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(248 S.W.) whether the bonds deposited wtih the State, liability, and is calculated on net premiums. It Treasurer were subject to taxation at Waco, is theoretically the difference between the presbut arrived at the same result reached by the ent value of the total insurance and the present trial court by deducting from the gross value value of the future premiums on the insurance, of the personal property of the company, less The reserve, being an amount for which antax-free government securities, the amount of take over the insurance, is sometimes called

other company could, theoretically, afford to its reserve.

the reinsurance fund or the self-insurance The contentions of the city are, in sub- fund.” stance, as follows: That article 4764 literally provides for the total valuation of all the In a number of states the amount of the company's assets, which includes its tax-free reserve of life insurance companies is resecurities; that the burden of proof was quired to be invested in a special fund and upon the company to show that the reserve held in trust for the policy holders, and, in was invested in taxable securities, and that, case of insolvency or dissolution, the propin the absence of such showing, it would be erty in which this fund is invested cannot be presumed that the property embraced in the applied to claims of general creditors until the assesment was taxable and that the reserve policy holders are satisfied. We have no statwas invested in securities not subject to ute in Texas requiring the setting aside of a taxation, and that the deposits at Austin reserve fund. Articles 4750 and 4751, which were a part of the total assets of the com- by their terms are made optional, authorize pany, and as such were taxable at Waco. domestic companies to deposit with the insur

The finding of the trial court with ref- ance commissioner the amount of their reerence to the reserve of the company is as

serve either in money or other approved sefollows:

curities, and when so deposited the com

panies are authorized to print upon their "That none of the funds of the company are designated on its books as reserve funds, and

policies the following: that the reserve is a quantity which is con “This policy is registered and approved sestantly changing. That the books of the com- curities equal in value to the legal reserve herepany are kept on a cash basis, and show all the on are held in trust by the Commissioner of assets of the company.

That at the end of Banking of the state of Texas.” each year the company takes each policy issued and calculates the reserve each policy When this statute is complied with the should have, and adds all these sums together, fund cannot be withdrawn so long as there and this constitutes the reserve of the com

are any outstanding policy liabilities of the pany. That the company's method of keeping books is that usually employed by life insurance ished in order at all times to be equal to the

company, but it may be increased or dimincompanies, and the company carried no account designating its reserve fund other than reserve; and the securities are subject to the as above stated. The reserve fund, as stated, control of the company with reference to is not taken by the company from a special collection of interest and substitution. account on the books, but is calculated at the Where a company has made a deposit under end of each year, and that item is inserted only article 4749, the amount of that deposit may in one place in the statement the company be placed within the reserve fund deposit. carries, and issued annually to its policy holders showing its assets and liabilities.”

The complaining company did not avail itself

of articles 4750, 4751. It will thus be seen that the company car

[1] We have reached the conclusion that ried no fund in which the amount of its re- the trial court and the Court of Civil Ap. serve was invested, but merely treated the peals correctly held that tax-free government reserve as a liability or debt of the company, securities cannot be taken into account in and its existence was merely a matter of estimating the total value of the company's bookkeeping. Our statutes do not define re- assets. The fallacy in the contentions of serve or prescribe any method of its ascer- the city arises out of treating the reserve as tainment, but the term is well understood

an asset instead of a liability or debt of the in insurance parlance, and its ascertainment company. It may be conceded that, if our is a matter of mathematical calculation aft- statutes required the investment of the reer determining what mortality tables and

serve in a trust fund, and exempted that What rate of interest are to be adopted as fund from taxation, the securities of the bases for the calculation. Webster's Interna- company not so invested would be subject to tional Dictionary gives the following defini- taxation; and, if the company should fail to tion, which will serve for our present pur- provide such trust fund, and all its assets pose:

were mingied, it would not be entitled to a

deduction for its tax-free securities except "The amount of funds or assets necessary for to the extent that they might exceed the total a company to have at any given time to enable it with interest and premiums paid as they amount required to be invested in its reserve shall accrue, to meet all claims on the insur. fund. But we have no such questiou pre ance, then in force as they would mature ac- sented here. The reserve of a life insurance cording to the particular mortality table ac- company is not an asset, but a liability. If cepted. The reserve is always reckoned as a the amount of that reserve is invested in a

trust fund, the fund is, of course, an asset. , reserve a debt, and authorizes a deduction of
But even in such case the fund is not exempt that debt from the gross value of the com-
from taxation unless expressly so made by pany's property.
statute. Attempts have been made in other We also think the statute itself eliminated
jurisdictions, where statutes require a special from the gross assets of the company its tax-
reserve fund to be maintained, to exempt free government securities. The statute pro
this fund from taxation on the ground that vides that,
it is in fact the property of the policy hold-
ers, and not the property of the company; ance companies shall be valued as other prop.

