Kellems v. Brown

• Citation: 163 Conn. 478,313 A.2d 53
• Court: Supreme Court of Connecticut
• Decision Date: 27 July 1972
• Parties: Vivien KELLEMS et al. v. F. George BROWN, Tax Commissioner, et al.

Page 53

313 A.2d 53

163 Conn. 478

Vivien KELLEMS et al. v. F. George BROWN, Tax Commissioner, et al.

Supreme Court of Connecticut.

July 27, 1972.

Appeal Dismissed Jan. 8, 1973. See 93 S.Ct. 911.

John S. Murtha, Hartford, with whom were John E. Silliman and Willard F. Pinney, Jr., Hartford, and, on brief, J. Read Murphy, Hartford, for plaintiffs.

Ralph G. Murphy, Asst. Atty. Gen., with whom were John M. Dunham and Richard K. Greenberg, Asst. Attys. Gen., and, on brief, Robert K. Killian, Atty. Gen., for defendants.

Before HOUSE, C.J., and RYAN, SHAPIRO, LOISELLE and MacDONALD, JJ.

HOUSE, Chief Justice.

This case started out as an action for a declaratory judgment and for ancillary relief by way of an injunction. The action was obviously designed primarily to seek a determination of the constitutionality of chapter 224 of the General Statutes, commonly known as the Capital Gains and Dividends Tax. This chapter was enacted as Public Act No. 8 of the June, 1971, special session of the General Assembly. The procedure finally followed by the parties however, deviated from the usual practice of a direct stipulation as to the operative facts with a prayer for relief stating 'with precision the declaratory judgment desired.' Practice Book § 310(b). Instead, following the practice customarily followed in will construction suits, the parties stipulated for a reservation of the case to this court on an agreed statement of facts, propounding twenty questions on which the advice of the court was sought. See Practice Book §§ 738, 739, From 614, p. 759. Two questions (Nos. 2 and 4) were not pursued in this court and one (No. 5) has become moot. The remaining questions are set out in the footnote. ¹

Perhaps because of this unorthodox procedure many of the questions reserved for the advice of this court lack the precision and specificity which is not only desirable but also mandatory in a declaratory judgment action. Practice Book § 310(b). See Plunkett v. Nationwide Mutual Ins. Co., 150 Conn. 203, 211, 187 A.2d 754; Holt v. Wissinger, 145 Conn. 106, 109, 139 A.2d 353; Kievman v. Grevers, 122 Conn. 406, 412, 189 A. 609. More particularly, many of the questions reserved are not limited to the situation of the particular plaintiffs as disclosed in the stipulation of facts or to the impact of the statutory provisions on any right of these plaintiffs as distinguished from the rights of any person not a party to this action. '(A) plaintiff, in challenging the constitutionality of a statute, must sustain the burden of proving that the effect or impact of the challenged statute on him adversely affects a constitutionally protected right which he has. 'This means a right which he proves that he has under the facts of his particular case and not merely under some possible or hypothetical set of facts not proven to exist.' Hardware Mutual Casualty Co. v. Premo, . . . (153 Conn. 465, 471, 217 A.2d 698).' Adams v. Rubinow, 157 Conn. 150, 152, 251 A.2d 49, 55; Riley v. Liquor Control Commission, 153 Conn. 242, 215 A.2d 402; Karen v. East Haddam, 146 Conn. 720, 727, 155 A.2d 921. A number of the plaintiffs' questions are not susceptible of the dogmatic and categorical answers which the plaintiffs seek. Under the circumstances, it is only because of the importance of the issues involved and the great public interest in them that we undertake, so far as is reasonably possible, to include in our discussion answers to some of the broad questions propounded. We do so with the express caveat that such answers are applicable only within the limited context of the specific facts covered by the stipulation agreed on by the parties to this action.

Chapter 224, to which we will hereafter refer as the act, is too long to be incorporated in this opinion and may be found in the 1971 Public Acts and General Statutes §§ 12-505-12-522. In essence, the act levies an income tax on dividends received and capital gains realized by residents of Connecticut. ² It is unnecessary to summarize in any detail the facts as stipulated by the parties. It suffices to note that the defendant F. George Brown is the state tax commissioner, that the plaintiffs Vivien Kellems, Carl E. Miller and Bryan H. Marsh are all residents of Connecticut, that during 1971 Kellems and Miller received dividends as that term is defined in the federal Internal Revenue Code, and that during 1971 Marsh received net gains from the sale or exchange of capital assets as those terms are defined in chapter 224.

