
    Insurance Company v. Cappellar.
    A fire insurance company made return of its property for taxation to the auditor of the proper county upon a printed blank form furnished to it by the auditor for that purpose as required by law, in which all its property subject to taxation and the value thereof were truly stated. Among other items so returned were “all legal claims and demands for money or other valuable thing, or for labor or service due or to become due ” to it, and the value thereof. There was also stated in said return, in conformity to the requirements of the form so furnished, a list of debts owing by said company, including an item for “Re-insurance,” the amount of which item was 50 per centum of all premiums received on policies not then expired. The amount of debt so returned was deducted from the amount of “ claims and demands and the remainder was placed upon the tax list and duplicate by the auditor, who understood the character of the claim, as the amount of credits due the company subject to taxation. Reid:
    
    
      1. The item returned as “re-insurance ” was not “ a legal bona fide debt ” within the meaning of section 2730 of Revised Statutes.
    2. The amount of said item was erroneously deducted by the auditor from the amount of “claims and demands” due the company, when the credits of the company were placed on the tax list and duplicate of the county for taxation.
    3. The return of the company was not false within the meaning of sections 2781 and 2782 of the Revised Statutes.
    
      4. The county auditor, under section 1038 of the Revised Statutes may correct an error in the amount of taxes upon the current duplicate, result-. ing from such erroneous deduction.
    Error to the Superior Court of Cincinnati.
    In tlie years 1878, 1879, 1880, 1881 and 1882, the plaintiff in error, a fire insurance company incorporated under the laws of this state, upon the stock plan, with its principal office in Hamilton county, made return of its property for taxation to the auditor of Hamilton county, upon a printed blank form furnished to it for that purpose by the auditor as required by law.
    In the manner prescribed by the form so furnished, the company listed all its property subject to taxation, and among other descriptions of property, its “credits.” The credits were returned thus : The amount and value of “ all its legal claims and demands, whether for money or other valuable thing, or for labor or for service due or to become due ” to it, were fully stated. Erom this amount its indebtedness was deducted. The balance was assumed to be the amount of its credits subject to taxation, and was placed on the tax list and duplicate, by the auditor of the county for taxation.
    Among the items of indebtedness so returned and deducted from “ claims and demands ” was one denominated “ re-insurance.” The value of this item, for each year, was stated in money, and its amount was a sum equal to 50 per cent, of all premiums received, on policies unexpired at the time for listing property for taxation. The sums so deducted for said years successively were $76,338, $65,300, $70,724, $71,788 and $75,881.
    On the 10th of August, 1882, the plaintiff in error commenced the original action against the defendant in error, and averred in its petition, that the item so deducted at each of said times of listing was a “ legal Iona fide debt ” of the company, owing on account of what is known in the fire insurance business, and in the laws of Ohio regulating the same, as “ unearned premiums;” that this item is also sometimes spoken of as a liability for “ re-insurance,” and still again as the sum to be paid by the company on account of the cancelTati on of its policies, when cancellation occurs; but plaintiff says, that whether called by the one name or the other, the reference is to one and the same thing.
    ‘£ Plaintiff further says, that these returns were so made. up under the direction and supervision of the auditor of said Hamilton county, that said deductions were shown upon the face of said returns, and that the auditor had full knowledge of the same, their character, amount, and the account on which they were made, and that he received the returns so made as true, just and correct, and in compliance with the law.”
    And it was further alleged in the petition, that “ its tax-returns so made out as stated, for the years 1878, 1879, 1880, 1881 and 1882, were true, just and correct, and not false in any particular whatever, and yet plaintiff says, that notwithstanding the premises, the defendant has notified it that it has been by'the state auditor directed and required, and that in pursuance thereof he is now proceeding, to place upon the current tax-duplicate of Hamilton county, for said years, the amounts so deducted as aforesaid during said years, as ‘ reinsurance,’ from the sum of all claims, demands, deposits, etc., due the company, and to charge against it taxes thereon for each of said years, and that for the year 1882 he intends to add to the taxes thereof a penalty of 50 per cent, of their sum, alleging as the ground of his said action that said returns so made as aforesaid are false within the meaning of sections 2781 and 2782 of the Revised Statutes of Ohio. ”
    The object of the action was to restrain the auditor from so doing.
    By the decree of the superior court, the auditor was restrained from levying taxes on account of the deductions from credits made in the years 1878, 1879,1880 and 1881, and also from imposing a penalty for the year 1882 ; but the petition was dismissed as to the matter of levying taxes on the amouni so deducted in the year 1882.
    As to so much of the decree as granted relief to the plaintiff, defendant excepted,.and to so much of the decree as refused relief, the plaintiff excepted.
    
