New England Mut. Life Ins. Co. v. City of Boston

• Decision Date: 04 November 1947
• Citation: 321 Mass. 683,75 N.E.2d 505
• Parties: NEW ENGLAND MUT. LIFE INS. CO. v. CITY OF BOSTON. JOHN HANCOCK MUT. LIFE INS. CO. v. SAME.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

321 Mass. 683

75 N.E.2d 505

NEW ENGLAND MUT. LIFE INS. CO.

v.CITY OF BOSTON.

JOHN HANCOCK MUT. LIFE INS. CO.

v.SAME.

Supreme Judicial Court of Massachusetts, Suffolk.

Nov. 4, 1947.

Report from Superior Court, Suffolk County; F. Forte, Judge.

Actions of contract by New England Mutual Life Insurance Company against the City of Boston, and actions by the John Hancock Mutual Life Insurance Company against the City of Boston to recover taxes paid on personal property. The actions were submitted to the superior court on a case stated and, without decision, were reserved and reported to the Supreme Judicial Court.

Judgment in each action for plaintiff.

Before QUA, C. J., and LUMMUS, RONAN, and WILLIAMS, JJ.

G. Hoague and R. C. Williams, Jr., both of Boston, for New England Mutual Life Ins. Co.

E. L. Twomey and J. A. Perkins, both of Boston, for John Hancock Mut. Life Ins. Co.

K. Hern, of Boston, for City of Boston.

RONAN, Justice.

The plaintiff New England Mutual Life Insurance Company brought four actions of contract against the city of Boston to recover taxes paid by it upon personal property which was in its possession under various leases upon the first days of January 1942, 1943, 1944 and 1945, respectively. The plaintiff John Hancock Mutual Life Insurance Company also brought four actions to recover taxes paid by it upon personal property leased to it and in its possession on the above mentioned dates. The four actions of each plaintiff were submitted to a judge of the Superior Court upon a case stated. The judge, at the request of the parties and without decision, reserved and reported the actions to this court.

Both plaintiffs are domestic life insurance companies having their principal offices in Boston. Neither engages in any other business. The property taxed to the plaintiffs comprised electric bookkeeping and accounting devices, which were used by them in the ordinary conduct of their business in making up records, mailing letters, keeping accounts with policyholders and others, preparing numerous complicated actuarial calculations, and mailing, receiving and handling hundreds of checks daily. This personal property was leased to the respective plaintiffs by different lessors. The lessors were foreign corporations, engaged in the business of manufacturing and leasing these devices. Each of the lessors was authorized to engage in business within the Commonwealth during the years 1942, 1943, 1944 and 1945. Each had been classified by the commissioner of corporations and taxation as a foreign corporation, as defined in G.L.(Ter.Ed.) c. 63, § 30. See St.1943, c. 459, § 1. None of them was a manufacturing corporation, as defined in G.L. (Ter.Ed.) c. 63, § 42B, as appearing in St.1937, c. 383, § 2, and none was engaged in manufacturing within this Commonwealth. None of them was a corporation without capital stock subject to taxation under G.L.(Ter.Ed.) c. 157, § 18. Each of the lessors during these four years filed with the commissioner of corporations and taxation corporate excise tax returns under G.L.(Ter.Ed.) c. 63, § 40, as appearing in St.1933, c. 58, § 2, in which was included the property leased by that particular lessor to one of the plaintiffs, and each of the lessors paid to the Commonwealth all corporate excise taxes and all other taxes due to the Commonwealth.

The plaintiffs contend that the property was exempt from local taxation by virtue of G.L.(Ter.Ed.) c. 59, § 5, Sixteenth, as appearing in St.1941, c. 467. Section 5 enumerates certain classes of property which are exempt from local taxation. Certain property of certain corporations is exempted by clause Sixteenth of that section, which, in so far as material, reads as follows: ‘Sixteenth, Property, other than real estate, poles, underground conduits, wires and pipes, and other than machinery used in manufacture or in supplying or distributing water, owned by Massachusetts savings banks or co-operative banks, by Massachusetts corporations subject to taxation under chapter sixty-three except domestic business corporations as defined in section thirty of said chapter or domestic manufacturing corporations, as defined in section thirty-eight C of said chapter, or by foreign corporations subject to taxation under section twenty, section twenty-three or section fifty-eight of said chapter; * * * also property, other than real estate, poles, underground conduits, wires and pipes, and other than machinery used in the conduct of the business, owned by domestic business corporations or by foreign corporations, as defined in section thirty of chapter sixty-three; * * * provided, that the term ‘machinery used in the conduct of the business' shall not, as herein used, be deemed to include stock in trade.’

