State v. Equitable Life Assurance Society of the United States ( 1938 )

The district court held that annuity considerations were taxable and judgment was rendered accordingly. I favor affirmance.

The defendant is a foreign corporation, organized as a life insurance company. Since 1926 it has been doing business in this state, to wit: issuing policies of insurance and annuity contracts. During the years of 1926 to 1935, the defendant received $2,740,570.07 from the sale of annuity contracts in North Dakota. For the privilege of doing this annuity business, the defendant has not paid any taxes whatsoever. In this action the State of North Dakota seeks to recover the franchise tax of two and one-half per cent upon said sum of annuity considerations, pursuant to the provisions of § 4924, 1925 Supplement to the 1913 Comp. Laws (being Comp. Laws of 1913, § 4924, as amended, without substantial change, by Laws of 1921, chapter 79).

The defendant has paid the franchise tax imposed by § 4924, supra, upon all premiums for life insurance contracts issued in this state; but the defendant has paid no tax of any nature upon the considerations received for annuity contracts issued in this state. Such annuity contracts were in a variety of forms and were represented by specimen copies, which are stipulated in evidence as Exhibits 1 to 57. In each of these forms of annuity contracts the consideration therefor is expressly referred to as a "premium." Some of the annuity contracts call for a "single premium" and others provide for the payment of an "annual premium."

Each year, the defendant filed with the Commissioner of Insurance an "Annual Statement," in each of which there appears a statement of total income wherein the total annuity business, throughout the United States and elsewhere, is reported (but without disclosing whether or not any part thereof was done in North Dakota). In such report of total income there appears a sub-title of "Total Gross Premiums," under which the amounts received from annuity contracts, as well as policies of life insurance, are classified as premiums.

(In my opinion, these annual statements should be made a part of the record on appeal, and, at conference I expressed the opinion that the case should be remanded, pursuant to chapter 214, Laws 1927, for that purpose. However, the other members of this Court intimated that the introduction of these annual reports into the record would not change their opinion even though it is disclosed therein that annuity considerations are classified as premiums.)

In my opinion, considerations received for life annuities issued in this state by a foreign life insurance company are taxable under the provisions of § 4924, supra. This conclusion is based upon three premises:

I. A franchise tax is imposed upon the gross amount of premiums received upon "business done" in this state by a foreign life insurance company. Section 4924, supra; Northwestern Mut. L. Ins. Co. v. Murphy (1937) ___ Iowa, ___, 271 N.W. 899, 109 A.L.R. 1054.

II. The sale of annuity contracts is a part of the business done by a life insurance company. (§ 4836, 1925 Supplement to the 1913 Comp. Laws, being Comp. Laws 1913, § 4836, as amended by Laws 1917, chapter 140; Northwestern Mut. L. Ins. Co. v. Murphy, supra; Mutual Ben. L. Ins. Co. v. Com. (1917) 227 Mass. 63, 116 N.E. 469, cited in note 19 of 63 A.L.R. 720, and cited with approval in said Iowa case at page 903 of 271 N.W. and pages 1059 and 1060 of 109 A.L.R. See the dissenting opinion of two justices and the concurring opinion of a third justice of the Appellate Division of the Supreme Court in People ex rel. Metropolitan L. Ins. Co. v. Knapp (1920) 193 A.D. 413, 184 N.Y.S. 345, affirmed without opinion in (1921) 231 N.Y. 630, 132 N.E. 916, and discussed in the annotations in 63 A.L.R. at 719 and 109 A.L.R. at 1061.

III. According to the approved usage of the word "premiums," annuity considerations are regarded as "premiums" within the meaning of the taxing statute. Section 4924, supra; Northwestern Mut. L. Ins. Co. v. Murphy, supra; dissenting and concurring opinions of three of the five justices in People ex rel. Metropolitan L. Ins. Co. v. Knapp, supra.

I. Section 4924 imposes a tax upon "business done." Comp. Laws 1913, § 4924, provides that: "Every (foreign) insurance company doing business in this state . . . shall at the time of making the annual statement of business done, as required by law, pay to the commissioner of insurance two and one-half per cent of the gross amount of premiums received in this state during the preceding year. Upon payment of such sum the commissioner of insurance shall issue the annual certificates provided by law."

