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Nos. 360, 361. Argued January 4, 5, 1905.-Decided February 20, 1905.

While technically municipal bonds deposited with the insurance commissioner under the laws of Ohio regulating the right of foreign companies to do business within the State are investments in bonds, they are also a part of the capital stock of the company invested in Ohio and required to be so invested for the security of domestic policy holders, and for the purposes of taxation to be considered as part of the capital stock of the company and included within the statutory definition of personal property required to be returned by foreign and domestic corporations for taxation.

While no tax can be levied without express authority of law, statutes are to receive a reasonable construction with a view to carrying out their purpose and intent, and

The collection by distraint of goods to satisfy taxes lawfully levied is one of the most ancient methods known to the law and in this case the law of Ohio authorizing it does not violate the constitutional right of a foreign insurance company and deprive it of its property without due process of law.

There is nothing in the exemption of Government bonds from taxation which prevents them from being seized for taxes due upon unexempt property. The laws of the State of Ohio as construed by the Supreme Court of that State have conferred the right to tax bonds deposited by a foreign insurance company with the insurance commissioner under the laws regulating the right to do business in the State.

Where municipal bonds so deposited are withdrawn before the return day and Government bonds substituted therefor as provided by law the company is not liable for taxation on the bonds so withdrawn. Where there is no personal liability for taxes the defense can be set up in an action at law and there is no necessity to resort to equity to enjoin prosecution of suits therefor. It will be presumed that if the claim of the party taxed is right no personal judgment will be entered.

THESE cases are cross-appeals from a decree rendered in the Circuit Court upon bill and demurrer. The Scottish Union

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and National Insurance Company, a corporation of Great Britain, filed its bill to enjoin the defendants Willis G. Bowland, treasurer, and L. Ewing Jones, auditor of Franklin County, Ohio; Arthur I. Vorys, superintendent of insurance, and William S. McKinnon, treasurer, of the State of Ohio, from the collection of taxes levied on certain bonds deposited by the complainant under the laws of Ohio regulating the right of foreign insurance companies to do business in that State. It appears from the averments of the bill that the bonds were deposited under section 3660 of the Revised Statutes of Ohio, as amended in 1894. 91 Ohio Laws, 40. They were municipal bonds of the county of Lucas and State of Ohio. Fifty thousand dollars thereof was deposited on September 14, 1894, and $50,000 on November 7, 1894. The bonds were registered in the name of the superintendent of insurance, in trust for the benefit and security of the policyholders of the insurance company, residing in Ohio, and were delivered by him to the state treasurer for safe keeping, and remained in the office of the treasurer of the State at Columbus, Franklin County, Ohio, until withdrawn on April 2, 1903, when United States bonds were substituted therefor.

The insurance company is transacting the business of insurance in Ohio, but it avers that its home office is in the city of Edinburgh, Scotland, and its chief office and managing agency for this country is at Hartford, Connecticut, from which office it conducts its business in Ohio.

Acting under the Ohio statute, section 2781a (94 Ohio Laws, 62), the auditor of Franklin County, by notice served on one of the local agents of the Scottish Union and National Insurance Company, notified it to appear and show cause why the said bonds should not be taxed against it on the duplicate of Franklin County, Ohio, and taxes collected thereon for the years 1895 to 1900, inclusive. The auditor entered upon the tax duplicate taxes against the insurance company for $2,700 each for the years 1895 to 1897, inclusive, and $2,750 each for the years 1898 to 1900 inclusive, and five per cent

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penalty thereon. On November 15, 1900, the treasurer of Franklin County brought a civil action against the company for taxes so assessed. This action at the time of the filing of the bill was still pending in the Court of Common Pleas of Franklin County, Ohio.

On December 4, 1903, another notice was served upon the company, through its local agent, and the auditor entered taxes against such company for the years 1901, 1902 and 1903, in all the sum of $8,935.50. On April 2, 1904, the treasurer of Franklin County procured a warrant of distraint, and upon such warrant demanded of the superintendent of insurance and the state treasurer the United States bonds so substituted on April 2, 1903, for such municipal bonds, for the purpose of seizing and selling the same to satisfy the taxes which had been assessed against the company with respect to the municipal bonds for the years 1895 to 1903, inclusive. It is averred that to permit the collection of these taxes by suit for personal judgment or distraint will be violative of complainant's treaty rights as a subject of Great Britain, and will be taking complainant's property without due process of law, in violation of the Fourteenth Amendment to the Constitution of the United States.

