Jahncke Service, Inc. v. Commissioner , 20 B.T.A. 837 ( 1930 )

JAHNCKE SERVICE, INC., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Jahncke Service, Inc. v. Commissioner

Docket No. 41685.

United States Board of Tax Appeals

20 B.T.A. 837; 1930 BTA LEXIS 2020;

September 16, 1930, Promulgated

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1. The petitioner held to be liable as a transferee.

2. Held that the granting of a motion of the respondent to file an amendment to his answer, wherein he alleged that the prior determination by this Board of the tax liability of the petitioner's transferor was conclusive upon the petitioner, was proper.

3. Where in a proceeding brought by it and in its own name a transferor corporation has its tax liability determined by this Board, held that such determination is conclusive upon a transferee stockholder of such corporation in a proceeding brought by such stockholder to have its liability as a transferee determined under section 280 of the Revenue Act of 1926.

John J. Finnorn, Esq., for the petitioner.

John D. Foley, Esq., for the respondent.

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TRAMMELL

Under section 280 of the Revenue Act of 1926 the respondent has proposed for assessment against the petitioner as transferee of the assets of the Jahncke Shipbuilding Co., Inc., New Orleans, La., deficiencies in the income and profits taxes of that company in the amount of $2,029.34 for 1918 and $23,751.62 for 1919.

Subsequent to the filing of his answer in this proceeding the respondent, by motion duly granted, amended such answer wherein he alleges that the appeal in the instant case involves the adjustment of the income for 1919 of the petitioner's predecessor and transferor, Jahncke Shipbuilding Co., Inc., and also alleges that the claims or demands made in the appeal in the instant case were litigated and determined by this Board in the appeal of the Jahncke Shipbuilding Co., Docket No. 18349, and reported in 11 B.T.A. 479">11 B.T.A. 479, and further alleges that the former determination and adjudication precludes the petitioner therein and its privy, this petitioner, as to ahl claims therein made and matters or things pleaded or which might or should have been made or pleaded, including the claims, demands and allegations of error set forth in the appeal in the instant case.

A motion by the respondent that the hearing be limited to the issue raised by the amendment to his answer having been granted, and the petitioner having excepted to the filing of such amendment and having moved to strike it from the record, hearing was had only on the issue raised by the amendment to the respondent's answer.

FINDINGS OF FACT.

The petitioner is a Louisiana corporation, organized on July 6, 1915, and having its principal office at New Orleans.

On May 5, 1917, the Jahncke Shipbuilding Co., Inc., hereinafter referred to as the Shipbuilding Co., was organized under the laws of Louisiana and thereafter engaged in the business of building ships and other facilities for the account of the United States Shipping Board, Emergency Fleet Corporation, under contract with that Board. On May 1, 1922, the Shipbuilding Co. had outstanding 250 shares of capital stock of a par value of $100 each.

On May 1, 1922, the petitioner acquired in exchange for shares of its own capital stock all of the outstanding capital stock of the Shipbuilding Co. and caused the same to be transferred, 247 shares to Paul F. Jahncke, trustee, and 1 share each to Ernest Lee Jahncke, Paul F. Jahncke, and Walter F. Jahncke. These transfers were made upon the books of the Shipbuilding Co.

On the same day, May 1, 1922, the petitioner issued to Paul F. Jahncke, trustee, one certificate for 247 shares of its capital stock, being certificate No. 8. On the same day this certificate was returned and canceled and there were issued against it certificates Nos. 15, 16, and 17 to Ernest Lee Jahncke, Paul F. Jahncke, and Walter F. Jahncke, respectively, each certificate being for 82 1/3 shares of the stock of the petitioner. The petitioner on the same day issued to Ernest Lee Jahncke, Paul F. Jahncke, and Walter F. Jahncke certificates Nos. 9, 10, and 11, respectively, for 2 shares each. On the same day and immediately after the issuance of the above mentioned certificates of its stock the petitioner caused to be transferred to itself all of the assets of the Shipbuilding Co. in liquidation of the capital stock of that company owned by the petitioner and acquired by it in exchange for its capital stock.

