Op. of the Ct. Gulf, Colo. & Santa Fe Ry. Co. v. Moser, 275 U.S. 133 (1927)

Opinion of the Court.

GULF, COLORADO & SANTA FE RAILWAY COMPANY v. MOSER, ADMINISTRATRIX.

CERTIORARI TO THE COURT OF CIVIL APPEALS, THIRD SUPREME JUDICIAL DISTRICT, STATE OF TEXAS.

No. 53. Submitted October 19, 1927.—Decided November 21, 1927.

1. In computing the damages recoverable under the Federal Employers’ Liability Act by a dependant who has been deprived of future benefits through the death of a railroad employee, the principle of limiting the recovery to compensation requires that adequate allowance be made, according to circumstances, for the earning power of money; in short, that when future payments or other pecuniary benefits are to be anticipated, the verdict should be made up on the basis of their present value only. P. 136.

2. This interpretation, heretofore approved by this Court, has become an integral part of the statute, and should be followed in the state courts. P. 136.

3. Refusal of a request for an instruction to the jury on the reduction of such future benefits to present value by deduction of interest at the highest rate that the testimony showed could be had on money safely invested and secured,—held erroneous. P. 135.

277 S. W. 722, reversed.

Certiorari , 271 U. S. 655, to a judgment of the Court of Civil Appeals of Texas sustaining a recovery of damages in an action under the Federal Employers’ Liability Act. The Supreme Court of Texas refused a writ of error for want of jurisdiction, 277 S. W. 722.

Messrs. Lawrence H. Cake, J. W. Terry, and Charles K. Lee for petitioner.

Mr. A. L. Curtis for respondent.

Mr . Justi ce Mc Reynol ds delivered the opinion of the Court.

The cause went to the jury upon special issues framed as questions. Answers thereto constitute the verdict. Relevant parts of Special Issue No. 7 follow—

“ Regardless of what your answers may be to the questions submitted in this charge, you will assess damages, and you will arrive at the amount thereof by assessing the same at such sum of money as if paid in cash at this time would be sufficient to fairly compensate the surviving wife and child for such actual pecuniary loss as you may believe from the evidence that they had a reasonable expectation of receiving from said John H. Moser, if any, from and after the death of the said John H. Moser, if he had not died on the date alleged. By pecuniary loss is meant such loss as may be compensated for in money. In answering special issue No. 7, you will take into consideration the contribution of money and other pecuniary benefits, if any, which the evidence may show that said surviving wife and child would have received from him after the time of his death, if he had continued to live; . . . In assessing the damages, if any, you will confine yourselves solely to the determination of the pecuniary and monetary interest, if any, that the plaintiff and her child had in the continued life of deceased. . . .

11 Bearing in mind the foregoing definitions and instructions on the measure of damages, you will answer special issue No. seven.

Petitioner seasonably objected to the charge as “generally too broad and not definite and specific enough and the jury should be limited in their consideration of the measure of damages, and the damages to be awarded, and should be further and more in detail instructed as to matters they can consider and the way their verdict should be arrived at more fully shown and in line with defendant’s requested charges on the issue of damages.” Also to Special Issue No. 7 because “ it does not give the jury any rule or formula by which the jury may determine the amount of money that if paid now will fairly and reasonably compensate the surviving widow and child for the actual pecuniary loss.” And it requested the following special instruction.

“ In considering of your verdict on the question of damages, and under the special issues submitted to you in that connection, and thereunder in determining 1 such sum of money as if paid in cash at this time would be sufficient to fairly compensate the surviving wife and child,’ for their pecuniary loss, you are instructed that in determining the present value of such contributions as plaintiff would probably have received from the continued life of the deceased you will make your calculations on the basis of the amount of your award, bearing interest at the highest net rate of interest that the testimony shows can be had on money safely invested, and secured as shown by the testimony in this case.”

This action sufficed to raise the point now presented. Refusal to grant the request was material error.

