Boston Elevated Ry. Co. v. Metropolitan Transit Authority

Citation83 N.E.2d 445,323 Mass. 562
CourtUnited States State Supreme Judicial Court of Massachusetts Supreme Court
Decision Date04 January 1949
PartiesBOSTON ELEVATED RAILWAY COMPANY v. METROPOLITAN TRANSIT AUTHORITY & others.

October 4, 1948.

Present: QUA, C.

J., LUMMUS, DOLAN WILKINS, & WILLIAMS, JJ.

Boston Elevated Railway Company. Contract, Construction, For assumption of liabilities, For payment of taxes, With Commonwealth. Sale Contract of sale. Commonwealth, Contracts. Words "Indebtedness," "Liabilities," "Outstanding," "Going concern."

In making with Boston Elevated Railway Company the contract respecting sale of the assets, property and franchises of the company, set forth in

Spec. St.

1918, c. 159, as amended and extended by St. 1931, c. 333, the

Commonwealth did not act in a sovereign capacity, but put itself in the position of a private citizen, and the contract must be construed as would a contract between individuals. Construction of the entire contract made between the Commonwealth and

Boston Elevated Railway Company for a sale by the company of its assets property and franchises to a political subdivision of the Commonwealth under the provisions of Spec. St. 1918, c. 159, as amended and extended by St. 1931, c. 333, to determine whether a Federal tax assessed by reason of a capital gain realized by the company from the sale was to be assumed by the political subdivision, should be guided by the general rule of construction that, where it is sought to shift a burden of taxation from the person upon whom it is imposed by statute, the intention of the parties to accomplish that result must clearly appear.

In the contract, established by Spec. St. 1918, c. 159, as amended and extended by St. 1931, c. 333, for a sale upon a certain consideration by

Boston Elevated Railway Company to a political subdivision of the Commonwealth of the company's "whole assets, property and franchises as a going concern," the provision for an assumption by the political subdivision "of all" the company's "outstanding indebtedness and liabilities" meant only outstanding indebtedness and liabilities of the company, actual or contingent, which arose during the operation of the public transportation system by the company as a going concern, and did not include a Federal tax assessed by reason of a capital gain realized by the company upon and by reason of the consummation of the sale.

Itemized services of counsel employed by Boston Elevated Railway Company and certain extra services of the chairman of the board of directors rendered during completion of arrangements for consummation of the sale by the company of its assets, property and franchises to a political subdivision of the Commonwealth under Spec. St. 1918, c. 159, as amended and extended by St.

1931, c. 333, including services rendered prior to the consummation of the sale in attempting to throw upon the political subdivision the burden of a Federal capital gains tax to result from the sale, were "outstanding indebtedness and liabilities" incurred by the board of directors of the company under authority conferred upon them by Section 4 of Spec. St. 1918, c. 159, which, under the terms of the statutory contract, were assumed by the political subdivision.

BILL IN EQUITY, filed in the Superior Court on July 2, 1947. The suit was reserved and reported by Hudson, J., for determination by this court.

R. H. Holt & J.

L. Hall, (R.

Wait with them,) for the plaintiff.

C. B. Rugg, (G.

B. Rowell & R.

W. Cutler, Jr., Assistant Attorneys General, W. F. Farr & B. J. Sargent with him,) for the defendants.

WILKINS, J. This bill in equity under G. L. (Ter. Ed.) c. 231A, inserted by St. 1945, c. 582, Section 1, seeks a declaration that the Metropolitan Transit Authority by contract has assumed, and is obligated to pay, the plaintiff's Federal income tax on a "capital gain" realized by the plaintiff from the sale to the authority of "its whole assets, property and franchises as a going concern." The defendants, who are the authority and its five trustees, in their answer seek by way of counterclaim a declaration that the authority has not so assumed, and is not obligated to pay, certain bills of the plaintiff's lawyers and of the chairman of its board of directors for services in relation to that sale. The case was heard on the pleadings and a statement of agreed facts. The judge found the facts to be as agreed, and reserved and reported the case, without determination, for the consideration of this court. G. L. (Ter. Ed.) c. 214, Section 31.