The assets and property of the Shipbuilding Co. so transferred to the petitioner had at the date of the transfer a net value in excess of the tax liability here involved, together with all interest prescribed by law. In addition to the transfer of the assets as aforesaid the petitioner assumed by written contracts all of the liabilities, past, present and future of the Shipbuilding Co.

At the time the petitioner acquired the stock of the Shipbuilding Co. and had it transferred to Paul F. Jahncke, trustee, and to Ernest Lee Jahncke, Paul F. Jahncke, and Walter F. Jahncke, the stock of that company was owned in the amounts indicated by the following named persons, who were the duly and regularly elected officers of the company as indicated:

	Shares owned
Ernest Lee Jahncke, president	83 1/3
Paul F. Jahncke, vice president	83 1/3
Walter F. Jahncke, secretary-treasurer	83 1/3

From and after May 1, 1922, until the date of the hearing in the instant case, the capital stock of the petitioner was owned in the amounts indicated by the following named persons who were the duly and regularly elected officers of the petitioner as indicated:

	Shares owned
Ernest Lee Jahncke, president	556 2/3
Paul F. Jahncke, vice president	556 2/3
Walter F. Jahncke, secretary-treasurer	556 2/3

The acquisition of the capital stock and assets of the Shipbuilding Co. by the petitioner as heretofore set out was the result of a merger of all the interests owned by Ernest Lee Jahncke, Paul F. Jahncke, and Walter F. Jahncke and included, in addition to the petitioner and the Shipbuilding Co., the following corporations, whose capital stock was acquired by the petitioner under date of April 1, 1922, and whose capital stock and surplus, according to their respective books, were as indicated:

		Surplus
	Par value of capital stock	Credit	deficit
Pontchartrain Express Co	$15,000		$8,353.96
Fritz Jahncke (Inc.)	30,000	$103,677.27
Jahncks Navigation Co. (Inc.)	25,000	428,084.44
Roseland Gravel Co	6,000		18,414.27
Southern Sand & Gravel Co	10,000	20,944.81
Jahncke Realty Co	50,000	143,361.75
	136,000	669,300.04

Prior to April 1, 1922, the petitioner had outstanding 60 shares of capital stock of a par value, as well as a book value, of $6,000.

Under date of August 24, 1928, the Shipbuilding Co. was duly and regularly dissolved according to the laws of Louisiana.

On May 13, 1926, the respondent notified the Shipbuilding Co. of a determination of deficiencies in income and profits taxes of $2,029.34 for 1918 and $23,751.62 for 1919. An appeal from such determination, verified by Ernest Lee Jahncke, as president of the Shipbuilding Co., was filed with this Board on July 9, 1926, and docketed as No. 18349.

Hearing was duly had on the issues presented in the petition, Ernest Lee Jahncke, among others, testifying in behalf of the Shipbuilding Co. and John J. Finnorn, counsel for the petitioner in the instant proceeding, appearing as counsel for the Shipbuilding Co. The Board's decision sustaining the determination of the respondent was promulgated April 10, 1928, and is reported at 11 B.T.A. 479">11 B.T.A. 479. Pursuant to its decision promulgated April 10, 1928, the Board on April 20, 1928, entered an order determining deficiencies against the Shipbuilding Co. of $2,029.34 and $23,751.62 for 1918 and 1919 respectively.

Within a short time prior to the expiration of the period for taking an appeal to the Circuit Court of Appeals for a review of the decision of the Board, Finnorn, counsel for the Shipbuilding Co., prepared a petition for the review of the decision and forwarded a copy to the Commissioner of Internal Revenue, and on September 21, 1928, a copy of the petition for review was filed with this Board.

About this time Finnorn discovered that certain other attorneys had theretofore proceeded to liquidate and dissolve the Shipbuilding Co., not having discussed the question of the tax liability of that company and having overlooked the fact that any litigation was pending in regard to such tax liability.

