Court Opinion

ID: 9650361
Source: CourtListenerOpinion
Date Created: 2023-08-23 15:32:59.894628+00
Date Added: 2024-06-11T18:12:20.665557
License: Public Domain

PARKER, Circuit Judge.
I concur in the result reached in the foregoing opinion and I concur also in the reasoning of the court, except with respect to grounds upon which the dividends credited in the year 1930 are taxable as income. In my view, the stock transaction was not absolutely void but voidable. See Rogers v. Guaranty Trust Co., 2 Cir., 60 F.2d 114, 118; 67 C.J. 270; Toledo, etc., R. Co. v. Continental Trust Co., 6 Cir. (Lurton, J.), 95 F. 497, 525; Anderson v. Roberts, 18 Johns. 515, 528, 529, 9 Am.Dec. 235. As said in Anderson v. Roberts, supra, “A thing is void * * * where no person is bound by the act; but a thing is voidable which is done by a person who ought not to have done it, but who, nevertheless, cannot avoid it himself, after it is done.” If the value of the stock had declined below the price at which Penn purchased it or, if the company had become insolvent, I apprehend that Penn could not have avoided paying for it in accordance with the terms of the note if the company or its receiver had insisted on payment. The case is not one where the issuance of the stock was ultra vires the powers of the corporation, but where the purchase and allotment at an inadequate price of stock lawfully issued was a fraud upon the corporation and was made by its officers without compliance with legal requirements. The law seems well settled that such a transaction is voidable and not void. See 14 C.J. 406, 456; 18 C.J.S., Corporations, §§ 207, 257, pp. 641, 721; 19 C.J.S., Corporations, § 795, p. 176; 13 Am.Jr. 328 and cases there cited. This being true dividends from the stock credited on the note in 1930 represented income from the investment received during that year, notwithstanding that the transaction was rescinded in the year following and the benefit of the dividends was then surrendered along with the stock. If, however, I were of opinion that the stock transaction was absolutely void, ab initio, and not merely voidable I would think that no taxable income resulted from the entry of the credit for dividends on the note of Penn. If the stock transfer was void, the credit of the dividends was likewise void. No taxable income could possibly result from void entries of credit on a void note. Ex nihilo, nihil fit.