Suttles v. Northwestern Mut. Life Ins. Co.

• Decision Date: 16 February 1942
• Docket Number: 13904.
• Citation: 19 S.E.2d 396,193 Ga. 495
• Parties: SUTTLES, Tax Collector, et al. v. NORTHWESTERN MUT. LIFE INS. CO.
• Court: Georgia Supreme Court

19 S.E.2d 396

193 Ga. 495

SUTTLES, Tax Collector, et al. v. NORTHWESTERN MUT. LIFE INS. CO.

No. 13904.

Supreme Court of Georgia

February 16, 1942

Rehearing Denied March 16, 1942.

Syllabus by the Court.

1. Intangible property of a non-resident owner, such as credits arising from loans, cannot be taxed in this State, unless it is connected substantially with some business transacted in Georgia by such non-resident or his agent.

(a) Where a non-resident life-insurance company made loans secured by Georgia real estate, without reference to policyholder relationship, and through a channel entirely separate from that through which it issued insurance policies to Georgia residents, doing so merely as part of its general plan of investment, for protection alike to all of its policyholders, and with no other reference to its Georgia insurance business, the loans thus made by the company were not so connected with its Georgia insurance business as to render credits arising therefrom taxable here merely on the theory that they were a part of such insurance business.

2. Aside from certain permitted exemptions, the constitution and laws of Georgia evince an intention to tax all property of every kind or class of which it has jurisdiction for that purpose.

(a) Intangible property of a non-resident may be taxed in this State, consistently with the fourteenth amendment of the United States constitution and the similar or due process clause of the constitution of Georgia, if it is so used as to become an integral part of some local business conducted by him or his agent.

(b) Where a non-resident corporation, a life-insurance company employed a loan agent in Georgia for the purpose of soliciting and submitting applications for loans and making reports concerning applicants and the proffered security, the agent being employed on a salary basis and having in this State a fixed office or place of business leased in his own name, but the rent of which was paid by the company through reimbursement to him on expense account, and in all negotiations in reference to loans the company dealt with applicants by communications passing through him as its agent, the notes and security deeds though prepared in the home office being sent to him for execution by applicants in this State, and, after their return to the home office and approval there, checks being mailed to him for delivery to applicants here, so that all loan contracts were thus finally executed in Georgia, and where as many as nineteen long term loans were so made during continuous existence of such agency, the company in making such loans was conducting a loan business in Georgia, and thus came within its taxing power, as to property derived from or used in such business.

(c) The facts that all management and control were vested in the officials of the company at its home office, and that the authority of the agent was limited to specific instructions as to each separate loan, do not alter the case. If the company did in fact conduct a loan business in Georgia, it could not deprive the State of its authority to tax by limiting the authority of its agent.

(d) Nor does it matter that the company kept no money in Georgia either in the hands of its agent or elsewhere for the purpose of making loans, where there was no effort to tax money, and the only property assessed consisted of credits arising from loans made in such business. Under the facts of the case, it is also unimportant that the notes and security deeds were not kept in Georgia.

3. Where nineteen loans that were made in such business were still outstanding and unpaid on January 1, 1931, and at least six of them were renewed or extended, one in each of the years 1931, 1932, 1933, 1935, 1936, 1937, the smallest number outstanding in any one of these years being thirteen, during which period (1931-1937) a number of leases were also assigned by borrowers as additional security, and the same agent remained in his same employment as resident loan agent performing substantially the same service, except as to solicitation, the company continued to be engaged in the loan business in Georgia, subject to the State's taxing power; and this is true although it had made no new loans since 1928, and the agent had not solicited an application for a loan since that time.

(a) Whether the company could have withdrawn from the field, so as to escape taxation as to any of the credits derived from such business and still owned by it is not decided.

(b) Under the foregoing rulings as applied to the evidence, the credits arising from such loans had a situs for ad valorem taxation in Fulton County, Georgia, where the loan business was conducted, so that to tax them there would not violate the due-process clause of either the State or the Federal constitution. The undisputed evidence demanded a finding in favor of the tax.

