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Bothwell v. United States

United States Court of Claims.
Apr 26, 1937
18 F. Supp. 1011 (Fed. Cl. 1937)

Opinion


18 F.Supp. 1011 (Ct.Cl. 1937) BOTHWELL et al. v. UNITED STATES. No. 42812. United States Court of Claims. April 26, 1937

        Suit by Don C. Bothwell and another, as receivers of the Magna Oil & Refining Company, a corporation dissolved, against the United States.

        Petition dismissed, and judgment rendered for defendant.

        In this case the receivers of the Magna Oil & Refining Company, a dissolved Delaware corporation, seek to recover $15,904.13, alleged overpayment of income and profits tax for 1919 paid by that corporation April 7, 1927, pursuant to an assessment made against it March 10, 1927, as transferee of the A-1 Oil & Gas Company, a dissolved Kansas corporation.

        Two waivers of the statute of limitation were given-- the first in December, 1925, by the Magna Oil & Refining Company purporting to extend the statutory limitation period for assessment against the A-1 Oil & Gas Company to December 31, 1926, and the second on November 9, 1926, by the Tidal Osage Oil Company purporting to extend the time for assessment against the A-1 Oil & Gas Company to December 31, 1927. Plaintiffs contend that the first waiver executed by the Magna Oil & Refining Company did not extend the period for assessment against the original taxpayer, the A-1 Oil & Gas Company, and that if it was effective to extend the period within which assessment could be made against the Magna Oil & Refining Company, as transferee, the period expired December 31, 1926. As to the second waiver, plaintiffs contend that it could not extend that period for assessment against A-1 Oil & Gas Company and, likewise, could not extend the period within which Magna Oil & Refining Company could be assessed for its liability as transferee of A-1 Oil & Gas Company.

        Defendant contends that the assessment and collection from Magna Oil & Refining Company, as transferee, were valid and legal under the waiver executed by it on December 17, 1925; that such waiver purported to and did extend that time for assessment against the original taxpayer, A-1 Oil & Gas Company, to December 31, 1926; and that under the statute the Government had one year thereafter within which to assess the tax against the Magna Oil & Refining Company as transferee.

        Special Findings of Fact.

        1. The Magna Oil & Refining Company was duly organized as a corporation in July, 1919, and was dissolved on February 24, 1926. The plaintiffs are the duly appointed receivers of the dissolved corporation.

        The A-1 Oil & Gas Company was a corporation organized in 1915 and on May 14, 1920, filed its income and profits tax return for the calendar year 1919 disclosing a tax liability of $3,740 which was paid and is not in controversy.

        During the year 1920, the entire capital stock of the A-1 Oil & Gas Company was acquired by the Magna Oil & Refining Company to which reference has been made above.

        On September 18, 1922, the A-1 Oil & Gas Company transferred all its assets to its sole stockholder, Magna Oil & Refining Company, as a liquidating dividend, and was duly dissolved as a corporate body on October 5, 1922, pursuant to the laws of the State of Kansas. The value of the assets so transferred was sufficient, over and above its liabilities, at the time of such transfer to pay the income and profits taxes of A-1 Oil & Gas Company involved in this suit. At the time of such transfer and dissolution of the A-1 Oil & Gas Company, and at all times thereafter, the Magna Oil & Refining Company had possession of the books, records, and papers of A-1 Oil & Gas Company, and its officers and directors had full knowledge of the affairs of the dissolved corporation. No receiver was ever appointed in connection with the dissolution of the A-1 Oil & Gas Company.

        2. The Commissioner of Internal Revenue, having previously assessed an additional tax in the sum of $21,130.44 for the year 1919 against the A-1 Oil & Gas Company, on March 11, 1925, notified the said company of this assessment and demanded payment thereof. This notice and demand was received by the Magna Oil & Refining Company. The additional assessment was paid by the last-named company and is not in controversy.

        3. On August 4, 1925, the entire net assets of the Magna Oil & Refining Company, exclusive of cash and accounts receivable, were sold at public auction to the Tidal Osage Oil Company which owned nearly all the capital stock of the Magna Oil & Refining Company.

        4. On December 17, 1925, the Magna Oil & Refining Company executed and delivered to the Commissioner of Internal Revenue a waiver in respect to the taxes of the A-1 Oil & Gas Company for 1919 purporting to extend the time for assessment thereof until December 31, 1926. This waiver read in part as follows:

        'In pursuance of the provisions of existing Internal Revenue Laws A-One Oil & Gas Co. c/o Tidal Oil Co., a taxpayer of Tulsa, Oklahoma, and the Commissioner of Internal Revenue hereby waive the time prescribed by law for making any assessment of the amount of income, excess-profits, or war-profits taxes due under any return made by or on behalf of said taxpayer for the year (or years) 1917-1918-1919 under existing revenue acts, or under prior revenue acts.

        'This waiver of the time for making any assessment as aforesaid shall remain in effect until December 31, 1926, and shall then expire * * *. (Here follow some provisions not material to the case on trial.)

