Atkins v. Bender

• Decision Date: 06 June 1928
• Docket Number: No. 1618.,1618.
• Citation: Atkins v. Bender, 26 F.2d 690 (W.D. La. 1928)
• Parties: ATKINS v. BENDER, Collector of Internal Revenue.
• Court: U.S. District Court — Western District of Louisiana

26 F.2d 690 (1928)

ATKINS v.BENDER, Collector of Internal Revenue.

No. 1618.

District Court, W. D. Louisiana, Shreveport Division.

February 15, 1928.

On Rehearing, June 6, 1928.

Wilkinson, Lewis & Wilkinson, of Shreveport, La., for plaintiff.

Philip H. Mecom, U. S. Atty., of Shreveport, La.

DAWKINS, District Judge.

This is an action at law to recover from the government the sum of $104,306.59, paid under protest as income and profit taxes for the year 1919.The claim is based, first, upon the contention that the right to collect the taxes, if it ever existed, had been lost by the running of limitations before proceedings were instituted for that purpose; and, secondly, upon the proposition that petitioner did not owe the taxes.The jury has been waived in writing and the matter submitted to the court.

The Facts.

The Caddo Oil & Refining Company was a Louisiana corporation, organized December 9, 1916, with an authorized capital of $10,000,000, of the par value of $100 per share.It acquired certain properties in this state, including a refinery, pipe lines, lands, leases, etc., and issued therefor 99,994 shares, of the total capital of $10,000,000.This stock had a market value of $20 per share.It was not issued direct to the subscribers, but in the name of three individuals, designated as voting trustees, who gave to the stockholders trust receipts in proportion to the stock belonging to each, respectively.

Early in the year 1919 the said Caddo Oil & Refining Company(hereinafter referred to as the Louisiana Company) found itself in need of additional property and funds.It had outstanding first mortgage 6 per cent. bonds, aggregating $2,122,000.A proposition to issue additional stock was considered, but discarded.Negotiations were then opened with certain financial interests in New York and Philadelphia, and on May 2, 1919, there was organized a New York corporation, styled the Caddo Central Oil & Refining Company(hereinafter referred to as the New York Company), with an authorized capital of $15,000,000 consisting of 150,000 shares, also of the par value of $100 each.The incorporators were Thos. F. Thornton, Mortimer Neuman, and Morris Buchter, who each subscribed for 2 shares.Thereupon one Jos. S. Qualey made a proposition to the said New York Company, which was duly accepted, as follows:

"New York, May 2, 1919.

"To the Board of Directors, of Caddo Central Oil & Refining Corporation — Gentlemen: I understand that your company has been organized under the laws of the state of New York, having an authorized capitalization of $15,000,000, divided into 150,000 shares, all common stock, of the par value of $100 per share, for the purpose, among other things, of engaging in the business of producing and refining oil.

"The Caddo Oil & Refining Company of Louisiana, Inc., is a corporation organized under the laws of the state of Louisiana, owning properties which are generally described by the vice president of said company as follows:

"Over 30,000 acres of oil-producing lands in fee, located in the Caddo fields of North Louisiana, and 7,500 acres of similar lands under leaseholds.

"On these properties are 84 producing wells, with a daily production of 2,000 barrels of oil per day, about equally divided between high gravity oil, which produces gasoline, and heavier oil, known as lubricating oil.

"A refinery at Cedar Grove, Louisiana, with a present capacity of 60,000 barrels of oil per month, which at the present time is showing an average profit of $1.078 per barrel.

"A three-fourths interest in a refinery at Shreveport, Louisiana, with a monthly capacity of 15,000 barrels.

"A recently completed casinghead gasoline plant located near Mooringsport, Louisiana, making about 25 barrels of high grade gasoline per day from casinghead gas.

"Modern steel storage tanks with a capacity of over 200,000 barrels of oil, which are located at advantageous points on the properties.

"83 miles of pipe line and numerous gathering lines which tap the entire North Louisiana field, connected with pumping stations which supply oil to the various storage tanks and refineries owned by the company.

"The entire property is connected by a telephone system, with switchboard in the company's main office, and there are warehouses, cottages, boarding houses for employees, stables for live stock, and trucks, automobiles, drilling rigs, and similar paraphernalia pertaining to a modern oil property.

"144 steel tank cars owned outright, and 36 under lease, having a capacity of from 8,000 to 10,000 gallons per car.

