Sheldon v. Mississippi Cottonseed Products Co.

• Decision Date: 08 January 1936
• Docket Number: No. 7906.,7906.
• Parties: SHELDON, Collector of Internal Revenue, v. MISSISSIPPI COTTONSEED PRODUCTS CO.
• Court: U.S. Court of Appeals — Fifth Circuit

81 F.2d 169 (1936)

SHELDON, Collector of Internal Revenue, v. MISSISSIPPI COTTONSEED PRODUCTS CO.

No. 7906.

Circuit Court of Appeals, Fifth Circuit.

January 8, 1936.

James E. Murphy, Sp. Asst. to Atty. Gen., and R. M. Bourdeaux, U. S. Atty., of Meridian, Miss., for appellant.

Marcellus Green, Garner W. Green, and F. B. Jackson, all of Jackson, Miss., for appellee.

Before SIBLEY, HUTCHESON, and WALKER, Circuit Judges.

WALKER, Circuit Judge.

The appellee, a Delaware corporation, brought this action to recover the amount, $945, of documentary stamp taxes exacted of it in circumstances mentioned below, with interest thereon. Appellee's original declaration contained two counts, one of which was withdrawn by it. Appellant's demurrer to the remaining count was overruled, and, upon appellant declining to plead further, final judgment was rendered in favor of the appellee. Allegations of the count demurred to showed the following: In July, 1927, appellee issued its bonds, with interest coupons, in the total amount of $1,250,000, and executed its mortgage to secure those bonds, which, in different amounts, were payable serially in successive years, beginning July 1, 1929, and ending July 1, 1942, when $350,000 of the bonds were payable. The mortgage contained a provision which, among other things, empowered the holders of 90 per cent. of the principal amount of bonds outstanding at any time, with the consent of appellee and the corporate trustee named in the mortgage, to assent to and authorize any modification of the provision of the mortgage, such modification to be set forth in a supplemental indenture between the appellee and the trustee in the mortgage. Pursuant to that provision, on or about January 1, 1933, when there had been no default of any kind or character in the payment of the then outstanding bonds amounting to $945,000 by an instrument called "a supplemental indenture," to which appellee, the trustee in said mortgage, and a named bank, depository of 90 per cent. in principal amount of all said bonds then outstanding, were parties, the maturity dates of all then outstanding bonds were extended for periods of five years. That instrument contained recitals to the effect that, due to the chaotic economic conditions for which appellee was in no way responsible, provisions of both the bonds and the mortgage securing them had become impossible of performance in respects mentioned. The depository indorsed on each of the then outstanding bonds the following: "The maturity date of this bond is hereby extended five years. Dated as at July 1, 1933." At the time of the execution of said supplemental indenture appellee issued additional interest coupons to cover interest for the five years for which said bonds were extended, and such coupons were delivered to the holders of said bonds. The above-mentioned supplemental indenture contained, in addition to what said mortgage contained, provisions whereby appellee agreed to do, or refrain from doing, stated things in the conduct of its business; and also provisions which conferred or imposed upon the corporate trustee named in said mortgage specified powers and duties. Upon the Commissioner of Internal Revenue ruling that the transaction evidenced by the above mentioned instruments was subject to the stamp taxes prescribed by Schedule A 1 of title 8 of the Revenue Act of 1926 (44 Stat. 99-101, § 800 et seq., 26 U.S.C.A. § 901, Schedule A (1), and amended by the Revenue Act of 1932, § 721 (47 Stat. 169, 272, 26 U.S.C.A. § 901 note) and demanding of the appellee the payment of such tax in the sum of $945, appellee paid that sum under protest, and duly claimed the refund of the sum so paid, which claim for refund was denied.

The above-cited provision of the Revenue Act of 1926 reads as follows:

"Sec. 800. On and after the expiration of thirty days after the enactment of this Act there shall be levied, collected, and paid, for and in respect of the several bonds, debentures, or certificates of stock and of indebtedness, and other documents, instruments, matters, and things mentioned and described in Schedule A of this title, * * * the several taxes specified in such schedule. * * *

"Schedule A. — Stamp Taxes

"1. Bonds of indebtedness: On all bonds, debentures, or certificates of indebtedness issued by any corporation, and all instruments, however termed, issued by any corporation with interest coupons or in registered form, known generally as corporate securities, on each $100 of face value or fraction thereof, 5 cents: Provided, That every renewal of the foregoing shall be taxed as a new issue."

So far as is material in this case, the amendment of the just set out provision made by the above-cited provision of the Revenue Act of 1932 consisted in striking from subdivision 1 of said Schedule A the words "5 cents," and inserting in lieu thereof "10 cents."

The decision of this case turns upon the meaning of the word "renewal" in the above set out proviso, "That every renewal of the foregoing shall be taxed as a new issue." The word "renewal" has different meanings, varying with the subjects with reference to which it is used. One of the definitions of the word "renew" found in Webster's New International Dictionary is: "To grant or obtain extension of; to continue in force for a fresh period; as to renew a note or a bond." As commonly used with reference to notes and bonds, the word "renewal" imports a postponement of the maturity of the obligation dealt with, an extension of the time in which that obligation may be discharged. Lowry National Bank v. Fickett, 122 Ga. 489, 50 S.E. 396, 397; Wilson v. Rousseau, 4 How. 646, 697, 11 L.Ed. 1141; Farmers' Loan & Trust Co. v. Central Park, N. & E. R. R. Co. (C. C. A.) 193 F. 963. With reference to the word "renewal" the following was said in the opinion in the case of Lowry National Bank v. Fickett, supra: "In law it has been defined to be `an obligation on which time of payment is extended.' English Law Dict. It has also been said that it is not a word of art, and has no legal or technical signification. * * * It has also been held that there might be such a thing as a renewal where the party was different, provided the obligation was of the same nature; as in a case where a widow gave her note in lieu of the note of her deceased husband for the same amount. Sponhaur v. Malloy, 21 Ind.App. 287, 52 N.E. 245. * * * Not only the definition of renewal, but also its application in the cases cited and in similar cases, carries the idea that an obligation is renewed when the same obligation is carried forward by the new paper or undertaking, whatever it may be. There may be a change of parties. There may be an increase of security, but there is no renewal unless the obligation is the same. What makes the renewal is an...