City of Boston v. Turner
| Decision Date | 26 February 1909 |
| Citation | 201 Mass. 190,87 N.E. 634 |
| Parties | CITY OF BOSTON et al. v. TURNER et al. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
Geo A. Flynn, for plaintiffs.
Tyler & Young and B. E. Eames, for defendant Edwards.
John P Wright and Wm. C. Rice, for defendants Turner and Potter.
This is a bill in equity brought by the city of Boston and its collector of taxes against Albion B. Turner and Albert B Potter, formerly copartners, and their common-law assignee Francis M. Edwards, to recover the amount of a tax assessed upon the copartnership property for the year 1902. On March 3, 1903, the copartners executed a common-law assignment for the benefit of their creditors to the defendant Edwards. This assignment recited that it was executed by the defendants, Turner and Potter, as copartners, parties of the first part, Francis M. Edwards as party of the second part, and 'the several persons, firms, and corporations, creditors of said Albion B. Turner and Albert B. Potter, as copartners or as individuals who shall execute these presents,' who were designated as parties of the third part. All the individual and firm property of the copartners was conveyed to Edwards in trust. The second purpose of the trust, as expressed in the instrument, was 'to pay in full such claims against the parties of the first part as are entitled to a priority by law, including herein such claims as would be entitled to priority under the United States bankrupt law of 1898 (Act July 1, 1898, c. 541, 30 Stat. 544 [U. S. Comp. St. 1901, p. 3418]) as now in force.' A further provision of the instrument was that 'The individuals, firms and corporations, creditors of the parties of the first part, who execute these presents accept this conveyance in full payment, satisfaction and discharge of all and singular their debts, claims and demands, actions and causes of actions against the parties of the first part.'
Neither the city of Boston nor its collector of taxes became a party to this instrument by execution of it. On November 10, 1904, the copartners filed a voluntary petition in bankruptcy, and were duly adjudged bankrupts thereon, and on January 17, 1905, the bankrupts received their discharge. On December 3, 1904, the claim of the city of Boston for the tax here sought to be collected, was proved in bankruptcy. No assets ever came into the hands of the trustee in bankruptcy. At the time of the assignment to Edwards, there was due from the copartnership the taxes assessed for the year 1902, with interest thereon at 6 per cent. from November 1, 1902. Immediately after the execution of the assignment the collector of taxes for the city of Boston demanded of the defendant Edwards payment of these taxes. A majority in interest and amount of the creditors of the copartnership assented to the assignment, and proved their claims. The aggregate of debts so proven was greatly in excess of the value of the assets. The defendant Edwards has sufficient moneys in his hands as such assignee to pay the taxes and all other claims entitled to preference, so far as known. After the prior decision in 194 Mass. 77, 80 N.E. 4, the action at law there pending was amended by leave of the superior court into the suit in equity now before us.
The first question to be considered is whether the city of Boston or its tax collector was obliged to assent in writing to the assignment in order to become entitled to its benefits. The answer to this question depends upon a determination of the persons, who were intended by the descriptive terms of the instrument to bcome parties to it. The only persons mentioned as parties of the third part are 'creditors,' and the same word occurs several times in the body of the instrument. 'Creditor' is ordinarily used as the antonym of 'debtor' and involves a debt and a credit. It commonly signifies one who holds some contractual obligation against another. In re Nicolin, 55 Minn. 130, 56 N.W. 587; New Jersey Ins. Co. v. Meeker, 37 N. J. Law, 282; Walsh v. Miller, 51 Ohio St. 462, 38 N.E. 381; State v. Georgia Company, 112 N.C. 34, 17 S.E. 10, 19 L. R. A. 485. A tax, however, has uniformly been held in this commonwealth not to be a debt. Taxes are not the subject of set-off (except by statute), nor do laws against imprisonment for debt apply to them. Peirce v. Boston, 3 Metc. 520; Appleton v. Hopkins, 5 Gray, 530; Andover & Medford Turnpike Corporation v. Gould, 6 Mass. 40, 44, 4 Am. Dec. 80. Generally statutes of limitations do not run against taxes, except by specific enactment (Hayden v. Foster, 13 Pick. 492; Howe v. Howe, 179 Mass. 546, 61 N.E. 225, 55 L. R. A. 626; Bradford v. Story, 189 Mass. 104, 75 N.E. 256), save where a special action in contract is given to the collector. See Rich v. Tuckerman, 121 Mass. 222. In construing the word 'tax' as used in the bankruptcy law of 1898, it was said in New Jersey