Opinion
Suit by the Middle States Petroleum Corporation against the United States.
Petition dismissed.
Thaddeus G. Benton, of New York City (Conrad E. Cooper, of Tulsa, Okl., on the briefs), for plaintiff.
Guy Patten, of Washington, D. C., and Robert H. Jackson, Asst. Itty. Gen. (Robert N. Anderson and Fred K. Dyar, both of Washington, D. C., on the brief), for the United States.
Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.
This case having been heard by the Court of Claims, the court, upon the evidence adduced, makes the following special findings of fact:
1. Plaintiff is a corporation organized on December 31, 1929, under the laws of the state of Delaware, with its office at 170 Broadway, City and State of New York. Its authorized capital stock consists of 2,300,000 shares without par value, of which 300,000 constitute Class A and 2,000,000 shares constitute Class B stock.
2. At the time of plaintiff's incorporation and for a number of years prior thereto, there existed a group of corporations principally engaged in the production and sale of crude oil, known as the Middle State Group. Of this group Middle States Oil Corporation, organized on February 24, 1917, was principally the holding company, having an interest through stock ownership in fifty-three subsidiary or associated companies, among which were United Oil Producers' Corporation and Oil Lease Development Company. The three named corporations were organized under the laws of Delaware. These three corporations were insolvent on and at all times after July 29, 1929, and their affairs were being administered by receivers appointed in 1924 by the District Court of the United States for the Southern District of New York. The principal assets of these corporations had been pledged as security for the payment of their outstanding notes and bonds, which were in default as to both principal and interest. In addition, there were numerous other claims against the corporations.
3. On July 29, 1929, a 'Plan and Agreement' was entered into between a reorganization committee (appointed by representatives of the noteholders and stockholders of Middle States Oil Corporation, bondholders of United Oil Producers' Corporation and Oil Lease Development Company and claimants of these corporations) formed for the purpose of reorganizing the Middle States Oil Corporation and its subsidiaries, and substantially all the owners and holders of the outstanding secured notes and bonds of the corporations, the stock of Middle States Oil Corporation, and claims against these corporations, who deposited their securities with such committee and to whom 'Certificates of Deposit' representing deposited securities were issued. By the terms of this agreement the owners of the secured notes and bonds, and other claimants, authorized the reorganization committee to transfer any deposited securities into its own name or into that of its nominees; to procure or consent to any corporate action by Middle States Oil Corporation or any of its subsidiaries; to generally manage, control, and collect all amounts in respect to the deposited securities; to organize a new company and make or cause to be made such sales and conveyances and take such other steps as it might deem proper for the purpose of creating the new securities, including the power to make contracts binding upon the new corporation, and to otherwise carry out all provisions of said plan and agreement. The plan and agreement further provided:
That the owners and holders of the secured notes and bonds, and other claimants (hereinafter referred to as depositors), who had or were to become parties to the agreement, should transfer and assign to the reorganization committee legal title to their securities and claims with power in said committee, as owners, to vote the deposited securities and to make contracts in respect thereto.
That the reorganization committee, or its nominees, should purchase the assets of the Middle States Oil Corporation and its subsidiaries at judicial foreclosure sales in suits brought to foreclose the assigned notes and bonds; and that the reorganization committee should also purchase the unpledged assets of the corporations at receivers' sales.
That the reorganization committee should satisfy the principal portions of the purchase prices with these notes, bonds, and claims, including those represented by deficiency judgment in the foreclosure proceedings, held by it, any balance being payable in cash.
