O'Donnell v. Comm'r of Corps. & Taxation

• Decision Date: 07 February 1945
• Citation: 60 N.E.2d 11,317 Mass. 664
• Parties: O'DONNELL et al. v. COMMISSIONER OF CORPORATIONS AND TAXATION.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

317 Mass. 664

60 N.E.2d 11

O'DONNELL et al.

v.COMMISSIONER OF CORPORATIONS AND TAXATION.

Supreme Judicial Court of Massachusetts, Middlesex.

Feb. 7, 1945.

Petition by James E. O'Donnell and another, as executors, trustees, and contingent beneficiaries, and another against the Commissioner of Corporations and Taxation to determine the validity of certain succession taxes assessed by respondent. From a decree abating such taxes and directing repayment thereof, respondent appeals.

Decree reversed with direction to enter decree dismissing petition.Appeal from Probate Court, Middlesex County; J. C. Leggat, Judge.

Before FIELD, C. J., and LUMMUS, DOLAN, RONAN, and WILKINS, JJ.

R. B. Walsh, of Boston, for petitioners.

W. F. Hayes, Asst. Atty. Gen., for respondent.

DOLAN, Justice.

This petition (alleged to have been) brought under G.L. (Ter.Ed.) c. 65, § 30) is by James E. O'Donnell and Katherine E. Butler as the executors of the will of Edward J. O'Donnell, late of Lowell, deceased, hereinafter referred to as the donor, and also as the trustees named in a trust indenture dated July 21, 1941, and as beneficiaries named therein in certain contingencies, and by James F. O'Donnell, a beneficiary named therein, to determine the validity of certain succession taxes assessed by the respondent under G.L.(Ter.Ed.) c. 65, §§ 1, 3, in their amended form. The petitioners James E. O'Donnell and Katherine E. Butler were brother and sister of the donor, and the petitioner James F. O'Donnell was his nephew. The case comes before us on the appeal of the respondent from the decree entered by the judge. The evidence is reported. In an equity or probate appeal, where the evidence is reported, it is our duty to examine it and to reach our own conclusions upon it, but where the credibility of witnesses who have testified orally is involved we accept the findings of the trial judge unless they are plainly wrong. Where, however, an ultimate finding rests upon inferences from facts admitted or found, since mere inferences do not involve the credibility of witnesses, we draw our own inferences without deference to those drawn by the trial judge. In the instant case, the motive to be ascertained being that of one deceased who could not testify, the question is whether the inference drawn by the judge from the evidence that the trust indenture was not made in contemplation of death was the proper inference. New England Trust Co. v. Commissioner of Corporations and Taxation, 315 Mass. 639, 643, 644, 53 N.E.2d 1001.

