First Nat. Bank of Boston v. Harvey

• Decision Date: 01 October 1940
• Docket Number: No. 1680.,1680.
• Citation: 16 A.2d 184
• Parties: FIRST NAT. BANK OF BOSTON v. HARVEY, Com'r of Taxes.
• Court: Vermont Supreme Court

16 A.2d 184

FIRST NAT. BANK OF BOSTON

v. HARVEY, Com'r of Taxes.

No. 1680.

Supreme Court of Vermont Washington.

Oct. 1, 1940.

Rehearing Denied Nov. 6, 1940.

[Copyrighted material omitted.]

Exceptions from Washington County Court; Charles B. Adams, Judge.

Proceeding by the First National Bank of Boston, trustee under the will of Charles H. Bayley, against Erwin M. Harvey, Commissioner of Taxes, for revision of income tax assessed against plaintiff and for a refund of any taxes paid which should be found to have been illegally assessed. To review the judgment, both parties bring exceptions.

Reversed and petition dismissed.

Argued before MOULTON, C. J., and SHERBURNE, BUTTLES, STURTEVANT, and JEFFORDS, JJ.

George L. Hunt, of Montpelier, and George S. Fuller, of Boston, Mass., for plaintiff.

Lawrence C. Jones, Atty. Gen. (Gelsie J. Monti, of Barre, and Philip B. Billings, of Rutland, of counsel), for defendant.

Erwin M. Harvey, Commissioner of Taxes, of Montpelier, pro se.

SHERBURNE, Justice.

Charles H. Bayley, late a resident of Newbury, in this State, deceased testate on January 28, 1928, leaving a large estate. His will was admitted to probate by the probate court for the district of Bradford, and letters testamentary thereon were issued to the petitioner, therein named as executor. By decree of the probate court on April 29, 1929, the petitioner, as the trustee named in the will, having duly qualified, received the residue and remainder of said estate in cash and securities, which it has since held and administered "wholly in the State of Massachusetts." By the terms of the will and the decree of the probate court, this residue and remainder, and the accumulations thereon, are to be held and invested upon trust, to pay the widow and certain other life beneficiaries annual incomes, and to pay stated amounts annually to certain charities located within and without the State. After the death of the last life beneficiary, the trust is to be terminated, and the principal and accummulations are to be distributed to certain trusts for charities within the State, and to certain charitable institutions without the State.

The petitioner duly filed income tax returns for the years 1933, 1934, 1935, 1936 and 1937, and was assessed taxes upon the undistributed income from the trust funds. On or about March 13, 1936, the petitioner duly applied to the commissioner of taxes, pursuant to the provisions of P.L. 908, for a revision of the taxes assessed against it on account of such income for the years 1933 and 1934; on or about March 8, 1938, it applied for a revision of the tax assessed against it for the year 1935; on or about May 2, 1938, it applied for a revision of the tax assessed against it for the year 1936; and on or about June 11, 1938, it applied for a revision of the tax assessed against it for the year 1937. These applications were held and heard together, and after hearing thereon, were, on August 29, 1939, denied by the commissioner of taxes; and the petitioner thereupon petitioned the Washington county court, pursuant to P.L. 909, for a revision of the determination of the commissioner, and for a refund of any taxes paid which should be found to have been illegally assessed. The case comes here upon the exceptions of both parties.

In this Court the petitionee filed a motion to dismiss the petition because the presiding judge of the county court did not take security by way of recognizance to the petitionee, conditioned that if the petitioner fails to prosecute its appeal to effect it will pay the intervening damages and costs accruing to the petitionee by reason of such appeal, as required by P.L. 2114. This motion was overruled.

P.L. 909 directs that the citation attached to the petition shall be signed by the county clerk and says nothing about any recognizance. As to whether any recognizance was required we need not determine, but it is clear that the kind of a recognizance set up in the motion was unnecessary. P.L. 2114 is a part of chapter 92 of the Public Laws, which has to do with new trials in the supreme, county and municipal courts; with the setting aside of default judgments rendered by a county or municipal court, when the defendant or a trustee is unjustly deprived of a hearing by fraud, accident or mistake; with granting leave to enter an appeal from the probate court where the petitioner has been prevented from taking or entering an appeal by fraud, accident or mistake; and with setting aside judgments of a justice of the peace in certain cases of fraud, accident and mistake, and hearing and determining the action in a court having jurisdiction of causes appealed from such justice. From an examination of P.L. 2114, it clearly appears that its provisions are applicable only to proceedings authorized by such chapter.

The petitioner claims that the undistributed income is exempt from taxation under the provisions of P.L. 875, 11(f), as amended by Laws 1937, No. 38, pt. 3, § 4, which reads as follows:

"II. The words 'gross income' do not include the following items, which shall be exempt from taxation under this chapter except as otherwise provided: * * *

"(f) An individual or fiduciary who holds in trust a fund to be used exclusively for charitable, benevolent, religious, public or educational purposes."

In view of the definition of "gross income" as given in division I of this section to include gains, profits and income derived from salaries, wages, or compensation for personal service, or from professions, vocations, trades, business, commerce, and net rentals from real and personal property, the net income from which, under the provisions of P.L. 873 is taxed at one rate, while the income from investments is taxed at another rate, it may have been inept to put paragraph (f), supra, in sec. 875, rather than in a section referring to investment income, although if a fund was invested in income producing real estate and tangible personal property, to that extent it is aptly placed.

If it can fairly be done, a statute must be so construed as to accomplish the purpose for which it is intended, and the intention and meaning of the Legislature are to be ascertained and given effect, not from the letter of the law which is not in all cases a safe guide, but from an examination of the whole and every part of the act, the subject matter, the effects and consequences, and the reason and spirit of the law, although the intention and meaning thus ascertained conflict with the literal sense of the words. Brammall v. Larose, 105 Vt. 345, 349, 165 A. 916, and cases cited.

An examination of the prior paragraphs (a) to (e) inclusive shows that they speak of certain classes of income "received" or "acquired", while paragraph (f) mentions an individual or fiduciary who "holds" in trust. Taking chapter 39 of the Public Laws relative to income taxes, of which sec. 875 is a part, as a whole, and also having regard to the provisions of P.L. 590, IV, relative to the exemption from taxation of real and personal estate granted, sequestered or used for public, pious or charitable uses, which had long been in force prior to the enactment of the income tax law, it is clear, as the court below ruled, that the Legislature intended to exempt the income from a fund held in trust and to be used exclusively" for the purposes enumerated, although the proper words to specifically set forth income are not used, and this exemption applies to all kinds of income received from such a fund, whether from tangible or intangible property.

A statute providing for exemption from taxation is to be strictly construed, and no claim for exemption can be sustained unless within the express letter or the necessary scope of the exemption clause. Spaulding v. City of Rutland, 110 Vt. 186, 192, 3 A.2d 556; City of Winooski v. Companion, 105 Vt. 1, 162 A. 795; Town of Sheldon v. Sheldon Poor House Ass'n, 100 Vt. 122, 130, 135 A. 492; In re Hickok's Estate, 78 Vt. 259, 262, 62 A. 724, 6 Ann.Cas. 578. Thus viewed, we hold that the word "exclusively" applies to the entire use of the fund, and not merely to that part of the income from the fund which is to be used for the enumerated purposes. As the trust fund is to be used in part for non-exempt purposes, all the income therefrom is subject to taxation.

The county court held that, as the petitioner is a non-resident, it is not taxable upon the undistributed income of this trust fund, and gave judgment for a refund of the taxes paid. The exceptions saved require an examination of the applicable provisions of the Public Laws.

By sec. 872, II, a "fiduciary" means a guardian, trustee, executor, administrator, receiver, conservator, or any person, whether individual or corporate, acting in any fiduciary capacity for any person, estate or trust. By sec. 873, an income tax is imposed upon every resident of the State, and the rates and exemptions are set out. Sec. 874 reads as follows:

"I. The taxes imposed by this chapter shall be imposed upon fiduciaries, which taxes shall be levied, collected and paid annually with respect to:

"(a) That part of the net income and the income from stocks, bonds, notes, agreements or other interest bearing securities of estates or trust which has not been distributed to beneficiaries during the income year. In the case of two or more joint fiduciaries, part of whom are nonresidents of the state, such part of the net income shall be treated as if each fiduciary had received an equal share; [By No. 38 of the Acts of 1937, Part III, sec. 3, the last sentence was amended out.]

"(b) The net income and income from stocks, bonds, notes, agreements or other interest bearing securities received during the income year by deceased individuals who, at the time of death, were residents and who have died during the tax year without having made a return;

"(c) The net income and income from stocks, bonds, notes, agreements or other interest bearing securities...