Appeal of Lorden

• Decision Date: 02 August 1991
• Docket Number: No. 90-418,90-418
• Citation: 594 A.2d 1303,134 N.H. 594
• Parties: Appeal of Kenneth A. LORDEN, Frederick Lorden, Francis J. Lorden, and Lorden Lumber Company, Inc. (New Hampshire Department of Revenue Administration).
• Court: New Hampshire Supreme Court

Page 1303

594 A.2d 1303

134 N.H. 594

Appeal of Kenneth A. LORDEN, Frederick Lorden, Francis J. Lorden, and Lorden Lumber Company, Inc. (New Hampshire Department of Revenue Administration).

No. 90-418.

Supreme Court of New Hampshire.

Aug. 2, 1991.

Wiggin & Nourie, Manchester (Mark A. Langan, on the brief and orally), for plaintiffs.

John P. Arnold, Atty. Gen. (Daniel J. Mullen, Asst. Atty. Gen., on the brief and orally), for Dept. of Revenue Admin.

JOHNSON, Justice.

The plaintiffs appeal the department of revenue administration's (the DRA) denial of their request for a tax refund. The issue presented is whether the distribution of unencumbered corporate assets to stockholders upon the corporation's dissolution and liquidation is a taxable event subject to a transfer tax pursuant to RSA 78-B:1, I (see Laws 1985, 407:1; current version at Supp.1990). We hold that the plaintiff stockholders gave no consideration for the distributed assets, and therefore are required to pay only the statutory minimum transfer tax. Accordingly, we reverse and remand.

The facts of this case are not in dispute. The plaintiffs Kenneth A. Lorden, Frederick Lorden, and Francis J. Lorden were the sole stockholders and sole directors of Lorden Lumber Company, Inc. (the corporation). On August 5, 1985, the Lordens voted in their capacities as directors to dissolve the corporation. See RSA 293-A:85. As a result of the dissolution, certain unencumbered real estate owned by the corporation passed by operation of law to each of the Lordens as stockholders. See RSA 293-A:88, II. The Lordens then paid, under protest, a transfer tax based on the fair market value of the real estate. The DRA denied their request for a refund, and their subsequent motion for rehearing. This appeal followed.

Before we address the merits of this case, we must resolve a procedural issue that came to our attention in the plaintiffs' notice of appeal. RSA chapter 78-B, governing the transfer tax, does not appear to authorize an appeal to this court. Instead, the relevant statute states: "Within 30 days after notice of any adjustment to tax by the commissioner under RSA 78-B:9, a taxpayer may appeal the commissioner's determination either by written application to the board of tax and land appeals or by petition to the superior court...." RSA 78-B:12 (Supp.1990). Consequently, we asked the parties to brief the issue of whether this court has jurisdiction of the plaintiffs' appeal.

The plaintiffs point out that RSA 78-B:12 (Supp.1990) applies only to cases in which the taxpayer receives a notice of adjustment; that is, a notice that a disputed tax is owed to some extent. Because here the taxpayers challenge the denial of a total refund for tax already paid, under protest that no tax is due, they argue that RSA 78-B:12 (Supp.1990) is inapplicable. Accordingly, the plaintiffs rely on RSA 541:6, which details the procedure available to parties seeking review of certain decisions made by State officials. The statute reads: "Within thirty days after the application for a rehearing is denied, or, if the application is granted, then within thirty days after the decision on such rehearing, the applicant may appeal by petition to the supreme court."

We agree with the plaintiffs that RSA 78-B:12 (Supp.1990) does not apply to this case, but disagree that RSA 541:6 may be automatically invoked instead. As the DRA has noted, RSA 541:2 stipulates that the appeal procedure outlined in RSA 541:6 applies to a particular case only "[w]hen so authorized by law." We have interpreted this clause to mean that "[t]he provisions of this chapter do not provide an appeal from the determination of every administrative agency in the state. Unless some reference is made to [chapter 541] in any given statute, an appeal under the provisions of [chapter 541] is not 'authorized by law.' " Petition of Dondero, 94 N.H. 236, 236-37, 51 A.2d 39, 39-40 (1947) (interpreting R.L. ch. 414, precursor to RSA 541:6). RSA chapter 78-B does not reference RSA chapter 541 in any way, and thus the plaintiffs may not invoke the provisions of RSA 541:6, allowing a party to appeal directly to this court.

