The opinion of the court was delivered by
Scudder, J.
The plaintiffs in error are a private corporation of this state. In 1869, the defendant, as receiver of taxes of the city of Trenton, demanded of them $969.93, the amount of tax assessed upon $64,662, which was fixed by the commissioners of appeal in cases of taxation as representing the sum of their capital stock paid in, and accumulated surplus. The amount of capital stock paid in is $50,000 ; the total amount of assets, $118,449.20. The capital stock has been invested, since the organization of the company in 1865, in United States five-twenty bonds; of the balance of assets, $13,000 is invested in New Jersey state bonds, exempt from taxation ; and the residue, $55,449.20, was, by the judgment of the Supreme Court, held liable to assessment, as accumulated surplus. This residue, as appears by the company’s balance sheet of May 1st, 1869, is composed of three items, viz., bonds and mortgages, $47,800; corporation bonds, $6000; cash, $1649.20. The company insist that the sum $24,462.44 is the total amount of the earned premiums, and that this, with their capital, $50,000, represents their taxable property. Of these two sums, $63,000 is invested in exempt securities, leaving the true balance upon which tax should be paid, $11,462.44. The judgment of the Supreme Court, charging them with the large sum of $55,449.20, is assigned for error.
It is admitted that the company is taxable, under section fifteen of the act of April 11th, 1866, (Nix. Dig. 954,) at the full amount of their capital stock paid in, and accumulated surplus. It is not within any of the excepted cases named in said section, nor within the act of March 24th, 1864, (Nix. Dig. 950,) which applies only to life insurance companies.
There is no question about the capital stock, but whether all the assets of the company, in excess of their capital stock, [577]*577as shown by their statement of May 1st, 1869, ratable as accumulated surplus, is the point of controversy. These assets are not represented by the capital stock, but stand distinct from it, and beyond it; they are, therefore, in some sense, a surplus. This word is defined as “overplus;” that which remains when use is satisfied; excess beyond what is prescribed or wanted in law; the residue of an estate after the debts and legacies are paid.
“Accumulated” is simply amassed, collected, heaped up. With these definitions in mind, we have the guide to find the legislative intention. As applied to banking institutions, these words have a well-settled meaning, and this was probably in the contemplation of tlie legislature- when framing this section, although such institutions are excepted from -its provisions. The earnings of banks arising from discounts, and interest on investments, are carried into the surplus account, and paid over, after deducting expenses and ascertained losses, at certain periods, to stockholders, as dividends, reserving, however, such portion as the directors may deem proper, as a fnnd to increase the capital employed in conducting the business of the company, and to provide against contingent losses. Tills fund is called accumulated surplus. The analogy between these discounts of banks and the premiums on policies of insurance is certainly very close. One is a premium paid for a loan; the other, a premium paid for a fire risk. Both are earnings. They are earned, in the one case, when tlie loan is actually made; in the other, when the risk is assumed and begun. A similar disposition may be made of them. A certain portion — «o much as may be thought safe in the due course of business — -may be paid over to stockholders as dividends; a certain other portion, in the exercise of ail honest judgment, and for better security, should be retained in the hands of the corporation, as a provision against contingent losses. This amount should always have relation to the sum of outstanding policies, and the estimated liabilities, in the usual course of business. It is thus surplus capital, or accumulated surplus, employed in conducting tlie business of [578]*578the company. It stands to them in the place of an increase of capita], by calls on the stockholders, which might be necessary to cover the amount of their risks. Instead of adding to the capital directly, by calls, these premiums are funded. The company derives income from them, and holds them equally .with capital, liable for losses. In case of banking and stock insurance companies, the provision is made against contingent and not ascertained and certain losses; not against present debts, but possible liabilities. Debts and losses are first deducted, and the balance is held as a fund against contingencies. As defined by the Supreme Court, it is the fund the corporation has in excess of its capital stock after payment of its debts.
It is, however, argued that from the special character of the contract between the insurer and the insured, the premiums are not earned until the risks have expired, and that unearned premiums cannot be accumulated surplus. Such distinction between earned and unearned premiums is doubtless important in estimating the strength of the company, and in determining the propriety of making dividends among stockholders ; but, in this case, it' is necessary to go further, and say that unearned premiums are so charged that they cannot be considered as the property of the company for purposes of taxation. Whose, then, is the premium when the contract of insurance is signed and delivered, and the risk is begun ? In the customary form of fire insurance policies, the contract is entire; the full premiums are paid, or secured to be paid, for the whole term that the policies run, at the time of insurance. Where the contract is entire, no apportionment or return of the premium is made after the risk has once commenced, without express stipulation. Tyrie v. Fletcher, Cowp. 666; Bermon v. Woodbridge, 2 Doug. 781; Hunter v. Wright, 10 B. & C. 714; Hendricks v. Commercial Insurance Company, 8 Johns. 1; Waters v. Allen, 5 Hill 421.
