Hood Rubber Co. v. Commonwealth
| Decision Date | 23 May 1921 |
| Citation | 238 Mass. 369,131 N.E. 201 |
| Parties | HOOD RUBBER CO. v. COMMONWEALTH. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
OPINION TEXT STARTS HERE
Report from Supreme Judicial Court, Suffolk County; James B. Carroll, Judge.
Proceeding by the Hood Rubber Company against the Commonwealth, to have an excise tax adjudged illegally exacted. Demurrer to the petition was sustained by a single justice, and the case reported on the petition, and demurrer for determination by the full court. Demurrer overruled with directions.
The excise tax was collected as a condition of filing a certificate increasing the shares of common stock in the petitioner and providing that they should have no par value. The petition alleged the capitalization of the company, the adoption of a vote for such change, the filing of the amendment, the refusal of the secretary of the commonwealth to file the certificate without payment of such excise, and the payment thereof under coercion, and because of inability to obtain its filing without such payment. The demurrer was on the grounds that the excise was assessed according to law, and that the change of capital stock as certified was an increase within the meaning of the law.Warner, Stackpole & Bradlee, of Boston, for petitioner.
J. Weston Allen, Atty. Gen., and Charles R. Cabot, Asst. Atty. Gen., for the Commonwealth.
This is a petition under St. 1909, c. 490, pt. 3, § 70, for the recovery of an excise alleged to have been exacted unlawfully. The salient facts are that the petitioner, a business corporation organized under the laws of this commonwealth, had prior to October 27, 1920, an authorized capital stock of $10,500,000, divided into 50,000 shares of preferred stock, each share having a par value of $100, and 55,000 shares of common stock, of which 50,000 shares had been issued, each of the same par value. On October 27, 1920, the stockholders of the petitioner adopted the following vote:
‘That the present authorized shares of common stock in this corporation with par value of one hundred dollars ($100) each be and the same are hereby changed into one hundred thousand (100,000) shares of common stock without par value and otherwise having the preferences, voting powers, restrictions, and qualifications of the present outstanding shares of common stock; and that the holders of the shares of outstanding common stock heretofore with a par value of one hundred dollars ($100) a share shall exchange the same and the certificates therefor for shares of common stock without par value, on the basis of two shares without par value for one share with par value of one hundred dollars ($100), such shares without par value being issued for and in place of said shares of common stock heretofore outstanding and without any capitalization or impairment of any existing surplus or accumulated and undistributed profits.’
An excise was demanded by the commonwealth for the filing of the proper certificate setting forth these facts, on the theory that the transaction constituted an increase of the capital stock of the corporation subject to tax under the Business Corporation Law, St. 1903, c. 437, §§ 40 and 89, as respectively amended by sections 6 and 9 of chapter 349, St. 1920, the last section being further amended by St. 1920, c. 598, § 2. Such excise was paid under protest, and the present petition is brought to recover it back. The case has been presented by both sides on the assumption that the money exacted was an excise and not a filing fee and it will be considered and determined on that footing.
The decision turns upon the meaning of the provisions of the governing sections of the statute. It is provided by section 40 of the Business Corporation Law as amended that--
‘Every corporation may * * * authorize an increase or a reduction of its capital stock and determine the terms and manner of the disposition of such increased stock, or authorize such terms and manner of disposition to be determined in whole or in part by the board of directors or officers of the corporation.’
These provisions relate to an enlargement of the capital assets of the corporation by the acquisition of such ‘cash, property, tangible or intangible, services or expenses * * * actually received or incurred by, or conveyed or rendered to, the corporation,’ for which alone shares for capital stock originally can be issued under St. 1903, c. 437, § 14. See, now, G. L. c. 156, §§ 14, 15, 16. The words ‘capital’ ‘capital stock,’ ‘shares of capital stock’ and ‘stock’ may be used as synonyms or with different meanings dependent upon the context in which they occur and the subject-matter to which they are applied. Wright v. Georgia Railroad & Banking Co., 216 U. S. 420, 424, 425, 30 Sup. Ct. 242, 54 L. Ed. 544;Farrington v. Tennessee, 95 U. S. 679, 687, 24 L. Ed. 558;Wetherbee v. Baker, 35 N. J. Eq. 501, 505.United States Radiator Co. v. State, 208 N. Y. 144, 149,101 N. E. 783,46 L. R. A. (N. S.) 585. See Smith v. Dana, 77 Conn. 543, 552, 553, 60 Atl. 117,69 L. R. A. 76, 107 Am. St. Rep. 51;Person & Riegel Co. v. Lipps, 219 Pa. 99, 109, 67 Atl. 1081. We are of opinion that in the statute here involved the words ‘capital stock’ and ‘such increased stock’ mean a genuine addition to the property permanently dedicated to the business enterprise for the prosecution of which the corporation was organized.
[3] This record does not present any features of an attempt to conform to these provisions of section 40. No new assets were, or were intended to be, transferred into the treasury of the corporation. The transactions manifested by the vote of the corporation did not add anything to the value of the capital resources of the corporation. Its permanent funds to remain for the uses of its business free from the possibility of distribution of dividends have not been made larger or in any manner affected by the stockholders' vote of October 27, 1920, and the execution of its terms. The property of the corporation will remain the same and the proportional interest of each shareholder in that property also will remain the same. There may be an increase of capital stock manifested by the issuance of shares without par value, and such an issue would be subject to the excise. That, however, is not the situation shown in the case at bar. There was no effort to issue in disguise a stock dividend, because the vote expressly...
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...1, 5-7, 159 N.E. 536. 4. The word ‘capital’ may have different meanings when used in different connections. See Hood Rubber Co. v. Commonwealth, 238 Mass. 369, 371, 131 N.E. 201; Commissioner of Banks v. Thurston (In re Prudential Trust Co.), 244 Mass. 64, 72, 138 N.E. 702. It appears, howe......
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