4. Since the law of this State as applied to the facts plainly required taxation of the credits in question, no interpretation or practice to the contrary by the local authorities could properly be adopted by the court in determining their taxability.

5. The case arose by suit of the company assailing assessments and executions for the years 1931 to 1937, inclusive, the petition alleging that under the State and Federal constitutions there was no tax situs in Georgia. The judge, trying the case by consent as court and jury, found in favor of the plaintiff. A motion for new trial was overruled, and the tax officers excepted. Under the preceding rulings, the finding was contrary to the evidence and without evidence to support it, and it was error to refuse a new trial.

The questions in this case relate to taxability in Fulton County, Georgia, of credits arising in favor of a non-resident corporation by reason of loans made by it on real estate in that county, as against its contention that as to such property there was no business or tax situs in this State.

On July 22, 1940, Northwestern Mutual Life Insurance Company filed a suit against T. E. Suttles, as tax collector of Fulton County, and C. H. Gullatt, Reese Perry, and Comer Davis, as members of the board of tax assessors of the same county, seeking to enjoin enforcement of assessments and executions for State and county taxes for the years 1931 to 1937, inclusive. The assessments were based on credits existing in the company's favor by reason of loans made by it on Fulton County real estate as security, before 1931, but remaining unpaid during the years in question. The allegations were in brief as follows:

Petitioner is a corporation of the State of Wisconsin, engaged in the life-insurance business, with its principal office and place of business in the City of Milwaukee. This is the only office from which it conducts its life-insurance business, and it has never maintained an office for the transaction of this or other business in the State of Georgia. While it has issued insurance and annuity contracts to residents of Georgia, it has done so only upon applications submitted through a named general agent in Atlanta, who with others employed by him worked on a commission basis and operated as independent business men. Petitioner has made loans in Georgia, but has done so merely for the investment of its reserves and surplus, to protect its policy and annuity holders and to insure performance of such contracts on its part, all of such loans having been made from its home office in Milwaukee. Petitioner owns and holds promissory notes given for such loans by persons owning real estate in Fulton County, and the notes are secured by deeds conveying real estate in that county, but all of such notes were payable to petitioner at its home office, both as to principal and interest, and they and the security deeds have at all times been kept at that office, and never used for any purpose in Georgia. 'Said notes did not accrue out of or as an incident to any property owned or business conducted by petitioner or any agent of petitioner in the State of Georgia, but said notes arose out of the business conducted by petitioner at its home office in Milwaukee, Wisconsin.' Consequently, as to such property, there was no situs for taxation in Fulton County, or elsewhere in this State, and enforcement of the executions would deprive petitioner of its property, contrary to the due-process clauses of the State and Federal constitutions, Code, §§ 2-103; 1-815. The petition prayed for injunction, cancellation, and general relief.

The defendants answered, denying the material allegations as to situs and jurisdiction, and contending that the credits were taxable.

So far as appears, there was no demurrer to either pleading.

The case came on for trial before Hon. E. E. Pomeroy, one of the judges of the superior court of Fulton County, who, after the submission of evidence by both sides, trial by jury having been waived, entered a decree finding that the intangibles were not taxable in Fulton County or elsewhere in Georgia, and granting injunction and cancellation as prayed. The defendants' motion for new trial was overruled, and they excepted.

Each of the first eleven special grounds of the motion complained of the admission of testimony over objecton, while the remaining grounds 12-15 were mere amplifications of the general grounds. Other facts are stated in the opinion.

Spalding, Sibley, Troutman, & Brock, E. Harold Sheats, W. S. Northcutt, Harvey Hill, and Standish Thompson, all of Atlanta, for plaintiffs in error.

Granger Hansell, Julius McCurdy, J. L. R. Boyd, and W. J. Parker, Jr., all of Atlanta, for parties at interest not parties to record.

MacDougald, Troutman & Arkwright, of Atlanta, for defendant in error.

BELL Justice (after stating the foregoing...