The plaintiff, Mutual Benefit Life Insurance Company, brought suit against defendants Charles R. Fischer, Commissioner of Insurance of the State of Iowa, John M. Grimes, Treasurer of the State of Iowa, and C. Fred Porter, Comptroller of the State of Iowa, to compel a refund to it of the sum of $378.10 as insurance-premium taxes paid by plaintiff to defendants under protest on July 14, 1943, and to compel such commissioner to issue to plaintiff a license to carry on its business of writing life insurance in Iowa, and to enjoin such commissioner from in any manner interfering with the operation of said company. Following trial the court entered a finding and decree in favor of plaintiff and defendants have appealed.
There is little dispute in the facts. The record before us consists of the pleadings, various exhibits, the undisputed testimony of Edward E. Rhodes, vice president of the insurance company, the finding of facts and conclusions of law by the court, and its decree.
I. Appellants, following their statement of the case, say: "The sole question involved in defendants' appeal and discussed in this argument is: Does Section 7022 of the Code of Iowa 1939 as amended apply to dividends applied upon the `Accelerative Endowment' plan under policies issued on the lives of residents of the State of Iowa by the plaintiff?"
The appellee sets forth the issues in a somewhat different form but we think that the issue as set forth by appellants is, in essence, as stated.
Appellee, in the year 1943, under protest, paid a tax computed upon certain dividends belonging to policyholders and *Page 42 under their directions retained by appellee and applied in what was known as the "accelerative endowment" plan. Appellee claims that such funds, being dividends returned to it by the policyholders, are not taxable under Code section 7022, while appellants claim that such sums so applied are to be included in the term "gross premiums" as set forth in said section. Said section 7022, in substance, provides that all foreign insurance companies authorized to do business in Iowa shall make annual statements to the Commissioner of Insurance and at the time thereof "pay into the state treasury as taxes two and one-half percent of the gross amount of premiums received by it for business done in this state, including all insurance upon property situated in this state and upon the lives of persons resident in this state during the preceding year."
Boiled down, it seems to us that the real issue goes to the right of appellants to impose and collect the two and one-half per cent premium tax upon certain dividends declared and used by the policyholders to purchase accelerated endowment insurance.
II. Appellee is a foreign insurance company and is authorized to carry on its business in Iowa. It operates upon the mutual plan, wherein each policyholder is a member. In it all profits and surplus belong to the policyholders. All policies issued are what are known as "participating," thereby giving each member a right to share in any profits or surplus returned in the form of dividends. It issues no other type of policy. By the terms of each policy, after the first year, and annually thereafter, the policyholder is entitled to participate in any dividend declared. All policies issued so provide. With this is coupled the proviso as to how such dividends are to be disposed of. To do so the member can exercise an option. Such method was pursued as to the policies involved in this case.
Insurance companies issue various types of policies. An ordinary life policy is payable only at the death of the member. The premium is a fixed annual charge and does not change. An endowment policy is payable at a fixed future date, either at some specified age or at some fixed period after issue. When dividends are declared they become the property of the insured member and he has an option to dispose of them as he sees fit. *Page 43 He may take them in cash, use them to reduce premium, or he can purchase additional insurance, or leave them with the company to accelerate the date of the maturity of the policy. In the present case the last-named plan was followed. The premium and the amount of the policy to be paid at maturity did not change; simply the maturity date was advanced — accelerated.
"Dividend" is a common expression in life insurance. Dividends generally are derived by reason of favorable mortality among the members, from interest earnings in excess of the interest assumed in the computation of the premium, and from lower expense of management and operation than that computed in the fixing of the premium rate. This last item is sometimes spoken of as excessive "expense loadings."
The premiums charged insurance members are based upon three assumptions: (1) That the rate of mortality — that is, the death rate — will not exceed that set forth in a given table of mortality (2) that the interest earnings will not fall below a certain rate and (3) that the expenses and contingencies will not exceed those contemplated in making the rate. As a rule the premiums charged are somewhat in excess of the amount thought necessary to carry the insurance. Such excess is taken into consideration in fixing the dividend.
