In re Malko Milling & Lighting Co.

Citation32 F.2d 825
Decision Date02 May 1929
Docket NumberNo. 4445.,4445.
PartiesIn re MALKO MILLING & LIGHTING CO.
CourtUnited States District Courts. 4th Circuit. United States District Court (Maryland)

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, 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, § 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 the period which the tax covered had commenced to run, as it had in the present case, when the petition was filed; but, unlike the present case, there had been no prior receivership proceeding. However, this fact is not controlling. What is here said is believed to be entirely consistent with the decision in People v. Hopkins (C. C. A.) 18 F.(2d) 731. See, also, New York Trust Co. v. Island Oil & Transport Corp. (D. C.) 7 F.(2d) 416.

The case of United States v. Whitridge, 231 U. S. 144, 34 S. Ct. 24, 58 L. Ed. 159, upon which the trustee relies, is not apposite, because there the court was not concerned with a franchise tax, but with the Corporation Tax Law of 1909 (36 Stat. 112), which the court expressly held did not, by its terms, impose a tax upon corporate property or franchises as such, or upon corporate income, unless the business was actually carried on by a corporation.

Next, as to the claim of the Shenandoah Milling Company. The facts are these: The Shenandoah Milling Company entered into two written contracts with the bankrupt for the purchase of flour, one on July 31, 1924, for 1,000 barrels, delivery to be made in "August, first half Sept., 1924." On August 7, 1924, a similar contract for an additional 1,000 barrels was entered into, delivery to be made the "last half of Sept., 1924." No deliveries were made, either in August or September, under either contract. On September 12th the Shenandoah Company wrote the bankrupt not to make any shipments until otherwise notified. However, in October and November 720 barrels were shipped and accepted by the Shenandoah Milling Company at the contract price named in the first contract; that is, $5.50 per barrel, which was 10 cents higher than the price per barrel specified in the second contract. In addition to these shipments, the Shenandoah Company ordered on November 25th — that is the day after receivers were appointed for the bankrupt — a further shipment of two carloads, which order the bankrupt declined the same day to fill, on the ground that it was in the hands of receivers.

The milling company's claim, as allowed by the referee, covers the undelivered balance — that is, 280 barrels under the first contract, and the 1,000 barrels under the second contract — and is based upon the difference between the contract prices and the market price of the flour at Shenandoah, Va., as of November 26, 1924, namely, the date when the bankrupt's notification to the Shenandoah Company that it was unable to fill its orders, due to the receivership, was received. The trustee objects to the allowance of any part of this claim, alleging that the bankrupt was at all times ready to make delivery, but was prevented from so doing by the action of the Shenandoah Company.

In a contract such as the present one, where deliveries are required within a certain time,...

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1 cases
  • Branker v. Bowman
    • United States
    • Arizona Supreme Court
    • March 6, 1945
    ... ... 23 F.2d 447; Duncan et al. v. Allen et al., ... 214 Ala. 551, 108 So. 357; In re Malko Milling & Lighting ... Co., D. C., 32 F.2d 825; and C. W. Ferguson Sawmill ... Co. et al. v ... ...

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