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(40 Sup.Ct.)

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aptly expressed by the phrase "shall not in- certiorari applied for by the government was clude," used in clause (c) above. Where the not denied by this court until December 15, premium was left unchanged, but was paid 1913 (231 U. S. 755, 34 Sup. Ct. 323, 58 L. Ed. in part by a credit or cash derived from 468); that is, after the passage of the act. the dividend, the instruction would be more properly expressed by a direction to deduct those credits. Congress doubtless used the words "shall not include" as applied also to these credits because it eliminated them from the aggregate of taxable premiums as being the equivalent of abatement of premiums. That such was the intention of Congress is confirmed by the history of the noninclusion clause (c), above. The provision in the Revenue Act of 1913, for taxing the income of insurance companies is in large part identical with the provision for the special excise tax upon them imposed by the Act of August 5, 1909, c. 6, § 38, 36 Stat. 112. By the latter act the net income of insurance companies was also to be ascertained by deducting from gross income "sums other than dividends, paid within the year on policy and

-renewal contracts"; but there was in that act no noninclusion clause whatsoever. The

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*Second. It is argued that the nature of life insurance dividends is the same, whatever the disposition made of them, and that Congress could not have intended to relieve that dividends are applied in payment of the companies from taxation to the extent premiums and to tax them to the extent that dividends are not so applied. If Congress is to be assumed to have intended, in obedience to the demands of consistency, that all dividends declared under life insurance policies should be treated alike in connection with income taxation regardless of their disposition, the rule of consistency would require deductions more far-reaching than those now claimed by the company. Why allow so-called noninclusion of amounts equal to in reduction of renewal premium and disalthe dividends paid in cash but not applied low so-called noninclusion of amounts equal

policy holders' benefit? The fact is, that Congress has acted with entire consistency in laying down the rule by which in computing gross earnings certain amounts only are excluded; but the company has failed to recognize what the principle is which Congress has consistently applied. The principle applied is that of basing the taxation on receipts of net premiums, instead of on gross premiums. The amount equal to the aggregate of certain dividends is excluded, although they are dividends because by reason of their application the net premium receipts of the tax year are to that extent less. There is a striking difference between an aggregate of individual premiums, each reduced by means of dividends, and an aggregate of full premiums, from which it is sought to deduct amounts paid out by the company which have no relation whatever to premiums received within the tax year, but which relate to some other premiums which may have been received many years earlier. The difference between the two *cases is such as may well have seemed to Congress sufficient to justify the application of different rules of taxation.

question arose whether the provision in the to the dividends paid by a credit representing amounts retained by the company for acact of 1913 identical with (c) *above prevent-cumulation or to be otherwise used for the ed using in the computation the reduced renewal premiums instead of the full premiums, where the reduction in the premium had been effected by means of dividends. In Mutual Benefit Life Insurance Co. v. Herold, 198 Fed. 199, decided July 29, 1912, it was held that the renewal premium as reduced by such dividends should be used in computing the gross premium; and it was said (page 212) that dividends so applied in reduction of renewal premiums "should not be confused with dividends declared in the case of a full-paid participating policy, wherein the policy holder has no further premium payments to make. Such payments having been duly met, the policy has become at once a contract of insurance and of investment. The holder participates in the profits and income of the invested funds of the company." On writ of error sued out by the government the judgment entered in the District Court was affirmed by the Circuit Court of Appeals on January 27, 1913 (201 Fed. 918, 120 C. C. A. 256), but that court stated that it refrained from expressing any opinion concerning dividends on full paid policies, saying that it did so "not because we wish to suggest disapproval, but merely because no opinion about these matters is called for now, as they do not seem to be directly involved." The noninclusion clause in the Revenue Act of 1913 (c) above, was doubtless framed to de

fine what amounts involved in dividends

should be "nonincluded," or deducted, and thus to prevent any controversy arising over the questions which had been raised under the act of 1909.5 The petition for writ of

• Substantially the same questions were involved, also, in Connecticut General Life Ins. Co. v. Eaton

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There is also a further significant difference. All life insurance has in it the element of protection. That afforded by fraternal beneficiary societies, as originally devised, had in it only the element of protection. There the premiums paid by the member ficient, to pay the losses which will fall durwere supposed to be sufficient, and only sufing the current year, just as premiums in

(D. C.) 218 Fed. 188, and Connecticut Mutual Life Ins. Co. v. Eaton (D. C.) 218 Fed. 206, in which decisions were rot, however, reached until the following

year.

