371 Mass. 773 (1977), First Nat. Bank of Boston v. Attorney Gen.

Citation:371 Mass. 773, 359 N.E.2d 1262
Party Name:The FIRST NATIONAL BANK OF BOSTON et al. [ 1] v. ATTORNEY GENERAL et al. [ 2]
Case Date:February 01, 1977
Court:Supreme Judicial Court of Massachusetts

Page 773

371 Mass. 773 (1977)

359 N.E.2d 1262




Supreme Judicial Court of Massachusetts, Suffolk.

February 1, 1977

Argued June 8, 1976.

[359 N.E.2d 1264] Francis H. Fox, Boston, Mass. (E. Susan Garsh, Belmont, Mass., with him), for The First National Bank of Boston and others.

Thomas R. Kiley, Asst. Atty. Gen., Boston, for the Attorney General.

Ernest Winsor, Boston, Mass., for Coalition for Tax Reform, Inc. and another, interveners.


[359 N.E.2d 1265]

Page 774

LIACOS, Justice.

The plaintiffs brought a declaratory judgment proceeding under G.L. c. 231A alleging that they intended to expend moneys to publicize, by newspaper advertisements and other similar methods, their views with respect to a proposed constitutional amendment which was to be submitted to the voters as a referendum question at the general election on November 2, 1976. The proposed amendment, set out in the margin, 3 would permit,

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but not require, the Legislature to modify the income tax laws of the Commonwealth by imposing a graduated tax on the income of individuals (GIT). The Attorney General (the original defendant herein) indicated that he would prosecute the plaintiffs under the provisions of G.L. c. 55, § 8, as appearing in St.1975, c. 151, § 1, 4 if they were to expend moneys to publicize their views on the proposed

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amendment to the general public. The plaintiffs sought a declaration that § 8 is unconstitutional on its face and as applied to them. They began this action by filing a complaint with the clerk of the Supreme Judicial Court for the county of Suffolk. The matter was heard before a single justice who permitted two groups to intervene as additional parties defendant 5 and reserved and reported the case to the full court. The matter was argued before this court on June 8, 1976. Due to the pendency of the election and the significance of the questions raised by this proceeding, an order of this court without opinion was entered on September 22, 1976, and judgment pursuant thereto was entered by the single justice on September 28, 1976. 6

[359 N.E.2d 1266]

Page 777

The plaintiffs are two national banking associations organized under the laws of the United States with usual places of business in Boston, and three business corporations (two organized under the laws of the Commonwealth of Massachusetts and one under the laws of the State of Delaware), with either principal or usual places of business in Massachusetts. They all are actively involved in substantial business activities in Massachusetts. They all alleged that the adoption of the proposed amendment would substantially and materially affect their business activities in a variety of ways including, but not limited to, discouraging highly qualified executives and highly skilled professional personnel from settling, working or remaining in Massachusetts; promoting a tax climate which would be considered unfavorable by business corporations, thereby discouraging them from settling in Massachusetts with 'resultant adverse effects' on the plaintiff banks' loans, deposits, and other services; and tending to shrink the disposable income of individuals available for the purchase of the consumer products manufactured by at least one of the plaintiff corporations. Although the plaintiffs hold these views, the record does not establish that these views are supported in fact. Rather, the parties have agreed that '(t)here is a division of opinion among economists as to whether and to what extent a graduated income tax imposed solely on individuals would affect the business and assets of corporations.' The statute requires generally that a referendum matter 'materially affect' a corporation's 'property, business or assets' before it may expend moneys to publicize its views on that matter. It states specifically that '(n)o question submitted to the voters solely concerning the taxation of the income, property or transactions of individuals shall be deemed materially

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to affect the property, business or assets of the corporation.' The plaintiffs have not shown, on this record, that the type of taxation authorized by the proposed amendment in fact would have such an effect. 7

  1. Legislative and Judicial History.

    We note that this is not the first time that this type of prohibition has been before us. In Lustwerk v. Lytron, Inc., 344 Mass. 647, 183 N.E.2d 871 (1962), we held that a referendum question proposing a constitutional amendment granting the Legislature the power to impose a graduated income tax on either corporations or individuals (or both) reasonably might be thought by the directors of the defendant corporation to be a matter materially affecting the corporation's [359 N.E.2d 1267] property, business or assets. 8 We, therefore, held that the statute as then constituted did not prohibit expenditures by such corporations for the purpose of influencing the voters on that proposed constitutional amendment. In First Nat'l Bank v. Attorney Gen., 362 Mass. 570, 290 N.E.2d 526 (1972) (First Nat'l Bank I), we considered the effect of a legislative amendment of the statute (after Lustwerk) which added the following sentence to G.L. c. 55, § 7: 'No question submitted to the voters concerning the taxation of the income, property or transactions of individuals shall

