Nichols & Cox Lumber Co. v. Commissioner

NICHOLS & COX LUMBER COMPANY, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Nichols & Cox Lumber Co. v. Commissioner

Docket No. 23601.

United States Board of Tax Appeals

24 B.T.A. 54; 1931 BTA LEXIS 1701;

September 19, 1931, Promulgated

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Where a deficiency notice is directed to a taxpayer corporation which has been dissolved, and such notice is received by a successor corporation of the same name, organized in the same State, but of distinctly separate legal identity, and such successor corporation files with this Board a petition for the redetermination of such deficiency, this Board is without jurisdiction.

J. S. Seidman, Esq., and F. E. Seidman, C.P.A., for the petitioner.

B. M. Coon, Esq., for the respondent.

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LOVE

This proceeding is for the redetermination of deficiencies asserted by the Commissioner in his notice dated December 10, 1926, for the calendar years 1919 and 1920, of $17,674.14 and $31,134.98, respectively.

Petitioner alleges several errors on the part of the Commissioner, but upon motion it was ordered at the hearing that in the first instance the case would be confined to the question of the statute of limitations.

FINDINGS OF FACT.

There are here involved two corporations of substantially the same name, each incorporated in the State of Michigan at different dates. The articles of incorporation of the earlier company provide that it shall be known in law as "Nichols & Cox Lumber Co." The articles of incorporation (as amended) of the later company, provide that it shall be known at law as "Nichols & Cox Lumber Company." Each company used the word "Co." or "Company" without discrimination; no importance attaches here to that distinction. We distinguish them in our report as the first company, and the second company.

The first company was incorporated February 23, 1904, and it remained continuously in the business of purchasing, selling, manufacturing, and dealing in lumber, flooring, and other forest and timber products until the date of its dissolution, December 28, 1922. At that time Charles Dregge was its president and Martin J. Dregge was its secretary. All the stock was common stock and was owned as follows:

	Shares
Charles Dregge	250
J. Hampton Hoult	198
Martin J. Dregge	198
Anna S. Dregge	99
Total	745

On December 27, 1922, articles of association (filed December 28, 1922) were executed for the Charles Dregge Lumber Company, created to "purchase, sell, manufacture and deal in lumber and flooring and other forest and timber products, and to buy, own, hold and sell any and all timber lands or other lands necessary or proper for said purpose; also to buy, own, hold, sell or dispose of shares of stock of other corporations organized under the laws of this or any other state, for purposes similar to those of this corporation." The total capital stock authorized was $450,000, and 60,000 shares of no par value. Charles Dregge was its president, J. Hampton Hoult its vice president, and Martin J. Dregge its secretary and treasurer. The stockholders listed in the articles of association were:

	Shares held
Stockholders	Preferred	No par
	stock	value stock
Charles Dregge	1,250	15,000
J. Hampton Hoult	990	11,880
Martin J. Dregge	990	11,880
Anna S. Dregge	495	5,940
Total	3,725	44,700

On December 28, 1922, the president and secretary of the first company, duly authorized so to do by the stockholders and directors of the company, executed the following instrument:

BILL OF SALE

KNOW ALL MEN BY THESE PRESENTS, That Nichols & Cox Lumber Company, a corporation organized under the laws of Michigan, with its principal office at the city of Grand Rapids in said State, in consideration of the sum of One ($1.00) Dollar and other good and valuable considerations to it in hand paid by the Charles Dregge Lumber Company, a corporation organized under the laws of Michigan, and having its principal office at said City of Grand Rapids, does hereby sell, transfer, assign and convey to said Charles Dregge Lumber Company, all and singular the assets, properties, franchises, tangible and intangible, of said Nichols & Cox Lumber Company, of every kind and nature, wherever the same may be situated, To Have and To Hold the same to said Charles Dregge Lumber Company, its successors and assigns, Forever.

This Bill of Sale and transfer is made upon the express condition that said Charles Dregge Lumber Company, as part of the consideration hereinbefore mentioned, assume and agree to pay all accounts and bills payable, and all interest thereon, and all other obligations of said Nichols & Cox Lumber Company, and save said Nichols & Cox Lumber Company, its Stockholders and Directors, harmless from such indebtedness and obligations.

IN WITNESS WHEREOF said Nichols & Cox Lumber Company has hereunto caused its corporate seal to be affixed and these presents to be signed by its President and Secretary, pursuant to the order and authority of the Board of Directors of said corporation and the consent of its Stockholders duly given, this twenty-eighty day of December, 1922.

