C. T. H. Corporation v. Maxwell
| Decision Date | 02 February 1938 |
| Docket Number | 458. |
| Citation | 195 S.E. 36,212 N.C. 803 |
| Parties | C. T. H. CORPORATION v. MAXWELL, Com'r of Revenue. |
| Court | North Carolina Supreme Court |
Appeal from Superior Court, Wake County; N. A. Sinclair, Judge.
Action by the C. T. H. Corporation against A. J. Maxwell Commissioner of Revenue of the State of North Carolina, to recover a franchise tax paid under protest. Judgment for defendant, and plaintiff appeals.
Affirmed.
Action for the recovery of franchise tax paid under protest, and alleged to have been illegally assessed.
Plaintiff a corporation chartered December 6, 1932, under the laws of the commonwealth of Virginia and authorized to carry on the business of buying, selling, and otherwise dealing in real estate, on December 7, 1932, filed in office of the secretary of state of North Carolina a copy of its charter, duly attested, and otherwise fully complied with the laws of this state for domestication of a foreign corporation to do business in this state, and has not withdrawn such domestication proceedings, and thereunder was authorized and empowered as a foreign corporation to do business in this state for the years 1934 and 1935.
For franchise tax purposes plaintiff duly filed verified reports (a) For 1934 in compliance with section 211 of Revenue Act of 1933, Pub.Laws 1933, c. 445, and (b) for 1935 in compliance with section 211 of the Revenue Act of 1935, Pub.Laws 1935 c. 371, in which the total assessed value of properties owned by it in North Carolina were stated to be (c) for April 1, 1934, the sum of $368,172, and (d) for April 1, 1935, the sum of $423,013. Franchise tax of $526.26, on basis of report for 1934, was assessed by defendant against and paid by plaintiff without protest on June 25, 1935.
In consequence of a conference between representatives of plaintiff and defendant, plaintiff requested that it be allowed to file, and on August 14, 1935, did file, a corrected return, duly verified, for each of the years 1934 and 1935, in which the total assessed value of its properties located in North Carolina, real estate only, is stated to be (1) $426,603 for 1934, situated in 26 towns and cities, and (2) $645,925, book or investment value $651,839.17, for 1935, situated in 28 towns and cities. On these returns franchise tax was assessed by defendant: (a) For 1934 in the amount of $639.90, or $87.64 in excess of the $552.26 theretofore assessed against and paid by plaintiff; (b) for 1935, in the amount of $1,140.72. On May 11, 1936, the plaintiff paid to the defendant, under protest, the said balance for 1934, and all of the assessment for 1935, made due demand for refund and, upon refusal thereof, and after the lapse of the required period allowed by statute for repayment, instituted this action.
Further agreed facts are:
"7. That the Nolting First Mortgage Corporation, a Virginia corporation, for a number of years was engaged in the mortgage and loan business which consisted of lending money on real estate, taking therefor real estate notes secured by deeds of trust of mortgages. Holding these notes as collateral, the corporation would then issue its own collateral first mortgage bonds which were sold to the public. The bonds were direct obligations of the corporation; they were issued in series and each series was secured by certain of the real estate notes hereinabove referred to.
8. The business of the Nolting First Mortgage Corporation was materially affected by the depression and during the month of May, 1932, the corporation found that it would not be able to meet its collateral trust bonds maturing on June 1st, because of the decrease in collections from underlying collateral. The corporation notified all of its bondholders of the situation and suggested that a bondholder's protective committee be formed to act for all of the bondholders. A committee was appointed by the bondholders and a program for the liquidation of the corporation was adopted. Pursuant to this program, a collateral trust agreement and a voting trust agreement, both dated June 1, 1932, were executed. A printed copy of these agreements are attached hereto, marked 'Exhibit A.'
9. Pursuant to the terms of the voting trust agreement, the entire management and control of the Nolting First Mortgage Corporation was vested in five voting trustees named therein. Under the terms of the collateral trust agreement the holders of Nolting First Mortgage Corporation collateral trust bonds deposited their bonds with the State-Planters Bank and Trust Company as trustee and received therefor new bonds dated June 1, 1932. To secure this new issue of bonds the Nolting First Mortgage Corporation transferred all collateral held by it to the Trustee as security for the bonds surrendered. The Nolting First Mortgage Corporation thereupon discontinued its regular business of negotiating mortgage loans and since June 1, 1932, it has confined its activities exclusively to the liquidation of the aforesaid mortgage notes. The status of the corporation with respect to these limited activities is that of agent for the collateral trust bondholders.
10. The total principal amount of first mortgage notes held by Nolting First Mortgage Corporation as of June 1, 1932, aggregated approximately $8,407,044.00, of which it is estimated that approximately $3,796,000.00 was secured by real estate located in the State of North Carolina."
In the collateral trust agreement, Exhibit A, the parties are Nolting First Mortgage Corporation, called corporation, and Home Mortgage Corporation, to State Planters Bank & Trust Company, trustee. The agreement provides, inter alia: "Art. VIII, Sec. 1, If and when the principal of and on all the bonds of all series issued hereunder have been paid, or the corporation shall have deposited with the trustee for their benefit, the whole amount due on all the bonds of all series for principal and interest, and shall have fully performed every other obligation herein imposed on it, then the deposited collateral applicable to all series issued hereunder, and then remaining in the hands of the trustee, shall revert to the corporation, or its assigns."
The defendant, while admitting the statement of facts contained in paragraphs 7, 8, 9, and 10, denies that the same was relevant or material to the determination of the questions of law arising upon the other agreed facts set out herein.
Further agreed facts are: The issued capital stock of the plaintiff corporation was five shares of the par value of $1 each. Stock certificates were issued to five directors of the Nolting First Mortgage Corporation, which were endorsed by them and returned to the Nolting First Mortgage Corporation and delivered by that corporation to the trustees under the collateral trust agreement dated June 1, 1932. At a meeting of the stockholders of said corporation approving its by-laws at the organization meeting on December 7, 1932, a resolution was adopted which in part provided as follows: "* * * that the purpose of its incorporation is that it may, in the event of foreclosure under any mortgage or deed of trust securing the payment of any part of the deposited collateral securing any bonds or series of bonds issued under the collateral trust agreement of June 1, 1932, * * * acquire legal title" to such properties and hold the same for account of such bonds or series of bonds of the Nolting First Mortgage Corporation hereinbefore referred to. The officers and directors of the Nolting First Mortgage Corporation were the same as the officers and directors of the plaintiff corporation. In North Carolina the C. T. H. Corporation has acquired title to property from trustees at foreclosure sales when mortgage notes on such properties were held as collateral for collateral trust notes issued under the collateral trust agreement of June 1, 1932, hereinbefore referred to.
In the granting clause in form of deed used in thus taking title, "C. T. H. Corporation, its successors and assigns," are named as grantees. In the habendum the following words are used: "To have and to hold * * * unto C. T. H. Corporation, its successors and assigns, in as full and ample manner as the said * * * Trustees * * * are authorized and empowered to convey the same: In Trust, nevertheless, to be held, managed, sold or otherwise disposed of, by the said party of the second part, as trustee for the lawful owners and holders of Nolting First Mortgage Corporation Bonds of Series, as their several interests may appear." Then there follows in minute descriptive detail an enumeration of all inclusive powers, authority, and rights of the C. T. H. Corporation with reference thereto, including the power "to deal with said real estate as if it were, and in every way exercise with respect thereto all the powers of, the fee simple owners thereof, in its own right."
All of the activities of the plaintiff corporation in the state of North Carolina for the years 1934 and 1935 were in connection with said properties and in accordance with the terms and provisions of the deeds so made to it. During said years the plaintiff corporation, acting under said conveyances, has held the said properties in trust and has managed, sold, and otherwise disposed of the same as trustee for the lawful holders and owners of the particular Nolting First Mortgage Corporation collateral trust series secured by the said property as their several interests appeared.
Coincident with taking title to the said properties, the plaintiff corporation delivered to the Nolting First Mortgage Corporation, which in turn delivered to the trustee under the collateral trust agreement dated June 1, 1932, a mortgage note in the amount of the investment of the collateral trust series in the particular property, and same was secured by deed of...
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