Pac. Mut. Life Ins. Co. of California v. Lowe

• Decision Date: 22 December 1933
• Docket Number: No. 21847.,21847.
• Citation: 188 N.E. 436,354 Ill. 398
• Parties: PACIFIC MUT. LIFE INS. CO. OF CALIFORNIA v. LOWE, Director of Trade and Commerce et al.
• Court: Illinois Supreme Court

354 Ill. 398

188 N.E. 436

PACIFIC MUT. LIFE INS. CO. OF CALIFORNIA

v.LOWE, Director of Trade and Commerce et al.

No. 21847.

Supreme Court of Illinois.

Dec. 22, 1933.

Suit by the Pacific Mutual Life Insurance Company of California against Leo H. Lowe, Director of Trade and Commerce, and others. From an adverse decree, complainant appeals.

Affirmed.Appeal from Circuit Court, Sangamon County; Lawrence E. stone, judge.

Ekern & Meyers, of Chicago (William E. Mooney and Luther F. Binkley, both of Chicago, of counsel), for appellant.

Otto Kerner, Atty. Gen. (B. L. Catron, of Springfield, of counsel), for appellees.

HERRICK, Justice.

The appellant (hereinafter called the complainant) filed its bill in equity in the Sangamon circuit court to restrain the appellees (hereinafter called the defendants), Leo H. Lowe, as director of trade and commerce, and Edward J. Barrett, as state treasurer, from paying into the state treasury the sum of $676.84, which sum represents certain contested taxes paid under protest by the complainant to the defendant Lowe. A temporary injunction was issued as prayed in the bill. The defendants demurred to the bill. Upon a hearing in the circuit court the demurrer was sustained by the court and a decree entered dismissing the bill for want of equity. From that decree this appeal is prosecuted.

The issues in the case are the construction of what is commonly called the Insurance Retaliatory Tax Act, and whether or not the construction as applied to the collection of the tax from the complainant is violative of the Constitution.

The complainant is an insurance corporation organized under the laws of the state of California for the transaction of life and accident insurance and has been admitted and licensed in this state as a foreign insurance company. It made its return in compliance with the Insurance Act to the department of trade and commerce for the fiscal year ending December 31, 1931. The department of trade and commerce extended a tax under the statute at the rate of 2.60 per cent. on the gross amount of annual premiums received by the complainant from business done in the state of Illinois for the year 1931, less the deductions permitted by the statute. Section 2 (Smith-Hurd Rev. St. 1933, c. 73, § 68, p. 1625; Cahill's Rev. St. 1933, c. 73, par. 80, p. 1601).

Section 1 of the Insurance Act pertaining to the taxation of nonresident insurance companies (Smith-Hurd Rev. St. 1933, c. 73, § 67, p. 1625; Cahill's Rev. St. 1933, c. 73, par. 79, p. 1601), provides, in substance, that each nonresident corporation licensed to do insurance business in the state of Illinois shall, except as by said act otherwise provided, pay an annual tax to the state for the privilege of doing an insurance business in this state equal to 2 per cent. on the gross amount of premiums received during the preceding calendar year on contracts covering risks within this state. Certain deductions are permitted by the act which are not pertinent to the issues here. Section 2 of the act provides that, if the laws of another state or territory shall require of insurance corporations, companies, or associations organized under the laws of this state and doing business in such other state or territory, payments for taxes, fines, penalties, certificates of authority, license fees, or otherwise on a basis or rate which will produce amounts greater than would be produced by the application of the basis or the rate provided for herein and by any other laws of this state, then and in every such case insurance corporations, companies, and associations of such state or territory, when admitted and licensed to do an insurance business in this state, shall be required to pay for such privilege on the same basis or rate as is imposed by the laws of such state or territory upon similar insurance companies, corporations, and associations organized under the laws of this state. In the imposition of any privilege tax under this section all the provisions of the act, so far as applicable, shall be observed.

