Saltonstall v. Treasurer & Receiver Gen.

• Decision Date: 10 July 1926
• Citation: 256 Mass. 519,153 N.E. 4
• Parties: SALTONSTALL et al. v. TREASURER AND RECEIVER GENERAL.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

256 Mass. 519

153 N.E. 4

SALTONSTALL et al.

v.TREASURER AND RECEIVER GENERAL.

Supreme Judicial Court of Massachusetts, Suffolk.

July 10, 1926.

Report from Supreme Judicial Court, Suffolk County; William Cushing Wait, Judge.

Suit in equity by Leverett Saltonstall and others, trustees, against the Treasurer and Receiver General of the Commonwealth and others, for instructions as to duty respecting excise taxes. On report of a single justice on petition, answer, and finding of fact. Decree of instructions entered.A. D. Hill, of Boston, for plaintiffs.

T. Hunt, of Boston, for individual defendants.

E. H. Abbot, Jr., of Boston, for defendant Treasurer and Receiver General.

RUGG, C. J.

This is a suit in equity by trustees holding property under an indenture of trust, asking for instructions as to their duty respecting certain excise taxes claimed by the commonwealth. In 1905, 1906, and 1907, Peter C. Brooks transferred to the petitioners or their predecessors property of considerable value upon enumerated trusts in substance as follows, so far as here material: (1) To pay the income to Mr. Brooks during his life or to allow it to accumulate at his option. (2) After the death of himself and his wife to pay the income in equal shares to his children, Mrs. Saltonstall and Lawrence Brooks upon spendthrift trust provisions as to each child (modified by later amendment so as to give to the trustees in addition discretionary power to apply the share of the son for his benefit, or to pay it to guardians, or to accumulate it). (3) After the death of each child, to pay the income to surviving issue of such child and ultimately to divide the principal, with gifts over in default of issue. The terms and provisions of the trust instrument might be changed and the trusts terminated by writings signed by Mr. Brooks and by one or more of the trustees. Mr. Brooks died January 27, 1920, having survived his wife and being survived by both his children. The trust instrument was changed as already pointed out with respect to the son. The trust also was terminated as to certain shares of stock and the trustees required to transfer them to the daughter. In 1919 the trust instrument was further amended by providing that during the life of Mr. Brooks the entire income should be accumulated and added to the principal.

At the times of the transfers of property to the trustees in 1905, 1906, and 1907, there was no statute imposing an inheritance tax upon property passing to children. The point to be decided is whether the shares of the children of Mr. Brooks under the trust are subject to an excise to be assessed as of the date of his death. The interest which the daughter took under the trust instrument was not an absolute right to the designated share of the income with the power of alienating it in advance, but only the right to receive that share of income, which became her absolute property only upon payment to her, and not before. Broadway National Bank v. Adams, 133 Mass. 170, 173,43 Am. Rep. 504;Boston Safe Deposit & Trust Co. v. Collier, 222 Mass. 390, 111 N. E. 163, Ann. Cas. 1918C. 962;Haskell v. Haskell, 234 Mass. 442, 125 N. E. 601. The interest which the son took was more attenuated because in addition to the spendthrift trust discretion was validly vested in the trustees to make expenditures themselves for his benefit and withhold the balance of income and add it to the principal. Foster v. Foster, 133 Mass. 179;Brown v. Lumbert, 221 Mass. 419, 108 N. E. 1079;Wright v. Blinn, 225 Mass. 146, 114 N. E. 79.

The governing statutes are as follows: St. 1916, c. 268, § 1, amending the preexisting general excise tax law on successions, St. 1909, c. 490, pt. 4, § 1, so as to read in its parts material to the case at bar, in these words:

‘All property within the jurisdiction of the commonwealth, corporeal or incorporeal, and any interest therein, belonging to inhabitantsof the commonwealth, and all real estate within the commonwealth, or any interest therein, * * * which shall pass by will, or by the laws regulating intestate succession, or by deed, grant or gift, except in cases of a bona fide purchase for full consideration in money or money's worth, made or intended to take effect in possession or enjoyment after the death of the grantor or donor, * * * shall be subject to a tax. * * *’

See now G. L. c. 65, § 1.

By section 4 of said chapter 268 it was provided:

‘This act shall take effect upon its passage, but it shall apply only to property or interests therein passing or accruing upon the death of persons who die subsequently to the passage hereof.’

See G. L. c. 65, § 36.

