Fifth Street Building v. McColgan

TRATNOR, J. —

On December 30, 1934, Walkers’ Inc., a domestic corporation doing business in California, filed a voluntary petition in bankruptcy in the District Court of the United States, Southern District of California. It was adjudicated a bankrupt, and a trustee in bankruptcy was appointed who carried on the business from December 31, ^ 1934, until about July 26, 1938. On March 9, 1937, the trustee filed a franchise tax return under the Bank and Corporation Franchise Tax Act (Stats. 1929, p. 19, as amended by Stats. 1935, pp. 959, 995, 1245, Deering’s Gen. Laws, 1937, Act 8488), and paid a franchise tax of $4,764.17 for the taxable year 1937. In 1938 Walkers’ Inc. was discharged from bankruptcy. The trustee filed a claim, which was denied, for the refund of the 1937 franchise tax. By an order of the federal court plaintiff, Fifth Street Building, became the assignee of the claim for refund and brought suit for the recovery of the tax paid by the trustee. Both the plaintiff and defendant filed motions for judgment on the pleadings, and judgment was entered in favor of the plaintiff for the refund of the tax in question. From that judgment defendant has taken this appeal.

Plaintiff contends that the trustee in bankruptcy was not subject to the Bank and Corporation Franchise Tax Act, which imposes a tax on corporations doing business in the state for the privilege of exercising their corporate franchises therein. In plaintiff’s view the corporation’s franchise did not pass to the trustee but he carried on the business as an individual, immune from the taxes applicable solely to corporations.

This contention would revive an issue, once highly controversial, laid at rest by an Act of Congress of June 18, 1934, 28 U. S. C. A. § 124a. (See

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Whitridge,

231 U. S. 144 [34 Sup. Ct. 24, 58 L. Ed. 159];

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Reinecke

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Gardner,

277 U. S. 239 [48 Sup. Ct. 472, 72 L. Ed. 866];

Bright

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