CAETEE, J. Plaintiff was successful in the trial court in this action to recover franchise taxes paid under protest, and defendant prosecutes this appeal.
In 1932, Marine Building and Loan Association, hereinafter referred to as Marine, was a corporation operating in this state under the Building and Loan Association Act. [149](Stats. 1931, p. 483; Deering’s Gen. Laws, 1937, Act 986.) The following year the business, property and assets of Marine were taken over by plaintiff commissioner pursuant to the provisions of said act. Said business, property and assets remained in the possession of plaintiff in liquidation from June 2, 1933, until the liquidation was completed in 1940. (Stats. 1931, p. 483, §§ 13.11-13.16.) Marine has been insolvent since it was taken over. Pursuant to defendant’s demand, plaintiff, in 1941, paid under protest a franchise tax and interest thereon for the income year ending on December 31, 1937, said tax being for an alleged liability for the year ending December 31, 1938. Plaintiff has also paid the $25 annual tax for Marine which is imposed where a corporation is not otherwise taxed by the Bank and Corporation Franchise Tax Act (§4(5). (Stats. 1929, p. 19; Deering’s Gen. Laws, 1937, Act 8488.)
Section 4(1) of the Bank and Corporation Franchise Tax Act provides as follows:
“Every financial corporation doing business within the limits of this State, taxable under the provisions of section 16 of Article XIII of the Constitution, of this State, shall annually pay to the State for the privilege of exercising its corporate franchises within this State, a tax according to or measured by its net income, to be computed, in the manner hereinafter provided. ...” (Italics added.) Section 4(5) of said act imposes an annual tax on all corporations not otherwise taxed under section 4 and not expressly exempted from the act.
Plaintiff does not question his obligation to pay the $25 annual tax as liquidator on behalf of Marine nor is it claimed that Marine would not be subject to the tax imposed by the above quoted portion of section 4(1), but he asserts that Marine is not doing business or exercising its corporate franchise because it is in the process of liquidation, and hence does not fall within the terms of section 4(1).
Turning first to the question as to whether or not Marine was doing business, we believe that that requirement is satisfied. That conclusion follows from the facts and law here involved. The Bank and Corporation Franchise Tax Act defines doing business as: “. . . actively engaging in any transaction for the purpose of financial or pecuniary gain or profit.” (Sec. 5.) Under the Building and Loan Assoeia[150]tion Act the commissioner as liquidator is given broad powers with respect to the business of the corporation being liquidated. He takes over all the business, property and assets of the corporation. (Stats. 1931, p.. 483, § 13.11.) He may place a custodian in charge of its business; collect all moneys due the corporation and “do such other acts as are necessary to or expedient to collect, conserve or protect its business, property and assets.” He may liquidate the affairs of the corporation and in so doing may pay claims against it; disaffirm executory contracts; require the officers of the corporation to furnish a schedule of assets and other information (Id., § 13.13); release or reconvey property pledged or hypothecated to the corporation; prosecute actions; borrow money; reduce the amount of interest on loans and rewrite the same; sell and transfer property in his own name or that of the corporation; and any instrument executed to effectuate a transaction in connection with the liquidation shall be valid for all purposes the same as if it had been executed by the duly authorized officers of the corporation (Id., § 13.16).
In the instant case the stipulated facts show that no surplus remained after the completion of the liquidation; and that the assets were insufficient to pay fully all of the claims; that “After the takeover, Marine did no business in its own name and did no business through its directors or officers, or through any agents appointed by them, or by the stockholders. The plaintiff, in the exercise of his statutory powers over the assets of Marine, made sales, rentals and transfers of the assets of Marine and made collections upon notes and other obligations which were among the assets of Marine. These activities by the Commissioner (plaintiff) commenced upon the takeover and continued thereafter through the years 1937 and 1938, until the year 1940.” (Italics added.) The doing of the foregoing things by plaintiff commissioner for and on behalf of the corporation and its creditors are clearly acts of doing business within the meaning of the definition given in the Bank and Corporation Franchise Tax Act (supra). And the fact that they were done in the course of liquidation which finally resulted in a complete disposal of all of the assets of Marine and distribution of the proceeds thereof does not change their character. While no profit may have been made as that term is usually understood, such factor is not controlling in the definition of the [151]term “doing business”; rather the criterion is whether or not the goal or aim is financial or pecuniary gain. (See Consolidated Coal Co. v. State, 236 Ala. 489 [183 So. 650].) It should be clear that the commissioner in liquidating Marine was endeavoring to get the best price obtainable for its assets and to conduct its affairs in liquidation to the end that the most financial gain would be realized for its creditors and stockholders. The aim was pecuniary gain. It is true that no new deposits were accepted by plaintiff commissioner for Marine and that that is ordinarily the chief activity of a building and loan association, as a going concern, yet the transactions were of the nature typified as doing business. It is not necessary to constitute doing business for franchise tax purposes that there be a regular course of business or transactions. This court stated in Golden State T. & R. Corp. v. Johnson, 21 Cal.2d 493, 495 [133 P.2d 395] :
“Defendant contends that East Bay Theatres, Inc., was not ‘actively’ engaged in any transaction for pecuniary gain or profit since its purpose was not to operate a business but merely to acquire property and derive income therefrom, and since none of the transactions occurred regularly. Such an interpretation of ‘actively’ would nullify the 1933 modification of the definition of doing business by reading into it the meaning given the term under the 1931 amendment defining it as ‘any transaction or transactions in the course of its business’ by a domestic or foreign corporation. The doing of business, however, does not necessarily mean a regular course of business under the 1933 amendment, for by its plain terms a corporation is doing business if it actively engages in any transaction for pecuniary gain or profit. Defendant would identify ‘doing business’ with ‘carrying on a trade or business. ’ A series of transactions regularly engaged in may be necessary to establish the ‘carrying on of a trade or business’ but the Legislature made it clear that it had no such concept in mind when it referred to transaction in the singular as ‘any transaction.’ The word ‘actively’ must therefore be interpreted as the opposite of passively or inactively, and as used in section 5 it means active participation in any transaction for pecuniary gain or profit.” (See, also, Carson Estate Co. v. McColgan, 21 Cal.2d 516 [133 P.2d 636].)
In Magruder v. Washington, Baltimore & Annapolis R. [152]Corp., 316 U.S. 69 [62 S.Ct. 922, 86 L.Ed. 1278], although the court was dealing with a corporation which had been organized by the bondholders for the particular purpose of liquidating the assets of a defunct railroad company, which it was engaged in doing, as distinguished from an existing corporation being liquidated, it is pertinent in that it implicitly holds that the mere fact that the business consisted of carrying out the process of liquidation, it nevertheless possessed the character of a corporation doing business. There is no magic in the fact of insolvency or that control is being exercised by a liquidator insofar as either may have an effect on the amount and character of business being done. A net income as envisioned by the frachise tax law may result from transactions carried on by the liquidator even though the chief aim is to dispose of the assets and distribute the proceeds. Although the liabilities of a corporation may exceed its assets, its current transactions may result in a net income. If that were not true a going concern controlling its own affairs might escape the tax merely because factually it was insolvent and was disposing of its capital assets to pay its debts. Those questions go to the issue of whether there is in fact a taxable income rather than whether the franchise tax law is applicable.
There is nothing in the Bank and Corporation Franchise Tax Act that necessarily precludes the assumption that it applies to a corporation being liquidated. Principles of fairness would indicate that a business being liquidated but carrying on transactions in which solvent concerns are engaged, should receive the same treatment so far as tax liability is concerned. Otherwise, solvent corporations would be at a disadvantage.