      
      Foraker & Black, for plaintiff in error:
    I. The return of the plaintiff in error to the auditor was not false within the meaning of sections 2781 and 2782 Revised Statutes. There was no concealment or intentionally false statements. The returns showed every item on their face. The auditor had full knowledge of their character, and they were made upon blanks furnished by him.
    II. What we have claimed and now insist upon, is that this re-insurance fund was provided for by law to meet and provide against an actual, existing and determined liability, which was and is a “legal tona fide debt owing” by these companies within the meaning of section 2730, of the Revised Statu tes, and which they, therefore, had a right to deduct, not from their assets generally, but from “ the sum of all claims and demands,” etc., due them in determining the amount of “ credits,” as defined by said section on which they should pay taxes; and that this liability exists wholly independent of probable losses on policies. It has nothing to do with anything of the sort. The allegations of the petition show the character'of the liability. And for the purpose of showing the character of this liability, and also to show that the statute law of our state recognizes it as an actual, existing indebtedness we call attention to the provisions of the Revised Statutes contained in sections 274, 3648, 3664, 3665, 3654. We think the words “ legal, tona fide ” and “ owing,” mere surplusage, except in so far as they may show the intention of the legislature. In that respect we think these words important, and, as bearing on the question of intention, we call attention to them. They are of no force in any other sense, for the reason that the word “debt” alone, would mean a “legal sum,” owing, in good faith. Why then did the legislature use the apparently unnecessary words ? The answer is manifest. It wanted to make sure that only (not debts in the strict legal technical sense of the word) but tona fide should be deducted. The words “tonafide” were more important than the words “ debts.” It meant that no room should be left for trumping up false notes, fictitious accounts, and obligations, improvised for the purpose of defrauding the state of its taxes. That this is what is meant, and that no more was intended, and that no more should now be asked, is evident from the context. The word “ debt,” as. here in question, should receive a construction liberal, and broad enough to embrace every kind of an actual, existing obligation which equity and justice would require to be taken into the account in determining “ the excess of the sum of all claims and demands,” étc., which only, is to be listed as the amount of credits to be taxed. Such a construction is warranted by authority. Franklin Life Ins. Co. v. Plaff, 11 Ins. L. J. 708, Lewis v. Railroad Co., 49 Barb. 330. Still, if the word “ debt” is used in its more technical sense, we are clearly within the terms of of the statute. Walker’s Am. Law. (7th ed.) 577; Stockwell v. United States, 13 Wall. 542. And see People ex rel. v. Ferguson, 38 N. Y. 89; Insurance Co. v. Lott, 54 Ala. 499.
    III. The auditor had no right to correct the deductions and charge up the amounts so deducted, for any year. ' The court below agreed with us in this claim to the extent of holding that he had no such authority, under sections 2781 and 2782, but differed from us as to the amount deducted for 1882, holding that the auditor had the right to do what he was proposing as to this year by virtue of section 1038. We claim that lie had no such power under this section; that if he does not have authority to make the change under sections 2781 and 2782, he does not have it under any section. He does not have it at all. We invite a close reading of section 1038.
    Now, how can this section be said to apply to authorize what the auditor is threatening in this case ? He is not threatening to proceed under this section at all. He threatens to proceed under 2781, for false returns. To do what? To add to the amount of our credits returned for taxation, by disallowing a deduction therefrom, which we have made. In other words, he is proposing to charge us on the tax-duplicate with an amount of credits greater than we returned, and to levy taxes against us on account thereof. Now, can this be said to be the correction of an error in the tax-list or duplicate ? We think not. But if so, it cannot be said to be the correction of an error in the name of the person charged, nor in the description of lands or other property. Nor is it the correction of an error in the taxing of exempted property. All this is clear. If this were the entire provision, then certainly there would be no such authority as claimed. If, therefore, the auditor has the authority at all, it must be by virtue of the last clause we have quoted, viz.: that he may correct errors in the particulars mentioned, “or in the amount of such taxes or assessments.” ¥e think it manifest, that no such authority is given by this provision. It is evident that what the legislature aimed to do by this section was to empower the auditor to make coiTeetions of only clerical errors. And not clerical errors generally, but only specified kinds. It is a well settled rule that when powers are enumerated, there is an exclusion as to all matters' not named. Hence, when the legislature said, the auditor might correct errors in names of persons charged with taxes and assessments, and in the description of lands or other property, and in the amount of such taxes or assessments, it excluded the power from him of correcting anything else. We see, therefore, that the power here given is of the most limited character. It is nothing more than clerical in the most simple sense.
    
