Sydney v. Commissioner of Corporations and Taxation

• Decision Date: 03 November 1976
• Citation: 356 N.E.2d 460,371 Mass. 289
• Parties: Stanley H. SYDNEY et al. v. COMMISSIONER OF CORPORATIONS AND TAXATION et al. 1
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 460

356 N.E.2d 460

371 Mass. 289

Stanley H. SYDNEY et al.

v. COMMISSIONER OF CORPORATIONS AND TAXATION et al.

¹

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Sept. 15, 1976.

Decided Nov. 3, 1976.

Myrna Putziger, Cohasset, for plaintiffs.

Howard Whitehead, Asst. Atty. Gen., for defendant.

Before HENNESSEY, C.J., and REARDON, QUIRICO, KAPLAN and WILKINS, JJ.

KAPLAN, Justice.

After commencing the present action for a declaratory judgment by filing a complaint in the Superior Court, the plaintiffs moved for preliminary injunctive relief. On the defendants' suggestion at the hearing that the court lacked jurisdiction of the subject matter, the judge, acting under Mass.R.Civ.P. 12(h)(3), 365 Mass. 754 (1974), ² entered judgment of dismissal. We took the case for direct review on our own initiative under G.L. c. 211A, § 10(A). For the reasons given below, we reverse and remand the case to the Superior Court for a discretionary determination on a better record whether the action should be entertained or dismissed.

We summarize the plaintiffs' case as seen from the complaint. Named as plaintiffs are Stanley H. Sydney and Arthur M. Winn, sole partners of Sydney & Winn Salem Associates, a general partnership, which is one of two general partners of Pequot Associates, a limited partnership. The latter partnership is the owner and developer of a residential apartment project in the city of Salem approved as an urban redevelopment project under G.L. c. 121A. The defendants are the board of assessors of Salem, the city of Salem, and the Commissioner of Corporations and Taxation.

Under c. 121A, § 10 (first par.), ³ the project is exempted from property taxation for forty years, but the Commonwealth levies, instead, an annual excise of five per cent of the gross income of the project plus one per cent of the fair cash value of the real estate and improvements constituting the project (with certain provisos). § 10 (third par.). However, if the Department of Community Affairs requests, the local assessors make a determination of the maximum fair cash value of the project as proposed, or of such values of any stages of the project, and their determinations then constitute the upper limits of value in the computation of the excise, except when it is shown that real estate or tangible personal property has been acquired which was not included in the project as proposed. § 10 (seventh par.; cf. fourth par.).

On July 12, 1972, the assessors determined under § 10 (seventh par.) that the maximum fair cash value of the land involved in the Pequot project was $300,000, and of the proposed improvements, $3,470,000. At the same time, pursuant to c. 121A, § 6A, ⁴ Pequot Associates entered into an agreement with the city of Salem to pay the city annually the excess of the respective following amounts over the excises payable pursuant to § 10: in each calendar year through the year in which building was completed, an amount determined by multiplying the real estate tax rate for such year by the fair cash value of the land, agreed to be $300,000; and in each subsequent calendar year (through the fortieth year in which the project is subject to c. 121A), an amount equal to fifteen per cent of the gross income of the project for the year (but not more than the real estate tax rate for such year multiplied by the maximum fair cash value of the project as fixed by the assessors). By later agreement of May 14, 1974, Pequot Associates agreed with the city of Salem to define the term 'completion' in the agreement of July 12, 1972, as 'issuance by Massachusetts Housing Finance Agency (MHFA) of its Certificate of Approval and Acceptance' for the project. ⁵

The complaint sets out a document entitled 'Certificate of Approval and Acceptance' signed for MHFA by its executive director, dated February 28, 1975, which states that, pursuant to a provision of a construction loan agreement of June 29, 1972, with Pequot Associates, MHFA 'hereby approves and accepts the project as being satisfactorily completed.'

On the same date, February 28, 1975, the assessors carried out their duty under § 10 (second par.) of certifying to the State Tax Commission and the taxpayer the value as of January 1 on which the excise was to be based; under the same statutory provision, the taxpayer might appeal the valuation to the Appellate Tax Board on or before April 1. The assessors certified 'the fair cash value of property consisting of land and buildings' to be $5,770,000.

The plaintiffs allege that, for purposes of the excise, the project was not complete on January 1, 1975, and therefore the applicable excise should be figured on the fair cash value of the land as previously determined by the assessors ($300,000), not on the value of the whole project (which in all events should be the $3,770,000 previously determined by the assessors, plus only the value of additions, if there were any). For the proposition that the project was incomplete on January 1, 1975, the plaintiffs' pleading appears to rely on the MHFA's certificate with its February 28 date.

