*1 plianee with requiring filing the law of claims and does not decide when filing the time for claim run, such a commences nor period during indicate the damages may be recov- erable.
Edmonds, J., Spence, J., concurred. July 30, F. No. 16980. In Bank.
[S. 1945.] (an INDUSTRIAL INDEMNITY EXCHANGE Interinsur ance Exchange), Respondent, v. STATE BOARD OF EQUALIZATION al., Appellants. et *2 Westphal, Attorney General, and T. A. Kenny, Robert W. General, for Attorney Jr., Haas, Deputies B. Harold Appellants. Respon- Burbank for
Burbank & Laumeister Daniel W. dent. According to in this CARTER, stipulation of facts the J. ex- plaintiff organization an interinsurance is an called pursu- dealing compensation insurance in workmen’s The sub- Insurance Code.
ant to sections 1280-1530 of organization exchange contracts scribers to the appoint- each other. have executed contracts The subscribers at- their ing Underwriters, Inс., corporation, Industrial a as torney exchange insurance between fact to the contracts of charge generally speaking is corporation them. The latter Grey- v. (Mitchell of the business of the Pacific agree- In Cal.App.2d 53 Lines, hound 33 agreеd de- attorney to ment with the in fact each subscriber posit “computed required by the terms condi- sum, a “Ex-, agreement stated that policy. tions of his also ...” accruing ‘savings cept to provided, as otherwise herein de- annually, unless otherwise subscribers shall be returned and “As com- Advisory . . termined Committee’ hereunder, said performed pensation for the services to be reinsurance, Attorney deducting after first the cost compen- percent of all may withhold seventeen and one-half Attorney premium deposits sation rеceived and addition equal percent is to a subscriber’s receive to five savings; ...”
In pre- 1936 the received deposits amounting $1,604,514.45. mium By resolution of to advisory exchange, $197,702.04 committee of was de- clared refund of returnable to the subscribers surplus distributable and directed accounts sub- scribers to be credited therewith. Pursuant to resolution on its books the latter amount to the credited accounts, only subscribers’ but such subscribers $187,817.04). (the cent thereof sum of The balance of 5 per ($9,885.10) attorney pursu- fact agreement ant above-quoted. to the clause in last Deduct- $197,702.04 ing $1,604,514.45 sum of from the sum of $1,406,812.41. Equal- leaves balance Defendant Board ization assessed as taxable to the the balance remain- $197,702.04 cent of the or the sum $187,817.04 $1,604,514.45, asserting inasmuch as the cent was fact and not the crediting 5 per the mеre cent on the books bring did not it within al- the deductions *3 computing paid having lowed in the tax. Plaintiff the tax protest judgment assessed under recovered and defendants appeal. Plaintiff contends that under the it statute involved $197,702.04 is sufficient that the full was credited as tax, to thе subject subscribers to make sum not that to the it is immaterial that 5 paid that cent thereof was not to the for the latter attor- ney discharge obligation was the of the individual of the sub- with scribers which the to do. taxing
The
statute reads:
“In
taxes,
lieu of all
whatever,
other
licеnses or fees
State
or local, each
shall
...
upon
an annual
tax
paid
all
preceding
sums
in
year by
calendar
subscribers
this State
reason of
exchanged,
the insurance
whether
premium deposit, membership
termed
fee,
otherwise,
or
premium deposit
cancellations,
returns or
therefrom
consideration for
reinsurance and
amounts
returned
credited to
savings;
their accounts as
. . .”
and/or
(Emphasis
(Ins.
added.)
Code, 1530.)
foregoing
We take it that the
section
should
considered
provision
fitting
wording
within the
the constitutiоnal
of
on
companies
of insurance
or associations
taxation
provides
every
“shall
company
that
insurance
or association
annually pay
tax,
...
of
and six-tenths
to the State a
two
gross
less re-
premiums,
centum
upon
amount of the
State,
turn premiums,
upon
in this
received
business done
its
. . . provided,
from said two
that there shall be deducted
gross premiums
six-tenths
the amount
upon
centum
of
companies
taxes
such
real
owned
on
estate
(Cal.
them in
Const.,
XIII, §14%.)
this State.”
art.
term companies
“persons, partnershiрs,
is declared
include
joint stock
It is
associations, companies
corporations.”
apparent
gross pre
provision
the tax is
miums
premiums.
only
rather than
or
net
deductions
gross
amounts
part
premiums
that are not a
are ex
pressly mentioned as rеturn premiums and reinsurance. The
only
However,
deduction is taxes
real estate.
such
on
dividends,
case,
present
pay
are
the instant
able because of
policy
the excess of
stated in the
over the
insurance,
gross
cost of
really
part
not а
of
premium.
