Williams v. Inhabitants of Milton

• Decision Date: 27 May 1913
• Citation: 102 N.E. 355,215 Mass. 1
• Parties: WILLIAMS et al. v. INHABITANTS OF MILTON.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

215 Mass. 1

102 N.E. 355

WILLIAMS et al. v. INHABITANTS OF MILTON.

Supreme Judicial Court of Massachusetts, Suffolk.

May 27, 1913

COUNSEL

Geo D. Burrage, of Boston, for complainants.

Wm. H White, of Boston, for respondent Inhabitants of Brookline.

Thos F. Kearns, City Sol., of Waltham, for respondent City of Waltham.

Jas. R Dunbar and Felix Rackemann, both of Boston, for respondent Inhabitants of Milton.

Karl Adams, of Boston, for respondent City of Boston.

OPINION

LORING J.

These are four petitions for the abatement of taxes assessed upon the plaintiffs as trustees of the Boston Personal Property Trust. The Boston taxes were assessed on the theory that the property held by the plaintiffs under that trust was partnership property to be assessed under St. 1909, c. 490, pt. 1, § 27, in Boston where the partnership (if there was a partnership) had its place of business. The other taxes were assessed upon the theory that the property held by the plaintiffs under that trust was held by them as trust property the income of which was payable to another person and was to be assessed under St. 1909, c. 490, pt. 1, § 23, cl. 5.

It has been contended in effect if not in terms that whatever may be its true character the trust for the purposes of taxation was a partnership. Doubtless the Legislature might provide that a trust which was not a partnership should be treated as a partnership for the purposes of taxation. But it has not done so. What the Legislature has done is to provide (1) that 'personal property held in trust by an executor, administrator or trustee, the income of which is payable to another person, shall be assessed to the executor, administrator or trustee in the city or town in which such other person resides, if within the commonwealth,' and if he resides out of the commonwealth, in the place where the trustee resides (St. 1909, c. 490, pt. 1,§ 23); and (2) that 'partners, whether residing in the same or in different cities or towns, may be jointly taxed under their firm name, in which their business is carried on, for all the personal property employed in such business, except ships or vessels' (St. 1909, c. 490, pt. 1, § 27). That is to say, the Legislature has provided that the right to tax property as trust or as partnership property depends upon the real character of the property taxed. Under these enactments of the Legislature there is no room for holding that property which is in reality not partnership property can be taxed as partnership property. The right to tax property as trust or as partnership property depends upon what the character of the property taxed really is.

We proceed to a discussion of the principles on which the question of the true character of the Boston Personal Property Trust depends.

Where persons associate themselves together to carry on business for their mutual profit, they are none the less partners because (1) their shares in the partnership are represented by certificates which are transferable and transmissible, and because (2) as a matter of convenience (if not of necessity in case of transferable and transmissible certificates) the legal title to the partnership property is taken in the name of a third person. The person in whose name the partnership property stands in such a case is perhaps in a sense a trustee. But speaking with accuracy he is an agent who for the principal's convenience holds the legal title to the principal's property.

