77 Neb. 18 | Neb. | 1906
Lead Opinion
Tbis case is before us on appeal from a judgment of the district court for Hamilton county affirming tbe order of tbe board of equalization of that county in tbe matter of tbe assessment of tbe property of appellant (Royal Highlanders, a domestic fraternal beneficiary association) for taxation for tbe year 1905. It appears that tbe association is duly organized under the laws of this state, and bas its home office and principal place of business at Aurora, in Hamilton county; that in May, 1905, in response to tbe demand of tbe county assessor of said county, tbe association delivered to him a schedule of its property, from which it appears that it was tbe owner' of certain lots in tbe city of Aurora, Hamilton county, Nebraska, and tbe building situated thereon, of tbe cost and value of $21,238.56; that it bad on band furniture,
It may be stated, in passing, that it clearly appears from the petition that the appellant is a fraternal beneficiary association, organized under the provisions of chapter 43 of the Compiled Statutes of this state, having a lodge system with ritualistic form of work, and a representative form of government; that it is formed, organized and carried on for the sole benefit of its members and their beneficiaries, and not for profit; that, for and in consideration of certain stipulated payments in the form of fees and dues, it issues beneficiary certificates on the lives of its members, payable after their death to beneficiaries named therein, in mannner and form as provided by its by-laws and the statutes of this state governing such associations; that it has its fidelity or mortuary fund, amounting to $455,900, deposited with the auditor of public accounts, which fund is set apart and pledged by said association and by-laws for the payment of its beneficiary certificates due and to become due, and constitutes a trust fund for that purpose, and for no other; that of its credit balance at the banks, $12,174.98 belongs to said fund, and the remainder thereof, amounting to $491.34, represents a fund used for the purpose of paying the running expenses of the association. The foregoing is an abridged statement of the facts shown by the record, but is quite sufficient as a basis for this opinion.
1. Appellant’s first contention is that its entire property is exempt from taxation because it is used exclusively for charitable purposes. This question must be determined, not by what the association professes to be, but by what it really is, and the nature of the business it conducts. The general trend of judicial opinion in this country is that organizations like the appellant are, in effect, mutual insurance companies. In State v. Live Stock Ass’n, 16 Neb. 549, it was held that an association which' insured only the property of its members by a policy in the form of a certificate of membership, for a premium paid simply
■ “The courts have with a great degree of unanimity treated all such organizations as substantially life insurance companies, applying to them and to the mutual relations of the members the rules and principles applicable to the contract of life insurance.”
The appellant classes itself as exclusively a charitable organization, but from an examination of its by-laws, called “Original Edicts,” it appears that it is conducted for the sole benefit of its members and their beneficiaries. Its declared purposes are: “First. To unite for mutual benefit and fraternal protection all white persons of sound physical health and exemplary character between the ages of 18 and 65, and to bestow substantial benefits upon the beneficiaries of its membership admitted between the ages of 18 and 48 years who are entitled thereto. Second. To cheer and aid the unfortunate, to comfort and provide for the sick and aged, and to bury with becoming honor the dead of our membership. Third., To educate its members socially, morally, and intellectually, promulgating by ritualistic degrees the principles of prudence, fidelity and valor. Fourth. To establish and maintain funds for the purpose of paying all benefits provided for the members and their beneficiaries, and to defray the expense of management and promotion.” All of these purposes are confined to its members, and are dependent upon the payment by them of the assessments required by the by-laws. Beneficiary members get what is paid for, and nothing more. If they cease to pay, they cease to receive. Members continue to pay for the benefit of another, not because of any charitable or benevolent impulse, but because they expect, upon their death, that those whom they are interested in, or bound by law or ties of affection to provide for,
“These benefits are not charities in the strict sense. They are dues, which the society becomes obliged to pay in certain events.. It is a matter of right, and not of grace. A consideration is paid, and the lodge reserves no right to withhold payments when the conditions arise.”