The prayer of the bill is, that the defendant, the treasurer of Franklin County, be restrained from collecting or attempting to collect any of the taxes against the complainant personally; that the said treasurer be restrained from collecting or attempting to collect said taxes or any portion of them by distraint against either such bonds of the United States so deposited or any personal property of complainant which may now or hereafter be situated in the county of Franklin or the State of Ohio; that the defendants, the superintendent of insurance and treasurer of the State of Ohio, be enjoined from delivering or attempting to deliver said United States bonds or any part thereof to the said county treasurer, and for such other relief as equity and good conscience may require.

The respondents having interposed demurrers to the bill,

Argument for Insurance Company.

196 U. S.

the court held that the municipal bonds on deposit in Ohio were subject to taxation under the laws of the State; that there was no personal liability of the complainant on account of said taxes, and therefore a civil action to recover the taxes should be enjoined; that for the year 1903 the collection of taxes could not be enforced, as the United States bonds were substituted before the time for returning property for that year; that the bonds might be seized by distraint to satisfy the taxes levied upon the municipal securities for the years they were on deposit, and the court therefore refused to enjoin the execution of the distress warrant, except for the taxes and penalty for the year 1903, and rendered a decree enjoining the collection of the taxes by civil action.

Both parties appealed, the company from so much of the decree as permitted distraint of the United States securities for the collection of taxes levied with respect to the municipal bonds, the treasurer and auditor of Franklin County from so much of the decree as denies the right of the State to prosecute a civil action against the company to recover the taxes aforesaid, and from so much thereof as restrained the officials from attempting to collect the taxes assessed against the municipal bonds for the year 1903.

Mr. Judson Harmon and Mr. Hartwell Cabell, with whom Mr. W. O. Henderson was on the brief, for Scottish Union and National Insurance Company, appellant in No. 360 and appellee in No. 361:

The municipal bonds deposited with the superintendent of insurance by foreign insurance companies under the requirements of section 3660, Revised Statutes, Ohio, are not taxed by the laws of Ohio.

Under State Tax on Foreign Held Bonds Case, 15 Wall. 300; Walker v. Jack, 31 C. C. A. 462; New Orleans v. Stempel, 175 U. S. 309; Blackstone v. Miller, 188 U. S. 189, a State has the right to class municipal bonds as tangible personal property, and to tax them when found in the State, but the State of

196 U.S.

Argument for Insurance Company.

Ohio has elected to treat such securities, not as tangible property, but as a species of intangible property, depending for taxability, not upon the situs of the paper, but upon the situs of some person in Ohio sustaining a specified relation to the bonds; that as the constitution and statutes have been construed by the Supreme Court of Ohio, these requirements do not here exist.

Judge Lurton in West. Assurance Co. v. Halliday, 126 Fed. Rep. 257, which was a case similar to this, ignores the fact that the State has not by statute taxed such bonds. As such the decision was contrary to the decisions of the Supreme Court of Ohio, see Art. XII. Ohio Const. 1851; Lamb v. Lane, 8 Ohio St. 167; Chisholm v. Shields, 67 Ohio St. 374; §§ 27302735 and 2744-2746, Rev. Stat. Ohio; Exchange Bank v. Hines, 3 Ohio St. 1, 39; Worthington v. Sebastian, 25 Ohio St. 1, 8; Myers v. Seaberger, 45 Ohio St. 232; Lander v. Burke, 65 Ohio St. 532.

Credits as well as municipal or railroad bonds would fall within Judge Lurton's definition of personal property under his construction of the same section and could be taxed whenever the paper evidence is found in Ohio, although neither held nor owned by a person in the State, and contra this proposition see Brown v. Noble, 42 Ohio St. 405, 409; Sommers v. Boyd, 48 Ohio St. 648; Payne v. Watterson, 37 Ohio St. 121; Sims v. Best, 1 Ohio. Cir. Ct. Rep. (N. S.) 41; S. C., 25 Ohio Cir. Ct. Rep. 149; Heintz v. Cameron, 70 Ohio St. 491.

As to construction of a proviso such as that in § 21 of the act of 1852, now § 2745, see Dwarris on Statutes, 514; Minis v. United States, 15 Pet. 423, 445; In re Webb, 24 How. Pr. 247; Boon v. Joliet, 22 Illinois, 258; Walsh v. Van Horn, 22 Ill. App. 170.

As to how these bonds are held and whether any person in the State holds them in such capacity as would bring him within the law requiring their return for taxation or as to whether the superintendent of insurance is a trustee, see Myers v. Seaberger, 45 Ohio St. 232; Walker v. Jack, 79 Fed. Rep. 138;

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