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fire, marine, or casualty insurance are sup- ment life policies which had been paid up. posed to cover only the losses of the year or There are others which arose under policy other term for which the insurance is writ- contracts in which the investment feature is ten. Fraternal life insurance has been ex- more striking; for instance, the Accelerative empted from all income taxation; Congress Endowment Policy or such special form of having differentiated these societies, in this contract as the 25-year "6% Investment respect as it had in others, from ordinary Bond" matured and paid March, 1913, on life insurance companies. Compare Royal which the policy holder received besides diviArcanum Supreme Council v. Behrend, 247 dends, interest, and a "share of forfeitures." U. S. 394, 38 Sup. Ct. 522, 62 L. Ed. 1182, In the latter, as in "Deferred Dividend” and 1 A. L. R. 966. But in level premium life in- other semi-tontine policies, the dividend repsurance, while the motive for taking it may resents in part what clearly could not be rebe mainly protection, the business is large-garded as a repayment of excess premium of ly that of savings investment. The premium the policy holder receiving the dividend. For is in the nature of a savings deposit. Except the "share of the forfeiture" which he rewhere there are stockholders, the savings ceives is the share of the redundancy in prebank pays back to the depositor his deposit with the interest earned less the necessary expense of management. The insurance company does the same; the difference being merely that the savings bank undertakes to repay to each individual depositor the whole of his deposit with interest; while the life insurance company undertakes to pay to each member of a class the average amount (regarding the chances of life and death); so that those who do not reach the average age get more than they have deposited, that is, paid in premiums (including interest) and those who exceed the average age less than they deposited (including interest). The dividend of a life insurance company may be regarded as paying back part of these deposits called premiums. The dividend is made possible because the amounts paid in as premium

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have earned more than it was assumed they would when the policy contract was made, or because the expense of conducting the business was less than it was then assumed it would be or because the mortality-that is, the deaths in the class to which the policy holder belongs proved to be less than had then been assumed in fixing the premium rate. When for any or all of these reasons the net cost of the investment (that is, the right to receive at death or at the endowment date the agreed sum) has proved to be less than that for which provision was made, the difference may be regarded either as profit on the investment or as a saving in the expense of the protection. When the dividend is applied in reduction of the renewal premium, Congress might well regard the element of protection as predominant and treat the reduction of the premium paid by means of a dividend as merely a lessening of the expense of protection. But after the policy is paid up the element of investment predominates and Congress might reasonably regard the dividend substantially as profit on the in

vestment.

mium of other policy holders who *did not persist in premium payments to the end of the contract period.

Third. The noninclusion clause here in question, (c) above, is found in section II G (b) in juxtaposition to the provisions concerning mutual fire and mutual marine companies, clauses (a) and (b) above. The fact that in three separate clauses three different rules are prescribed by Congress for the treatment of redundant premiums in the three classes of insurance would seem to be conclusive evidence that Congress acted with deliberation and intended to differentiate between them in respect to income taxation. But the company, ignoring the differences in the provisions concerning fire and marine companies respectively, insists that mutual life insurance rests upron the same principles as mutual fire and marine, and that as the clauses concerning fire and marine companies provide specifically for noninclusion in or deduction from gross income of all portions of premiums returned, Congress must have intended to apply the same rule to all. Neither premise nor conclusion is sound.

Mutual fire, mutual marine, and mutual life insurance companies are analogous in that each performs the service called insuring wholly for the benefit of their policy holders, and not like stock insurance companies in part for the benefit of persons who as stockholders have provided working capital on which they expect to receive dividends representing profits from their investment. In other words, these mutual companies are alike in that they are co-operative enterprises. But in respect to the service performed fire and marine companies differ fundamentally, as above pointed out, from legal reserve life companies. The thing for which a fire or marine insurance premium is paid is protection which ceases at the end of the term. If after the end of the term a part of the premium is returned to the policy holder, it is not returned as something purchased with the premium,

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The dividends, aggregating $686,503, which the Penn Mutual Company insists should but as a part of the premium *which was not have been "nonincluded," or more properly required to pay for the protection; that is, deducted, from the gross income, were, in the expense was less than estimated. On part, dividends on the ordinary limited pay- the other hand, the service performed in

(40 Sup.Ct.)