In the present case, as above stated, at the direction of the member the dividend was left with the appellee to be used in securing an accelerated endowment. This accelerated endowment did not change the premium or the amount to be paid; it simply hastened the time of the payment of the face of the policy. By using the dividend in such manner the insured had an opportunity to be paid the face of the policy during his lifetime. This he could not do under the ordinary life policy.
During the trial a specimen policy was used as an exhibit. It was an ordinary life policy issued by appellee to a member on September 15, 1905, said member then being aged twenty-one years. The level annual premium was $18.40 and when the second annual premium fell due there was a dividend to the credit of the insured of $1.96. Each year thereafter an annual dividend was declared. He used the dividend of $1.96 and added to it $16.44 to pay the premium due the second year. Later, by using *Page 44 the dividends to apply on the accelerated endowment plan, the policy matured and was paid in full — $1,000 — in 1943.
During the entire period from 1905 to 1943, the annual premium was paid by the assured and the insurer paid to the state of Iowa the regular tax of two and one-half per cent thereon.
It stands uncontradicted that the appellee at all times has paid the two and one-half per cent tax on all annual premiums. Appellee concedes that the state has a legal right to have paid it such tax undiminished by any credit of dividends withheld or applied. Appellee does contend, however, that in computing the "gross premium" received appellants are not entitled to have added to the regular annual premium the dividend declared. For example, they cite the policy introduced as an exhibit, wherein the annual premium was $18.40, and say that if appellants' contention is sustained the state could collect the two and one-half per cent tax on $20.36 — the $18.40 annual premium and the $1.96 dividend.
The trial court held that section 7022 of the Code of 1939 did not provide for any tax upon dividends applied upon the accelerative endowment plan and that such statute should be construed to apply only to contract premiums as specified in the various policy insurance contracts issued by the insurer and held by residents of the state of Iowa.
III. Singularly, both parties place reliance upon two of our holdings: New York L. Ins. Co. v. Burbank, 209 Iowa 199,216 N.W. 742; and Prudential Ins. Co. v. Green, 231 Iowa 1371,2 N.W.2d 765, 141 A.L.R. 1401. Appellants also cite In re Continental Cas. Co., 189 Iowa 933, 179 N.W. 185; Metropolitan L. Ins. Co. v. Rouillard, 92 N.H. 16, 24 A.2d 264.
We have gone over the above-cited cases carefully in connection with the arguments which the parties have made. We are impressed by the manner in which the legal arguments have been presented. It reveals careful and painstaking study and consideration. We hold that the trial court did not err in the decree rendered. Following a careful consideration of the record and issues involved, we are of the opinion that the holding of this court in Prudential Ins. Co. v. Green, supra, is controlling in this case. In essence, the issues in that and the present case are similar. In that case Miller, J., went into the matters *Page 45 involved thoroughly and made a very extensive and complete exposition of the legal principles controlling therein. Six of the members of this court concurred in the opinion rendered. The opinion, in effect, held that dividends declared by an insurance company were not subject to tax under section 7022.
In that opinion careful consideration was given to the holding of this court in New York L. Ins. Co. A. Burbank, supra, and the holding in that case was distinguished from the opinion being rendered. The Burbank case was carefully and fully analyzed and the court held that its holding in that case was not in conflict with its holding in the Green case. We do not think it necessary to again cover the field which was so fully and ably set forth in the Green case. We think that the logic and reasoning and rules of statutory construction therein set forth are as controlling in the present case as in that case. Appellants argue at length that the holdings in the Burbank and Green cases are conflicting and inconsistent and that one or the other should be overruled. With this contention we are unable to agree. In the Burbank case the New York Life Insurance Company brought suit against the treasurer of the state of Iowa to compel a refund of the two and one-half per cent premium tax paid under protest by the insurance company on various items, to wit, (1) annual dividends paid in cash, $10,354.21 (2) dividends used by way of deduction from the stipulated premiums, $104,628.59 (3) deferred dividends paid in cash, $216,221.48 (4) amounts paid to policyholders in cash on surrender of policies, $245,894.68: a sum total of $577,098.96. The contract rates on policies for such period amounted to $1,611,198.64. Taking these figures into consideration it will be seen that the insurance company was asking that the amount derived from the annual premium rate be reduced by over thirty-five per cent. There the insurance company was contending that the regular contract premium be reduced by the allowance of certain specified credits. We think the court very properly denied this claim when it held that such reduction was not allowable.
