North Am. Co. v. Green

• Decision Date: 02 December 1959
• Citation: 120 So.2d 603
• Parties: NORTH AMERICAN COMPANY, a Florida corporation, Appellant, v. Ray E. GREEN, Comptroller of the State of Florida, Appellee.
• Court: Florida Supreme Court

Page 603

120 So.2d 603

NORTH AMERICAN COMPANY, a Florida corporation, Appellant, v. Ray E. GREEN, Comptroller of the State of Florida, Appellee.

Supreme Court of Florida.

Dec. 2, 1959.

On Rehearing May 11, 1960.

Saunders, Curtis, Ginestra & Gore and George H. Gore, Fort Lauderdale, for appellant.

Richard W. Ervin, Atty. Gen., Fred M. Burns and Robert J. Kelly, Asst. Attys. Gen., for appellee.

THORNAL, Justice.

Appellant North American Company which was plaintiff below seeks reversal of a declaratory decree finding it liable for the payment of certain documentary stamp taxes.

Several questions, including the constitutionality of Section 201.05, Florida Statutes, F.S.A., are presented for consideration. The determining point, however, is whether the hereinafter described corporate stock transaction constituted a transfer of a right to receive stock thereby producing a liability for the documentary stamp tax imposed by Section 201.04, Florida Statutes, F.S.A.

Appellant North American Company, a Florida corporation, was the wholly owned subsidiary of R. H. Gore Company, an Illinois corporation. The former will hereinafter be referred to as 'North American' and the latter as 'Gore'. Although authorized by charter to issue 1,000 shares of no par value stock, appellant North American had issued to Gore 104 shares which constituted all of its outstanding stock. As consideration for the stock, Gore had transferred to North American real estate of the value of $689,065.22. At all times mentioned herein this was considered to be the value of the common stock of North American that had been issued to Gore. During 1954 the stockholders and directors of Gore decided to reorganize its operation for reasons not here material. Thereafter the stockholders and directors of North American approved a plan of reorganization which was proposed by Gore. The plan simply was that North American would amend its charter so as to obtain authority to issue a total of 104,000 shares of no par value stock. The plan provided that Gore, the parent company, would surrender for cancellation its 104 shares of the original stock of North American and thereupon in turn North American would issue and deliver direct to the stockholders of Gore the 104,000 shares of North American in proportion to the stock ownership of the Gore stockholders. In accord with the plan, Gore endorsed its two certificates evidencing the 104 shares of North American stock in the following words, to wit: 'Surrendered for reissue to stockholders of the R. H. Gore Co.' Reduced to its simplest terms, the transaction merely was that Gore surrendered to North American all of the outstanding capital stock of the latter with instructions to North American to reissue its total authorized capital stock to the stockholders of Gore in proportion to their stock ownership in the latter.

The appellee Green, as Comptroller, contended that the transaction was a transfer of a right to receive the 104,000 shares of North American stock and therefore taxable at the rate of 10 cents per share under Section 201.04, Florida Statutes, F.S.A. In the alternative Green claimed that the transaction resulted in an original issue of 104,000 shares of North American stock and therefore was taxable as such under Section 201.05, Florida Statutes, F.S.A. In either case the amount of the tax would be the same. In order to have its rights and liabilities, if any, determined, appellant North American filed its complaint for a declaratory decree. It asked the Chancellor to construe the two statutes and in the ultimate to find that the transaction did not constitute a transfer of anything more than 104 shares of no par stock and therefore taxable at the rate of 10 cents per share under Section 201.04, Florida Statutes, F.S.A. The total tax on the transaction in the view of appellant was $10.40. Appellant also asked the Chancellor to declare that the issuance of 104,000 shares was not an 'original issue' under Section 201.05, Florida Statutes, F.S.A. It alleged, however, that if this should be considered an 'original issue' of no par stock having an actual value of less than $100 per share, as it did, then the applicable provisions of Section 201.05, Florida Statutes, F.S.A., should be declared unconstitutional as a denial of equal protection of the law. This was grounded on the fact that the statute taxed no par stock on the basis of value if its actual value exceeded $100 per share but did not recognize the actual value element if it was worth less than $100 per share.