      George K. Wash, attorney general, and J. T. Holmes, for defendant in error:
    I. The first question to be determined by the court is, whether the obligation of fire insurance companies, under certain circumstances, to re-insure outstanding risks, or to return, upon proper demand, unearned premiums, is a legal Iona fide debt owing within the meaning of section 2730 of the Revised Statutes. We claim that it is not. A debt owing is a certain •fixed sum, whether due or not, the amount of which does not depend upon the happening of any future event. “The distinguishing and necessary feature is, that a fixed and specific quantity is owing, and no future valuation is required to settle it.” 3 Black. Comm. 154; 2 Hill (N. Y.) 220. If A. has a policy of insurance issued by the Amazon Insurance Company, that company does not owe A. anything upon that agreement, so far as premiums may be concerned, until A. has notified it that he desires to have such policy canceled. Whether it will ever owe A. anything upon that account depends upon the determination of A. to have his policy canceled. How much it will owe A. depends upon the time when A. reaches this conclusion, if ever. Whether the Amazon Insurance Company-will ever have its policy-holders re-insured, and how much money it will require, depends entirely upon future events. The most that can be said of these obligations is, that they are contingent liabilities — such liabilities as are incurred by persons who attach their names, as sureties, to official bonds and promissory notes. In section 2730 it is provided that in deducting liabilities from credits, no “ greater amount or portion of any liability, as surety, than the person required to make the statement believes that such surety is in equity bound, and will be compelled to pay, or to contribute, in case there be no securities,” shall be considered. There is no fixed liability as surety, until there has been a default on the part of the principal. There is a contingent liability, which may become an actual liability upon the happening of a future event. The above provision, after 'the liability has become a certainty, only permits the jjerson listing his credits to deduct no greater amount .than what he is in equity bound, and will be compelled to pay. Counsel, for the purpose of showing that this thing which they seek to deduct from liabilities is an actual existing indebtedness, quote from section 274 of the Revised Statutes. For their theory we think this reference is unfortunate.' Therein there is a clear-cut distinction between debts — “ actual liabilities,” and “ re-insurance fund.” The language is not “ actual liabilities,” including a re-insurance fund, or a sum to meet reinsurance liability, or a re-insurance liability. “ Actual liabilities ” are one thing, “ re-insurance liability ” is another. But when we look to section 2744, every shadow of doubt or question vanishes. That is the section upon which counsel should have based their argument on the subject of the definition of “ credits: ” “ Every insurance company in Ohio, whether incorporated by any law of this State or not, shall list for taxation .... all the personal property, which shall be held to include all such real estate as is necessary to the daily operations of the company, money and credits of such company or corporation within the state, at the actual value in'money.” If we are correct in this point, the argument on the other side touching it must be pointless.
    II. The second question is whether, under sections 2781 and 2782, the auditor of Hamilton county has the power to place the “re-insurance reserve fund” of these companies upon the duplicate for the years 1878, 1879, 1880 and 1881, and a penalty for 1882. A return, to be false within the meaning of section 2781, Revised Statutes, does not necessarily involve any moral turpitude upon the part of the maker thereof. If it is made through ignorance, or under a false construction of the law, it is not a true return, and therefore false. If what the court below held to be law is true, one must conceal his ignorance for but a single year to escape taxation, especially if the assessor or county auditor happens to be as ignorant as the person attempting to list tire property. If this be the law, what a door is opened to fraud ! It would be very easy for one who has willfully gone astray to successfully plead ignorance of the law. This is one of the cases in which ignorance of the law will not excuse. If these companies are now required to pay taxes upon property, unlawfully withheld from the tax-duplicate in the years 1878, 1879, 1880 and 1881, no wrong will be done to them. They will simply be required to pay money which was rightfully due to the government years ago. They will be the gainers, for they have had the use of the money during the time it lias been withheld from the treasury.
    We suppose that the word “ false,” as used in these sections, has its plain and obvious meaning, “ not true.” Section 2744, R. S., provides what the companies shall do in order to make true returns. These companies did not comply with this section in making their returns, therefore they are “ not true.” They are false. Genin v. Belmont County, 18 Ohio St. 534.
   McIlvatne, J.

