
    CASE 23. — ACTION BY THE COMMONWEALTH AGAINST THE WESTERN & SOUTHERN LIFE INSURANCE COMPANY TO RECOVER A CERTAIN PER CENT. OF ITS ANNUAL GROSS PREMIUMS
    March 25, 1909.
    Western & Southern Life Ins. Co. v. Commonwealth
    Appeal from Franklin Circuit Court.
    R. L. Stout, Circuit Judge.
    Judgment for Commonwealth,. Defendant appeals.
    Reversed.
    Taxation — Constitutional Law — Statutes — Equality .and Uniformity — Delegation of' Legislative Power — Uniform Operation of Law Imposing License Tax. — Const. Section 60, provides that no 'law shall he enacted to take effect upon the approval of any other authority than the General Assembly. Section 171 provides that taxes shall be uniform upon all property' subject to 'taxation within the territorial limits of the authority levying the tax, and all taxes shall be levied and collected by general laws. Section 180 provides that every act. ordinance, or resolution levying a tax shall specify the purpose for which said tax is levied, and no tax levied and collected for one purpose shall ever be devoted to another purpose. Section 181 provides that the General Assembly may by general laws only provide for the payment of license fee®. Held, that Ky. St. 1909, Section 637 (Russell’s St. Section 4284), providing that when, by the laws of any other State, any taxes are imposed on insurance companies organized or incorporated under the law of this state and transacting business in such other state, greater than those imposed upon similar companies by the laws of' this state, the same taxes shall be imposed upon all insurance companies doing business in this State which are organized under the laws of such State, imposes a license tax,' and is unconstitutional, and a foreign insurance company cannot he taxed a higher rate on its annual gross premiums than the rate taxed resident insurance companies, because a higher rate is taxed in the State where the foreign insurance company is domiciled.
    T. L. EDBLEN and D. W. LINDSEY for appellant.
    
      • JAMES BREATHITT, Attorney General, and JOHN P. LOCK-ETT, Assistant Attorney General, for Commonwealth.
    fNo briefs — record misplaced.)
   Opinion op the coiter by

Judge Hobson

Reversed.

■ Section 637 of tlie Kentucky Statutes (RnsselPs St. Sec. 4284) is as follows: “When, by the laws of any other State, any taxes, fines, penalties, deposits of money, or of securities or other obligations, prohibitions or requirements, are imposed upon insurance companies organized or incorporated under any general or special law of this State, and transacting business in such other State, or upon the agents of such insurance company, greater than those imposed upon similar companies by the .laws of this State, or when such laws of other States shall require insurance companies of this Commonwealth to deposit money or security for the benefit or protection of citizens of such other States, or when the laws of any other State, or the officers thereof, shall prohibit companies of this Commonwealth from transacting business in said State without a special examination of said companies, or a computation of their liabilities by the officers of said State, the same taxes, fines, penalties, deposits, examinations, obligations and requirements, shall be imposed upon all insurance companies doing business in this State, which are incorporated or organized under the laws of such State, and upon their agents.” The Western & Southern Life Insurance Company is a corporation organized under the laws of Ohio, having its principal office in Cincinnati. It paid its taxes regularly to the State under Section 4226, Ky. St. (Russell’s St. Sec. 6096), which provides that every insurance company shall pay a tax of $2 upon each $100 of premiums collected by it. The laws of Ohio provide that life insurance companies doing business in that State must pay a tax of 2 1-2 per cent, of the annual gross premiums. This suit was brought 'by the Commonwealth against the Western & Southern Life Insurance Company to recover the amount of one-half of 1 per cent, of the annual gross premiums received by it in the State, on the ground that, as Kentucky companies are required to pay at the rate of 2 1-2 per cent, in Ohio, Ohio companies should pay at a like rate in this State. The circuit court entered judgment against the defendant for the amount claimed, and it appeals. /

The only question to be determined on the appeal is the validity of Section 637, Kentucky Statutes, in so far as it makes the amount of the taxes which the taxpayer is to pay dependent upon the law of the State where the taxpayer has his domicile. We have no doubt that the Legislature may require of foreign companies the same deposits, examinations, obligations, and the like which are required by the State of their domicile from Kentucky companies; but whether the amount of taxes to be paid here may be made to depend upon the law in force at the residence of the foreign companies is a different question. It would not be contended that, if Ohio taxed insurance companies at 1 per cent, of the yearly pre miums, Ohio companies could do business here by paying at the rate of 1 per cent., although other companies paid taxes at the rate of 2 per cent. We have been referred to a number of decisions upholding this retaliatory legislation; but in a number of the cases the question of taxation was not presented, and in others the decisions of the court turned upon provisions of the 'Constitution different from our Constitution. Thus the case of Talbott v. Fidelity & Casualty Co., 74 Md. 563, 22 Atl. 395, 13 L. R. A. 584, involved simply the question whether Maryland might exclude New York companies when New York excluded Maryland companies. Phillips v. Fidelity & Casualty Co., 77 Iowa, 648, 42 N. W. 509, turned upon the question whether Iowa might prohibit a foreign insurance company from making more than one kind of insurance in that State, when by the law of its domicile foreign companies were permitted there to make only one kind of insurance. Union Central Life Insurance Co. v. Durfee, 164 Ill. 186, 45 N. E. 441, was rested upon a provision of the Constitution of Illinois, which, as held, gave the General Assembly full power to so regulate the matter. Such a statute was upheld in People v. Fire Association, 92 N. Y. 311, 44 Am. Rep. 380, Phoenix Ins. Co. v. Welch, 29 Kan. 672, Goldsmith v. Home Ins. Co., 62. Ga. 379, State v. Insurance Co., 115 Ind. 257, 17 N. E. 574, and Haverhill Ins. Co. v. Prescott, 42 N. H. 547, 80 Am. Dec. 123. In passing on the question the Kansas court expressly said that the Legislature may constitutionally pass a law whose operation is made to depend upon some contingency; and the other opinions, while they do not expressly say this, are evidently based upon that construction of the State Constitution. It was held in Fire Association v. New York, 119 U. S. 110, 7 Sup. Ct. 108, 30 L. Ed. 342, that such a statute does not infringe any provision of the Constitution of the United States.