The usual stipulation that in the event, of the transfer of the property insured, and the termination of the insurer’s risk, a part of the premium may be reclaimed, proportionate to the [579]*579time the risk lias run, is but a contingency, and not such a charge upon the premium that it takes away the right of property and ownership. Such liability to return is in the same class as possible losses by fire, against which provision is made by the-capital stock, and the reserved fund of the corporation, which is called the accumulated surplus. It is not a specific charge on the premium paid, but a possible liability that may be claimed out of the general assets of the company.
Besides, this idea of the difference between earned and unearned premiums, as affecting the question of present property, is too uncertain to form a basis of taxation. It is a matter of nice calculation and adjustment, beyond the reach of assessing officers, and within the exclusive knowledge of the corporation. There are difficulties, also, that are unanswerable. Policies run for different times — some for one year; some, more; and, in certain companies, there are perpetual policies. Where, for purposes of taxation, are those premiums earned ? Shall the companies, for years, hold them invested, deriving income from them, and paying no tax ?
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The opinion of the court was delivered by
Scudder, J.
The plaintiffs in error are a private corporation of this state. In 1869, the defendant, as receiver of taxes of the city of Trenton, demanded of them $969.93, the amount of tax assessed upon $64,662, which was fixed by the commissioners of appeal in cases of taxation as representing the sum of their capital stock paid in, and accumulated surplus. The amount of capital stock paid in is $50,000 ; the total amount of assets, $118,449.20. The capital stock has been invested, since the organization of the company in 1865, in United States five-twenty bonds; of the balance of assets, $13,000 is invested in New Jersey state bonds, exempt from taxation ; and the residue, $55,449.20, was, by the judgment of the Supreme Court, held liable to assessment, as accumulated surplus. This residue, as appears by the company’s balance sheet of May 1st, 1869, is composed of three items, viz., bonds and mortgages, $47,800; corporation bonds, $6000; cash, $1649.20. The company insist that the sum $24,462.44 is the total amount of the earned premiums, and that this, with their capital, $50,000, represents their taxable property. Of these two sums, $63,000 is invested in exempt securities, leaving the true balance upon which tax should be paid, $11,462.44. The judgment of the Supreme Court, charging them with the large sum of $55,449.20, is assigned for error.
It is admitted that the company is taxable, under section fifteen of the act of April 11th, 1866, (Nix. Dig. 954,) at the full amount of their capital stock paid in, and accumulated surplus. It is not within any of the excepted cases named in said section, nor within the act of March 24th, 1864, (Nix. Dig. 950,) which applies only to life insurance companies.
There is no question about the capital stock, but whether all the assets of the company, in excess of their capital stock, [577]*577as shown by their statement of May 1st, 1869, ratable as accumulated surplus, is the point of controversy. These assets are not represented by the capital stock, but stand distinct from it, and beyond it; they are, therefore, in some sense, a surplus. This word is defined as “overplus;” that which remains when use is satisfied; excess beyond what is prescribed or wanted in law; the residue of an estate after the debts and legacies are paid.
“Accumulated” is simply amassed, collected, heaped up. With these definitions in mind, we have the guide to find the legislative intention. As applied to banking institutions, these words have a well-settled meaning, and this was probably in the contemplation of tlie legislature- when framing this section, although such institutions are excepted from -its provisions. The earnings of banks arising from discounts, and interest on investments, are carried into the surplus account, and paid over, after deducting expenses and ascertained losses, at certain periods, to stockholders, as dividends, reserving, however, such portion as the directors may deem proper, as a fnnd to increase the capital employed in conducting the business of the company, and to provide against contingent losses. Tills fund is called accumulated surplus. The analogy between these discounts of banks and the premiums on policies of insurance is certainly very close. One is a premium paid for a loan; the other, a premium paid for a fire risk. Both are earnings. They are earned, in the one case, when tlie loan is actually made; in the other, when the risk is assumed and begun. A similar disposition may be made of them. A certain portion — «o much as may be thought safe in the due course of business — -may be paid over to stockholders as dividends; a certain other portion, in the exercise of ail honest judgment, and for better security, should be retained in the hands of the corporation, as a provision against contingent losses. This amount should always have relation to the sum of outstanding policies, and the estimated liabilities, in the usual course of business. It is thus surplus capital, or accumulated surplus, employed in conducting tlie business of [578]*578the company. It stands to them in the place of an increase of capita], by calls on the stockholders, which might be necessary to cover the amount of their risks. Instead of adding to the capital directly, by calls, these premiums are funded. The company derives income from them, and holds them equally .with capital, liable for losses. In case of banking and stock insurance companies, the provision is made against contingent and not ascertained and certain losses; not against present debts, but possible liabilities. Debts and losses are first deducted, and the balance is held as a fund against contingencies. As defined by the Supreme Court, it is the fund the corporation has in excess of its capital stock after payment of its debts.
