United States v. Baldy

Ninth Circuit

United States v. Baldy

108 F.2d 591, 24 A.F.T.R. (P-H) 53, 1939 U.S. App. LEXIS 2616

CourtCourt of Appeals for the Ninth Circuit

DecidedDecember 22, 1939

DocketNo. 9241

StatusPublished

Cited by1 cases

This text of 108 F.2d 591 (United States v. Baldy) is published on Counsel Stack Legal Research, covering Court of Appeals for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook

United States v. Baldy, 108 F.2d 591, 24 A.F.T.R. (P-H) 53, 1939 U.S. App. LEXIS 2616 (9th Cir. 1939).

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Opinion

HEALY, Circuit Judge.

Appellee had judgment in a suit to obtain a refund of a tax exacted under § 213 of the National Industrial Recovery Act (48 Stat. 206), and the Government appeals.¹ The statute, § 213(a), imposed an excise tax of 5% upon the receipt of corporate dividends, the tax to be withheld at the source. Dividends declared before the date of the enactment of the statute (June 16, 1933), although paid after that date, were exempted from the tax.

The findings are that on April 15, 1933 appellee’s board of directors adopted a resolution reading as follows: “Mr. Gibbs then moved and Mr. Southern seconded the motion that a July dividend be declared at the rate of 200 per share on the Preferred Stock; 150 per share on the Class ‘B’ Fully Participating Preference stock and 150 per share on the Common stock, with authority for the president to make a reduction in the rate if in his discretion it is deemed advisable.”

The full amount of the dividend was paid on July 1, 1933. At the time of the adoption of the resolution the corporation was solvent and a sufficient earned surplus existed out of which to pay the dividend. The requisite amount was then available and remained available at all times thereafter until paid.

The trial court concluded as a matter of law that the resolution was a valid declaration of a dividend and created a debtor-creditor relationship between the corporation and its stockholders. The case is controlled by our decision in Maloney v. Western Cooperage Co., 9 Cir., 103 F.2d 992,² handed down after the entry of judgment below, and the judgment must be reversed. A declaration of dividend which does not create a definite, irrevocable and enforceable debt against the corporation in favor of the stockholders is not a fully declared dividend. There was here no [592]*592definite and irrevocable debt, ascertainable as of the effective date of the National Industrial Recovery Act. At that time the payment of the dividend was subject to the discretionary authority of the appellee’s president to make any reduction in the rate of dividend he might deem advisable.

Reversed.

MATHEWS, Circuit Judge, dissents.

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HEALY, Circuit Judge.

Appellee had judgment in a suit to obtain a refund of a tax exacted under § 213 of the National Industrial Recovery Act (48 Stat. 206), and the Government appeals.¹ The statute, § 213(a), imposed an excise tax of 5% upon the receipt of corporate dividends, the tax to be withheld at the source. Dividends declared before the date of the enactment of the statute (June 16, 1933), although paid after that date, were exempted from the tax.

The findings are that on April 15, 1933 appellee’s board of directors adopted a resolution reading as follows: “Mr. Gibbs then moved and Mr. Southern seconded the motion that a July dividend be declared at the rate of 200 per share on the Preferred Stock; 150 per share on the Class ‘B’ Fully Participating Preference stock and 150 per share on the Common stock, with authority for the president to make a reduction in the rate if in his discretion it is deemed advisable.”

The full amount of the dividend was paid on July 1, 1933. At the time of the adoption of the resolution the corporation was solvent and a sufficient earned surplus existed out of which to pay the dividend. The requisite amount was then available and remained available at all times thereafter until paid.

The trial court concluded as a matter of law that the resolution was a valid declaration of a dividend and created a debtor-creditor relationship between the corporation and its stockholders. The case is controlled by our decision in Maloney v. Western Cooperage Co., 9 Cir., 103 F.2d 992,² handed down after the entry of judgment below, and the judgment must be reversed. A declaration of dividend which does not create a definite, irrevocable and enforceable debt against the corporation in favor of the stockholders is not a fully declared dividend. There was here no [592]*592definite and irrevocable debt, ascertainable as of the effective date of the National Industrial Recovery Act. At that time the payment of the dividend was subject to the discretionary authority of the appellee’s president to make any reduction in the rate of dividend he might deem advisable.

Reversed.

MATHEWS, Circuit Judge, dissents.

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108 F.2d 591, 24 A.F.T.R. (P-H) 53, 1939 U.S. App. LEXIS 2616, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-v-baldy-ca9-1939.

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