Section 4924 imposes a tax upon "premiums received." "Premiums received" on what? On policies of insurance alone? No. It is a statute of general application. It neither expressly includes policies of insurance nor expressly excludes annuity contracts. The words "premiums received" are a part of the same sentence wherein the Legislature is speaking of the subject of "doing business in the state" and "business done." "Words and phrases are construed according to the context. . . ." Comp. Laws 1913, § 7325. Thus, according to the context, the words "premiums received" refer back to the subject of "doing business" and "business done."

Section 4924 refers to the "annual statement of business done." Such a statement of "business done" is required by Comp. Laws 1913, § 4915, which provides, in part, that "Every insurance company doing business in this state must transmit to the commissioner of insurance a statement of its condition and business for the year . . . ." (My italics.) The requirements of such an annual statement of business done, are set forth in Comp. Laws 1913, § 4916, which requires such a statement to "state particulars as follows: . . . 5. The income of the company during the preceding year, . . ." (My italics.)

In addition to the requirements of §§ 4915 and 4916, which apply to all insurance companies alike, Comp. Laws 1913, § 4931 further requires that ". . . every annual report of every life insurance company doing business in this state, shall contain an accurate, concise and complete statement of the following matters, to wit: . . .

"11. A complete statement of the profits and losses upon thebusiness transacted during the year . . ." (My italics.)

Thus, reading § 4924 in the light of §§ 4915, 4916, and 4931, we see that the annual statement of a life insurance company must contain a complete report of the "business" done in this state including a report of the "income" therefrom.

The nature, object and purpose of the tax is disclosed in the last sentence of § 4924, which reads: "Upon payment of such sum the commissioner of insurance shall issue the annual certificates provided by law. Such provision "makes the tax a franchise or privilege tax." Continental Ins. Co. v. Smrha (1936)131 Neb. 791, 270 N.W. 122 at 125. The object and purpose of the tax is to impose a tax upon business done in this state by foreign insurance companies, which otherwise would pay no taxes whatsoever for the privilege of doing business in this state.

In Northwestern Mut. L. Ins. Co. v. Murphy, supra, the Iowa court, construing a taxing statute similar to our § 4924, said at page 901 of 271 N.W. and at page 1058 of 109 A.L.R.: "The tax imposed by § 7022 partakes of the nature of a tax on business and of a license tax or condition required of corporations to enable them to continue business in this state. It is not a property tax. Scottish U. Nat. Ins. Co. v. Herriott, 109 Iowa, 606, 80 N.W. 665, 77 Am. St. Rep. 548. As a prerequisite to transacting business in Iowa in 1934, plaintiff was required to pay as taxes a certain percentage of the gross amount of premiums received by it for business done in this state."

The primary purpose of § 4924 is to raise revenue. It is based on the theory that a foreign insurance company, permitted to come into the state, should contribute to the public revenue in proportion to the benefits actually received. See Continental Ins. Co. v. Smrha, supra, 131 Neb. 791, at page 126 of 270 N.W. The taxes are upon the privilege of carrying on business in a corporate capacity in this state. The amount received from that business is the basis upon which the state reckons its compensation for the permission and protection given.

Therefore, giving a literal interpretation to the language of § 4924, in the light of the nature, object and purpose of such statute, we see that § 4924 imposes a tax upon the gross amount of premiums received from "business done" in this state by foreign insurance companies.

II. Section 4836 makes the sale of annuity contracts a part of the business done. Since an annuity contract is not strictly a contract of life insurance and inasmuch as the defendant is a foreign insurance corporation, was it authorized to sell annuity contracts in North Dakota? It did hold the certificates as required by § 4924, but such statute does not enumerate the kinds of business which may be carried on by insurance companies.

The defendant agrees that it was authorized to sell annuity contracts in this state; and the majority opinion herein concedes that § 4836, supra, vests "insurance companies with the power to engage in the business of granting, purchasing and paying of annuities."

Section 4836, supra (providing for the incorporation of insurance companies and enumerating the purposes for which they may be formed), authorizes insurance corporations ". . . to carry on the business of insurance, . . . including the granting, purchasing and paying of annuities. . . ."