“All of the personal property of such insur-
but this contention has not been main. erty is valued for assessment in this state.”
tained. The uniform holding in this regard
has been that the fund belongs to the com-
pany, although charged primarily with the

When we turn to our statutes governing claims of policy holders, and is subject to the assessment of personal property we find taxation as other property. In re Oklahoma that owners are required to list their propLife Ins. Co. (Okl. Sup.) 173 Pac. 376, 13 A. erty with the assessor under various headings L. R. 174; Commonwealth Life Ins. Co. V.

or items. R. S. art. 7518. Under subdiCity of Louisville, 145 Ky. 284, 140 S. W. 306, vision 37 of this article it is provided 36 L. R. A. (N. S.) 226, and cases there cited. that this list shall contain "amount and In some of the states it has been held that value of bonds and stocks other than United the reserve is a debt of the company within States bonds.” Thus it will be seen that in the meaning of a general statute which au

the assessment of personal property United thorizes the offset of debts against taxable States bonds are expressly omitted. They are credits. Probably the leading case upon entirely eliminated from the property, a list this subject is Alabama Gold Life Insurance of which is furnished to the assessor for Co. v. Lott, 54 Ala. 499, decided in 1875. purposes of taxation. We think that the This holding has been followed in other cases. above-quoted language of article 4764 to the Insurance Co. v. Board of Equalization, 74 effect that the personal property shall be Iowa, 178, 37 N. W. 141; Insurance Co. v.

valued as other property for assessment in Detroit, 133 Mich. 408, 95 N. W. 1131. In some this state has reference not only to the of the states, however, it has been held that method of nxing the value, but also to the the reserve is not allowable as an offset ei- property required to be listed for taxation. ther under the peculiar wording of the stat- An examination of our statutes relating to utes of those states or upon the ground that taxation generally will show that the Legisthe liability is contingent and not fixed. In-lature has in many instances studiously habitants of Trenton v. Standard Life Ins. avoided placing tax-free government securiCo., 77 N. J. Law, 757, 73 Atl. •606, and cases ties in the items to be taken into considerathere cited.

tion in tising the value of property in this [2] The question whether the reserve shall state for taxation. In article 4764 there is be treated as a fund in which a designated no provision for deduction of government amount of the company's property is invest- tax-free securities, and, if that article is to ed, and is therefore an asset, or whether it be construed as requiring the inclusion of is a debt or liability, is removed from all such securities in the gross assets of life indoubt in the instant case by the language of surance companies, clearly the statute would article 4764, which provides that:

be beyond the power of the Legislature to "From the total valuation of its assets shall enact in a case where, after making deducbe deducted the reserve, being the amount of tions provided in the statute, the remainder the debts of insurance companies by reason of of personal property subject to be taxed must their outstanding policies in gross."

necessarily include tax-free securities. It

will not be presumed that the Legislature Nothing, to our mind, could be plainer than intended to pass an act beyond its powers, that for the purposes of taxation the reserve and consequently we think, even in the abis treated as a debt or liability, and the de- sense of the above-quoted provision referring duction allowed is not in any sense the re- to valuation of the personal property as moval of any specific part of the assets of other property is valued for assessment in the company from taxation. As siated above, this state, the requirement that the deducthe statute does not require the investment tions provided for shall be from the total of the amount of the reserve, or the setting was intended to mean the total assets subject apart of any of the assets of the company to taxation by the state, concerning which as a trust fund to cover or secure the liabil- alone the Legislature had power to legislate. ity to policy holders represented by the re- If such were not the intention of the Legserve; nor was that procedure actually fol- islature, we think, clearly, some provision lowed by the complaining company in the would have been made for deduction of the present case. Article 4761 does not exempt nontaxable securities at least to the extent any fund or assets of the company from tax- that would remove them from the amount ation as constituting a reserve fund, but on necessarily to be included in the value of the contrary specifically denominates the property assessed for taxation.

