State of Missouri Missouri Ins Co v. Ghener

Decision Date14 April 1930
Docket NumberNo. 222,222
Citation50 S.Ct. 326,74 L.Ed. 870,281 U.S. 313
PartiesSTATE OF MISSOURI ex rel. MISSOURI INS. CO. v. GHENER, Assessor of City of St. Louis, et al
CourtU.S. Supreme Court

Messrs. Ralph T. Finley, James C. Jones, and Lon O. Hocker, all of St. Louis, Mo., for appellant.

[Argument of Counsel from page 314 intentionally omitted] Mr. Oliver Senti, of St. Louis, Mo., for appellees.

[Argument of Counsel from pages 315-316 intentionally omitted] Mr. Justice BUTLER delivered the opinion of the Court.

Appellant is an insurance company organized under the laws of Missouri. It maintains that as construed in this case section 6386, Revised Statutes of Missouri 1919, is repugnant to the Constitution and laws of the United States.

Section 6386 provides:

'The property of all insurance companies organized under the laws of this state shall be subject to taxation for state, county, municipal and school purposes, as provided in the general revenue laws of this state in regard to taxation and assessment of insurance companies.

Every such company or association shall make returns, subject to the provisions of said laws: First, of all the real estate held or controlled by it; second, of the net value of all its other assets or values in excess of the legally required reserve necessary to reinsure its outstanding risks and of any unpaid policy claims, which net values shall be assessed and taxed as the property of individuals. * * *'

The company made a return in pursuance of that section. The total value of its personal property was $448,265.33, including $94,000 in United States bonds. The legal reserve and unpaid policy claims amounted to $333,486.69. It deducted such bonds, reserve, and claims, leaving.$20,778.64 as the net value to be taxed.1

The board of equalization declined to accept the return, and, after hearing, the parties held that the bonds of the United States are not taxable, that section 6386 contravenes provisions of the state constitution requiring uniform taxation, and that therefore the company was not entitled to deduct the amount of such reserve and claims. The board assessed the company's taxable property at $50,000 without disclosing how it arrived at the amount.

On the company's application, the state Supreme Court issued its writ of certiorari to bring up for review the record and action of the board. The court held the section valid, found the company's liabilities were chargeable against all its assets-taxable and nontaxable alike-declared that such reserve and claims should be apportioned between the two classes of assets according to their respective amounts, and determined that approximately 79.03 per cent. of such liabilities should be deducted from the value of the taxable personal property, leaving $90,710.80 as the net value to be taxed.2 And as that exceeded the amount fixed by the board, the court refused to disturb the assessment, and entered judgment quashing the writ.

The company made a motion for rehearing on the ground, among others, that section 6386 as construed violated the clause of section 8, art. 1, of the Constitution, which gives to Congress the power to borrow money on the credit of the United States, and also section 3701, Revised Statutes (31 U. S. C. § 742 (31 USCA § 742)), which provides that all bonds of the United States shall be exempt from taxation by or under state, municipal, or local authority. The court overruled the motion and modified its opinion. The modified opinion was the same as the earlier one except as to details of calculation. It found $74,136.52 to be the tax able net value.3 The court did not refer to the federal questions raised by the motion for rehearing.

1. It is well settled that this court will not consider questions that were not properly presented for decision in the highest court of the state. Ordinarily, it wll not consider contentions first made in a petition to the state court for rehearing where the petition is denied without more. Citizens' National Bank v. Durr, 257 U. S. 99, 106, 42 S. Ct. 15, 66 L. Ed. 149. But here the company, at the first opportunity, invoked the protection of the Federal Constitution and statute. It could not earlier have assailed the section as violative of the Constitution and laws of the United States. The board of equalization completely eliminated the bonds from its calculations, and there is nothing in the language of the section to suggest that it authorizes any diminution of the amount of the deductible reserve and unpaid claims or an apportionment of such liabilities between taxable and nontaxable assets. It may not reasonably be held that the company was bound to anticipate such a construction or in advance to invoke federal protection against the taxation of its United States bonds. Upon the facts disclosed by this record it is clear that appellant sufficiently raised in the highest court of the state the federal questions here presented, and is entitled to have them considered. Saunders v. Shaw, 244 U. S. 317, 320, 37 S. Ct. 638, 61 L. Ed. 1163; Ohio ex rel. Bryant v. Akron Park District, 281 U. S. 74, 50 S. Ct. 228, 74 L. Ed. —.

