Travelers' Insurance Company v. Connecticut

Section 2 of chapter 153 of the Public Acts of Connecticut, passed in 1897, reads as follows:

'The cashier or secretary of each corporation whose stock is liable to taxation, and not otherwise taxed by the provisions of this title, shall, on the 1st day of October, annually, or within ten days thereafter, deliver to the comptroller a sworn list of all its stockholders residing without this state on said day, and the number and market value of the shares of stock therein then belonging to each; and shall, on or before the 20th day of October, annually, pay to the state 1 1/2 per cent of such value; and if any such cashier or secretary shall neglect to comply with the provisions of this section he shall forfeit to the state $100, in addition to said 1 1/2 per cent so required to be paid.'

This method of assessment and taxation of nonresident stockholders in insurance corporations has been in force in Connecticut since 1866, although at first the rate of tax was only 1 per cent. Pub. Acts 1866, chap. 29.

By § 1 of chap. 50 of the Public Acts of 1899 it is provided:

'Section 1923 of the General Statutes is hereby amended to read as follows: When not otherwise provided in its charter, the stock of every corporation shall be personal property, and be transferred only on its books in such form as the directors shall prescribe; and such corporation shall at all times have a lien upon all the stock owned by any person therein, for all debts due to it from him; and any corporation desiring to enforce such lien may give notice to such stockholder, his executor or administrator, and if there be none, his heir at law, that unless he shall pay his indebtedness to said corporation within three months it will sell said stock; and such corporation may prescribe by its by-laws the manner of giving notice required by this section, but the notice of sale shall in no case be given until the liability has become fixed.'

The original section in the General Statutes, enacted in 1888, is precisely the same as the first half of the amended section, and secured to the corporation a lien upon the stock for debts due to it by the stockholder, the amendment consisting in the addition of the last half, which provides the method of enforcing such lien.

Section 3836 of the General Statutes, as amended by chapter 63 of the Public Acts of 1889, reads:

'Sec. 3836. Shares of the capital stock of any bank, national banking association, trust, insurance, turnpike, bridge, or plankroad company, owned by any resident of this state, shall be set in his list at its market value in the town in which he may reside; but so much of the capital of any such company as may be invested in real estate, on which it is assessed and pays a tax, shall be deducted from the market value of its stock, in its returns to the assessors.'

This action was commenced by the state of Connecticut to recover of the Travelers' Insurance Company, under the first of the statutes quoted, taxes due for the year 1898, from nonresident stockholders. The defendant answered, alleging that its capital stock consisted of 10,000 shares, of which 8,201 were owned by residents and 1,799 by nonresidents of the state; that it was the owner of a large amount of real estate on which it had been assessed and had paid a tax, and adding these averments:

'7. The market value of the stock of the defendant company on the 1st day of October, 1898, was $250 per share.

'8. All of the said resident owners of said stock were assessed upon the stock owned by them respectively on the 1st day of October, 1898, at an assessed valuation equal to the said market value of said stock less a large deduction therefrom by reason of the company's said investments in real estate.

'9. The amount per share sought to be collected from the defendant in this action as a tax upon the stock owned by said nonresident shareholders is far in excess of the amount per share paid and required to be paid as a tax by the several resident shareholders aforesaid on the stock owned by them on the said 1st day of October, 1898.'

A demurrer to this answer was sustained and judgment entered for the state, which was affirmed by the supreme court of the state (73 Conn. 255, 47 Atl. 299), and thereupon the case was brought here on error.

Messrs. William R. Matson and Lucius F. Robinson for plaintiff in error.

Mr. Charles Phelps for defendant in error.

Mr. Justice Brewer delivered the opinion of the court: