Deer Park Pine Industry v. Stevens County
| Decision Date | 07 July 1955 |
| Docket Number | No. 33201,33201 |
| Citation | 286 P.2d 98,46 Wn.2d 852 |
| Court | Washington Supreme Court |
| Parties | DEER PARK PINE INDUSTRY, Inc., and J. H. Leuthold, Liquidating Trustee of North Columbia Co., Appellants, v. COUNTY OF STEVENS, Washington, and Chester A. Hills, Treasurer of County of Stevens, Washington, Respondents. |
Witherspoon, Witherspoon & Kelley, Spokane, for appellant.
Don Eastvold, Frank P. Hayes, Quinby R. Bingham, Jr., Olympia, Sidney R. Buckley, Colville, for respondents.
Bogle, Bogle & Gates, Evans, McLaren, Lane, Powell & Beeks, Graham, Green, Howe & Dunn, Monheimer, Schermer & Mifflin, Montgomery, Montgomery & Purdue, Skeel, McKelvy, Henke, Evenson & Uhlmann, Wright, Innis, Simon & Todd, Seattle, amici curiae.
Is the distribution of real property to stockholders, by the statutory-liquidating trustee of a corporation in dissolution, subject to the one per cent tax on real estate sales, as authorized by RCW 28.45, Laws of 1951, 1st Ex. Sess. chapter 11; Laws of 1951, 2d Ex.Sess. chapter 19; Laws of 1953, chapter 94, and as implemented by Stevens county ordinance No. 56-1953, enacted by the board of county commissioners on April 27, 1953?
The facts are stipulated. March, 1950, the Deer Park Pine Industry, Inc., acquired a three-fourth stock interest, and The Chicago and Riverdale Lumber Company acquired a one-fourth stock interest, in the North Columbia Company, a Washington corporation.
On, and prior to, December, 24, 1953, North Columbia Company owned certain real property, 76.62 per cent of which was located in Stevens county, Washington. The exact value of the property is unknown, but the parties stipulated that it has a value in excess of five hundred thousand dollars. On December 24, 1953, the shareholders of North Columbia Company unanimously resolved to liquidate the corporation and disincorporate. .) J. H. Leuthold, one of the plaintiffs, was appointed trustee to wind up the affairs of the corporation out of court. December 29, 1953, the trustee conveyed and quitclaimed the real property located in Stevens county to the shareholders.
Prior to the conveyance, Stevens county passed ordinance No. 56-1953, imposing a tax on real-estate sales based on one per cent of the selling price, pursuant to authority granted by the legislature. RCW 28.45.
The parties stipulated
'That at the time of the dissolution of said North Columbia Co., a Corporation, the liabilities to be assumed by the stockholders were computed at $109,388.87, * * * and that J. H. Leuthold, on December 31, 1953, paid to the defendant [treasurer of Stevens county] * * * the sum of $834.14, being one per cent (1%) of that portion of the liabilities of North Columbia Co., assumed by the shareholders that the valuation of the properties [located in Stevens county] * * * bear to the total value of all properties distributed to said shareholders on liquidation.'
Plaintiff Leuthold, as liquidating trustee, and Deer Park Pine Industry, Inc., commenced this declaratory judgment action against Stevens county and its treasurer to determine whether a distribution in liquidation to stockholders of real property is a taxable event under the ordinance.
Plaintiffs appeal from a judgment declaring such a transfer to be a taxable event, under the ordinance, and fixing the tax at
'* * * one per cent (1%) of the selling price, the selling price being the value on December 29, 1953 of said lands in Stevens County conveyed in undivided interests reduced by 76.62% of $109,388.87. * * *'
Section II of Stevens county ordinance No. 56-1953 provides:
'There is hereby levied and there shall be collected by the Treasurer on such sale of any real property situated in Stevens County a tax equal to one per cent of the selling price.'
This portion of the ordinance is authorized by RCW 28.45.050.
The applicable portion of § I of the ordinance provides:
'* * * on or after June 11, 1953, the term 'sale' shall be defined as follows:
"Sale' shall have its ordinary meaning and shall in addition include any conveyance, grant, assignment, quitclaim, or transfer of [the] ownership of or title to real property, including standing timber, or any estate or interest therein, for a valuable consideration and any contract for such [conveyance] grant, assignment, quit-claim, or transfer, and any lease with an option to purchase real property, including standing timber, or any estate or interest therein or other contract under which possession of the property is given to the purchaser or any other person by his direction while [which] title is retained by the seller [vendor] as security and [for] the payment of the purchase price. * * *'
Section I of the ordinance also contains the following definition:
"Selling price' shall mean the consideration, in money or anything of value paid or delivered or contracted to be paid or delivered in return for the transfer of the real property or estate or interest therein * * *.' See RCW 28.45.030.
The science of semantics would be stretched beyond permissible limits to conclude that the transaction under examination constitutes a sale in 'its ordinary meaning.' If the event is a taxable one, it must be held to be such, because it constitutes a 'conveyance * * * for a valuable consideration.'
We are not here concerned with the many rights which arise from ownership of corporate stock. It is sufficient for our purpose, in the instant case, to note that such ownership carries with it the inherent right to participate in the control of the corporation, while it is operating as such, and the inherent right to share in the assets of the corporation--after creditors--when it is in the process of dissolution.
The transition from the power to exercise the one right to the enjoyment of the other is governed by statute. The ultimate right of a particular stockholder to share in the assets of the corporation upon dissolution is not affected by his vote for or against dissolution, provided the vote in favor of dissolution is sufficient under the statute. Rem.Rev.State.(Sup.) § 3803-49 (cf. RCW 23.44.020).
When dissolution has commenced, the authority and duties of the directors and officers of the corporation cease, except in so far as it may be necessary to preserve the corporate assets, and any transfer of shares or alteration in the status of shareholders is void, except as a court may otherwise order, if the proceeding is subject to the supervision of the court. RCW 23.44.090, Rem.Rev.Stat. (Sup.) § 3803-56.
If dissolution is not under the jurisdiction of the court, the powers and duties necessary to effect dissolution are vested by statute in the liquidating trustee. Rem.Rev.Stat.(Sup.) § 3803-54 (cf. RCW 23.44.070).
Among other things, the statute directs the liquidating trustee to collect all sums due the corporation; sell and convert into cash any and all corporate assets; pay all debts and liabilities of the corporation; and
'Any surplus remaining after paying off all debts and liabilities of the corporation shall be paid by the trustee or trustees to the shareholders according to their respective rights and preferences.' Rem.Rev.Stat.(Sup.) § 3803-52 (cf. RCW 22.44.050).
Although it does not appear in the stipulated facts, it is inherent, from the ultimate nature of the distribution in liquidation made by Mr. Leuthold, that the stockholders of North Columbia Company voluntarily agreed (1) that the trustee might distribute their proportionate share in kind; and (2) that they would assume their proportionate share of the liabilities of the North Columbia Company.
The fact that the dissolution of the corporation is the act which terminates the right to participate in the management of the corporation, and makes operative the right to share in the distribution of assets, does not make the termination of the first, the consideration for the execution of the second. There is no conveyance for a valuable consideration, taxable under the ordinance and statutes we are considering, where a change of title to real property is effected solely as a result of its distribution to stockholders of a solvent corporation in the process of dissolution, except as...
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