author: COWEN, Chief Judge: NICHOLS, Judge SKELTON, Judge

text:
    UNION OIL COMPANY OF CALIFORNIA v. The UNITED STATES.
    No. 700-71.
    United States Court of Claims.
    June 20, 1973.
    Nichols, J., concurred with opinion.
    Skelton, J., dissented with opinion.
    Carl Estes, II, Houston, Tex., for plaintiff. Marvin K. Collie, Houston, Tex., attorney of record. Thomas P. Marinis, Jr., and Vinson, Elkins, Searls, Connally & Smith, Houston, Tex., of counsel.
    Allan C. Lewis, Washington, D. C., with whom was Asst. Atty. Gen., Scott P. Crampton, Washington, D. C., for defendant. Gilbert E. Andrews and Joseph Kovner, Washington, D. C., of counsel.
    Before COWEN, Chief Judge, and DAVIS, SKELTON, NICHOLS, KASHIWA, KUNZIG, and BENNETT, Judges.
   OPINION

COWEN, Chief Judge:

In this tax refund suit, which is before the court on a stipulation of facts by the parties for a decision on an issue of law, plaintiff seeks to recover $233,912.32 in Federal Documentary Stamp Taxes collected under Section 4321 of the Internal Revenue Code of 1954. We have concluded that the plaintiff is not entitled to recover.

The basic facts material to the resolution of the issue before the court may be briefly summarized. On April 29, 1965, plaintiff Union Oil Company of California (Union), a California corporation, entered into an Agreement of Merger with the Pure Oil Company (Pure, a corporation organized under the laws of the State of Ohio. Under the terms of the Agreement, which was written in conformance with the applicable statutory provisions of California and Ohio, Pure was to be merged into Union by a transfer of all of Pure’s corporate assets to Union, subject to the approval of the stockholders of each corporation as required by local state law. The Agreement further provided that each outstanding share of Pure’s common stock was to be converted into one share of the cumulative convertible preferred voting stock of Union on the effective date of the merger. The shareholders of the two corporations duly approved the Agreement of Merger. On July 16, 1965, in accordance with the Agreement, Pure merged into Union, and Union issued 9,953,715 shares of its cumulative convertible preferred voting stock directly to the former shareholders of Pure.

It is the position of the Government that the merger of the two corporations involved two transactions subject to the imposition of Federal Documentary Stamp Taxes. The first such transaction, the issuance by Union of 9,953,715 shares of its capital stock, required payment of $584,780.80 of original issue stamp taxes under Section 4301 of the 1954 Code. Plaintiff concedes that the latter tax was properly assessed. The Government further asserts that plaintiff was liable for an additional $233,912.32 of transfer stamp taxes imposed by Section 4321 of the 1954 Code, based on the implied transfer by Pure to its own shareholders of the right to receive 9,953,715 shares of Union stock issued in exchange for the assets of Pure. It is the assessment of the Section 4321 transfer stamp tax that plaintiff challenges here. Defendant asserts that Treasury Regulation (26 C.F.R.) Section 47.4321-2(a) (9) is controlling. That regulation provides:

§ 47.4321-2 Illustrations.
(a) Sales and transfers subject to tax. The following transfers of stock are illustrations of transactions which are taxable, unless exempt from tax under a specific provision of the Internal Revenue Code * * *:
•X- # * -* * -X-
(9) In addition to the tax on the issuance of stock in connection with a merger or consolidation, where such stock is issued directly to the stockholders of the merging or consolidating corporations by the continuing or consolidated corporation * * *, there is also a transfer tax imposed at the time of the issuance of such stock. The transfer tax is applicable to such a transaction inasmuch as there is involved the transfer to the stockholders of the merging or consolidating corporations of such corporations’ right to receive the stock of the continuing or consolidated corporation. * * * [Emphasis added.]

Simply stated, the Government’s theory is that the nonsurviving corporation, here Pure, initially had the right to receive the capital stock of Union issued in exchange for the assets of Pure. This is because the corporation, rather than its individual stockholders, is the owner of the corporate assets. See EL Henn, Law of Corporations § 79 (2d Ed. 1970). Consequently, when Union and Pure agreed that incident to their merger Union would issue its capital stock directly to the shareholders of Pure, the merging corporation, there was an implied transfer by Pure to its own stockholders of the right to receive the Union capital stock. Defendant finds support for its position and for the above-quoted regulation, in the decision of the Supreme Court in Raybestos-Manhattan, Inc. v. United States, 296 U.S. 60, 56 S.Ct. 63, 80 L.Ed. 44 (1935). In that case the corporate taxpayer was organized under the laws of New Jersey as part of a plan of consolidation. Pursuant to the consolidation agreement, two preexisting corporations transferred their assets to the taxpayer and in return the taxpayer issued its capital stock directly to the shareholders of the two consolidating corporations. The Internal Revenue Service assessed both original issue and transfer stamp taxes on the transactions. The transfer tax was assessed, as here, on the implied transfer by the consolidating corporations to their stockholders of the right to receive the stock of the new corporation. In construing the transfer stamp tax statute, similar to Section 4321, the Court held that when the act referred to transfers, it did not mean exclusively an actual transfer from the hand of the transferor to that of the transferee. The statute also referred to the relinquishment of a right by one party and the vesting of the same right in another. The Court stated:

* * * In the present case the generating source of the right to receive the newly issued shares of petitioner was the conveyance to it of the property of each of the corporations to be consolidated. The new shares could not lawfully be issued to any other than the grantor corporation without its authority, and that authority could not be exercised for the benefit of third persons other than its own assenting stockholders. The consolidation agreement thus imposed the duty on petitioner to issue the new shares upon receipt of the property, and at the same time made disposition to the stockholders of the two corporations of the correlative right to receive the stock. [296 U.S. at 63, 56 S.Ct. at 65; emphasis added.]

The Court concluded that there was not “even a technical difference of any significance” for Federal tax purposes whether the shares were issued first to the consolidating corporations and later transferred to their stockholders, or whether the initial issuance of the stock and the transfer thereof to the shareholders of the consolidating corporations were effected in the single consolidation agreement. Although the RaybestosManhattan case arose in the context of a corporate consolidation, its principles have been applied in the traditional merger situation. U.S. Industrial Chemicals, Inc. v. Johnson, 181 F.2d 413 (2d Cir. 1950); American Processing & Sales Co. v. Campbell, 164 F.2d 918 (7th Cir. 1947), cert. denied, 333 U.S. 844, 68 S.Ct. 661, 92 L.Ed. 1127 (1948); American Mail Line, Ltd. v. United States, 101 F.Supp. 364, 121 Ct.Cl. 63 (1951); Western Massachusetts Elec. Co. v. United States, 101 F.Supp. 544 (D. Mass.1951).

Plaintiff recognizes that RaybestosManhattan and the cases following it are controlling as to the applicability of the transfer stamp tax in the usual merger situation. However, plaintiff asserts that the critical factor in each of those cases was that under the applicable state laws respecting mergers and consolidations, the nonsurviving corporation in a merger or consolidation had the right to receive and the correlative right to control the disposition of the stock issued in exchange for its assets by the continuing corporation. Thus, plaintiff contends that, while the application of the transfer stamp tax to a particular transaction is a question of Federal law, the form of the transaction is controlled by state law and the tax is assessed on the basis of state-created relationships. Plaintiff also maintains that the law of Ohio with respect to mergers and consolidations, which was applicable to the merger of Pure into Union, prohibits the merging or nonsurviving corporation from receiving or controlling the disposition of the shares issued by the continuing corporation. Consequently, says plaintiff, the shareholders of the merging corporation have the exclusive right to receive such stock. The law of Ohio, plaintiff argues, precludes the possibility of any actual or implied transfer by the merging corporation to its stockholders of the right to receive the shares of the continuing corporation, and the transfer stamp tax of Section 4321 cannot be imposed.

Plaintiff claims support for its basic position in the decision of the United States Court of Appeals for the Fifth Circuit in Union Bankers Insur. Co. v. United States, 317 F.2d 598 (5th Cir. 1963). That case concerned the merger, in accordance with the law of the State of Texas, of two Texas insurance corporations. The agreement of merger directed the issuance of the stock of the continuing corporation directly to the shareholders of the merging corporation in exchange for the assets of the latter. The Internal Revenue Service assessed the Section 4821 transfer stamp tax on the basis of the implied transfer by the merging corporation to its shareholders of the right to receive the capital stock of the continuing corporation. The court of appeals reversed the decision of the district court in favor of the Government. The court noted that Texas, like most other jurisdictions, stringently regulates by statute the activities of insurance companies doing business in the state. The court then concluded that the provisions of the Texas Insurance Code prohibited one insurance corporation from owning, possessing, or controlling the capital stock of any other insurance company at any time, even momentarily. Consequently, the court decided that in a merger situation, the acquired corporation had no right to receive, and no right to control the disposition of, the capital stock issued by the continuing corporation where both were insurance corportaions. Thus, the court disallowed the imposition of the transfer stamp tax on the ground that “in this unusual situation” the applicable Texas law rendered impossible any transfer by the merging corporation to its shareholders of the right to receive the stock of the continuing corporation

Turning to the law of Ohio pertaining to mergers and consolidations, plaintiff concedes that, unlike the Texas Insurance Code in Union Bankers, no provision of the Ohio statutes expressly precludes the acquired corporation in a merger from receiving or controlling the shares of the continuing corporation issued in exchange for its assets. However, plaintiff asserts that several of the merger and consolidation provisions can reasonably be read to support such a prohibition and that the courts and commentators in Ohio have so construed the statutes. We have considered the Ohio authorities and hold that they do not support plaintiff’s theory of recovery.