Section 4836 discloses the legislative intention of including the sale of annuity contracts as a part of the "business" done by an insurance corporation, and this statutory authorization is applicable to foreign life insurance companies such as the defendant. This interpretation of such a statute is supported by the decision of Northwestern Mut. L. Ins. Co. v. Murphy, supra, wherein the Iowa tax statute, § 7022, Code of 1931, provided that every foreign insurance company ". . . shall, at the time of making the annual statements as required by law, pay into the state treasury as taxes two and one-half per cent of the gross amount of premiums received by it for business done in this state, . . ." (This statute is similar to our § 4924.)

Another Iowa statute, enacted in 1933, provided that "Any life insurance company organized on the stock or mutual plan may grant and sell annuities."

Construing that latter statute, which is like our § 4836, the Iowa Supreme Court said at page 902 of 271 N.W. and at page 1058 of 109 A.L.R.: "That these words ``business done in this state' were inclusive of the granting and selling of annuities was made definitely certain by legislative enactment prior to the year 1934. That is, the Legislature had identified the granting and selling of annuities as a part of the business permitted and anticipated to be done in this state by insurance companies in the enjoyment of their business licenses."

The Iowa court cites with approval the "somewhat analogous case" of Mutual Ben. L. Ins. Co. v. Com. (1917) 227 Mass. 63, 116 N.E. 469, supra, wherein the petitioner, a foreign life insurance corporation, was engaged in the two types of business, insurance and annuities. It was conceded by the Massachusetts court that a contract for an annuity is not strictly a contract of life insurance. See 63 A.L.R. 720, note 19. Such Massachusetts decision holds that although an annuity contract is not strictly a contract of life insurance, nevertheless the issuing of annuity contracts is a part of the "business of life insurance." The petitioner brought that action for the abatement and refund of a tax paid, under protest, upon annuity contracts. The statute under construction (hereafter referred to as "§ 26, as amended") provided that a foreign insurance company engaged in the business of life insurance within this Commonwealth shall annually pay an excise tax of one quarter of one per cent upon the net value of all policies in force . . . (and) . . . every company . . . shall annually . . . make a return to the tax commissioner . . . giving . . . the total number of policies in force . . . (and) . . . details relating to each policy of ordinary business in force . . ." Another Massachusetts statute, referred to as § 66 of the Statutes of 1907, chapter 576, provided that: "All corporations . . . doing business in this Commonwealth . . . conditioned upon the continuance or cessation of human life, or involving an insurance guaranty, contract or pledge for the payment of endowments or annuities, shall be deemed to be life insurance companies . . ."

Construing these statutes, the Massachusetts decision reads at page 65 of 227 Mass. and at page 470 of 116 N.E.: "And the conclusion is irresistible that if the petitioner had issued only contracts for the payment of annuities, it must be deemed to be a life insurance company. If so it would be accurately described as in ``the business of life insurance.' It is none the less so engaged because it also issues policies of life insurance. The words ``the business of life insurance,' ``all policies in force,' ``total number of policies in force,' ``ordinary business,' ``each policy of ordinary business,' and ``the amount insured and the net value' found in § 26, as amended, are consequently to be read in connection with the spirit and purpose of § 66 of the Stat. of 1907, chap. 576. While language more technically appropriate might have been used, the business of issuing contracts for annuities is under the statute ``the business of life insurance,' and if the word ``policy' ordinarily imports that at death a certain sum will be payable by the insurer, yet a ``policy' is a contract, and ``each policy of ordinary business' where the insurer engages solely in providing such security would cover the business of issuing contracts of annuity."