At the time of listing its property for taxation, did any obligation or duty rest on the plaintiff in error, in respect to re-insurance or otherwise, whereby, under the tax laws of the state, it became entitled to deduct from its “ claims and demands ” a sum equal to 50 per cent, of all premiums on unexpired policies, and designated as “ re-insurance fund” in section 274, and as “unearned premiums” in section 3648 of the Revised Statutes %

Section 274 reads as follows:

“ When it appears to the Superintendent (of insurance) . . . . that the assets of any joint stock insurance company other than life, . . . after deducting therefrom all actual liabilities and a re-insurance fwid equal to fifty per cent, of the whole amount of the premiums on unexpired risks and policies, are reduced twenty per cent, or more below the capital stock required by law, he shall require the officers thereof to direct the stockholders to pay in the amount of such deficiency, etc.”

Section 3648 is as follows:

“No insurance company, organized under any law of this state, shall make any dividend except from the surplus profits arising from its business ; and in estimating its profits there shall be reserved therefrom :
First. A sum equal to fifty per cent, of the whole amount of premiums on unexpired risks and policies, which is hereby declared to be unearned premiums.”

The portion of an insurance company’s assets thus designated is not set apart, or appropriated by law, for any particular-use; but it remains a part of the general assets of the company for general uses, save only the payment of dividends.

All money received by an insurance company on account of premiums, whether earned or “ unearned,” remaining the property of the company, in the form of money, or in any other form at the time of listing, is subject to taxation under section 2744 of Revised Statutes, which reads as follows:

“ Every insurance company in Ohio, whether incorporated by any law of this state or not, shall list for taxation. . . . all the personal property, which shall be held to include all such real estate as is necessary to the daily operations of the company, money and credits of such company or corporation within the state at the actual value in money.”

The same may be said of the “ re-insurance - fund,” which consists of property in any form, and confessedly is not distinguishable from tlie assets which represent “ unearned premiums.” Not only so, but it is admitted, that the plaintiff in error has uniformly stated in its return of property for taxation, all its assets, whether personal property (which under this section includes real estate) money or credits.

The contention now is as to the right of the company to deduct, in its return, from its credits, as a “legal bona fide debt,” a sum equal to 50 per cent, of all premiums on unexpired policies, under section 2730 of the Revised Statutes, which reads as follows :

The term credit,’ shall be held to mean the excess of the sum of all legal claims and demands, whether for money or other valuable thing, or for labor or service due or to become due to the person liable to pay taxes thereon, including deposits in banks, or with persons in or out of this state, other than such as are held to be money, as hereinbefore defined, •when added together (estimating every claim or demand at its true value in money,) over and above the sum of legal bona fide debts owing by such persons; but in making up the sum of such debts owing, there shall be taken into account no obligation to any mutual insurance company, nor any unpaid subscription to the capital stock of any joint stock company, nor any subscription for any religious, scientific, literary or charitable purpose, nor any acknowledgment of any indebtedness unless founded on some consideration actually received, and believed at the time of making such acknowledgment to be a full consideration therefor: nor any acknowledgment made for the purpose of diminishing the amount of credits to be listed for taxation; nor any greater amount or portion of any liability as surety / than the person reguired to- malee the statement of such credits believes that such surety is in eguity bound, and will be compelled to pay, or to contribute, in case there be no securities ; provided, that pensions receivable from the United States shall not be held to be credits; and no person shall be required to take into account, in making up the amount of credits, a greater portion of any credits than he believes will be received or can be collected, or any greater portion of any obligation given to secure the payment of rent, than the amount that shall have accrued on any lease and remain unpaid.”