The provisions of the Ohio statutes regarding corporate mergers and consolidations are found at Sections 1701.78 through 1701.85 of the Ohio Revised Code. Plaintiff particularly relies on Sections 1701.78(B) (10) and 1701.-81(A)(1), which provide, in pertinent part, as follows:

§ 1701.78 Merger and consolidation procedure.
-X -X -X -X -X -X
(B) To effect such merger or consolidation, the directors of each constituent corporation shall approve an agreement * * *, which agreement shall set forth:
* * * *X* * -X*
(10) * * * [T]he manner and basis of making distribution to shareholders of the constituent corporations, which distribution to shareholders of any of the constituent corporations, in extinguishment of or in substitution for shares of such constituent corporations, may be by way of shares * * * of the surviving or new corporation * * *.
* X- * -X -X -X
§ 1701.81 Effect of merger.
(A) When such merger or consolidation becomes effective:
(1) The separate existence of all the constituent corporations, except the surviving or new corporation, shall cease * * *.

Plaintiff argues that under Section 1701.81(A)(1) a corporation which has ceased to exist as a separate legal entity on the effective date of the merger cannot, as a matter of inexorable logic, be the recipient of the stock issued by the surviving corporation. Therefore, plaintiff asserts the Ohio legislature has provided in Section 1701.78(B) (10) that prior to the effective date of the merger, the agreement of merger must provide for distribution of the shares of the surviving corporation directly to the stockholders of the merging corporation. Since- only the stockholders, under this reading of the statutes, have the right to receive the stock, there can be no taxable transfer of that right. While conceding that this is not the reasonable construction of the statutes, plaintiff contends that it has been the interpretation thereof made by the Ohio courts.

Plaintiff refers us to Robison v. Cleveland City Ry. Co., 13 Ohio Dec. (10 Nisi Prius Rep.) 1 (Cuyahoga Common Pleas 1902). Plaintiff asserts that in that ease, the court held that an agreement of consolidation providing for the issuance of the shares of the new corporation to the acquired corporation itself was invalid or unenforceable. That the Robison case represents the current law of Ohio, plaintiff suggests, is indicated by the statement at 13 Ohio Jur.2d, Corporations § 810 (1955), which provides in part, as follows:

-» -x- * Thg shares of the new company must be delivered or distributed directly to the shareholders of the constituent corporations or their authorized agents. A delivery of the shares to the constituent corporations cannot be made, inasmuch as after the consolidation or merger becomes effective those corporations do not remain in existence for any such purpose. (Footnotes omitted.)

The commentary cites only the Robison case as authority for the quoted proposition.

We do not believe, however, that' the Ohio statutes preclude the existence of an implied transfer by the merging corporation to its shareholders of the right to receive the stock issued in exchange for its assets by the surviving corporation. To the contrary, we think that the Ohio statutes recognize the existence of such a transfer and require that it be effected in the terms of the agreement of merger executed by the corporations involved and approved by their stockholders, prior to the effective date of the merger. It is especially significant that in Section 1701.78(B)(10) of the Ohio Revised Code, supra, the statute requires the directors of the corporations to specify in their agreement the manner by which the shares of the continuing corporation will be issued to the former shareholders of the merging corporation. It seems clear that the statute thereby acknowledges the power of the merging corporation to direct the disposition of the shares given in exchange for its assets, and by implication, the underlying right of the merging corporation to receive those shares.

The provision of Ohio law that the separate existence of the merging corporation will cease is not unique; that is the usual result of a corporate merger. This point indicates the critical fallacy of plaintiff’s argument. It is precisely because the merging corporation will cease to exist that the legislatures of the states normally require that such details as distribution of the stock of the surviving corporation be worked out prior to the effective date of the merger. Virtually the same argument as that made by the present plaintiff was before the Seventh Circuit in American Processing & Sales Co. v. Campbell, supra. That case involved a merger in accordance with the law of the State of Illinois which is substantially similar to the Ohio statute, and the agreement for the merger closely resembles the agreement for the merger of Pure and Union. As here, the main issue was the propriety of the assessment of the transfer stamp tax. The taxpayer argued that under Illinois law the merging corporation went out of existence and had no right to receive the stock of the continuing corporation ; therefore, it had nothing to transfer to its stockholders. The court rejected this contention, noting that prior to the effective date of the merger the two corporations, with the consent of their stockholders, had adopted a plan of merger providing for the transfer of the assets of the merging corporation to the surviving corporation. The quid pro quo of this transfer of assets was to be the issuance of stock by the continuing corporation to the former shareholders of the merging corporation. Consequently, the shareholders acquired the right to receive the stock by virtue of the terms of the agreement of merger between the corporations. Therefore, the court decided that the agreement effected a transfer of the right to receive the stock within the meaning of the taxing statute.

Similar principles were applied in the case of a vertical merger in U.S. Industrial Chemicals, Inc. v. Johnson, supra. See also, American Mail Line Ltd. v. United States, supra, 101 F.Supp. at 368-369, 121 Ct.Cl. at 74-76.

The Robison case in the Ohio Common Pleas Court, on which the plaintiff relies, was one of several suits brought against Cleveland City Railway Company (Railway) by the shareholders of the Cleveland City Cable Railway Company (Cable) following the consolidation between Cable and another company to form the Cleveland City Railway Company. The merging corporations entered into a' consolidation agreement which provided that 18,250 shares of the new corporation were to be issued to Cable. After a sufficient number of the shares were sold to liquidate its indebtedness, Cable was to distribute the remainder among its stockholders. Pursuant to the agreement, Railway delivered to Robison and Shipherd, who had been appointed agents of the shareholders and of Cable, a certificate representing the 18,250 shares. After the receipt of the certificate, Shipherd wrongfully converted some of the shares to his own use. Thereafter, Robison sued Railway for the recovery of his shares of stock that had been converted. One of the defenses raised by Railway was that the consolidation agreement authorized it to deliver the stock to Cable company for distribution by it to its shareholders and that Railway had therefore discharged its obligation. The Common Pleas Court rejected this defense and held that under the Ohio statute “the new stock could be delivered only to individual holders or their authorized agents.” It is upon this portion of the court’s decision that plaintiff places its principal reliance.

The question which the Common Pleas Court had to decide was whether the new corporation was liable to the shareholders of one of the merging corporations for the negligent misdelivery of the stock to the person who wrongfully converted it. The court did not address the factor deemed so critical by the Supreme Court in Raybestos-Manhattan, supra, namely, that the “generating source” of the right to receive the stock issued by the new corporation was the transfer to it of the assets of the non-surviving corporation. In view of these circumstances and the provisions of the Ohio statutes, which are quoted above, we would have difficulty in accepting the decision of the Common Pleas Court as the basis for deciding the wholly different issue before us. However, any doubts raised by Robison have been removed because defendant has called our attention to a decision of the Ohio Supreme Court, which was handed down about one year later than Robison and holds directly to the contrary. It is the case of Cleveland City Ry. Co. v. First Nat’l Bank of New York, 68 Ohio St. 582, 67 N.E. 1075 (1903). In that case, which involved the same agreement of consolidation as that before the Common Pleas Court in Robison, the plaintiff bank claimed to be the assignee of shares of the non-surviving corporation and sought to recover damages from the new corporation because of the wrongful conversion of the newly issued stock by Shipherd. In an unreported decision, the Cuyahoga County Common Pleas Court followed the decision in Robison and found the Cleveland City Railway Company liable. The decision was affirmed by the Ohio Court of Appeals, 22 Ohio Cir. Ct. Reports 165 (8th Cir. 1901). The Ohio Supreme Court reversed both decisions and held that the applicable Ohio statute

not only expressly empowered [the directors of the constituent corporation] to agree upon the manner of converting the capital stock of each of the constituent companies into that of the new company, but [also] they are invested with the widest discretion as to the details of the consolidation, which may not be specifically included in the words of the statute.

The Court then went on to hold that the agreement was valid; that it conformed to the applicable state statutes; that it was assented to by the shareholders, and that it was properly performed.

As a result of this holding by the Supreme Court of Ohio, we cannot accept the decision of the Common Pleas Court in Robison as authority for deciding the issue now before us. Unlike the Texas statutes before the Fifth Circuit in Union Bankers, supra, it is apparent that there is nothing in either the statutory or the decisional law of Ohio, as expounded by the highest court of that state, which denies the non-surviving corporation in a merger the right to receive or control the disposition of the shares issued in exchange for its assets. On the contrary, we find that the Ohio law supports the opposite conclusion and recognizes the existence of the implied transfer to the shareholders of a non-surviving corporation of the right to receive such stock.

For the reasons discussed above, we hold that the 1965 merger of Pure Oil Company into Union Oil Company of California gave rise to a taxable transfer by Pure to its own stockholders of the right to receive the newly issued shares of Union. The transfer documentary stamp tax imposed by Section 4321 of the Internal Revenue Code of 1954 was properly assessed.

Upon the foregoing opinion, which contains the essential findings of fact as stipulated by the parties, the court concludes as a matter of law that the plaintiff is not entitled to recover, and the petition is dismissed.