That the assets so acquired by the committee, or its nominees, should be transferred to a new corporation to be formed at the instance of said committee;
That: 'The Plan provides for a Voting Trust for ten years of the stock of the New Company. This has also appeared to be an essential requisite in order to prevent a reversion to conditions antedating the receivership and to ensure continuity of management. The personnel of the Voting Trustees as well as of the Board of Directors of the New Company, is to be representative of the various classes of security holders in whose interest the Plan has been adopted and is also to include impartial members. * * *
'All of the A Stock and B Stock of the New Company to be presently issued shall be deposited under a trust agreement under which the entire voting power in respect of such stock shall be vested in five voting trustees for a term of ten years (subject to earlier termination by action of all of the Voting Trustees other than the two impartial Voting Trustees hereinafter provided for). The Reorganization Committee shall designate as the Voting Trustees two persons whom the Reorganization Committee shall believe to be impartial as among the holders of the various classes of Deposited Securities, one person who shall be approved by the Bondholders' Committee, one person who shall be approved by the Serial Noteholders' Committee and Gulf Coast Committee, and one person who shall be approved by the Stockholders' Committee.
'All references in the Plan or Agreement to the delivery of A Stock or B Stock shall be understood to mean and include the Voting Trust Certificates in respect of such stock. * * *
'Holders of Certificates of Deposit, on compliance with all of the terms and conditions of the Plan and Agreement and of their Certificates of Deposit and on surrender of such Certificates of Deposit in negotiable form, shall be entitled to receive upon completion of the reorganization the New Securities (but only as and when issued and ready for delivery under the Plan) to which they shall respectively be entitled pursuant to the terms and provisions of the Plan and Agreement.
'That the New Corporation should issue its no par value Common Stock to certain individuals designated as 'Voting Trustees', who in turn should issue to the 'Depositors' trust certificates entitling them to receive the stock in the New Corporation held by the Voting Trustees upon the termination of the Voting Trust, and bonds of the New Corporation. Said Plan and Agreement further provided:
'It is contemplated that the delivery of the New Securities by the New Company will be based upon the acquisition by it of the assets to be vested in it pursuant to the Plan.
'Treatment of Deposited Securities
'Depositors of U. O. P. Bonds will receive, on the completion of the reorganization and surrender of their Certificates of Deposit in negotiable form:
'For each $100 principal amount thereof, with interest from July 25, 1924, to July 1, 1929: $100 principal amount of New Bonds, and 2 37/100 shares of A Stock.
'Depositors of O. L. D. Bonds will receive, on the completion of the reorganization and surrender of their Certificates of Deposit in negotiable form:
'For each $100 principal amount thereof, with interest from March 1, 1924, to July 1, 1929: $100 principal amount of New Bonds, and 2 56/100 shares of A Stock. * * *
'Depositors of Serial Notes will receive, on the completion of the reorganization and surrender of their Certificates of Deposit in negotiable form:
'For each $100 principal amount thereof, with interest from May 1, 1924, to July 1, 1929: 3 1/2 shares of A Stock, and 2 8/100 shares of B Stock.
'The Depositor or Depositors of the Gulf Coast Claim will receive, on the completion of the reorganization and surrender of its or their Certificate or Certificates of Deposit in negotiable form:
'For each $100 principal amount thereof, with interest to July 1, 1929: 4 shares of A Stock, and 2 83/100 shares of B Stock.
'Depositors of Old Stock will receive, on the completion of the reorganization and the surrender of their Certificates of Deposit in negotiable form, and upon payment of such federal and state stock transfer taxes as may be required:
'For each four shares of Old Stock, one share of B Stock.'
The Class A stock has substantial priorities over the Class B stock in such dividends as may be declared, and, upon any liquidation of the corporation, the A stock is entitled to receive the first $30 per share, the remainder, if any, of the assets to go to the Class B stockholders. Upon the deposit of the stock of Middle States Oil Corporation (the only corporation whose stock was permitted to be deposited under the plan of reorganization) under the plan of reorganization, such depositors were required to pay 5 cents per share. Such depositors became entitled to receive only voting trust certificates for the Class B stock of the new corporation, this treatment being in conformity with the theme of the plan that the holders of bonds and notes of the old corporation and the claimants against such corporations should have the senior securities of the new corporation.
That the reorganization committee may prescribe the terms and form of all securities, charters, certificates, or articles of incorporation, by-laws, trust indentures, mortgages, voting trust agreements, and all other instruments at any time to be executed, issued, filed, or entered into in connection with the carrying out of the plan. It may create and provide all necessary trusts and, subject to the specific provisions of the Plan with regard to the Voting Trust, may nominate and appoint trustees thereunder.
That the rights of the depositors shall be such only as are conferred by the plan and agreement and shall be subject to compliance with such terms as the plan and agreement shall impose as conditions of participation therein. By accepting and holding any certificate of deposit, every recipient or holder thereof shall thereby become a party hereto as if he had actually executed this agreement.
That all reorganization expenses, including all expenses in connection with carrying out the plan and agreement and the transfer of securities, and the fees for taxes payable on the authorization and issuance of the stock of the New Company, shall be assumed and paid by the New Company.
The provision of the plan and agreement of reorganization that the stock of the new corporation to be created be issued to voting trustees for a period of ten years was an essential and indispensable condition to the adoption of said plan and agreement, the purpose thereof being to vest control of the new corporation in what were regarded as responsible hands for ten years and to prevent a return to conditions which had brought about the receivership of the old corporations, which corporations had been managed by the same group of officers. It would have been impractical to effect the plan and agreement of reorganization if any of the several classes of security holders of the reorganized companies had not agreed and, independently of said plan and agreemant, brought foreclosure proceedings under the mortgage securing the bonds or notes of such class.
Said plan and agreement was made in the state of New York and provides that it shall be construed as a contract governed by the laws of New York.
4. The reorganization committee, in the manner aforesaid, acquired legal title to and control of more than 95 per cent. of the notes of Middle States Oil Corporation, 78 per cent. of the bonds of United Oil Producers Corporation, 91 per cent. of the bonds of Oil Lease Development Company, and 85 per cent. of the capital stock of Middle States Oil Corporation, together with other claims against Middle States Oil Corporation. The latter claims included one very substantial claim against Middle States Oil Corporation, Gulf Coast Refining Company, and Southern States Oil Corporation (corporations affiliated with Middle States Oil Corporation), which claim was known as the 'Gulf Coast claim.' The deposit of this claim under the agreement was subject to the payment to the committee representing the claimants of the sum of $100,000, upon the completion of the reorganization and upon the assignment by the committee to the new corporation to be formed, or to the reorganization committee, of certain shares of stock and other claims held by such committee.
5. Having acquired title, as aforesaid, to the deposited securities and claims, the reorganization committee caused foreclosure proceedings to be taken in the District Court of the United States for the Southern District of New York under the mortgages securing the aforesaid notes and bonds. Final decrees were entered in each of the proceedings on November 15, 1929, directing the sale of all of pledged assets of Middle States Oil Corporation, Oil Lease Development Company, and United Oil Producers Corporation. Final decree was also entered on November 22, 1929, by the same court in a creditors' suit against the same corporations and others, directing the sale of all the assets of the three corporations that were not pledged as security for the notes and bonds, and the assets of Imperial Oil Corporation, which had guaranteed the payment of the bonds of United Oil Producers Corporation. The foreclosure decrees permitted the purchasers of such assets to satisfy the principal portion of the purchase price with the notes and bonds held by the reorganization committee, and the decree of sale in the creditors' suit permitted the purchasers to satisfy the principal portion of the purchase price with the claims against such corporations held by the reorganization committee. The balance of the purchase price in each instance was payable in cash. The decrees also permitted the successful bidders to assign their rights under the bids subject to the terms of the decrees. Two individuals, W. Chester Bottome and John Howden, being nominees of the reorganization committee, were the successful bidders for the assets sold, and utilized the notes, bonds, and claims made available to them by the reorganization committee in satisfying the principal portions of the purchase prices. On December 24, 1929, orders were entered by the court confirming the sales to the successful bidders.
The successful bidders represented the reorganization committee under an agreement dated December 13, 1929, the material provisions of which required the bidders to cause an assignment of the assets to be made to such corporation as should be designated by the reorganization committee and on such terms and conditions as the committee might direct, and the reorganization committee to make available to the bidders the necessary securities, claims, and cash with which to make the purchases.
On December 31, 1929, Middle States Petroleum Corporation, the plaintiff herein, and the new corporation which the plan and agreement required to be organized, were organized under the laws of the state of Delaware at the instance of said reorganization committee. Section 2 of Article X of the by-laws of plaintiff provides that:
'So long as the Voting Trust referred to in Section 3 of Article II of these by-laws shall be in force, no shares of stock of any class shall be issued by the corporation except to the Voting Trustees.'
6. On December 31, 1929, the aforesaid successful bidders at said judicial sales and plaintiff entered into a written agreement in the state of New York, the material provisions of which are, in substance, as follows:
That the bidders would (a) designate plaintiff as the corporation to receive a transfer and assignment of all the assets purchased by them, as aforesaid; (b) cause to be vested in plaintiff the Gulf Coast claim hereinbefore mentioned, together with the shares of stock and other claims to be delivered by the Gulf Coast committee under the agreement of reorganization; (c) cause five named individuals to act as voting trustees of the shares to be issued by plaintiff; (d) satisfy, in the manner permitted by the final decrees of sale, the sale prices in so far as the utilization for such purposes of the securities and claims deposited under the agreement of reorganization would permit; (e) cause the plaintiffs in the foreclosure suits and the receivers to make the deliveries of the securities and other assets required by said final decrees and orders confirming sale, respectively; and (f) take all other steps which may be necessary or proper in order to vest in the company all of the assets so sold to the bidders.
Plaintiff agreed that, in consideration of the vesting in it of all the assets purchased by said bidders and the other considerations accruing to it under the agreement, it would (a) execute and deliver $2,500,000 principal amount of its collateral trust fifteen-year sinking fund gold bonds to the persons entitled under the agreement of reorganization and an appropriate indenture securing said bonds; (b) execute a voting trust agreement, the terms of which had been agreed upon, and issue and deliver thereunder to the voting trustees 299,649 full-paid and nonassessable shares of A stock and 895,378 full paid and nonassessable shares of B stock; (c) satisfy the balances due on the purchase prices of the assets acquired by the bidders and comply with all the conditions of such sales; (d) pay to the Gulf Coast Committee $100,000 in cash as required by the agreement of reorganization; and (e) pay all expenses of reorganization.
The contract of December 31, 1929, between W. Chester Bottome and John Howden and plaintiff is the only contract to which plaintiff was ever a party by which it agreed to issue any of its capital stock.
7. Thereafter, on January 1, 1930, an agreement was entered into in New York, N. Y., between the 'holders from time to time of trust certificates issued' thereunder who held certificates of deposit of notes and stock of Middle States Oil Corporation, bonds of United Oil Producers Corporation, and of Oil Lease Development Company, and claims against such corporations, and the voting trustees, and the plaintiff herein. This agreement was signed only by plaintiff and the voting trustees, the depositors becoming parties thereto, according to the terms of the agreement, by their acceptance of voting trust certificates issued thereunder. This agreement provides, in substance, that the voting trustees, upon the issue to them of the stock of plaintiff then to be issued, would issue to the 'depositors' under the plan and agreement trust certificates entitling the depositors to receive on December 31, 1939, or upon the earlier termination of the agreement, certificates for as many shares of stock of the plaintiff corporation as hereinbefore indicated, entitling the holder of such trust certificates in the meantime to receive from the voting trustees, subject to the provisions of such agreement, 'payments equal to the cash dividends, if any, collected by, and one or more additional trust certificates, or fractional scrip certificates in respect of the stock divdends, if any, received by the Voting Trustees hereinafter mentioned upon a like number of such shares standing in their names. Until after the actual delivery of such stock certificates, the Voting Trustees shall, subject to the provisions of Article Sixteenth of the Agreement, possess and shall be entitled in their discretion to exercise all of the rights and powers of absolute owners of such stock, including the right to vote and consent for every purpose, it being expressly stipulated that no voting right passes to the holder of this Trust Certificate by implication or otherwise.'
