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Wiramal Corp. v. Director of Division of Taxation

Decided: November 20, 1961.

WIRAMAL CORPORATION, PETITIONER-APPELLANT,
v.
DIRECTOR OF DIVISION OF TAXATION, DEFENDANT-RESPONDENT



For affirmance -- Chief Justice Weintraub, and Justices Jacobs, Francis, Hall and Schettino. For reversal -- None. The opinion of the court was delivered by Schettino, J.

Schettino

Appeal was taken to the Appellate Division from the determinations of the Division of Tax Appeals of the Department of the Treasury of the State of New Jersey, affirming assessments of additional franchise taxes for the years 1955 and 1956. The petitioner was found not to be an investment company entitled to preferential tax treatment under N.J.S.A. 54:10A-5(d). Before argument in the Appellate Division, we certified the appeal on our own motion.

The opinion of the Division of Tax Appeals, delivered by Commissioner Kopp, is adopted by this court and we shall hereafter discuss the constitutional point not disposed of therein.

I.

The opinion reads as follows:

"Petitioner, a Delaware corporation authorized to do business in the State of New Jersey, seeks to set aside two determinations of the Director of the Division of Taxation assessing additional franchise taxes against it for the tax years 1955 and 1956 under N.J.S.A. 54:10A-1 et seq.

The parties entered into a written stipulation of facts which clearly established that petitioner qualified as an investment company except for its ownership of 30% of the outstanding stock of Salt Creek Development Corporation, an Ohio corporation. The factual situation with respect to the Salt Creek stock was the subject of testimony and exhibits received at the hearing before me on November 10, 1960.

Petitioner called John J. Phelan as its witness and he testified that he was a director and the secretary of Wiramal Corporation; that W. C. Fitkin was a director and the president of said corporation; that in 1951 Fitkin was indebted to petitioner in the sum of $35,000; that Fitkin agreed to assign his interest in Salt Creek Development Corporation to petitioner for the sum of $45,000 and some odd dollars, and as a next step, repay the corporation (petitioner) the $35,000 that he owed it; that Fitkin retained the right to vote the Salt Creek stock as consideration for indemnifying petitioner against any subsequent loss.

The witness then read into the record three letters which he testified contained the entire understanding between petitioner and Fitkin relative to the Salt Creek stock.

The first letter from petitioner to Fitkin, dated August 5, 1951, is as follows:

'Dear Mr. Fitkin:

This letter confirms purchase from you of 300 shares of Salt Creek Development Corporation capital stock for the sum of $45,149.25.

This sale has been consummated with you on the basis that you agree in writing to indemnify the corporation against loss upon disposition of this security at any time within our discretion.

Upon receipt of your written acknowledgement of indemnification, we will agree that you will maintain the sole voting rights carried by this stock in any manner in which you desire.

Very truly yours,

Wiramal Corporation

J. J. Phelan, Secretary'

The second letter was from Fitkin to petitioner dated August 5, 1951 and is as follows:

'Wiramal Corporation

18 Corlies Avenue

Allenhurst, New Jersey

Gentlemen:

This is to confirm the understanding as outlined in your letter of this date, wherein I agree to indemnify you against any loss upon the disposition or liquidation of 300 shares of Salt Creek Development Corporation capital stock which you have purchased from me at an appraised value of $45,149.25.

This also confirms our agreement which provides that in consideration of my indemnification, I will have the sole right to vote the stock at any ...


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