NICHOLS, Judge

(concurring):

I join in the decision of the court but I question its approach to the problem before it. When the United States Supreme Court elects to take a ease on certiorari, receives briefs, hears oral argument, and puts out a decision including a signed opinion, it seems to me it is entitled to expect that it has created a precedent that lower Federal courts will follow over a wide area. Diligence by them in reducing the authority of such a holding to its own peculiar facts, is hardly to be reconciled with the place of the Supreme Court in our judicial system.

Here we have a decision, Raybestos-Manhattan, Inc. v. United States, 296 U.S. 60, 56 S.Ct. 63, 80 L.Ed. 44 (1935). The Court does not quote the laws of New Jersey, as it does the applicable Revenue Act. Neither does the more extended opinion below, 10 F.Supp. 130, 80 Ct.Cl. 809 (1935). In holding that the stamp tax liability attached to the “vicarious” transfer of the new corporation’s stock from the old corporations to the stockholders, I am sure it expected its decision to apply as a precedent to reorganizations and mergers throughout the United States. Presumably it subscribed to the idea that Federal taxes should be uniform everywhere. Had it anticipated and meant to sanction a hair splitting analysis of differences between the laws of New Jersey, and of other states, with respect to the procedural details of reorganizations and mergers, with results determinative of tax liability, it might very well have thrown in the sponge and held the other way. The decision rests on a fiction, in that new stock which by agreement was to go direct to the stockholders, is imagined or presumed to go to them via the old corporations. Whether the fiction is not permitted to be a fact under local law, or is just not the agreement of the parties, appears to me to be neither here nor there.

Union Bankers Ins. Co. v. United States, 317 F.2d 598 (5th Cir., 1963), is the case that should be reduced as a precedent to its own peculiar facts. The incapacity of the old corporation to receive the stock of the continuing corporation in that case was due to a prohibition in Texas law, on substantive grounds. In fn. 16, Chief Judge Brown limits his holding to such a case. If we exclude it from application here, we do only what he has first done for us. The alleged strictures of Ohio law were procedural only.

My concurrence in the decision, therefor, does not depend on who is right about the Ohio cases. I would apply Raybestos uniformly in all 50 states, in the absence of special factors which we could pass upon should they arise.

SKELTON, Judge

(dissenting):

I do not agree with the decision of the court. The facts are stipulated and involve the merger of Union Oil Company of California (Union) and Pure Oil Company, a corporation, of Ohio ("Pure). Pure was merged or absorbed into Union. Thus, Union became the “acquiring” corporation and Pure became the “absorbed” corporation. The parties agree that the merger was governed by the laws of Ohio.

After the merger, Union issued stock in the new corporation on a pro rata basis previously agreed upon to its old stockholders and to the old stockholders of Pure. Union paid documentary stamp taxes in the sum of $584,780.80 on the issuance of such stock. The Internal Revenue Service (IRS) required Union to pay an additional $233,912.34 as a documentary stamp tax for an alleged and theoretical transfer by Pure of the new shares of the new Union corporation, or the right to receive such shares, to the former owners of Pure common stock. Union contends that the collection of said $233,912.34 by the IRS was illegal and sues for its recovery. The Government says the tax is legal under 26 U.S.C. § 4321 and Treasury Regulation § 47.4321-2. I do not agree.

The court relies heavily on the case of Raybestos-Manhattan, Inc. v. United States, 296 U.S. 60, 56 S.Ct. 63, 80 L.Ed. 44 (1935), which held that where the acquiring corporation issued new shares directly to the former stockholders of the absorbed corporation, there was in substance a transfer for tax purposes of the new shares by the absorbed corporation to its old stockholders because it had a right to receive the new shares which it passed on to its old stockholders. This resulted in a “two step” or a “two-transfer” transaction. The Raybestos-Manhattan decision is correct in a state (New Jersey) where the law of the state allows the absorbed corporation to own or possess the stock of the acquiring corporation. However, the converse is true where the law of the state governing the merger does not permit the absorbed corporation to own or possess stock of the acquiring corporation. In the latter case, no transfer of the stock of the acquiring corporation can be made to the absorbed corporation nor by the absorbed corporation to its former stockholders, and consequently, no stamp tax is due. That is the situation in this case.

The parties agree, and the court holds, that the stamp tax is imposed on the basis of state created relationships. See Fidelity-Baltimore Nat’l Bank v. United States, 328 F.2d 953, 957 (4th Cir. 1964), cert, denied, 379 U.S. 823, 85 S.Ct. 48, 13 L.Ed.2d 34. In other words, if the state law prohibits or does not authorize or permit an absorbed corporation to hold or possess stock of an acquiring corporation with which it has been merged, it cannot transfer any of such stock to its former stockholders and, consequently, no stamp tax is due. This was the express holding of the court in Union Bankers Ins. Co. v. United States, 317 F.2d 598 (5th Cir. 1963), which involved the merger of two insurance companies under Texas law, which prohibited an insurance company from owning stock in another insurance company. There, the acquiring corporation issued its new stock directly to the former stockholders of the absorbed corporation. Nevertheless, the IRS assessed a transfer stamp tax on the issuance of the stock to the former stockholders of the absorbed corporation, as it has done in this case, on the theory expressed in Raybestos-Manhattan, supra. The Fifth Circuit Court held the assessment to be illegal, saying:

* * * [I]t is within the competence of the local law alone to determine the circumstances under which assets of incorporated entities may be transferred and how and in what manner the consideration therefor is to, or may, be paid. In every ease so far * * * the Court in finding a taxable transfer was justified in holding on the basis of the pertinent local law that the Absorbed Company had the right to receive and hence the right to direct the disposition of stock issued in payment for assets. [Footnotes omitted.] [Id. at 601-602.]
* -x- # * * *
* -x- -x- [T]here is a transfer subject to the stamp tax only if, under the law of Texas, in the execution of that corporate devised plan for exchange of assets for stock, the Absorbed Company had the right to acquire such shares of stock and, having such right, it chose to direct their disposition of stock to others.
Since under Texas law the Absorbed Company had no such right * * * the transaction may not * * * be viewed as though the stock was first received and then redistributed. [Footnote omitted.] [Id. at 603-604.]

The laws of Ohio which govern the present case are not as explicit as were the laws of Texas in the Union Bankers Ins. Co. case, because of the absence of a similar statute, but the effect is the same. Pertinent sections of the Ohio Revised Code provide as follows:

§ 1701.78 Merger and consolidation procedure.
* * * * * -X-
(B) To effect such merger or consolidation, the directors of each constituent corporation shall approve an agreement * * *, which agreement shall set forth:
-X- -X- * *X* -X*
(10) * * * [T]he manner and basis of making distribution to shareholders of the constituent corporations, which distribution to shareholders of any of the constituent corporations, in extinguishment of or in substitution for shares of such constituent corporations, may be by way of shares * * * of the surviving or new corporation * * *.
•X- * -X- * -X- *
§ 1701.81 Effect of merger.
(A) When such merger or consolidation becomes effective:
(1) The separate existence of all the constituent corporations, except the surviving or new corporation, shall cease * * *.

In accordance with these statutes, the shares of the acquiring corporation must be issued directly to the former stockholders of the absorbed corporation, because they are the only ones entitled to receive the stock. Furthermore, the absorbed corporation no longer exists after the merger and cannot receive the stock nor, transfer it to its former stockholders. The law of Ohio was interpreted in this fashion in the case of Robison v. Cleveland City Ry. Co., 13 Ohio Dec. (10 Nisi Prius Rep.) 1 (Cuyahoga Common Pleas 1902). That case involved the merger of two Ohio corporations. The court held that upon the merger, the absorbed corporation ceased to exist and stock of the new acquiring corporation could not be delivered to the absorbed defunct corporation but had to be delivered directly to its former stockholders. There, the court said:

Next, as to paragraph 7 of the consolidated agreement, it contemplates the delivery of the stock of the consolidated company to the constituent companies as such. This is impracticable because the constituent companies after the consolidation went into effect, did not remain in existence for any such purpose, and the companies, as such, could not surrender the old stock, certainly not without the consent of the holders nor were they authorized to receive the new stock. And I am of the opinion that the statute contemplates the surrender of the old stock by individual holders and the issue of new stock to them, and that the new stock could be delivered only to individual holders or to their authorized agents. * * * [Id. at 17.]

The same interpretation of the Ohio law is found in 13 Ohio Jur.2d, Corporations § 810 (1955), in pertinent part as follows:

* * * The shares of the new company must be delivered or distributed directly to the shareholders of the constituent corporations or their authorized agents. A delivery of the shares to the constituent corporations cannot be made * * *. [Emphasis-supplied.]

See also, Compton v. Wabash, St. Louis & Pacific Ry., 45 Ohio St. 592, 16 N.E. 110 (Ohio 1888).

Under these authorities, it appears clear that the absorbed corporation had no right to receive the shares of the acquiring corporation, and, in fact, could not do so since it no longer existed, and, consequently, could not transfer any such shares, nor any right to them to its former stockholders. Therefore, it made no transfer and no tax was due. This principle is not only in accordance with Ohio law, but also complies with the merger agreement of Union and Pure which is a part of the stipulation in this case. That agreement provides in pertinent part as follows:

ARTICLE II.

