Kimball v. Cotting

• Decision Date: 28 February 1918
• Parties: KIMBALL et al. v. COTTING et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

229 Mass. 541

118 N.E. 866

KIMBALL et al.

v.COTTING et al.

Supreme Judicial Court of Massachusetts, Suffolk.

Feb. 28, 1918.

Report from Superior Court, Suffolk County; John A. Aiken, Judge.

Action by David P. Kimball and others, trustees, against Charles E. Cotting and others, trustees. On report without decision on the agreed statement of facts to the Supreme Judicial Court. Judgment ordered for plaintiffs.

Felix Reckemann and Harrison M. Davis, both of Boston, for plaintiffs.

Tyler, Corneau & Eames, of Boston, for defendants.

RUGG, C. J.

The question presented is whether the burden of the federal income tax on the rent reserved in a lease of real estate in Boston, of which the owners and lessors are the plaintiffs, and the lessees are the defendants, must be borne by the former or by the latter. The answer to that question depends upon the words of the lease. It is dated in 1902 for a term of ninety-nine years. One of its covenants provides comprehensively that the lessees shall pay ‘all taxes, charges, assessments, betterments, and liens' in any way assessed and levied upon or payable for or in respect of the demised premises. Another covenant upon which the decision must turn is this:

‘The lessess covenant and agree to pay and discharge any taxes or excises which during the term may on any assessment day be lawfully levied or assessed to either the lessors or the lessees upon or against the rent payable hereunder [41st word] for or in respect of the period between such assessment day and the last prior assessment day, or for or in respect of the period between the first of such assessment days and one calendar year prior thereto, whether levied or assessed upon the same as rental or income, but not for any other taxes or excises in respect thereof.’

This covenant relates exclusively to the payment of taxes and excises levied upon the rent reserved by the lease. It concerns no other subject. It expressly includes such taxes and excises whether levied against the lessors or the lessees. It makes no difference with the scope of the covenant whether the burden is imposed by the law upon the one or the other. In either event the lessees are liable by contract of the parties, so far as that point goes. If the covenant ended with ‘hereunder,’ its forty-first word, the lessees undoubtedly would be liable.

But the covenant contains additional words. Further reference is made to ‘any assessment day,’ and the obligation assumed by the lessees to pay rent is limited by the words ‘for or in respect of the period between such assessment day and the last prior assessment day.’ It is manifest from words following in the covenant that it was the purpose of the parties to impose the obligation upon the lessee whether the tax was levied as a property or as an income tax. See in this connection Tax Commissioner v. Putnam, 227 Mass. 522, and cases collected at 531, 532, 116 N. E. 904, L. R. A. 1917F, 806. An income tax necessarily has reference to moneys received during a specified period of time. At any single moment one can hardly be said to have income. Duration of time is required for its measurement. On the other hand, a property tax requires a definite moment for its assessment, in order that its items and their value may be measured by reference to a known or ascertainable standard. Since by express words of the covenant the lessee is liable for the tax, whether levied upon the rent ‘as rental or as income,’ it inevitably follows that it was the intent of the parties that the words ‘assessment day’ were not intended to refer immutably to a single...