Case Name: The People of the State of New York ex rel. The Provident Savings Life Assurance Society, Appellant, v. Nathan L. Miller, as Comptroller of the State of New York, Respondent
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1904-10-18
Citations: 179 N.Y. 227
Docket Number: 
Parties: The People of the State of New York ex rel. The Provident Savings Life Assurance Society, Appellant, v. Nathan L. Miller, as Comptroller of the State of New York, Respondent.
Judges: 
Reporter: New York Reports
Volume: 179
Pages: 227–235

Head Matter:
The People of the State of New York ex rel. The Provident Savings Life Assurance Society, Appellant, v. Nathan L. Miller, as Comptroller of the State of New York, Respondent.
1. Tax—Franchise Tax Imposed upon Domestic Life Insurance Companies — L. 1901, Ch. 118, Not Retroactive. Section 187 of the Tax Law (L. 1896, ch. 908, amd. L. 1901, ch. 118), authorizing an annual tax upon the gross amount of premiums received during the preceding calendar year by every domestic insurance company, for the privilege of exercising corporate franchises and of carrying on business in this state, to be paid over before the first day of June in each year, is not retroactive, but prospective in its operation, and imposes a tax not upon premiums derived from contracts made prior to the time the statute took effect, but upon future business only.
3. Basis for Computation of Tax. The statute not going into effect until October 1, 1901, the provision therein that the tax should be based upon the amount of premiums received during the preceding calendar year must refer to the calendar year commencing January first thereafter, since if the year commencing with the preceding January was intended the law would be retroactive, the tax reacting during nine months when no law authorizing it was in existence.
People ex rel. Provident Savings Life Assur. Society v. Miller, 88 App. Div. 318, reversed.
(Argued April 27, 1904;
decided October 18, 1904.)
Appeal from an order of the Appellate Division of the Supreme Court in the. third judicial department, entered November 17, 1903, which confirmed a determination of the defendant denying the relator’s application for a revision and readjustment of an assessment for franchise taxes upon premiums collected during the year 1901.
The facts, so far as ■ material, are stated in the dissenting opinion.
Andrew Hamilton for appellant.
The tax should be laid only upon premiums received from policies issued during the calendar-year for which it is,imposed or first year premiums. All other premiums are collectible by virtue of the contracts of insurance of prior date and" are not dependent upon any franchise or privilege to do business. (People ex rel. v. Wemple, 129 N. Y. 558; Doyle v. C. Ins. Co., 94 U. S. 535; People v. H. Ins. Co., 92 N. Y. 344; 134 U. S. 594; A. E. Co. v. Ohio, 166 U. S. 224; M. S. Bank v. Rochester, 37 N. Y. 365; People v. S. L. Ins. Co., 78 N. Y. 114; Ins. Co. v. Statham, 93 U. S. 24; Ins. Co. v. Heidel, 8 Lea, 498; Judson on Taxation, § 175; State v. C. M. Ins. Co., 106 Tenn. 282; People ex rel. v. Roberts, 22 App. Div. 282; People ex rel. v. Roberts, 30 App. Div. 150; People ex rel. v. Roberts, 8 App. Div. 201.) The amendment is not retrospective and the franchise tax was not in force prior to the date that it was enacted, and the date when it went into effect. (Matter of Howe, 112 N. Y. 100; Rice v. Ruddiman, 10 Mich. 125; Matter of D. & H. Co., 129 N. Y. 105; Matter of Van Kleeck, 121 N. Y. 107; N. Y. & O. M. R. R. Co. v. Van Horn, 57 N. Y. 473; G. S. Bank v. Suspension Bridge, 159 N. Y. 369; Benton v. Wickwire, 54 N. Y. 229; Stone v. Bd. of Suprs., 166 N. Y. 91; People ex rel. v. Willis, 35 N. Y. S. R 180; C. T. Co. v. N. Y. C. R. R. Co., 15 N. Y. S. R 178; Clark v. Norton, 49 N. Y. 243.)
John Gunneen, Attorney-General {William - II. Wood on the brief), for respondent.
The comptroller rightly considered the amount of premiums received for the year 1901 in determining the tax. (H. Ins. Co. v. New York, 134 U. S. 594; 92 N. Y. 328; People ex rel. v. Miller, 85 App. Div. 211; Society for Savings v. Coite, 6 Wall. 59; Provident Inst. v. Mass., 6 Wall. 611; Hamilton County v. Mass., 6 Wall. 633.) The tax imposed by the law was riot retrospective. It was á tax for the privilege of future exercise of corporate functions measured by past realization of benefits. (People v. S. V. H. G. Co., 92 N. Y. 3S9.) In computing the tax it was proper to take the gross amount of premiums ‘received during the" preceding calendar year, without regard to when the policies were issued. (M. L. Ins. Co. v. Darenkamp, 66 S. W. Rep. 1125.)

Opinion:
O'Brien, J.
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 jiast transactions and pre-existing contracts. The statute designates the burden as one . " for the privilege of exercising corporate franchises," and, consequently, it can he 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 sovereign-ties. 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 he 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 con struction. 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, 111 N. Y. 1.) When a corporation merely does what it has the right to do without the consent of the state it is not in any legal or proper sense exercising a franchise, and hence past transactions are not within the scope of the statute, since effect can be given to all of its provisions by limiting its operations to future transactions.
(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, 177 N. Y. 51.) But by plain implication the legislature fixed that day three months after the law went into operation ; that is to say, on January 1st, 1902, since it provided for an annual tax calculated for the calendar year. The calendar year referred to in the statute must necessarily mean the first calendar year occurring after the law took effect; that is to say, the year 1902. The calendar year 1901 could not have been intended, since that would make the law retroactive — a construction that is always avoided, unless clearly expressed — and the tax would react on the privilege during nine months when no law for taxing the relator was in existence. The first calendar year, therefore, for which the tax was to be imposed was the year commencing January 1st, 1902. Thus construed the law is clear, natural and not violative of any principle of law or equity applicable to the exercise of the taxing power.
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.