The authorities dealing with the question of whether or not a corporation is subject to a franchise tax when it is in liquidation or in the hands of a receiver are numerous, and varying results have been reached. Some have considered that when a corporation is in that condition the franchise tax is not applicable, but they deal chiefly with the proposition of whether or not the corporation is exercising its corporate franchise under such conditions, a subject that is discussed later herein. Much of the diversity of opinion in these cases arises from the interpretation of the particular statute involved, some cases holding that the tax was solely on the bare right to exercise the corporate franchise regardless of [153]whether or not business has been done. The tendency has been to treat the tax statute as applicable although the corporation is in receivership. It is said in 45 Am.Jur., Receivers, §§410, 411, 412:
“A question upon which authorities divide exists, however, as to the accruability of such taxes [franchise taxes] during receivership. . . . Cases affirming the accruability during receivership of franchise and privilege taxes involve various factual situations, in some of which it appears that the receiver carried on the corporate business, and in others it does not so appear or the fact is regarded as.immaterial. It is generally held that a franchise or privilege tax accrues during a receivership and that the receiver must pay such tax, at least where the receiver continues the operation of the business of the corporation and where the franchise tax is regarded as one upon doing business; when a receiver is thus carrying on the business of a corporation as a going concern he is in effect exercising the corporate franchise. . . .
“'Although there is contrary authority, it has been both held and intimated that a franchise tax accrues during a receivership which does not continue to operate the business of the corporation. . . .
“A Federal receiver is required to pay state-imposed franchise taxes accruing during the proceedings. Under Federal statute the liability of a receiver appointed by a Federal court for state and local taxes, where the receiver conducts any business under the authority of the court, is now specifically fixed. The purpose of the Federal statute is to subject businesses conducted under receivership in Federal courts to state and local taxation the same as if such private businesses were being conducted by private individuals or corporations. In a few cases since the enactment of this statute the courts in holding the receiver liable for franchise taxes have not relied on this statute. Although there is contrary authority, the courts have held in a few cases that a franchise tax arising during a Federal receivership was payable by the receiver even though the business of the debtor corporation was not conducted by him. The view has been expressed that it is the duty of a receiver to pay the franchise tax to protect the corporate existence. Distinguishing cases holding that a corporation in the hands of a receiver is not subject to a franchise tax where the corporation has been prohibited by law [154]or by injunction from exercising its franchises, a court has held that the commutation excise tax upon street railways imposed by the statute of a state was a tax exacted for the privilege of operation of street railways in public ways, operation for revenue being the basis of the tax, and that there was no apparent reason why such a tax should not be paid if the railway tracks in the highway were used for operation of the railway for the purpose of obtaining receipts, even though the operation was by a receiver of the railroad. . . .
“The cases in which it has been held that a franchise or privilege tax does not accrue during the receivership of a corporation have, generally speaking, certain characteristics, as nonoperation of the corporate business by the receiver, prohibition from doing business, or practical dissolution of the corporation. In several cases the franchise tax has been regarded as one upon ‘ doing business, ’ and it has been held that if the receiver does not carry on the ordinary business of the corporation there is no ground for the tax. The same conclusion has been reached even though the corporation still exists and may, perhaps, be allowed to resume business. In some cases the decision rests apparently on the ground that the corporation is substantially dissolved. Thus, in a proceeding to wind up the affairs of an insolvent corporation and distribute its assets, in which receivers were appointed, it was held that a franchise tax assessed, under the provisions of the state law, upon the authorized capital stock of the corporation, after the appointment of the receivers, and covering the succeeding year, was not a valid claim, although the statute provided that the tax should be a debt due from the corporation to the state, and should be a preferred debt in ease of insolvency; since, when the corporation passed into the hands of receivers under proceedings for its dissolution, it thereafter had no right to exercise any of the privileges conferred upon it by the state, which had taken possession of its assets for distribution among its then existing creditors. Some of the cases have held that where a Federal receiver has not continued the business of the debtor corporation franchise taxes accruing during the proceedings are not taxable.” (See, also, 18 A.L.E. 700; 26 Id. 426; 76 L.Ed. 1141; 85 L.Ed. 656, 674; Fletcher Cyclopedia Corporations (perm, ed.), § 7907.) Because of the difference in the statutes construed, and the wide variation in results, those authorities are not of much assistance and a digest of them would serve [155]no useful purpose. The tendency above mentioned finds support in the sound policy that a corporation in the hands of a receiver or being liquidated should not be favored by being exempt from the tax over a going solvent concern, when during the process of liquidation many transactions are engaged in which are the same as those common to the latter corporation. There is nothing in the Bank and Corporation Franchise Tax Act which clearly shows that the franchise tax should not apply or that the above policy is not approved. Plaintiff relies particularly upon State v. Old Abe Co., 43 N. M. 367 [94 P.2d 105, 124 A.L.R. 1085], That ease takes a narrow view of the definition of doing business and is out of harmony with the broad position taken by this court in Golden State T. & R. Corp. v. Johnson, supra, and Carson Estate Co. v. McColgan, supra. The case of People v. Richardson, 37 Cal.App.2d 275 [99 P.2d 366], is of no particular assistance. It merely holds that under the Bank Act where a conservator of a bank in financial difficulties, is continuing the business looking toward rehabilitation, the franchise tax is applicable. While it speaks of a distinction between a conservator and liquidator in that the former continues operation of the business, it does not consider the various acts that may be done by either, and which would constitute doing business, even though done by a liquidator. In the case at bar we have seen that transactions were conducted which constituted doing business.