Upon learning of this, Finnorn took up the matter with Albert G. Miller, the then internal revenue agent in charge at New Orleans, and discussed with him various phases of the case, more particularly the question of posting a bond and the effect of the dissolution of the Shipbuilding Co. prior to the filing of the petition for review and without having stated in such petition that the corporation had been dissolved.

Miller requested Finnorn to submit the matter to him in the form of a letter. Finnorn thereupon addressed the following letter to Miller under date of September 20, 1928:

ALBERT G. MILLER, ESQ.,

Internal Revenue Agent in Charge, New Orleans, La.

In re: Jahncke Shipbuilding Co., Inc., versus Commissioner, B.T.A. Docket No. 18,349.

DEAR SIR: Reference is made to our recent conversation relative to the petition for review of the decision of the United States Board of Tax Appeals in the above-entitled and numbered cause, and in accordance with your suggestion we will hereinafter recite the facts which have given rise to the perplexities with which we are confronted.

We feel that the Board would have decided our case differently had the original petition raised the true error. In short, had error been assigned to cover the action of the respondent in subjecting to tax as income the fees which petitioner received for the express purpose of restoring its property to the condition in which it was prior to undertaking the war contracts of the Shipping Board, instead of questioning the disallowance of the reserve which was created to correct the error resulting from the inclusion of said fees in gross income. Therefore, we are determined to insist on all our rights and privileges in the premises, and, if necessary, we shall seek to have our rights determined by the court of last resort.

However, it is here that we are confronted with the problem which I have already brought to your attention. Finding that the Jahncke Shipbuilding Co., Inc., had no further business to transact, a contract was entered into on May 1, 1922, whereby the Jahncke Service Incorporated, took over the remaining assets of the former and assumed all of its liabilities present and future, in consideration for which the latter gave its capital stock to the stockholders of the former. During the latter part of August, 1928, firmly believing that all of its affairs had been definitely and finally settled, and completely overlooking the fact of the existence of the claim of the Government for Income and Profits Tax, the charter of the Jahncke Shipbuilding Co., Inc., was surrendered to the State, and a certificate of dissolution issued under date of September 12, 1928.

The petition for review had already been prepared and a copy thereof, together with a notice of appeal, had been transmitted to the respondent before counsel learned of the dissolution of the corporation. Upon learning of the situation, counsel sought to meet the same, and to this end called on you and discussed the matter.

Thereafter it was determined that inasmuch as it was held, in the case of Oklahoma Natural Gas Co. vs. State of Oklahoma,47 S. Ct. 391">47 S.Ct. 391; 273 U.S. 257">273 U.S. 257, that the successor of a dissolved corporation is not entitled to be substituted as party appellant, we might jeopardize our interests were we to substituted the Jahncke Service Incorporated.

Inasmuch as Section 30 of Act 267 of the session of the General Assembly of the State of Louisiana of the year 1914 provides that:

"All corporations, whether they expire by limitation or are otherwise dissolved, shall be continued as bodies corporate for the purpose of prosecuting and defending suits by or against them," we decided to prosecute our appeal as though no change had occurred.

In this connection, however, we did not post a bond for the reason that it might be held that since the corporation had been dissolved, we were not properly before the court.

The appeal having been taken without furnishing bond, the Commissioner is at liberty to assess the tax and proceed with its collection. In this connection, however, since the tax debtor has been dissolved and its assets disposed of, it may be necessary to proceed against the Jahncks Service, Incorporated, under its contract of assumption of liability.

You are, therefore, hereby respectfully requested to transmit a copy of this letter to the Commissioner for his consideration and determination of the procedure to be followed in the matter. We feel that the Circuit Court of Appeals for the Fifth Circuit, to which court our appeal has been directed, will reverse the decision of the Board. Should this happen, we trust that the matter will be considered as closed; but, of course, this will depend upon the disposition of the Commissioner in the premises.

On October 23, Finnorn sent the following telegram:

MASON B. LEMING,

Care General Counsel, Bureau of Internal Revenue,

Washington, D.C.

Reference Jahncke Ship Building Company dissolved and advice that sixty day letter would be issued against transferee Stop Notice and demand has been received by dissolved corporation aforesaid but sixty day letter has not been received Stop Kindly advise disposition to make notice and demand dissolved corporation has no assets.

In response to the foregoing telegram, Finnorn received from C. M. Charest, General Counsel, Bureau of Internal Revenue, the following letter, dated October 29, 1928:

In re: Jahncke Shipbuilding Company, Petitioner, v. Commissioner of Internal

Revenue, Respondent. B.T.A. Docket No. 18349. U.S.C.C.A. 5th.

Reference is made to your telegram of October 23, 1928, directed to Mr. M. B. Leming, relative to the above-entitled case.

In reply you are advised that under date of October 4, 1928, the Income Tax Unit was notified that the Jahncke Shipbuilding Company was dissolved and the assets distributed to the Jahncke Service, Inc., and the suggestion was made that a deficiency letter be mailed to the transferee. Accordingly, in due time the deficiency letter will be mailed to the transferee, and will probably reach you in the near future.

Under date of November 2, 1928, the respondent mailed the following letter to the petitioner:

JAHNCKE SERVICE, Incorporated,

New Orleans, Louisiana.

SIRS: In accordance with Section 274 of the Revenue Act of 1926 you are advised that the determination of your tax liability for the years 1918 and 1919, discloses a deficiency of $25,780.96 as shown in the attached statement as transferee of the Jahncke Shipbuilding Company, Incorporated, New Orleans, Louisiana, under Section 280 of said Act.

The section of the law above mentioned allows you to petition the United States Board of Tax Appeals within sixty days from the date of the mailing of this letter for a redetermination of your tax liability. However, if you acquiesce in this determination, you are requested to execute the enclosed Form 866 and forward both original and duplicate to the Commissioner of Internal Revenue, Washington, D.C., for the attention of IT:C:P-7.

D. H. BLAIR,

Commissioner.

By (Signed) C. B. ALLEN,

Commissioner.

The "attached statement" referred to in the foregoing letter is as follows:

IT:AR:D-60D

DGS

Statement of Returns Examined and Resulting Tax Liability
RETURNS EXAMINED
Company	Year	Forms
Jahncke Shipbuilding Co. (Inc.)	1918	1120
	1919	1120

TAX LIABILITY
Company	Year	Deficiency
Janhcke Service (Inc.), New Orleans, La	1918	$2,029.34
	1919	23,751.62
Jahncke Shipbuilding Co. (Inc.)		25,780.96

The adjustments producing these deficiencies were set forth in detail in Bureau letter of May 13, 1926, addressed to the Jahncke Shipbuilding Company, Incorporated.

The records of this office indicate that the Jahncke Shipbuilding Company, Incorporated transferred its assets to you on or about May 1, 1922, and was formally dissolved on September 12, 1928.

From the determination set out in the respondent's letter of November 2, 1928, the petitioner on November 30, 1928, filed its petition with the Board. The petition is signed by John J. Finnorn, as counsel for the petitioner, and verified by Ernest Lee Jahncke, as president of the petitioner.

The respondent on January 29, 1929, filed his answer with the Board, but did not raise in it the question of the amount of the tax liability of the Shipbuilding Co. asserted against the petitioner being conclusive upon it, but plead to the assignments of error set forth in the petition.

Thereafter Finnorn received from C. M. Charest, General Counsel, Bureau of Internal Revenue, the following letter, dated March 2, 1929:

In re: Jahncke Shipbuilding Company, Inc., v. Commissioner of Internal Revenue. B.T.A. Docket No. 18349. U.S.C.C.A. 5th.

Reference is made to the above-entitled cause, wherein you have filed a petition with the Board of Tax Appeals to have its decision reviewed by the United States Circuit Court of Appeals for the Fifth Circuit.

In order to dispose of the above-entitled cause, which by virtue of the filing of the petition for review is now pending in the United States Circuit Court of Appeals for the Fifth Circuit, it is necessary that the cause be docketed by that court and dismissed. Accordingly, this office has prepared a motion to be filed with the Clerk of the Circuit Court of Appeals for the Fifth Circuit. The original and two copies of the motion are transmitted herewith. If you consent to the granting of the motion, you are requested to acknowledge service and note your consent on the original and one copy and return the same to this office. You may retain for your files one copy of the motion transmitted.

The motion referred to in the foregoing letter is as follows:

UNITED STATES CIRCUIT COURT OF APPEALS FOR THE FIFTH CIRCUIT

JAHNCKE SHIPBUILDING COMPANY, INC., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

MOTION TO DOCKET AND DISMISS

Comes now the respondent in the above-entitled cause, the Commissioner of Internal Revenue, by and through his attorneys, Mabel Walker Willebrandt, Assistant Attorney General, and C. M. Charest, General Counsel, Bureau of Internal Revenue, and moves that the above-entitled cause be docketed and dismissed.

In support of this motion there is produced the certificate of the Clerk of the United States Board of Tax Appeals, showing that on April 20, 1928, the Board rendered a decision showing deficiencies of $2,029.34 and $23,751.62, respectively, for the years 1918 and 1919; that thereafter on September 21, 1928, the petitioner filed a petition for review of the Board's decision in the United States Circuit Court of Appeals for the Fifth Circuit; that no further documents have been filed by the petitioner since the filing of the above-mentioned petition for review; that no review record has been perfected or prepared for transmission to the Court of Appeals for the Fifth Circuit; and that the time for such preparation and transmission of record has expired.

WHEREFORE, respondent prays that the above-entitled cause be docketed and dismissed pursuant to the rules of the Court in such case made and provided.

MABEL WALKER WILLEBRANDT,

Assistant Attorney General.

C. M. CHAREST, General counsel,

Bureau of internal revenue.

Service of the foregoing motion and consent to the granting of the same is noted hereon this day of , 1929.

,

Counsel for Petitioner.

Finnorn signed the motion as requested and, pursuant to the filing of the same with the Circuit Court of Appeals for the Fifth Circuit, together with the certificate of the Clerk of this Board, the petition for review of the decision of the Board in the case of the Shipbuilding Co. was docketed and dismissed on March 12, 1929.

Finnorn had not filed and docketed the record with the Circuit Court of Appeals for the Fifth Circuit as a notice of the determination of a deficiency against the petitioner had been sent the petitioner, and according to his interpretation of such notice the petitioner had the right to have the tax liability of the Shipbuilding Co. redetermined by this Board. Also, the answer filed to the petition did not raise the defense of the Shipbuilding Co.'s tax liability having been theretofore determined.

Pursuant to a motion filed by the respondent on February 11, 1930, and granted on February 13, 1930, the respondent has amended his answer as follows:

AMENDMENT TO ANSWER.

The Commissioner of Internal Revenue by his attorney, C. M. Charest, General Counsel, Bureau of Internal Revenue, for further answer to the petition of the above named taxpayer alleges as follows:

(1) That the above entitled appeal involves the adjustment of income for the year 1919 of this petitioner's predecessor and transferor which transferred its assets to this petitioner for its stock whereby the same persons who were the stockholders of the transferor corporation and accordingly interested in its assets became likewise and in similar proportion interested in the assets of this petitioner.

The identical claims or demands made in this appeal were in substance and effect litigated, passed upon and determined by this Board in the appeal of the Jahncke Shipbuilding Company, Inc., Docket No. 18349, decided April 10, 1928 and reported in Vol. 11 at page 479 of the official reports of the Board, which former determination and adjudication precludes the petitioner therein and its privy, this petitioner, as to all claims therein made and matters of things pleaded or which might or should have been made or pleaded including the claims, demands and allegations of error set forth in the petition in this appeal.

