Dexter v. Comm'r of Corps. & Taxation

• Decision Date: 27 April 1944
• Citation: 55 N.E.2d 226,316 Mass. 31
• Parties: DEXTER et al. v. COMMISSIONER OF CORPORATIONS AND TAXATION.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

316 Mass. 31

55 N.E.2d 226

DEXTER et al.

v.COMMISSIONER OF CORPORATIONS AND TAXATION.

Supreme Judicial Court of Massachusetts, Essex.

April 27, 1944.

On reservation and report from Probate Court, Essex County; H. R. Dow, Judge.

Proceeding by William Dexter and another, trustees under the will of Charles H. Appleton, deceased, and others against the Commissioner of Corporations and Taxation for abatement of certain legacy and succession taxes assessed and collected upon the successions to property passing by the will of Charles H. Appleton, deceased. On reservation and report.

Decree for plaintiffs.

Argued before RUGG, C. J., and DONAHUE, QUA, DOLAN, and COX, JJ.

Reargued, after the death of RUGG, C. J., before FIELD, C. J., and DONAHUE, LUMMUS, QUA, DOLAN, and COX, JJ.

DONAHUE and COX, JJ., retired before the final decision.

F. H. Nash and R. Wait, both of Boston, for petitioners.

Paul A. Dever Atty. Gen. and E. O. Proctor, Asst. Atty. Gen., for respondent.

FIELD, Chief Justice.

This is a petition brought under G.L. (Ter.Ed.) c. 65, § 27, in a Probate Court by the two trustees under the will of Charles H. Appleton, of Boston, who died April 3, 1874, and whose will was allowed June 1, 1874, and by his three grandchildren, against the commissioner of corporations and taxation, herein referred to as the commissioner. When the case came before the judge of probate for final determination, he found the facts to be as stated in a statement of agreed facts filed in the case, and reserved and reported the case under G.L. (Ter.Ed.) c. 215, § 13, without decision, for consideration of the full court upon the petition, the answer of the commissioner and the statement of agreed facts.

The mother of these grandchildren, Mrs. Meyer, of Hamilton, who was the daughter of Charles H. Appleton, died November 28, 1935, leaving a will allowed January 14, 1936, whereby she disposed of substantiallyall of her own property to her three children, who are her only heirs at law and next of kin. Legacy and succession taxes upon the estate of Mrs. Meyer owned by her and passing by her will have been paid in full and no controversy arises respecting them. The petitioners seek abatement of certain legacy and succession taxes assessed and collected upon successions to property passing by the will of Charles H. Appleton.

By the will of Charles H. Appleton a trust was created whereby the principal and income of the trust property, with certain modifications not now material, were disposed of as follows: His two daughters Mrs. Meyer and Julia A. Appleton, were each given a life estate in the income of one half of the trust property, but if either daughter died without issue, the surviving daughter was given a life estate in the income of the entire trust property. Each daughter was given a power of appointment, by written instrument effective at her death, to and among her children or issue, of one half of the trust property or of the entire trust property if the other daughter had previously died without issue. In default of appointment by either daughter one half of the trust property was to go to her children (or issue by right of representation) in equal shares, but if either daughter died without issue the entire trust property was to go in like manner to the children (or issue by right of representation) of the surviving daughter.

Julia A. Appleton died without issue. Mrs. Meyer survived her sister but did not exercise the power of appointment conferred upon her by the will of Charles H. Appleton. Therefore, the entire trust property upon the death of Mrs. Meyer on November 28, 1935, went in default of appointment to her children, the three individual petitioners, the youngest of whom was born April 7, 1891. Legacy and succession taxes, amounting to $39,626.85, upon the entire trust property were assessed by the commissioner purporting to act under G.L. (Ter.Ed.) c. 65 and St.1935, c. 480, who certified them to the trustees under the will of Charles H. Appleton. The same persons, however, were executors of the will of Mrs. Meyer. The amount so certified together with interest was paid by the trustees. The petitioners contend that the imposition of such taxes is contrary to the statutes of this Commonwealth and the provisions of the Constitution of this Commonwealth and of the United States. They seek an abatement of the entire amount assessed.

