Commonwealth of Massachusetts v. Davis

• Decision Date: 16 December 1942
• Docket Number: No. 8011.,8011.
• Citation: 168 S.W.2d 216
• Parties: COMMONWEALTH OF MASSACHUSETTS v. DAVIS et al.
• Court: Texas Supreme Court

168 S.W.2d 216

COMMONWEALTH OF MASSACHUSETTS v. DAVIS et al.

No. 8011.

Supreme Court of Texas.

December 16, 1942.

Rehearing Denied February 24, 1943.

COPYRIGHT MATERIAL OMITTED

Error from Court of Civil Appeals of Third Supreme Judicial District.

Action by the Commonwealth of Massachusetts against Edgar B. Davis on a Massachusetts income tax judgment, wherein a writ of garnishment was served on the United North & South Development Company and the defendant filed a cross-action for damages for wrongful garnishment. A judgment for defendant was modified and affirmed in part by the Court of Civil Appeals, 160 S.W.2d 543, and both parties bring error.

Judgment of the district court and Court of Civil Appeals in favor of the Commonwealth of Massachusetts affirmed, and judgment for the district court and the Court of Civil Appeals in favor of defendant on his cross-action reversed and judgment rendered denying recovery thereon.

Robert T. Bushnell, Atty. Gen. of Massachusetts, Jacob Lewiton, Asst. Atty. Gen. of Massachusetts, and Trueheart, McMillan & Russell, of San Antonio, for petitioner.

S. J. Brooks, Clinton G. Brown, W. L. Matthews, and Brooks, Napier, Brown & Matthews, all of San Antonio, and Fred L. Blundell and Tom Gambrell, both of Lockhart, for Davis, respondent.

Richard L. Hughston and Albert B. Hall, both of Dallas, for Fidelity & Deposit Co. of Maryland, respondent.

Ike D. White, H. Grady Chandler, and John W. Stayton, all of Austin, and James D. Williamson, of Waco, amici curiae.

ALEXANDER, Chief Justice.

In 1933 the Commonwealth of Massachusetts recovered judgment in the Massachusetts state courts in the sum of $534,917.48 against Edgar B. Davis for delinquent income taxes, alleged to be due for the year 1926. In 1937 said Commonwealth brought this suit against Davis in a district court of this State to recover judgment on its Massachusetts tax judgment, and as ancillary thereto caused a writ of garnishment to issue to the United North and South Development Company, a corporation, requiring it to answer, among other things, what stock, if any, Davis owned in said corporation. Davis reconvened for damages for alleged wrongful suing out of the writ of garnishment. Upon the trial the court instructed a verdict in favor of the Commonwealth of Massachusetts for the sum of $724,904.16, that being the amount of its Massachusetts judgment, interest, and costs. Davis' cross-action was submitted to the jury, and the jury found that the writ of garnishment had been wrongfully sued out, and that Davis had suffered damages in two items, one in the sum of $1,000,000, and the other in the sum of $550,000. Thereupon the trial court offset the Commonwealth's claim on its judgment for $724,904.16 against Davis' claim for damages in the sum of $1,550,000, and allowed Davis a net recovery against the Commonwealth in the sum of $825,095.84. Upon appeal, the Court of Civil Appeals denied Davis a recovery on the $1,000,000 item of damages, but otherwise affirmed the judgment of the trial court. This resulted in a net judgment in favor of the Commonwealth for the sum of $174,904.16. 160 S.W.2d 543. Each party applied for writ of error to this Court, and both applications were granted.

The first question to be decided is whether full faith and credit must be given to the Massachusetts judgment upon which this suit was brought.

Davis urges that the judgment is void because the statute upon which the tax was based is unconstitutional. The statute, § 25, Chapter 62, General Laws of Massachusetts, 1921, provides that any inhabitant of the Commonwealth of Massachusetts at any time between January 1 and June 30 of any year shall be subject to taxes for income received in the preceding year. Davis contends that this statute is unconstitutional because on its face it purports to tax persons residing out of the State on income received outside of the State, and is therefore so indefinite in its application as to violate the due process clause of the Fourteenth Amendment to the Federal Constitution. In the case of Hart v. Tax Commissioner, 240 Mass. 37, 132 N.E. 621, the Supreme Judicial Court of Massachusetts (which is the highest court of that State) held, in effect, that an income tax levied in 1918 for income received during the year 1917 by one who was a resident of Massachusetts during 1918, but not during 1917, was invalid because the State had no extraterritorial authority to levy the tax against one who was not a resident of the State at the time the income was received. In the case of Kennedy v. Commissioner, 256 Mass. 426, 152 N.E. 747, the statute above referred to was construed to apply only to those who were inhabitants of the State at the time the income was received, and, as so applied, the statute was held to be constitutional. It should be noted that in the trial of the Massachusetts case the jury found that Davis was a resident citizen of Massachusetts during the year 1926, for which the tax was assessed. Under these facts, it is probable that the statute, as applied to Davis in this case, would not be held unconstitutional by the Massachusetts courts.

