Opinion
No. 3979.
July 15, 1929.
Appeal from the District Court of the United States for the Middle District of Pennsylvania; Albert W. Johnson, Judge.
Action by the Lyman H. Howe Films Company against D.H. Phillips, Collector of Internal Revenue, to recover taxes alleged to have been wrongfully collected prior to merger of two corporations. Judgment for plaintiff, and defendant appeals. Affirmed.
Statement of Facts.The material facts to be considered in the determination of this case are that the Lyman H. Howe Attractions was incorporated under the laws of the state of Pennsylvania in 1914, and on August 26, 1921, it filed with the plaintiff its income tax return for the fiscal year ended June 30, 1921, which return disclosed no tax liability.
The Lyman H. Howe Films Company was incorporated under the laws of the state of Pennsylvania in 1914, and on August 26, 1921, it filed with the defendant, as collector of internal revenue, its income tax return for the fiscal year ended June 30, 1921, disclosing a tax liability of $4,066.10, which was subsequently paid in installments.
Upon an audit of the returns by the Commissioner of Internal Revenue and a consolidation thereof, it was determined that an overpayment had been made by the Lyman H. Howe Films Company in the sum of $4,066.10.
On February 7, 1922, the Lyman H. Howe Films Company and the Lyman H. Howe Attractions filed in the office of the secretary of the commonwealth of Pennsylvania a joint agreement for the merger and consolidation of said companies and the formation of a new company under the style and title of the Lyman H. Howe Films Company, in accordance with the Act of the General Assembly of Pennsylvania of May 3, 1909, P.L. 408, as amended by the Act of April 29, 1915, P.L. 205 (Pa. St. 1920, §§ 5748-5752). The Governor of Pennsylvania issued letters patent as of February 7, 1922, to the Lyman H. Howe Films Company, plaintiff in the case at bar.
On March 29, 1926, the plaintiff corporation filed a waiver for and on behalf of the original Lyman H. Howe Films Company, purporting to extend the time during which additional assessments for the fiscal year ended June 30, 1921, might be made. This waiver was not accepted by the Commissioner of Internal Revenue as being filed by the taxpayer, and, as result thereof, no refund under section 284(g) of the Revenue Act of 1926 (26 USCA § 1065) was allowed of the balance of $2,066.10 then due the said original Lyman H. Howe Films Company.
Andrew B. Dunsmore, U.S. Atty., of Wellsboro, Pa., and A.A. Vosburg, Asst. U.S. Atty., of Scranton, Pa. (C.M. Charest, Gen. Counsel, Bureau of Internal Revenue, and B.H. Bartholow and M.W. Goldsworthy, Sp. Attys., Bureau of Internal Revenue, all of Washington, D.C., of counsel), for appellant.
L.E. Renard, of Scranton, Pa., for appellee.
Before BUFFINGTON, WOOLLEY, and DAVIS, Circuit Judges.
This action was brought to recover taxes alleged to have been wrongfully collected from the Lyman H. Howe Films Company. Jury was waived by stipulation, and the case heard by the judge. On the facts agreed upon, he entered judgment for the taxpayer. Thereupon the collector took this appeal.
The proofs were that the Lyman H. Howe Attractions and the Lyman H. Howe Films Company, corporations of Pennsylvania, were, subsequent to the payment of certain taxes by the latter company, duly merged under the Pennsylvania statutes into a third corporation called the Lyman H. Howe Films Company, the plaintiff. The facts touching the merger were that the plaintiff bears the name of one of the merging companies; the officers, directors, and by-laws of the merged company were the same as the two constituent merging companies; the number of shares in the merged company was the same as that held by each shareholder in the merging companies.
Without discussing the speculative question as to just when and how the rights, liabilities, and properties of the merging companies passed to the merged one, it suffices to say that in the relation of taxpayer and government it is clear that the same shareholders, the same subject-matter, and the several rights and liabilities of taxpayer and government continued in unbroken continuity from the time the government wrongfully collected the tax until the taxpayer brought this suit. The merger was a permissible proceeding under the state law. It introduced no new parties; it was a mere readjustment of relation of the original shareholders among themselves. The wrong done those shareholders by the unjust collection of the taxes from one of the merging companies continued to be a wrong suffered by them as shareholders of the merged company. Regarding substance and not mere corporate form, it is clear to us that the filing of the required statutory waiver was the right of the shareholders of the merged corporation. In so holding, the court below committed no error, and its judgment is therefore affirmed.