Court Opinion

ID: 6874085
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:05:18.935913+00
Date Added: 2024-06-11T16:05:27.743862
License: Public Domain

STEPHENS, Circuit Judge
(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 :
“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." (Italics added.)
Changed in form as I have suggested the resolution would read:
“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 until otherwise ordered by the Board of Directors. The said dividend to be paid in equal quarterly payments, and to be paid at the rate herein stated.” (Italics added.)
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 not to be taken as an authorization to the Board to change the rate or time of payment of an “annual dividend” after indication once given that the dividend described in the resolution was to be paid for any particular year.
Such' an indication for the year 1933 is found in the payment in January of a quarterly dividend answering the description of the March 10, 1932 resolution. This act, I think, since unaccompanied by any statement to the contrary, effectuated a readoption of the dividend resolution of March 10, 1932, in so far as the year 1933 was concerned. Concurrently with the payment of the first installment the obligation to pay the full dividend described in the resolution became perfect and complete. At that time there arose the relationship of debtor and creditor between the corporation and its stockholders for the three remaining unpaid' quarterly installments- of the “annual dividend” for the year 1933. Hence there was, prior to the adoption of the National Industrial Recovery Act, a complete, valid and unqualified declaration of the dividends here claimed to be subject to the excise tax imposed by section 213(a) thereof, 48 Stat. 206. Consequently the judgment should be affirmed. See, United States v. Southwestern R. Co., 5 Cir., 1937, 92 F.2d 897; Alabama Pipe Co. v. U. S. (Ct.Cl.1937) 21 F.Supp. 173; Evening Star Newspaper Co. v. United States, Ct.Cl. 1936, 16 F.Supp. 1020; Crocker v. Carney, D.C.Mass., 1936, 17 F.Supp. 534.