(See
Richardson,
Mutual
L. Ins. Co. v.
Benefit
776 Assn. v. thing (Sеe Fire Ins. taxed. Camden value Johnson, Cal.App.2d 528, category in the per the 5 cent was same It is clear that excerpt above-quoted last per as the cent mentioned 17% also fact, which was agreement for ser compensation its paid vicеs; attorney. to the Both were upon a was based Merely per cent because the 17% savings figure (the rather than the paid) different total sums method unimportant. different more than a It was thing, compensation, not of calculation to arrive at the same “sаvings” in word purpose. a a for different standpoint of sub section 1530 must be viewed other cor savings them? No scribers, is, that were there as to poration, person is concerned. Cer persons or association of the 5 tainly savings when there were to the subscribers no was a yet cent be That remained to deducted. arrangement participation reciprocal cost of its- in a use of the expense. as much as other item of reference to “returned” with word “credited” as well as savings “credited” alter situаtion. The word does not a must cover situation as differentiated from “returned” “credited” payment. To be where there was a lack of actual subscribers that there it must have been so set aside for the against for the current would be no further claims say including compensation To credit of cer you subscribers in one breath have taking tain cent amount, next, and in the but we are binding obligations, away existing is sham to meet other reality pretence. savings credited until They have no all of such items have been deducted. truly reflected until is not less the fairly ascertained. language argues
Plaintiff is clear of section may interpretation; and needs a tax statute no provided extended interpretation; and that the tax imposed upon section 1530 rather than applying particular the subscribers. But the statute are not truth facts before us it is obvious that attorney has compensation such until the 5 been must the tax. deducted. It is true that (Ins. 1530.) ex Code, It is also true that while an organization may corporation, is not a it is an circumstances, is treated under some sue be sued and *5 subscribers liquidation, entity such an distinct the as as (Mitchell Greyhound Lines, 33 Cal. v. Pacific App.2d But it does not follow agreed attorney the subscribers to be of the ex entirely separate is a matter from the transactions determining savings. entity in what are Realisti an cally savings. may viewed, exchange "-riothave There does surplus to sub strings attached to the insolvency scribers in case of in situations. While other organization represents subscribers and controls the funds, picture we must look at the subscribers’ side of the to savings. аscertain what constitutes The subscribers must act . through governing exchange organization. board of the an exchange The status of and its subscribers in is discussed Greyhound Lines, supra, Mitchell v. at page where Pacific the court said: said, “From apparent what has beеn reciprocal that' a ‘organization’ many respects differs ordinary stock or mutual company. insurance has It no stock and no capital as operating such. Its premiums funds consist of the policies earnings for its and the on investment of premiums. contingеnt those liability of the subscribers (Sec. 2) to premiums addition their to stands in place capital of the company of the stock liability and the contingent subscribers to meet liability such may be respects likened some liability to. pay unpaid to stock subscriptions сompany. to a stock plan appears to be de- signed those who desire positions to assume the both the insurer and insured with a eliminating view to ’’ the ordinary premium goes into profit. agreement between the subscribers attorney and the speaks belonging thаn subscribers rather It states: savings accruing “all to the sub- scribers shall be annually, returned unless otherwise deter- ’’ mined Advisory Committee. If the 5 cent com- pensation considered an individual" and with, separate obligation of the exchange which the computing to do in savings, then the same reasoning the ultimate result would be no tax. All of the of insurance includ- independent liability losses would be the of the subscrib- ers, organization, and the an having no expenses,
778' savings. There premiums claim all of the were could there obligations therefrom because would be no to deduct would We do believe it was the intention be none. Legislature be rendered so ineffective its act could bookkeeping a mere The relation between procedure. be so status cannot attorney, segregatеd imposed may be of the tax part. whole or avoided
- urged per the 5 cent is It is that contingent existence, upon being savings in and there first though they exist, they once the subscrib are deductible even Looking pay per ers must cent of them beyond however, that situation it cannot be doubted savings until all of the subscribers there no There are connection with the insurance have met. been pay 5 per before the cent is deducted to only in but the sense that there is a left over after meet expenses except per compensation cent to the at torney. per paid, The 5 still be to the sub cent must and saving scriber there is no until all the costs of his insurance have been met. foregoing
For the judgment reasons the is reversed. Gibson, J., J., Peters,' pro tern., Traynor, J. con- C. curred. taxing (Ins. Code,
SCHAUER, The statute J. I dissent. 1530) applicable entity, an is not to the provides “exchange individual subscribers. It shall upon ... an preceding annual tax all sums in the year by calendar subscribers in State this reason of the exchanged, premium deposit, whether termed mem- othеrwise, bership fee, therefrom deposit cancellations, returns or consideration for reinsurance and all amounts returned to subscribers credited to and/or savings. (Italics . ) their accounts as . .’’ stip- added. upon ulation presented of facts is recites thаt “plaintiff apportioned . . did credit . amounts plaintiff to subscribers’ accounts on the books of ex- change; aggregate $197,- of such sums credited was 702.04; plaintiff paid by that thereafter check to cent the sum credited to each subscriber and (Italics thereof.” per cent attorney in fact five to said added.) the contro-
It this five is ex- per cent such five versy Plaintiff claims that centers. savings while defendants empt duly credited as a savings. contend that it is not a (cid:127) paid to the-attor- appears five cent so It to mе that the respective sub- ney. accounts of the fact was for the obligation was, effect, payment to them. scribers. "It obligation, was their not that money; had disposal
was a of the subscribers’ completed savings. The its function and effected the un- , under the duly crеdited to the subscribers be.en ambiguous credited, savings, were terms of the statute such so deductible from the taxable base.
Accordingly my it is the trial court reached view that proper Dis- opinion conclusion. I am of 'the satisfied that Two, Appeal, Appellate District, trict Court of Division First prepared by Presiding Mr. in 152 (reported Justice Nourse affirming judgment, 37) correctly disposes the issues opinion involved. Reference' made to that complete its more of the essential facts and discus- statement applicable sion of principles logic. lawof *7 Shenk, J., Edmonds, J., concurred.
Respondent’s petition rehearing August was denied 27, J., 1945. Shenk, Edmonds, J., Schauer, J., voted for rehearing.