Before BIGGS, JONES, and MCLAUGHLIN, Circuit Judges.
This appeal is by The Pennsylvania Company for Insurances on Lives and Granting Annuities (hereinafter referred to as the Pennsylvania Company or as the Trustee) from a judgment for the defendant entered by the court below in a suit instituted jointly by the Pennsylvania Company and the Wabash Railroad Company (an Ohio corporation) against the defendant Collector for the recovery of certain stamp taxes assessed against the Trustee and paid under protest. No claim for refund was filed by either the Wabash Railroad Company or by the receivers of its predecessor, the Wabash Railway Company (an Indiana corporation), and, at trial, the claim of the Wabash Railroad Company to a refund was not pressed. Only the plaintiff-Trustee has appealed.
The facts upon which the appellant bases its contentions in this court may be summarized from the supported findings of fact made by the learned trial judge as follows:
Between August 1, 1922, and February 1, 1929, the Wabash Railway Company, the Indiana corporation, in order to finance its acquisition of railroad equipment entered into a series of equipment trust agreements and leases with certain corporate trustees under the well-known "Philadelphia Car Trust" plan. See Rawle, 8 A.B.A.R., p. 277 (1885); Baldwin, American Railroad Law, p. 197 (1904).
In accordance with the plan, the designated trustee purchased the desired equipment from the vendors and paid for it out of the proceeds received from trust certificates which were issued by the trustee and sold to investors. The trust certificates carried semiannual dividend warrants and were to mature serially in annual installments. Upon the trustee's acquisition of the equipment, to which it took title in its own name, it leased the same to the Railway Company at an annual rental sufficient to pay the principal of the trust certificates at their respective maturities and also to pay all dividend warrants when due. By June 1, 1929, the Pennsylvania Company had become the successor trustee in all of the trust agreements and leases above referred to.
On December 31, 1931, the Wabash Railway Company was placed in the hands of receivers appointed by a United States District Court for Missouri. Nearly one-half of the Railway's rolling stock or other operating equipment then on hand had been acquired under the equipment trust agreements and leases above mentioned. It was, moreover, the Railway's newest equipment. The receivers being unable later to meet the rentals due under the extant equipment trust leases, the Court on May 20, 1933, entered an order directing them to make no "further payments on account of matured and/or maturing principal and/or interest upon any of" the equipment trust certificates as specifically identified in the order. The court order further directed the receivers to "negotiate with the Trustee and/or the holders of the above described Equipment Trust Obligations for the formulation of a plan for the refinancing or extension of the principal of said Equipment Trust Obligations upon terms that will preserve the equipment for use in the operation of the receivership estate and will readjust the amounts of the annual payments in amortization of the principal thereof".
The receivers did so negotiate and, as of June 1, 1933, entered into a written agreement with the holders of the subject outstanding equipment trust certificates. The agreement recited that the receivers had proposed, and that the subscribing certificate holders had approved, that "all installments of principal falling due under the Equipment Trust agreement in the years 1933 and 1934 be deferred for a period of three years * * *." Each subscribing certificate holder agreed not to take any action or require or request the Trustee to take any action and not to do any act which would cause the Trustee to take any action under the equipment trust because of the failure or refusal or default of the Railway or its receivers in respect of the rentals or principal due under the equipment trust agreement or lease.
Pursuant to the extension agreement, the subject equipment trust certificates were surrendered by the holders thereof to the treasurer of the receivers who endorsed on each certificate, in accordance with the agreement, a legend stating in substance that the certificate was subject to the agreement and that copies of the agreement were on file with the Trustee and with the receivers. The certificates, when so endorsed, were returned to their respective owners or holders.
A similar extension agreement between the receivers of the Railway and holders of equipment trust certificates was executed as of February 1, 1936, and was carried into effect in the same way as was the agreement of June 1, 1933.
The receivers' treasurer with his staff acted as the Trustee's register, or transfer agent, with respect to the equipment trust certificates during the receivership just as he had done as an officer of the Wabash Railway Company prior to the receivership and as he did as an officer of the successor Wabash Railroad Company after the receivership. While the Trustee did not sign the extension agreements, it knew that they were being negotiated and received copies of them following their execution which it placed in its files. It was not the policy of the Trustee to act in respect of the equipment trusts by repossessing itself of the equipment upon the lessee's default unless it was requested by the certificate holders so to do.
The extension of the maturity dates of the certificates was for the use and benefit of the receivers of the Railway Company and aided them in their operation of the railroad's properties and their administration of its affairs. The extensions also enured to the benefit of the Trustee in the administration of its trust duties.
The equipment trust certificates, which were on the usual engraved form used for corporate securities with dividend or interest coupons attached, were registered as to principal only.
The Commissioner of Internal Revenue, holding that the extensions of the indebtedness, worked by the agreements, constituted a renewal of the equipment trust certificates within the meaning of Sec. 800 of the Revenue Act of 1926, c. 27, 44 Stat. 9, as amended by Sec. 721 (a) of the Revenue Act of 1932, c. 209, 47 Stat. 169,*fn1 accordingly assessed a commensurate tax against the Trustee which the Trustee paid to the defendant Collector under protest. The funds required for the payment were furnished by ...