In the New York case of People ex rel. Metropolitan L. Ins. Co. v. Knapp (1920) supra, in a dissenting opinion, two of the five justices, construing two New York statutes similar to our §§ 4836 and 4924, said at pages 419 and 420 of 193 App. Div. (184 N.Y.S. 345): ". . . the Legislature has considered the granting of annuities to be a part of the life insurance business. . . . We must consider that the Legislature intended to impose an equal tax upon all corporations engaged in the insurance business. There is no reason why a life insurance company, which has the power as such to grant annuities, should escape taxation on account of the annuities when it is taxed on account of the life insurance. The act should be construed in a manner which will make it reasonable and just and in a way not to do violence to the legislative intent. . . . The payments to be made by the company (upon an annuity contract) depend upon the life of the person making the payment, or the annuitant mentioned, so that the payment in either case (either an insurance policy or an annuity contract) depends upon a human life. The company, in either case, for a consideration, agrees to make certain payments during the life, or at the end of life. The risks are substantially alike, but the manner in which the company computes and pays the value of its contract is arrived at in different ways. In effect, under the law, an insurance company is a savings institution which uses the trust funds committed to it for the payment of the life policy to the insured or for the life annuity to the annuitant. In either case it is paid for the life risk. The Legislature, with reason, considered the business of granting annuities as a life insurance business and the consideration for it a premium."

In such New York case, a third justice held in a similar vein.

In my opinion, the foregoing authorities support my interpretation of § 4836, namely, that § 4836 makes the issuing of annuity contracts a part of the business done by an insurance company.

III. Annuity considerations are "premiums" within the meaning of the taxing statute, § 4924. A. Construed in the light of § 4836, the taxing statute, § 4924, imposes a tax upon premiums received from annuity contracts.

It appears from what has been said above that § 4924 imposes a tax upon "business done;" and that § 4836 makes annuity contracts a part of the business done; and thus, construed in the light of § 4836, § 4924 imposes a tax upon premiums received on annuity contracts. This being so, the words "premiums received" must necessarily refer to the considerations received on annuity contracts.

Such an interpretation of the word "premiums" is in harmony with the approved trade usage, that is to say, life insurance companies engaged in the annuity business customarily refer to annuity considerations as "premiums" in their annual statements and in the annuity contracts themselves. But before showing that such approved usage exists, I shall refer to some matters found in the majority opinion herein.

(III) B. Foreign Decisions. Admittedly, the tax imposed by § 4924 is applicable to premiums received on policies of life insurance; and the defendant herein has paid the tax on such premiums. Here the question is whether such franchise tax is applicable to the considerations received for annuity contracts.

Are the considerations paid for annuity contracts to be regarded as "premiums on policies of insurance"? No, for the reason that an annuity contract is not a policy of insurance. This was the situation in Daniel v. Life Ins. Co. (Tex. Civ. App.) 102 S.W.2d 256 (cited in the annotation in 109 A.L.R. 1060 at 1061, and cited in the majority opinion herein). There the taxing statute, by express limitation, was applicable only to "premiums . . . on policies of insurance." The Texas statute is different from our taxing statute, § 4924. The Texas statute is, by express limitation, applicable only to premiums received "on policies of insurance;" while our § 4924 contains no such express limitation, and is expressly applicable to premiums received upon "business done." Thus, because of this difference in statutes, the Texas case is not in point in the matter of interpreting a statute of the type of our § 4924.

At the outset, the majority opinion herein attacks the problem of whether or not the determinable "premiums" (in § 4924) includes the determinate "annuity considerations;" and the conclusion reached by the majority is that an annuity consideration is not a premium; that the word "premiums" includes only the considerations paid for policies of insurance. In support of such holding the majority opinion cites the Texas case, supra, which is not in point; and two decisions of Pennsylvania (1916) and New York (1920). It is stated in the annotation at 109 A.L.R. 1060 that these three decisions, together with the Iowa case of Northwestern Mut. L. Ins. Co. v. Murphy, ___ Iowa, ___, 271 N.W. 899, 109 A.L.R. 1054, supra, "are the only cases which have been found touching the point" of "whether the word ``premium' in a taxing statute may include money paid for annuity contracts."

Wherein do I differ from the majority opinion herein and its two supporting decisions of Pennsylvania and New York? In my estimation the majority opinion herein and such two decisions are based upon a false premise, to-wit: the premise that an annuity consideration is not a premium.

Generally speaking, the reasoning of the majority opinion and its two supporting decisions is somewhat as follows:

"Annuity considerations are not premiums; only the considerations received on policies of insurance are premiums. (false premise)

"Annuity contracts are not policies of insurance. (true premise)

"Conclusion: Therefore annuity considerations are not taxable. (logical conclusion from false premise; result erroneous).

