192 F. 223 | D.N.J. | 1911
The plaintiff in this action is seeking to recover the amount of a tax, together with certain penalties, imposed under section 38 of the act entitled “An act to provide revenue, equalize duties, and encourage the industries of the United States and for other purposes,” approved August 5, 1909, c. 6, 36 Stat. 11 (U. S. Comp. St. Supp. 1909, p. 844). The act is commonly known as the federal corporation tax act, and among other things provides that a tax shall be imposed upon each corporation of the class made liable thereto, for the year ending December 31, 1909, and for each calendar year thereafter. Subject to certain specified deductions, the net income of any corporation embraced in the act for each year ending December 31st is made the basis or measure from and by which the amount of the tax for that year is ascertained. The act also provides that a statement of its income for the preceding year shall be made by every such corporation to the collector of internal revenue for the district in which such corporation has its principal place of business, on or before March 1st of each year, or, upon failure so to do, its books and papers may be examined in behalf of the govr eminent, for the purpose of obtaining the necessary data from which to ascertain and fix the amount of the tax. .
The declaration is apparently unassailable, and indeed hss not been attacked. It contains a single special count and the common counts, and attached thereto and made a part thereof, is a copy of the return made to the collector by the defendant corporation. To the common counts the defendant pleaded the general issue, and to the special count it likewise pleaded the general issue, and also two special pleas. The first of them is to the effect that, at and before the time when the Commissioner of Internal Revenue assessed the supposed excise tax alleged to be due from the defendant, the defendant, formerly a corporation of New Jersey, had been duly dissolved in accordance with the laws of that state; that it no longer existed, and was not carrying on business, and by' reason thereof was not subject by law to the payment of a special excise tax for the carrying on or doing business by it as in the declaration alleged; and that it was under no duty to pay the collector the supposed tax in the declaration alleged to have been assessed against it.
"Because the dissolution of the said defendant company at and before the time when the Commissioner of Internal Revenue assessed the tax sued for did not relieve the defendant company of liability therefor.
“Because the dissolution of the said defendant company in accordance with the laws of the state of New Jersey, prior to the assessment of the tax as in the declaration alleged, did not relieve it of the duty to pay the same upon assessment, as required by law.”
And to the second:
“Because the dissolution of the said defendant company on the 14th day of February, 1910, did not relieve it of the duty to pay the excise tax for the year ending at midnight of the 31st day of December, 1909, in the declaration sued for.
"Because upon obtaining a certificate of dissolution on the 14th day of February, 1910, from the Secretary of State of the State of New Jersey, 'pursuant to proceedings taken for thal purpose under the laws of the state of New Jersey, the corporation continued to exist for all purposes except the continuing of the business for which it was established, and the return filed on the 14th day of March, 1910, was the return of the said corporation.
“Because the failure of the defendant corporation to file a return pursuant to the statute in such ease made and provided does not relieve it of the duty of paying the excise tax in the declaration sued for.
“Because the dissolution of the said company on the 14th day of February, 1910, did not exempt it from taxation under the federal corporation excise tax act, in the declaration mentioned, for the year ending at midnight on the 31st day of December, 1909.”
*226 ■ “Sec. 53. All corporations, whether they expire by their own limitation or-be annulled by the Legislature or otherwise dissolved, shall be continued bodies corporate for the purpose of prosecuting and defending suits by or against them, and of enabling them to settle and close their affairs, to dispose of and convey their property and to divide their capital, but not for the purpose of continuing the business for which they were established.
“Sec. 54. Upon the dissolution in any manner of any corporation the directors shall be trustees thereof, with full power to .settle the affairs, collect the outstanding debts, sell and convey the property and divide the moneys and other property among the stockholders, after paying its debts, as far as such moneys and property shall enable them; they shall have power to meet and act under the by-laws of the corporation and, under regulations to be made by a majority of said trustees, to prescribe the terms and conditions of the sale of such property, and may sell all or any part for cash, or partly on credit, or take .mortgages and bonds for part of the purchase price for all or any part of said property.
“Sec. 55. The directors, constituted trustees as aforesaid, shall have authority to sue for and recover the aforesaid debts and-property, by the name of the corporation, and shall be sueable by the same name, or in their own names or individual capacities, for the debts owing by such corporation, and shall be jointly and severally' responsible for such debts, to the amount of the moneys and property of the corporation which shall come to their hands or possession as such trustees.”
It is manifest, since the tax under consideration is an excise tax, that decisions of state courts relative to the imposition and lien of ordinary state and municipal taxes upon property' have little relevancy. The tax under consideration “is imposed upon the exercise of the privilege of doing business in a corporate capacity.” Flint v. Stone, Tracy Co., 220 U. S. 107, 155, 31 Sup. Ct. 342, 350, 55 L. Ed. 389. The Congress, by section 38 of the act referred to, in specific terms imposed the liability for such a tax upon all corporations of the character of the defendant doing business during the year 1909. It also imposed upon them the duty of making a return to the internal revenue collector, on or before March 1st of the following year, as a basis or measure from which the amount of its liability could be determined. With such a liability to taxation impending, and such a duty to make a return of its income resting upon the defendant, it sought escape therefrom by dissolution.
This is not the case of a liability to taxation accruing after dissolution, but rather of a liability incurred before dissolution, and while a complete scheme for an ascertainment of the extent of such liability and for its enforcement were in existence. The case does not differ greatly in principle from that in which a party, after having made and broken a contract, should die, in which case his death would not protect his estate from the liquidation and payment of any damages resulting from such breach. The counsel of the defendant argued that, even though there were a liability to taxation existing against the defendant on December 31, 1909, still, as the extent thereof had not been ascertained at the time when the corporation dissolved, it was not a debt, and that consequently the sections of the New Jersey corporation act above quoted have no relevancy. It may be that such liability was not a debt, in the primary and strict signification of the word; but it is often given a broader meaning, as in N. J. Insurance Co. v. Meeker, 37 N. J. Law, 282, 301. Furthermore, as
‘■State of Illinois, County of Cook — to wit:
‘•II. II. Titsworth, vice president, and Thomas D. Brown, treasurer, of the ———• corporation, whose return of annual net income is set forth above, he: ins severally duly sworn, each for himself, deposes and says that the foregoing report and several items therein set forth are, to his best knowledge and belief and from such information as he has been able to obtain, true and correct in each and every particular; that the amount of gross income therein set forth is the full amount of gross income, without any deduction, whatever received from ail sources by the said corporation during the year stated and that the net income therein set forth is the full amount on which tax is proper to be assessed. Thomas D. Brown, Treasurer.
“11. II. Titsworth, Vice President. .
“Sworn and subscribed to before me this ninth day of March, 1910.
“Fred >1. Sargeant [Seal.l
“Notary Public, Cook Co., Ill.”
Before closing it should be noted that, under section 31 of the New Jersey corporation act, the certificate of dissolution issued by the Secretary of. State must be published for four weeks successively at least once a week, and that, upon the filing in his office of proof of such publication, “the corporation shall be dissolved and the board (of directors) shall proceed to settle up and adjust its business and affairs.” The second plea shows that such publication had not been completed on March 1, 1909, when the duty of making a return rested upon the corporation. The corporation therefore had not then been dissolved, and the board of directors were, even after the dissolution had become effective by reason of such publication, under the express duty of proceeding to settle up and adjust its affairs. The corporation cannot escape the tax through willful disobedience of the act imposing it.
As the pleas do not, although claiming' to, meet and answer the averments of the declaration, the demurrers thereto will be sustained, with costs. ■