The voting trust agreement further provided:
'The Company agrees that it will from time to time pay to the Voting Trustees reasonable compensation for the performance of their duties hereunder and will also pay, or seasonably furnish the Voting Trustees with sufficient funds for the payment of, the reasonable compensation and proper and necessary expenses of the agent of the Voting Trustees and the registrar of the Trust Certificates and all other expenses incurred by the Voting Trustees, including compensation of their counsel, and will indemnify and hold harmless the Voting Trustees from and against any and all claims and any and all expenses and liabilities by them properly and necessarily incurred in connection with or growing out of this agreement or the discharge of their duties hereunder. * * *
'The several persons beneficially interested in the shares of stock of the company vested in the Voting Trustees as above recited, by accepting the Trust Certificates issued hereunder, become parties to this Agreement and ratify, approve, and confirm the action of the Reorganization Committee in causing the stock of the Company to be issued to the Voting Trustees as above recited.'
On December 31, 1929, the board of directors of plaintiff approved the aforesaid agreements and directed that upon the delivery to the corporation of the bills of sale of the aforesaid assets there be issued to the voting trustees under the voting trust agreement the aforesaid stock and that there be issued to the reorganization committee for delivery to the depositors entitled thereto its collateral trust fifteen-year gold serial bonds in the principal amount of $2,500,000.
8. The bidders, to whom said assets were sold, gave written notice to the special master of their election not to take such assets and designated plaintiff as the corporation to receive a transfer and assignment thereof. Proper transfers of the aforesaid assets were made to plaintiff by the special master who conducted the sales, and by the receivers of the aforesaid corporations whose assets were sold, as of January 1, 1930. Thereupon plaintiff issued to the voting trustees as of January 2, 1930, 299,954 shares of its Class A stock and 895,529 shares of its Class B stock. The voting trustees have at all times since receiving such certificates held such shares and the certificates evidencing same, and plaintiff has not issued any other stock.
9. Thereafter the voting trustees, upon the requisition of the reorganization committee as provided in the voting trust agreement, from time to time issued and caused to be delivered to the depositors under the agreement or reorganization, through the reorganization committee and the several depositories under the agreement of reorganization, their voting trust certificates as required by the voting trust agreement, upon the certification by the depositories of instructions received from said depositors as to the names in which such trust certificates shall be issued and of the delivery by such depositors of their certificates of deposit issued under the agreement of reorganization, and upon the requisition by such depositories that the trust certificates be issued for the number of shares of stock indicated on the schedules supplied.
At all times since the voting trustees for the Class A and Class B Stock of Middle States Petroleum Corporation issued their trust certificates entitling the owners to receive on December 31, 1939, or upon the earlier termination of the voting trust agreement, certificates for shares of stock of plaintiff corporation, it has been the practice of such voting trustees to require the imposition of United States documentary stock transfer tax stamps upon all sales or transfers of such trust certificates from one holder to another, when and as required by regulations of the Treasury Department, as would be required by law upon all sales or transfers of capital stock as such; and there has at all times been much trading in such trust certificates and many transfers thereof.
10. Thereafter, in April 1930, the Commissioner of Internal Revenue assessed against plaintiff documentary stamp tax in the sum of $23,909.66 under the claimed authority of Schedule A, par. 3, of section 800, title 8 of the Revenue Act of 1926 (44 Stat. 99, 101), at the rate of two cents per share on 299,954 shares of Class A stock and 895,529 shares of Class B stock of plaintiff corporation issued to said voting trustees. This assessment was based upon the claim that there had been transferred to the voting trustees, as of January 2, 1930, the right to receive these shares.
