Dana v. Treasurer & Receiver General

• Decision Date: 29 June 1917
• Citation: 227 Mass. 562,116 N.E. 941
• Parties: DANA v. TREASURER AND RECEIVER GENERAL et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

227 Mass. 562

116 N.E. 941

DANA

v.TREASURER AND RECEIVER GENERAL et al.

Supreme Judicial Court of Massachusetts, Middlesex.

June 29, 1917.

Appeal from Supreme Judicial Court, Middlesex County.

Bill for instructions by Richard H. Dana, executor of Edith L. Dana, deceased, against the Treasurer and Receiver General and another. From the decree rendered, Dana appeals. Reversed.

See, also, 115 N. E. 418.

Hollis R. Bailey, of Boston, for appellant Dana individually.

Henry C. Attwill, Atty. Gen., and Wm. Harold Hitchcock, Asst. Atty. Gen., for Treasurer and Receiver General.

LORING, J.

Edith L. Dana died domiciled in Massachusetts and possessed of 75 shares in the Amoskeag Manufacturing Company, 130 shares in the Boston Ground Rent Trust, and an ‘interest under the Duluth & Gladstone Real Estate Trust.’ A succession duty was imposed upon each of these pieces of property. Mrs. Dana's husband, the sole residuary devisee and legatee under her will, made the claim that the three pieces of property in question or ‘so much of’ them as consists of an equitable interest in real estate situate outside the territorial limits of the state were not the subject of a succession duty in this commonwealth. Thereupon the executor brought a bill for instructions in the probate court, making the treasurer and receiver general and Mrs. Dana's husband the parties defendant. The probate court decided that said property was subject to a succession duty. From that decree Mr. Dana took the appeal which is now before us.

1. Mr. Dana's contention is that an equitable estate in land lying outside of the commonwealth, although owned by one domiciled in it at the date of his death, is not subject to a succession duty here. There is no question of the correctness of that proposition. See, for example, Attorney General v. Barney, 211 Mass. 134, 97 N. E. 750,39 L. R. A. (N. S.) 1024;Walker v. Treas. & Recvr. Genl., 221 Mass. 600, 109 N. E. 647. The question which we have to decide is how far that principle of law is applicable in this case.

2. We take up first Mrs. Dana's shares in the Amoskeag Manufacturing Company. The Amoskeage Manufacturing Company was the name by which the trustees under a declaration of trust were to be known in their collective capacity as matter of convenience in the practical conduct of the business carried on by them under that declaration of trust. The trust was created to take over the factory and manufacturing business theretofore owned and carried on by a New Hampshire corporation known as the Amoskeage Manufacturing Company. The factory in question and the tangible personal property held under the trust are situate in the state of New Hampshire. ‘The beneficial interest in this trust’ is dividend into shares. These shares are represented by transferable certificates. It is provided in the declaration of trust that the death of a shareholder shall not operate to determine the trust nor entitle the legal representatives of a deceased shareholder to an accounting, but that the executors, administrators and assigns of the deceased shareholder shall succeed to the rights of the decedent and be entitled to a certificate in their own names upon surrender of the old certificate. It is also provided therein that the ownership of shares thereunder shall not entitle the shareholder to any title in or to the trust property or right to call for partition or division of the same, or for an accounting. The declaration of trust provides for meetings of the shareholders, and that at these meetings the shareholders shall have power to elect the trustees and to alter and amend the declaration of trust. It is further provided therein that on the expiration of 21 years after the eath of certain persons therein named the trustees shall wind up the affairs of the trust, liquidate its assets and distribute the same among the holders of shares. There is a provision in it whereby the time for winding up its affairs can be shortened or extended by the shareholders at shareholders' meetings. In addition there is a provision which authorizes the trustees in case they elect so to do ‘to distribute the shares, securities or obligations instead of cash’ in case of the liquidation of the assets of the trust. But there is no provision authorizing them to distribute among the shareholders the real property by the trust.

