CORPORATION COMMISSION et al.
EQUITABLE LIFE ASSUR. SOC. OF UNITED STATES et al
Fred O. Wilson, Atty. Gen., Wilbert E. Dolph, Jr., Asst. Atty. Gen. (Edward Jacobson, Phoenix, Snell, Wilmer, Walsh, Melczer & Beauchamp, all of Phoenix, of counsel), for appellants.
Evans, Hull, Kitchel & Jenckes, Norman S. Hull and John E. Madden, all of Phoenix, for appellee.
La Prade, Justice. Udall, C. J., Stanford, Phelps, JJ., and Bernstein, Superior Court Judge, concur. De Concini, J., being disqualified, the Honorable Charles C. Bernstein, Judge of the Superior Court, Maricopa County, was called to sit in his stead.
La Prade, Justice.
[73 Ariz. 173] This action was instituted by The Equitable Life Assurance Society of the United State, a mutual life insurance company, in its own behalf and on behalf of all other insurance companies similarly situated, to obtain a declaratory judgment determining and declaring the construction to be placed upon section 61-328, A.C.A.1939, as amended by ch. 113, S.L.1941, ch. 100, S.L.1945, imposing upon every insurance company doing business in Arizona, an annual tax of two (2) per cent of the gross amount of all premiums received on policies and contracts of insurance covering property or other risks within Arizona. From a judgment declaring that said statute, as amended, does not impose any tax upon considerations received on contracts of annuities by plaintiff and other insurance companies similarly situated and enjoining defendants (agents of the state of Arizona) from collecting or attempting to collect such tax and from withholding or revoking any certificate of authority or license by reason of the nonpayment thereof, the corporation commission and other named defendants have appealed.
The question presented is one of statutory construction to determine the legislative intent from the wording of the statute. The portion of section 61-328, upon which the state relies to tax payments for annuities, reads as follows: "(b) Every insurance company doing business in this state except those companies engaged in the class of insurance business described in paragraph 11, section 61-102, Arizona Code of 1939 (title insurance), shall pay to the state treasurer, through the commission, a tax of two  per cent of the gross amount of all premiums received on policies and contracts of insurance covering property or other risks within this state * * * The tax * * * shall be payment in full of all demands of any and all taxes on said [73 Ariz. 174] company or of licenses for conducting said business of insurance, except the fees prescribed for agents' licenses and for the commission, and the tax prescribed in section 61-340 [on non-admitted companies]." (Emp. and bracketed matter supplied.) For the purpose of clarity, we believe that it should be pointed out right here, that the underscored words in the above section, to wit: "a tax of two  per cent of the gross amount of all premiums received on policies and contracts of insurance covering property or other risks within this state" was first inserted in the law by the amendment appearing in chapter 113, Session Laws 1941, section 3. The law prior to the amendment read that every company should pay "a tax of two  per cent of all premiums collected or contracted for in this state during the year ending December 31 next preceding * * *"
The assignment of error is based on the contention that the above-quoted statute was intended to and does levy a valid tax upon insurance companies for considerations received from annuity policies. The several propositions of law presented in support of the assignment will be severally examined and treated.
Proposition of law No. 1 states: "The prime rule of statutory construction is to arrive at the legislative intent." We agree that to determine the legislative intent is a cardinal rule of statutory construction. Just how that intent may be determined requires careful reading and consideration of the statutory language. The state directs attention to other statutes relating to insurance companies and points out that in the various provisions thereof no reference is made to annuities but they refer generally to "contracts of insurance". For a definition of "insurance" the company refers to section 61-101, A.C.A.1939, as amended: "'Insurance'
means: A contract of insurance or an agreement by which one  party, for a consideration, promises to pay money or its equivalent or to do an act valuable to the insured upon the destruction, loss, or injury of something in which the insured has a pecuniary interest, or in consideration of a price paid, adequate to the risk, becomes security to the other against loss by certain specified risks;" We observe that this definition does not mention or refer to annuity contracts. A similar statute was construed by the Supreme Court of Oregon as not including a contract of annuity in the definition of "insurance". Hall v. Metropolitan Life Ins. Co., 146 Or. 32, 28 P.2d 875, 876. Counsel for the state review the history of the insurance code, quoting from section 3423, R.S.1913, wherein insurance business was classified as follows: "(2) Life insurance, including endowments or annuities, but not including health or accident or sickness insurance, or any casualty insurance except as hereinafter provided." (Emp. sup.) The comparable code, section 61-102, A.C.A.1939, as amended by S.L.1949, ch. 116, sec. 1, reads: "2. Life insurance, which [73 Ariz. 175] includes insurance upon the lives of persons or appertaining thereto, and the granting, purchasing, or disposing of annuities." (Emp. sup.) It is significant that the language was changed from including annuities within the term "life insurance" to a separate classification using the conjunction "and" in the amendment. It is generally recognized that contracts for annuities differ from life insurance policies. 29 Am.Jur., Insurance 52, sec. 6; 3 C.J.S., Annuities, § 1, page 1375; Carroll v. Equitable Life Assur. Soc. of United States, D.C.Mo., 9 F.Supp. 223, 224; Rishel v. Pacific Mut. Life Ins. Co. of California, 10 Cir., 78 F.2d 881, 131 A.L.R. 414; Commonwealth v. Metropolitan Life Ins. Co., 254 Pa. 510, 98 A. 1072, 1073, wherein an annuity contract is distinguished from an insurance contract in the following language: "Insurance, as generally understood, is an agreement to indemnify against loss in case property is damaged or destroyed by fire, or to pay a specified sum upon the death of the insured or upon his reaching a certain age. An annuity is generally understood as an agreement to pay a specified sum to the annuitant annually during life. The consideration for an insurance contract is generally spoken of as a premium, which is payable annually, semiannually, monthly, or weekly. The consideration for an annuity contract is not generally regarded as a premium and is usually covered by a single payment." The distinction between annuities and life insurance was pointed out in the following cases:
"Annuity contract differs from life policy in that the contract for 'Insurance' provides against contingency of death, while an 'annuity' is a provision for life with no indemnity feature." In re Sothern's ...