179 N.Y. 227 | NY | 1904
Lead Opinion
I think the tax in this case, or at least a considerable portion of it, was improperly imposed and should have been revised and readjusted by the comptroller upon the petition of the relator. I will state only very briefly my reasons for this conclusion.
(1) The tax can be imposed only under the authority of chapter 118 of the Laws of 1901. The relator is a domestic corporation and within the general scope of the statute, but the question is how and to what extent the tax can be lawfully imposed. It has been imposed upon the receipts of the company derived from past transactions and pre-existing contracts. The statute designates the burden as one "for the privilege of exercising corporate franchises," and, consequently, it can be laid only upon such business as depended upon the exercise of such franchise. It could not have been lawfully imposed upon the receipts of past contracts that the company had the right to collect and enforce by virtue of the contract alone and that did not depend upon the exercise of the franchise. These contracts would survive the destruction of the franchise by the dissolution of the corporation. The collection by the company of the premiums upon insurance contracts entered into before the enactment of the statute was not the exercise of a franchise privilege, but depended upon an absolute and indestructible contract right. The tax is purely a franchise tax and nothing else as to domestic corporations. The tax imposed "for carrying on business in their corporate or organized capacity" applies only to foreign corporations deriving their franchises from other sovereignties. The statute went into effect October 1st, 1901. There is nothing in the statute that warrants the imposition of the tax upon premiums derived from contracts made prior to that date and upon every principle of justice and sound construction the tax could be imposed only upon future business. If these contracts would survive the destruction of the franchise, as they clearly would, and be good without it, then the tax in question does not reach them unless it is made to operate retroactively, and every fair intendment is against such construction. *230
The tax in question being a franchise tax does not, within the terms of the statute, or by any reasonable construction, become a burden upon contracts made before the law was enacted and that exist and may be enforced entirely independent of the corporate franchise. Contracts of life insurance once made exist solely by virtue of the right to contract at the time they were entered upon by the parties, and not by virtue of any privilege or franchise from the state. (People v. O'Brien,
(2) The statute under which the tax was imposed had no existence until October 1st, 1901. It speaks only from that day, and of future transactions of the company. That was the day on which the statute commenced to operate upon the relator, and no tax can be imposed upon any business transacted prior to that day. The statute is not in terms retroactive, but clearly prospective in its operation. No law can properly be held retroactive unless so expressed. In the absence of such clear declaration laws operate only in the future and upon future transactions. If there was no other guide the first day of October, 1901, was the day fixed by the statute for the relator to commence to pay. (People ex rel. Mutual Trust Co. v.Miller,
The order should be reversed and the account remitted to the comptroller for revision and correction, limiting the tax to new policy premiums commencing with those collected during the calendar year 1902, with costs to appellant.
Dissenting Opinion
During the calendar year 1901, the relator, a domestic corporation engaged in the business of life insurance, received for business done in this state premiums amounting to $619,346.01. In April, 1902, the comptroller assessed upon the relator a franchise tax of $6,193.46, or one per cent. of said sum, pursuant to the provisions of the Tax Law as amended during the year 1901. An application for a revision of the tax was denied by the comptroller and a writ of certiorari issued to review his decision resulted in the confirmation thereof by the unanimous vote of the Appellate Division.
The questions presented depend upon the construction of section
The tax thus imposed, as we have distinctly held, is not a tax upon property but upon the privilege of exercising the corporate franchises and carrying on business in a corporate capacity in this state. (People ex rel. Mutual Trust Co. v. Miller,
The question is raised whether renewal premiums paid during the year 1901 represent any part of the business done during that year within the meaning of the statute. In transacting *234 life insurance business there may be a single premium paid in advance for the entire life of the policy, but this is unusual as the custom is to pay annual premiums and sometimes semi-annual, quarterly or even monthly premiums. The contract provides that these premiums must be paid in advance as a condition of continuing the policy in force for another year or for the period for which they are paid. Hence such premiums are known as renewal premiums, because they renew and continue the policy in force for another year or another period. Thus we reach the question whether renewal premiums, collected by life insurance companies in the ordinary course of business, are a part of "the gross amount of premiums received during the preceding calendar year for business done in this state."
A corporation can do no business, legitimately, except by the exercise of its franchise. Whatever it does which is lawful, is done by virtue of its franchise, for it can neither exist without a franchise, nor act without exercising its franchise. Every act done by the lawful exercise of its franchise is the transaction of corporate business, for "exercising corporate franchises" and "carrying on business" in a "corporate or organized capacity" mean the same thing under the statute before us. Is not the collection of renewal premiums part of a life insurance business? If they are not paid the policy terminates and the corporation ceases to do business so far as that policy is concerned, but if the renewal premium is collected the policy continues in force and the company keeps on doing business and furnishing insurance through that policy. (People ex rel. Cont. Ins. Co. v.Miller,
I dissent from the judgment about to be pronounced and vote to affirm the order appealed from, with costs.
GRAY, HAIGHT and WERNER, JJ., concur with O'BRIEN, J.; BARTLETT, J., concurs with VANN, J.
Order reversed, etc.