United States v. Southwestern Portland Cement Co.

This appeal is taken by the United States, defendant below, from a judgment entered in favor of plaintiff for refund of excise taxes alleged to have been erroneously collected.

*414 The facts, stipulated to, are substantially as follows:

The appellee, a West Virginia corporation, had its principal place of business at Los Angeles, Calif. On March 10, 1932, at a regular meeting thereof, its Board of Directors passed the following resolution: “Resolved that out of the net earnings of the corporation, there be paid an annual dividend of $8.00 per share on the Preferred stock outstanding; and $4.00 per share on the Common stock outstanding, the said dividend to be paid in equal quarterly payments, and to be paid at the rate herein stated, until otherwise ordered by the Board of Directors.” On March 10, 1932, there were issued and outstanding 20,511 shares of Preferred stock of the par value of $100.00, and 61,534 shares of Common stock of like par value. On that date the appellee had a surplus available for dividends at the rate stated to and including December 31, 1933. No other action was taken by the Board of Directors between March ,10, 1932, and December 31, 1933, relative to…

(dissenting).

I dissent. I agree with the majority’s statement of the general rule that “a declaration of dividend which does not create a definite, final, irrevocable and enforceable debt against the corporation in favor of the stockholders is not a fully declared dividend.” But I think that in the present case the dividends upon which tax is claimed were absolutely and unqualifiedly declared prior to the date of the enactment of the statute, and that consequently their receipt was not subject to the tax.

The resolution of March 10, 1932 was clumsily phrased, but its intent is not different than if it had been drawn with the italicized phrase “until otherwise ordered by the Board of Directors” placed so that it is in juxtaposition with the first part of the sentence of which it is a part. The original resolution reads :

Changed in form as I have suggested the resolution would read:

Again if the evident misplacement of the semicolon following the first use of the word “outstanding” be placed after the second use of that word the same result is obtained. That is to say, as I construe the resolution, the qualifying clause “until othei-wise ordered by the Board of Directors” is…