St. 1914, c. 563, amended the preexisting general excise tax on successions, St. 1909, c. 490, pt. 4, § 25, so as to read:

‘This part shall not apply to estates of persons deceased prior to the date when chapter five hundred and sixty-three of the acts of the year nineteen hundred and seven took effect, nor to property passing by deed, grant, sale or gift made or intended to take effect in possession or enjoyment after the death of the grantor when such death occurred prior to said date; but said estate and property shall remain subject to the provisions of law in force prior to the passage of said chapter.’

See G. L. c. 65, § 36.

It was provided by St. 1909, c. 527, § 8, that--

‘Whenever any person shall exercise a power of appointment derived from any disposition of property made prior to September first, nineteen hundred and seven, such appointment when made shall be deemed to be a disposition of property by the person exercising such power, taxable under the provisions of chapter five hundred and sixty-three of the acts of the year nineteen hundred and seven, and of all acts in amendment thereof and in addition thereto, in the same manner as though the property to which such appointment relates belonged absolutely to the donee of such power, and had been bequeathed or devised by the donee by will; and whenever any person possessing such a power of appointment so derived shall omit or fail to exercise the same within the time provided therefor, in whole or in part, a disposition of property taxable under the provisions of chapter five hundred and sixty-three of the acts of the year nineteen hundred and seven and all acts in amendment thereof and in addition thereto shall be deemed to take place to the extent of such omission or failure in the same manner as though the persons or corporations thereby becoming entitled to the possession or enjoyment of the property to which such power related had succeeded thereto by a will of the donee of the power failing to exercise such power, taking effect at the time of such omission or failure. * * *’

See G. L. c. 65, § 2. The additional taxes provided by St. 1918, c. 191, and St. 1919, c. 342, § 4, are pertinent, but no separate question of law is raised touching them and they need not be considered in detail.

All these statutes are in substance, when not in these exact words, entitled ‘Taxation of Legacies and Successions.’ Their words make plain the legislative purpose to impose the excise on whatever rightly may be termed a ‘succession’ coming within the specific statutory description. ‘Succession,’ as that word is used in the statute, has been said in numerous decisions to include the privilege enjoyed by the beneficiary of succeeding to the possession and enjoyment of property. In Attorney General v. Stone, 209 Mass. 186, at page 190, 95 N. E. 395, 397, occur these words:

‘This is an excise tax, imposed not only upon the right of the owner of property to transmit it after his death, but also upon the privilege of his beneficiaries to succeed to the property thus dealt with. Minot v. Winthrop, 162 Mass. 113, 124 [38 N. E. 512,26 L. R. A. 259];Crocker v. Shaw, 174 Mass. 266, 267 . The privilege is not fully exercised until the property shall have come into the possession of the beneficiary. This rule underlies the reasoning of Minot v. Treasurer and Receiver General, 207 Mass. 588 [93 N. E. 973,32 L. R. A. (N. S.) 1010]. And see the cases there cited. Until the full exercise of such privilege and while as yet no tax has been assessed and paid thereon, we see no reason why, by a general rule applicable to all such cases, any pending liability to taxation may not be regulated so as to subject it to a just and uniform method of assessment, even though some change may thereby be made from the method previously adopted.’

In Burnham v. Treasurer and Receiver General, 212 Mass. 165, at page 167, 98 N. E. 603, 605, an excise was upheld ‘as a tax levied upon the privilege exercised by the beneficiaries on their coming into the possession and enjoyment of the property.’ It is manifest from these decisions that succession includes, or may by the Legislature lawfully be described to include, as an essential element the entering into possession and enjoyment of property by the beneficiary. See Pratt v. Dean, 246 Mass. 300, 140 N. E. 924. This point is covered, also, by Magee v. Treasurer and Receiver General, 255 Mass.-,153 N. E. 1, decided this day. The words of St. 1916, c. 268, § 1, to the effect that interests passing and ‘made or intended to take effect in possession or enjoyment after the death of the grantor or donor’ shall be subject to the tax, are precisely applicable to the facts disclosed in the case at bar. The words of section 4 of the same chapter, making the tax applicable to property or interests ‘passing or accruing’ upon the death of persons subsequent to the act, confirm what already has been said. ‘Accruing’ in this connection has some antithesis to ‘passing,’ and was intended to include the entering into ‘possession or enjoyment’ made subject to the tax by section 1.

The terms of the trust instrument as to change and termination of the several trusts by Mr. Brooks and one trustee include in substance and effect a power of appointment within the meaning of St. 1909, c. 527, § 8. See now G....