v. Anderson, 203 U.S. 483, at page 492, 27 S.Ct. 137, at page 140, 51 L.Ed. 284: 'Generally a tax is a pecuniary bruden laid upon individuals or property for the purpose of supporting the government. * * * As was said * * * in Meriwether v. Garrett, 102 U.S. 472, 513, 26 L.Ed. 197: 'Taxes are not debts. It was so held by this court in the case of Lane County v. Oregon, reported in 7 Wall. 71, 19 L.Ed. 101. Debts are obligations for the payment of money founded upon a contract, express or implied. Taxes are imposts levied for the support of the government, or for some special purpose, authorized by it. The consent of the taxpayer is not necessary to their enforcement. They operate in invitum. Nor is their nature affected by the fact that in some states * * * an action of debt may be instituted for their recovery. The form of procedure cannot change their character.” We are aware of no case in which a tax has been called a debt. It has been termed a 'pecuniary imposition.' Dunham v. Lowell, 200 Mass. 468, 86 N.E. 951. Other authorities to the same point are collected in a footnote. [1]
It is clear that a tax, therefore, is not properly describable as a debt. This being true, the state, county or municipality or public officer to whom the tax is payable is not technically denominable as a creditor. Statutes may clothe the public officer whose duty it is to collect taxes, with the rights of creditors as to certain remedies for the collection of the tax (Rev. Laws, c. 13, §§ 32, 33; Id., c. 159, § 3, cl. 7), but these specially conferred remedies do not change the nature of the tax. The conclusion follows that neither the city of Boston nor its collector was obliged to become a party to the indenture of assignment by signature for the reason that its terms descriptive of parties did not properly include either.
But paragraph 'Second' of the indenture of assignment above quoted, created a trust for the benefit of the tax collector. A primary duty of the defendant Edwards established by members of the copartnership in the very instrument which conveyed to him the property and to which all the creditors who became parties to the assignment assented in writing, was to pay in full all claims against the partners entitled to priority under the bankrupt law. The first class of these preferred claims was taxes. Bankr. Act July 1, 1898, c. 541, § 64a, 30 Stat. 563 (U. S. Comp. St. 1901, p. 3447). It is well settled that a trust may be created for the benefit of third persons without their knowledge or consent. Ward v. Lewis, 4 Pick. 518. It is equally well settled that those for whose benefit a trust is established may avail themselves of its benefits by instituting proceedings to enforce the performance of the trust. Dedham Bank v. Richards, 2 Metc. 105, 113; Bryant v. Russell, 23 Pick. 508, 520; Draper v. Butler, 7 Allen, 172, 174; Andrews v. Tuttle-Smith Co., 191 Mass. 461, 78 N.E. 99. The demand made by the tax collector upon the defendant Edwards and the bringing of this suit are sufficient acts of assent, if indeed any assent was required, in order to enable the enforcement of the trust. The right to maintain a bill in equity for the purpose of enforcing a trust established for the purpose, among other things, of paying taxes, is not one of the remedies expressly conferred by statute upon the tax collector. The right to enforce the payment of taxes by an action at law does not exist apart from statute, the history of which is traced in Rogers v. Gookin, 198 Mass. 434, 85 N.E. 405; Harrington v. Glidden, 179 Mass. 486-494, 61 N.E. 54, 94 Am. St. Rep. 613; Crapo v. Stetson, 8 Metc. 393. So far as the Legislature has undertaken to govern the assignments for the beneift of creditors it has required the payment of taxes. Rev. Laws, c. 147, § 22. But where a trust is legally established for the benefit of anybody, even though the beneficiary be a public officer in his official capacity or the representative of the sovereignty, it is not consonantwith the general principles of equity jurisprudence to permit the trust to fail or allow the trustee to maladminister the trust. The existence of the equitable right ordinarily gives the person for whose benefit it was established a right to come into a court of equity for the purpose of enforcing it. This is true even though the beneficiary be an officer who under ordinary conditions might not be clothed with the right to institute general equity proceedings. The tax collector or the municipality, into whose treasury he is obliged to pay the money, has frequently been permitted to intervene without objection in equitable proceedings for the purpose of securing the payment of the tax. Waite v. Worcester Brewing Co., 176 Mass. 283, 57 N.E. 460; City National Bank v. Charles Baker Co., 180 Mass. 40, 61 N.E. 223; Central Trust Co. v. Worcester Cycle Mfg. Co. (C. C.) 110 F. 491; ...
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