This appeal is from the granting of appellees' motion for summary judgment and the denial of appellants' motion for summary judgment. The pivotal issue concerns the questioned legality of a tax imposed by the appellees (State) upon the appellants (Insurance Companies).
The Insurance Companies contend that the statutory authority relied upon by the State to impose such a tax is unconstitutional because Law 1973, Ch. 160, § 6 amending ARS § 20-224(B) did not reasonably and fairly express the tax subject matter in the title of the legislative act. Specifically, it is alleged that there is a constitutional violation because the title to the act fails to fairly inform the legislature and the public that § 6 of the act would impose additional premium taxes on the appellant Insurance Companies.
ARS Const. Art. 4, pt. 2 § 13 relied upon by the Insurance Companies reads:
The title to the act questioned in this appeal reads:
Under this title the Thirty First Legislature amended ARS § 20-224(B) to read:
Pursuant to this statute the Arizona Department of Insurance imposed a tax upon the appellant Insurance Companies covering all premiums received from policyholders whose mailing addresses at the time of payment were in states or foreign countries in which the appellants were not licensed, did not have resident agents, and to which they paid no premium taxes during the calendar years of 1974. After this tax was upheld in an administrative hearing, the case was appealed pursuant to ARS § 20-166 to the Maricopa County Superior Court. This appeal followed a summary judgment rendered in favor of the State by the superior court.
The Insurance Companies argue that they should not be required to pay taxes on these "orphan premiums" as authorized in ARS § 20-224(B) because there was nothing in the title of the legislative act granting this section to warn the Insurance Companies that they would be subject to any additional premium taxes. The term "orphan premiums" is a term used in the industry to identify those premiums received by a domestic insurance company from policyholders residing in a state in which the company is not licensed and where the company does not pay a premium tax.
We agree there is nothing in the title which would put the legislature, the Insurance Companies or members of the interested public on notice that a new tax on "orphan premiums" was going to be imposed under the act. The only reference to premium taxes is "Prescribing Date for Paying Premium Taxes."
The State argues that the title of the act is "insurance" which is broad in scope and that it is not necessary for the title of every act to have an index of what is contained therein. Ellery v. State, 42 Ariz. 79, 22 P.2d 838 (1933). Any party questioning the validity of a statute must overcome the presumption of the statute's
Although we find this to be a close question, we are persuaded by the two most recent cases from the Arizona Supreme Court on this subject. In State v. Sutton, 115 Ariz. 417, 565 P.2d 1278 (filed June 6, 1977), the court held the title to an act "RELATING TO CRIMES, PRESCRIBING PENALTY FOR THEFT OF CREDIT CARD, AND AMENDING SECTIONS 13-1073, ARIZONA REVISED STATUTES" did not comply with our constitutional requirement when the act added the new crime of possession of a credit card with intent to defraud. The court held that portion of the act unconstitutional and set aside the defendant's conviction for possession of a credit card with intent to defraud because the title of the 1972 act under which he was convicted did not express the subject matter which would embrace possession of a credit card with intent to defraud.
The supreme court held that although the title to the act stated it was to provide an alternate procedure for the formation of county improvement districts, the real thrust of the contents of the act was to provide an alternate procedure for financing improvements after the formation of an improvement district. The court held the act unconstitutional for the reason that the title did not clearly express the true content of the body of the act.
In both these recent cases the court stated that ARS Const. Art. 4, pt. 2, § 13:
Applying the strict construction of State v. Sutton, supra, and White v. Kaibab, supra, to the facts of the case we hold that the tax of ARS § 20-224(B) is unconstitutional because the title to the act fails to give adequate notice that within the contents of the act there is a new tax placed upon "orphan premiums."
The Insurance Companies raise additional arguments which we now deem moot in light of our holding above.
DONOFRIO, J., and JACOBSON, P.J., Department C, concur.