Welch v. City of Boston

• Decision Date: 01 March 1912
• Citation: 211 Mass. 178,97 N.E. 893
• Parties: WELCH et al. v. CITY OF BOSTON.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

211 Mass. 178

97 N.E. 893

WELCH et al. v. CITY OF BOSTON.

Supreme Judicial Court of Massachusetts, Suffolk.

March 1, 1912

COUNSEL

Fish Richardson, Herrick & Neave and Malcolm Donald, for complainants.

Thos M. Babson, for respondent City of Boston.

Wm. H White, for respondent Town of Brookline.

G. W. Anderson and A. E. Lunt, for respondent City of Beverly.

Felix Rackemann, for respondent Town of Milton.

OPINION

RUGG C.J.

These cases involve the validity of assessment made by the assessors of the several defendant municipalities for the year 1910, upon property of the estate of Quincy A. Shaw, a resident of Boston, who died in June, 1908. He left a will, duly allowed in July, 1908, under which the petitioners were appointed executors and also trustees. He gave a devise and legacy to his widow, and the residue to the petitioners in trust for the benefit of his widow and children. The question is whether the estate is taxable under clause fifth or under clause seventh of St. 1909, c. 490, pt. 1, § 23. ^[1]

Narrowly stated, it is whether the estate has been distributed by the petitioners acting in their capacity as executors to themselves as trustees. The material facts upon which it is claimed that such a distribution took place are that just before February 1, 1910, the executors met and determined to distribute to themselves as trustees a large part of the estate. Pursuant to this determination, stock certificates and registered bonds were transferred to the petitioners as trustees and certain other transfers of property were made. The physical location of the securities remained as theretofore and in the repositories were other securities belonging to them as executors. A new inventory was opened, in which the securities so transferred were marked as belonging to the trustees and separate accounts were kept except that large overdrafts were made temporarily on the executors' account for the benefit of the trustees. About April 1, 1910, notice in due form was given of the alleged transfers of property by the executors to the assessors of all the defendant municipalities, and lists filed with them. The trustees claim that thereby they should be assessed under said clause fifth in the several defendants by reason of residence therein of beneficiaries or of trustees. The city of Boston claims the right to assess the entire estate under said clause seventh. No account was filed in the probate court showing this distribution by the executors until August, 1910, and it was allowed in November, 1910.

I. The contention is made that reading these two clauses together the general purpose appears to make property held for beneficiaries taxable in their place of residence, and that under a will like the present establishing a trust fund of many millions of dollars where the debts are comparatively insignificant, such taxes became assessable from and after the death of the testator. Though this argument gains some color from the language of clause fifth, it fails to treat the two clauses as correlative parts of a single scheme of taxation, and to give due force to decisive words of clause seventh. Clause seventh governs the taxation of estates of deceased persons until the expiration of three years from the date of the appointment of the executor or administrator or until there has been an earlier distribution of the estate together with notice of the required facts to the assessors. White v. Mott, 182 Mass. 195, 65 N.E. 38. Clause fifth governs taxation after the expiration of three years from such date of appointment and, within said three years, after such distribution and notice. It also governs in case of trusts between the living, or created otherwise than by will. This is the only construction which gives natural and adequate meaning to all the language of both clauses of the statute.

II. The inquiry as to what acts one must do in order to transfer property held by him as executor to himself as trustee under the same will has been before this court several times. In Hall v. Cushing, 9 Pick. 395, at page 408, it was said: 'Before there could be any transmutation of property * * * the executor must have settled his final account of administration in the court of probate, in which the balance due from him as executor should be allowed to his credit, as retained by him in his capacity as trustee.' The requirement of an allowance of an account showing a transfer from the accountant in one capacity to himself in the other was laid down again in Conkey v. Dickinson, 13 Metc. 51-53. In Hardy v. Yarmouth, 6 Allen, 277, the precise point now argued was presented for decision. Executors of a wealthy testator transferred property to themselves as trustees under the same will, and sought to be taxed accordingly. But it was held that 'the estate had not been legally transferred by the executors until their account had been duly filed, allowed and proved in the probate court. Until that was done, it was only an initiatory step on the part of the executors to make such an account, and the status of the property, other liability of the executors to be assessed therefor in Yarmouth were not changed.'

