Hartford Fire Ins. Co. v. Jordan

A rehearing was granted in this ease for consideration of the sole question of the personal liability of defendant Frank C. Jordan, against whom, as an individual, judgment was given. This question did not receive the attention it merited, the mind of the court being led away from a

As to the facts controlling this consideration it is to be noted that everything that Jordan did was in consonance with the language of the law of the state and was done in his ministerial official capacity. He certified the list of delinquent corporations to the governor as the state law in terms ordered him to do. The governor made his proclamation to the effect that the delinquent corporations would forfeit their right to do business in the state if their license-fees were not paid upon the date fixed by the statute. Jordan, as secretary of state, received the fees, as the law declared it his duty to do, which were paid under protest by plaintiff. Thus the duress on plaintiff was the duress of the law and not the duress of officers of the law. The fact that the money was paid to Jordan under protest enlarged neither his powers nor his liabilities. The law itself made plain the steps which he must take upon receipt of such moneys, whether paid under protest or not. It is the duty of all state officers to pay all moneys received by them in their official capacities into the state treasury. (Stats. 1906, p. 43.) They must make these payments monthly. It is the duty of the state treasurer to keep all moneys in the state treasury. (Pol. Code, sec. 452.) Once deposited in the state treasury funds can be taken therefrom only upon warrant of the state controller after audit by the state board of control. (Pol. Code, sec. 663 et Seq.) It is pleaded and admitted that Jordan so paid the money into the state treasury. He was not only under the mandate of our fiscal civil laws so to do, but he was equally under the strong compulsion of the penal laws, since by section 424 of the Penal Code, his willful omission or refusal to pay over the moneys to the treasurer would have been a felony, punish

There will be found in the earlier adjudications a strictness of accountability upon the part of public officers which has been greatly and justly abated. Thus in Elliott v. Swartwout, 10 Pet. 137 , [ 9 L. Ed. 373 ], it is said:

“The case put by the other point is where, at the time of payment, notice is given to the collector that the duties are charged too high and that party paying so paid to get possession of his goods, and accompanied by the declaration to the collector that he intended to sue him to recover back the amount erroneously paid, and notice given to him not to pay it over to the treasurer. This question must'be answered in the affirmative, unless the broad proposition can be maintained that no action will lie against the collector to recover back an excess of duties paid him, but that recourse must be had to their government for redress. Such principle would be carrying an exemption to a public officer beyond any protection sanctioned by the principles of law or sound public policy.”

Cary v. Curtis, 3 How. 236 , [ 11 L. Ed. 576 ], announces the same doctrine touching the responsibility of the agent where protest has been made at the time of payment, and Justice Story, in the course of his dissenting opinion in that case speaks as follows:

“Hence it is a doctrine of common law (so far as my researches extend) absolutely universal, that if a man, by fraud, or wrong, or illegality, obtains or exacts, or retains money justly belonging to another, with notice that the latter contests the right of the former to receive, or exact, or retain it, an action for money had and received lies to recover it back; and it is no answer for the wrongdoer to say that he has paid it over to his superior; for, although as between the wrongdoer and his superior, the maxim may well apply, respondeat superior, yet the injured party is not bound to seek redress in that direction; and, a fortiori, he is not so bound, where, as in the case of the government, the superior is not suable. That would be a mere mockery of justice.”

This action was brought by plaintiff in its own behalf, and as assignee of several other fire insurance companies, to recover certain moneys paid by them under protest as a state license-tax on fire insurance corporations for the fiscal year commencing July 1, 1911.

The license-tax in question is provided for under an act of the legislature entitled “An act relating to revenue and taxation providing”for a license-tax upon corporations and making a provision for the purpose of carrying out the objects of this act,” approved March 20, 1905 (Stats. 1905, p. 493), and amendments thereto.

This act, in as far as material to the questions presented here, and as it stood when the license-tax involved was paid, provides that every domestic corporation and every foreign corporation doing business in this state must procure from the secretary of state a license authorizing it to do so and pay a license-tax therefor, the amount of tax being based on the authorized capital stock of the corporation; makes the tax payable to the secretary of state on July 1st of each year and a delinquency of the corporation therefor if the tax is not paid by September 1st thereof. The act then provides for a 'report to the governor of the state by the secretary of state before the fifteenth day of September of each year of a list of delinquent corporations and the issuance forthwith by the governor of a proclamation declaring under the act “that the charters of such delinquent domestic corporations will be forfeited, and the right of such foreign corporations to do business in the state shall be forfeited” unless payment of the license-tax is made to the secretary of state on or before 4 o’clock of November 30th following. Provision is then made for the immediate filing of this proclamation of the governor in the office of the secretary of state; that said secretary shall immediately publish it, and that at the hour and date specified in the proclamation the charters of all domestic corporations which have failed to pay said license-tax shall be forfeited to the state and the right of all delinquent foreign corporations to do business in the state which have failed so to pay shall be' likewise forfeited. The secretary of state is required to make out and transmit to each county clerk in the state, to be filed in his office, a list of such domestic and for

Subsequent to the passage of the act and its amendments and in November, 1910, section 14 of article XIII of the constitution of this state was ratified.