Finally, it is true that the ordinary business of Marine was to receive deposits and make loans, however a necessary part of that business was the rental and disposal of property, transactions which as we have seen constitute doing business.
It will be remembered that the tax under the Bank and Corporation Franchise Tax Act is imposed upon the corporation “for the privilege of exercising its corporate franchises.” Plaintiff contends that pursuant to the Building and Loan Association Act he is a state officer and his taking over of Marine and proceeding with its liquidation placed the corporation in the hands of the state and forfeited its corporate franchise and the license issued to operate as a building and loan association; that hence the Bank and Corporation Franchise Tax Act cannot apply because the franchises cannot and are not being exercised and no right so to do exists.
There is no provision in the Building and Loan Association [156]Act which provides for a forfeiture of the franchise of a corporation taken over and in liquidation. The act does generally provide that the commissioner retain possession of the property, business and assets of the corporation “until such association shall with the consent of the commissioner resume business, or until its affairs be liquidated. Such association may, with the consent of the commissioner, resume business upon such conditions as may be approved by him.” (§ 13.11.) Manifestly, that provision contemplates a resumption of the business and affairs by the duly constituted corporation officers with limited or no restrictions by the commissioner, rather than implying that the corporation’s franchises are forfeited and no business can be done in its name. On the contrary it is contemplated that the commissioner may make sales, transfers and rentals of property, renew and rewrite loans, and “conserve or protect its business.” (§§13.13-13.16a.) That is to say the commissioner steps into the shoes of the corporation and proceeds with its affairs analogous to a liquidator or receiver. As heretofore seen, broad powers are given to the commissioner in liquidation and he ousts the corporate officers from control and takes complete charge of the business of the corporation. He acts for and on behalf of the corporation, its officers and creditors. (See in analogous situations People v. United States Fid. & Guar. Co., 45 Cal.App.2d 474 [114 P.2d 389]; Verder v. American Loan Society, 1 Cal.2d 17 [33 P.2d 1081].) The commissioner acts in a sense as a trustee or receiver. (See Brandon v. Anglo-California Trust Co., 177 Cal. 699 [171 P. 956]; Richardson v. Superior Court, 138 Cal.App. 389 [32 P.2d 405]; Mercantile Trust Co. v. Miller, 166 Cal. 563 [137 P. 913]; Carpenter v. Pacific Mut. Life Ins. Co., 10 Cal.2d 307 [74 P.2d 761]; Evans v. Superior Court, 14 Cal.2d 563 [96 P.2d 107].) The commissioner does not lose his status as a state officer during liquidation but he also occupies in connection therewith a position described in Evans v. Superior Court, supra, 573: “During such time, the commissioner has the status of a trustee of a trust in private property, or in other words, the status of a trustee of a private trust. As was said in Richardson v. Superior Court, 138 Cal.App. 389, at page 394 [32 P.2d 405], ‘While it thus appears that the authority of the commissioner over the property and business affairs of the association when in his custody is subject to certain pre[157]
‘‘The act (bank act) imposes upon him duties in the liquidation of such banks which will often require him to maintain or defend actions concerning them. He must collect the moneys of the bank and do all other acts necessary to conserve and liquidate its assets. When he takes possession he supersedes the bank officials in the management and con[158]trol of its property and business. Its franchise to do business as a bank is thereupon suspended. In closing up its affairs he is not required to consult its officers, or cooperate with them, but acts upon his own initiative and independent of them. Upon complete liquidation and final settlement, the residue, if any, must be transferred