The plaintiff is a street railway corporation incorporated under St. 1894, c 548, and until noon on August 29, 1947, it owned a rapid transit system in metropolitan Boston. That system it managed and operated until June 30, 1918. On July 1, 1918, by virtue of its acceptance of Spec. St. 1918, c. 159, the management and operation devolved upon a board of trustees (hereinafter called the public trustees) appointed by the Governor. The amendment of that statute by St. 1931, c. 333, was also accepted by the plaintiff, and the public trustees continued the management and operation until noon on August 29, 1947. [1]

The contract of which interpretation is sought is contained in Spec. St. 1918, c. 159, as amended and extended by St. 1931, c. 333, known as the public control act. [2] The act originally provided: "The acceptance of this act by the Boston Elevated Railway Company shall constitute an agreement upon its part to sell to the commonwealth or any political subdivision thereof at any time during the period of public management and operation its whole assets, property and franchises as a going concern upon the assumption by the commonwealth of all its outstanding indebtedness and liabilities and the payment of an amount in cash equal to the amount paid in in cash by its stockholders for stock then outstanding" (Spec. St. 1918, c. 159, Section 16). In the amendment the language respecting the option and the assumption of indebtedness and liabilities is preserved in substantially identical form, but a change was made in the amount of the cash payment. After amendment the act reads: "The acceptance of this act by the company shall constitute . . . an agreement by the company to sell to the commonwealth or any political subdivision thereof . . . at any time during the period of public management and operation, its whole assets, property and franchises as a going concern upon the assumption by the commonwealth or such political subdivision of all its outstanding indebtedness and liabilities, and the payment of an amount in cash equal to any amount paid in in cash for stock hereafter issued and also an amount in cash equal to one hundred and five dollars per share for all common stock at present issued and then still outstanding decreased by one half of any sums hereafter assessed under the provisions of said chapter one hundred and fifty-nine or of this act upon cities and towns served by the company which have not then been repaid to the commonwealth provided however that such decrease shall not reduce the amount payable on account of said common stock below the amount of eighty-five dollars per share" (St. 1931, c. 333, Section 17). Under both of the foregoing sections a sale under the option was to effect a dissolution of the company subject to the general statutory provisions relative to the dissolution of corporations. [1]

The authority is "a body politic and corporate and a political subdivision of the commonwealth" created by St. 1947, c. 544, Section 1, which became effective June 19, 1947. Its five trustees are appointed by the Governor (Section 2). The authority was "authorized and directed to exercise the option" set forth in St. 1931, c. 333, Section 17, and the trustees were "authorized and directed" in the name of the authority to notify the plaintiff "that the authority elects as of a day and time to be specified in said notice," but not later than August 30, 1947, "to exercise such option" (Section 5). Section 5 further provided: "Upon the date and the time specified in such notice to the company, the whole assets, property and franchises of the company as a going concern shall, without further conveyance and by virtue of this act, be and become vested in the authority; and all the then outstanding indebtedness and liabilities of the company shall, without further action and by virtue of this act, be assumed by the authority in accordance with the provisions of said section seventeen. In accordance with the provisions of said section seventeen, there shall thereupon and forthwith thereafter be paid to the company an amount in cash equal to eighty-five dollars per share for all the common stock of the company issued and outstanding" (emphasis supplied). Upon such cash payment, "all claims of every kind and nature against said authority by the company are by virtue of this act released, and thereafter no suit shall be brought against the authority by the company" (Section 6).

By reason of Section 6 and of the italicized words in Section 5, we are told in the plaintiff's brief, the present suit was brought on July 2, 1947, to enjoin the authority and its trustees from giving notice of the election to exercise the option and from tendering the cash payment, and, in the alternative, for the declaration mentioned at the opening of this opinion. On July 8 a prayer for preliminary injunction was denied after hearing. On the same day the defendant trustees gave notice in writing of the authority's election to exercise the option "as of" August 29 1947, at noon. On August 21 an interlocutory decree, entered by consent, declared that the option had been effectively and validly exercised by the authority as provided in Section 17 of the public control act "without...

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    ...disregarded.” McMann v. McGowan, 71 Mass.App.Ct. 513, 516 n. 2, 883 N.E.2d 980 (2008), quoting from Boston Elev. Ry. v. Metropolitan Transit Authy., 323 Mass. 562, 569, 83 N.E.2d 445 (1949). 3. Authority. Decisions from other jurisdictions have construed similar endorsement language to requ......

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