Upon what ground can the item returned as “ re-insurance ” be regarded as a “ legal bona fide debt ” owing by the company %

Unless the context requires some other construction surely the phrase legal bona fide debts owing by such persons ” can mean nothing more than a fixed liability to pay a sum or sums certain, due or to become due at all events, to some other person or persons — it being understood, of course, that that is certain which can be made certain. Does such liability-rest upon the plaintiff in error in respect to the sum in controversy, either by virtue of the statute, or its own contracts ?

An insurance company is liable to the full extent of all its assets for losses covered by its policies. This liability is fixed by the contract of insurance. The amount of this liability is certain ; and where the loss has occurred, no doubt a legal bona fide debt exist. But where the loss has not happened, and may never happen, there exists no debt within the meaning of this statute. This is conceded, by plaintiff in error, and no claim is made on the ground of such liability.

It is claimed, however, that the company is authorized to re-insure its unexpired risks ; the expense of which would be at least 50 per cent, of all premiums on its unexpired policies, and that the statute requires it to keep in reserve that amount of assets. Let it be granted. Still,' the company is under no obligation to re-insure; nor is it claimed that it has re-insured any of its risks. And until it does re-insure, it is impossible to say that it owes debts on account of re-insurance. True, the statute requires it to keep in reserve assets equal to eighty per cent, of its capital stock over and above all its actual liabilities, and a re-insurance fund equal to fifty per cent, of all premiums on unexpired policies; yet this re-insurance fund is not a debt, or in the nature of a debt.

It is also claimed that the company, under certain circumstances, is bound to l’edeem its policies. Section 3664, Revised Statutes, requires insurance companies to insert in their policies an obligation to cancel the same upon the written request of the person insured; and section 3665 provides: “ When a policy issued on the cash 'plan is cancelled, in accordance with the preceding section, the companies so issuing may retain customary short rates, as now established and charged by companies doing a cash business, for the time the policy has been in force, and return to the insured the unearned premium on the policy for the unexpired time.” Surely, this obligation, before request to cancel by the person insured, is no more “ a legal bona fide debt” than is the liability to pay losses covered by the policy before a fire insured against has taken place. Under this provision, a debt may or may not accrue; but, whether any such debt existed at the time of listing, we are not informed. On this point it may be further remarked, that if every policy were cancelled (an improbable event), the amount due policy holders would be less than the amount sought to be withdrawn from taxation, as the company, in such case, is authorized to retain “ customary short rates.”

It is further claimed, on behalf of the plaintiff in error, that, if neither reinsurance nor cancellation is effected, a duty rests on the company to carry its risks until the expiration of its policies, which is a service of agreed and fixed value, to wit: the amount of unearned premiums; and therefore a legal bona fide debt within the meaning of the statute.

This claim is based, as we understand it, upon the statutory definition of credits, to wit: “ all legal claims and demands, whether for money or other valuable thing, or for labor or service due or to become due,” etc.

The theory of the claim is, that for every credit there must be a corresponding debt; and if a claim for service be a credit, the owing of service is a debt. This point is urged with much, ingenuity and ability by counsel, and while we are willing to adopt his theory, we are not ready to adopt his conclusions.

Assuming that creditor and debtor are relative terms, we are not now required to determine the full meaning of the phrase, “legal claim or demand for labor or service,” but only, whether a contract for insurance is a contract for “labor or service,” within the meaning of the statute, whereby the relation of debtor and creditor is created. If such relation exists, the insurex- becomes the debtor by reason of his obligation to continue the risk until the expiration of the policy, and it is self-evident that the insured is a creditor on the same account. And it follows, if the insurer may deduct from his claims and demands ” the amount of “ unearned premiums ” as a “ legal bona fide debt ” on account of service owing,” that the person insured must list for taxation a like amount, on account of “ service due ” to him. That every person holding a policy of insurance should list for taxation the value of his right to have the risk carried until the expiration of the policy, is, to say the least, a novel proposition.