and delivered by him to the stockholders, not to the corporation. Thereupon the franchise of the corporation to do business as a bank is terminated and it cannot be again acquired except by compliance with the provisions of the act in the same manner as a new corporation must comply.” That language indicates that the power of the corporate officials is superseded, rather than that the corporate franchise is not being exercised by the Superintendent of Banks. True it contains the statement that the taking over suspends the franchise but that must be read in the light of the other language with respect to the powers of the corporate officers and the last sentence that the corporate franchise is lost when the liquidation has been completed. While it was said in Fifth Street Building v. McColgan, 19, Cal.2d 143 [119 P.2d 729], that the amendment to the federal statute had set at rest by express authorization the question of whether or not a trustee in bankruptcy of a corporation must pay the franchise tax (28 U.S.C.A. § 124a), it is also stated that “There is no need to amend the Bank and Corporation Franchise Tax Act to specify that a trustee in bankruptcy conducting the business of a corporation shall be subject to the tax as if he were a corporation in order to insure that an intervening bankruptcy will not interrupt the application of the tax.” The clear intimation from what was said in the opinion in that case is that Congress by its plenary powers over bankruptcy matters removed all doubt of its consent, by that statute, that a trustee in bankruptcy may be subject to the tax, and that that difficulty being removed there was nothing in the Bank and Corporation Franchise Tax Act which indicated that such tax should not apply to a trusteeship or receivership. That ease held that the act of Congress gave to the trustee the status of the corporation for the purpose of imposition of the tax. Likewise in the instant case we have seen that the Building and Loan Commissioner as liquidator has been declared to be in the shoes of the corporation.
In 1943, section 5 of the Bank and Corporation Franchise [159]Tax Act dealing with definitions was amended to read: “The term ‘bank’ and the term ‘corporation’ as herein used shall include any ‘bank’ or any ‘corporation’ operated by any receiver, liquidator, referee, trustee or other officers or agents appointed by any court.’’ (Stats. 1943, ch. 352, p. 1405, Deering’s Gen. Laws, Act 8488.) According to the Assembly Journal the purpose of the amendment was stated to be: “Enlarges definition of ‘bank’ and ‘corporation’ in accordance with principle announced in Fifth Street Building v. McColgan, 19 Cal.2d 143 [119 P.2d 729], Restates existing law. ’ ’ Under appropriate circumstances an amendment to -a statute may be for the purpose of clarification rather than new matter or an alteration of the former law. (See Union League Club v. Johnson, 18 Cal.2d 275 [115 P.2d 425]; San Joaquin Ginning Co. v. McColgan, 20 Cal.2d 254 [125 P.2d 36]; Martin v. California Mut. B. & L. Assn., 18 Cal.2d 478 [116 P.2d 71].) Inasmuch as we have determined that the act prior to the amendment was applicable to the instant case, and the stated purpose of the amendment, we believe the amendment was only for clarification purposes.
Plaintiff contends that there was no tax due because the operating expenses plus interest falling due on claims against Marine during the year 1937 exceeded the operating revenue for the year. Defendant asserts however, that the interest on the claims was not a deductible item from the' gross revenue because Marine was insolvent, the interest had not been paid for that year and because of Marine’s insolvency, would never be paid; that to allow the deduction would be to place Marine’s return on an accrual rather than a cash basis which cannot be done inasmuch as Marine’s insolvency eliminates the expectation that the interest will be paid in the future; and that under section 12 of the Bank and Corporation Franchise Tax Act it is within the discretion of the commissioner whether a corporation shall be entitled to use the accrual or cash basis.
