Pratt v. Dean

• Decision Date: 14 September 1923
• Citation: 246 Mass. 300,140 N.E. 924
• Parties: PRATT et al. v. DEAN et al. (two cases). SAME v. PRATT et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

246 Mass. 300

140 N.E. 924

PRATT et al.

v.DEAN et al. (two cases).

SAME

v.PRATT et al.

Supreme Judicial Court of Massachusetts, Middlesex.

Sept. 14, 1923.

Case Reserved and Report from Probate Court, Middlesex County; John C. Leggat, Judge.

Three suits, by Waldo E. Pratt and others, trustees, against Minnie Palmer Dean and others, trustees, by Waldo E. Pratt and others, executors, against Waldo E. Pratt and others, trustees, and by Waldo E. Pratt and others, trustees against, minnie Palmer Dean and others, for determination of validity and apportionment of estate and succession taxes. Reserved and reported for determination by the Supreme Judicial Court. Decrees imposing tax as stated in the opinion.Jay R. Benton, Atty. Gen. (C. R. Cabot, of Boston, of counsel), for treasurer and receiver general.

Harold T. Davis and William E. Fuller, both of Boston, for Dean and others.

RUGG, C. J.

These are three suits in equity brought in the probate court as to inheritance, succession and estate taxes assessed respecting estates and properties because of the death of Charles A. Dean, testate, late of Weston in this commonwealth. On October 21, 1909, the testator with others executed a declaration of trust concerning certain real estate in Boston of which they held the title. This is known as the Dean building trust. The present trustees are Waldo E. Pratt, Eleanor H. D. Pearse and George F. Larcom. By the terms of this trust as altered and amended the net income was payable to Charles A. Dean, the testator, during his life, and after his death for the benefit of his widow and daughter during their lives and the life of the survivor, and after the decease of the survivor the trust is to be terminated by distribution of the body of the trust among charitable institutions. Charles A. Dean had power during his life to revoke, alter or amend this trust, and exercised the power of alteration and amendment. On March 12, 1913, the testator with others executed a declaration of trust concerning certain shares of stock standing in their names. This is known as the Hollingsworth & Whitney trust. The present trustees are Waldo E. Pratt, Herbert E. Fales, George F. Larcom, and M. Lester Madden. By the terms of this trust as altered and amended the net income was payable to Charles A. Dean, the testator, during his life, and after his death for the beneift of his widow and daughter during their lives and the life of the survivor, and after the death of both, the principal of the trust is to be used to establish and maintain one or more hospitals in the state of Maine. Power was given to the testator to revoke, alter or amend this trust during his life and it was thus altered and amended. Charles A. Dean died on March 30, 1921, leaving a will and codicils, which have been duly proved and allowed, of which Waldo E. Pratt, Herbert E. Fales and Eleanor H. D. Pearse are executors, whereby he gave the income of a large estate to his widow and daughter during their lives and after the death of the survivor the principal over to other persons.

A federal estate tax, payable to the United States under the acts of Congress, has been assessed, calculated by adding together the value of the property held under the Dean building trust, the value of the property held under the Hollingsworth & Whitney trust, and the value of the property held by the executors. It is alleged in the bill that this estate tax has been assessed and not paid, and there is a prayer that the validity of this tax be determined. This court has no jurisdiction in equity to determine the validity of an estate tax assessed by the United States and not paid. Warr v. Collector of Taxes of Taunton, 234 Mass. 279, 125 N. E. 557, and cases collected. It was said in Snyder v. Marks, 109 U. S. 189, 193, 3 Sup. Ct. 157, 160 (27 L. Ed. 901), that ‘the remedy of a suit to recover back the tax after it is paid is provided by statute, and a suit to restrain its collection is forbidden. The remedy so given is exclusive, and no other remedy can be substituted for it.’ Rev. St. U. S. §§ 3220, 3224, 3226, 3227 (U. S. Comp. St. §§ 5944, 5947, 5949, 5950). This principle and these statutory provisions have been declared applicable to the federal income tax. Dodge v. Osborn, 240 U. S. 118, 36 Sup. Ct. 275, 60 L. Ed. 557. They doubtless are equally applicable to the federal estate tax. There is nothing at variance in Regal Drug Co. v. Wardell, 260 U. S. 386, 43 Sup. Ct. 152, 67 L. Ed. 318, and cases there cited. We should hesitate under any conditions to pass upon the validity of a federal tax in view of these decisions and statutes of the United States, which provide ample means for testing the legality of such a tax. The case at bar presents no justification for such assumption of jurisdiction on our part. See Welch v. Treasurer & Receiver General, 223 Mass. 87, 91, 111 N. E. 774.