As briefed by the parties, the case reserved for the advice of this court involves five principal issues, four of them involving the constitutionality of the act and the fifth primarily questions of statutory construction. The plaintiffs claim that (1) chapter 224 violates the equal protection provisions of the state and federal constitutions in singling out for taxation dividends received by individuals while not taxing interest income and other types of investment income; that (2) the act is so badly drafted as to be void for vagueness under the due process clauses of the state and federal constitutions; that (3) the act unlawfully delegates legislative powers to the state tax commissioner and the federal government in violation of applicable constitutional principles; that (4) if the basis for measuring capital gains is not limited to the increase in value subsequent to December 31, 1970, then the capital gains tax violates the due process provisions of the state and federal constitutions; and that (5) even if the act is otherwise valid, a proper construction of its provisions requires that the taxpayer be permitted a deduction of 50 percent of his net long term capital gains less net short term capital losses.

I

(a) We consider first the contention of the plaintiffs that the act is unconstitutional because it establishes arbitrary and unreasonable classifications in the designation of the subject of the tax and in the added exemption allowed to 'any person who is unmarried and a widow on the last day of her taxable year'. § 12-506(c)(3). It is the plaintiffs' claim that the classifications designated by the act violate the equal protection clauses of the fourteenth amendment to the constitution of the United States, § 1, and the constitution of Connecticut, article first, § 20. The Conneciticut constitutional provision has 'a like meaning to that in the Fourteenth Amendment to the constitution of the United States which prohibits the states from denying to any person the equal protection of the laws.' Lyman v. Adorno, 133 Conn. 511, 515, 52 A.2d 702; State ex rel. Brush v. Sixth Taxing District, 104 Conn. 192, 195, 132 A. 561. The plaintiffs assert that these constitutional provisions are violated by the imposition of the tax on investment income derived from dividends and capital gains while investment income in the form of interest and rents is not subject to the tax. Similarly, they contest the constitutional validity of the provision of the act which granted to 'any person who is unmarried and a widow' a tax exemption which is two and one-half times greater than the exemption granted to other taxpayers including widowers, divorced women and women who have never married.

It is well settled that a plaintiff who attacks a statute on constitutional grounds has no easy burden. As this court said in Adams v. Rubinow, 157 Conn. 150, 152-153, 251 A.2d 49, 54: 'Because of the separation of powers, one claiming that a legislative enactment is invalid on the ground that it is unconstitutional must establish its invalidity on that ground beyond a reasonable doubt. Hardware Mutual Casualty Co. v. Premo, 153 Conn. 465, 470, 217 A.2d 698. . . . (W)here a statute reasonably admits of two constructions, one valid and the other invalid on the ground of unconstitutionality, courts should adopt the construction which will uphold the statute even though that construction may not be the most obvious one. Carilli v. Pension Commission of City of Hartford, 154 Conn. 1, 8, 220 A.2d 439; Ferguson v. Borough of Stamford, 60 Conn. 432, 447, 22 A. 782; Town of Wilton v. Town of Weston, 48 Conn. 325, 338. Of course, the fact that the plaintiffs chose to request a declaratory judgment, upon a stipulation of facts, in nowise changes or relieves them of the burden of proof resting on them. Hardware Mutual Casualty Co. v. Premo, supra, 153 Conn. 472, 473, 217 A.2d 698.' To like effect we said in Edwards v. Hartford, 145 Conn. 141, 145, 139 A.2d 599, 601: 'Courts in passing upon the validity of a legislative act do not feel justified in declaring it void unless there is a clear and unequivocal breach of the constitution . . .. We approach the question with great caution, examine it with infinite care, make every presumption and intendment in favor of validity, and sustain the act unless its invalidity is, in our judgment beyond a reasonable doubt.'

In Connecticut, the power to levy taxes is vested in the General Assembly. Beach v. Bradstreet, 85 Conn. 344, 348, 82 A. 1030. Unlike the federal constitutional limitation which existed prior to adoption of the sixteenth amendment, it appears that this state's power of taxation has never been costitutionally limited except by the constitutional requirements of equal protection and due process. See Montgomery v. Branford, 107 Conn. 699, 707-708, 142 A. 574. In selecting the subjects of taxation, legislatures have been allowed broad discretion. 'The latitude of discretion is notably wide in the classification of property for purposes of taxation and the granting of partial or total exemptions upon grounds of policy.' Royster Guano Co. v. Virginia 253 U.S. 412, 415, 40 S.Ct. 560, 562, 64 L.Ed. 989. As the United States Supreme Court observed in Madden v. Kentucky,309 U.S. 83, 87-88, 60 S.Ct. 406, 408, 84 L.Ed. 590: 'The broad discretion as to classification possessed by a legislature in the field of taxation has long been recognized. This Court fifty...