Nw. Mut. Life Ins. Co. v. State

• Decision Date: 07 December 1915
• Citation: 155 N.W. 609,163 Wis. 484
• Parties: NORTHWESTERN MUT. LIFE INS. CO. v. STATE.
• Court: Wisconsin Supreme Court

163 Wis. 484

155 N.W. 609

NORTHWESTERN MUT. LIFE INS. CO.

v.STATE.

Supreme Court of Wisconsin.

Dec. 7, 1915.

Action by the Northwestern Mutual Life Insurance Company against the State of Wisconsin. Original action in the Supreme Court heard on demurrers to the complaint. Complaint dismissed on the merits.

Timlin, J., dissenting.George H. Noyes, of Milwaukee (Harry L. Butler, John M. Olin, and Byron H. Stebbins, all of Madison, of counsel), for plaintiff.

W. C. Owen, Atty. Gen., and Walter Drew, Dep. Atty. Gen., for the State.

WINSLOW, C. J.

The plaintiff, a domestic mutual life insurance corporation, doing business on the level–premium plan, brings action in this court against the state, to recover license taxes paid to the state under protest, amounting to $482,193.23 in 1912, and $505,643.22 in 1913.

The license taxes were levied under section 1220, Statutes of Wisconsin 1911 (being section 51.32, Stats. Wis. 1913), and the plaintiff's claim is that the statute is void: (1) Because it denies the equal protection of the laws guaranteed by the state Constitution and by the Fourteenth Amendment to the federal Constitution; and (2) because it unlawfully interferes with interstate commerce. The complaint shows that the claims were duly presented to the state Legislature and disallowed. The state demurs: (1) Because this court has no jurisdiction of the defendant's person; (2) because it has no jurisdiction of the subject of the action; and (3) because the complaint does not state a cause of action.

[1][2] In support of the first two grounds of demurrer it is argued that section 3200 of the Statutes, under the terms of which this action is brought by original action in this court, is void because it attempts to confer original jurisdiction upon this court, in violation of section 3, art. 7, of the state Constitution, the provisions of which, so far as material to this inquiry, are that:

“The Supreme Court, except in cases otherwise provided in this Constitution, shall have appellate jurisdiction only.”

It is sufficient to say, in answer to this objection, that section 27, art. 4, of the Constitution provides that “the Legislature shall direct by law in what manner and in what courts suits may be brought against the state,” and that it was decided by this court in 1853 (Dickson v. State, 1 Wis. 122) that this section gave power to the Legislature to designate the Supreme Court as the court in which such suits might be brought, such designation being considered as one of the exceptions referred to in section 3 of article 7. This decision has never been overruled or questioned; it directly sustained the constitutionality of chapter 249 of the Laws of 1850, which has been upon our statute books ever since, and with unsubstantial changes now appears as sections 3200–3203 of the Statutes. This decision has also been uniformlyrecognized in numerous instances by all departments of the state government, legislative, executive and judicial, as correctly construing the Constitution from the time of its rendition up to the present time, a period of more than 60 years. To overrule it now would be hardly permissible, even if we were convinced (which we are not) that it was incorrect as an original proposition.

The law in question provides, in substance, that every company transacting the business of life insurance in this state (except fraternal societies having lodge organizations and insuring only their own members) shall annually pay, as license fees for transacting such business and in lieu of all other taxes, except taxes on real estate, the following amounts: Domestic level–premium or old–line companies, 3 per centum of the gross income for the year, excepting therefrom rentals of real estate on which the taxes have been paid, and premiums collected outside the state on policies held by nonresidents; foreign level–premium or old–line companies, $300, except that whenever the law of the foreign company's domicile requires a larger license fee or tax to be paid by an outside company as a condition for the issuance of a license, then such foreign company shall pay the same fee or tax for a license permitting it to do business in this state; stipulated premium companies, foreign or domestic, $300; assessment companies, foreign or domestic, and fraternal associations having no lodge organizations, $300; fraternal associations having lodge organizations and insuring only their own members, nothing.

The plaintiff's first claim is that this law denies to it the equal protection of the laws because it makes arbitrary discrimination: (1) As between it and foreign level–premium companies; (2) as between level–premium companies and fraternal insurance organizations; and (3) as between domestic levelpremium companies and assessment and stipulated premium companies. The plaintiff's second claim is that the law unlawfully hampers and interferes with interstate commerce. These claims will be discussed in their order.

