32 F.2d 825 (D.Md. 1929), 4445, In re Malko Mill. & Lighting Co.

Docket Nº:4445.
Citation:32 F.2d 825
Case Date:May 02, 1929
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit

Page 825

32 F.2d 825 (D.Md. 1929)


No. 4445.

United States District Court, D. Maryland.

May 2, 1929

Guy W. Steele, of Westminster, Md., for trustee.

James E. Boylan, Jr., of Westminster, Md., for Shenandoah Milling Co.

Theo. F. Brown, of Westminster, Md., for Farmers' Milling & Grain Co.

WILLIAM C. COLEMAN, District Judge.

This case arises on exceptions to the allowance by the referee of the claims of three separate creditors. The first claim is that of the state of Maryland for a franchise tax for the year 1925 in the amount of $80; the second claim is by the Shenandoah Milling Company for $1,764, on account of alleged failure on the part of the bankrupt company to deliver to it certain flour pursuant to contract; and the third claim is by the Farmers' Milling & Grain Company for $1,650.95 for alleged losses in connection with the purchase of wheat for the bankrupt company. These claims will be considered in the order in which they are referred to above.

First, with respect to the claim of the state of Maryland, the Malko Milling & Lighting Company went into the hands of receivers in the state court in November, 1924. In the latter part of January, 1925, a petition in bankruptcy was filed against it,

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and adjudication followed in the same month. The trustee in bankruptcy was appointed in March. The tax here in question is imposed by virtue of article 23, Sec. 109, of the Maryland Code. It is levied on the corporation in July, is payable the 1st day of September on the capital stock outstanding on the 1st day of the preceding January, 'for its franchise to be a corporation. ' The trustee resists the payment of the franchise tax levied against the corporation in July, 1925, on the ground that the tax was not levied on property, but was in the nature of a license fee for the right to continue to exercise the privilege conferred upon it by the state, and that, since the receivership in November, 1924, there was in reality no corporate existence.

The court finds that the trustee's contention is unsound. Although it is true that the tax did not accrue until after the state receivership, this receivership did not in law terminate the corporate existence. The appointment of a receiver for an insolvent corporation does not work its dissolution under the law of Maryland, in the absence of a judicial declaration to that effect. Woodland v. Wise, 112 Md. 35, 37, 76 A. 502. The tax is laid on the right 'to be a corporation'; that is, a tax upon the right conferred, not upon the actual exercise of it, regardless of what may be the reason for the nonexercise. It is true that the cases of New Jersey v. Anderson, 203 U.S. 483, 27 S.Ct. 137, 51 L.Ed. 284, and New York v. Jersawit, 263 U.S. 493, 44 S.Ct. 167, 68 L.Ed. 405, upon which the state of Maryland relies for the payment of the tax, rest upon facts different from those in the present case. In each of these cases in the period which the tax covered had commenced to run, as it had in the present case, when the...

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