236 N.W. 850 | Mich. | 1931
This is certiorari to the corporation tax appeal board to review affirmance of a levy of corporation privilege tax by the secretary of State.
The Detroit Properties Corporation was incorporated under the laws of this State to buy and hold *525 real estate, stocks, bonds, or other securities and to deal in the same. A bill of complaint was filed against it by a creditor, alleging, in substance, that the corporation was solvent but confronted with immediate financial embarrassment and praying, among other things, for the appointment of a receiver, with authority to continue the business of the defendant and "to protect and preserve its franchise and privileges." The court appointed Union Guardian Trust Company temporary receiver with the usual powers and also authority —
"in general to operate the business of the defendant as fully as the defendant operated same and in the manner best calculated in the opinion of the receiver to fully protect that business, to the end that the business of the defendant may be preserved as well as its assets."
The issue is whether the corporation is subject to the privilege fee which, by 2 Comp. Laws 1929, § 10140, every domestic corporation is required to pay "for the privilege of exercising its franchise and of transacting its business within this State," and which accrued after the appointment of the receiver and its taking control of the corporate property and business. The question is one of first impression with this court.
The privilege fee is an excise tax, not upon the right to be a corporation, but upon the activities of the corporation in the exercise of its corporate franchise, or, as it is sometimes expressed, upon the franchise "to do," not upon the franchise "to be." Union Steam Pump Sales Co. v. Secretary of State,
In all the cases cited or found, where the power to impose a similar tax during receivership has been denied, it has appeared that the corporation was insolvent, or in process of liquidation, or had been prohibited by law or injunction from exercising its franchises, or the proceedings were for dissolution, the receiver was not operating the business, and the life or right of the corporation to do business had ceased.Jones v. Winthrop Savings Bank,
In holding a receiver liable for a tax "for the privilege of operation of the street railway in public ways" inCollector of Taxes v. Railway,
"There are numerous cases which have held that a corporation in the hands of a receiver is not subject to a franchise tax. Those are cases, however, where the corporation has been prohibited by law or by injunction from exercising its franchises and the receiver is not using them, or the corporation is in process of liquidation."
The cases in which the power to tax has been upheld are many, but some of them have aspects which *527 cause them to be more or less distinguishable from that at bar.
In some States the fax is on the franchise of the corporation "to be" and seems to be collectible until legal dissolution or its equivalent. Kirkpatrick v. Board of Assessors,
In some other States statutes provide for the collection of such taxes from a receiver. The courts, however, have not laid decision upon the ground that such special provision created the liability of the receiver for franchise taxes, but have founded liability upon general principles as well.Bright v. State of Arkansas (C.C.A.), 249 Fed. 950; Armstrong
v. Emmerson,
The New York statute, Cahill's Consol. Laws of New York, 1930, Chap. 61, § 209, usually reported in the cases as "Consol. Laws, C. 60," provides a *528
tax on corporations generally, "for the privilege of exercising its franchise in this State in a corporate or organized capacity;" and for railroad companies in substantially the same language (Chap. 61, § 184). See People v. State Tax Comm.,
To complete the review of authorities, we are informed by counsel that the Federal district court of the western district of Michigan and the standing master in chancery of the eastern district, in unreported cases, have sustained the Michigan tax under conditions similar to those at bar.
It appears, then, that the courts are unanimous in holding a receiver liable for the franchise or privilege tax where he operates the business of the corporation. May the rule be sustained in principle?
Plaintiffs seek to draw a distinction between public utility corporations with special and public functions and private corporations, but we do not find that the courts have done so, except in Mather's Sons' Co.'s Case,
Plaintiffs also stress United States v. Whitridge,
The cases holding that a trustee in bankruptcy is not liable for the tax are not pertinent. They point out that, unlike a receiver, the trustee takes the *530
whole title to the corporate property, and, in operating the business, he does so as an individual, and does not exercise the corporate franchises. In re Continental Candy Co., supra;In re Century Silk Mills (D.C. [N.Y.]),
On receivership, the corporation is not divested of its franchises, nor do they lapse. The court merely takes them into its custody for a time. The franchise "to do" passes to control of the court. Detroit, etc., R. Co. v. Campbell,
The receiver is the creature or officer of the court and is not an agent of the corporation. Face v. Hall,
"The receiver of a corporation, conducting its business, takes the place of the corporation and its officers for the purpose of performing the necessary corporate duties and functions, and has the same powers for such purposes, while on the other hand, he cannot act in excess of the corporate powers and the court cannot invest him with authority to that extent." 14-A C. J. p. 1005. *531
So it follows that, in conducting the business under order of court, the receiver is exercising the franchise "to do" of the corporation. Substantially all the above authorities sustaining the tax so hold. See, also, State v. Sessions,
The tax is on the franchise, and, as the franchise is being exercised by the receiver, the tax is valid. This ruling is confined to the case before us and without prejudice to the contentions of counsel as to liability under other circumstances.
The determination of the board is affirmed.
BUTZEL, C.J., and WIEST, CLARK, McDONALD, POTTER, SHARPE, and NORTH, JJ., concurred.