level premium life insurance is both pro- The Penn Mutual Company, seeking to tection and investment. Premiums paid- draw support for its argument from legislanot in the tax year, but perhaps a generation tion subsequent to the Revenue Act of 1913, earlier have earned so much for the co- points also to the fact that by the Act of operators that the company is able to pay to September 8, 1916, c. 463, § 12, subsec. second, each not only the agreed amount, but also subd. c, 39 Stat. 756, 768 (Comp. St. § 63364), additional sums called dividends, and have the rule for computing gross income there earned these additional sums, in part at provided for mutual fire insurance companies least, by transactions, not among the mem- was made applicable to mutual employers' bers, but with others, as by lending the mon- liability, mutual workmen's compensation, ey of the co-operators to third persons who and mutual casualty insurance companies. It pay a larger rate of interest than it was as- asserts that thereby Congress has manifested sumed would be received on investments. a settled policy to treat the taxable income The fact that the investment resulting in ac- of mutual concerns as not including premium cumulation or dividend is made by a co- refunds, and that, if mutual life insurance operative as distinguished from a capitalistic companies are not permitted to "exclude" concern does not prevent the amount thereof them, these companies will be the only mubeing properly deemed a profit on the in- tual concerns which are thus discriminated vestment. Nor does the fact that the profit against. Casualty insurance, in its various was earned by a co-operative concern afford forms, like fire and marine insurance, provide basis for the argument that Congress did only protection, and the premium is wholly not intend to tax the profit. Congress ex- an expense. If such later legislation could empted certain co-operative enterprises from be considered in construing the act of 1913, all income taxation, among others, mutual the conclusion to be drawn from it would be savings banks; but, with the exception of clearly the opposite of that urged. The later fraternal beneficiary societies, it imposed in act would tend to show that Congress *perexpress terms such taxation upon "every in- sists in its determination to differentiate be surance company."

The purpose of Congress to differentiate between mutual fire and marine insurance companies, on the one hand, and life insurance companies, on the other, is further manifest ed by this: The provision concerning return premiums in computation of the gross income of fire and marine insurance companies is limited in terms to mutual companies, whereas the noninclusion clause (c), above, relat

$535

ing to life insurance companies, applies whether the company be a stock or a mutual one. There is good reason to believe that the failure to differentiate between stock and mutual life insurance companies was not inadvertent. For while there is a radical difference between stock fire and marine com

panies and mutual fire and marine companies, both in respect to the conduct of the business and in the results to policy holders, the participating policy commonly issued by the stock life insurance company is, both in rights conferred and in financial results, substantially the same as the policy issued by a purely mutual life insurance company. The real difference between the two classes of life companies as now conducted lies in the legal right of electing directors and officers. In the stock company stockholders have that right; in the mutual companies the policy holders who are the members of the corporation.

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tween life and other forms of insurance.

Fourth. It is urged that in order to sustain the interpretation given to the noninclusion clause by the Circuit Court of Appeals (which was, in effect, the interpretation set forth above) it is necessary to interpolate in the clause the words "within such year," as shown in italics in brackets, thus:

"And life insurance companies shall not include as income in any year such portion of any actual premiums received from any individual policy holder [within such year] as shall have been paid back or credited to such individual policy holder, or treated as an abatement of premium of such individual policy holder, within such year."

What has been said above shows that no construction given by the Circuit Court of such interpolation is necessary to sustain the Appeals. That court did not hold that the permitted noninclusion from the year's gross income is limited to that portion of the premium received within the year which, by reason of a dividend, is paid back within the same year. What the court held was that the noninclusion is limited to that portion of the premium which, although entered on the books as received, was not actually received within the year, because the full premium was, by means of the dividend, either reduced or otherwise wiped out to that extent. Nor does the government contend that any portion of a premium not received within the tax year shall be included in computing the The alleged unwisdom and injustice of taxing year's gross income. On the other hand, mutual life insurance companies while mutual sav- what the company is seeking is not to have ings banks were exempted had been strongly pressed "nonincluded" a part of the premiums which upon Congress. Briefs and statements filed with Senate Committee on Finance on H. R. 3321-Sixty- were actually received within the year, or Third Congress, First Session, vol. 3, pp. 1955-2094. which appear as matter of bookkeeping to

40 SUP.CT.-26

have been received, but actually were not. It is seeking to have the aggregate of premiums actually received within the year reduced by an amount which the company paid

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(252 U. S. 553)

CANADIAN NORTHERN RY. CO. v. EGGEN.

(Argued March 1, 1920. Decided April 19, 1920.)

No. 281.

out within the year, and which it paid out mainly on account of premiums received long before the tax year. What it seeks is not a noninclusion of amounts paid in, but a de- 1. LIMITATION OF ACTIONS 4(1)-LIMITAduction of amounts paid out.

