The State of Missouri ex rel. Hyde v. Buder

• Decision Date: 08 October 1926
• Docket Number: 26021
• Parties: The State of Missouri ex rel. Ben C. Hyde, Superintendent of Insurance Department of State of Missouri, in Charge of Equitable Surety Company, and Equitable Surety Company v. William Buder, as President of Board of Equalization and as Assessor of City of St. Louis, and Edmond Koeln, as Collector of City of St. Louis
• Court: Missouri Supreme Court

287 S.W. 307

315 Mo. 791

The State of Missouri ex rel. Ben C. Hyde, Superintendent of Insurance Department of State of Missouri, in Charge of Equitable Surety Company, and Equitable Surety Company v. William Buder, as President of Board of Equalization and as Assessor of City of St. Louis, and Edmond Koeln, as Collector of City of St. Louis

No. 26021

Supreme Court of Missouri

October 8, 1926

Record quashed.

Jourdan & English, T. M. Pierce and Samuel H. Liberman for relators.

(1) Only the net value of assets of an insurance company are taxable and, since the legal reserve and the unpaid policy claims of the Equitable Surety Company exceeded the value of its gross assets, there were no net values subject to tax. Sec. 6386, R. S. 1919; State ex rel. Automobile Ins. Co v. Schramm, 271 Mo. 223. (2) The Superintendent of the Insurance Department, having possession of the property of the Equitable Surety Company, is not subject to taxation on said property where it would not be taxable in the possession of the Surety Company. Rosenblatt v. Johnston, 104 U.S. 462, 26 L.Ed. 832; McFarland v. Hurley, 286 F 365; Coy v. Title Guarantee Co., 220 F. 90; 8 Fletcher, Cyc Corp., p. 8898.

Oliver Senti and Charles J. Dolan for respondents.

(1) The statute upon which relators take their stand (Sec. 6386, R S. 1919) violates the Constitution of the State. The allowance of the deductions authorized by this section would violate Section 4 of Article X of the Constitution, requiring that all property subject to taxation shall be taxed in proportion to its value. Whenever the deductions allowed under this section exceeded the total value of the taxable property, as in the instant case, Sections 6 and 7 of Article X, prohibiting unauthorized exemptions, would be violated. Life Assn. v. Board of Assessors, 49 Mo. 512; St. Louis Ins. Co. v. Board of Assessors, 56 Mo. 503; Standard Ins. Co. v. City of Atlanta, 151 Ga. 153; Railway v. Worthen, 46 Ark. 312, 120 U.S. 97; In re Assessment and Collection of Taxes, 4 S. Dak. 6, 54 N.W. 818; Judson on Taxation in Missouri, 217; State ex rel. v. Shipman, 290 Mo. 65. (2) Section 6386 relates exclusively to the method of fixing the assessment of shares of stock in domestic insurance companies. Such shares are no longer taxed. The property of each domestic company is now assessed directly against the company. Accordingly, Section 6386, does not govern the method of assessment of property held in charge by relators. State ex rel. v. Catron, 118 Mo. 280; State ex rel. v. Shryack, 179 Mo. 424; Laws 1911, p. 417. (3) Section 6386 was repealed by implication by the Act of the General Assembly approved April 1, 1891, providing for a method of returns to be made by insurance companies in conflict with the method provided by Sec. 6386, R. S. 1919. Laws 1891, p. 195. (4) Section 6386 was never enacted by the General Assembly of Missouri. It has only been construed by the court once, and on that occasion neither its constitutionality nor its authenticity was in question. R. S. 1879, sec. 6056; Journals of 30th General Assembly. (5) The reserves of insurance companies are proper subjects of taxation and are assessable only against the companies. St. Louis Ins. Co. v. Charles. 47 Mo. 462, 56 Mo. 503; Life Assn. v. Board of Assessors, 49 Mo. 512; Kansas City Life Assn. v. Hill, 51 Kan. 636; Kenton Ins. Co. v. City of Covington, 86 Ky. 213; Republic Life Ins. Co. v. Pollak, 75 Ill. 292; Sun Mutual Ins. Co. v. City of New York, 8 N.Y. 241; Standard Life Ins. Co. v. City of Atlanta, 151 Ga. 153. (6) Under the law of Missouri, the property of insurance companies is subject to assessment for taxation against such companies. R. S. 1919, sec. 12775.