11. Thereafter, upon notice and demand by the collector of internal revenue for the Second District of New York, dated June 4, 1930, and after protest duly made thereto, plaintiff paid this tax in the amount of $23,909.66 to the collector of internal revenue on June 13, 1930, which sum has been covered into the Treasury of the United States. Plaintiff has previously paid the tax on the original issue of the aforesaid stock provided for in Schedule A, par. 2, of section 800, title 8 of the Revenue Act of 1926 (44 Stat. 99, 101), which is not here in controversy.
12. Thereafter, on June 13, 1932, plaintiff duly filed its claim for refund with the collector of internal revenue in which it asked for the refund of $23,909.66, together with interest thereon from the date of payment thereof, upon the ground that it was not liable to any documentary stamp or stock transfer tax under Schedule A, par. 3 of section 800, title 8 of the Revenue Act of 1926 (44 Stat. 99, 101).
By letter dated August 9, 1932, addressed to plaintiff, the Commissioner of Internal Revenue rejected said claim for refund. The reasons for rejecting the claim for refund are fully stated in the Commissioner's letters to plaintiff dated August 9, 1932, and June 8, 1933, respectively, copies of which are attached to plaintiff's petition herein as Exhibits A and B, and are by reference made a part hereof.
GREEN, Judge.
On January 2, 1930, the plaintiff issued 299,954 shares of Class A stock and 895,529 shares of Class B stock to certain voting trustees pursuant to an agreement made with the stockholders of a group of insolvent corporations engaged in the production and sale of crude oil for the purpose of a reorganization. The Commissioner of Internal Revenue exacted a stamp tax of 2 cents a share on the issuance of this stock under the provisions of Schedule A, par. 3, of section 800 of the Revenue Act of 1926 (44 Stat. 99, 101).
In 1929, the Middle States Petroleum Corporation, United Oil Producers Corporation, and Oil Lease Development Company, Delaware corporations, were insolvent and in receivership in the District Court of the United States for the Southern District of New York. The Middle States Petroleum Corporation was a holding company having interest through stock ownership in fifty-three subsidiaries, including the other corporations above named. All were engaged in the production and sale of crude oil. The principal assets of the three insolvent corporations were held as security for the payment of their outstanding notes and bonds which were in default and there were numerous other claims against them.
In this state of affairs the secured creditors, the holders of claims against these corporations, and the stockholders of the holding company appointed a reorganization committee, and on July 29, 1929, a 'Plan and Agreement' was executed by and between the committee and the secured note and bond holders, claimants, and stockholders, in which it was agreed as stated in Finding 3.
Among other things, this agreement provided in substance with reference to the stock to be issued: (a) That the securities, claims, and stock would be deposited with, and title thereto by transfer be vested in, the committee or its nominees; (b) that the committee, or its nominees, would acquire the assets of the insolvent corporations at judicial sales in suits brought to foreclose the mortgages securing the assigned notes and bonds and in suits on the other claims, and would satisfy the purchase price with said notes, bonds, and claims; (c) that the assets so acquired would be transferred to a new corporation to be formed, which would issue for said assets its no-par value common stock, which the depositing note and bond holders, claimants, and stockholders would be entitled to receive on completion of the reorganization, each a certain designated number of the shares for each $100.00 principal amount of securities contributed as aforesaid; (d) that the contributing, or depositing, security holders, claimants, and stockholders consented and agreed that the stock should be issued to certain persons designated as 'Voting Trustees.'
In the respective arguments of the parties it is agreed that the issuance of the stock to the voting trustees was for the purpose of vesting control of the new corporation in what was regarded as responsible hands for ten years and to thus prevent a return of conditions which had brought about the receivership of the old corporations.
It is apparent that under this agreement the reorganization committee acquired legal title to the secured notes and bonds, claims, and stock which were turned over to it.