[2] If the terms of the noninclusion clause (c), above, standing alone, permitted of a doubt as to its proper construction, the doubt would disappear when it is read in connection with the deduction clause (d), above. The deduction there prescribed is of "the sums other than dividends paid within the year on policy and annuity contracts." This is tantamount to a direction that dividends shall not be deducted. It was argued that the dividends there referred to are "commer

cial" dividends like those upon capital stock, and that those here involved are dividends of a different character. But the dividends which the deduction clause says, in effect, shall not be deducted, are the very dividends here in question; that is, dividends "on policy and annuity contracts." None such may be deducted by any insurance company except as expressly provided for in the act, in clauses quoted above (a), (b), and (c); that is, clauses (a), (b), and (c) are, in effect, exceptions to the general exclusion of dividends from the permissible deductions as prescribed in clause (d) above.

[3] In support of the company's contention that the interpolation of the words "within the year" is necessary in order to support the construction given to the act by the Circuit Court of Appeals we are asked to consider the legislative history of the Revenue Act of 1918 (enacted February 24, 1919, [40 Stat. 1057, c. 18]), and specifically to the fact that in the bill as introduced in and passed by the House the corresponding section-233 (a); Comp. St. Ann. Supp. 1919, 8 6336p contained the words "within the taxable year," and that these words were stricken out by the Conference Committee (Report No. 1037, Sixty-Fifth Congress, Third Session). The legislative history of an act uay, where the meaning of the words used

*538

is doubtful, be resorted to as an aid to construction. Caminetti v. United States, 242 U. S. 470, 490, 37 Sup. Ct. 192, 61 L. Ed. 442, L. R. A. 1917F, 502, Ann. Cas. 1917B, 1168. But no aid could possibly be derived from the legislative history of another act passed nearly six years after the one in question. Further answer to the argument based on the legislative history of the later act would, therefore, be inappropriate. We find no error in the judgment of the Circuit Court of Appeals.

It is affirmed.

TION OF ONE YEAR FOR PERSONAL INJURY ACTIONS NOT UNDULY SHORT.

A limitation of one year for actions for personal injuries is not unduly short, having regard to the likelihood of the dispersing of witnesses, their exposure to injury and death, and the failure of memory as to the minute details of conduct on which questions of negligence often turn.

2. CONSTITUTIONAL LAW ~207(3)—NonRESIDENT OF STATE NOT ENTITLED TO PRECISELY SAME RIGHTS IN THE COURTS AS RESIDENTS.

of each state shall be entitled to all privileges Const. art. 4, § 2, providing that citizens and immunities of citizens of the several states, does not entitle a nonresident of a state to precisely the same rights in the courts of such states as resident citizens have if he is given access to the courts upon terms which, in themselves, are reasonable and adequate for the enforcing of any rights he may have. 3. CONSTITUTIONAL LAW

45 ADEQUACY AND REASONABLENESS OF TERMS ON WHICH NONRESIDENTS ARE PERMITTED TO SUE IS A JUDICIAL QUESTION.

The adequacy and reasonableness of the terms on which nonresidents of a state are

given access to its courts are to be determined by the courts, and ultimately by the United States Supreme Court.

4. CONSTITUTIONAL LAW 207(3)—LIMITATION OF ACTIONS 4(2)—EXCEPTION IN FAVOR OF RESIDENTS RESPECTING LIMITATION OF ACTIONS ARISING OUTSIDE OF THE STATE IS VALID.

when a cause of action arises outside the state Gen. St. Minn. 1913, § 7709, providing that, and is barred by the laws of the place where it arose, no action thereon shall be maintained unless plaintiff be a citizen of the state, who has owned the cause of action ever since it accrued, does not violate Const. U. S. art. 4, § 2, as applied to a cause of action for personal injuries, on which the laws of the country where it arose allowed one year in which to bring an action.

On Writ of Certiorari to the United States Circuit Court of Appeals for the Eighth Circuit.

Action by Gus Eggen against the Canadian Northern Railway Company. A judgment for defendant was reversed by the Circuit Court of Appeals for the Eighth Circuit (Eggen v. Canadian Northern Ry. Co., 255 Fed. 937, 167 C. C. A. 229), and defendant brings certiorari. Reversed, and judgment of the District Court affirmed.

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

(40 Sup.Ct.)