Wherefore petitioner's appeal is without merit and should be dismissed.

OPINION.

TRAMMELL: The questions presented for our decision are (1) whether the petitioner is the transferee of the assets of the Shipbuilding Co. within the meaning of section 280 of the Revenue Act of 1926, (2) whether the Board erred in permitting the respondent to file an amendment to his answer, and (3) if the Board did not err in so doing, whether the Board having determined the tax liability of the Shipbuilding Co. after hearing duly had on the merits raised by the pleadings in that case, the petitioner is entitled to have the tax liability of the Shipbuilding Co. redetermined by having a hearing on the issues raised in the petition in the instant case and the answer filed thereto exclusive of the amendment.

With respect to the question as to whether the petitioner is the transferee of the assets of the Shipbuilding Co. the petitioner's brief contains the following:

We have admitted that petitioner is liable at law as a transferee of the assets of Jahncke Shipbuilding Company by virtue of the fact that it assumed by written contract all of the liabilities of said shipbuilding company; but we do not agree nor do we admit that petitioner is liable in equity as a transferee, but on the contrary, we contend that there is no liability in equity for the reason that petitioner was never a stockholder of the shipbuilding company, except for the convenience of transferring the physical assets of the latter to itself.

It is not necessary under the statute that petitioner be held to be liable both at law and in equity. Liability either at law or in equity is sufficient. Regardless of the contractual liability, the petitioner as a stockholder of the shipbuilding company received as a distribution in liquidation all the assets of that corporation, and we think this constitutes it a transferee within the meaning of section 280 and its liability for any tax due by the transferor is thus established to the extent of the value of assets received, which is conceded to be in excess of the tax liability.

In its exception to the filing of the amendment to the answer and its motion to strike such amendment from the record, the petitioner avers among other things (1) that the amendment is not timely, (2) the petitioner having instituted the instant proceeding in reliance upon certain statements, acts and conduct of the respondent, the allowance of the amendment is prejudicial to and destructive of the rights of the petitioner, and (3) that the respondent is now estopped to plead the matters set forth in the amendment.

We think that the allowance of an amendment to an answer upon motion timely filed, like the extension of the time prescribed for filing an answer, is, in a proper case, within the sound discretion of the Board. See Shultz Bread Co.,10 B.T.A. 268">10 B.T.A. 268; Charles P. Leininger,19 B.T.A. 621">19 B.T.A. 621. We think that the motion to amend was timely filed and that the respondent was not estopped from raising the question. Nor do we think that the filing of the amended answer deprives the petitioner of any legal rights.

Although we have heretofore determined the tax liability of the Shipbuilding Co. and found a deficiency in tax, the petitioner attacks that determination and contends that it is entitled to be heard on the question of such liability by having a hearing on the issues raised by it in the petition in the instant proceeding and the answer thereto. The respondent contends that, the tax liability of the Shipbuilding Co. having been determined by the Board, the petitioner is precluded from having that liability tried again.

It seems well settled, in the absence of fraud or collusion, that a judgment rendered by a tribunal of competent jurisdiction is conclusive against the parties to the suit and against all persons represented by the parties. It is also well settled that a corporation represents its stockholders in all matters within the scope of its corporate powers transacted in good faith by its officers. In Hawkins v. Glenn,131 U.S. 319">131 U.S. 319, it was sought to recover from a stockholder the unpaid portion of his subscription to the capital stock of a corporation to be used in the satisfaction of a judgment against the corporation which was insolvent. The stockholder sought to avoid liability on the ground that he was not a party to the cause between the creditor and the corporation. The court said:

We understand the rule to be otherwise, and that the stockholder is bound by a decree of a court of equity against the corporation in enforcement of a corporate duty, although not a party as an individual, but only through representation by the company.

A stockholder is so far an integral part of the corporation that, in view of the law, he is privy to the proceedings touching the body of which he is a member. Sanger v. Upton,91 U.S. 56">91 U.S. 56, 58 * * *.

The foregoing was quoted with approval in Glenn v. Liggett,135 U.S. 533">135 U.S. 533, where the same question was again involved.

In Hancock National Bank v. Farnum,176 U.S. 640">176 U.S. 640, the court said:

This representative character of the corporation has been affirmed by this court in several cases. In Hawkins v. Glenn,131 U.S. 319">131 U.S. 319, it was held that "in the absence of fraud, stockholders are bound by a decree against their corporation in respect to corporate matters, and such a decree is not open to collateral attack." This was a case in which an assessment ordered by a court which had jurisdiction of the corporation was held binding upon stockholders residing in another State; and in the opinion, on page 329, it was said by Chief Justice Fuller:

"A stockholder is so far an integral part of the corporation that, in view of the law, he is privy to the proceedings touching the body of which he is a member."

See also Glenn v. Liggett,135 U.S. 533">135 U.S. 533; Great Western Telegraph Co. v. Purdy,162 U.S. 329">162 U.S. 329, 337.

In Royal Arcanum v. Green,237 U.S. 531">237 U.S. 531, it was said:

In addition it was by the application of the same principle that a line of decisions in this court came to establish: * * * and third, that putting out of view the right of the person against whom a liability for a stockholder's subscription is asserted to show that he is not a stockholder, or is not the holder of as many shares as is alleged, or has a claim against the corporation which at law or equity he is entitled to set off against the corporation, or has any other defense personal to himself, a decree against the corporation in a suit brought against it under the state law for the purpose of ascertaining its insolvency, compelling its liquidation, collecting sums due by stockholders for subscriptions to stock and paying the debts of the corporation, in so far as it determines these general matters, binds the stockholder, although he be not a party in a personal sense, because by virtue of his subscription to stock there was conferred on the corporation the authority to stand in judgment for the subscriber as to such general questions. Selig v. Hamilton,234 U.S. 652">234 U.S. 652; Converse v. Hamilton,224 U.S. 243">224 U.S. 243; Bernheimer v. Converse,206 U.S. 516">206 U.S. 516; Whitman v. National Bank,176 U.S. 559">176 U.S. 559; Hawkins v. Glenn,131 U.S. 319">131 U.S. 319.

Respecting the same question, it was said in Marin v. Augedahl,247 U.S. 142">247 U.S. 142:

Whether the stockholder against whom the order is here sought to be enforced was personally a party to the suit in which it was made does not appear; nor is it material. Under the rule in Minnesota, as also the general rule, he was sufficiently represented by the corporation to be bound by the order in so far as it determined the character and insolvency of the corporation and other matters affecting the propriety of a general assessment such as was made. This court frequently has recognized and applied that rule. In Hawkins v. Glenn,131 U.S. 319">131 U.S. 319, an assessment ordered by a Virginia court having the corporation before it was sustained as against stockholders residing in another State and not personally brought into the suit, the ground of decision being that "a stockholder is so far an intergral part of the corporation that, in the view of the law, he is privy to the proceedings touching the body of which he is a member." Of similar import are Sanger v. Upton,91 U.S. 56">91 U.S. 56; Glenn v. Liggett,135 U.S. 533">135 U.S. 533; Great Western Telegraph Co. v. Purdy,162 U.S. 329">162 U.S. 329, 336; Hancock National Bank v. Farnum,176 U.S. 640">176 U.S. 640; Bernheimer v. Converse,206 U.S. 516">206 U.S. 516, 532; Royal Arcanum v. Green,237 U.S. 531">237 U.S. 531, 544.

With regard to the similarity between unpaid stock subscriptions and other assets of a corporation, the Supreme Court in Hawkins v. Glenn, supra, said:

As against creditors there is no difference between unpaid stock "and any other assets which may form a part of the property and the effects of the corporation," (Morgan County v. Allen,103 U.S. 498">103 U.S. 498, 509,) and "the stockholder has no right to withhold the funds of the company upon the ground that he was not individually a party to the proceedings in which the recovery was obtained." Glenn v. Williams, 60 Maryland, 93, 116.