There was evidence as follows: James F. O'Donnell had been engaged in the undertaking business in the city of Lowell for many years. Upon his death two of his sons, Thomas J. and Edward J. O'Donnell, the donor, continued the business. Thomas died in 1929, leaving one son, the petitioner James F. O'Donnell. After the death of Thomas, the donor continued the business as owner. The petitioner James F. O'Donnell had been employed in the business while a boy during the life of his father, becoming a full-time employee under the supervision of the donor after he completed his education. At some time not disclosed by the record the business had been incorporated under our laws, with an authorized issue of five hundred shares, of which the donor held four hundred ninety-eight shares. His brother, James E. O'Donnell, and his sister, Katherine, held one share each. On July 21, 1941, the donor executed a trust instrument, transferring his shares in the corporation to James E. and Katherine upon trust to pay the net income ‘if any’ therefrom to his nephew, James F. O'Donnell, and further providing, so far as here material, as follows: ‘On the written request of said James F. O'Donnell to the trustees made not less than ten years from the date of this instrument the principal of the trust fund shall be transferred by the trustees to him and the trustees may in their discretion transfer the principal to him on his written or verbal request of an earlier date. If there is no request by the said James F. O'Donnell within twelve years from the date of this instrument for such transfer the trustees shall transfer the principal of said trust fund to themselves as individuals in equal shares, free and clear of all trusts. By the word ‘request’ as before used in this article is meant James F. O'Donnell's own personal request and the meaning of the word ‘request’ as above used excludes any asking by any agent of James F. O'Donnell or by any executor, administrator or assign of the said James F. O'Donnell. * * * The transfer to said trustees in said trust is hereby agreed to be irrevocable and is declared to be irrevocable by the donor. * * * One of the objects of the donor to be attained by this trust is, so far as appears possible, to keep the business of said corporation in the ownership of individuals who are blood relatives of the founder of the business, the late James F. O'Donnell.' At the time of the execution of the trust instrument an agreement was prepared in which it was provided that the donor was to be manager of the business as long as he should live at a salary of $7,500 a year. This provision was voted by the stockholders and the vote was recorded, but the agreement was not executed because its terms were not satisfactory to the donor, and he continued to draw salary at the rate of $15,000 a year until his death. The donor died testate on August 29, 1941. Under the terms of his will dated May 12, 1936, which was duly proved and allowed, he devised and bequeathed to his wife, Etta (who survived him), such part of his estate as she would receive had he died intestate, and two thirds of the residue to his sister, Katherine, and one third to his brother, James, nominating them as executors. On July 10, 1942, the trustees and the beneficiary James F. O'Donnell entered into a written agreement under seal reciting that the latter had made a verbal request to the trustees to transfer the principal of the trust estate to him, and also reciting the trustees' willingness to exercise their discretion to terminate the trust, which the agreed to do upon payment to them individually for their remainder interests of the sum of $8,250 each; and the trustees further agreed to deliver to James F. the four hundred ninety-eight shares of the corporation, and as individuals to transfer to him the one share of stock held by each of them, and to resign their offices in the corporation. In turn James F. agreed to pay the sum of $8,250 to each of them. The agreement was to take effect upon its execution.¹

The respondent, hereinafter referred to as the commissioner, placed a valuation upon the shares of the corporation of $82,600 but assessed a tax of $7,216 on the sum of $65,600 to the donee James F. O'Donnell. The petitioners alleged that the commissioner also assessed a tax of $363 to James E. O'Donnell ‘donee’ on a valuation of $8,250, and a tax of $363 to Katherine E. Butler ‘donee’ on a valuation of the same amount. The judge entered a decree as follows: ‘After hearing and consideration, the court doth order and decree that said instrument, dated July 21, 1941, was not a deed, grant or gift made in contemplation of death; that the respondent determined and levied the taxes against petitioners, as set forth in the bill of complaint without right and contrary to law, and that said taxes are hereby abated, and that so much of said taxes as have been collected from the petitioners, James E. O'Donnell and Katherine E. Butler by respondent, namely the sum of Three Hundred Seventy-three Dollars ($373) [sic] from each of them, be repaid to them with interest at the rate of six percent from the date of payment.’

While the parties have not raised a jurisdictional question that arises on the record, we feel that we should take notice of it of our own motion. See Eaton v. Eaton, 233 Mass. 351, 364, 124 N.E. 37, 5 A.L.R. 1426;Eustace v. Dickey, 240 Mass. 55, 86, 132 N.E. 852;Moll v. Wakefield, 274 Mass. 505, 175 N.E. 81;Maley v. Fairhaven, 280 Mass. 54, 181 N.E. 798. The jurisdictional question involved is whether the proceeding, in so far as it purports to be brought under G.L.(Ter.Ed.) c. 65, § 30, for determination of the validity of the tax, can be maintained. While the executors of the will of the donor and the trustees under the deed of transfer are parties petitioner, the taxes assessed on the transfer were not assessed to them in either capacity, but were assessed to them and to the petitioner James F. O'Donnell individually. It further appears that when the tax was assessed the trust had terminated and neither James E. nor Katherine was in possession of the property under the transfer in trust, and the commissioner testified that he did not assess the taxes against the estate of the donor. It is to be assumed that he assessed the taxes in question in accordance with G.L. (Ter.Ed.) c. 65, § 7, which provides in part that ‘In case of any deed, grant or gift of a life interest or term of years, the donee for life or years shall pay a tax only on the value of his interest, and the donee of the future interest shall pay his tax when his right of possession or enjoyment accrues.’ The estate of the donor is not concerned with the taxes in question. It...