The Pennsylvania case (1916) is Com. v. Metropolitan L. Ins. Co. 254 Pa. 510, 98 A. 1072, holding that annuity considerations were not taxable under a statute imposing a franchise tax upon premiums received. Such Pennsylvania case asserts its "false premise" in a somewhat qualified manner at page 514 of 254 Pa.: "The consideration for an annuity contract is not generally regarded as a premium. . . ."

This statement is the only thing that appears in the body of the Pennsylvania opinion upon the vital issue of whether or not an annuity consideration is a premium. No authorities are cited and no reasons are given. The only authority is the court's own statement to that effect: like Atlas supporting the world, and the world supporting Atlas.

The New York case (1920) is People ex rel. Metropolitan L. Ins. Co. v. Knapp, 193 A.D. 413, 184 N.Y.S. 345, affirmed without opinion in 231 N.Y. 630, 132 N.E. 916, supra. It cites the Pennsylvania case as its only authority. Only two of the five justices of the Appellate Division held that annuity considerations are not premiums; the other three justices held that annuity considerations were premiums within the meaning of the taxing statute (although one of the three concurred specially on a ground that we are not here concerned with).

Concerning such New York decision, the following comment appears in the annotation in 109 A.L.R. 1060 at 1061: "Two dissenting justices, however, took the view that the Legislature had considered the granting of annuities to be part of the life insurance business, and said that there was no reason why a life insurance company, which had the power as such to grant annuities, should escape taxation on account of the annuities, when it was taxed on account of the life insurance, and that ``the Legislature, with reason, considered the business of granting annuities as a life insurance business, and the consideration for it a premium,' and concluded that ``the word "premium," when we know the legislative intent from the general purport of the law, may as well cover a payment for a life annuity policy as for a life policy.' And another justice, who concurred in the result, stated that it seemed to him that the Legislature must have understood that the word ``premiums' covered the income from the sale of annuities; otherwise that branch of the business would have been specifically exempted from the provisions of the taxing statute."

Northwestern Mut. L. Ins. Co. v. Murphy, 223 Iowa, 333, 271 N.W. 899, 109 A.L.R. 1054, supra, is the most recent decision, being decided in March, 1937, all eight of the justices concurring. The Iowa court criticizes and distinguishes the Pennsylvania and New York decisions and refuses to follow those decisions.

(III) C. "Annuity companies." The majority opinion herein reads: "The Legislature did in 1891 authorize the incorporation of insurance companies with the power to engage in the business of granting, purchasing and paying of annuities. And in 1897 (chapter 143, Sess. Laws 1897, now § 5205, Comp. Laws 1913, supra) the Legislature authorized the incorporation of annuity companies. There is, however, no statute requiring that annuity companies shall pay a tax on premiums received similar to that imposed on insurance companies under the provisions of § 4924."

Yes, it would be unfair if the Legislature has imposed a tax upon annuity considerations received by foreign insurance companies, under the provisions of § 4924; while, at the same time, it has not imposed any such tax upon annuity considerations received by foreign "annuity companies." But the implication that foreign "annuity companies" are authorized to engage in the business of granting and selling life annuities in this state, is erroneous. In fact, it is erroneous to assume that domestic "annuity companies" are authorized to engage in the annuity business. (Of course, even though domestic "annuity companies" were authorized to engage in the annuity business and to receive annuity considerations tax free, this would not be unfair todomestic insurance companies engaged in the annuity business for the reason that § 4924 applies only to foreign insurance corporations.)

Chapter 31 of the Civil Code provides for the "organization and management of annuity, safe deposit and trust companies," which are commonly referred to as "trust companies" but which are seldom, if ever, referred to as "annuity companies." Chapter 31 comprises Comp. Laws 1913, §§ 5205 to 5220, inclusive. Paragraph 2 of § 5210 provides, in effect, that such companies may take and hold "any real estate or personal property upon trust . . . and to execute and perform any and all such legal and lawful trusts in regard to the same upon the terms . . . imposed" by the trust instrument, which may be in the form of a deed, will, decree, or contract. It is pursuant to this corporate power that trust companies become authorized to pay charges on land and annuities. However, such companies are not authorized to grant and sell life annuities; but, rather, such an annuity is created by the trust instrument whereby such a company becomes a trustee for the disbursement of the annuity to the beneficiaries of the trust. Consequently, such companies would pay no tax upon an annuity business for the simple reason that they are not authorized to engage in the annuity business, in the sense that we are concerned with annuities in this case.

