U.S. Fidelity & Guaranty Co. v. State Bd. of Equalization
| Decision Date | 30 November 1956 |
| Citation | 303 P.2d 1034,47 Cal.2d 384 |
| Court | California Supreme Court |
| Parties | UNITED STATES FIDELITY AND GUARANTY COMPANY, a corporation, Plaintiff and Respondent, v. STATE BOARD OF EQUALIZATION, et al., Defendants and Appellants. NORTHWEST CASUALTY COMPANY, a corporation, Plaintiff and Respondent, v. STATE BOARD OF EQUALIZATION, et al., Defendants and Appellants. NATIONAL AUTOMOBILE & CASUALTY INSURANCE CO., a corporation, Plaintiff and Respondent, v. STATE BOARD OF EQUALIZATION, et al., Defendants and Appellants. L. A. 23712-23714. |
Edmund G. Brown, Atty. Gen., James E. Sabine, Asst. Atty. Gen., and Harold B. Haas, Deputy Atty. Gen., for appellants.
Latham & Watkins, Dana Latham and Charles E. Horning, Jr., Los Angeles, for respondents.
Defendants, the State Board of Equalization and others, appeal from judgments for plaintiffs, insurance companies, in their actions to recover taxes on their gross premiums paid under protest, together with interest on the sums.
It was stipulated that the method of conducting the bail bond business (it is a tax on premiums for such bonds which are here involved) by plaintiff companies and their agents was substantially as follows: 'P, a prisoner, contacts B, a bail agent, to secure his release from jail. If B. Holds a bail permittee license he first decides whether to post cash bail or a bail bond. Assuming that he decides to post a bond he has P make out an application for a bond in the penal sum of P's bail. B undertakes, for a fee, to secure the release of P on bail. Assuming that P's bail is set at $1,000, the total amount charged by B will ordinarily (but not necessarily) be $100. P pays B $100 and is given a Receipt and Statement of Charges (see Exhibit 'I') carrying a breakdown as follows:
Upon instructions of G, the general agent, B will insert the sum of $20 opposite the item 'Bail Bond Premium,' and $100 opposite the item 'Total Charges.' It is stipulated that these were G's instructions to B, but it is not clearly established that more than 75% of the receipts were so broken down. b, having satisfied himself that the security offered by P is in all respects sufficient, posts a surety bail bond in the penal sum of $1,000 and secures the release of P from jail. At the end of the week during which this transaction was carried out, B reports to G, the general agent or supervising agent, of the surety company. B days to G a consideration for the bond determined by the contractual arrangement between B and G. At the same time B deposits with G an additional sum as a 'reserve' to cover possible losses on the bond. G then reports to S, the surety company, the total face amount of all bonds written during the period covered by the report and pays to S an agreed amount. G may also deposit an additional sum as a 'reserve' to cover possible losses on this and other bonds. S reports the sum of $20 or a portion thereof (there being no uniformity) as gross premiums received on account of this bond in its annual statement and in its premium tax return to the Insurance Commissioner.' The taxes which were paid under protest and awarded by the judgments were on the amounts paid to and retained by the insurance companies' agents who solicited and obtained takers of bail bonds. There is no question about the amount actually received by the companies from the agents as that was included in the gross premiums reported by the companies and on which taxes were paid. This method of operation is substantially the same as that set forth in Groves v. City of Los Angeles, 40 Cal.2d 751, 754, 256 P.2d 309, where we held that the entire amount that was paid by the applicant to the bail agent for a bail bond was the premium, hence was gross premium received by the companies which was taxed by the Constitution, Cal.Const., art. XIII, § 14 4/5; this was held to be true even though the companies' bail agent retained a large percentage of the amount for his profit and operation expenses. It is not questioned that the Constitution levies taxes on the entire amount but heretofore the state has been collecting taxes on only the amount actually received by the companies.
Plaintiff companies contend that, as held by the trial court, the state is estopped to collect taxes on those premiums for the past years, 1947 in the instant cases. Defendants contend there can be no estoppel against the state in tax matters; that assuming estopped is available, none was established here; and that in any event interest on the taxes paid under protest should not be allowed.