What is the right of the assured under his contract ? To have indemnity in case of loss. Nothing more. What is the obligation of the insurer in his contract ? To indemnify the assured in case of loss. Nothing more. If no loss occurs during- the life of the policy, the assured takes nothing by his contract, arid the insurer loses nothing. It is therefore plain, that until a loss occurs, the relation of creditor and debtor does not exist between the parties.

It is said, that a policy is a valuable thing,” before a loss covered by it takes place. How so ? Clearly, it does not add to the value of the property insured. It is not a thing valuable in its use. It is not an article valuable in trade. But it is said the holder may, at any time, demand its cancellation and recover the “ unearned premium,” so called. True, the statute secures to the holder such a privilege; but he cannot exercise the privilege and hold the indemnity also. The object in obtaining insurance is to secure indemnity against loss —not the investment of money; hence the right to demand cancellation, until exercised, is of no taxable value. After the right to demand cancellation is exercised, and the right to indemnity is thereby abandoned, of course the taxable property of the assured is increased, and that of the insurer diminished, to the extent of the premium returned, or liable to be returned, as above shown.

Upon full consideration of all the facts and the law, we are of opinion, that a policy of insurance, issued upon a paid-up premium, before condition broken, does not constitute a contract for service, which can be construed as creating a credit on the part of the assured, or a debt on the part of the insurer, within the meaning of the statute.

2. The next question is, Did the court below err in restraining the auditor from charging taxes against the plaintiff in error on account of re-insurance deducted from “ claims and demands” in the years 1878, 1879, 1880 and 1881, and a penalty on the like deduction in 1882? The solution of this question depends on the extent of power conferred upon the auditor by sections 2781 and 2782 of Devised Statutes. The decision of the court will be apparent by quoting section 2781, which is as follows : •

“ See. 2781. If any person whose duty it is to list property or make a return thereof for taxation, either to the assessor or to the county auditor, shall make a false return or statement, or shall evade making a return or statement, the county auditor shall ascertain, as near as practicable, the true amount of personal property, moneys, credits, and investments, that such person ought to have returned or listed, to which amount he shall add fifty per centum, and place the same on the tax-list ; and the inquiry and corrections provided for in this and the next sections may go as far back as the same can be traced, not exceeding the four years next prior to the year in which the inquiries and corrections are made, but as to former years, no ■ penalty shall be added, and only simple taxes shall be claimed.”

The point is, were these returns or statements false ? They were made upon printed blanks furnished by the auditor, and in conformity thereto. The law required the auditor to furnish blanks for that purpose. The value of all property of the company subject to taxation was truly returned. The amount of re-insurance was also returned among the debts of the company, in conformity to the requirement of the blank form. No doubt the auditor at the time the blank was'furnished, believed that this item, with full knowledge of its character, was a debt which could properly be deducted from the credits of the company ,• and that the company, when it returned the item, was of the same opinion. But, however that may be, we are of opinion that the returns as made, under the circumstances shown, were not false within the meaning of these sections. This point is further elucidated by the decision upon the next question made in this case, as we do not think that the remedy provided by sections 2781 and 2782 was intended to apply in cases where section 1038 is applicable.

3. Did the superior court err in holding that the auditor had power under section 1038 of Revised Statutes to correct the amount of plaintiffs’ taxes for the year 1882 ?

This section provides:

The auditor shall, from time to time, correct all errors which he discovers in the tax-list and duplicate, either in the name or the person charged with taxes or assessments, the description of lands or other property, or when ¡oroperty exempt from taxation has been charged with tax, or in the amount of such taxes or assessments.” . . .

True, it was held in State v. Com. of Montgomery County, 31 Ohio St. 271, that the corrections which the auditor may make under this section are merely clerical. The error to be corrected in relation to the plaintiff’s taxes was the deduction of the re-insurance item from its credits. No fact is to be inquired into. Every necessary fact appeal’s on the face of the return. Charge the proper rate of taxes upon the amount of credits returned without any deduction on account of the,reinsurance item, and the error in the amount of plaintiff’s taxes will be corrected — clerical work merely. Corrections authorized by this section are limited, however, to the current tax-list and duplicate.

Judgment affirmed.  