"We are not here concerned with annuities created by deed or will, which are of ancient origin. The granting of annuities by corporations upon consideration paid is a more recent practice. It appears to have been engaged in first by insurance companies to which it is largely confined at the present day." Daniel v. Life Ins. Co. (Tex. Civ. App.) 102 S.W.2d at 260, supra.

Same as the above type of argument is that resorted to by the State, plaintiff herein: why would the Legislature tax the sale of insurance contracts and not tax the sale of annuities? If we agree that § 4924 imposes a franchise tax on the privilege of doing business in this state, then on what basis can we reconcile a holding which would tax a foreign insurance company which does an insurance contract business in this state, and on the other hand, does not impose even a single penny of tax upon a large annuity business done in this state by another foreign insurance company? In the same vein is the comment appearing in the annotation in 109 A.L.R. 1060 at 1061, wherein the New York case of People ex rel. Metropolitan L. Ins. Co. v. Knapp, supra (cited in the majority opinion herein) was commented on as follows: "Two dissenting justices . . . said that there was no reason why a life insurance company, which had the power as such to grant annuities, should escape taxation on account of the annuities, when it was taxed on account of the life insurance, . . ."

In Northwestern Mut. L. Ins. Co. v. Murphy, 223 Iowa, 333, 271 N.W. at 902, 109 A.L.R. at 1058, supra, we find this criticism of such a result as is reached by the majority opinion herein and its two supporting decisions: "It would cause the result that if a foreign insurance company engaged only in the annuity business, it would not only be exempt from taxes, but would become a source of loss to the state to the extent of the expense of its supervision."

(III) D. The "annual statement" statutes 4915, 4916 and 4931. Above, we discussed these three statutes and found (interpreting § 4924 in the light of their provisions) that the annual report of a life insurance company must contain a complete report of the "business" done in this state including a report of the "income" therefrom.

The majority opinion, after setting forth the provisions of § 4916, makes this comment thereon: that no reference is made to annuities or premiums received for annuities; that § 4916, as well as § 4924, was originally enacted prior to the original enactment of § 4836 (which authorizes the doing of an annuity business); that therefore annuities were not within the contemplation of the Legislature when §§ 4916 and 4924 were enacted.

Section 4916 provides that the annual statement must state:

"5. The income of the company during the preceding year, specifying: (a) . . . (b) The whole amount of cash premiums received, stating separately the amount of premiums received on policies written in the state. . . ."

Section 4916 is a statute of general application. It does not expressly refer to and include policies of insurance and it does not expressly exclude annuity contracts. There is no express inclusion of the one or express exception of the other. The same is true as to the provisions of § 4931, supra.

The word "policies" in 5(b) of § 4916 may include annuity contracts as well as insurance contracts. The Massachusetts court in Mutual Ben. L. Ins. Co. v. Com. supra, expressly held that the word "policy" includes an annuity contract. Thus, in 227 Mass. at 65, and 116 N.E. at 470, we find this: "While language more technically appropriate might have been used, the business of issuing contracts for annuities is under the statute ``the business of life insurance,' and if the word ``policy' ordinarily imports that at death a certain sum will be payable by the insurer, yet a ``policy' is a contract, and ``each policy of ordinary business' where the insurer engages solely in providing such security would cover the business of issuing contracts of annuity."