The Chancellor had the view that Section 201.05, Florida Statutes, F.S.A., did not offend the Constitution; that the issue of 104,000 shares by North American constituted an 'original issue' under said Section 201.05, supra, and that appellant would be liable for the payment of the tax upon an original issue at the rate of 10 cents per share or a total of $10,400. The Chancellor had the further view that even if the transaction should not be considered an 'original issue', it nevertheless constituted a transfer of a right to receive 104,000 shares of no par stock and was taxable at the rate of 10 cents per share under Section 201.04, Florida Statutes, F.S.A. in which event the tax would likewise amount to $10,400. In either event the result would be the same. The appellant seeks reversal of this decree.

It is the contention of the appellant that the issuance of the 104,000 shares by North American could not constitute an 'original issue' for the simple reason that no new capital was introduced into the operation of the corporation. It contends that at most the 104,000 shares constituted merely a reissue of stock in lieu of the 104 shares surrendered by Gore. It contends that the stockholders of Gore received no increased benefits from the transaction because the reissued shares of North American were divided among the stockholders proportionately. Appellant further contends that at most the transaction was merely a transfer of 104 shares of non par stock in North American with a resulting tax of $10.40 under Section 201.04, Florida Statutes, F.S.A.

The appellee contends here, as he did before the Chancellor, that the issuance of the 104,000 shares by North American was an original issue and taxable as such under Section 201.05, Florida Statutes, F.S.A., which section he asserts is constitutional. In the alternative, appellee contends that if the transaction did not constitute an original issue then it was a transfer of a right to receive 104,000 shares of no par stock taxable under Section 201.04, Florida Statutes, F.S.A. In either event the amount of the tax would be the same. The appellee specifically disclaims any effort to collect the tax on an original issue under Section 201.05, and also to collect the tax on the transfer under Section 201.04, Florida Statutes, F.S.A. We are therefore not confronted with this problem.

In view of the conclusion which we hereafter announce, we find it unnecessary to explore the matter of the alleged unconstitutionality of certain provisions of Section 201.05, Florida Statutes, F.S.A. It is a long established rule that the courts will not consider the alleged unconstitutionality of a statute unless it is necessary to do so in order to dispose of the problem at hand. In the instant matter we find it unnecessary. As pointed out hereafter we have the view that the transaction described in the forepart of this opinion is taxable as a transfer of a right to receive 104,000 shares of nonpar stock under Section 201.04, Florida Statutes, F.S.A. We do not consider that the issuance of the 104,000 shares by North American was an 'original issue' within the contemplation of Section 201.05, Florida Statutes, F.S.A.

The pertinent provisions of Section 201.04, Florida Statutes, F.S.A., are as follows:

'On all sales, agreememts to sell, or memoranda of sales or deliveries of, transfers of legal title to shares, or certificates of stock or profits or interest in property or accumulations in any corporation, or to rights to subscribe for or to receive such shares or certificates, whether made upon or shown by the books of the corporation, or by any assignment in blank, or by any delivery, or by any paper or agreement or memorandum or other evidence of transfer or sale, whether entitling the holder in any manner to the benefit of such stock interests rights or not, on each one hundred dollars of face value or fraction thereof the tax shall be ten cents; and where such shares are without par or face value, the tax shall be ten cents on the transfer or sale or agreement to sell on each share; * * *.' (Emphasis added.)

The pertinent provisions of Section 201.05, Florida Statutes, F.S.A., are as follows:

'On each original issue, whether organization or reorganization, of certificates of stock issued in the state, or profits, or of interest in property or accumulations, by any corporation, on each one hundred dollars of face value, or fraction thereof, the tax shall be ten cents; provided, that where a certificate is issued without face value, the tax shall be ten cents per share, unless the actual value is in excess of one hundred dollars per share, in which case the tax shall be ten cents on each one hundred dollars of actual value or fraction thereof. * * *' (Emphasis added.)

The appellant asserts that if the transaction could be construed as involving an 'original issue' under Section 201.05, Florida Statutes, F.S.A., then that portion of the section imposing the tax of 10 cents per share on non par stock unless the actual value is in excess of $100 per share in which case the tax shall be 10 cents on each $100 of actual value or fraction thereof is unconstitutional and discriminatory against the issuance of non par stock having an actual value of less than $100 per share. We have stated that we pretermit any discussion of the contended unconstitutionality of the statute because we have the view that...