"I understand you have caused these properties to be appraised by William Gross, Esq., and the present financial condition of the company is indicated by the balance sheet and earnings statement audited by Messrs. Price, Waterhouse & Co. and transmitted herewith.

"I hereby offer to sell, assign, transfer, and set over, or cause to be sold, assigned, transferred, and set over, to your company, by due and proper deed of conveyance, bill of sale, or other requisite legal documents to be approved by counsel for your company, all the properties of the Caddo Oil & Refining Company of Louisiana, Inc., and all of its assets of every name, nature, and description whatsoever, tangible and intangible, as a going concern, or, in lieu thereof, to transfer and deliver, or cause to be transferred and delivered, to your company the whole of the issued and outstanding capital stock of the Caddo Oil & Refining Company of Louisiana, Inc., consisting of 100,000 shares, of the par value of $100 each.The said properties are free from any lien or incumbrance of any kind, except $2,122,000, face value first mortgage ten-year sinking fund 6 per cent. gold bonds, of an authorized issue of $10,000,000 (the said mortgage being closed in the aforesaid sum of $2,122,000) and the indebtedness shown upon the audit of Messrs. Price, Waterhouse & Co.

"There has been released from the lien of the last-described mortgage land near Lewis, Louisiana, on which your company can build a new refinery with the funds to be supplied by me as hereinafter stated.

"I also agree to transfer or cause to be transferred to your company the additional Louisiana oil lands or leaseholds described in the annexed schedule, and to pay or cause to be paid into the treasury of your company the sum of $2,499,400 in cash.

"In exchange for all the foregoing, I agree to accept from your company 149,994 shares of the common capital stock thereof, of the par value of $100 per share, and $4,378,000 face value (of a total authorized issue of $5,378,000) first mortgage consolidated ten-year sinking fund 6 per cent. gold bonds, to be secured by a mortgage constituting a junior lien to the $2,122,000 closed mortgage hereinbefore described on the properties which are now subject to said mortgage, and to constitute a first lien upon the property near Lewis, Louisiana, hereinbefore described, and the refinery to be built thereon by your company, and as well upon the new properties turned over by me to your company, as herein set forth, and upon any and all of its other property not acquired by it from Caddo Oil & Refining Company of Louisiana, Inc., the remaining $1,000,000 of first consolidated mortgage bonds last described out of the total authorized issue of $5,378,000, to remain in the treasury of your company for corporate purposes; the terms and conditions of the mortgage securing the said bond issue and the form of said mortgage and bonds to be as per the draft herewith submitted.

"The said bonds and certificates of stock are to be delivered to me or to my nominees, all, however, upon the following express conditions:

"(a) That with and out of the $2,499,400 cash to be supplied by me to the treasury of your company your company agree forthwith to proceed with the erection and construction upon the land near Lewis, Louisiana, released from the lien of the mortgage made by Caddo Oil & Refining Company of Louisiana, Inc., of a modern refinery of 5,000 barrels per day capacity, to cost not exceeding $1,750,000; and

"(b) The assumption by your company and its agreement to pay all of the existing indebtedness of Caddo Oil & Refining Company of Louisiana, Inc., as disclosed by the audit of Messrs. Price, Waterhouse & Co.; and

"(c) These properties having been examined and approved for your account and the books of Caddo Oil & Refining Company of Louisiana, Inc., having been audited for your benefit, this offer in its entirety is without recourse of any kind to me.

"If this proposition is acceptable to you, will you kindly take due and appropriate corporate action to accept the same, to authorize the making of the mortgage and the issuance of the bonds therein described to me or my nominees, and the issuance of the capital stock of your company, as herein provided, to me or my nominees, and notify me of such corporate action in due form by having your company, through its authorized officers, pursuant to resolutions adopted for that purpose, sign the duplicate original of this offer beneath the words `approved and accepted,' and return the same so signed by you to me; and this letter and the duplicate original thereof, so signed by you, shall constitute the contract between us.

"Very truly yours "Signed Joseph S. Qualey."Approved and accepted "Caddo Central Oil & Refining Corporation"By Thomas F. Thornton, Secretary."

Thereafter, pursuant to said agreement, all of the property of the Louisiana Company was conveyed to the New York Company and all of the outstanding stock was likewise transferred to it or its agents.A few of the old stockholders in the Louisiana Company became holders of stock in the new company, but in the main they received bonds for their stock on the basis of $35 per share, face value.

Plaintiff in this case, and her husband, J. B. Atkins, lived under the régime of the community of acquêts and gains of the Louisiana law, which made them...