See, also, Canadian Northern Ry. Co. v. ¡ enacted for the purpose of creating an arbiEggen, 249 U. S. 594, 39 Sup. Ct. 259, 63 L. trary or vexatious discrimination against Ed. 793. nonresidents of Minnesota.

*560 Mr. Wm. D. Mitchell, of St. Paul, Minn., for *It has been in force ever since the state petitioner. was admitted into the Union in 1858; it is Mr. Ernest A. Michel, of Minneapolis, in terms precisely the same as those of sevMinn., for respondent.

*558

eral other states, and in substance it does not differ from those of many more. It gives a

*Mr. Justice CLARKE delivered the opin- nonresident the same rights in the Minnesota ion of the Court.

The only question presented for decision in this case is as to the validity of section 7709 of the Statutes of Minnesota (General Statutes of Minnesota 1913), which reads: "When a cause of action has arisen outside of this state, and, by the laws of the place where it arose, an action thereon is there barred by lapse of time, no such action shall be maintained in this state unless the plaintiff be a citizen of the state who has owned the cause of action ever since it accrued."

The Circuit Court of Appeals, reversing the

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District Court, held this statute invalid for the reason that the exemption in favor of citizens of Minnesota rendered it repugnant to article 4, section 2, of the Constitution of the United States, which declares that

"The citizens of each state shall be entitled to all privileges and immunities of citizens in the several states."

The action was commenced in the District Court of the United States for the District of Minnesota, Second Division, by the respondent, a citizen of North Dakota, against the petitioner, a corporation organized under the laws of the Dominion of Canada, to recover damages for personal injuries sustained by him on November 29, 1913, when employed by the petitioner as a switchman in its yards at Humboldt, in the province of Saskatchewan. The respondent, a citizen and resident of North Dakota, went to Canada and entered the employ of the petitioner as a switchman a short time prior to the accident complained of. He remained in Canada for six months after the accident and then returned to live in North Dakota. He commenced this action on October 15, 1915, almost two years after the date of the accident. By the laws of Canada, where the cause of action arose, an action of this kind must be commenced within one year from the time injury was sustained. If the statute of Minnesota, above quoted, is valid, it is applicable to the action, which, being barred in Canada, cannot be maintained in Minnesota by a nonresident plaintiff. If, however, the statute is invalid, the general statute of limitations of Minnesota, allowing a period of six years within which to commence action, would be applicable. The record properly presents the claim of the petitioner that the Circuit Court of Appeals erred in holding the statute involved unconstitutional and void.

It is plain that the act assailed was not

courts as a resident citizen has, for a time equal to that of the statute of limitations where his cause of action arose. If a resident citizen acquires such a cause of action after it has accrued, his rights are limited precisely as those of the nonresident are, by the laws of the place where it arose. limitation of the foreign state is equal to or longer than that of the Minnesota statute, the nonresident's position is as favorable as that of the citizen.

If the

It is only when the foreign limitation is shorter than that of Minnesota, and when the nonresident who owns the cause of action from the time when it arose has slept on his rights until it is barred in the foreign state (which happens to be the respondent's case), that inequality results-and for this we are asked to declare a statute unconstitutional which has been in force for 60 years.

This court has never attempted to formulate a comprehensive list of the rights included within the "privileges and immunities" clause of the Constitution (article 4, § 2), but it has repeatedly approved as authoritative the statement by Mr. Justice Washington, in 1825, in Corfield v. Coryell, 4 Wash. C. C. 371, 380, Fed. Cas. No. 3,230 (the first federal case in which this clause was considered), saying:

"We feel no hesitation in confining these expressions to those privileges and immunities which are, in their nature, fundamental." Slaughter-House Cases, 16 Wall. 36, 75, 21 L. Ed. 394: Blake v. McClung, 172 U. S. 239, 248, 19 Sup. Ct. 165, 43 L. Ed. 432; Chambers v. Baltimore & Ohio R. R. Co., 207 U. S. 142, 155, 28 Sup. Ct. 34, 52 L. Ed. 143.

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*The state of Minnesota, in the statute we are considering, recognized this right of citizens of other states to institute and maintain suits in its courts as a fundamental right, protected by the Constitution, and for one year from the time his cause of action accrued the respondent was given all of the rights which citizens of Minnesota had under it. The discrimination of which he complains could arise only from his own neglect.

[1-3] This is not disputed, nor can it be fairly claimed that the limitation of one year is unduly short, having regard to the likelihood of the dispersing of witnesses to accidents such as that in which the respondent

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