The laws of California relating to the imposing of a tax on insurance companies impose a tax of 2.60 per cent. on gross premiums, subject to certain deductions which are not in controversy here, and provide that the tax may be paid in two installments: one-half on the first Monday of July following the end of the fiscal year for which the tax is payable and the other one-half on the first Monday of the following February. (Deering's Political Code, §§ 3664b, 3668b.) Under section 3668b of the California Code it is provided that the one-half of the tax due and payable on the first Monday in July shall become delinquent on the sixth Monday thereafter,and, unless paid prior to that date, a penalty of 15 per cent. shall be added, and, unless paid prior to the first Monday in February, an additionalpenalty of 5 per cent. shall be added. As to the installment due on the first Monday of February, it is provided that, in the event that installment becomes delinquent, 5 per cent. is to be added to the amount thereof. Under the provisions of the Illinois statute the tax shall be paid on or before the 31st day of July. If not paid and the tax becomes delinquent, there shall be added a penalty of 5 per cent. for each month thereafter until paid.

It is the contention of the complainant that it be permitted to pay the tax assessed against it in two equal installments on the dates provided by the California statute, or, in the event the entire tax is paid on or before the 31st day of July, that it be entitled to a discount on one-half of the tax, computed at the rate of 6 per cent. until the first Monday in February following. The amount is represented by the sum of $676.84. On the part of the defendants it is contended that the complainant is not entitled to any discount, nor is it entitled to pay its tax in two installments in conformity with the California Code.

The complainant further contends that to apply section 2 of the Illinois act literally to the complainant doing business here gives this section an unconstitutional result because of the two payments permitted by the California Act. In support of its contention the complainant relies chiefly upon the case of Pacific Mutual Life Ins. Co. v. State, 161 Wash. 135, 296 P. 813, 815. The state of Washington has a retaliatory statute, as follows: ‘If, by the laws of any other state, any taxes, fines, penalties, licenses, fees, deposits, or other obligations or prohibitions, in the aggregate, additional to or in excess of those imposed by the laws of this state, upon foreign insurance companies and their agents and solicitors, are imposed on insurance companies of this state and their agents doing business in such state, like obligations and prohibitions shall be imposed upon all insurance companies of such state and their agents doing business in this state, so long as such laws remain in force.’ (Rem. Rev. Stat. § 7092.)

The insurance statute of the state of Washington (Rem. Rev. Stat. § 7071) provides for an annual tax of 2.25 per cent. on gross premiums received. Under the laws of the state of Washington the tax is due on or before March 30th. The insurance commissioner of the state of Washington levied a tax at the rate of 2.60 per cent. under the provisions of the Washington retaliatory statute. The insurance company there, and which is the same complainant in this case, protested the sum of $396.94 and then brought suit to recover that amount so paid under protest. The contention in that case was that the insurance commissioner might assess a tax at the rate of 2.60 per cent. and by executive order provide that the tax should be paid on the dates provided by the California Code, or in the alternative, the commissioner might assess upon such gross premiums a 2.60 per cent. tax and require payment thereof at the time provided by the Washington Code, but if he adopted the latter plan he must offset a reasonable discount based on the value of the use of the money for the additional time allowed by the California law, which sum was represented to be $396.64. The state contended in that case that, if such discount were allowed the California company, the tax paid by it would be less than the 2.25 per cent. tax levied under the laws of Washington against domestic corporations and payable as provided by the Washington statute. The Washington court said, in passing upon the issues presented: ‘It is our opinion that such a situation as is here presented calls, in the first instance, for the determination by the insurance commissioner of a question of fact, to wit, whether or not under the law of the state of the domicile of the insurance company, the amount of whose tax in this state is being determined, a Washington insurance company doing business in that state would be required to pay a greater tax than the insurance company in question is required to pay under our law. In deciding this question, the insurance commissioner should take into consideration, in connection with other pertinent facts, the time fixed for the payment of the tax, and if, as in the case at bar, it appears that the taxpaying date is later than that fixed by our statute, that fact should be considered in deciding whether or not the tax imposed by the sister state is in fact more onerous than that imposed by our insurance act. If, after such an estimate of the...