        'Magna Oil & Refining Company, 'Successor to A-One Oil & Gas Co., Dissolved, 'Taxpayer. 'By D. W. Bell, Secretary. 'D. H. Blair, Commissioner.'

        This waiver bore the corporate seal of Magna Oil & Refining Company, and was accepted by the Commissioner of Internal Revenue.

        No other waivers were executed with respect to the taxes of A-1 Oil & Gas Company for 1919, except a waiver purporting to extend the time for assessment thereof until December 31, 1927, which waiver was delivered by the Tidal Osage Oil Company to the Commissioner November 9, 1926. This waiver bore the corporate seal of Tidal Osage Oil Company, and was accepted by the Commissioner of Internal Revenue.

        5. March 10, 1927, upon further examination and review of the tax liability of A-1 Oil & Gas Company for 1919, the Commissioner found and determined an additional income and profits tax liability against this company for that year in the amount of $14,975.93, and, pursuant to sections 279 and 280 of the Revenue Act of 1926 (44 Stat. 59-61), assessed this amount against Magna Oil & Refining Company as transferee of A-1 Oil & Gas Company. March 25, 1927, the Commissioner, by letter, notified Magna Oil & Refining Company of the aforesaid assessment, among others, and by this letter notified it of its right to appeal therefrom to the United States Board of Tax Appeals within 60 days.

        April 7, 1927, Magna Oil & Refining Company made payment of the aforesaid additional assessment of $14,975.93, together with interest thereon in the sum of $928.10.

        On April 4, 1931, plaintiffs filed a claim for refund of the $14,975.93 so paid, alleging that the collection thereof was not made within the statutory period provided by law. This claim for refund was rejected by the Commissioner.         Walter J. Carrico, of Tulsa, Okl., for plaintiffs.

        Guy Patten, of Washington, D.C., and Robert H. Jackson, Asst. Atty. Gen., for the United States.

        Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.

        LITTLETON, Judge.

        The A-1 Oil & Gas Company, a Kansas corporation, filed its completed income and profits tax return for the calendar year 1919 on May 14, 1920, disclosing a tax liability of $3,740, which was duly paid.

        During 1920 the Magna Oil & Refining Company acquired the entire capital stock of the A-1 Oil & Gas Company and in 1922 received all its assets as a liquidating dividend. On October 5, 1922, the original taxpayer was dissolved. The value of the assets so transferred was sufficient over and above its liabilities at the time of such transfer to pay the income and profits taxes of the A-1 Oil & Gas Company involved in this suit. At all times after such transfer and dissolution of the A-1 Company, the Magna Oil & Refining Company had possession of the books, records, and papers of the A-1 Company and had full knowledge of the affairs of the dissolved corporation. No receiver was ever appointed in connection with the dissolution of the taxpayer.

        December 17, 1925, the Magna Oil & Refining Company executed and delivered to the Commissioner of Internal Revenue a waiver in respect to the taxes of the A-1 Oil & Gas Company for 1919 purporting to extend the time for assessment thereof until December 31, 1926, and on March 10, 1927, the Commissioner determined an additional income and profits tax against the A-1 Oil & Gas Company for 1919 in the sum of $14,975.93, and, on the same day, assessed this amount against the Magna Oil & Refining Company as transferee of the A-1 Oil & Gas Company. April 7, 1927, the Magna Oil & Refining Company paid this additional assessment with $928.10 interest.

        In the meantime the Magna Oil & Refining Company was dissolved February 24, 1926. Under the laws of the State of Delaware, in which it had been incorporated, it had authority for three years after its dissolution to act in its own behalf in matters affecting the winding up of its affairs. This period having expired, the plaintiffs were appointed receivers for this corporation on February 18, 1931.

        Thereafter, on April 4, 1931, plaintiffs filed a claim for the refund of the tax and interest paid by the Magna Oil & Refining Company pursuant to the assessment of March 10, 1927, upon the ground that this assessment was not made within the statutory period provided by law, and that the waiver referred to above was not valid to extend the statutory period for assessment because it was neither executed by the taxpayer (A-1 Oil & Gas Company) before dissolution nor by statutory trustees after dissolution, but was executed by a successor corporation. The claim for refund having been rejected, this suit was begun to recover the amount so paid.

        It will be observed that no question is raised as to the correctness of the additional tax on account of which a claim for refund was filed, nor is it claimed that the Magna Oil & Refining Company was not in the first instance liable as transferee. The ultimate question upon which the decision depends is whether this tax was collected after the period of limitations had expired, and this, in turn, depends upon the construction and effect of the waiver executed by the Magna Oil & Refining Company.