But still the question remains: Is it in keeping with the Constitution of Kentucky? .Section 60 of the Constitution provides, that, with certain exceptions not material here, no law shall be enacted to take effect upon the approval of any other authority than the General Assembly. Section 171 provides as follows: “The General Assembly shall provide by law an annual tax which, with other resources, shall 'be sufficient to defray the estimated expenses of the Commonwealth for each fiscal year. Taxes shall be levied and collected for public .purposes only. They shall be uniform upon all property subject to taxation within the territorial-limits of the authority levying the tax; and all taxes shall be levied and collected by general laws. ’ ’ Section 180 provides: Every act enacted by the General Assembly, and every ordinance and resolution passed by any- county, city, town or municipal board or local legislative body, levying ,a tax shall specify distinctly the purpose for which said tax is levied, and no tax levied and collected for one purpose shall ever be devoted to another purpose.” Section 181 provides: “The General Assembly may, by general laws only, provide for the payment of license fees on franchises, stock used for breeding purposes, the various trades, occupations and professions, or a special or excise tax.”

It will thus be seen that the power of- the Legislature to enact laws whose operation will depend upon the approval of any other authority is denied, except in the cases named in the Constitution; that the General Assembly is authorized to provide by law an annual tax sufficient to defray the-estimated expenses of the Commonwealth; that these taxes must be levied and collected only by general law; that every act levying a tax must specify the purpose for which it is levied; and that the General Assembly may by general laws only provide for tbe payment of a license tax. Tbe tax for 2 per cent, on tbe. gross amount of premiums received by insurance companies is a license tax. Tbe Constitution clearly imposed upon tbe General Assembly tbe duty of determining wbat levy was necessary, and required it, by a general law to levy sucb a tax as was necessary, tbe tax to be equal and uniform. It was not contemplated by tbe Constitution that tbe amount of taxes paid by a taxpayer in Kentucky should depend upon tbe amount of taxes paid by some other corporation in tbe State where tbe taxpayer' has its domicile. On tbe contrary, tbe Constitution contemplated that tbe Legislature should determine wbat tax should be paid, and that only tbe taxes necessary for tbe support of tbe government should be levied: To allow one person to be taxed at one rate and another at a different rate, not because of any other fact than to retaliate for tbe mode in which a corporation of this State is taxed in some other State, is to lose sight entirely of tbe fundamental idea of equality in tbe public burdens aimed at in our Constitution.

Tbe conclusion we have reached is supported by tbe decision of tbe Supreme Court of Alabama, in Clark v. Mobile, 67 Ala. 217. Tbe court there well said: “This section of tbe Code authorizes, in effect, tbe Legislature of Mississippi, speaking through its statutes, which are tbe subjects of extrinsic proof, and -not of judicial knowledge, in our courts, to fix by law tbe amount which the Treasurer of Alabama shall demand of appellants as a license tax to do an insurance business in this State. If tbe lawmaking power of that State should, in a day, modify, amend or repeal their revenue laws, ipso facto, such legislative action would modify, amend or repeal the legal operation of our laws, provided the principle contended for 'by appellant’s counsel is a sound and prevailing one. This can not be, for it would be confiding to a foreign jurisdiction that legislative discretion which the General Assembly of Alabama are constitutionally bound to exercise themselves, and which they can not delegate or commit to another.” See, also, a note by the editor in 10 Ins. Law J. 361.

Retaliation rarely brings about the result aimed at. Its effect is usually to intensify the evil. It is strictly forbidden by Him who taught as one having authority and not as the scribes; and we are constrained to believe that the rule we have announced is more in keeping with the spirit of American institutions than the rule allowing taxes to be collected in one State, not for public necessity, but in retaliation for those collected in another State from foreign corporations doing business there. The State may exclude foreign corporations from doing business here if it sees fit, and it may impose such conditions as it sees fit to impose within the constitutional inhibitions. But the people of the State who desire insurance will not be benefited in the end by laws that drive foreign insurance companies from the State or cripple competition in the insurance business.

Judgment reversed, and cause remanded, with instructions to the circuit court to dismiss the petition.  