Chesapeake de Ohio Railway Company v. Kelly, 241 U. S. 485, 491, and Chesapeake do Ohio Railway Company v. Gainey, 241 U. S. 494, announce the applicable rule.

Statement of the Case. 275 U. S.

In the first, we distinctly stated that “ in computing the damages recoverable for the deprivation of future benefits, the principle of limiting the recovery to compensation requires that adequate allowance be made, according to circumstances, for the earning power of money; in short, that when future payments or other pecuniary benefits are to be anticipated, the verdict should be made upon the basis of their present value only.” The interpretation approved by us has become an integral part of the statute. It should be accepted and followed.

The judgment below is reversed; and the cause will be remanded to the Court of Civil Appeals, Third Supreme Judicial District, State of Texas, for further proceedings not inconsistent with this opinion.

Reversed,

NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY v. WISCONSIN.

SAME v. SAME.

ERROR TO THE SUPREME COURT OF THE STATE OF WISCONSIN.

Nos. 75, 76. Argued October 27, 1927.—Decided November 21, 1927.

A state tax on domestic insurance companies, called an annual license fee, which consists of three per cent, annually of the gross income of the corporation, save rents from land otherwise taxed and premiums, is void pro tanto where the income is in part interest from United States bonds. P. 140. 189 Wis. 103, 114 reversed.

court dismissing the complaints on demurrer were affirmed by the court below.

Messrs. Sam T. Swansen and George Lines for plaintiff in error.

Mr. Franklin E. Bump, Assistant Attorney General of Wisconsin, with whom Mr. John W. Reynolds, Attorney General, was on the brief, for the State of Wisconsin.

The license fee is a privilege or franchise tax, and not a tax on property or income from property. Northwestern Ins. Co. n . State, 163 Wis. 484; Northwestern Ins. Co. v. Wisconsin, 247 U. S. 132. It clearly is not intended as a tax on United States bonds or anything else not taxable by the State.

The inducements or considerations for the privilege tax are local, special, privileges clearly within the power of the State to grant or withhold altogether, and, when granted, are clearly within the jurisdiction of the State to tax as such, the tax being lawfully measured by reference to property, business, or income of the corporation which, itself, is beyond the power of the State to tax. Northwestern Ins. Co. v. Wisconsin, supra; Home Ins. Co. v. New York, 134 U. S. 594; Flint v. Stone Co., 220 U. S. 107; Gillespie v. Oklahoma, 257 U. S. 501; U. S. Grain Corp. v. Phillips, 261 U. S. 106; Baltic Min. Co. v. Mass., 231 U. S. 68; Adams Exp. Co. v. Ohio, 165 *U. S. 194; Cleve. &c. Ry. v. Backus, 154 U. S. 438; Delaware R. R. Tax Case, 18 Wall. 206; Hamilton Co. n . Mass., 6 Wall. 632; State Tax on Ry. Receipts, 15 Wall. 284; Kansas City R. R. v. Botkin, 240 U. S. 227; Maine v. Gr. Trunk Ry., 142 U. S. 217; Horn Co. v. New York, 143 U. S. 305; Kan. City &c. R. R. v. Stiles, 242 U. S. Ill; Provident Inst. v. Massachusetts, 6 Wall. 611; Society for Savings v. Coite, 6 Wall. 594; Van Allen v. Assessors, 3 Wall. 573; Securities Bank v. District, 279 Fed. 185.

Mr . Justice Mc Reynolds delivered the opinion of the Court.

These two causes, originally brought in the Circuit Court of Dane County, present the same question. The plaintiff company, a corporation under the laws of Wisconsin, has long carried on therein the business of insuring lives. It seeks to recover excess taxes exacted by the State for the five years, 1918-1923. The courts below held that the exaction was proper under § 76.34, Wisconsin Statutes, 1923 (§ 1211-35, Stat. 1919; § 51.32, Stat. 1917). And they definitely denied the contention that so construed and applied the statute conflicted with the Constitution or laws of the United States.

