State Bd. of Tax Com'rs v. Holliday

• Citation: 150 Ind. 216,49 N.E. 14
• Parties: STATE BOARD OF TAX COM'RS et al. v. HOLLIDAY et al.
• Decision Date: 12 January 1898
• Court: Supreme Court of Indiana

150 Ind. 216

49 N.E. 14

STATE BOARD OF TAX COM'RS et al.

v.HOLLIDAY et al.¹

Supreme Court of Indiana.

Jan. 12, 1898.

Appeal from circuit court, Marion county; Henry Clay Allen, Judge.

Action by John H. Holliday and another against the state board of tax commissioners and others for an injunction. From a decree for plaintiffs, defendants appeal. Affirmed.

Howard, C. J., and Monks, J., dissenting.

Wm. A. Ketcham, Atty. Gen., Silas M. Shepherd, and Smiley N. Chambers, for appellants. Smith & Korbby, A. J. Beveridge, and Finch & Finch, for appellees.

McCABE, J.

This suit was brought by appellees for themselves and on behalf of many other persons, citizens of Indiana, similarly situated, who, it is alleged, are too numerous to be brought before the court, the object of which was to enjoin the listing and valuing of life insurance policies for taxation, held by the appellees. The defendants filed an answer of general denial only, and the issues thus formed were tried by the court, resulting in a finding for the plaintiffs, and upon such finding the court rendered judgment and decree perpetually enjoining the defendants from listing and causing to be listed for taxation paid-up life insurance policies and nonforfeitable and partly paid-up life insurance policies held by appellees and by each and all of those for whom this suit is brought and prosecuted; the defendants' motion for a new trial having been overruled. From this judgment the defendants have appealed, and assign for error that the complaint does not state facts sufficient to constitute a cause of action, and that the court erred in overruling the defendants' motion for a new trial. The other defendants named in the complaint and included in the decree, in addition to the state board of tax commissioners, are the auditor and assessor of Marion county and the assessors of the several townships of said county. After stating that the appellees hold each a life insurance policy issued by the appellee the New York Life Insurance Company, a minute description of the terms and conditions of the policies so issued by said company is given. Among other things, it is alleged that the New York Life Insurance Company is a corporation organized under the laws of the state of New York, and has been engaged in the life insurance business ever since its organization, and has been engaged for 40 years in such business in Indiana. It is also averred that the state board of tax commissioners have caused to be printed in the tax assessment lists to be used by the township assessors in the several townships of this state, under the schedule lists of personal property known as “Credits,” items 7 and 8, to be answered by the taxpayers holding life insurance policies, as follows, to wit: “(7) Number of paid-up insurance policies, and their value: * * *. (8) Number of nonforfeitable and partly paid-up life insurance policies, and their value: * * *.” It is alleged that the said board is threatening and is about to instruct all assessors in the state to assess and value for taxation all such policies, and is about to cause the same to be done, and about to cause criminal prosecutions to be instituted against all refusing to list and value such policies. If the complaint is sufficient, the evidence is also amply sufficient to support the finding; and, on the other hand, if the complaint does not state facts sufficient to constitute a cause of action, the evidence will not support the finding.