■X- -X- * -X -X- -X-

2.4 As promptly as practicable after the effective date of the merger, each holder of an outstanding certificate or certificates theretofore representing shares of common capital stock of Pure may surrender the same to a transfer agent or agents designated by the Surviving Corporation, and such holder shall be entitled upon such surrender to receive in exchange therefor a certificate or certificates representing the number of Preferred Shares of the Surviving Corporation into which the shares of common stock of Pure theretofore represented by the certificate or certificates so surrendered shall have been converted as aforesaid. Until so surrendered, each outstanding certificate which, prior to the effective date of the merger, represented common stock of Pure, shall be deemed for all corporate purposes to evidence ownership of the number of Preferred Shares of the Surviving Corporation into which the shares of common stock of Pure (which, prior to such effective date, were represented thereby) have been so converted.

2.5 Upon the effective date of the merger, it shall be deemed that the stock transfer books of Pure are closed and no transfer of shares of Pure shall thereafter be made or consummated. * * *

ARTICLE III.

3.1 Upon the effective date of the merger provided for in this Agreement, the separate existence of Pure, except to the extent, if any, continued by statute, shall cease, * * *.

•X * * * -X *

3.3 The “effective date of the merger” shall be (and such phrase as used herein shall mean) the time at which this Agreement is filed by Union in the office of the Secretary of State of the State of California.

It is clear from this agreement that the merger was to be effective when the agreement was filed in the office of the Secretary of State of the State of California, and on that date Pure would cease to exist and its stock transfer books were closed and “no transfer of shares of Pure shall thereafter be made or consummated.” After the merger, the former stockholders of Pure could surrender their stock to a transfer agent of Union (the surviving or acquiring corporation) and receive shares directly from the acquiring corporation. Until so surrendered, the old shares of Pure were evidence of ownership of the number of shares in Union into which the shares of Pure had been converted. Thus, this agreement shows that after the merger Pure was a dead corporation and did not have and could not have anything to do with the issuance or transfer of stock in the acquiring corporation to Pure’s former stockholders. This agreement fully complied with Ohio law, and, together with such law, should be dispositive of this case.

In the present case, the court points out that in the Robison case, supra, the court held that under the Ohio statute “the new stock could be delivered only to individual holders or their authorized agents.” (Emphasis supplied.) The opinion of our court then states that the Supreme Court of Ohio holds directly to the contrary in the case of Cleveland City Ry. Co. v. First Nat’l Bank of New York, 68 Ohio St. 582, 67 N.E. 1075 (1908). The court seems to rely on that case in deciding in favor of the Government in this case. The reliance by the court on the Cleveland City Ry. case is misplaced. I do not read that case the same way the court does. In the first place, the case is clearly distinguishable from the Robison case on both the law and the facts. In the second place, the court in the Cleveland City Ry. case never considered nor addressed itself to the problem decided in Robison and which is involved here. A careful reading of the Cleveland City Ry. case shows that it does not overrule nor contradict the decision in Robison on the problem we have before us. (Actually, it does not even mention the Robison case.) The two cases are compatible in this regard. In fact, in my opinion, the Cleveland City Ry. case actually supports the position of the plaintiff in the instant case. This is shown by the following facts in that case, together with the decision of the court. In the Cleveland City Ry. case there was a merger of two corporations under Ohio law. Prior to the merger, the stockholders of the absorbed corporation signed a written instrument naming and appointing one Robison and one Shipherd as their agents and proxies to deliver their stock in the absorbed corporation to the acquiring corporation and to receive for them and in their behalf the new stock in the acquiring corporation. The new stock was delivered to said agents by the acquiring corporation for the stockholders of the absorbed corporation after the merger. The stock was issued to them as trustees.

It should be kept in mind that the Robison case and the Cleveland City Ry. case both arose out of the merger of the same two corporations, but the issues in the two cases are different.

Also, it should be noted that Robison and Shipherd were president, vice president, and treasurer, respectively, of the absorbed corporation, and were made directors, vice-president, treasurer, and transfer agent of the acquiring corporation after the merger. However, it should be emphasized that when the acquiring corporation issued the stock to Robison and Shipherd it was issued to them as agents, proxies and trustees of the former stockholders of the absorbed corporation and not as officers of the absorbed corporation. This is shown by the decision of the court in Robison when it said:

* * * [T]he delivery of stock of the new company could not be made to the president and treasurer [Robison and Shipherd] of the cable company [the absorbed corporation] as such, because when the consolidated company [the acquiring corporation] went into effect, they ceased to have any official relations to the old company except so far as necessary for the protection of creditors. [Emphasis supplied.] [Id. at 18.]

The delivery of the stock to Robison and Shipherd, as agents and trustees of Pure’s former stockholders was in accord with the decision in Robison when the court in that case held that “the new stock could be delivered only to individual stockholders or their authorized agents.” After the new stock was delivered to Robison and Shipherd as trustees, agents, and proxies for the stockholders of the absorbed corporation by the acquiring corporation, the said Ship-herd converted to his own use a great number of the new shares delivered to him for the shareholders of the absorbed corporation. Prior to the merger a stockholder, who had signed the instrument authorizing Robison and Shipherd to receive the new stock for the stockholders, had pledged his stock in the absorbed corporation to the First National Bank of New York as security for a loan. After the merger and the delivery of the new stock to Robison and Ship-herd as trustees and agents for the stockholders of the absorbed corporation, and after the conversion of the stock by Shipherd, said stockholder assigned his claim of loss due to Ship-herd’s conversion of the stock, to said bank. The bank then sued the new acquiring corporation for the stockholder’s loss. The court held that the acquiring corporation was not liable, saying that when it delivered the new stock to Robison and Shipherd as trustees and agents for the old stockholders of the absorbed corporation it had complied with the authorization signed by such stockholders and had done all it was required to do. Thus, it is clear that no new stock was delivered to the absorbed corporation and none of such stock was distributed by it to its former stockholders. The court did not even mention or discuss whether this could or could not be done after the merger. The delivery of the stock of the acquiring corporation to the trustees and agents of the former stockholders of the absorbed corporation was the same as delivering the stock to the stockholders themselves. This was in complete accord with the requirements of the Ohio law as interpreted in Robison, supra, and other cited authorities above, to the effect that after the merger the absorbed corporation ceased to exist and could not receive nor transfer shares of the new acquiring corporation to its former stockholders and that such new shares were required to be issued by the acquiring corporation directly to the former shareholders of the absorbed corporation or their authorized agents. For all of these reasons, in my opinion, the Cleveland City Ry. case does not support the defendant in the present case, but on the other hand is authority for the plaintiff. The court errs in relying on it in deciding for the defendant.

The court cites the Raybestos ease and American Processing & Sales Co. v. Campbell, 164 F.2d 918 (7th Cir. 1947), cert. denied, 333 U.S. 844, 68 S.Ct. 661, 92 L.Ed. 1127 (1948), American Mail Line Ltd. v. United States, 101 F.Supp. 364, 121 Ct.Cl. 63 (1951); and U. S. Industrial Chemicals, Inc. v. Johnson, 181 F.2d 413 (2d Cir. 1950), in support of its decision. These cases, though valid under the laws of the states where they arose, are not apposite here because they involved the laws of states other than Ohio (New Jersey, Illinois, Nevada-Delaware, and West Virginia-Delaware) with reference to the merger of corporations. The laws of such states are different to the laws of Ohio with which we are concerned in this case. Consequently, such cases should be disregarded in deciding our case.

The parties agree, and the court concedes, that in the case before us, no stock of Union, the acquiring corporation, was actually issued to Pure, the absorbed corporation, after the merger, and that Pure never actually transferred any stock of the new acquiring corporation nor any right to receive such stock to its former stockholders after the merger. Furthermore, in my opinion, neither transfer could be made under Ohio law. Under these circumstances, no stamp tax is due and the plaintiff is entitled to judgment. But the court gets around these fatal defects in the Government’s case by applying the theory of Raybestos and the other cases it cites, saying that there was an implied issuance of the new stock by Union to the defunct and expired Pure corporation, and that, in turn, there was an implied transfer of such stock by Pure, which no longer existed, to its former stockholders. I cannot agree to the imposition of a tax on a taxpayer, especially of the magnitude of that involved here, based on the hypothetical fiction and supposition that two transfers prohibited by Ohio law had taken place. It amounts to allowing the IRS to assess and collect a tax based on speculation, supposition, and implication on top of implication that the transfers had been made contrary to Ohio law. Everyone will agree that every responsible citizen should pay taxes imposed upon him by the plain and unambiguous provisions of laws enacted by Congress. On the other hand, a taxpayer should not be required to pay a Federal stamp tax imposed upon him on the theory that by inference, speculation, or implication on top of implication two stock transfers had taken place contrary to governing state law. In my opinion, that is what has happened here, where two transfers are held to have occurred by implication when the evidence shows that neither of the transfers, actually occurred, nor could occur. The tax imposed on the taxpayer in this ease is wrongful, illegal, and confiscatory, for all of the reasons set forth above.

The decision of the court that the tax was validly imposed would be correct on the basis of Raybestos and other cases cited by the court if Ohio laws authorized the alleged transfers of the stock from Union to Pure and from Pure to its former stockholders after the merger. I do not believe such authorization can be found in Ohio laws. No Ohio case to that effect has been cited. On the other hand, Ohio laws and the cited Ohio cases make it impossible for such transfers to be legally accomplished. Consequently, no transfer tax is due.

I would enter judgment for the plaintiff for $233,912.32, plus interest.