It seems clear therefore that the appellant is not what may be termed purely or exclusively a charitable organization. It further appears from an examination of its bylaws that its funds are divided into two classes, as follows : “The finance of the fraternity shall be divided into two funds: The fidelity fund and the general fund.” The fidelity fund of the association is its mortuary fund, and is set apart for the payment of its beneficiary certificates due and to become due, while the general fund is used for organizing, maintaining and promoting the best interest,
2. It is further contended that we are bound by the administrative construction of our former revenue law. It is said, in substance, that our constitution was adopted in 1875; that the legislature of 1879, acting under the provisions of said instrument relating to taxation, framed a general revenue law, and exempted from taxation all property used exclusively for charitable purposes; that said revenue law has been so construed that no one has ever thought of taxing the funds of a fraternal beneficiary society until the year 1904; that the present revenue act is, in■ substance, the same as the former one; that the courts are bound by such administrative construction, and should not now hold the property of such associations subject to taxation. The doctrine of estoppel by construction is well established, and the argument of counsel based thereon comes with much force. Indeed, it might be held conclusive, were it not for the fact that in the year 1903 the legislature, by the adoption of the new revenue law, established more effectual methods than those which theretofore obtained in regard to matters of taxation. It is a fact, within the common knowledge of all, and one of which we may take judicial notice, that formerly so much property escaped taxation as to render the revenue of the state insufficient to pay the expenses incurred in conducting its ordinary business affairs, and we were confronted with a continually increasing state debt. This created a universal demand throughout the state for a new revenue law.. In answer to this demand the legislature at its session of 1903 adopted our present system. While so much of the present act as designates what property shall be taxed, and what shall be exempt from taxation, is practically the same as those provisions contained in the former revenue law, yet the new act
It is further urged that it was the intention of the legislature in passing the present law to completely exempt fraternal beneficiary associations from taxation, and our attention is called to the provisions of the act relating to the taxation of what are called old line insurance companies. It is insisted that, when the legislature provided for taxing such old line insurance companies upon their gross premiums for the preceding year, and exempted fraternal beneficiary associations and other like societies from that provision, the intention was not to • tax such associations at all. It seems to us, however, that excepting such associations from those special provisions constitutes no evidence of an intention not to tax them, but, on the other hand, it shows an intention to tax them the same as all persons, corporations and other domestic associations are taxed. If the legislature had intended to exempt them from taxation, it certainly would have expressed such intention and thus put the question beyond all doubt. So we are of the opinion that the property of mutual benefit associations organized under the laws of this state is taxable the same as the property of individuals, corporations and other domestic associations.
3. Finally it is contended by the appellant that it is entitled to set off the amount of its outstanding beneficiary certificates, matured and unmatured, against its fidelity
“It is plain that the legislature enacted this statute to secure to the policy-holders the performance of the obligation to pay the amount secured by the policy. This
In Michigan Mutual Life Ins. Co. v. Common Council of Detroit, 133 Mich. 408, the question of the right of a mutual life insurance company (organized for profit), under a statute practically like our own, to set off its reserve fund credits against its mortuary debts for the purpose of taxation was before the court, and it was held that it had the right to deduct the amount of its policies from its premium reserve; that the reserve fund of the company represents its indebtedness to its policy-holders, and should be exempt from taxation.
It is contended by the state, however, that the foregoing decisions furnish no authority for the determination of the question involved in the instant case; that they apply only to old line life insurance companies, and the reason given for such contention is that the policies of old line companies have a present surrender value, while the beneficiary certificates of fraternal associations have no such value. It seems to us that this is a distinction without a difference. It is difficult to understand why old line insurance companies, which are organized for the purpose of gain and profit, should be accorded the privilege of the set-off, and that right denied to beneficiary associations, which are organized solely for the purpose of conserving the interests of their members and are prohibited by law from being conducted for the purpose of gain. It seems clear to us therefore that the beneficiary certificates issued to the members of-the appellant association create a debt against it, for the payment of which the fund or, in other Avords, the credit in question is specifically pledged.. So we are of opinion that the certificates create a tona fide
For the foregoing reasons, the judgment of the district court is reversed and the cause is remanded for further proceedings according to law.