The lessors were, doubtless, foreign corporations, as defined in section 30 of chapter 63, as amended, and the leased property was exempted by clause Sixteenth from local taxation unless it was machinery used by the lessors in the conduct of their business and not a part of their stock in trade.

We assume, without deciding, that this personal property which was in the possession of the respective plaintiffs as lessees was machinery. Murphy v. O'Neil, 204 Mass. 42, 90 N.E. 406, 26 L.R.A.,N.S., 146. The leased property, however, was a part of the merchandise which the lessors owned and held for the purpose of leasing it in the usual course of their business to those who were willing to hire it. The leasing of the machinery was the means employed by the lessors to conduct their business just as the sales of goods over the counter by a merchant are the method by which he maintains his business. The machinery was as much stock in trade of the lessors as were the goods of the merchant. It was held in Singer Manuf. Co. v. County Commissioners of Essex, 139 Mass. 266, 1 N.E. 419, that sewing machines owned by a foreign corporation having a store in Lynn, in the possession of third persons under contracts by which such persons agreed to pay rent for such machines and, after such rent had been fully paid, to purchase said machines, were ‘stock in trade’ of the petitioner within Pub.Sts. c. 11, § 20, First, providing that the stock in trade should be taxed in the place where the owners hired or occupied a manufactory, store, shop or wharf. It was said at pages 267, 268 of 139 Mass., at page 419 of N.E., that ‘It cannot be questioned that the machines kept by the petitioner in its store in Lynn for the purpose of sale or letting belonged to its stock in trade. We see no ground for the contention that a machine ceased to be stock in trade when a contract was made for its sale, or when it was let for hire, and the possession delivered to the lessee. By the contract under which the possession was delivered, the general and taxable property in the machine remained in the petitioners [the lessor], and was held for the purposes of the business carried on at its store as fully as if the machines remained in the store.’ It was said in New York Biscuit Co. v. Cambridge, 161 Mass. 326, 37 N.E. 438, 439, that stock in trade means ‘the visible and tangible property with which the trade or business of the owner is carried on, and to which it relates.’ The property leased to these plaintiffs constituted the stock in trade of the lessors. See Boston Loan Co. v. Boston, 137 Mass. 332;Renziehausen v. Lucas, 280 U.S. 387, 50 S.Ct. 156, 74 L.Ed. 501;Roney v. Commissioner of Internal Revenue, 4 Cir., 67 F.2d 165;Charles J. Off & Co. v. Morehead, 235 Ill. 40, 85 N.E. 264, 20 L.R.A.,N.S., 167, 126 Am.St.Rep. 189,14 Ann.Cas. 434.

The leased property being a part of the stock in trade of the lessors, it was not subject to a local tax to them so long as they were the owners; and it having been included in the excise taxes paid by the lessors, it ought not to be burdened further by a local tax. The instant taxes, however, have been assessed to the lessees, and the question arises whether the exemption which the property had enjoyed was destroyed by a transfer of its possession and use to them by the owners. Clause Sixteenth which creates the exemption does not require the retention of possession by the owner as a prerequisite to the existence and continuance of the exemption. Where an exemption from local taxation is conditioned upon the retention of possession or use of the property by the owner, it is usual for the Legislature to express such conditions in the statute. See, for example, Grasselli Chemical Co. v. Assessors of Boston, 281 Mass. 79, 183 N.E. 150;Assessors of Weston v. Trustees of Boston College, 296 Mass. 399, 6 N.E.2d 363;Irving Usen Co., Inc., v. Assessors of Boston, 309 Mass. 544, 36 N.E.2d 373;Animal Rescue League of Boston v. Assessors of Bourne, 310 Mass. 330, 37 N.E.2d 1019, 138 A.L.R. 110;Boston v. Quincy Market Cold Storage & Warehouse Co., 312 Mass. 638, 45 N.E.2d 959. Unless this exemption which is on the property itself is controlled by some other statutory provision authorizing the assessment of a local tax to the lessees upon this property, the latter are not liable for the tax. We proceed to consider the statutes which the defendant contends make the property subject to such a tax to the lessees.

The city points to general provisions of our statutes authorizing the taxation of personal property, G.L.(Ter.Ed.) c. 59, §§ 2, 4, but these sections and the original statutes from which they stem have been held not to authorize the imposition of a property tax upon the personal property of domestic corporations before or since the enactment of St.1864, c. 208, adopting our present system of an excise tax on domestic corporations, or in the case of foreign corporations before or since the enactment of St.1919, c. 355, Part II, establishing a similar excise taxing system for foreign corporations, except where a statute in specific terms provided for a tax upon certain personal property of a corporation or where such property, not being indirectly...