         The parties agree that in the absence of a valid waiver the statutory period for assessment against the A-1 Oil & Gas Company, the original taxpayer, expired on May 14, 1925, but it will be observed that the waiver provided that such limitation period for assessment should be extended to December 31, 1926. The plaintiffs, however, contend that his waiver is invalid and of no effect because it was not executed by the original taxpayer but by the Magna Oil & Refining Company, and that, when properly construed, it shows that the last-named company was merely acting for itself as principal and agreeing to an extension of time for assessment only of its own liability. We think this objection to the waiver executed by the Magna Oil & Refining Company is without merit. This waiver plainly shows that there was a consent extending the statutory period of limitation for assessment of any tax for the years 1917 to 1919, inclusive, against the A-1 Oil & Gas Company and that it was signed 'Magna Oil & Refining Company, Successor to A-1 Oil & Gas Co., Dissolved, Taxpayer. ' This leaves for consideration only the question whether the Magna Oil & Refining Company, as successor to and transferee of the assets and business of A-1 Oil & Gas Company, could legally execute a valid waiver. We think it could, and, further, we are of opinion that the waiver which it executed was in all respects valid and extended the statutory period for assessment against the original taxpayer to December 31, 1926. Under section 280 of the Revenue Act of 1926, 44 Stat. 61, the defendant therefore had one year additional within which to assess any tax found to be due by the A-1 Oil & Gas Company against the transferee of its assets. Stange v. United States, 282 U.S. 270, 51 S.Ct. 145, 75 L.Ed. 335; Id., 68 Ct.Cl. 395; McDonnell v. United States, 288 U.S. 420, 53 S.Ct. 410, 77 L.Ed. 869; Id., 59 F. (2d) 290, 75 Ct.Cl. 155; American Natural Gas Co. v. United States, 13 F.Supp. 69, 82 Ct.Cl. 300.

        Chapter 17, article 8, 17-- 808, 17-- 809, Revised Statutes of Kansas, provides as follows:

        'Directors as trustees in cases of dissolution; their powers and duties. Upon the dissolution of any corporation already created by or under the laws of this state, unless a receiver is appointed by some court of competent authority, the president and directors, or managers of the affairs of the corporation, at the time of the dissolution, by whatever name they may be known in law, shall be trustees of the creditors and stockholders of such corporation, with full power to settle the affairs, collect the outstanding debts, and divide the moneys and other property among the stockholders, after paying the debts due and owing by such corporation at the time of its dissolution, as far as such money and property will enable them; and for this purpose they may maintain or defend any judicial proceeding.

        'Trustees responsible to creditors and stockholders. The trustees mentioned in the last section shall be severally responsible to the creditors and stockholders of such corporation, to the extent of its property and effects that shall have come into their hands.'

         The taxpayer, A-1 Oil & Gas Company, filed its return for 1919 on May 14, 1920, and shortly thereafter the Magna Oil & Refining Company acquired all the capital stock of the A-1 Oil & Gas Company. September 18, 1922, the A-1 Oil & Gas Company transferred all its assets to its sole stockholder, the Magna Oil & Refining Company, as a liquidating dividend, and the Magna Oil & Refining Company thereafter dissolved the A-1 Oil & Gas Company October 5, 1922. It will thus be seen that at and prior to the date of its dissolution the title to all the corporate property of A-1 Oil & Gas Company was vested in Magna Oil & Refining Company and title to its corporate property could not, upon any theory, become vested in any of the former officers of directors of the A-1 Oil & Gas Company upon its dissolution. The Magna Oil & Refining Company was clearly therefore the manager of the affairs of the A-1 Oil & Gas Company at the time of its dissolution and, under the Kansas statute, was trustee of the dissolved corporation with full power to settle the affairs, collect the outstanding debts, pay the debts due and owing by such corporation at the time of its dissolution, and to do all things necessary to wind up and settle the affairs of the dissolved corporation, even to the extent of maintaining or defending judicial proceedings. The authority conferred by the Kansas statute upon the Magna Oil & Refining Company as manager of the affairs of the A-1 Oil & Gas Company at the time of its dissolution was clearly sufficient to authorize it to execute a waiver extending the statutory period of limitation for assessment and collection of any tax that might be due upon the income of the A-1 Oil & Gas Company for 1919. The trustee or manager of the affairs of a dissolved corporation clearly has authority to execute a valid waiver. The decisions to this effect are uniform.

         Under the waiver which extended the statutory period for assessment against the original taxpayer to December 31, 1926, the Government had one year after the expiration period of limitation, as so extended, for assessment against the transferee as provided in section 280(b)(1) of the Revenue Act of 1926, 44 Stat. 61. American Natural Gas Co. v. United States, supra. The assessment was made well within this time and plaintiffs are not entitled to recover.

        The petition is therefore dismissed. It is so ordered.


Summaries of

Bothwell v. United States

United States Court of Claims.
Apr 26, 1937
18 F. Supp. 1011 (Fed. Cl. 1937)
Case details for

Bothwell v. United States

Case Details

Full title:BOTHWELL et al. v. UNITED STATES.

Court:United States Court of Claims.

Date published: Apr 26, 1937

Citations

18 F. Supp. 1011 (Fed. Cl. 1937)

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