The reorganization committee, having under these proceedings acquired legal title to and control of nearly all the outstanding notes and bonds, claims, and stock of the various corporations interested, caused foreclosure proceedings to be had upon the mortgages securing the notes and bonds and by judgments obtained under the agreement bid in the assets of the insolvent corporations in the name of its nominees at judicial sales and used the securities and claims in its control to satisfy the purchase price of the assets, after which its nominee by direction of the committee caused legal title to all of the assets to be vested in plaintiff, the new corporation which was formed to receive the same under the agreement. Thereupon plaintiff issued the 1,195,483 shares of stock involved herein to the voting trustees.
Further agreements were executed in completing the reorganization in which, among other things, the plaintiff agreed that, in consideration of the vesting in it of the assets purchased by said bidders, it would execute and deliver $2,500,000 in bonds to the persons entitled thereto under the agreement of reorganization and execute a voting trust agreement, the particulars of which are set out in finding 6. A final agreement dated January 1, 1930, was made between the voting trustees and the plaintiff which provided, among other things, 'The several persons beneficially interested in the shares of stock of the company vested in the Voting Trustees as above recited, by accepting the Trust Certificates issued hereunder, become parties to this Agreement and ratify, approve, and confirm the action of the Reorganization Committee in causing the stock of the Company to be issued to the Voting Trustees as above recited.'
The execution of these agreements completely carried out the original plan and agreement of July 29, 1929.
The voting trust agreement provided that the voting trustees 'shall * * * possess and shall be entitled * * * to exercise all of the rights and powers of absolute owners of such stock, including the right to vote and consent for every purpose, it being expressly stipulated that no voting right passes to the holder of this Trust Certificate by implication or otherwise.'
The issue in the case is whether under the facts as found the issuance of stock to the voting trustees by the plaintiff constituted a taxable transfer under the provisions of Schedule A, par. 3, of section 800 of the Revenue Act of 1926 (44 Stat. 99, 101). The contention made by plaintiff is that the voting trustees were the first and only persons entitled to receive plaintiff's stock and that there was accordingly no transfer of stock to them within the meaning of the statute when plaintiff issued the stock in accordance with the agreement. The argument is that the reorganization agreement provided for the issuance of the stock directly to the voting trustees instead of to those who furnished the consideration for the stock and that the statute does not apply to the original issue by a corporation of its stock to voting trustees or to a nominee. The questions of law involved in the case have been the subject of much controversy and opposing decisions have been rendered upon them. The law, however, is now settled by a recent decision of the Supreme Court in the case of Founders General Corporation v. James J. Hoey, Collector, 57 S.Ct. 457, 458, 81 L.Ed. 639, and two other cases decided March 1, 1937. In all of these cases the transfer was held taxable. The Supreme Court said the three cases present in the main the same question which was: 'When, at the instance of one entitled to receive stock, the certificates therefor are, at his request and for his convenience, issued by the corporation in the name of a nominee who receives no beneficial interest therein, does the transaction involve a transfer by the beneficial owner requiring a documentary stamp pursuant to section 800, Schedule A(3) of the Revenue Act of 1926, February 26, 1926, c. 27, Title 8, 44 Stat. 99, 101?'
The issue in this case upon the facts found presents the same question which the Supreme Court answers in the affirmative.
In plaintiff's reply brief it is said: 'The parties to the agreement did not consent to the issue of stock to voting trustees--they required same as a condition to their execution of the reorganization agreement.' But it cannot be said that these parties did not consent to what they had agreed should be done.
The Supreme Court further said in the cited case that the fact that the transaction did not involve the transfer of a beneficial interest was immaterial and that the tax was exacted because the 'right to receive the certificate' was transferred; also in substance that the grant of authority to issue the stock in the names of the nominees was 'a transfer of 'the right to receive' within the meaning of the act.'
It follows that the Commissioner correctly exacted the stamp tax in controversy and that plaintiff's petition must be dismissed. It is so ordered.