Southern Package Corporation v. State Tax Commission

• Decision Date: 24 January 1944
• Docket Number: 35521.
• Court: Mississippi Supreme Court
• Parties: SOUTHERN PACKAGE CORPORATION v. STATE TAX COMMISSION.

15 So.2d 436

195 Miss. 864

SOUTHERN PACKAGE CORPORATION v. STATE TAX COMMISSION.

No. 35521.

Supreme Court of Mississippi

January 24, 1944

W. S. Henley, of Hazlehurst, and Watkins &amp Eager, of Jackson, for appellant.

J H. Sumrall, of Jackson, for appellee.

GRIFFITH, Justice.

During the year 1930 eight industrial concerns located in this state and engaged in the business of manufacturing fruit and vegetable boxes or crates decided to consolidate their plants and assets into one new corporation, and they entered into a consolidation agreement to that effect. The plants and all their property and assets were to be conveyed to the new corporation in consideration of Common and of Class A Preferred Stock, except timber assets, but for timber owned by the several consolidating concerns and conveyed to the new corporation, that particular property was to be evidenced by Class B Preferred Stock. The consolidation agreement on the subject of the timber was in the following terms:

"Class 'B' Preferred Stock shall be authorized to the extent of five thousand shares of par value of $100.00 each, to be used from time to time, in the purchase of timber, is to be cumulative non-voting to receive dividends at the annual rate of 6%, to be payable annually, and to be preferred over all other stock as to all of the timber holdings, including the real estate on which the timber is situated, and to carry the usual provisions, including the provision that said stock may be retired at any time by the payment of $100.00 per share for each share of the par value of $100.00, or, in other words, said stock may be retired without the payment of any premium whatever, except accrued dividends. A retirement fund shall be set aside in a separate bank account at the end of each month, in amounts equal to the value of timber cut during the previous months, based on the value of timber at the time of purchase. This class of Capital Stock shall be in serial numbers, starting with number one and when the retirement fund is sufficient to retire one or more shares of this Capital Stock, the New Company shall call for retirement at par value of said shares of this stock, commencing with number one (1) and following until the retirement fund is exhausted from time to time."

In pursuance of the consolidation agreement, appellant corporation was organized under the laws of Delaware; the charter carried express provisions as to the issuance of the three classes of stock mentioned, including particularly the authority for the issuance of the Class B Preferred Stock and this in accordance with the terms of the above quoted timber stipulation. Timber in the estimated value of $500,000 was conveyed to the corporation, and the owners received Class B Preferred Stock therefor, the stock certificates being also in accord with the agreed plan above quoted. This stock was set up on the books as a part of its capital, and is so shown on its annual returns made for the franchise tax.

Appellant corporation contends now however, that said Class B Preferred Stock is in substance a mere evidence of indebtedness creating between the corporation and the holders of this particular stock the relation of debtor and creditor, and that therefore it should not be included in the computations of the franchise tax.

Corporations enjoy privileges and immunities not possessed by natural...