Section 76.34 provides—

“ Life insurance companies to pay annual license. Every company, corporation or association transacting the business of life insurance within this state, excepting only such fraternal societies as have lodge organizations and insure the lives of their own members, and no others, shall, on or before the first day of March, in each year, pay into the state treasury as an annual license fee for transacting such business the amounts following:

“(1) Domestic Companies; Three per cent of Gross Income. If such company, corporation or association is organized under the laws of this state, three per centum of its gross income from all sources for the year ending December thirty-first, next prior to said first day of March excepting therefrom income from rents of real estate upon which said company, corporation or association has paid the taxes assessed thereon, and excepting also premiums collected on policies of insurance and contracts for annuities.

In annual reports the Company disclosed all receipts derived from interest on United States bonds and claimed they were exempt from taxation under the Constitution and laws of the United States. The revenue officers acted upon another view, and both courts below have held that they rightly disregarded the source of the receipts and properly assessed sums reckoned upon the Company’s entire gross income.

Counsel for the State maintain that the effect of t 76.34 is to impose upon domestic insurance companies a privilege or franchise tax, and not one on property or income; that no charge is laid upon bonds of the United States, but the fee exacted is for granted privileges, including exemption from personal property taxation and right to do business; that the State may require domestic corporations to pay privilege, franchise or license taxes measured by gross income, although partly derived from United States bonds; and that in no proper sense can the challenged tax be regarded as one directly imposed upon gross income.

It cannot be denied (and denial is not attempted) that bonds of the United States are beyond the taxing power of the states. Home Savings Bank v. City of Des Moines, 205 U. S. 503, 509; Farmers & Mechanics Bank v. Minnesota, 232 U. S. 516; and First National Bank v. Anderson, 269 U. S. 341, 347. Certainly since Gillespie v. Oklahoma, 257 U. S. 501, 505, it has been the settled doctrine here that where the principal is absolutely immune, no valid tax can be laid upon income arising therefrom. To tax this would amount practically to laying a burden on the exempted principal. Accordingly, if the challenged Act, whatever called, really imposes a direct charge upon interest derived from United States bonds, it is pro tanto void.

The fundamental question, often presented in cases similar to these, is whether by the true construction of the statute the assessment must be regarded as a tax upon property or one on privileges or franchise of the corporation. Society for Savings v. Coite, 6 Wall. 594; Home Insurance Co. v. New York, 134 U. S. 594.

Section 76.34 undertakes to impose a charge not measured by dividends paid, as in Home Insurance Co. v. New York, 134 U. S. 594, nor by net income, as in Flint v. Stone Tracy Co., 220 U. S. 107; and thos6 cases are not controlling. The distinction between an imposition the amount of which depends upon dividends or net receipts and one measured by gross returns is clear. U. S. Glue Co. v. Town of Oak Creek, 247 U. S. 321, 328, and earlier opinions there cited.

A taxing act which requires payment of a certain percentage of the gross earnings of anM interstate carrier but which practically imposes no more than the ordinary charge upon local property may be sustained. U. S. Express Co. v. Minnesota, 223 U. S. 335, Cudahy Packing Co. v. Minnesota, 246 U. S. 450. But if the enactment goes further and burdens property beyond the state, as in Union Tank Line Co. v. Wright, 249 U. S. 275, or amounts to a direct imposition upon interstate commerce itself, as in Galveston Ry. Co. v. Texas, 210 U. S. 217, or lays an impost upon exports, as in Crew Levick Co. v. Pennsylvania, 245 U. S. 292, it violates the Federal Constitution.

Here the statute undertook to impose a charge of 3 per cent, upon every dollar of interest received by the Company from United States bonds. So much, in any event, the State took from these very receipts. This amounts, we think, to an imposition upon the bonds themselves and goes beyond the power of the State.

The judgment below is reversed; and the cause will be remanded to the Supreme Court of the State of Wisconsin for further proceedings not inconsistent with this opinion.