This declaration of trust created a partnership. Upon that point Phillips v. Blatchford, 137 Mass. 510, is decisive. In addition the trust is well within the distinction between trusts which create partnerships and trusts which are pure trusts, stated at length in Williams v. Milton, 215 Mass. 1, 102 N. E. 355, where the cases are collected. For the last case in which this distinction was applied and the trust held to have created a partnership see Frost v. Thompson, 219 Mass. 360, 106 N. E. 1009.

It is alleged in the petition and admitted by the answer that at the date of Mrs. Dana's death over 75 per cent. of the property of the Amoskeag Manufacturing Company consisted of real estate situate in New Hampshire and 23 per cent. of it ‘consisted of tangible personal property in New Hampshire in the shape of raw material and goods finished and in process of manufacture,’ the other 2 per cent. seems to have been made up of intangible personalty.

It is the contention of the appellant that a person dying possessed of one of the shares of this trust dies possessed of real estate to the extent to which the assets of the trust at the time of the decedent's death consist of real estate and of personal property to the extent to which those assets consist of personal property at that time. And we see no escape from that result if the rule as to partnership real estate which obtains in this commonwealth in case of ordinary partnerships applies to a partnership like the Amoskeag Manufacturing Company.

In case of an ordinary partnership there is no practical difficulty in carrying out the Massachusetts rule as to partnership real estate, namely, that so far as necessary to pay the debts of the firm partnership real estate is personalty, but that for all other purposes it is real property. In an ordinary case a partnership comes to an end upon the death of each partner and by reason of that fact the partnership affairs have to be wound up at that time. In such a case there is no practical difficulty in winding up the estate of the decedent partner under the Massachusetts rule as to partnership real estate. But the same rule applied to partnership real estate in a partnership like the Amoskeag Manufacturing Company partnership would raise great practical difficulties. Take the case of a person who dies owning one share in the Amoskeag Manufacturing Company partnership. If the Massachusetts rule as to partnership real estate applies, that one share (as we have said already) is real estate to an amount determined by ascertaining the proportion of the real estate owned by the partnership to all its assets and is personal property to the amount determined by ascertaining the proportion between its personal property and those assets. If that be so that one share must be dealt with accordingly in winding up the estate of the decedent; that is to say, so far as that one share is real estate it cannot be sold without a license from the probate court to sell it as real estate although so far as it is personal property it can be sold by the executor or administrator by virtue of his office.

Wilcox v. Wilcox, 13 Allen, 252, is the case in which the rule as to partnership real estate in case of ordinary partnerships was finally established in this commonwealth. It was pointed out in that case (13 Allen, at page 254) that:

‘Upon examination of the earlier English cases, from which this doctrine [the English doctrine that in case of partnership real estate there is an out and out conversion of it into personal property for all purposes] has grown, it will be found that, in several of them, there was an express agreement between the copartners, the specific performance of which would of itself convert the real estate into personal assets. The conversion was worked, therefore, not merely from the relation of copartnership, but on the ground that the deceased partner had, by the very contract under which he became joint owner, stamped upon the realty the character and incidents of personalty.’

From an examination of the authorities before the court in Wilcox v. Wilcox, it is plaint that one of the cases thus referred to was Ripley v. Waterworth, 7 Vesey, 425. The agreement in Ripley v. Waterworth was an agreement that on the conclusion of the partnership all the partnership property should be sold and reduced to cash. That is to say the agreement which it was held in at least one of the early cases referred to in Wilcox v. Wilcox, to work an out and out conversion was an agreement of the same kind as the agreement in the case of Amoskeag Manufacturing Company partnership. Since the decision in Ripley v. Waterworth it has been held and is now established in England (for reasons based on practical considerations) that partnership realty is converted out and out to personalty in the absence of an agreement, and that this conversion dates from the beginning of the partnership. For this reason no late cases bearing on the case at bar are to be found there. It was not necessary in Ripley v. Waterworth to decide what the time was from which the real estate was converted into personalty by force of this agreement. That point, however, is covered (so far as the case now before us is concerned) by the decision in Fletcher v. Ashburner, 1 Bro. C. C. 497. In that case a testator devised his real and personal property to trustees to permit his widow to enjoy the residue during her life and after her decease to sell the same and distribute the proceeds between his son and his daughter or in case his widow should marry again then and in that case to sell all...