Returning to the reasoning of the majority opinion: that since §§ 4924 and 4916 were originally enacted in 1885 and that since it was not until six years later, in 1891, that § 4836 was enacted, authorizing the doing of an annuity business; that therefore annuities were not within the contemplation of the Legislature when the taxing statute, § 4924, was enacted: I disagree with this line of reasoning on two general grounds. In the first place these statutes have been reenacted since the original enactment of § 4836 in 1891 and therefore, § 4924, the taxing statute, was, at the time of reenactment, intended to apply to "business done," which then included the annuity business. In the second place, § 4924, as originally enacted, was a statute of general application without exceptions, that is, § 4924 imposed a tax upon business done. Therefore, when the annuity business was authorized by the Legislature in 1891 as a part of the business done by an insurance company, the annuity business, by operation of law, fell within the provisions of the taxing statute, § 4924. (N.B. In the Iowa case, too, the taxing statute had been enacted first.)

(III) E. Approved usage.

1. General definitions may be conflicting and are not exhaustive and therefore are unsatisfactory.

As stated in the majority opinion, "the dictionaries and legal encyclopedias give the word ``premium' a diversity of meanings."

In State v. Hogan, 8 N.D. 301 at 303, 78 N.W. 1051 at 1052, 45 A.L.R. 166, 73 Am. St. Rep. 759, in referring to a statutory definition of insurance (namely, § 4441 Rev. Codes 1895, which now is § 6458 Comp. Laws 1913) this was said: "Necessarily in defining insurance in a single sentence, only the most general terms can be used, and any general definition must be extended to cover the ever-changing phases in which the subject is presented to the public."

This same attitude was taken by the Iowa court in Northwestern Mut. L. Ins. Co. v. Murphy, ___ Iowa, ___, 271 N.W. at 900, 109 A.L.R. at 1056, supra: "plaintiff concludes that, because the word ``premiums' is used, there is no intention expressed in the statute that considerations realized from annuity contracts be taxed. To establish such premise plaintiff cites several cases in which it is said in substance that the definition of the word ``premium' as used in the law and business of insurance is the consideration paid for a contract of insurance. Plaintiff relies on this definition. But a mere definition is not always a safe foundation for correct conclusions. One reason is that, except in mathematics, it is difficult to frame exhaustive definitions of words. . . . Consequently, unless the authority offering the definition has undertaken the difficult task of framing a definition that is exhaustive, and has succeeded in such undertaking, error may result if there be reliance upon the element of exhaustiveness. Plaintiff's point depends on acceptance of these definitions as being exhaustive. But such they were not in our opinion. . . . Definitions differ in their character according to the nature of the thing defined. . . . Looking upon these definitions as having been pronounced primarily for application to the issues and facts these courts had in hand, we are unable to agree with plaintiff that these courts intended to go any further, or to consider a question not in issue, that is whether the word ``premium' may not in fact also be applied to contracts other than those for insurance. We think the definitions in the two above cases were intended to be used in pointing out the obvious, that is, that amounts paid for life insurance are premiums."

(III) (E) 2. There was no departmental construction but merely an unwitting acquiescence.

The majority opinion reads: "At all times prior to 1936 the departmental construction was that premiums taken for annuity contracts were not within the contemplation of the Legislature when it used the words ``gross premiums' in § 4924.

In my opinion this is an erroneous conclusion. The evidence is not sufficient to establish that the Insurance Commissioner or his legal advisor, the Attorney General, had, prior to 1936, ever placed any "departmental construction" one way or the other upon this matter. Nor is there sufficient evidence to establish that the Insurance Commissioner or the Attorney General or the Legislature had any knowledge that the defendant insurance company was doing an annuity business in this state. The annual "Statement of Taxable Premiums," which the defendant made upon a form prepared by the Insurance Commissioner, on a single sheet of paper, merely called for a statement of "Gross premiums received during 19__ (see schedule ``North Dakota Business') .............. $______." Such statement contained no express reference to annuity or insurance contracts. In my opinion, such form of statement required foreign insurance companies to state all of the premiums received upon their North Dakota business, regardless of whether such premiums were received on annuity contracts or on policies of insurance. It was required in order that the Insurance Commissioner might know the numerical base upon which to compute the two and one-half per cent tax imposed by § 4924.