That section as far as applicable here provides that:

“Sec. 14. Taxes levied, assessed and collected as hereinafter provided upon . . . telephone companies, . . . insurance companies, . . . and taxes upon all franchises of every kind and nature, shall be entirely and exclusively for state purposes, and shall be levied, assessed and collected in the manner hereinafter provided. . . .

“(b) Every insurance company or association doing business in this state shall annually pay to the state a tax of one and one-half per cent upon the amount of the gross premiums received upon its business done in this state, less return premiums and reinsurance in companies or associations authorized to do business in this state. . . . This tax shall be in lieu of all other taxes and licenses, state, county and municipal, upon the property of such companies. ...”

The principal question on this appeal, though others are involved, is whether the constitutional provision quoted superseded the state corporation License Tax Act and thus exempted the plaintiff and its assignors from the payment of such tax.

The complaint alleged that plaintiff and its assignors are foreign fire insurance companies and were on July 1, 1911, each doing business in the state under certificates of authority regularly issued to them pursuant to law by the insurance

The complaint as originally filed was against Jordan and Roberts in their official capacities only. Subsequently plaintiff by leave of court was allowed to amend the complaint by including said Jordan and Roberts in the title as defendants individually, and to amend the prayer by asking judgment also against them as individuals.

All the allegations of the complaint were admitted except the allegation that the money was paid involuntarily under a threat of forfeiture.

Several grounds are urged for a reversal but the three main propositions upon which this is sought need only be considered.

Defendants first contend that the superior court had no jurisdiction to entertain this action. In that regard it is insisted that this is an action against the defendants as state officers in which judgment is sought against them in their official capacities; that while not nominally a suit against the state, in legal effect it is such and cannot be maintained under the principle that the state cannot be sued without its consent and there is no law under which consent to do so has been granted.

But we do not perceive that this point is involved on this appeal. The action was originally brought against Jordan and Roberts in their official capacities. It was amended so as to make them also defendants individually. During the trial the motion of defendants for a nonsuit in favor of Roberts as defendant officially and individually, was granted, and eliminated him entirely from the case. There was no judgment against Jordan in his official capacity but solely against him individually. While it is true this appeal purports to be taken by both defendants in the official capacity in which they were sued, as there was no judgment against either of them in that capacity, they had no right of appeal as such and there is therefore nothing in the case under which the question of the jurisdiction of the court attempted to be raised by them can be considered.

It is next insisted that the license-tax was voluntarily paid and hence cannot be recovered back.

The general rule for determining whether a payment illegally exacted is voluntary or involuntary, is well settled and its discussion is not necessary here because attention will be presently called to cases where under conditions similar to those shown here, if the payments herein named were illegally exacted they were made involuntarily and may be recovered back.

This precise question has arisen in eases where the tax was exacted under the provisions of acts, in the main, similar to ours, and some less drastic in their provisions, and where it was held that the payments made were involuntary and could be recovered back.

In Atchison T. & 8. F. Rey. Co. v. O’Connor, 223 U. S. 280 , [Ann. Cas. 1913C, 1050, 56 L. Ed, 436 , 32 Sup Ct. Rep. 216 ], the action was to recover back a tax of two per cent on the capital stock imposed by an act of the state of Colorado. The plaintiff was a Kansas corporation. As to the tax the Colorado law gave an action for debt to the state and provided that every corporation failing to pay the tax should forfeit its right to do business in the state until the tax was paid, with certain penalties as long as its payment remained in default. Plaintiff paid the tax under protest that the act was unconstitutional as levying a tax on interstate commerce. The supreme court declared: ‘ ‘ The defendant did not argue that the tax could be maintained, but contended only that the payment was voluntary. ... It is reasonable that a man who denies the legality of a tax should have a clear and certain remedy. ... Of course, we are speaking of those cases where the state is not put to an action if the citizen refuses to pay. In these latter he can interpose his objection by way of defense, but when, as is common, the state has a more summary remedy such as distress and the party indicates by protest that he is yielding to what he cannot prevent, courts

Gaar, Scott & Co. v. Shannon, 223 U. S. 468 , [ 56 L. Ed. 510 , 32 Sup. Ct. Rep. 236 ], was also an action to recover back money paid as a tax under protest. An act of the state of Texas required foreign insurance companies doing business in Texas to pay a certain franchise tax measured by their capital stock and provided that if by a given date payment was not made, a percentage penalty would be incurred, and that if the tax was not paid by a still further date the permit of such company to do business in the state would be forfeited “without judicial ascertainment” and the company de