It is stated in the brief for the executors that they have now paid the federal estate tax under protest, to avoid interest and threatened penalties. If proper amendments are made to the bill setting out such facts and asking for apportionment of the tax between the trust and the estate, then there would be jurisdiction to pass on that subject, for the reason that Waldo E. Pratt, being a trustee under each trust and an executor, and Mrs. Pearse a trustee under one trust and an executor, they cannot bring an action at law against themselves and may resort to equity to ascertain where the burden of the tax already paid by the executors ought ultimately to rest. Bemis v. Converse, 244 Mass. --, 140 N. E. 686. The case is considered on the footing that such amendments are made.

Neither of the declarations of trust makes any provision for the payment of succession or estate taxes. Therefore the entire burden of this tax must rest upon the residuary estate in the hands of the executors. This point is fully covered by the recent decision of Bemis v. Converse, 244 Mass. --, 140 N. E. 686, where the reasons are stated at length. Plunkett v. Old Colony Trust Co., 233 Mass. 471, 124 N. E. 265, 7 A. L. R. 696;New York Trust Co. v. Eisner, 256 U. S. 345, 41 Sup. Ct. 506, 65 L. Ed. 963, 16 A. L. R. 660; Dexter v. Treasurer and Receiver General, 244 Mass. --, 140 N. E. 268.

The executors received as a part of the assets of the estate of the testator shares of stock in two corporations organized under the laws of the state of New Jersey. Neither the trustees of the Dean building trust nor of the Hollingsworth & Whitney trust had shares of stock in any New Jersey corporation. The state of New Jersey assessed to the executors inheritance or transfer taxes on account of these shares amounting to $887.61, that amount being determined by including as assets of the estate of the testator all the assets of both the Dean building trust and the Hollingsworth & Whitney trust, as well as the estate in the hands of the executors. If the assets of these trusts had not been so included, the tax assessed to the executors by the state of New Jersey in respect to such shares of stock would have been only $46.55.

There is no allegation in the bills to the effect that the executors have paid the taxes assessed by the state of New Jersey. Extraordinary circumstances differing widely from those here disclosed would be required before we should undertake to adjudicate the legality of a succession tax assessed by a sister state before it had been paid. Welch v. Treasurer and Receiver General, 223 Mass. 87, 91, 111 N. E. 774.

If it be assumed, however, that the tax has been paid and the bill amended accordingly, then there would be jurisdiction to determine how the tax should be borne by the parties hereto. Bemis v. Converse, 244 Mass. --, 140 N. E. 686.

There are not sufficient facts set forth in the record to warrant a decision as to the legality in whole or in part of the New Jersey tax. Manifestly that state had jurisdiction to impose some succession or transfer tax because the corporations in which the testator owned shares of stock were incorporated under its laws. Greves v. Shaw, 173 Mass. 205, 53 N. E. 372;Peabody v. Treasurer and Receiver General, 215 Mass. 129, 131, 102 N. E. 435;Bliss v. Bliss, 221 Mass. 201, 211, 109 N. E. 148, L. R. A. 1916A, 889;Walker v. Treasurer and Receiver General, 221 Mass. 600, 602, 109 N. E. 647;Bellows Falls Power Co. v. Commonwealth, 222 Mass. 51, 55, 109 N. E. 891, Ann. Cas. 1916C, 834. Since there was jurisdiction in the state of New Jersey to impose some tax on these shares of stock, there is no justification on this record for us to inquire into the correctness of its amount, or the soundess of its methods of calculation.

This New Jersey tax was assessed with reference to property of the estate of the intestate. The shares of stock belonged to the executors alone. The reasoning of Bemis v. Converse, 244 Mass. --, 140 N. E. 686, is applicable. No such stock was held as part of the assets of either trust. There is no provision in either trust instrument authorizing in terms the payment of such tax. The burden of such tax must remain where it is cast by the law in the first instance.

The Massachusetts legacy and succession taxes were assessed on present interests passing by reason of the death of Charles A. Dean under each of the trusts and under the will of the testator and computed on the basis that the property in the hands of the executors and of the trustees constituted a...