Reversed.
Concurrence Opinion
concurring specially.
I concur in the view expressed in the opinion of Mr. Justice Barnes as to fraternal beneficiary associations, such as the Royal Highlanders, not being charitable associations and entitled to exemption from taxation for that reason. I also agree that this court is not bound by any administrative construction of the former revenue law for the reasons set forth in his opinion. With the conclusion reached I also concur, but, since I do so mainly upon grounds not mentioned in his opinion, I deem it proper to briefly state my views. ■
The question whether or not the securities held in pledge by the Royal Highlanders, or other domestic fraternal beneficiary associations, or whether the reserve held by domestic old line life insurance companies, are taxable as the property of the respective associations or corporations, is purely one of statutory construction. The controlling question for the court to determine is, what was the intention of the legislature with respect to the subject matter? To ascertain this intention is the sole duty of the court in
No specific provisions are made for taxation of fraternal beneficiary associations, or mutual assessment companies, having no capital stock, making no dividends, and whose scheme of insurance does not contemplate the return of any profits to policy-holders. The tangible property of such associations and mutual companies, whether domestic or foreign, is to be taxed, therefore, the same as the property of other persons and corporations. It is made compulsory upon domestic corporations carrying on the business of life insurance under the old line plan to accumulate and keep on hand a fund for the purpose of meeting their outstanding obligations to policy-holders, and, although not compulsory in the case of domestic fraternal beneficiary associations or mutual assessment companies, it is a matter of common knowledge that a number of such associations or companies, including the Royal Highlanders, voluntarily have accumulated a fund, variously designated as a mortuary, reserve, or emergency fund, for the purpose of meeting liabilities to their certificate-holders as they mature, in order to prevent such frequent assessments as experience has shown may be caused by epidemics of disease or widespread calamities. Whether held by old line companies or associations formed upon the assessment plan, these funds are set apart to meet obligations of a certain nature. They are not the property of the company or association for general purposes, but are devoted to a specific end. In the case of foreign life insurance companies, these accumulations are held, in other states or countries and are not within the reach of the taxing officers of this state. In this
It will be seen, from a comparison of these provisions with reference to the taxation of foreign and domestic life insurance companies, that if the law is construed so that the special reserve or mortuary funds of domestic companies and of domestic fraternal beneficiary associations, accumulated, reserved, and set apart to meet their liability to their policy and certificate-holders, are to be taxed as the property of such companies and associations, a heavy burden is placed upon domestic organizations from which foreign are exempt. The business tax which domestic companies are required to pay may be as great as, or greater than, that exacted from foreign companies, depending upon local conditions. It is not to be presumed that the legislature intended to impose a heavy burden upon domestic enterprises of this character from which those organized in other states are free. It would be doing violence to common sense to believe that its intention was to make a hostile discrimination against citizens of this state in favor of citizens of other states. It may be said that foreign companies are taxed in the states or countries of their domicile npon such funds, but, as is pointed out in the opinion of my brother Barnes, in several states where net credits are the subject of taxation the amount of liabilities to policy-holders has been held entitled to be properly
With respect to the taxation of insurance companies and fraternal beneficiary associations, as well as in many other respects, the provisions of the revenue law of 1903 are far from clear and definite, and may be expected to give rise to many controversies. If the construction now placed upon the law fails to evidence the purpose of the lawmakers, the remedy lies with the legislature. The resources of the English language are vast and rich and flexible enough so that it may express its intention in phrase so clear and plain that an ordinary man may understand, and thus relieve the court from liability to a misconstruction of its meaning, and the taxpayers of the state from unnecessary litigation.