(Signed) NICHOLS & COX LUMBER COMPANY

(Corporate seal) By CHARLES DREGGE, President

and By MARTIN J. DREGGE, Secretary.

The following instrument was executed on the same day and filed on December 29, 1922:

MICHIGAN

NOTICE OF DISSOLUTION

(Name of Corporation) Nichols & Cox Lumber Company

(Postoffice Address) Godfrey Avenue and Curve Street, Grand Rapids, Michigan.

(Date) December 28, 1922.

We, the undersigned, being a majority of the remaining members of the last board of directors of Nichols & Cox Lumber Company, a corporation doing business under the provisions of Act No. 84, Public Acts of 1921, do hereby certify and give notice in accordance with the requirements of Section 7, Chapter 4, Part I, of said Act, that the said corporation has been dissolved by the sale of its property and franchises in accordance with Section 11,350 Compiled Laws of 1915 (Act 112 Public Acts 1889).

CHARLES DREGGE MARTIN J. DREGGE J. HAMPTON Poult Majority of Directors

(Seal)

On December 28, 1922, the following instrument was executed on behalf of the Charles Dregge Lumber Company:

CERTIFICATE OF AMENDMENT TO THE ARTICLES OF ASSOCIATION OF THE CHARLES DREGGE LUMBER COMPANY

P. O. Address: Godfrey Avenue and Curve Street, S.W., Grand Rapids, Michigan.

We, the undersigned, being the president and the secretary of the Charles Dregge Lumber Company, a corporation existing under the provisions of Act No. 84 of the Public Acts of 1921, do hereby certify, as required by section 9, Chap. 1, Part II of said act:

That at a meeting of the stockholders of said corporation expressly called for the purpose of amending its articles of association and held at the office of Butterfield, Keeney & Ambert, Michigan Trust Building, Grand Rapids, Michigan, on the twenty-eighth day of December, AD., 1922, it was resolved, by a majority vote of the capital stock of said corporation, that Article No. I of the articles of association be and the same is amended so as to read as follows, viz:

ARTICLE I.

The name assumed by this association, and by which it shall be known at law, is Nichols & Cox Lumber Company.

In witness whereof we hereunto sign our names this twenty-eighth day of December, A.D. 1922.

CHARLES DREGGE, President.

MARTIN J. DREGGE, Secretary.

Filed Dec. 29, 1922.

A completed return for 1919 was filed by the Nichols & Cox Lumber Co. on May 12, 1920. The same corporation filed its return for 1920 on May 14, 1921.

On June 15, 1923, Nichols & Cox Lumber Company filed its return for 1922. In response to Question 8 on page 4 of that return: "Did the corporation file a return under the same name for the preceding taxable period?" the answer was "Yes." On June 16, 1924, a return for 1923 was filed in the name of Nichols & Cox Lumber Company. Question 8 on page 4 of that return and the response thereto are as follows:

8. Did the corporation file a return under the same name for the preceding taxable period? Yes.

If not, was the corporation in any way an outgrowth, result, continuation, or reorganization of a business or businesses in existence during this or the preceding taxable period" Yes.

If answer is "yes," give name and address of each predecessor business. Reorganized under same name Jan. 1, 1923.

Three "Income and Profits Tax Waivers" were signed, under seal, by "Nichols & Cox Lumber Co." and filed with the Commissioner, by whom, or on whose behalf, each was also signed. The first, dated November 15, 1924, for the year 1919, was executed on behalf of the corporation by "Martin J. Dregge, Secy." Both the other two were signed for the company on February 1, 1926, by "Chas. Dregge, Pres.," on Treasury Department Form 872A, one being for the year 1919, and the other for the year 1920.

OPINION.

LOVE: Respondent concedes that the proposed deficiencies for the years involved in this appeal are barred from assessment unless the waivers filed by and for the Nichols & Cox Lumber Company are valid, and, at the hearing, the entire evidence submitted was confined to that issue.

We are of the opinion, however, that the question of jurisdiction intervenes and must be decided.

We have found that the first company was dissolved on December 28, 1922, and that on the previous day, December 27, articles of association were executed incorporating the Charles Dregge Lumber Company with an entirely different capitalization from that of the first company, although at the time of the dissolution of the first company, and the organization of the Charles Dregge Lumber Company, the stockholders in each appear to have been identical. On December 28, the first company, prior to its dissolution, sold, transferred, and conveyed to the Charles Dregge Lumber Company for a valuable and valid consideration, all its assets, properties, and franchises, tangible and intangible, of every kind and nature, and thereupon dissolved. Thereafter, but on the same day, December 28, the Charles Dregge Lumber Company executed a certificate of amendment to its articles of association, which certificate it filed with the Secretary of State on December 29, 1929, changing its name to Nichols & Cox Lumber Company, thereby becoming what we have designated as the second company.

