Court Opinion

ID: 8269766
Source: CourtListenerOpinion
Date Created: 2022-10-16 19:23:27.674653+00
Date Added: 2024-06-11T16:43:28.581281
License: Public Domain

White, J.
(dissenting).
My vote for reversal is based solely upon the fact, as appears in the case without contradiction, that after the act of 1899 was *441passed the corporation brought up and retired all its then outstanding capital stock, and thus with a clean slate started over again with its new issue of capital stock under its charter, which contained an express clause authorizing, as I think, such leasing as is now contemplated. The effect of this action in legalizing from that time on what before the act had been an unauthorized power in the charter was, I think, exactly the same as if, with the express consent of all of the stockholders, the corporation had formally accepted the enlargement of its charter powers provided for in the act. Such an acceptance with such consent would, I think, have been binding upon all subsequent stockholders. Rankin v. Newark Library Association, 64 N. J. Law 265.
Upon the question of public policy I think the answer must depend upon the legalitjr óf the proposed lease rather than upon the reasons for making it. If I own a sugar plantation in Cuba which is so- highly profitable that before our federal excess profits tax was imposed I refused an offer from a Cuban citizen of $1,000,000 for its purchase, but under the operation of that tax I conclude I would be better off if I accepted the offer and invested the proceeds in United States first liberty loan bonds, which are not taxable at all, I think I am at liberty to do so, although avoidance of the federal tax is the effect and also the moving cause of my so doing.
It is said, however, that as the lessor company owns all the stock of the foreign lessee corporation, the whole thing is a sham to evade federal taxation. The answer to' this is, that if it is a sham it will not evade the taxation, and, consequently, the ground for declaring an otherwise legal transaction unlawful because contrary to public policy does not exist.
For affw'mance—The Chibe-Justice, Trencharh, Parker, Minturn, Kaliscit, Black, Williams, Taylor, Ackerson —9.
For reversal—Swayze, Bergen, Katzenbaci-i, White, HepPENHEIMER—5.