In the present case the position of the parties is reversed from that which existed in the Burbank case. There, in essence, the insurance company was contending that the annual contract *Page 46 premium for taxable purposes be reduced by certain applications, such as dividends, retained premiums, etc., while in the present case the state, through its Commissioner of Insurance and other officials, makes the claim that the annual contract premium for taxable purposes be increased by adding thereto dividends applied to the accelerative endowment plan. Would it be logical or reasonable to say that the annual contract rate was the taxable basis in the Burbank case and then say in the present case that the annual contract rate plus dividends was to be the taxable basis? It strikes us that to so hold would not only be unfair but unreasonable and inconsistent.
In the Prudential-Green case, supra, 231 Iowa 1371, 1383,2 N.W.2d 765, 771, 141 A.L.R. 1401, the court, in distinguishing its holding from the Burbank case, used the following language:
"When we come to the intermediate and ordinary life policies, the situation is different because the insured has an option. But does this require a different answer? The insured still pays the same contract premium and that premium is still earned in the same manner. There would be an element of unreasonableness in the application of a different rule. Under the rule of the Burbank case, the tax is the same even though the premium actually paid is reduced by the exercise of option 3. This is because the statute is construed to mean that the tax is based upon the contract premium and does not authorize a reduction therefrom where the premium actually paid is reduced by application of a dividend. Would it be fair or reasonable to say that the statute contemplates that the tax be increased by adding to the contract premium the amount of such dividend when applied to provide paid-up additions to the amount of insurance? If the statute doesnot contemplate any reduction from the contract premium becauseof the payment of dividends, to be consistent we must also holdthat it does not contemplate any addition thereto because of theapplication of dividends. [Italics supplied.]
"Stated otherwise, in the Burbank case, supra, we stated that the question to be decided was whether the statute is to be construed as requiring a tax on `the total amount of premiums *Page 47 computed at table or policy rates at their face,' or `that amount less such sums as the company has during the year abated from premiums or paid in cash to policyholders for dividends.' (Italics supplied.) We held that the tax must be computed on the total amount of premiums computed at policy rates, the contract premiums, and that dividends would not be considered for the purpose of reducing the tax. We now hold, in line with that decision, that dividends will not be considered for the purpose of increasing the tax. In both instances it is the policy rate, the contract premium, that determines the amount of the tax. In both cases the dividends do not affect the amount of the tax."
It seems to us that the language above quoted from the Green case is clearly decisive in this case. While there may be some language in the Burbank case which may seem at variance with the holding in the Green case, yet, by careful study, we are of the opinion that on the broad general principle of statutory construction, as applied to the record, the two do not conflict and can be clearly distinguished from each other. We are content to follow our holding in the Green case.
We have examined the two other cases cited by appellants. In re Continental Casualty Co., supra, so far as applicable, we think is not inconsistent with our holding herein. However, in that case the controversy was over taxing unearned premiums where policies were canceled or surrendered. Such policies, under the statute, have a surrender value, and the court very properly held, we think, that there could be no tax imposed upon an unearned premium returned following such cancellation or surrender. That case did not involve life-insurance policies such as are involved in the present case. We think that there is language in that case which supports our holding here.
In the case of Metropolitan L. Ins. Co. v. Rouillard, supra, there was a special statute of the state of New Hampshire which expressly defined "gross premiums" and provided that same could not be reduced by the deduction of dividends. In effect, the Burbank case arrived at the same conclusion.
IV. In support of the finding of the trial court appellee has set forth and argued two propositions: (1) That the inclusion of dividends in the "gross premium received," as set forth *Page 48 in section 7022, applied to accelerated endowments would amount to double taxation, and (2) that taxing statutes are to be construed strictly and any uncertainty or ambiguity should be resolved in favor of the taxpayer. In view of the fact that we are affirming the case on the first ground argued, we will refrain from passing upon the second, but we make the suggestion that were these two points the only ones raised they would merit serious consideration.
The finding and decree of the trial court was right and is affirmed. — Affirmed.
HALE, C.J., and WENNERSTRUM, SMITH, and MILLER, JJ., concur.