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(248 S.W.) We have serious doubt whether the Legis-, the purposes of taxation. The concluding lature had the power under the method it paragraph of the opinion is as follows: adopted for assessing the personal property

"If we had reached the opposite conclusion to of the company to take into consideration for that herein announced, and bad held that the asany purpose the tax-free government securi- sets of the corporation to the extent of the reties. The deduction allowed for the reserve, serve were not the property of the corporation, it is true, was a deduction which the Legis- but of the policy holders, or that the company lature was not required to make; and in was entitled to a deduction of the amount of making it, the Legislature had, no doubt, the the reserve as a debt or liability, it is not probpower to reduce the amount of this deduction have been reached in this case.

able that a substantially different result would

Having held by offsetting against it the value of any spe that the mortgages on which the registration cific property of the company. In other tax was paid were not subject to taxation, words, the Legislature had the power to lim- the finding would not be authorized that the it the deduction to a particular character reserve was invested only in the taxable propof the company's assets. For example, we erty, while practically all the capital and sursee no reason why the Legislature could not plus was invested in nontaxable property and limit the deduction from the total personal real estate, and this notwithstanding the tesassets of the company to the amount by the capital and surplus in mortgages exempt

timony that the president was directed to invest which the reserve might exceed the real from ad valorem taxation. In the absence of estate of the company. But the statute does evidence that the money actually invested in the not provide for the deduction to be made nontaxable property and real estate was capfrom any particular character of assets. It | ital and surplus and not the reserve, it must be is general, and taken from the gross. Under assumed that the reserve, to the extent of the this method the effect of including the tax- Trenton v, Standard Fire Ins. Co., 76 N. J.

value of such property, was invested therein. free securities in the gross assets necessarily Law, 79, 68 Atl. 1111." (Italics ours.) requires the offsetting of those assets against the reserve up to its full amount. It would This expression of opinion is clearly obiter. be impossible, therefore, for the company to But even so we are not prepared to say that obtain the benefit of investing its funds in it was not correct when applied to that case. tax-free securities unless it invested an

If the view had been taken that the assets amount sufficient to cover the reserve and in the reserve fund belonged to the policy leave a surplus; and in that event it would holders, and were therefore not subject to be benefited by the tax-free character of its taxation as property of the company, then it securities only to the extent of this surplus. would seem clear that, in order to determine We are strongly inclined to the view that, if what assets were not thus subject to taxathe statute be interpreted to require an in- tion, the specific assets constituting the re

serve fund must be definitely ascertained ; clusion of tax-free securities in the gross as- and, no doubt, in order to secure the exempsets of the company, it would be violative tion the burden would rest upon the company of the United States statutes exempting these to show that particular property sought to securities from taxation,

be taxed constituted a part of that fund. We are cited in this connection to the The correctness of the views expressed in the above cases of Insurance Co. v. Louisville and quotation with reference to a deduction of the Trenton y. Insurance Co. In the Oklahoma reserve as a debt or liability would depend, case the company sought a deduction of its we think, upon statutory provisions authorizreserve from its personal property not other. ing such deduction. In the Oklahoma case wise taxed on the ground that its reserve the assets claimed to be tax-free were not Was invested in such property, and that the government bonds, but were certain securities reserve constituted a trust fund which was which had already been taxed under the state in fact not an asset of the insurance com- law. To determine whether a deduction pang, but belonged to the policy holders, and should be made from those securities, or enfurther on the ground that it was entitled to tirely from securities which had not been a deduction of the amount of reserve as a taxed, it would be necessary to have some debt or liability of the company. The first basis for the deduction. We hardly see how of these contentions was overruled, the hold a deduction for liabilities could be affected ing being that, regardless of the provisions by the manner in which the assets set aside of the Oklahoma law requiring the invest- to meet those liabilities were invested unless ment of the amount of the reserve for the the deduction were allowed only from the benefit of policy holders, the assets consti- funds so invested. We do not regard this tuting such fund were nevertheless the prop-expression of view by the Oklahoma court as erty of the insurance company, and not of its authority at variance with the conclusions policy holders. The second contention was we have reached. overruled upon the distinct holding that The New Jersey case in 76 N. J. Law, 79, 68 there was no provision in the laws of Okla- Atl. 1111, is probably in point in sustaining homa for a deduction from the value of the the city's contention. That decision was by personal property of debts or liabilities for the Supreme Court of New Jersey, whose

