legislature to extend the provisions of this latter section to insurance companies doing business of the character specified in the agreed case.

2 and 3. Section 1 of article 12 of the state Constitution reads: "The necessary revenue for the support and maintenance of the state shall be provided by the legislative assembly, which shall levy a uniform rate of assessment and taxation, and shall prescribe such regulations as shall secure a just valuation for taxation of all property, except that specially provided for in this article. The legislative assembly may also impose a license tax, both upon persons and upon corporations doing business in the state." Two schemes or systems of taxation are recognized by this section--a property tax and a license tax. Authority is also given by this section for the coexistence of both of these systems of taxation with reference to the same person or corporation. The two systems are not mutually dependent. Each is independent of the other, and the existence of one is not a bar to the imposition of the other. Nor is it necessary that the license system should be employed only as a police supervision or regulation. The Constitution confers upon the Legislature the authority to employ both systems of taxation in the exercise of its duty to provide "the necessary revenue for the support and maintenance of the state." No limitation is placed upon the purposes for which the license system may be employed, and it may be resorted to for the purposes of revenue, or for the purposes of regulation, or for both of such purposes, in the discretion and wisdom of the legislative will. State v. Camp Sing, 18 Mont. 128, 44 P. 516, 32 L. R. A. 635, 56 Am. St. Rep. 551; State v. French, 17 Mont. 54, 41 P. 1078, 30 L. R. A. 415. The justice of the license system of taxation for any other purposes than those of police supervision and regulation has many times been called in question, but this is a matter for legislative determination.

Section 7 of this article of the Constitution provides that "all corporations in this state, or doing business therein, shall be subject to taxation *** on real and personal property owned or used by them." Section 11 of the same article provides that taxes shall be "uniform upon the same class of subjects." Section 17 of the same article reads: "The word 'property' as used in this article is hereby declared to include moneys, credits, bonds, stocks, franchises and all matters and things (real, personal and mixed) capable of private ownership, but this shall not be construed so as to authorize the taxation of the stocks of any company or corporation when the property of such company or corporation represented by such stocks is within the state and has been taxed." This latter section, in its definition of that which may be made subject to taxation, is sufficiently comprehensive to include all matters and things, visible and invisible, tangible and intangible, corporeal and incorporeal, capable of private ownership.

The provisions of the section of the statute under consideration apply indiscriminately to "each and every insurance corporation or company transacting business in this state." This includes domestic, as well as foreign, insurance companies. The law is therefore "uniform upon the same class of subjects." The Legislature has the right to prescribe reasonable terms upon which foreign corporations may do business in this state. Paul v. Virginia, 8 Wall. 168, 19 L.Ed. 357; B. & L. Asscn. v. Norman, 98 Ky. 294, 32 S.W. 952; Ins. Co. v. Herriott (Iowa) 80 N.W. 665, 77 Am. St. Rep. 548. The character, kind, and amount of business done by the company, as well as the situs of its tangible property, may be considered in applying the various systems of taxation.

The franchise of a corporation is granted by the jurisdiction where the company is incorporated, and its situs is in the state or country of its origin; but before the company can do business in this state it must comply with the terms of the statute relating thereto, and upon such compliance a certificate of authority is issued to it. It then stands, under this law, on the same footing with domestic companies, and is subject to the same taxation on the same class of property. This certificate of authority issued to a foreign insurance company confers upon such company a privilege or right not possessed or enjoyed by citizens generally, and not conferred upon it by its original franchise. This right or privilege so conferred is in that sense a franchise, and by it the company is authorized to establish, conduct, and maintain an insurance business, the value of which is ascertained in the manner prescribed by statute; that is, "the excess of premiums over losses and ordinary expenses incurred." It applies only to business transacted within the state, and is not objectionable as interfering with interstate commerce. "'Business done within the state' cannot be made to mean business done between that state and other states." Pacific Express Co. v. Seibert, 142 U.S. 339, 12 S.Ct. 250, 35 L.Ed. 1035. The situs of the business done is therefore within the state. Though the company may transact a large business, yet the expenses and losses may equal or exceed the amount received. In that event the company pays no taxes. The method adopted by the statute of ascertaining the value of the privilege or right granted to the company is eminently a fair one, for the reason that it seeks to make only the net proceeds or profits the measure of value; and the taxes imposed by this statute are not a fixed or arbitrary amount, but are determined at the same rate that all other personal property is taxed.

Judge Cooley, in considering the subject of taxing business and privileges, says: "And what is true of property is true of privileges and occupations. The state may tax all, or it may select for taxation certain classes." Further on he says: "Taxes which are most customary are: (1) On the privilege of carrying on the business. (2) On the kind of business done. (3) On the gross profits of the business. (4) On the net profits or profits divided. *** It has been seen that it is no conclusive objection to any such tax that it duplicates the burden to the person who pays it. To tax a merchant on his stock as property, and also upon his gross sales, may seem burdensome; but it is not unconstitutional when the people have not seen fit expressly to forbid it. The two...