Atwood, J. All concur, except Graves, J., absent.

OPINION

ATWOOD

This case comes to the writer on reassignment. It is an original proceeding in this court to quash the assessment made by the Assessor of the City of St. Louis and its Board of Equalization, and to annul the tax bill issued thereon by the Collector of Revenue of the City of St. Louis, against the assets of the Equitable Surety Company, a domestic insurance corporation, now in the hands of Ben C. Hyde Superintendent of the Insurance Department of the State of Missouri, under a decree of the Circuit Court of the City of St. Louis.

In July, 1919, on application of the then State Superintendent of Insurance, the Equitable Surety Company was declared to be insolvent by the Circuit Court of the City of St. Louis, and by the terms of its decree the Superintendent of the Insurance Department took over the assets of the Surety Company and the company was enjoined from doing business until the further order of the court. The company has never been dissolved, but still maintains its corporate existence.

The relators made their tax return to the city of St. Louis, showing assets in the amount of $ 412,212.17, consisting of taxable bonds in the amount of $ 369,100; a certificate of deposit in the amount of $ 20,000; cash in the amount of $ 19,411.17; shares of stock in a railroad corporation of the value of $ 2967; and Liberty Bonds of the value of $ 769. From this total of assets relators claimed deductions on account of reserve on deposit with the Superintendent of the Insurance Department and unpaid policy claims, under the provisions of Section 6386, Revised Statutes 1919, amounting in the aggregate to $ 525,000. The Board of Equalization found that there was a reserve of $ 200,000 and that there were unpaid policy claims to the amount of $ 325,000, but held that these were not deductible from the gross assets of the Equitable Surety Company in the hands of the Superintendent of Insurance, and ordered an assessment against the "Equitable Surety Company, E. H. Benoist, Special Deputy Finance Commissioner in charge," of $ 400,000. Respondent Koeln, Collector of Revenue, issued a tax bill based on this assessment amounting to $ 9880.

Respondents filed returns showing their action as above stated. Relators do not make any technical point on the verbiage of the assessment or return, but stand squarely on the proposition that they are entitled to the deductions specified in Section 6386, Revised Statutes 1919.

I. Respondents, in their brief filed a few days before this case was argued, assert that Section 6386, Revised Statutes 1919, violates Section 4 of Article X of the Missouri Constitution, which requires that all property subject to taxation shall be taxed in proportion to its value, and Sections 6 and 7 of Article X, which prohibit unauthorized exemptions. Section 6386, Revised Statutes 1919, is as follows:

"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: Provided, that the premium notes held by fire insurance companies organized on the mutual plan shall not be returned as assets; and provided further, however, that nothing herein shall operate to exempt from such taxation the paid-up capital stock of such companies."

In their printed suggestions in opposition to relators' application for certiorari, filed some months previous, respondents failed to raise any constitutional question, and in their reply brief relators say that respondents' constitutional objections should not be now considered for the reason that they were not raised at the earliest opportunity within the rule laid down by this court.

The rule is thus succinctly stated by Judge Graves in George v. Railroad, 249 Mo. l. c. 199: "If a law is plainly relied upon by the plaintiff, as here, and defendant desires to challenge that law upon constitutional grounds, it should be done at the earliest practical moment, and in addition, a finger should be placed upon the provisions of the Constitution violated. This has been so long and well ruled that the mere mention of the ruling should suffice." Also, in Lohmeyer v. Cordage Co., 214 Mo. 685, l. c. 689, Judge Lamm speaking for this court said: "But it must be taken as settled law that in so grave a matter as a constitutional question it should be lodged in the case at the earliest moment that good pleading and orderly procedure will admit under the circumstances of the given case, otherwise it will be waived."

The instant case is an original proceeding in this court, and it may be that our writ was not such as would properly require respondents to state their constitutional objections in their return, but a copy of relators' petition and suggestions in support thereof was served on respondents many months before oral argument, and they filed printed suggestions in opposition thereto. This was respondents' earliest opportunity in the course of orderly procedure to raise these constitutional questions in this court. It would seem that in all candor and fairness and under our oft repeated rule they should have done so. The rule has most frequent and apparent application in cases that reach us on appeal from court judgments below where timely lodgment is essential to obtain a proper presentation to and judgment of the trial court, and in original proceedings before us it is conceivable that the same reason exists in support of the rule. The circumstances of the instant case will serve to illustrate....