So far as taxation of legacies and successions in this Commonwealth is concerned there have been, broadly, three periods: First, the period of no legacy and succession taxes. Second, the period of so called collateral legacy and succession taxes. St.1891, c. 425, imposed such taxes upon property of a decedent passing to collateral relatives and to certain other beneficiaries. No such taxes were imposed by this statute upon property passing to the husband or wife or lineal descendants of the decedent. Third, the period of so called direct legacy and succession taxes. By St.1907, c. 563, such taxes were imposed upon property of a decedent passing to the husband or wife and lineal descendants of the decedent as well as upon such property passing to collateral relatives of the decedent and to certain other beneficiaries. From time to time statutes were enacted changing these statutes in various particulars. Charles H. Appleton died during the first period-the period of no legacy and succession taxes. Mrs. Meyer died during the third period-the period of direct legacy and succession taxes.

The governing statutes at the death of Mrs. Meyer in 1935 are in G.L. (Ter.Ed.) c. 65, as amended-by changing the schedule of rates by St.1933, c. 293, and by adding a provision relating to estates of nonresidents by St.1933, c. 319-and in St.1935, c. 480, § 2, providing for a temporary additional tax. The material words of G.L. (Ter.Ed.) c. 65, as amended, are these: ‘Section 1. All property within the jurisdiction of the commonwealth, corporeal or incorporeal, and any interest therein, belonging to inhabitants of the commonwealth * * * [and certain property belonging to persons not such inhabitants], which shall pass by will, or by laws regulating intestate succession, or by deed, grant or gift, except in cases of a bona fide purchase for full consideration in money or money's worth, made in contemplation of the death of the grantor or donor or made or intended to take effect in possession or enjoyment after his death, and any beneficial interest therein which shall arise or accrue by survivorship in any form of joint ownership in which the decedent joint owner contributed during his life any part of the property held in such joint ownership or of the purchase price thereof, to any person, absolutely or in trust * * * shall be subject to a tax at the percentage rates fixed by the following table: [A table of graduated rates appear based upon ‘Relationship of Beneficiary to Deceased,’ of which Class A included ‘Husband, wife, father, mother; child, adopted child, adoptive parent, grandchild,’ and the ‘Value of Property or Interest.’] Provided, however, that no property or interest therein, which shall pass or accrue to or for the use of a person in Class A, except a grandchild of the deceased, unless its value exceeds ten thousand dollars, and no other property or interest therein, unless its value exceeds one thousand dollars, shall be subject to the tax imposed by this chapter, and no tax shall be exacted upon any property or interest so passing or accruing which shall reduce the value of such property or interest below said amounts. All property and interests therein which shall pass from a decedent to the same beneficiary by any one or more of the methods hereinbefore specified and all beneficial interests which shall accrue in the manner hereinbefore provided to such beneficiary on account of the death of such decedent shall be united and treated as a single interest for the purpose of determining the tax hereunder. Section 2. Whenever any person shall exercise a power of appointment, derived from any disposition of property made prior to September first, nineteen hundred and seven, such appointment when made shall be deemed a disposition of property by the person exercising such power, taxable under section one, in the same manner as though the property to which such appointment relates belonged absolutely to the donee of such power, and had been bequeathed or devised by the donee by will; and whenever any person possessing such a power of appointment so derived shall omit or fail to exercise the same within the time provided therefor, in whole or in part, a disposition of property taxable under section one shall be deemed to take place to the extent of such omission or failure in the same manner as though the persons thereby becoming entitled to the possession or enjoyment of the property to which such power related had succeeded thereto by a will of the donee of the power failing to exercise such power, taking effect at the time of such omission or failure.' ‘Section 36. This chapter shall apply only to property or interests therein passing or accruing upon the death of persons dying on or after May fourth, nineteen hundred and twenty, and as to all property and interests therein passing or accruing upon the death of persons who have died prior to said date the laws theretofore applicable shall remain in force; but so much of this chapter as relates to property or interests therein passing by deed, grant or gift completed inter vivos in contemplation of death shall apply only to such deeds, grants or gifts made on or after May twenty-seventh, nineteen hundred and twenty.’ St.1935, c. 480, § 2, provides in part: ‘All property subject to a legacy and succession tax under the provisions of chapter sixty-five of the General Laws, as appearing in the Tercentenary Edition, and of any further amendments thereof or additions thereto, shall be subject to an additional tax of ten per cent of all...