Concluding, the complaint, filed on March 18, 1975, alleges that a genuine controversy exists, and prays a declaration as just indicated with respect to the proper base for computing the 1975 excise; it seeks also interlocutory relief in the form of a preliminary injunction extending, for some period after March 15, 1975, the date for filing the excise return.

The slim record before us consists essentially of the complaint and the judgment of dismissal. In view of the judge's reference to a lack of subject matter jurisdiction, and in the absence of any statement of reasons indicating that he was exercising discretion, we are entitled to assume that the judge thought the plaintiffs were barred from a declaratory action simply because they had available to them the regular, designated route of attack through the Appellate Tax Board (with final appeal to this court, see G.L. c. 121A, § 10 (second par.), referring to G.L. c. 58A, § 13). ⁶ In other words, the decision is taken to rest on the theory that the failure of the plaintiffs to exhaust their administrative remedy gave the defendants an automatic defense to the action, and the appeal has been argued on this basis. (For present purposes we need not pursue the question whether such a defense, if it existed, should strictly be entitled lack of subject matter jurisdiction, which implies an absence of power or competence to hear and decide, or might rather be called by some other name.) ⁷

Our decided cases do not accord with the judge's approach. We have held repeatedly, in the tax field, ⁸ that a declaratory action is not ousted merely by fact that the taxpayer has an administrative path to relief. Rather we have taken the view that the judge in such a case may still exercise a discretion as to whether the action should be entertained. See East Chop Tennis Club v. Massachusetts Comm'n Against Discrimination, 364 Mass. 444, 449--450, 305 N.E.2d 507 (1973); Sears Roebuck & Co. v. Somerville, 363 Mass. 756, 758 n. 4, 298 N.E.2d 693 (1973); Massachusetts Mut. Life Ins. Co. v. Commissioner of Corps. & Taxation, 363 Mass. 685, 688, 296 N.E.2d 805 (1973) (involving an interpretation of G.L. c. 121A); Massachusetts Ass'n of Tobacco Distribs. v. State Tax Comm'n, 354 Mass. 85, 87--88, 235 N.E.2d 557 (1968); Stow v. Commissioner of Corps. & Taxation, 336 Mass. 337, 339, 145 N.E.2d 720 (1957); Squantum Gardens, Inc. v. Assessors of Quincy, 335 Mass. 440, 443, 140 N.E.2d 482 (1957); Madden v. State Tax Comm'n, 333 Mass. 734, 735--737, 133 N.E.2d 252 (1956). ⁹ From these decisions no comprehensive formula emerges governing the exercise of discretion, but the following can be observed. Unless the administrative remedy is 'seriously inadequate' under all the conditions of the case, it should not be displaced by an action for a declaration (see Leto v. Assessors of Wilmington, 348 Mass. 144, 149, 202 N.E.2d 922 (1964)), and care must be taken lest allowance of a judicial substitute disrupt unduly the orderly collection of tax. 'Injunctions delaying the collection of the tax are not a necessary part of declaratory procedure and caution should be exercised in granting them.' Qua, C.J., in Meenes v. Goldberg, 331 Mass. 688, 691, 122 N.E.2d 356, 359 (1954). ¹⁰ Favorable to maintenance of a declaratory action, on the other hand, is the circumstance that the issue is important or novel or recurrent; that the decision will have public significance, affecting the interests of many besides the immediate litigants; or that the case reduces to an issue of law without dispute as to the facts. See East Chop Tennis Club, supra, 364 Mass. at 450, 305 N.E.2d 507; Massachusetts Mut. Life Ins. Co., supra, 363 Mass. at 688, 296 N.E.2d 805; Stow, supra, 336 Mass. at 342, 145 N.E.2d 720; Squantum Gardens, Inc., supra, 335 Mass. at 443, 140 N.E.2d 482. ¹¹

As the question is one of discretion in light of the total controversy, it will often be unwise or unsafe to attempt to decide it on the basis of the complaint alone; thus the court said (in a pre-Rules case), 'Since the bill states a case within the declaratory judgment statute, it is proof against demurrer.' Carlton Hotel, Inc. v. Abrams, 322 Mass. 201, 203, 76 N.E.2d 666, 667 (1948). See Stow, supra, 336 Mass. at 342, 145 N.E.2d 720. Cf. Nearis v. Gloucester, 357 Mass. 203, 257 N.E.2d 467 (1970). And where a judge at the trial level has confined himself artificially to the pleading--has acted on the basis of words when he should have looked to the facts ¹²--this court on appeal has characteristically remanded the case so that the story might be spelled out further to provide a better groundwork for the discretionary judgment. Stow, supra, 336 Mass. at 342, 145 N.E.2d 720; Carlton Hotel, Inc., supra, 322 Mass. at 203, 76 N.E.2d 666; Hogan v. Hogan, 320 Mass. 658, 663, 70 N.E.2d 821 (1947).

A remand is called for here...