Court Opinion

ID: 5312050
Source: CourtListenerOpinion
Date Created: 2022-01-08 03:54:24.752839+00
Date Added: 2024-06-11T08:29:13.424833
License: Public Domain

Whitmyer, J. (dissenting).
Prior to December, 1922; the United States Shipping Board carried insurance against claims for personal injury and damages arising against its ships in a mutual assurance company. Thinking that the cost was excessive, the Board decided to handle its own insurance and to carry on the work through an independent corporation, of which relator was to have control. Thereupon, the United States P. & I. Agency, Inc., was organized with an authorized capital stock of one hundred shares, no par. The stock was issued to relator, sixty shares, and to his wife, forty shares.
A contract was made between the Board and the new corporation on December 14, 1922. Under it, the new corporation was *355appointed agent and its duties were enumerated. The agreement provided for a fixed fee of $65,000 to the agent. In consideration thereof and without further cost to the Board, the agent was to procure the services of certain officers, including the president, vice-president and managers of various departments and to pay their personal expenses, including traveling expenses and taxes, incurred by the agent otherwise than in the performance of its duties under the contract.
Further, the Board was to pay the actual amount of expenses incurred by the agent, other than those which were to come out of the fixed fee.
Relator is a resident of New Jersey and was to manage the corporation. He was to receive not to exceed $20,000 a year, with the agreement that any profits over $20,000 were to be returned to the Board. Annexed to the contract was a letter of the same date from him, in which he stated that the “ understanding is that my personal compensation to be received through the corporation directly and /or indirectly is to be an amount not to exceed $20,000 a year.”
He claims that the payments were dividends and not compensation.
He received sixty shares of the stock, his wife forty. He rendered services as an officer. His wife did not render any. Nothing was paid for the stock. It was indorsed in blank for transfer, was deposited with the Board and, upon termination of the relations, was to revert to the Board. The contract does not mention dividends or profits. The payments to the agent were by way of the fixed fee, from which all expenses were to be deducted. Relator’s services were an expense. He was the only shareholder to receive a payment and it was contracted for in advance. And there could be no surplus, because everything above the expenses was to be returned to the Board. The compensation was a dividend only in name.
The United States Government did not pay relator for his services. The contract of the Shipping Board was with another corporation, as agent, and relator performed his services for and received his compensation from that agent.
It seems clear that the finding of the Tax Commission should be affirmed.
Davis, J., concurs.
Determination annulled, with fifty dollars costs and disbursements, and matter remitted to State Tax Commission.