Several instances of such partnerships are to be found in our reports. In Hoadley v. County Com'rs of Essex, 105 Mass. 519, one Gordon McKay executed a declaration of trust by which he declared that he held his patents for sewing the soles of boots and shoes to the vamps, his factory where machines were manufactured under these patents and the whole business theretofore carried on by him, in trust for such persons as should buy certificates which were to be issued under that declaration of trust to the amount of 50,000 in number, the proceeds to be used in carrying on the factory and business assigned to and held by the trustee. The certificate holders were to be known as the McKay Sewing Machine Association and the business to be conducted by an executive committee to be chosen by them. This was held to create a partnership, and for that reason the shares were held not to be taxable to the holders of them. For a subsequent case involving the same association, where the same conclusion was reached, see Gleason v. McKay, 134 Mass. 419. In Whitman v. Porter, 107 Mass. 522, certain subscribers associated themselves together to buy a ferryboat to be run between Agawam and Springfield; the boat was to be conveyed to one of the subscribers in 'trust' and the entire business was to be conducted by these trustees and their officers to be annually elected by the subscribers. The stock was assignable. These stockholders were held to be partners. In Phillips v. Blatchford, 137 Mass. 510, the money to carry on the business of manufacturing and selling grates was raised by the sale of transferable certificates issued under a somewhat similar declaration of trust which provided that the business should be carried on by a board of managers of whom the trustee was to be one, and the other members were to be elected by the shareholders. This also was held to be a partnership. In Ricker v. American Loan & Trust Co., 140 Mass. 346, 5 N.E. 284, the doctrine of these cases was extended to a case where the purpose of the association was to buy cars to be leased to a specified railroad. The persons providing the purchase money were to have transferable certificates, which certificates by the terms of the lease to the railroad were to be paid in ten annual installments with six per cent. interest until paid. The certificate holders were declared in the declaration of trust to be an association, and all the business was to be transacted by a board of managers to be elected by them. The property of the association was to be held by the American Loan & Trust Company as trustee. This also was held to be a partnership. Williams v. Boston, 208 Mass. 497, 94 N.E. 808, was a similar case. The trust agreement in that case provided that the trust was established 'for the purchase, development and disposition of' the former site of the Museum of Fine Arts in Boston. The property was to be held by trustees, but the shareholders had a right to remove the trustees, and meetings of the shareholders were to be held at which the shareholders might authorize or instruct the trustees in any manner and alter or amend the declaration of trust, or direct the trustees to end the trust, sell the property and distribute the proceeds. The original papers in the case show these to have been the facts in the case, although they are not stated in the report of that decision. The property of this association was held to be taxable as partnership property.

In Mayo v. Moritz, 151 Mass. 481, 24 N.E. 1083, on the other hand, it was held that certificate holders under the declaration of trust there in question were not partners. In that case an inventor transferred his invention to trustees to whom by the terms of the trust indenture the patent was to be issued when it was issued. The trust indenture provided for the issue of scrip to those who should furnish to the trustees the money necessary for the more advantageous disposition of the invention. The trust on which the trustees were to hold the invention and the money produced by the issue of scrip was to hold, manage and dispose of the invention or any part thereof or interest therein upon such terms as to them (the trustees) or a majority of them should seem best, the net proceeds to be paid one half to the inventor and the other half to the holders of the scrip or certificates. The scrip, called in the trust indenture scrip or certificates, was transferable. Vacancies in the office of trustees were to be filled by the remaining trustees. It was held that the scrip holders were not partners, and in that respect the case was 'unlike Gleason v. McKay, 134 Mass. 419, and Phillips v. Blatchford, 137 Mass. 510.'

The difference between Hoadley v. County Commissioners, 105 Mass. 519 (involving the same indenture as that in Gleason v. McKay, 134 Mass. 419), Whitman v Porter, 107 Mass. 522, Phillips v. Blatchford, 137 Mass. 510, Ricker v. American Loan & Trust Co., 140 Mass. 346, 5 N.E. 284, and Williams v. Boston, 208 Mass. 497, 94 N.E. 808, on the one hand, and Mayo v. Moritz, 151 Mass. 481, 24 N.E. 1083, on the other hand, lies in the fact that in the former cases the certificate holders are associated together by the terms of the 'trust' and are the principals whose instructions are to be obeyed by their agent who for their convenience holds the legal title to their property, the property is their property, they are the masters; while in Mayo v. Moritz, on the other hand, there is no association between the certificate holders, the property is the property of the trustees and the trustees are the masters. All that the certificate holders in Mayo v. Moritz had was a right to have the property managed by the trustees for their benefit. They had no right to manage it themselves nor to instruct the trustees how to manage it for them. As was said by C. Allen, J., in Mayo v. Moritz, 151 Mass. 481, 484, 24 N.E. 1083: 'The scrip holders are cestuis que trust, and are entitled to their share of the avails of the property when the same is sold,' and that is all to which they were entitled. In Mayo v. Moritz the scrip holders had a common interest in the trust fund in the same sense that the members of a class of life tenants and the members of a class of remaindermen (among whom the income of a trust fund and the corpus are to be...