      . At the time of the merger, § 4321 (since repealed, effective January 1, 1966, by the Act of June 21, 1965, Pub.L. No. 89-44, § 401(a), 79 Stat. 148) provided, in pertinent part, as follows:
      “Sec. 4321. Imposition of tax

      There is hereby imposed on each sale or transfer of shares or certificates of stock, or of rights to subscribe for or to receive such shares or certificates, issued by a corporation, a tax * *

      . The merger and consolidation provisions of the Ohio statutes are not unique. Substantially similar provisions have been enacted in other jurisdictions. E. g. Burns’ Ind.Stat.Ann. §§ 25-230 through 25-236, IC 1971, 23-1-5-1 to 23-1-5-7; Smith-Hurd Ill.Ann.Stat., c. 32, §§ 157.61 through 157.70; Ky.Rev.Stat. §§ 271.465 through 271.490; and Corporations Code, West’s Ann.Calif.Codes, §§ 4100 through 4124.


source: Caselaw Access Project

author:
DURFEE, Senior Judge:
      BENNETT, Judge,

license: Public Domain

text:
    The UNITED STATES of America v. The FORT SILL APACHE TRIBE OF OKLAHOMA and the Chiricahua Apache Tribe et al.
    Appeal No. 3-72.
    United States Court of Claims.
    June 20, 1973.
    Bennett, J., concurred in part and dissented in part and filed opinion in which Skelton and Nichols, JJ., concurred.

      I. S. Weissbrodt, Washington, D. C., attorney of record, for appellees. Weissbrodt & Weissbrodt, Abe W. Weissbrodt, Richmond F. Allan, Ruth W. Duhl, Washington, D. C., of counsel.
    A. Donald Mileur, Washington, D. C., with whom was Asst. Atty. Gen. Kent Frizzell, for appellant. Dean K. Duns-more, Christopher Smith, Washington, D. C., of counsel.
    Before COWEN, Chief Judge, DURFEE, Senior Judge, and DAVIS, SKELTON, NICHOLS, KUNZIG and BENNETT, Judges.
   DURFEE, Senior Judge:

The United States appeals (a) from the final judgment and order of the Indian Claims Commission dated August 25, 1971, in Dockets 30, 30-A, 48 and 48-A, awarding compensation under Section 2, Clause 4, of the Indian Claims Commission Act (60 Stat. 1049) for the forcible taking by the United States of certain lands in southwestern New Mexico and southeastern Arizona to which appellees held aboriginal title and (b) from the order of the Commission dated June 9, 1971, denying the Government’s motion to consolidate the four dockets with Docket 182.

This appeal presents three issues: (1) Whether the Commission abused its discretion in denying the Government’s motion to consolidate Dockets 30, 30-A, 48, 48-A and 182; (2) Whether substantial evidence supports the Commission’s holding that the date of extinguishment of appellees’ aboriginal title was September 4, 1886; and (3) Whether the Commission erred in valuing appellees’ mineral interests taken on the basis of capitalized anticipated net profits from mining enterprises rather than on the basis of capitalized hypothetical royalty payments.

We affirm.

FIRST ISSUE

The first petition, Docket No. 30, in these cases was filed by the Fort Sill Apache Tribe of Oklahoma claiming to be composed of descendants of the “Warm Springs and Chirieahua Bands of Apache Indians.” The second petition, Docket No. 48, was filed by individuals on the Mescalero Reservation in New Mexico, alleging to represent the “Chiricahua and Warm Springs Tribes of Apache Indians.”

By order of July 1962, the Commission consolidated Dockets 30 and 48 for trial because it appeared that the subject matter and real parties in interest were the same. Trial in these consolidated cases was held in December 1962 on the issues of the extent and boundaries of the Indian title and the date of the taking.

In another case not here involved the Navajo Tribe had made a claim of aboriginal title to an area which in part overlapped the northern portion of the area claimed in Dockets 30 and 48. After requested findings and briefs on the issues of Indian title and the taking date had been filed in consolidated Dockets 30 and 48, the Commission, on motion of appellees and without objection by the United States, entered an order in January 1968, severing from the consolidated cases the portion of the area which was claimed solely by appellees. This severed claim was assigned consolidated Docket Nos. 30-A and 48-A. This left in Docket Nos. 30 and 48 the claim to the tract to which the Navajo Tribe was asserting a conflicting claim.

In June 1968, the Commission issued its findings, opinion and interlocutory order in Docket Nos. 30-A and 48-A. The Commission determined the boundaries of the land there involved to which appellees held aboriginal title and held that the land had been taken by the United States on September 4, 1886, without payment of compensation. 19 Ind.Cl.Comm. 212-268. In April 1970, the Commission issued its findings, opinion and interlocutory order in Dockets 30 and 48, segregating the land to which appellees held aboriginal title from the Navajo lands and likewise determining the date of taking to be September 4, 1886. 22 Ind.Cl.Comm. 527-545.

After Docket Nos. 30-A and 48-A had proceeded to trial in January 1970 on the valuation of the land as of the 1886 taking date and the matter was pending determination by the Commission, the Government on June 4, 1970 filed a motion for rehearing the determination made in June 1968 that September 4, 1886 was the date of taking. In August 1970, the Commission issued an “Order Denying Defendant’s ‘Motion for Rehearing and Reconsideration of Date of Taking’ ” on three grounds, ruling that the motion was not timely filed, that defendant had failed to state any valid grounds for rehearing under the Commission’s Rules of Procedure or applicable decisions, and that the Commission’s findings with respect to the 1886 date of taking were supported by substantial evidence. 23 Ind.Cl.Comm. 417-418.

After both parties had filed their requested findings and briefs on the valuation issues in Dockets 30-A and 48-A and the matter was still awaiting the Commission’s decision, on March 10, 1971 the Government filed a “ * * * Motion to Consolidate * * *” the two groups of dockets (30-A, 48-A and 30, 48) with a fifth case, Docket No. 182. The Fort Sill Apaches and individual associated Indians had filed the petition in Docket No. 182. Alleging the same aboriginal title boundaries as in Docket No. 30, those petitioners sought inter alia to hold the United States liable for alleged “trespass damages” prior to the date of extinguishment of aboriginal title.

In its “ * * * Motion To Consolidate * * * ” the Government reasoned that all five dockets constituted essentially one claim, arguing that the Indians involved were entitled to be compensated only once for the extinguishment of their aboriginal title. In its motion to consolidate the Government concluded: “Accordingly, the cases alleging the extinguishment of aboriginal title and Docket No. 182 should be consolidated in order that, if necessary, the date of extinguishment should be moved back. * * * ”

In its order denying the Government’s “* * * Motion to Consolidate * * * ”, 25 Ind.Cl.Comm. 382-83 (1971), the Commission viewed the motion in part as a second motion for hearing to “determine a new date of taking applicable to all five cases.” As grounds for rejecting the “ * * * Motion to Consolidate * * * ” the Commission separately cited its “Order Denying Defendant’s ‘Motion for Rehearing and Reconsideration of Date of Taking’ ” in Dockets 30-A and 48-A and the Commission’s decision in the case of Washoe Tribe v. United States, 21 Ind. Cl.Comm. 447 (1969). In Washoe the Commission held the Government liable on two claims, essentially recognizing as separate one claim under' Section 2, Clause 4, of the Indian Claims Commission Act (60 Stat. 1049) for the taking of aboriginal title lands and another claim under Section 2, Clause 5, of the Act for “trespass damages” prior to the time of extinguishment of title.

The Commission’s Rules of Procedure provided that leave of the Commission was required before the same party could file a second motion for rehearing. The United States failed to comply with this rule. The Commission did not abuse its discretion in treating the “ * * * Motion to Consolidate * * * ” in part as a motion for rehearing. The United States sought “further litigation” in its motion to consolidate on the identical issue, i.e., the date of taking, as it sought in its first motion for rehearing.

Although the “ * * * Motion to Consolidate * * * ” cannot be said to have been filed too late since neither the June 28, 1968 opinion and order (in Dockets 30-A and 48-A) nor the April 1, 1970 opinion and order (in Dockets 30 and 48) were a “final determination” commencing the period for filing, we do not read the Commission’s order denying the “ * * * Motion to Consolidate * * * ” as being grounded on untimeliness.

Moreover, the Commission did not abuse its discretion in denying the “ * * * Motion to Consolidate * * * ” based upon its Washoe decision. That decision recognized the distinctness of a claim for the taking of Indian lands without compensation and a claim for damages to Indian lands prior to the taking. This distinction went to the heart of the Government’s claim that the five dockets involved only one claim.

In affirming the order of the Commission denying the “ * * * Motion to Consolidate * * * ”, we do not pass upon the merits of the Washoe decision and merely hold that the Commission did not abuse its discretion in relying upon one of its own decisions on point. The correctness of the Washoe decision is not an issue here.

SECOND ISSUE

The Commission, referring to appellees collectively as the “Chiricahua Apaches”, found in consolidated Dockets 80-A and 48-A that: “September A, 1886, the date of the final surrender of the Chiricahua Apaches under Gerónimo and the time of the removal of the members of the tribe from their homelands, marks the date on which the United States took from the Chiricahua Apache tribe its Indian title to its lands in New Mexico and Arizona. * * * ” 19 Ind. Cl.Comm. 212, 245 (1968). In Dockets 30 and 48 the Commission concluded: “The Fort Sill record [Dockets 30-A and 48-A] is the record in this proceeding, with the addition of that evidence offered by the Navajos in Docket No. 229. In like manner, the date of taking in the Fort Sill case, September 4, 1886, applies herein with respect to the extinguishment by the United States of whatever interest the Apaches may have enjoyed in the overlap area.” 22 Ind.Cl.Comm. 527, 529 (1970).