In his brief respondent confines himself to an argument for the validity of the waivers. He contends that when the Dregges signed the waivers in question they were in effect and in fact acting as officers of the first company; he questions the validity, as to legaleffect of the dissolution; he raises the question of estoppel; but he does not throw any light upon the question of the Board's jurisdiction, which was raised by the parties for the first time at the hearing after the evidence in regard to the waivers was all in.

The matter of jurisdiction is the fundamental question here to be first determined, for if we have not jurisdiction in this case, obviously we are without authority to pursue this inquiry further. And we do not believe that we have that jurisdiction and the authority that would be conferred thereby.

The contentions advanced by respondent we regard as beside the point we are now considering, because we must first determine whether petitioner here has any standing before this Board, and for that purpose it makes no difference whether or not the first company had even a technical existence at the time the waivers were signed, the deficiency notice issued, and the petition filed, if, as a matter of fact, the deficiency was against the first company and the notice was mailed to it, and the petition was filed by the second company.

That the deficiency notice was mailed to the first company we believe to be placed beyond controversy by the wording of the notice itself. The Revenue Act of 1926 provides in:

SEC. 274 (a) If in the case of any taxpayer, the Commissioner determines that there is a deficiency in respect of the tax imposed by this title, the Commissioner is authorized to send notice of such deficiency to the taxpayer by registered mail. Within 60 days after such notice is mailed (not counting Sunday as the sixtieth day), the taxpayer may file a petition with the Board of Tax Appeals for the redetermination of the deficiency, * * *

The deficiency notice mailed December 10, 1926, to Nichols & Cox Lumber Company, reads:

An audit of your income and profits tax returns for the years 1919 and 1920 has resulted in the determination of a deficiency in tax amounting to $48,809.12, as shown in the attached statement.

In accordance with the provisions of Section 274 of the Revenue Act of 1926, you are allowed 60 days from the date of mailing of this letter within which to file a petition for the redetermination of this deficiency. * * *

Clearly the Commissioner, in his letter, was addressing the first Nichols & Cox Lumber Company, for no other Michigan corporation of that name rendered tax returns for 1919 or 1920, nor was any other in existence during those years. That corporation was the "taxpayer" to whom only was the Commissioner authorized under section 274 of the Revenue Act of 1926 to send the notice of deficiency; and who alone is authorized by the Act to "file a petition with the Board of Tax Appeals for a redetermination of the deficiency."

The Nichols & Cox Lumber Company which came into existence in 1922 through an amendment to the articles of association of the Charles Dregge Lumber Company is certainly not "the taxpayer" referred to in the Act, or in the Commissioner's notice of deficiency. Admittedly, the second company is the successor of the first, but it is a distinct legal entity; and since it is not "the taxpayer" authorized by the Act to "file a petition with the Board of Tax Appeals for the redetermination of the deficiency," it can have no standing here. The answer "yes" to question 8, on page 4, of the 1923 return, was incorrect. It should have been "no." A return in the same name had been filed for 1922, but it was a return of the first company.

The officers who signed the waivers swore that they executed them without consulting with other officers, directors, or stockholders of either the first or second company, or with each other. They signed them in the regular course of business of the second company, or what they regarded as such business. Charles Dregge testified that "the new corporation, Nichols & Cox Lumber Company, had purchased the assets of the old Nichols & Cox Lumber Company, and I assumed that I could sign as an official of the new company, and that matters of that nature simply carried on." Martin J. Dregge testified that the waiver "which bears my signature came to my desk from a source I do not recall at the present time. In signing it, I knew the fact that the old Nichols and Cox Lumber Company had been liquidated and gone out of business. I signed it as secretary and as an officer of the new company."

The Board has consistently held in a large number of cases, though the circumstances in each case may have differed widely, that it has no jurisdiction where a notice of deficiency has been mailed to a taxpayer, and the petitioner is neither that taxpayer nor his authorized representative. , and cases therein cited; ; ; ; ; ; ; ; ; .

Accordingly, we hold that we have acquired no jurisdiction in the proceeding before us.

Reviewed by the Board.

Order of dismissal will be entered accordingly.

ARUNDELL and MATTHEWS dissent.