Scottish Union Ins. Co. v. Herriott, 109 Iowa, 606 , [ 77 Am. St. Rep. 548 , 80 N. W. 665 ], presents a case practically identical with the one at bar. A law of Iowa provided that foreign and domestic insurance companies on filing their annual statements should pay to the treasurer of the state as taxes a certain percentage tax (different as between foreign and domestic companies) on the gross amount of premiums received by them during the preceding year, taking a receipt therefor to be filed with the auditor of the state, who should not, until such filing, issue the annual certificate as provided by law authorizing the corporations to do business in the state. Upon failing to make payment of the taxes imposed when plaintiff filed its annual statement it was notified by the auditor that if the amount was not paid, action would be taken to collect the tax by distress or suit, and that the company would be precluded from doing business in the state. The plaintiff then paid the tax to the state under protest and subsequently sued to recover it back. It was claimed that the payment was voluntary. The court said: “Again it is said that the money was paid voluntarily and cannot be recovered

We refer to and quote from these eases because of their practical identity with- the case at bar. Cases other than those cited supporting the proposition that payment made under similar conditions to those here are involuntary and may be recovered back are Swift etc. Co. v. United States, 111 U. S. 29 , [28-L. Ed. 341, 4 Sup. Ct. Rep. 244 ]; Western Union etc. Co. v. Mayer, 28 Ohio St. 521 , and our own cases of Lewis v. San Francisco, 2 Cal. App. 112 , [ 82 Pac. 1106 ], and Trower v. San Francisco, 152 Cal. 479 , [ 15 L. R. A. (N. S.) 183 , 92 Pac. 1025 ],

It is next insisted by appellant that insurance companies are not exempt under the constitutional provision relied -on by respondent from the payment of the corporation license-tax exacted by the act. Appellant insists that it is matter of grave doubt whether the constitutional provision was intended to have this effect, and, hence, the rule of strict construction against the exemption of property from taxes should be applied ; that the provision contains no express exemption respecting a “license-tax” or “corporation license-tax” and that these terms should not be read into it. Along the same line it is insisted that as the only exemption proceeding from

These are the only points made by appellant against the exemption of such companies from the payment of the state license-tax by virtue of the terms of the constitutional provision.

An extended discussion of these points is rendered unnecessary by the decision of this court in San Francisco v. Pacific Tel. & Tel. Co., 166 Cal. 244 , [ 135 Pac. 971 ], rendered since the appeal in this case was submitted.

That action was brought to recover a license fee or tax imposed by an ordinance of the city and county of San Francisco enacted prior to the adoption of section 14 of article XIII of the constitution. The claim of defendant was that under such constitutional provision it was exempted from liability for such license charge. The trial court so held and that ruling was sustained here upon a full consideration of the subject.

In applying the reasoning of the court in that case to the contention of’ appellants in this, it is to be observed that though in the case referred to, a license-tax imposed on a telephone company under a municipal ordinance was involved, and here an act of the legislature imposing a state license-tax on insurance companies is under consideration, the same constitutional provision applies to both these classes of corporations. Both telephone and insurance companies are enumerated as among the persons and corporations to be taxed. By the constitutional provision “a tax upon all franchises of any kind or nature shall be entirely and exclusively for state purposes and shall be assessed and collected in the manner hereinafter provided.” The manner provided is that taxes in the case of telephone corporations (and other corporations enumerated) shall be a specific percentage upon the gross

In the case cited the court stated the claims of the respective parties on the appeal; that of the appellant being “that the constitutional provision relieves the companies named (telephone companies) from no burden except that of taxes upon the property theretofore enumerated and that the charge imposed by the ordinance is a business or occupation tax and not a tax upon, property at all, and therefore not covered by the so-called exemption.”

This is the identical point made by appellants here under their claim that the exemption being from “taxes” and “licenses upon the property of the company,” the word “licenses” should, under the rule of strict construction of provisions under which exemption from taxes is claimed, be given the same meaning as taxes.

Defining the position of respondent in the cited case, the court said: “The respondent, on the other hand, claims that under a fair reading of the constitutional amendment the liability of a telephone company to pay a percentage of its gross receipts was designed to exclude the power of the state or any county or municipality to exact from it any further revenue . . . whether by way of a direct tax upon its property, or in the guise of a license-fee upon its business.”

This is the position of the present respondent. Hence the claims of the respective parties here as to the construction to be given the constitutional provision are the same as with those made by the respective parties there. In disposing of the contention of the appellant in the cited case this court, after discussing the point made as to the rule of strict construction to be applied to provisions exempting from taxation and holding that the constitutional provision was to be interpreted upon a full consideration of all its terms, said: “Giving then, a fair and reasonable interpretation to the constitutional provision, we think the charge imposed by the ordinance of the city and county was within the class of taxes and licenses from the imposition of which the respondent was relieved by the amendment. It is true that a license-tax upon an occupation

We do not think in view of this decision just quoted, that further discussion on this branch of this appeal is necessary. The right of insurance companies, whether domestic or for

The judgment appealed from is therefore reversed.