Were we to rule upon the merits of appellant’s claim that the date of taking is not supported by substantial evidence,we might agree on the present record. The record could be said to establish that Indian title was extinguished before September 4, 1886, when the Act of August 15, 1876, 19 Stat. 176, 195, was passed. Congress may extinguish Indian title by a “clear and plain indication” in the public records that the sovereign “intended to extinguish all of the [claimants’] rights” in their property. United States v. Santa Fe Pac. R. R. Co., 314 U.S. 339, 353, 62 S.Ct. 248, 255, 86 L. Ed. 260 (1941); Lipan Apache Tribe v. United States, 180 Ct.Cl. 487, 492 (1967). See Tlingit & Haida Indians v. United States, 177 F.Supp. 452, 147 Ct.Cl. 315 (1959); Three Affiliated Tribes of the Fort Berthold Reservation v. United States, 390 F.2d 686, 182 Ct.Cl. 543 (1968); Klamath & Modoc Tribes v. United States, 436 F.2d 1008, 193 Ct.Cl. 670 (1971). The Act, applying to the “Apaches of Arizona and New Mexico”, commanded that the “Commissioner of Indian Affairs shall direct that said Indians shall not be allowed to leave their proper reservations”, the effect of which was intended to confine the ancestors of appellees to a reservation wholly outside the aboriginal title area.

However, we hold that the Government’s conduct of the litigation in these dockets amounts to & waiver of the right to challenge the September 4, 1886 taking date.

In December 1962, at the outset of the only trial held in these four dockets before the Commission on the taking issue, petitioners’ counsel clearly stated one of the “main issues” to be “the date or dates of the taking of the Indian title lands by the defendant.” An eight-day trial followed.

In January 1964, the petitioners (appellees) submitted their proposed findings of fact and brief on the issues of title and taking. In Proposed Finding Nos. 88, 89 and 90 petitioners marshalled the facts in their favor to suggest September 4, 1886 as the date of taking and specifically proposed September 4, 1886 as the date of taking in Proposed Finding No. 90. Petitioners argued the facts in their brief and provided supporting legal authority on the taking issue.

In its Proposed Findings of Fact, Objections to Petitioners’ Proposed Findings of Fact, and Brief on the issues of title and taking filed in May-1964, defendant-appellant proposed no finding of fact on the date of taking despite a then existing Commission rule requiring the same. Other than a bald objection to petitioners’ Proposed Finding No. 90, defendant-appellant chose not to argue for an alternative taking date and ignored the issue in its brief. Both at the trial and in its proposed findings and brief, the Government relied instead upon defenses that the petitioners never had aboriginal title and that the Apaches in the claimed area did not constitute a single tribe or band with a cognizable claim. The posture of the case at that time with respect to the taking date issue is best reflected in a footnote to Petitioners’ Reply to Defendant’s Proposed Findings of Fact, Objections and Brief: “Although defendant objects to petitioners’ proposed taking date of September 4, 1886 (Pet.Fdg. 90, pp. 85-88), it presents no evidence to contradict the facts upon which this taking date is predicated (Def.Obj. 90, pp. 75-76). Defendant also offers no answer to petitioners’ discussion of the legal authorities which support petitioners’ 1886 taking date in the circumstances of this case (Pet.Br., pp. 94-98). Further discussion of the taking date in this reply is therefore considered unnecessary.”

After the Commission issued its findings, opinion and interlocutory order in consolidated Dockets 30-A and 48-A in June 1968 on the issues of aboriginal title and date of taking defendant-appellant did not challenge the date of taking finding. Defendant-appellant continued to remain silent between June 1968 and April 1970 when the Commission issued its findings, opinion and interlocutory order in Dockets 30 and 48, again finding a taking date of September 4, 1886. And at the intervening and costly valuation trial in Dockets 30-A and 48-A in January 1970, not once did the Government express objection to the taking date. It was not until defendant-appellant’s rejected “ * * * Motion to Consolidate * * * ” filed March 10, 1971, that the Government for the first time proposed a specific alternative date of extinguishment of title.

In short, in the proceedings below at no time did defendant-appellant properly propose its alternative theories of the date of taking when the issue was pending before the Commission and seek to convince the Commission that the weight of the evidence in the record supported one or another of such theories. Likewise, at no time did defendant-appellant actively and properly oppose the taking date proposed by petitioners and found by the Commission. As we said in Suquamish Tribe v. United States, 197 Ct. Cl. 775, 777 (1972):

“[T]hese matters should have been presented to the fact-finding tribunal; no adequate excuse is offered for the failure to do so. * * * In § 20(b) of the Act, 25 U.S.C. § 70s, Congress made it clear that, in cases coming from the Commission, we were to be an appellate or reviewing court, not a court of first instance. From the beginning, we have followed that concept, refusing to treat appeals as trials de novo or to consider the proceedings before the Commission as mere preliminaries to a ‘real trial’ here. (Citations omitted.)”

Reviewing courts have developed various rules governing appealable issues under the rubric of waiver which have been described as “positive rules of procedure based on manifest justice and, to a greater or less degree, on considerations of the orderliness, regularity, and expedition of litigation.” Reviewing courts will normally only consider questions raised and reserved in the lower court and will not consider grounds of defense or opposition not asserted and relied on below. The right to raise a particular matter on appeal may be waived by conduct indicating an intention not to insist upon the matter. While there are no decisions of this court dealing with the precise situation presented on this appeal, the cumulative circumstances of this case, wherein appellant repeatedly refused to raise and press the issue of the date of taking compels us to decline review.

In analyzing the scope of review of this court, Judge Littleton noted in Osage Nation v. United States, 97 F. Supp. 381, 392, 119 Ct.Cl. 592, 613, cert. denied, 342’U.S. 896, 72 S.Ct. 230, 96 L.Ed. 672 (1951): “It thus appears that it was at the instance of the Department of Justice that this court was ultimately directed to review judicially the findings of fact of the Commission, and the form of review applied to the Commission’s findings were those embodied in the Administrative Procedure Act.” It goes without saying that the Department of Justice is one of the advocates in every Indian claims case before the Commission and this court. It was fully apprised of the main issues in this case.

Indeed, the issues of liability and date of taking, if any, are among the most basic issues in every land claims case under Section 2, Clause 4, of the Indian Claims Commission Act. Under the circumstances of this case we acknowledge the salutary rule that: “[I]ssues not effectively presented to an administrative agency, where ample opportunity to do so has been afforded, cannot be raised on appeal of that agency’s decision.” Hennesey v. Securities and Exchange Commission, 285 F.2d 511, 514 (3rd Cir. 1961).

It is just and appropriate to apply this rule to this case because appellees might well have introduced other or additional evidence if they had been alerted that the Government was challenging the 1886 date. Likewise, the Commission might have decided differently if it had been made aware that the 1886 date was in contest. As it was, the entire valuation trial centered on the 1886 date which the Government first disputed after the completion of that trial.

THIRD ISSUE

Appellant complains that the Commission erred as a matter of law in selecting (for some 60,000 acres of mining properties taken) a valuation method based on the capitalized anticipated net profits from mining enterprises.

This valuation method was expressly sanctioned in Tlingit & Haida Indians v. United States, 182 Ct.Cl. 130, 148, 389 F.2d 778, 790 (1968). Although this method is not the only possible way to value mineral interests, it certainly is a permissible method. The Commission did not err as a matter of law in selecting this method.

Affirmed.

BENNETT, Judge,

(concurring in part and dissenting in part):

I concur with that portion of the majority opinion which holds that the Indian Claims Commission did not abuse its discretion in denying the defendant-appellant’s motion to consolidate all five dockets discussed in the opinion. I agree, also, that in so holding we do not pass on the correctness of the principles enunciated by the Commission in Washoe Tribe v. United States, 21 Ind.Cl. Comm. 447 (1969), a case which was not appealed to this court. The troublesome issue of whether Indians are entitled to trespass damages prior to the date of extinguishment of aboriginal title is not in proper posture for our consideration at this time. We will doubtless have to face this later because these particular Indians claim over $20,000,000 additional for such trespass. I respectfully dissent from the court’s resolution of the other two issues in the instant case.

The majority has agreed with the Commission that September 4, 1886, the date of the final surrender of the Chiricahua Apaches, who at the time were under leadership of Gerónimo in Mexico, marks the date of taking of the Chiricahua lands in New Mexico and Arizona. The majority, however, states:

Were we to rule upon the merits of appellant’s claim that the date of taking is not supported by substantial evidence, we might agree on the present record. The record could be said to establish that Indian title was extinguished before September 4, 1886, when the Act of August 15, 1876, 19 Stat. 176, 195, was passed. Congress may extinguish Indian title by a “clear and plain indication” in the public records that the sovereign “intended to extinguish all of the [claimants’] rights” in their property. [Citations omitted.] The Act, applying to the “Apaches of Arizona and New Mexico”, commanded that the “Commissioner of Indian Affairs shall direct that said Indians shall not be allowed to leave their proper reservations”, the effect of which was intended to confine the ancestors of appellees to a reservation wholly outside the aboriginal title area. [Footnote omitted.]