If that case and the two others cited are still authorities, they control the determination of the case at bar. It has been earnestly urged by the counsel of the petitioners and for the municipalities other than Boston, that they ought to be disregarded. It is said that Hardy v. Yarmouth was decided correctly, but for another reason. It is true that the same result would have been reached upon the ground that no notice of distribution was given to the assessors. But the case was in fact decided as to the taxes for the year 1859 upon the ground that no account had been allowed in the probate court, and upon no other ground.

It is argued further that it has been decided that legacies paid are not proper items for executors' accounts to the probate court, and that hence Hardy v. Yarmouth is wrong in holding that an account showing a transfer allowed by the probate court is a prerequisite to a transfer for taxation purposes. Reliance is placed on Granger v. Basset, 98 Mass. 462, in support of this proposition. In that case the question was as to the effect of a probate account upon the rights as between themselves of residuary legatees in the residuum of the estate. It did not relate to the matter of taxation. One point at issue was whether a division of residuum among several distributees was to be settled by a decree upon an account, and it was held that it was not. The language used on page 469 must be read, as apparently it was intended, as applying to the precise question decided, and not as stating an abstract generalization. It is obvious, both from the tenor of the bonds of the executors then in force (Gen. Sts. c. 93, § 2) as well as from the language and decision of many early and later cases (see, for example, Minot v. Armory, 2 Cush. 377-390; Miller v. Congdon, 14 Gray, 114; Hall v. Cushing, 9 Pick. 395; Eliott v. Sparrell, 114 Mass. 404-406; Crocker v. Dillon, 133 Mass. 91-95-101; White v. Ditson, 140 Mass. 351-355, 4 N.E. 606, 54 Am. Rep. 473; Welch v. Adams, 152 Mass. 74, 25 N.E. 34, 9 L. R. A. 244; Shores v. Hooper, 153 Mass. 229, 26 N.E. 846, 11 L. R. A. 308; Brigham v. Morgan, 185 Mass. 27-45, 69 N.E. 418; Bassett v. Granger, 140 Mass. 183, 4 N.E. 228; Little v. Little, 161 Mass. 188-192, 36 N.E. 795; Porter v. Howe, 173 Mass. 521, 54 N.E. 255; Cummings v. Cummings, 143 Mass. 340-344, 9 N.E. 730), that payments of legacies are proper items in the accounts of executors. They have been treated frequently as rightly included in executors' accounts, and questions of importance have been decided arising upon such accounts. There is nothing in Cowdin v. Perry, 11 Pick. 503, to show that a charge in an executor's account of the payment of a legacy was improper, as a matter of accounting. The point of the decision was that the rights of a legatee were not concluded by such an account. The court said at page 512: 'The object of such an accounting before the judge [of probate] is to show that he has paid according to his charges and upon producing proof of the fact of payment such charge is allowed. But whether such payment is rightful is a question for which executor himself stands responsible. To hold that the allowance of a payment in account under such circumstances, would bar a legatee, whose legacy is not yet payable, would be pressing the doctrine of res judicata beyond all reasonable limits.' An executor occupies a dual position, one of direct liability to the legatees, the other of fidelity to the court which appoints him. His liability to the legatee can be satisfied only by payment. For this an action at law is given to the legatee. R. L. c. 141, § 19. This remedy is not affected by the allowance of a probate account showing that the legacy has been paid, unless under such circumstances as amount to an estoppel. Fidelity to the court requires the executor conformably to the tenor of his bond to administer according to law and to the will all the estate which comes to his hand, and to render 'a true account of his administration at least once a year until his trust is fulfilled.' R. L. c. 149, § 1. In order to satisfy fully this obligation, the accounts rendered to the probate court should truly show all payments of legacies given by the will, as well as the performance of other duties of settlement of the estate. The provisions of the collateral inheritance tax (St. 1909, c. 490, pt. 4, §§ 21 and 23) now impose certain special duties upon the probate court as to legacies and ascertainment of their amount. These obligations of an executor to legatees and to the court are several, performances of one of which does not...