In view of the statements of the Supreme Court in the foregoing cases and as the petitioner does not allege that fraud or collusion was perpetrated in the determination of the tax liability of the Shipbuilding Co. we think that such determination is conclusive upon the petitioner both as to the existence as well as the amount of the deficiency so determined against that company. See also John Robert Brewer,17 B.T.A. 713">17 B.T.A. 713.

The petitioner urges that as section 280 of the Revenue Act of 1926 provides that the liability of a transferee shall be assessed, collected and paid in the same manner and subject to the same provisions, with certain statutory exceptions, as a deficiency in tax, it is entitled to have another and further determination made of the tax liability of the Shipbuilding Co. Where the tax liability of a transferor corporation has never been adjudicated, we think that under the provisions of section 280 a transferee stockholder may have the tax liability of the transferor determined in a proceeding brought by the transferee, but we find nothing in section 280 which indicates thatCongress intended that, although the tax liability of the transferor corporation has been determined in a proceeding brought by and in the name of the corporation, such determination is to be ignored and the tax liability of the transferor corporation determined anew each time a transferee stockholder comes before the Board and asks that such be done. Under the construction contended for by the petitioner, there could be no finality of the determination of the tax liability of the transferor corporation so long as there remained a transferee stockholder against whom the respondent had determined a liability as transferee and whose case remained undecided.

In Coe v. Armour Fertilizer Works,237 U.S. 413">237 U.S. 413, the court said:

It may be conceded that a judgment recovered against a corporation, without fraud or collusion, in a court having jurisdiction over the subject-matter and the party, may consistently with the Fourteenth Amendment be treated as concluding the stockholder respecting the existence and amount of the indebtedness so adjudged. Sanger v. Upton, Assignee,91 U.S. 56">91 U.S. 56, 59; Hawkins v. Glenn,131 U.S. 319">131 U.S. 319, 329; Glenn v. Liggett,135 U.S. 533">135 U.S. 533, 544; Great Western Telegraph Co. v. Purdy,162 U.S. 329">162 U.S. 329, 337. But before a third party's property may be taken to pay that indebtedness upon the ground that he is a stockholder and indebted to the corporation for an unpaid subscription, he is entitled, upon the most fundamental principles, to a day in court and a hearing upon such questions as to whether the judgment is void or voidable for want of jurisdiction or fraud, whether he is a stockholder and indebted, and other defenses personal to himself. See Grant Western Telegraph Co.v. Purdy, ubi supra; Bernheimer v. Converse,206 U.S. 516">206 U.S. 516, 528, 532; Converse v. Hamilton,224 U.S. 243">224 U.S. 243, 256; Selig v. Hamilton,234 U.S. 652">234 U.S. 652, 660.

While in a case, such as the one now before us, the prior determination of a deficiency against the transferor corporation is conclusive upon the transferee stockholder as to the existence and amount of such deficiency, the transferee stockholder who is proceeded against under section 280 is, as pointed out in Coe v. Armour Fertilizer Works, supra, entitled to a hearing upon such questions as whether he was liable as a transferee stockholder, whether the prior determination is void or voidable because of fraud or want of jurisdiction, and other defenses personal to himself.

The petitioner being liable as a transferee of the assets of the Shipbuilding Co. having received assets in excess of the tax liability of that company, and our prior determination of the tax liability of the Shipbuilding Co. being conclusive on the petitioner, and there being no defenses personal to the petitioner, we are of the opinion that the respondent's action in proposing to assess against the petitioner the deficiencies heretofore determined by us against the Shipbuilding Co. must be sustained. The fact that counsel for the petitioner herein has mistaken his remedy in failing to prosecute its appeal from our judgment in the Circuit Court of Appeals is a circumstance over which we have no control and for which we can afford no relief.

Reviewed by the Board.

Judgment will be entered under Rule 50.