People v. Richardson

NOURSE, P. J.

The People sued the superintendent of banks to recover a deficiency in the franchise tax paid as liquidator of the bank of San Pedro. From a judgment for plaintiff the defendant has appealed on a bill of exceptions.

The bank closed on March 3, 1933, and one of its vice-presidents was named conservator, pursuant to the terms of sections 135b et seq. of the Bank Act. (Stats. 1933, p. 319, Deering Gen. Laws, Act No. 652.) On December 17, 1934, the conservator was removed and the bank was placed in the hands of a liquidator. On March 15, 1934, the conservator filed an income tax return in which he deducted from the net income the sum of $65,000 representing the amount that had been written off on certain bonds upon the order of the superintendent of banks. This deduction was disallowed by the franchise tax commissioner and notice thereof given. The defendant filed no protest. Franchise taxes are to be rated on the basis of the net income of the previous year, hence, the controversy here relates to the proper tax to be paid by the bank in the year 1934 for the year subsequent to March 3, 1933, while the bank was in the hands of the conservator.

The appellant advances three grounds for reversal—that the franchise tax is chargeable only upon a bank

“

doing

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business within the limits of this state” (sec. 2, Franchise Tax Act, Deering Gen. Laws, Act 8488), and that the evidence is insufficient to support the finding that the bank was “doing business” in 1933; whether the bank was justified in deducting $65,000 from its net income because of bonds in default which were written down upon order of the superintendent of banks; and whether interest and penalties were chargeable during the period of operation by the conservator.

There was sufficient evidence to support the finding that the bank was engaged in business during its operation under the conservator. We refer to a portion of it. The doors were kept open as usual during all banking days and hours. Deposits were accepted under certain restrictions. There were checking accounts. Safety deposit boxes were available to customers throughout the period. Collections were made in the usual manner and upon the customary collection charges. Rentals of other offices in the bank’s property were collected and handled in the usual manner. During this period the bank officials were attempting a reorganization and the activities above noted were carried on to hold the clientele until such reorganization might be effected.