However, we do not deem it necessary for us to here determine whether or not the law under which the tax was assessed was unconstitutional. Under Article IV, Section 1, of the Constitution of the United States, we are required to give full faith and credit to the Massachusetts judgment if the court which rendered it had jurisdiction of the parties and of the subject matter of the suit.

The suit was brought in the Superior Court of Suffolk County, Massachusetts, for personal judgment against Davis for the unpaid income taxes. Davis signed an acceptance of service, and appeared by counsel and defended the suit. The case was tried before a jury, and resulted in a judgment in favor of the Commonwealth. Davis appealed, and the judgment was affirmed by the Supreme Judicial Court of Massachusetts. See Commonwealth v. Davis, 284 Mass. 41, 187 N.E. 33. Unquestionably as to parties the court had jurisdiction, because Davis voluntarily submitted himself to the jurisdiction of the court. As to subject matter, it is shown by the Massachusetts statutes admitted in evidence that the Superior Court is a court of general jurisdiction, having original jurisdiction of all civil actions, except those of which other courts have exclusive original jurisdiction. Sections 3 and 4, Chapter 212, General Laws of 1921; Id., General Laws of 1932. It does not appear that exclusive jurisdiction of income tax matters is vested by law in any other court. The court therefore had jurisdiction over both the person of the defendant and the subject matter of the suit.

Davis takes the position that under Hart v. Tax Commissioner, 240 Mass. 37, 132 N.E. 621, the Massachusetts income tax is a tax on property; and since the property from which this income was derived was located outside of Massachusetts, the court had no jurisdiction of the subject matter of the suit. We are not in accord with this view. Regardless of the construction placed by the courts of Massachusetts on its income tax law, it appears that the cause of action upon which the judgment was recovered was a personal claim against Davis for taxes. There was no attempt to fix a lien on Davis' property outside the Commonwealth or to affect the title thereto. The subject matter of the suit was not a res outside the boundaries of the Commonwealth, but a personal cause of action against Davis, and we see no reason why it was not within the jurisdiction of the Superior Court.

Since it appears that the Superior Court had jurisdiction of the parties and of the subject matter, it is not necessary for us to decide whether the statute is unconstitutional. The attack made by Davis upon the Massachusetts judgment is a collateral attack, and in order for such an attack to be successful the judgment must be void. W. T. Rawleigh Co. v. Little, Tex. Civ.App., 32 S.W.2d 214, writ refused; 26 Tex.Jur. 424. The question then arises whether a judgment based on an unconstitutional statute is void or merely erroneous. Of course, the validity of the judgment must be determined by the laws of Massachusetts, but in the absence of pleading and proof of what the Massachusetts courts have held on this question, we shall presume that the Massachusetts law is the same as our own. United States Fidelity & Guaranty Co. v. Richey, Tex.Civ.App., 18 S.W.2d 231, writ refused; 26 Tex.Jur. 421, 439.

Although there is some authority to the contrary (see 6 R.C.L., p. 117, sec. 117; 12 C.J. 801; 16 C.J.S., Constitutional Law, § 101), we believe the correct rule, supported by the more numerous and better reasoned decisions, to be that where the unconstitutionality of a statute goes only to the merits of the cause of action, and not to the jurisdiction of the court, a judgment in a civil suit based thereon is not void but merely erroneous, and remains effective until regularly set aside or reversed. King v. King, Tex.Civ.App., 291 S.W. 645, writ dismissed; New York Life Ins. Co. v. Breen, 227 Iowa 728, 289 N.W. 16; Chicot County Drainage Dist. v. Baxter State Bank, 308 U.S. 371, 60 S.Ct. 317, 84 L.Ed. 329; Hanchett Bond Co. v. Morris, 143 Okl. 110, 287 P. 1025; Jones v. McGrath, 160 Okl. 211, 16 P.2d 853; Forest Lumber Co. v. Osceola Lead & Zinc Mining Co., Mo.Sup., 222 S.W. 398; Arnold v. Booth, 14 Wis. 180; Woods Brothers Const. Co. v. Yankton County, 8 Cir., 54 F.2d 304, 81 A.L.R. 300. See annotation, 36 A.L.R. 492, wherein it is stated that the rule in most jurisdictions is as above announced.

Applying this rule to the present case, it is clear that the question of the constitutionality of the Massachusetts income tax law relates to the merits of the cause of action — that is, whether Davis was liable to the Commonwealth for income taxes for the year 1926. Since the Superior Court had jurisdiction of the parties and of the subject matter, it had authority to...