In the written stipulation of facts, it appears that although in the defendant's annual statements of its total income received in the United States and elsewhere, the amounts received as premiums from annuity contracts were disclosed; that it was not disclosed whether any part of those annuity premiums were received in North Dakota. The written stipulation reads: ". . . said annuity considerations . . . were not included in the sums and premiums shown by the annual statements for said years (1926 to 1935, inclusive) to have been received by defendant in the course of the business transacted by it within said state, nor were the said annuity considerations included in the gross premiums or taxable premiums as shown by the ``Statement of Taxable Premiums' for said years to have been received by defendant in the course of the business transacted by it within such state; . . ." There is nothing in the record on appeal which shows that the Insurance Commissioner did have actual knowledge of the defendant's failure to report its annuity business. On the contrary, the record shows that the defendant did not give to the Insurance Commissioner any notice or information whatsoever that it was doing an annuity business in North Dakota. The record is devoid of any evidence of any ruling or opinion made by either the Insurance Commissioner or his legal advisor, the Attorney General, prior to 1936. In my opinion, the evidence does not support the conclusion that a departmental construction was made by the Commissioner of Insurance. The evidence merely supports a conclusion that there was an unwitting acquiescence on his part in the defendant's practice.

(III) (E) 3. Among the life insurance companies which are engaged in the annuity business, the approved usage of the word "premiums" is to specifically denominate annuity considerations as premiums.

"Words and phrases are construed according to the context and the approved usage of the language; . . ." § 7325, supra.

Has the insurance trade adopted an approved usage of the term "premiums"? Clearly it has in so far as policies of life insurance are concerned. And I am of the opinion that life insurance companies have an approved usage for the word "premiums" in so far as it refers to annuity considerations. Among the life insurance companies which are engaged in the annuity business, the approved usage of the word "premiums" is to specifically denominate annuity considerations as premiums. As stated in the first part of my opinion, annuity considerations are specifically denominated as "premiums" in the annuity contracts issued (see specimen copies, Exhibits 1 to 57) and in the annual statements made by the defendant. So, here we find tangible evidence of an approved usage which specifically classifies annuity considerations as premiums.

In Northwestern Mut. L. Ins. Co. v. Murphy, supra, the facts of that case too were that the forms of the annuity contracts issued by the foreign life insurance company were in evidence and that such annuity contracts specifically denominated the considerations therefor as "premiums." With regard to this usage, the Iowa case reads, continuing from my last quotation (in III E 1) therefrom: "But if we could be in accord with plaintiff that the definitions from other jurisdictions were undertakings to frame exhaustive definitions, nevertheless there is still the question, in view of the conceded facts before us, whether we can agree that such courts successfully did so. This is because it is the record in this case that the word "premium" is in fact used in a more general sense than that urged by plaintiff. The forms of the annuity contracts issued by plaintiff, the contracts that are the subject to this controversy, are in evidence. In all of these contracts is found the recital of the parties that ``in consideration of the payment of a single premium of (the agreed amount) the receipt of which is hereby acknowledged, the Northwestern Mutual Life Insurance Company promises to pay . . . a life annuity . . .' (Italics ours.) In argument plaintiff frankly admits that it does so use the word ``premium' in its annuity contracts. Plaintiff further concedes that ``most other companies' do likewise. From this record it is our opinion that in interpreting the words chosen by the Legislature for use in this statute, it would be hardly within reason to hold that there was an impossibility that the Legislature could adopt and intend to use the word ``premiums' in the same manner in which it was concededly and commonly used by the insurance companies themselves upon whom the tax is imposed. It might well be that in taxing insurance companies the Legislature sought to talk their language. To hold that the alleged definition is in fact exhaustive of the uses of the word ``premium' would be arbitrary and inconsistent with the facts in this case. We are unable to adopt plaintiff's premise that the word ``premium' is necessarily inapplicable to annuity contracts." The Iowa court then held that considerations paid to foreign insurance companies for the issuance of annuities were "premiums" within the purview of the statute imposing a gross premium tax on business done in the state, so as to be taxable thereunder. "I cannot find that any other term has been used to designate the amount paid for an annuity contract than the word ``premium'." Kiley, J. (concurring) in People ex rel. Metropolitan L. Ins. Co. v. Knapp, 193 A.D. 413, 184 N.Y.S. 345, affirmed without opinion in 231 N.Y. 630, 132 N.E. 916, supra.