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    be deemed materially to affect the property, business or assets of the corporation.' (See St.1972, c. 458. 9)

    The court was divided as to whether the issue of the validity of G.L. c. 55, § 7, could be resolved merely by statutory construction thereof or whether it was necessary to consider its constitutionality. Three Justices took the former view; two Justices took the latter view. All five agreed that the proposed constitutional amendment contained in the 1972 referendum question would authorize the Legislature to impose a graduated income tax on both individuals and corporations, or either. See First Nat'l Bank I at 575, 290 N.E.2d 526 (Tauro, C. J.) (Reardon, J., concurring); and at 593 (Quirico, J., with whom Braucher and Kaplan, JJ., join, concurring in the result). Chief Justice Tauro felt impelled in these circumstances to reach the constitutional issue involved in determining the validity of the prohibitions contained in G.L. c. 55, § 7. They came to the conclusion that this statute, as framed in 1972, was invalid because (in part) it did 'not meet the requirements of a narrowly drawn law, circumscribing only the evil to be curtailed.' Id. at 590, 290 N.E.2d at 539. However, these Justices were careful to point out that they did 'not reach the general question of the manner, mode and extent to which corporate expression may be limited to ensure free elections' (footnote omitted). Ibid.

    The other three Justices did not find it necessary to reach the constitutional question. Rather, they interpreted the statutory addition as inapplicable to the 1972 referendum question because that question concerned the levying of a graduated corporate income tax as well as a graduated personal income tax. See id. at 593, 290 N.E.2d 526 (Quirico, J., concurring). Since three Justices held G.L. c. 55, § 7, inapplicable, and two others viewed it as unconstitutional, the plaintiffs of 1972 (some of whom are now plaintiffs in this matter) prevailed, and were allowed to make contributions

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    to a political committee to campaign against the proposed amendment. It was defeated.

    Subsequent to the decision in First Nat'l Bank I, G.L. c. 55 was amended on various occasions. General Laws c. 55, § 7, ultimately became G.L. c. 55, § 8. The most significant post-First Nat'l Bank I amendment was to rephrase the second sentence of the first paragraph previously found in § 7 by adding the word 'solely.' This sentence now reads: 'No question submitted to the voters solely concerning the taxation of the income, property or transactions of individuals shall be deemed materially [359 N.E.2d 1268] to affect the property, business or assets or the corporation' (emphasis supplied). 10

    Further, the referendum question for 1976 did not, like the question considered in Lustwerk and First Nat'l Bank I, apply in any way to corporate income taxation. The statutory amendment to § 8 makes it clear that the Legislature has specifically proscribed corporate expenditures of moneys relative to this proposed amendment. We conclude therefore that the plaintiffs' claim that G.L. c. 55, § 8, is unconstitutional must be considered. Before doing that, however, we must first deal with certain procedural problems raised by the defendants.

  2. Procedural Considerations.

    In First Nat'l Bank I, supra, a challenge was raised to the constitutionality of the precursor to § 8 in a proceeding for declaratory relief. Where an actual controversy exists we have held that such a proceeding against the Attorney General is an appropriate method of securing a determination of such a claim. Mobil Oil Corp. v. Attorney Gen., 361 Mass. 401, 405, 280 N.E.2d 406 (1972), and cases cited. Cf. Attorney Gen. v. Kenco Optics, Inc., --- Mass. ---, --- a, 340 N.E.2d 868 (1976). The defendants do not dispute the use of this procedure in such circumstances but they argue (a) that this particular case is not ripe for adjudication, and

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    (b) that there is not an actual controversy over one of the issues presented. We disagree.

    (a) The defendants ground their lack of ripeness claim on their characterization of the record in this case as 'inadequate' to present the issues raised. They suggest that we defer consideration of these issues until after a full trial on the merits. We think that the record in this case, which consists of an extensive stipulation...

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