273 F. 452 | 2d Cir. | 1921
On March 9, 1917, plaintiff below authorized an issue of bonds and executed a trust agreement securing them, by the action of its board of directors. On the same day the bonds were underwritten by its bankers. On April 16th the issue of bonds and the execution of the trust agreement was ratified by die stockholders, and on the following day the right to subscribe to this issue, $35,000,000, series A, was offered to the stockholders. On May 1st the underwriters requested the plaintiff below to issue a temporary $35,000,000 series A bond to the Guaranty Trust Company of New York. Such issue was authorized by the directors, and a trust agreement executed on May 3d, and a temporary bond was executed on
“for and in respect of the several bonds, debentures, or certificates of stock and of indebtedness, and otlior documents, instruments, matters, and things mentioned and described in Schedule A of this title, or for or in respect of the vellum, parchment, or paper upon which such instruments, matters, or things, or any of them, are written or printed, by any person, corporation, partnership or association who makes, signs, issues, sells, removes, consigns, or ships the same, or for whose use or benefit the same are made, signed, issued, sold, removed, consigned, or shipped, the several taxes specified in such schedule.” Comp. St. 1918, § G318a.
And Schedule A, referring to stamp taxes, provides:
“Bonds of indebtedness: Bonds, debentures, or certificates of indebtedness issued on and after the first day of December, nineteen hundred and seventeen, by any person, corporation, partnership, or association, on each §100 of face value or fraction thereof, 5 cents.” Section 6318h.
The Commissioner of Internal Revenue contended that the issue of the bonds in question occurred when the permanent and engraved bonds were handed to the subscribers and underwriters on May 29, 1918, after the effective date of the stamp tax, and that therefore the bonds in question were taxable. Adhering to this contention, the Commissioner of Internal Revenue imposed a tax of $17,500 which tax was paid under protest. It was held below that ihe bonds were issued at a date prior to the effective date of the stamp tax, and that the bonds were not taxable, and the demurrer to the complaint was overruled, and judgment for the plaintiff below followed.
“The parties were not on equal terms. The appellant had no choice. The only alternative was to submit to an-illegal exaction, or discontinue its business. It was in the power of the officers of the law, and could only do as they required. Money paid, or other value parted with, under such pressure,, has never been regarded as a voluntary act, within the meaning of the maxim, ‘Volenti non fit injuria.’” 111 U. S. 28, 29, 4 Sup. Ct. 247, 28 L. Ed. 341.
As it was said in Maxwell v. Griswold et al., 51 U. S. (10 How.) 241, 13 L. Ed. 405:
“Now, it can hardly be meant in this class of cases that, to make a payment involuntary, it should be by actual violence, or any physical duress. It suffices if the payment is caused on the one part by an illegal demand, and made on the other part reluctantly and in consequence of that illegality, and without being able to regain possession of his property, except by submitting to the payment.” 51 U. S. (10 How.) 255, 13 L. Ed. 405.
In Edwards, etc., v. Wabash Ry. Co., 264 Fed. 610, this court permitted a recovery where a tax was imposed illegally by a collector under the same Stamp Tax Act, holding that under .the statute, where a tax is imposed upon the original issue, it is intended not to be imposed
“should issue and deliver the same to the Guaranty Trust Company of New York, such bond to be held by the said Guaranty Trust Company of New York substantially under the terms expressed in the following draft letter:
“ ‘New York City, May 24, 1917.
“ ‘Guaranty Trust Company of New York, 140 Broadway, New York City-’ Gentlemen: Chile Copper Company hands you herewith its collateral trust gold bond series A for $35,000,000; principal amount issued under and secured by the trust agreement, dated April 1, 1917, between Chile Copper Company, Guaranty Trust Company of New York, as trustee, and Chile Exploration Company.
“ ‘The company is issuing hearer receipts to the principal amount of $35,000,000, which are exchangeable at your office (upon the terms and conditions stated in such receipts) for an equal principal amount of said collateral trust gold bonds series A.
“ ‘The $35,000,000 bond transmitted herewith is delivered to you, so that, without further action by Chile Copper Company, the holders of such receipts may be in a position to obtain the bonds in accordance with the terms and conditions of the receipts. * * * ’ ”
The installment receipts, issued when payment was made, provided;
“The bonds above mentioned have been issued by the eompany and deposited with Guaranty Trust Company of New York, to be held by said trust company pending the payment of such remaining installment pursuant to the provisions hereof.”
We think that, within the meaning of the statute, bonds were issued when, on June 7, 1917, the first installment of the subscribing stockholders and underwriters had been paid in full. The bond had been delivered to and authenticated by the Guaranty Trust Company prior thereto, on April 1, 1917. It is clear that there was a binding obligation thereon when the first installment was paid. If, on June 7th, the stamp tax was effective, a tax would have been imposed upon this temporary bond, and if, at a later date, the engraved bonds were substituted therefor, no tax could be imposed. Edwards, etc., v. Wabash Ry., supra. The intention of the parties is clear. The Guaranty Trust Company was to hold the $35,000,000 temporary bond in trust as security for the amount paid by the subscribers and underwriters until the payment of the second installment and the delivery of the permanent bonds. About June 1st, the underwriters advanced, on the faith of this security, subscriptions of over $17,000,000, and the intention was that they were to receive permanent small denomination engraved bonds about a year later, when the final payment was made. The issuance of the temporary bond was for the purpose of security only. The plaintiff below entered the entire amount of the bond as an outstanding obliga
Under the British Finance Act of 1899, which imposed a stamp duty, it was said in Attorney General v. Liverpool Corp. [1902] 1 Kings Bench, 411, in a case somewhat parallel to the one at har, where stamps upon bond's were involved (the stock of the city of Liverpool being the equivalent of bonds), and where a contract had .been entered into whereby the' corporation was bound to deliver the bonds upon fulfillment of certain conditions, and script certificates redeemable for permanent certificates had been issued, and where- the question of what was meant by issue of the securities was presented, it was said that—
“ * * * By the time the corporation had issued the necessary certificates, whereby they bound themselves, upon the creditor complying with the remainder of the terms of the allotment, to issue the stock to him and to enter him as a stockholder, they had, in my opinion, issued the loan capital.”
It was never intended by the statute to impose the'tax on the exchange of the permanent bonds for temporary bonds, or upon the exchange of registered of unregistered bonds, or vice versa, or * for the substitution of several small bonds for one large one, and vice versa. For us to hold, as contended for by the defendant below, would be to reach such a conclusion. No additional tax is required upon the issuance of a permanent or definite bond in substitution for a temporary bond which has been delivered. The term “issued,” as used in the statutes,- implies not merely delivery, but delivery of an instrument creating or renewing an obligation, and not merely furnishing a different expression of a pre-existing obligation.
We think that the bonds were issued prior to the effective date of the Stamp Tax Act, and that the demurrer was properly overruled.
Judgment affirmed.