The opinion of the court was delivered by: WALKER
1. Plaintiffs are citizens and residents of the State of New York.
2. The defendant, Tobacco Products Corporation of New Jersey
is a corporation incorporated under the laws of the State of New Jersey.
3. The matter in controversy exceeds, exclusive of interest and costs, the sum of $3,000.
4. In 1931 directors of Tobacco Products Corporation of Virginia
, a corporation existing under the laws of Virginia, proposed a reorganization which was consummated on or about February 11, 1932. Virginia pursuant to said plan of reorganization transferred a lease
it had to New Jersey and New Jersey paid therefore by issuing its 6 1/2% debentures in the sum of $35,591,235, to the shareholders of Virginia, among whom was The United Stores Corporation
This left $1,012,544.15
of alleged value for which debentures were not issued and for the $1,012,544.15, New Jersey issued all its capital stock to Tobacco Products Corporation of Delaware, a corporation existing under the laws of Delaware
5. About the same time Virginia transferred to Tobacco Products its remaining assets in exchange for Tobacco Products assuming the liabilities of Virginia, Tobacco Products issued its shares of common stock to the stockholders of Virginia and Stores became the majority stockholder in Tobacco Products.
6. The cost of acquisition of the lease with the American Tobacco Company as reflected upon the books of New Jersey was $36,603,779.15, although the lease had been carried on the books of Virginia at $4,105,509.81.
7. When Virginia was dissolved no provision was made for the payment of income taxes to the United States Treasury should the lease New Jersey had with American Tobacco Company be commuted.
8. In January, 1935, said lease was commuted by American Tobacco Company and New Jersey received $462,744.15, less than the cost of said lease to it as reflected on its books.
9. On June 8, 1937, the Treasury Department levied and assessed a tax against New Jersey for the year 1935 in the sum of $4,967,890.40, claiming that the defendant had sustained a taxable net profit of $32,150,497.09, on the transfer and commutation of the lease. Subsequently the Treasury Department levied and took over $725,638.27 that New Jersey had on deposit.
10. The defendant Tobacco Products Corporation of New Jersey in September, 1939, filed a claim for refund against the United States claiming the lease had cost them $36,603,779.15, and less than that amount had been realized when the lease was commuted, therefore it did not make a net profit.
11. On October 27, 1939, Stores, as owner of the majority of the stock of Tobacco Products, asked for the appointment of a receiver for Tobacco Products and the Chancery Court of Delaware appointed one Elwyn Evans.
12. The chancellor of the State of Delaware made an order directing the receiver to cause the directors of New Jersey to adopt a resolution ...