2. It is elementary that the bonds or other securities of the United States may not be taxed by state authority. That immunity always has been deemed an attribute of national supremacy and essential to its maintenance. The power of Congress to borrow money on the credit of the United States would be burdened and might be destroyed by state taxation of the means employed for that purpose. As the tax-exempt feature tends to increase and is reflected in the market prices of such securities, a state tax burden thereon would adversely affect the terms upon which money may be borrowed to execute the purposes of the general government. It necessarily follows from the immunity created by federal authority that a state may not subject one to a greater burden upon his taxable property merely because he owns tax-exempt government securities. Neither ingenuity in calculation nor form of words in state enactments can deprive the owner of the tax exemption established for the benefit of the United States. National Life Ins. Co. v. United States, 277 U. S. 508, 519, 48 S. Ct. 591, 72 L. Ed. 968, and cases cited; McCulloch v. Maryland, 4 Wheat. 316, 431, 432, 436, 4 L. Ed. 579.

After deducting government bonds (exempt), real estate (otherwise taxed), legal reserve and unpaid policy claims from total assets, there remained the amount returned by appellant,.$20,778.64. The court held the section to require the reserve and unpaid claims to be reduced by the proportion that the value of the United States bonds bears to total assets. It found $74,136.52 to be appellant's taxable net value. And so it used the value of the bonds, $94,000, to increase the taxable amount by $53,357.88.

The section discloses a purpose as a general rule to omit from taxation sufficient assets of the insurance companies to cover their legal reserve and unpaid policy claims. It would be competent for the state to permit a less reduction or none at all. But where, as in this case, the ownership of United States bonds is made the basis of denying the full exemption which is accorded to those who own no such bonds, this amounts to an infringement of the guaranteed freedom from taxation. It is clear that the value of appellant's government bonds was not disregarded in making up the estimate of taxable net values. That is in violation of the established rule. National Life Ins. Co. v. United States, supra; Northwestern Ins. Co. v. Wisconsin, 275 U. S. 136, 48 S. Ct. 55, 72 L. Ed. 202; Miller v. Milwaukee, 272 U. S. 713, 47 S. Ct. 280, 71 L. Ed. 487.

Judgment reversed.

The CHIEF JUSTICE concurs on the ground that this case is governed by National Life Ins. Co. v. United States, 277 U. S. 508, 48 S. Ct. 591, 72 L. Ed. 968.

Opinion of Mr. Justice STONE, dissenting.

To state the problem now presented in its simplest concrete form, if an insurance company has policy liabilities of $100,000, $100,000 of taxable personal property, and $100,000 of government bonds, its net assets would be $100,000. Under the statute of Missouri taxing net assets, as applied by the state court, one-half of this net worth or $50,000 would be subject to the tax, since one-half of its entire property consists of taxable assets and so contributes one-half of the net. Under the decision of this Court, the company would go tax free, on the theory that the Constitution requires that, in ascertaining the taxable net worth, tax-exempt bonds must be excluded from the computation as though they were not liable for the debts of the taxpayer.

That conclusion appears to me to open a new and hitherto unsuspected field of operation for the immunity from taxation enjoyed by national and state securities as instrumentalities of government, and to accord to their owners a privilege which is not justified by anything that has been decided or said by this Court.

Since Weston v. Charleston, 2 Pet. 449, 7 L. Ed. 481, this Court, by a long line of decisions, has so restricted the immunity as to relieve only from the burden of taxation imposed on such securities or their income. The immunity has not been supposed to confer other special benefits on their owners. In every case it has been consistently applied so as to leave reasonable scope for the exercise by both national and state governments of the constitutional power to tax. Union P. R. Co. v. Peniston, 18 Wall. 5, 21 L. Ed. 787; Plummer v. Coler, 178 U. S. 115, 20 S. Ct. 829, 44 L. Ed. 998; South Carolina v. United States, 199 U. S. 437, 461, 26 S. Ct. 110, 50 L. Ed. 261, 4 Ann. Cas. 737; Flint v. Stone Tracy Co., 220 U. S. 107, 162-165, 31 S. Ct. 342, 55 L. Ed. 389, Ann. Cas. 1912B, 1312; Greiner v. Lewellyn, 258 U. S. 384, 42 S. Ct. 324, 66 L. Ed. 676; Blodgett v. Silberman, 277 U. S. 1, 12, 48 S. Ct. 410, 72 L. Ed. 749; see Metcalf & Eddy v. Mitchell, 269 U. S. 514, 523, 524, 46...

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