jurisdiction was not final; and the case was, trict court and Court of Civil Appeals should later taken to the Court of Errors and Ap- be affirmed. peals of that state. In that court the decision of the Supreme Court was affirmed on CURETON, C. J. The judgment recomthe ground that no deduction was allowable mended in the report of the Commission of for reserve as a debt, because the liability Appeals is adopted, and will be entered as was not a fixed one, but was merely contin- the judgment of the Supreme Court. gent. This decision was reached without re gard to the manner in which the reserve was PIERSON, J., not sitting. invested. We have found no other case which seems to have bearing upon this particular question; and we are clear in the view above expressed that for the purposes of taxation under article 4764 the reserve HINES, Director General, v. BAKER. * is a liability, and not an asset, and that in

(No. 375–3501.) determining the total assets of the company no account can be taken of the government (Commission of Appeals of Texas, Section B. tas-free securities.

Feb. 28, 1923.) [3] The contention that the mortgage Railroads Om 102(1)-Statutory duty to leave bonds deposited with the State Treasurer openings in fence for farm crossing limited are not subject to taxation in Waco has been to "inclosure." decided adversely to the insurance company Vernon's Sayles' Ann. Civ. St. 1914, art. in the recent case of City of Austin v. Great 6486, requires an opening in a right of way Southern Life Ins. Co. (Tex. Sup.) 243 s. fence which in fact divides an inclosure, and W. 778.

does not give landowners generally whose [4] The Court of Civil Appeals arrived at property is bisected and traversed by railroad the conclusion that the insurance company rights of way an opening or means of going had no taxable personal property by taking opposite sides of the railroad to another, where

from one portion of their farms situated on the gross amount of the personal assets, less there is no inclosure; the word "inclosure" bethe tax-free securities, and deducting there ing used advisedly (quoting Words and Phrasfrom the reserve. The statute provides that es, First Series, Inclosure). the value of the personal property shall be arrived at as follows:

Certified Questions from Court of Civil

Appeals of First Supreme Judicial District. "From the total valuation of its assets shall be deducted the reserve,

and from the

Action by W. S. Baker against Walker D. remainder shall be deducted the assessed value Hines, Director General. There was a judg. of all real estate owned by the company, and ment for plaintiff, and defendant appealed the remainder shall be the assessed taxable to the Court of Civil Appeals, which certifies value of its personal property."

question. Question answered.

Henderson & Ranson, of Bryan (Jno. M. The total value of the company's assets King, of Houston, of counsel), for appellant. were $3,214,432.33. After deducting from Lewis & Dean, of Navasota, for appellee. this the tax-free securities, the total assets for taxing purposes were $2,308,382.33. By

POWELL, J. This cause is before the deducting the reserve there is left $776,- Supreme Court upon the following certificate 628.27; and if from this is deducted the as- from the honorable Court of Civil Appeals sessed value of the real estate, as the statute for the First District: provides, there is a remainder of $86,975.27, which according to the statute “shall be the

"In the above styled and numbered cause now assessed taxable value of its personal prop- pending on rebearing in this court upon an aperty.” This is the exact method of ascer- peal from the county court of Grimes county.

the question hereinafter stated, which is mataining the value of the personal property terial to a determination of the appeal, arose prescribed by the statute, and we think it out of the facts disclosed by the record as should be followed.

follows: [5] We are not permitted to review this "The I. & G. N. Railroad runs through the action of the Court of Civil Appeals because land or farm of J. H. Stewart, its right of the question is not raised in the application way being fenced across the Stewart place, and for writ of error. Schaffv. Mason, 111 there being one opening and gate in the fence Tex. 389,235 S. W. 520. We merely call on each side of the railroad, but the Stewart attention to the matter in order that our property so lying on both sides of the railroad recommendation as to the disposition of the track was not inclosed. The cause turns upon

the construction of article 6-186, Vernon's case may not be interpreted as approving the method of calculation adopted by the Sayles'. Civil Statutes of 1914, which in full

is as follows: ‘Art. 6486. All railway corCourt of Civil Appeals.

porations in this state which have or which We conclude that the judgments of the dis-1 may hereafter fence their right of way, may For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

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(248 S.W.) be required to make openings or crossings instant case does construe it. Decision aftthrough their fence and over their roadbed along cr decision has been rendered, apparently their right of way every one and one-half taking it for granted that the Legislature miles thereof; provided, that, if such fence used the word "inclosure" advisedly, and shall divide any inclosure, that at least one opening shall be made in said fence within such meant what it said. We shall refer to some

of these decisions hereafter. In them there inclosure.'

