The STATE of Texas et al., Petitioners, v. CONNECTICUT GENERAL LIFE INSURANCE COMPANY, Respondent, 382 S.W.2d 745

STEAKLEY, Justice. With legislative permission, Connecticut General Life Insurance Company, Respondent, instituted this suit to recover overpay-ments to the State of occupation taxes totaling $408,661.26 for the years 1952 through 1957, and for the year 1959. The judgment of the trial court for Respondent was affirmed by the Court of Civil Appeals. State v. Connecticut General Life Insurance Co., 372 S.W.2d 352. Petitioners are the Attorney General, the State Treasurer, the Commissioner of Insurance, and the members of the State Board of Insurance.

Article 4769, Vernon’s Annotated Texas Statutes \ requires insurance organizations to file an annual statement of its gross premiums during the preceding calendar year from persons residing or domiciled in. Texas. It imposes thereon a maximum tax of 3.3 per cent which is reduced on a sliding scale to a minimum of 1.925 per cent, depending on the ratio of investments of the company in Texas securities to investments in similar securities in the state in which the company has invested the highest percentage of its admitted assets. The report is required to be filed on or before the first day of March of each year.

The Board of Insurance Commissioners is required to certify to the State Treasurer “the amount of taxes due * * * which shall be paid * * * on or before the fifteenth day of March, following.” Respondent timely filed the annual reports and sworn statements required by

Article 4769 for the years in question, 1952 through 1957, and 1959. In each instance the Board of Insurance Commissioners certified to the State Treasurer that Respondent owed for each year the amount in taxes shown on the annual reports. The remittances of Respondent in such amounts for each year were also delivered by the Board to the State Treasurer. These remittances by Respondent of the amounts certified by the Board were prerequisite to the right of Respondent to the issuance of a permit to continue its business in Texas.

Article 4.05 of the Insurance Code, Vol. 14, V.A.T.S., provides, in part: “Upon the receipt of sworn statements showing the gross receipts of any insurance organization, the Board of Insurance Commissioners shall certify to the State Treasurer the amount of taxes due by such insurance organization for the preceding year, which taxes shall be paid to the State Treasurer for the use of the State, by such company. Upon his receipt of such certificate and the payment of such tax, the Treasurer shall execute a receipt therefor, which receipt shall be evidence of the payment of such taxes.

No such life insurance company shall receive a certificate of authority to do business in this State until such taxes are paid. ’ (Italics added.) In its reports for the years in question, Respondent did not list its Texas securities and its similar securities in the state of its highest investment of assets, but merely stated the ratio to be less than 75% for the years 1952-57; the rate of tax according to the face of these reports was therefore 3.3 per cent for these years. A rate of 2.2 per cent was shown for the year 1959.

The Court of Civil Appeals determined upon the basis of the stipulations of the parties quoted in its opinion that Respondent was entitled to a rate of 1.925 per cent for each year in question. This resulted from the affirmative findings of alternative stipulations 15 and 17 by the trial court; the finding as to stipulation 17 was not brought under attack in the appeal and the Court of Civil Appeals properly declared the law applicable to stipulation 15.

The overpayments which follow from this determination constitute the amount of the judgment of the trial court which was affirmed by the Court of Civil Appeals, both of which judgments are, in turn, affirmed. The problem of the recovery of taxes which a taxpayer has paid but which he does not owe has confronted the courts under many circumstances and with varied results. See the annotations in 64 A.L.R. 9, 84 A.L.R. 294, 94 A.L.R. 1223, 165 A.L.R. 879, 84 A.L.R.2d 1133; also 51 Am.Jur., Taxation, §§ 1183-1213, 84 C.J.S. Taxation §§ 634-637.

This Court has consistently held that the voluntary payment of an illegal flax will not support a claim for repayment; but that a payment under duress, which may be either express or implied, is not a voluntary payment and may be recovered. Austin National Bank v. Sheppard, 123 Tex. 272, 71 S.W.2d 242; National Biscuit Co. v. State, 134 Tex. 293, 135 S.W.2d 687; Union Central Life Insurance Co. v. Mann, 138 Tex. 242, 158 S.W.2d 477; Metropolitan Life Insurance Company of New York v. Mann, 140 Tex. 450, 168 S.W.2d 212; State v. Akin Products Co., 155 Tex. 348, 286 S.W.2d 110.

The crucial test is whether the taxpayer acted under duress and duress was found in each of the foregoing decisions by this Court. Duress was not found in Corsicana Cotton Mills v. Sheppard, 123 Tex. 352, 71 S.W.2d 247, which was decided contemporaneously with Austin National Bank v. Sheppard. The duress in Austin National Bank rested on the fact that the refusal of the corporation to pay the additional filing fee demanded by the Secretary of State would have subjected it to the risk of having its right to do business in this state called in question with a resulting injury to its business should such occur.

The absence of duress in Corsicana Cotton Mills rested largely on the conclusions that “ * * * we find nothing therein that can be construed as a contention that the taxes here involved were claimed or demanded by the state or any state authority”; and that the reports filed by the corporation gave the Secretary'of State “no information by which he could have known that any overpayment of franchise taxes was being made.” In Metropolitan, as here, the insurance company overpaid the tax required of it under

Article 4769. The report of the company reflected on its face a higher tax than was actually owed. The Commissioner of Insurance certified the incorrect amount shown on the report and forwarded to the State Treasurer the remittance of the company in payment of the certified amount. The only difference between the problem in Metropolitan, and here, is that the report form then prescribed for use in complying with

Article 4769 subjected the company to a higher tax liability, if literally followed, than required by the statute. This was the basis for the statement im Metropolitan that “The form, in legal effect, demanded that such taxes be paid in conformity therewith. This is evident because the form, in effect, required relator to pay the very illegal taxes this appropriation was made to refund.” But it is to be noted that the company in Metropolitan did not consider itself bound by the report form and, indeed, included information not called for which reduced its tax liability.