[3] I. Under this head the most serious contention doubtless is the contention that there is arbitrary and illegal discrimination between the plaintiff and foreign companies of the same class, i. e., companies doing life insurance business in this state on the levelpremium plan. The plaintiff, a domestic corporation, is required to pay for the privilege of doing business in this state a license fee amounting to 3 per centum of its gross receipts (certain classes of receipts being excepted), while foreign corporations doing business upon the same plan are required to pay only $300 per year (except in cases where the retaliatory clause is called into operation) for the same privilege.

It is clear that this so–called license fee is a privilege or occupation tax, and that, while it is not subject to that clause of the state Constitution which requires the taxation of property to be uniform (section 1, art. 8), it is subject to the general equality clauses of the state Constitution and to the clause guaranteeing the “equal protection of the laws” contained in the Fourteenth Amendment to the federal Constitution.

[4] It is clear also that this means that there can be no arbitrary or whimsical classification, but that there may be classification founded upon real differences of situation and condition affording rational grounds for the difference in treatment. Black v. State, 113 Wis. 205, 219, 89 N. W. 522, 90 Am. St. Rep. 853;Nunnemacher v. State, 129 Wis. 190, 220, 108 N. W. 627, 9 L. R. A. (N. S.) 121, 9 Ann. Cas. 711;Beals v. State, 139 Wis. 544, 557, 121 N. W. 347;Connolly v. U. S. P. Co., 184 U. S. 540, 559, 560, 22 Sup. Ct. 431, 46 L. Ed. 679.

The disparity between the annual license fee required of domestic companies by the law in question and the fee required of foreign companies is admittedly very great, and the question arising is simply whether there is any substantial difference, other than the difference between foreign and domestic corporations, which differentiates the two classes and which justifies such great difference in treatment.

[5] The question is by no means an easy one. A corporation is a person within the meaning of the Fourteenth Amendment, and a state cannot, under that amendment, discriminate against its own citizens and in favor of citizens of other states any more than it can do the reverse. Yick Wo v. Hopkins, 118 U. S. 356, 6 Sup. Ct. 1064, 30 L. Ed. 220;State v. Hoyt, 71 Vt. 59, 42 Atl. 973. Every person, whatever his citizenship, is protected against unequal laws.

[6] On the face of it this law seems to allow foreign life insurance companies to do business in this state upon payment of a mere nominal fee, while exacting from domestic companies for the same privilege a very large fee. Are there any real differences between the two classes which bear a just and proper relation to the attempted classification and justify this difference of treatment? If there are such differences, the law may doubtless be justified so far as this objection is concerned, for it is quite well established that the Fourteenth Amendment does not prevent a state from changing its system of taxation in all proper and reasonable ways, nor from allowing exemptions, nor from imposing different specific taxes upon different trades or professions, nor from classifying property for taxation, so long as the classification does not invade rights secured by the federal Constitution. Bell's Gap R. R. Co. v. Pennsylvania, 134 U. S. 232, 10 Sup. Ct. 533, 33 L. Ed. 892; Connolly v. U. S. P. Co., supra.

[7] The question whether there are substantial differences of condition reasonably suggesting the propriety of difference of treatment is primarily a legislative question, and the legislative judgment thereon is not to be disturbed by the courts, unless legislative action has clearly passed the boundaries of reason. Given the differences of condition above referred to, and the field of legislative action is very broad, the legislative judgment is not to be interfered with merely because the judicial mind might reach a different conclusion as to the policy or wisdom of the law, nor unless the court can confidently say that no reasonable ground can be discovered to support the classification.

[8] In approaching this question it is important to note at the outset that the license tax in question is levied in lieu of all other state taxes, except taxes on real estate owned by the company. It covers all the contributions which the state demands from the company or its business, except real estate taxes which are relatively small in amount. It is common knowledge that all of the great level–premium insurance companies of the present day have vast reserve funds, to protect their liabilities on policies, running up into the hundreds of millions of dollars, and that these reserves are invested in interest–bearing securities of which real estate loans secured by mortgage generally form the largest part. In the complaint...