Without belaboring the point, the record is clear that the 1886 date is indeed unrealistic because when Gerónimo surrendered he wasn’t even in the United States occupying the claimed lands and, had he been, his small band of 38 Indians, 24 men and 14 women and children, who surrendered, could hardly, in all reason, be said to have been maintaining exclusive use and control over 15,-606,387 acres of claimed aboriginal lands. To the contrary, the Commission discloses that in 1886 there were 26,000 white settlers on the lands with their numerous towns and settlements, and the area was traversed by two railroads and telegraph facilities. There were 425,000 head of cattle grazing on the subject tract. Further, the petition in Docket No. 30 alleged that Congress, by the Act of July 22, 1854, 10 Stat. 308, and other acts, opened the Chiricahua lands to homesteading, settlement, and preemption. The petition in Docket No. 182 (which was not consolidated here) demanded an accounting back to February 2, 1848. Appellant here contends that the taking could have been no later than 1872 when, as a physical fact, the Chiricahua Apaches no longer had exclusive and continuous use and control of their aboriginal title area, and, as a matter of official Government policy, were confined to reservations, which policy was enforced by the United States Army and a special Indian police force, thus extinguishing Indian title under the authority of statute, executive action, and cases cited in appellant’s briefs. It would also appear that there might be several different dates of taking for so many millions of acres because the various Indian bands were directed onto reservations at different times. Further, miners, ranchers and farmers are shown to have had possession of the Indian lands at various early dates, thus negating the exclusive use, control and possession necessary to sustain aboriginal title in claimants in 1886. So, it is with very good reason that the majority says that on the present record it might have to agree that the 1886 date of taking found by the Commission is unsupported by substantial evidence. That is probably the understatement of this term of court.

Whatever the correct date of taking might be, however, the majority holds that the appellant has waived any 'challenge to September 4, 1886, as the date of taking. Appellant took a big gamble at the trial, and in submission of proposed findings, by arguing that there was no taking because there' was no title to take and that the Apaches in the claimed area did not constitute a single tribe or band with a cognizable claim. Presumably, the Government thought its legal position would be weakened by contending for an alternate date to 1886, relied upon by claimants. Hindsight suggests that this was a tactical error, for a judgment against the Government in the net sum of $16,489,096 resulted, 26 Ind.Cl.Comm. 193, 198 (1971), and is now affirmed by the majority opinion. On June 4, 1970, the Government filed a motion for a rehearing and reconsideration of the valuation date. The motion was denied on August 26, 1970. Appellant then, on March 10, 1971, after rejection of its motion to consolidate, for the first time proposed a specific alternate date of title extinguishment.

It is an unhappy situation which now brings this case to us on appeal after trial and rejection of the Government’s legal defense and where now, on a technicality of waiver, the majority says that a judgment exceeding 16 million dollars must be affirmed, although at the same time saying it is probably not based on substantial evidence. Indeed, the decision of the Commission is clearly wrong on the date of taking, and the majority does not say one word to defend this error but, on the other hand, points it up. It is wrong on the facts and it is not supported by substantial evidence, although the appellant did not contest it when this could most conveniently have been done. The decision as to the date is also wrong as a matter of law because the Act of August 15, 1876, if not earlier acts, directed that the Indians be confined to reservations outside their alleged aboriginal lands and, thus, deprived them of those lands. This issue should be remanded to the Commission for development of an appropriate record on the date or dates of taking and new findings thereon pursuant to the correct rule of law, namely, extinguishment of title by intent of Congress in establishing reservations, appropriating money, and loss by the Indians of exclusive control and possession of their aboriginal lands. It is a travesty of justice when the court admits that the date is probably wrong and that the record suggests it is not supported by substantial evidence, and 16 million dollars is riding on such error.

As authority for this harsh rule against the sovereign, which has generously consented to be sued, the majority opinion cites a Third Circuit case, Hennesey v. Securities & Exch. Comm’n, 285 F.2d 511 (3d Cir. 1961). An examination of that case shows that it deals with a different situation. There, Hennesey, a minority stockholder, was granted leave to seek review of an SEC order which had followed an extensive administrative hearing and a decision entered after a trial of 27 days over a period of 8 months. Hennesey had been granted permission to participate in those hearings but did not appear nor file exceptions or briefs before the hearing examiner, or before the Commission. The court properly held that Hennesey had not exhausted administrative remedies and cited section 43(a) of the Investment Company Act of 1940, 54 Stat. 844, 15 U.S.C. § 80a-42(a), which provided :

* * * No objection to the order of the Commission shall be considered by the court unless such objection shall have been urged before the Commission or unless there were reasonable grounds for failure to do so. * * *. [Emphasis supplied.]

The court also cited the Commission’s Rules of Practice which required that a party preserve objections to an intermediate decision by exceptions.

It is clear that Hennesey, unlike appellant here, was not standing on legal grounds but simply defaulted, without any reasonable grounds for such failure. Appellant here raised its point late, but before the case got to this court. What the majority is really saying is that it is helpless because “there are no decisions of this court dealing with the precise situation presented on this appeal.” I respectfully refer, as an example to the contrary, to the case of Volentine & Littleton v. United States, 145 F.Supp. 952, 136 Ct.Cl. 638 (1956), where the Government counsel, standing on finality of an administrative decision, declined to offer evidence at a trial before a commissioner of the court, but the court concluded that he should have done so and said:

* * * we shall not foreclose it [the Government] from now introducing evidence, if it wishes to do so. It was seeking to obtain a decision on an important legal question and we will not penalize it for having done so. The case is remanded to the commissioner of this court, who will proceed with it in the regular course. [145 F.Supp. at 954-955, 136 Ct.Cl. at 643.]

This court, in its desire to get at the true facts of a case, has not, historically, been hesitant to remand a case for the taking of further evidence before a final judgment. It should not be hesitant now to follow its own precedent, to exercise its discretion, and to send this case back on the issue of the date or dates of taking and damages therefrom. The Indians are entitled to just compensation for the taking, but the Government is entitled to the considered judgment of the court that the date or dates of taking, and the compensation therefor, are factually and legally correct and not based on some procedural technicality or excessive legalism lawyers can appreciate better than the taxpayers to whom an error is an error, and who must foot the bill. The court has not been so strict when the Indians misapprehended what they should have proved. A remand was ordered to give them opportunity to offer further proof in Confederated Salish & Kootenai Tribes v. United States, 189 Ct.Cl. 319, 417 F.2d 1340 (1969). Can we be less fair now? Are we to countenance a judicial double standard of justice? All appellant seeks is to receive fair and honorable treatment. Is it to be a one-way street in this court for Indians only ?

The majority opinion is not only based on a finding wrong in fact and law as to the date or dates of taking, but there is grave question about the method of valuation used by the Commission, and which the court affirms, as to mineral lands within the claimed area. The court doesn’t defend the method of valuation very strongly, just as it cannot defend the date of taking. It simply says that it is a “permissible method” and was sanctioned in Tlingit & Haida Indians v. United States, 389 F.2d 778, 790, 182 Ct.Cl. 130, 148 (1968). I dissent, also, from this complacent treatment of a vital issue involving a multimillion-dollar judgment.

There are some 61 mining properties at issue here, involving about 60,000 acres. The highest and best use of the acreage is agreed to be for mineral production. Expert witnesses were employed by the litigants and, to a large extent, based fair market value of the properties on a capitalization of income which could reasonably have been anticipated therefrom as of September 4, 1886. Appellee’s expert rejected the use of comparable sales and relied upon capitalization of future profits it was assumed a mining entrepreneur would make from production from an existing mine or prospective profits from a potential mineral area. This was equated by him to total fair market value of a mine as a business operation. Appellant’s expert applied his valuation largely to a royalty which a landowner would have received and used sales data where available. When neither reliable production statistics nor a sales price was at hand, appellant’s expert used a “comparability and interpretation” method where general appraisal factors used in other districts of the region were compared and interpreted. Appellant’s expert valued the 60,000 acres as worth $3,023,265 while appellee’s expert valued the mineral lands to be worth $10,763,478 in 1886. The Commission’s valuation was $6,375,000.

The Commission agreed that it is common practice for a landowner to lease mineral properties for a royalty But rejected this method of valuation in favor of one giving the Indians the entire profits from a mining enterprise although the Chirieahua Apaches of the 19th century had no more mining expertise than the ordinary farmer on whose lands minerals were found. This is a rather startling proposition, one I never encountered in my 23 years as a trial judge, hearing many valuation cases. A passive fee owner is certainly entitled to the fair market value of his property as just compensation for its taking, but under the weight of authority this does not include damages represented by loss of anticipated profits from business which might be conducted on the property by an astute businessman with experience and technical skills. Mitchell v. United States, 267 U.S. 341, 45 S.Ct. 293, 69 L. Ed. 644 (1925); Joslin Mfg. Co. v. Providence, 262 U.S. 668, 675, 43 S.Ct. 684, 67 L.Ed. 1167 (1923); Mosca v. United States, 417 F.2d 1382, 1386, 189 Ct.Cl. 283, 290 (1969), cert denied, 399 U.S. 911, 90 S.Ct. 2197, 26 L.Ed.2d 565 (1970); and R. J. Widen Co. v. United States, 357 F.2d 988, 994, 174 Ct.Cl. 1020, 1029 (1966).