The books of Marine were kept on an accrual basis. If interest on both general creditors claims and holders of investment certificates became a fixed and certain liability during 1937, a year Marine was in liquidation, the amount thereof was $10,013.77. Plaintiff commissioner alleges in his complaint that: “. . . pursuant to the requirements of the said notice, elai3ns were filed by creditors and investors of [160]the said association in an original . . . sum of . . . $300,-000.00; that of the said . . . sum claims of approximately $50,000.00 were paid in full . . . prior to the end of the calendar year of 1937. That there were claims filed in an original amount of $247,300.00 which remained unsatisfied as of December 31, 1937; that of "the said claims, $4,246.68 represented the general claims of creditors other than investors and $243,063.32 represented the claims of investors in the association. That in addition to the said' claims as filed, there were claims shown by the books of the association to exist in favor of investors against the association in the total original sum of $3,669.51, which claims were not presented or filed with the Commissioner; that the total original amount of claims of investors as of December 31, 1937, was the sum of $246,732.83. . . .
* ‘ That during the liquidation of the property, business and assets of the said association, this plaintiff and his predecessors in office have distributed, as dividends to the investors and other creditors of the said association, the total sum of $151,646.20; ...” We assume from those allegations that the amount of claims not including interest thereon was considerably more than the payments made. In other words there was insufficient to pay even the principal. There was nothing to pay the interest that might accrue during the year.
While plaintiff states that he computed about half of the $151,646.20 paid in 1937 as interest and the balance as principal the payments were not so earmarked. Under these circumstances it must be concluded that no interest in fact became a fixed and definite liability in 1937. That follows from the general rule that when an insolvent building and loan association is in the hands of the commissioner in the process of liquidation no interest is payable during liquidation to investment certificate holders until and unless the assets are sufficient to discharge the principal obligations to all the creditors including membership shareholders. (In re Pacific Coast Bldg.-Loan Assn., 15 Cal.2d 134 [99 P.2d 251].) While some of the interest claimed to have accrued in 1937, was on claims of general creditors, the reasoning in the above cited case would indicate that the general outside creditors of an insolvent building and loan association in the process of liquidation are not entitled to interest after [161]liquidation until the principal has all been paid to the other creditors and a surplus is available. Assuming the general outside creditors had a priority over the holders of investment certificates yet both the investment certificate holders and general creditors are creditors of the corporation and the following rule applies: “Nor is it to be implied that the prior claimants are the only ones admitted to share in the estate. They are not. On the contrary, all that happens is that they are paid first, the other creditors getting what is left. It is for this reason that prior claimants should not be allowed interest on their claims as long as the estate is not able to pay off the general claims also with interest.” (Glenn on Liquidation, § 510.) In the instant case the assets in 1937 were insufficient to pay the principal of the creditor’s claims, and hence there was no surplus. Therefore the interest should not have been deducted on the accrual basis for that year. At least it is obvious that there was grave uncertainty of the interest for the year 1937 ever being paid because there was insufficient to meet the principal. Those circumstances fit in with the method of allowing deductions on the accrual basis or computing income on that basis, that is, the reasonable expectation and probability that the deductible expense will be paid from income received in the future. It is stated in Commissioner of Internal Revenue v. R. J. Darnell, Inc., 60 F.2d 82: “As to both income and deductions it is the fixation of the rights of the parties that is controlling.” It is said in Law of Federal Income Taxation, Paul & Mertens, § 1174: “ The basic idea is that all the events creating the liability have occurred; no contingency remains. The taxpayer has then earned the income, or is subject to the liability to pay.” (See, also, Id. §§11.73, 11.96.)
The fact that the Bank and Corporation Franchise Tax Act (§ 8(b)) allows the deduction of interest “paid or accrued” does not alter the result in the light of the foregoing discussion in regard to the basis of the accrual method and the probability that no interest will be paid.
The case of Zimmerman Steel Co. v. Commissioner of Int. Rev., 130 F.2d 1011, involved a contemplated bankruptcy and the interest accrued prior thereto. There did not exist [162]in that case the circumstance of the contingency of their being a surplus before any interest could be paid.
For the foregoing reasons the judgment is reversed.
Gibson, C. J., Shenk, J., Traynor, J., and Schauer, J., concurred.