Stow v. Commissioner of Corporations and Taxation

• Decision Date: 06 November 1957
• Citation: 336 Mass. 337,145 N.E.2d 720
• Parties: Mary P. STOW, executrix, v. COMMISSIONER OF CORPORATIONS AND TAXATION.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 720

145 N.E.2d 720

336 Mass. 337

Mary P. STOW, executrix, v. COMMISSIONER OF CORPORATIONS AND TAXATION.

Supreme Judicial Court of Massachusetts, Berkshire.

Argued Sept. 26, 1957.

Decided Nov. 6, 1957.

Edward F. Mahony, Asst. Atty. Gen., for respondent.

Before WILKINS, C. J., and SPALDING, WILLIAMS, COUNIHAN and CUTTER, JJ. CUTTER, Justice.

The petitioner (hereinafter called the executrix) was appointed executrix of the will of Cyrus A. Stow (hereinafter called the testator) on December 4, 1952. The commissioner of corporations and taxation (hereinafter called the commissioner), acting through a subordinate officer of his department, on October 10, 1955, sent to the executrix a notice of proposed assessment of additional income taxes for the years 1951 and 1952, based upon alleged inaccuracy in the returns filed by the testator of income received by him in the years 1950 and 1951. These inaccuracies thus were first brought to the attention of the executrix far more than one year after the date of her qualification as executrix and after expiration of the one year period for commencement of actions provided by the so called short statute of limitations, found in G.L. (Ter.Ed.) c. 197, § 9, as amended by St.1933, c. 221, § 4, and St.1954, c. 552, § 1. The record reveals no action, under § 9 or under G.L. (Ter.Ed.) c. 197, § 10, as appearing in St.1954, c. 552, § 2, seasonably taken in behalf of the commissioner, either to extend the time for initiating actions against the testator's estate or to prosecute the claim after the expiration of the one year period by a bill in equity brought in the Superior Court (see City of Haverhill v. Porter, 333 Mass. 594, 596, 132 N.E.2d 290) or in this court.

The executrix on October 31, 1955, filed in the Probate Court this petition for declaratory relief, seeking an adjudication that the commissioner is not entitled to make any claim against the estate for back income taxes. A demurrer was filed in behalf of the commissioner alleging that the executrix had not stated facts sufficient to entitle her to relief, that the Probate Court was without jurisdiction of the subject matter, that the executrix had not shown that she had exhaused her administrative remedies under G.L. (Ter.Ed.) c. 62 as amended, and that the remedies under c. 62 were exclusive so that a petition for declaratory relief would not lie. The executrix appeals from the order sustaining the demurrer, which was entered on January 18, 1956, several weeks prior to the decision (on March 28, 1956) of this court in Madden v. State Tax Commission, 333 Mass. 734, 133 N.E.2d 252.

No final decree dismissing the petition appears to have been entered, so the appeal is not properly before us. See Rowe v. Bragg, 300 Mass. 298, 15 N.E.2d 230; Vincent v. Plecker, 319 Mass. 560, 562-563, 67 N.E.2d 145. However, since the matter, on certain issues, has been briefed and argued, we comment (see Town of Wakefield v. Attorney General, 334 Mass. 632, 634-636, 138 N.E.2d 197) on those issues in an effort to avoid the delays incident to perfecting the record and resubmission of the case.

It is now established that the remedies provided in G.L. (Ter.Ed.) c. 62, §§ 43-46, as amended, ¹ although declared to be 'exclusive' in § 48 of that chapter, do not prevent courts of equity, as a discretionary matter, from entertaining petitions for declaratory relief under the later enacted G.L. (Ter.Ed.) c. 231A, inserted by St.1945, c. 582, § 1, in matters which affect or control issues which may be raised as of right by proceedings under §§ 43-46. Madden v. State Tax Commission, 333 Mass. 734, 133 N.E.2d 252, the language of which is broad enough, in paragraph (2) at pages 736-737, and at pages 253-254 respectively, to govern a case where there has been an actual tax assessment. See Meenes v. Goldberg, 331 Mass. 688, 691, 122 N.E.2d 356; Cabot v. Assessors of Boston, 335 Mass. 53, 57, 58, 138 N.E.2d 618; Squantum Gardens, Inc., v. Assessors of Quincy, 335 Mass. ----, 140 N.E.2d 482. Of course, '[u]pon demurrer, a bill stating a case within the declaratory judgment statute is good, and no question of discretion whether to grant relief is open.' Burnes v. Metropolitan District Commission, 325 Mass. 731, 733, 92 N.E.2d 381, 383. See MacPherson v. Boston Edison Co., 335 Mass. ----, 142 N.E.2d 758.

The executrix contends that the commissioner is now entirely barred by the short statute of limitations and other limiting statutes from assessing and collecting any tax with respect to the testator's 1950 and 1951 income. A declaration, that the commissioner is or is not thus barred and that, if barred, the circumstances permitting him to proceed under G.L. (Ter.Ed.) c. 197, § 10, as amended (or under other provisions of c. 197), do or do not exist, would terminate and 'settle * * * the controversy submitted for decision' by the petition (compare Brown v. Neelon, 335 Mass. ----, 140 N.E.2d 213, 215) as set out in its prayer. In view of the Madden case, such a declaration would be binding on all concerned. The Probate Court has discretion to declare the relevant rights of the parties.

Analysis of the facts confirms this interpretation of the question to be decided. If the testator were still alive, the taxes now proposed to be assessed upon his alleged 1950 and 1951 income could not be assessed later than September 1, 1954 (upon alleged income of 1950), or later than September 1, 1955 (in the case of alleged income of the year 1951), by virtue of the provisions of G.L. (Ter.Ed.) c. 62, § 37 (as appearing in St.1933, c. 350, § 1, as amended by St.1949, c. 698, § 1, and St.1954, c. 605, § 1), except in 'the case of a false or fraudulent return filed with intent to evade a tax or of a failure to file a return' when an assessment may be made 'at any time.' Even if it were to be assumed (and we intend no suggestion that the assumption is warranted) that the expiration of the one year period of the short statute of limitations (G.L. [Ter.Ed.] c. 197, § 9) did not bar an assessment within the three year period provided in § 37, that three year period had already expired with respect to the income of each of the years 1950 and 1951 by the time that notice of the proposed assessment was given on October 10, 1955. There are no facts alleged in the petition which suggest any fraud by the testator and the petition does show that the testator filed income tax returns covering his income of the years 1950 and 1951. The commissioner, however, contends that his proposed assessment must be presumed to have been based on fraud and that, therefore, it would not be barred by the three year period of limitation found in the first sentence of § 37.

As to the...