Fair market value may be enhanced by known mineral deposits and, absent comparable sales, it may be necessary to use a capitalization-of-income approach, although capitalization is an inaccurate method usually resorted to only when all else fails. In any event, conjectural business profits from mining would not be capitalized in preference to the royalty value of the land, by the weight of authority. United States v. Land in Dry Bed of Rosamond Lake, Cal., 143 F.Supp. 314, 318 (S.D.Cal.1956); ' cf. United States v. Whitehurst, 337 F.2d 765, 772-773 (4th Cir. 1964); United States v. 158.76 Acres of Land, 298 F.2d 559 (2d Cir. 1962); and United States v. Silver Queen Mining Co., 285 F.2d 506 (10th Cir. 1960). It is just not reasonable, nor is it just compensation, that passive, primitive landowners, such as appellees, should reap all the hypothetical profits that could be made out of minerals which only expert mining engineers could discover, mine, mill and ship to market, using much capital, labor, and know-how. The mines which accounted for much of the production noted by the experts were large, extensively developed, highly capitalized and sophisticated enterprises. The Commission’s rule leaves no incentive to the mining company or the oil company which must put up risk capital to explore and extract, and does so not for the benefit of the landowner but for profit to itself. The Commission’s rule affirmed by the court, if widely adopted, would produce an energy crisis worse than the one we read about today, Exxon and its competitors are not the charitable enterprises the majority would make of the Government. Of course, it can safely be assumed, no one would ever apply such an unconventional rule to any but Indian cases. Yet, if we are to equate the landowner and the entrepreneur by eliminating profits to the latter in this case, it must be on clearer authority than the court’s decision in Tlingit & Haida Indians v. United States, supra, which the Commission relies upon, but misreads, and the majority opinion glosses over in three short sentences, without discussion. That case involved several issues with which we are not concerned here, and it was prosecuted under a special jurisdictional act, not the Indian Claims Commission Act on which the instant claim is predicated. However, it did involve a claim for certain gold mines and mineral lands by Indians in Alaska. As to that part, of the claim, the court said, in pertinent part:

• The value of land includes the fair market value of its mineral content. [Citation omitted.] Mineral value is established by adequate proof of a fair market value indicating that removal of the deposit would be a profitable venture and would not involve exorbitant expense.
Proof either of actual profits from an existing mine or of prospective profits from a potential mineral area establishes ..the mineral value of the area. The valuation data amassed and the testimony offered by plaintiffs do not establish the required factual proof of the mineral area’s prospective profitability which could be translated into a market value for the mineral deposit'. Those factors to which a court looks in ascertaining value, which are not proved probable, remain mere speculation and may not be the basis for valuing property. [Citations omitted.]
After consideration of the speculative nature of the mining venture in unexplored mining areas, the absence of any existing production in the area, the cost of development and the removal and transportation of the minerals, the trial commissioner found that the prospective profitability of the venture was not established. In the absence of proof that the venture would be profitable, no fair market value can be found.
* * * '■» * -X-
Plaintiffs proved the value of mined mineral in those areas for which compensation was awarded, by proof of the value of the ore as a removed and processed commodity. This established that removal was profitable and the fair market value based on the known value of the mineral deposit was determined. * * *. [389 F. 2d at 790,182 Ct.Cl. at 148-149.]

It is clear from the above that the court did not say that only profits could be used in detérmining the fair market value of mineral property. It allowed them where not speculative, but was unable to make an award based on prospective profits from undeveloped areas because they were speculative. The court did not equate the landowner and the mining entrepreneur nor eliminate, as the Commission has done, other methods of valuation. The Commission jumped to the wrong conclusion when it determined that this court has approved only capitalization of anticipated future profits as the most probative of valuation methods for mineral lands. The language in Tlingit & Haida is broad, too broad perhaps, and susceptible to misinterpretation. The Commission has misread the ease for it does not favor capitalization of future speculative profits over capitalization of a royalty to the landowner. The opinion does not discuss this more generally accepted alternative valuation method on which proof was apparently not offered, as it was here. The capitalized profits projected by the Commission are too speculative. They are based on eonclusory findings of prospective profitability on unidentified tracts. Only half a dozen mining districts are described out of a total of 61. These cursory findings do not meet the Tlingit & Haida test and should be rejected in favor of a more realistic valuation, even granting the implied thesis of that case that Indians are entitled to a more favorable valuation method than other claimants. The court cannot find the facts about this, but must observe the findings before us to have been based on a mistaken view of the law of valuation even as expanded by the single case relied on by the majority.

In his dissent in Tlingit & Haida, Judge Nichols observed, as to the gold mine claims, that it is contrary to most precedent to make a lawful taker pay for an improvement it has itself installed in good faith. He said that it is wrong to base an award on estimates of the unmined minerals in place because this is too speculative. He cited with approval the Commission’s holding in Winnebago Tribe v. United States, 16 Ind.Cl.Comm. 81 (1965), wherein the Commission refused to make a fact-finding speculating on possible profits, after the taking date, from the minerals involved. He said:

As a practical matter, the original proprietors of the soil, however well protected by law and skillfully represented, could not have expected to pocket all or most of the profits from mining on their lands. It is common knowledge that the party who has the capital, the equipment, the know-how, and the access to markets, will always take the lion’s share. The commissioner’s method of valuation here donates these things to the Indians. [389 F.2d at 793, 182 Ct.Cl. at 153-154.]

Had I been a member of the court at the time and participated in the decision in Tlingit & Haida, I would have agreed with Judge Nichols’ dissent in this case which he has elsewhere described as producing an absurdity, paying the Indians for gold mines they never had. That is what the majority does here for copper and silver mines. Yet, it is not necessary to reverse Tlingit & Haida to reach a proper result here. It is respectfully submitted that the majority should recognize this and not give Tlingit & Haida the restricted meaning attributed to it by the Commission (but not heretofore by the court), which, rejecting all prior precedent, professes an ability to anticipate profits from potential mineral areas and hands them over to claimants who did not earn them, and from whom they were not taken. If the valuation method used by the Commission is sometimes, as the majority says, “permissible,” I would say that it is impermissible in the instant case where both its application and result are distorted. Tlingit & Haida teaches that the method it allows should not be employed where the results would be speculative. That fits this case like a glove. I would reverse and remand.

SKELTON and NICHOLS, Judges, join in the foregoing concurring and dissenting opinion,

      . 26 Ind.Cl.Comm. 198-199.

      . 25 Ind.Cl.Comm. 382-383.

      . The status of Dockets 30 and 48 at this time was as follows: In order to avoid a valuation trial, on September 4, 1970, by stipulation the parties agreed that the tract of land involved in Docket Nos. 30 and 48 embraced 804,000 acres and agreed that the per acre fair market value of this tract would be the same as the per acre value of the surface tract involved in Dockets 30-A and 48-A which was pending determination by the Commission.

      . Rule 33(a) : “Whenever either party desires to question the correctness or the sufficiency of the Commission’s conclusions on its findings of fact or to amend the same, the complaining party shall file a motion which shall be known as a motion for rehearing. * * * After the Commission has announced its decision upon such motion no other motion for a rehearing shall be filed by the same party unless by leave of the Commission. Motions for a rehearing shall be filed within 30 days from the time the final determination of the Commission is filed with the Clerk.” 25 C.F.R. § 503.33(a) (1971). This rule governed during all pertinent times.

      . Hid.

      . Seminole Indians of the State of Florida v. United States, 471 F.2d 614, 200 Ct.Cl.- (1973).

      . By May of 1877 the only officially recognized home for appellees was the San Carlos Reservation. The Commission found: “[I]n 1876, the Government embarked on a program of moving all Chiricahua Apaches from their ancestral homelands and settling them on the San Carlos Reservation located outside their homelands.” 19 Ind.Cl.Comm. 212, 229.

      . Transcript Docket Nos. 30 and 48, December 11, 1962, p. 29.

      . 25 U.S.C. § 70h gives to the Commission the power to establish its own rules of procedure. Pursuant to this authority, the Commission promulgated the following rule which governed the Commission’s proceedings during all pertinent times:
      “§ 503.28 Briefs—
      (b) Defendant. Within 40 days from the filing of petitioner’s brief (or if none has been filed within the time on which it should have been filed under paragraph (a) (1) of this section) the defendant shall file with the Clerk 25 printed copies of its request for findings of fact and brief * * 25 C.F.B.. § 503.28 (1958).

      . Filed May 3, 1965 ; p. 3, n. 1.

      . Appellees note in their brief that the cost to them of the valuation trial, including fees to the appraisers, was in excess of $100,000.

      . In fact it appears that the Government thought the 1886 date was a much better date from its standpoint than a date three or four years earlier.

      . 10 Ruling Case Law, Estoppel § 26, p. 698.

      . United States v. L. A. Tucker Truck Lines, Inc., 344 U.S. 33, 36-37, 73 S.Ct. 67, 97 L.Ed. 54 (1952) ; McGrath v. Manufacturers Trust Co., 338 U.S. 241, 249-250, 70 S.Ct. 4, 94 L.Ed. 31 (1949).

      . Kay v. United States, 303 U.S. 1, 5, 58 S.Ct. 468, 82 L.Ed. 607 (1938).

      . See 5 Am.Jur.2d, Appeal & Error, § 710. See generally 5 Am.Jur.2d, Appeal & Error, §§ 235 et seq., 545 et seq., and 709 et seq.