There is no dispute as to the facts. At the close of 1947, plaintiffs submitted reports to the state insurance commissioner of their gross premiums, 1 but did not include therein the portion of the premiums received by their bail agents as discussed above and in the Groves case. The commissioner made his report to the State Board of Equalization on the basis of the reports by plaintiffs to him (see Rev. & Tax.Code, § 12403) and the board assessed taxes on that basis against plaintiffs (see Rev. & Tax.Code, § 12431 et seq.) and plaintiffs paid those taxes in 1948. In 1951, the state's attorney general advised the commissioner that all the amounts received by the bail agents were taxable premiums and the commissioner advised plaintiffs that an additional assessment was being included in the 1951 assessments to include those amounts for 1947. The additional assessments were paid under protest and recovery thereof allowed by the trial court.
The gross premium tax law has been in effect since 1911, but until 1951 no surety company has reported the entire amount received by its bail agents. In 1937, licenses were required for bail agents and section 1800 was added to the Insurance Code providing that no insurer shall execute an undertaking on bail except 'by and through' a licensed bail agent, which this court considered in Groves v. City of Los Angeles, supra, 40 Cal.2d 751, 256 P.2d 309, as a factor showing that the bail agents were the agents of the insurer and hence amounts received by them for bail bonds were gross premiums received by the insurers and taxed by the Constitution. Plaintiffs as well as all other companies, prior to 1951, considered and reported to the commissioner as gross premiums for bail bonds only the amount actually received by them from the agents. The commissioner and attorney general knew of the practice because of letter in 1941 from the commissioner to the attorney general asking an opinion on the subject; that request was withdrawn by the commissioner before the attorney general gave an opinion. No objection was ever made by the commissioner to any company for the failure to report the whole bail bond premiums, and, of course, no taxes were collected. Also in 1941 the commissioner held hearings in regard to proposed regulations by him for the bail bond business which were attended by plaintiffs. At the hearing one of the things considered was a form for the receipt given by the bail agent to the applicant for a bond, which was approved. in that receipt, as appears from the method of doing business, the amount charged for the bond was broken down into two categories: one, the amount listed as 'premium' for the bond which included only the amount actually received by the company and the other, 'fees for arranging bond' which included all of the rest of the charge for the bond, most of which the bail agent retained. In other branches of the surety business there is no such breakdown. Nothing was said about taxes on gross premiums and the commissioner at the hearings said 'he wanted the paying public to know where their dollar was going that they spent and that we could either give them a certified copy of the bond with the various charges thereon or, in lieu thereof, break those charges down on a receipt form and that he would approve the receipt form that they would receive.'
Farrell v. Placer County, 23 Cal.2d 624, 627, 145 P.2d 570, 571, 153 A.L.R. 323. (See, also, Lorenson v. City of Los Angeles, 41 Cal.2d 334, 260 P.2d 49; San Diego County v. California Water etc. Co., 30 Cal.2d 817, 186 P.2d 124, 175 A.L.R. 747; Tyra v. Board of Police etc. Com'rs, 32 Cal.2d 666, 197 P.2d 710; Cooke v. Ramponi, 38 Cal.2d 282, 239 P.2d 638; Adams v. California Mutual B. & L. Ass'n, 18 Cal.2d 487, 116 P.2d 75.
The government may be estopped in tax matters. See, Garrison v. State of California, 64 Cal.App.2d 820, 149 P.2d 711; Outer Harbor Dock & Wharf Co. v. City of Los Angeles, 49 Cal.App. 120, 193 P. 137; Goodwill Industries v. Los Angeles County, 117 Cal.App.2d 19, 254 P.2d 877; La Societe Francaise v. California Emp. Comm., 56 Cal.App.2d 534, 133 P.2d 47; Market St. Ry. Co. v. California State Board of Equalization, 137 Cal.App.2d 87, 290 P.2d 20; Joseph Eichelberger & Co. v. Commissioner of Int. Rev., 5 Cir., 88 F.2d 874; ...
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