Michigan v. Michigan Trust Co., 286 U.S. 334 (1932)

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Michigan v. Michigan Trust Co.

No. 598

Argued April 19, 1932
Decided May 16, 1932
286 U.S. 334

CERTIORARI TO THE CIRCUIT COURT OF APPEALS

FOR THE SIXTH CIRCUIT

Syllabus

1. The annual tax laid by § 4 of Act No. 233, Pub. Acts of Mich. 1923, upon every local corporation "for the privilege of exercising its franchise and of transacting its business within this State" has been held by the state supreme court to be a tax on the privilege to do business, not merely on the doing of it, and to be applicable where the business is being conducted by a receiver, appointed for the purpose of continuing it.

Held:

(1) The decision must be followed in a federal court receivership as a binding construction of the local law. P. 342.

(2) A decision upholding.the tax as applied to a receiver is necessarily a construction of the statute, although the statute does not mention receivers and its application to them was guided by general principles as to the effect of a receivership. P. 343.

(3) The tax should be paid by the receiver as it accrues, as part of the expense of administration, and where this was deferred until the receivership developed from a merely protective into a winding up process, the accumulated taxes must be paid in preference to the claims of creditors. P. 344.

2. Receiverships for conservation should be watched with a jealous eye to avoid inequitable results. P. 345.

3. United States v. Whitridge, 231 U.S. 144, distinguished. P. 346.

52 F.2d 842 reversed.

District Court, affirmed.

Certiorari, 284 U.S. 616, to review the reversal of an order requiring the receiver of a corporation to pay accrued corporate franchise taxes before the claims of creditors. The order was made on petition of the state.