"On original hearing a majority of this is no holding construing this statute on this
court determined that by the passage of this point. But, as we see it, the courts clearly
law the Legislature meant what was held to be evidence their opinion that the statute means
plainly stated by the language therein used, what it says.
that is, to require at least one opening in a

What does "inclosure" as used in the statright of way fence which in fact divides any in- ute mean? In the absence of any provision closure

, rather than that its intendment was in the act evidencing a contrary intention, to give landowners generally whose property is bisected and traversed by railroad rights of it will be presumed that the Legisláture used way an opening or means of going from one the word in its usual and ordinary significaportion of their farms, situated on opposite tion. But, even if you apply to the word its sides of the railroad, to another, without refer- broadest possible meaning, it cannot be ence to whether such lands are comprised stretched so as to include an open tract of within an inclosure or not, and consequently land. Such a tract could not possibly be one that the railroad company in this instance was within an inclosure.” Counsel for the railnot protected by this enactment, One member of the court dissented, however, taking way company cite no authority, text, or desubstantially the alternative view above ex

cision so extending the meaning of the word pressed. We now deem it advisable, to certify "inclosure." Judge Lane cites no authority for your decision the question:

in that connection. We have been unable to "Did the majority of this court err in the find any such authority in Texas or elseconstruction so given the statute quoted ?" where. Words and Phrases, First Series,

vol 4, p. 3497, defines an inclosure as apIn passing upon this question, the majority

plied to land as follows:
opinion of the Court of Civil Appeals reads as

“ 'Inclosed,' when applied to lands, as defined "The argument of appellant, in effect, is that by Webster, is 'separated from cominon grounds

by a fence. Worcester defines it as 'parted the Legislature did not mean what it here so

off or shut in by a fence; set off, as private plainly says, that is, to require at least one property.' Inclosed lands, therefore, are lands opening in a right of way fence which in fact surrounded by a fence. Kimball v. Carter, 27 divides any inclosure, but that its purpose and S. E. 823, 825, 95 Va. 77, 38 L. R. A. 570." object was to give landowners generally whose property is bisected and traversed by railroad rights of way an opening or means of going

Therefore, in order to give the statute the from one portion of their land situated on op- construction contended for by the railway posite sides of the railroad to another, with company, the proviso section of this statout reference to whether such lands were com- ute must be rewritten by the courts. This prised within an inclosure or not. This court section must be, in effect, repealed by the is unable to agree with him; it seems to us courts and amended or rewritten by them the meaning of the statute is made quite clear before the railway company's contention can by the simple and unequivocal language used,

Said contention demands, as and that to read into it the view contended for be sustained. by appellant would be to discard its plain terms we see it, a rejection of the language used and glean its purport from extraneous sources.” by the Legislature. We think Judge Graves

correctly holds herein that this cannot be Judge Lane, dissenting, adopted the con- done by the courts. The language of the tention raised by the railway company as set statute is “simple and unequivocal.” It is out in the majority opinion above quoted. but fair to assume that the Legislature in

The article of the statute first above quot-tended to do what it actually did do. If it ed was a part of the act of 1887, and can be had desired to write the statute as Judge found in full in Gammel's Laws, vol. I, p. 837. Lane thinks they intended to write it, there · The various provisions of that act are also was nothing to prevent them from doing so. set out in full by Judges Brown and Wil. It was a simple matter, and they could have lains in their opinions in cases to which very easily declared that every owner of we shall hereafter refer.

In addition to land, divided by a railway company's fence, article 6486, set out in the certificate above, should have at least one opening. But these the act prescribes the character of crossings, gentlemen writing this law did not so protheir location and construction, method of ride. For the courts to take this matter obtaining same, etc. Although this act has out of their hands would clearly constitute been the law in this state for more than 35 an invasion of their constitutional prerogaFears, it seems that this is the first time any tives. The courts are not created for the one has ever contended in an appellate court purpose of taking over the duties of the Leg. in Texas that the article in question should islature in making laws for the people. be construed as the minority opinion in the We seriously doubt if we should consid

248 S.W.-22

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