Although the plaintiffs are not entitled to an appeal under RSA chapter 78-B, and "have mistaken their remedy, our practice permits consideration of their petition as one for writ of certiorari, entitling them to the limited determination of whether the Commission has acted 'illegally in respect to jurisdiction, authority or observance of the law.' " Winn v. Jordan, 101 N.H. 65, 67, 133 A.2d 485, 487 (1957) (citation omitted); accord Appeal of Hollingworth, 122 N.H. 1028, 1032, 453 A.2d 1288, 1290-91 (1982); Connell's New & Used Cars, Inc. v. State, 117 N.H. 531, 532, 375 A.2d 257, 257-58 (1977); see also Cumberland Farms v. Pierce, 104 N.H. 489, 502, 190 A.2d 403, 413 (1963) (error of law open to correction on writ of certiorari); In re Doe, 126 N.H. 719, 722-23, 495 A.2d 1293, 1296 (1985) (review on certiorari usually available only in absence of right to appeal); R. Wiebusch, 5 New Hampshire Practice, Civil Practice and Procedure § 1283, at 161 (1984) (writ of certiorari granted "when no alternative means exist of assuring that the tribunal has kept within the limits of its legal authority"). We hold that we may properly consider the plaintiffs' petition as a petition for a writ of certiorari and determine whether a tax is due.

We turn now to the merits of the case. The transfer tax statute in effect at the time of the corporation's dissolution reads, in pertinent part:

"A tax is imposed upon the sale, granting and transfer of real estate and any interest therein.... The rate of the tax is $.375 per $100, or fractional part thereof, of the price or consideration for such sale, grant or transfer; except that where the price or consideration is $4,000 or less there shall be a minimum tax of $15."

RSA 78-B:1, I (see Laws 1985, 407:1; current version at Supp.1990) (hereinafter referred to as "former RSA 78-B:1, I"). "Price or consideration" is defined in the revenue regulations as "the total amount paid or required to be paid for the real estate valued in money whether received in money or otherwise and shall include the amount of any mortgages, paid taxes ... liens, or other encumbrances assumed by the buyer." N.H. Admin. Rules, Rev. 801.01.

The plaintiffs argue first that upon dissolution of the corporation, no "sale," "granting," or "transfer" of real estate took place, and thus no tax was owed. Instead, the plaintiffs maintain, the real estate simply "passed" from the corporation to the stockholders by operation of law. Second, the plaintiffs argue that, even if a transfer did take place for purposes of RSA 78-B:1, I, the Lordens paid no consideration for the real estate, and thus are entitled to a refund of the taxes paid. The DRA responds that (1) the "passing" of the corporate real estate to the stockholders was a "transfer," according to the plain meaning of the word; and (2) the Lordens gave adequate consideration for the real estate in that they gave up their rights to manage the corporation and to receive corporate profits.

We have previously stated that the unencumbered real estate owned by the corporation passed to the stockholders by operation of law. See RSA 293:88, II. This statute states that upon dissolution, "The corporation shall ... after paying or adequately providing for the payment of its obligations, distribute the remainder of its assets, either in cash or in kind, among its stockholders according to their respective rights or interests." While we believe plaintiff's second argument, noted above, is the most persuasive, we should note that it has been held that no tax is due in this situation because the "transfer" of assets by deed, from the corporation to the stockholders, is merely confirmatory. As the court in Commonwealth v. Passell, 422 Pa. 473, 223 A.2d 24 (1966) stated:

"When the [stockholders] surrendered for cancellation their stock certificates then, in the absence of any obligations owed ... this realty became vested in and passed to its stockholders by operation of law. The provisions of the liquidation statute that the 'property remaining' in a debt-free corporation 'shall be paid or distributed' merely provide the mechanical operation required of the directors for record purposes: by operation of law the transfer of the remaining corporate assets to the stockholders has already taken place and the statutory requirement simply supplements that which has already occurred. We agree with the [stockholders] statement: 'The only purpose of the deed in a corporate liquidation and dissolution is simply to place on record information regarding the transfer....' "

Id. at 480-81, 223 A.2d at 28-29 (emphasis in the original).

Assuming arguendo that a "transfer" did take place for purposes of former RSA 78-B:1, I, we hold that the Lordens gave no consideration in exchange for the real estate and that this was therefore not a fully taxable event contemplated by the taxing statute.

We first note that the DRA cites no authority to support its argument that stockholders who receive unencumbered real estate as a result of a corporation's dissolution have "paid for" the real estate, or have given consideration for it, by giving up their rights to manage the corporation and to receive profits, and we have found no authority for this proposition. Moreover, the plaintiffs cite several cases which support their argument that a stockholder gives no consideration for unencumbered real estate which passes to him or her upon a corporation's dissolution. See, e.g., Greyhound Corp. v. United States, 208 F.2d 858, 860 (7th Cir.1954) (construing statute governing former federal documentary stamp tax); R.H. Macy & Co. v. United States, 107 F.Supp. 883, 885 (S.D.N.Y.1952) (same); Tide Water Associated Oil Co. v. Jones, 57 F.Supp. 482, 483 (W.D.Okla.1944) (same); Socony-Vacuum Oil Co....