It is, however, argued that from the special character of the contract between the insurer and the insured, the premiums are not earned until the risks have expired, and that unearned premiums cannot be accumulated surplus. Such distinction between earned and unearned premiums is doubtless important in estimating the strength of the company, and in determining the propriety of making dividends among stockholders ; but, in this case, it' is necessary to go further, and say that unearned premiums are so charged that they cannot be considered as the property of the company for purposes of taxation. Whose, then, is the premium when the contract of insurance is signed and delivered, and the risk is begun ? In the customary form of fire insurance policies, the contract is entire; the full premiums are paid, or secured to be paid, for the whole term that the policies run, at the time of insurance. Where the contract is entire, no apportionment or return of the premium is made after the risk has once commenced, without express stipulation. Tyrie v. Fletcher, Cowp. 666; Bermon v. Woodbridge, 2 Doug. 781; Hunter v. Wright, 10 B. & C. 714; Hendricks v. Commercial Insurance Company, 8 Johns. 1; Waters v. Allen, 5 Hill 421.
The usual stipulation that in the event, of the transfer of the property insured, and the termination of the insurer’s risk, a part of the premium may be reclaimed, proportionate to the [579]*579time the risk lias run, is but a contingency, and not such a charge upon the premium that it takes away the right of property and ownership. Such liability to return is in the same class as possible losses by fire, against which provision is made by the-capital stock, and the reserved fund of the corporation, which is called the accumulated surplus. It is not a specific charge on the premium paid, but a possible liability that may be claimed out of the general assets of the company.
Besides, this idea of the difference between earned and unearned premiums, as affecting the question of present property, is too uncertain to form a basis of taxation. It is a matter of nice calculation and adjustment, beyond the reach of assessing officers, and within the exclusive knowledge of the corporation. There are difficulties, also, that are unanswerable. Policies run for different times — some for one year; some, more; and, in certain companies, there are perpetual policies. Where, for purposes of taxation, are those premiums earned ? Shall the companies, for years, hold them invested, deriving income from them, and paying no tax ?
This uncertainty is opposed to the policy of this statute, as it is clearly expressed in many of its provisions, and there is no intimation of a purpose to exempt any part of such premiums from taxation.
The proviso at the end of the fifteenth section of this act, “ that all premium rates held by life insurance companies shall, in no case, be considered as future premiums, but shall be included in the valuable assets of said companies,” is in pari materia,. It is the expression of an intention to bring all things hold by insurance companies, that are properly ratable, within the operation of the assessment for public taxes.
The act of March 24th, 1864, which relates to corporations whose business is that of insurance on lives, is a peculiar statute, for a favored class, and the allowance of deductions of the present value of policies, as part of the liabilities of such companies, is distinct from the claim here made for allowance and [580]*580deduction of what are called unearned premiums. It is certainly an exception from the general policy'of the statute in taxing private corporations. The cases^ cited give but little aid in settling the exact meaning of the words accumulated surplus, as used in our statute.
Mutual Insurance Company v. Supervisors of Erie, 4 Coms. 442, construes the particular words of ,the charter in question. The whole capital of the company was composed of premiums paid in and invested. These were held to be capital for the purpose of taxation. State v. Tunis, 3 Zab. 546, was under the tax law of 1851, and is only applicable from the use of some expressions which indicate the idea of a surplus fund in the hands of a corporation, in its relation to valuation of stock by increasing the stockholders’ tax. Thus, on page 549 : “ If the assessment was directed to be made upon the capital stock, at its par value, there might be propriety in taxing the surplus capital as so much accumulated wealth; but an assessment upon the stock, at its actual value, necessarily includes the accumulated surplus.” Again, on the same page: “ In addition to the capital stock, the bank has accumulated a fund of $46,000, which belongs to the stockholders, but has not been divided among them, being retained and used for banking purposes, and out of which losses are paid when they occur. State v. Hallam, 1 Vroom 405, was overruled in Rudderow v. State, 2 Vroom 512. In the latter case, the opinion of Justice Elmer is an exposition of the law of 1862, but does not decide the question now discussed. In State v. Utter, 5 Vroom 493, a definition is given of accumulated surplus, incidentally, thus: “The term ‘accumulated surplus,’ in its application to stock companies, is well understood to refer to the fund they have in excess of their capital and liabilities.” The word “liabilities” there used, means fixed liabilities — not contingent — hence, Justice Van Syckel, who wrote the opinion in that case, when the point came up directly, as it did in the case now under review, used the corresponding and more precise expression, “the fund it has in excess of its capital stock after the payment of its debts.’ [581]*581All of these former cases, so far as they apply, favor the construction last given to this expression, “ accumulated surplus,” in the Supreme Court, and there is no error found in their judgment.