The cardinal question lying at the bottom of the whole controversy is whether life insurance policies are legally subject to taxation in this state. The extreme length to which the argument of that question has been extended has made it needlessly burdensome. It is conceded by the appellants that no insurance policies of any description have ever been taxed in this state heretofore. Section 3 of the tax law of 1891 provides that “all property within the jurisdiction of this state not expressly exempted, shall be subject to taxation.” Rev. St. 1894, § 8410. In section 50 of that act, specifying what shall be embraced in the schedule, the last specification is, “All other goods, chattels and personal property, not heretofore specifically mentioned, and their value, except property specifically exempt from taxation.” These provisions are relied on by the appellants' counsel as including life insurance policies, if they are personal property. The attorney general, on behalf of the state, says: “Our contention is that such policies are claims and demands in favor of the policy holder against the company issuing such policy, and form the basis of a right of action between them; that they are personal property. It is not necessary for us to cite authorities defining personal property, for the statutes of Indiana have done that, and the definition is in point in this contention.” And we are referred to section 1309, Rev. St. 1894 (section 1285, Rev. St. 1881), containing this provision: “The phrase ‘personal property’ includes goods, chattels, evidences of debt and things in action.” That definition of personal property, however, by the express terms of the section, which is a section of the Code of Civil Procedure, is made to apply only in the construction of that Code. And appellants' learned counsel further extend this line of argument by quoting from Hutson v. Merrifield, 51 Ind., at page 29, that “a policy of insurance is a chose in action, governed by the same principles applicable to other agreements involving pecuniary obligations.” There are many decisions by this court and other courts to the same effect. And hence it is argued that life insurance policies are personal property within the meaning of the tax law of 1891 and the constitution, and therefore the action of the state board of tax commissioners was justified by law. It is admitted, however, that there is no statute authorizing the taxation of life insurance policies by name, and that they were added to the assessment sheets and inserted in the schedule by the state board of tax commissioners in manner and form as alleged in the complaint. The power of taxation is a sovereign power, and belongs exclusively to the legislative department of the government. The power of the legislature over the subject of taxation admits no limitation, except where specially imposed by the constitution itself. Black, Const. Law (2d Ed.) 375; Cooley, Tax'n, p. 4.

Appellants' learned counsel also contend that section 1 of article 10 of the state constitution requires the taxing officers to assess for taxation life insurance policies, they being properly within the meaning of the tax law and that provision of the constitution. It reads as follows: “The general assembly shall provide by law for a uniform and equal rate of assessment and taxation, and shall prescribe such regulations as shall secure a just valuation for taxation of all property both real and personal, excepting such only for municipal, educational, literary, scientific, religious or charitable purposes as may be especially exempted by law.” This constitutional provision does not confer the power of taxation, because, that power being sovereign, it is inherent in the legislature. But the provision is rather a limitation upon the power to tax. It is, therefore, a legislative power to select the subjects for taxation, and this constitutional provision imposes the duty and limitation upon the legislature of providing by law regulations or methods for a just valuation of all property, both real and personal, for taxation. Where the legislature has not exercised this power, no other department of the state government can supply the omission; and where no such regulation has been prescribed by law as to any particular species of property, then such property cannot be taxed. This conclusion may rest either on the inference from such failure to prescribe such regulations that the legislature did not intend to select that particular species of property as a subject for taxation, or, regardless of the legislative intent, the failure to prescribe such regulations leaves such property unselected as a subject for taxation. Riley v. Telegraph Co., 47 Ind. 511;Senour v. Ruth, 140 Ind. 318, 39 N. E. 946;Hyland v. Coal Co., 128 Ind. 335, 26 N. E. 672. The statute must not only provide what property shall be taxed, but it must provide methods for the valuation of such property, and clothe some person, officer, or tribunal with power and authority to assess such valuation; and, if the statute contains no such provisions, it will be insufficient to subject such property to taxation. Riley v. Telegraph Co., supra; Senour v. Ruth, supra. Accordingly, it was held by this court in Pfaff v. Railroad Co., 108 Ind. 144, 9 N. E. 93, that real estate belonging to the right of way of the railroad, which had been omitted from the schedule by the state board of equalization, could not be placed upon the duplicate by the county auditor as omitted property, for the reason that the statute conferred the power and authority exclusively on the state board to value or assess said property for taxation; and that the act of the county auditor in assessing the same was without authority of law, and void. And it is settled in this state that taxes cannot be imposed or collected except in the mode prescribed by law. State v. Illyes, 87 Ind. 405;Hamilton v. Amsden, 88 Ind. 304. But it is, in effect, contended by the learned counsel for appellants that, life insurance policies being personal property, the township assessors are clothed with the power and authority to assess and value them for taxation by the statute. To this contention the appellees' counsel interpose two objections, namely: First. That, assuming that such policies are personal property of such a nature as to fall within the literal terms of the tax law above quoted, yet the legislature has provided no regulations for the valuation of such...