Nevertheless, this Court held: “The form contained at the very beginning a very pertinent admonition or reminder.

Such admonition or reminder reads as follows: ‘The officers of any company who knowingly submit under oath a tax return under which the amount paid is less than the amount actually due the State under its laws render themselves and the company subject to all the penalties provided by law for such action.’ [The forms in the case at bar contained the same admonition] “To our minds the part of the report form just above quoted, in legal effect, was and is a statement that a failure, on the part of the relator, to make its report in conformity therewith, and so pay its taxes, would result in its' being subjected to the penalties prescribed. by our laws.

One. of these, penalties was that it would not receive a renewal of its certificate to .do business in Texas.

Article 4769, supra. The withholding of such' certificate would have compelled relator to cease writing insurance in this .state, and thus would have subjected it to a great inconvenience, and. financial loss. No court action was, or is, required to enable the Commissioner to withhold a renewal certificate. Taxes paid uri--der the circumstances we have detailed are taxes paid under duress.” Implicit in Metropolitan is the holding that taxes are paid under duress when

an act of the Commissioner of Insurance causes or results in an overpayment of taxes by an insurance organization, the payment of which in such amount is necessary to avoid the loss of the right of the insurance company to do business in this state. In Metropolitan this act was considered to be the furnishing of a report form which, if followed, would compel the payment of more taxes than owed. In the case at bar there is a comparable act which follows from the second major holding in Metropolitan.

Article 4769 defines the duty of the Board of Insurance Commissioners with respect to the annual reports required by the statute, as follows: “Upon receipt by it of the sworn statement above provided, the Board of Insurance Commissioners shall certify to the State Treasurer the amount of taxes due by such insurance organization which shall be paid to the State Treasurer on or before the fifteenth day of March, following, and the State Treasurer shall issue his receipt therefor as evidence of the payment of such tax.” In construing the foregoing, this Court said in Metropolitan: “The statute requires the Commissioner to certify to the State Treasurer the amount of taxes due.

Certainly this does not confine the Commissioner’s certificate to the amount shown by a report if such report is incorrect. To so hold would be to add something to the statute not contained therein.

The statute says that 'the Commissioner of Insurance shall certify to the State Treasurer the amount of taxes due by such company for the preceding year, * * The construction contended for by the respondents would call on us to add to the statute, the additional provision, as shown by such report, and would compel the Commissioner to issue a renewal certificate even though he knew the insurance company involved had not reported all taxes due.” (First italics added.) It is thus the statutory duty of the Commissioner of Insurance to certify the correct amount of taxes due and owing by a reporting insurance organization, whether more or less than the amount shown by the report.

The discharge by the Board of this duty to certify the taxes actually due and owing will necessarily disclose if a company has reported taxes which it does not owe. One of the controlling facts upon the basis of which no duress was found in Corsicana Cotton Mills was the absence of any information to indicate that the taxpayer had overreported and overpaid.

The corollary fact of controlling, legal significance, which was also absent-in Corsicana Cotton Mills, is that the certification, in legal effect, is a demand by the state that the tax in such amount be paid, otherwise the company will subject it-’ self to the loss of its right to do business in Texas. So it is that in the operation of the statute as it has been construed by this Court, the overpayment of taxes by Respondent for the years in question did not result from its failure to properly list its securities and to indicate the lower and proper rate in its reports.

The overpay-ments resulted from the incorrect certifications, and under the rationale of Metropolitan, and other decisions by this Court, the payments by Respondent of the amounts certified by the Board of Insurance Commissioners were payments under duress of the certifications, and of the applicable statutory provisions. Respondent therefore has a valid claim for recovery of the overpayments of taxes which were included in the certifications of the Board of Insurance Commissioners for the years in question.

We recognize that it may not have been feasible (although it was possible) for the Board of Insurance Commissioners to have determined before the certification deadlines the correct amount of taxes due and owing by Respondent for the years in question.

But our conclusions are not gainsaid by this fact nor by practices of expediency which may have developed during the years, i. e., that the reporting companies send along their remittances in the amount of the taxes shown in their reports and that the Board routinely certifies the amounts shown in the reports and transmits to the State Treasurer the remittances of the companies which accompanied their reports. The judgments of the trial court and of the Court of Civil Appeals are affirmed. .

Article 4769 remained so designated notwithstanding the enactment of the Insurance Code of 1951 and of Title 122A, Taxation, in 1959.

It is carried under Title 78, Insurance, at page 484 of volume 14A, Yernon’s Annotated Texas' Statutes. , The 1957 amendment to the Insurance Code of 1951 provides that “Except as otherwise provided herein, all remaining references in- the Insurance Code and other statutes of this state to ‘Board of Insurance Commissioners,’ ‘Board,’ or individual Commissioners shall mean the ‘State Board of Insurance’ or the ‘Commissioner of Insurance,’ consistent with their respective duties and responsibilities under the terms and provisions of this amendatory Act.” Art. 1.02(e); Acts 1957, 55th Leg., p. 1454, ch. 499, §2. . ,