316 Mass. 31 | Mass. | 1944
This is a petition brought under G. L. (Ter. Ed.) c. 65, § 27, in a Probate Court by the two trustees under the will of Charles H. Appleton, of Boston, who died April 3, 1874, and whose will was allowed June 1, 1874, and by his three grandchildren, against the commissioner of corporations and taxation, herein referred to as the commissioner. When the case came before the judge of probate for final determination, he found the facts to be as stated in a statement of agreed facts filed in the case, and reserved and reported the case under G. L. (Ter. Ed.) c. 215, § 13, without decision, for consideration of the full court upon the petition, the answer of the commissioner and the statement of agreed facts.
The mother of these grandchildren, Mrs. Meyer, of Hamilton, who was the daughter of Charles H. Appleton, died November 28, 1935, leaving a will allowed January 14, 1936, whereby she disposed of substantially all of her own property to her three children, who are her only heirs at law and next of kin. Legacy and succession taxes upon the estate of Mrs. Meyer owned by her and passing by her will have been paid in full and no controversy arises respecting them. The petitioners seek abatement of certain legacy and succession taxes assessed and collected upon successions to property passing by the will of Charles H. Appleton.
By the will of Charles H. Appleton a trust was created whereby the principal and income of the trust property, with certain modifications not now material, were disposed of as follows: His two daughters, Mrs. Meyer and Julia A. Appleton, were each given a life estate in the income of one
Julia A. Appleton died without issue. Mrs. Meyer survived her sister but did not exercise the power of appointment conferred upon her by the will of Charles H. Appleton. Therefore, the entire trust property upon the death of Mrs. Meyer on November 28, 1935, went in default of appointment to her children, the three individual petitioners, the youngest of whom was born April 7, 1891. Legacy and succession taxes, amounting to $39,626.85, upon the entire trust property were assessed by the commissioner purporting to act under G. L. (Ter. Ed.) c. 65 and St. 1935, c. 480, who certified them to the trustees under the will of Charles H. Appleton. The same persons, however, were executors of the will of Mrs. Meyer. The amount so certified together with interest was paid by the trustees. The petitioners contend that the imposition of such taxes is contrary to the statutes of this Commonwealth and the provisions of the Constitution of this Commonwealth and of the United States. They seek an abatement of the entire amount assessed.
So far as taxation of legacies and successions in this Commonwealth is concerned there have been, broadly, three periods: First, the period of no legacy and succession taxes. Second, the period of so called collateral legacy and succession taxes. Statute 1891, c. 425, imposed such taxes upon property of a decedent passing to collateral relatives and to certain other beneficiaries. No such taxes were imposed by this statute upon property passing to the husband or wife
The governing statutes at the death of Mrs. Meyer in 1935 are in G. L. (Ter. Ed.) c. 65, as amended —: by changing the schedule of rates by St. 1933, c. 293, and by adding a provision relating to estates of nonresidents by St. 1933, c. 319 — and in St. 1935, c. 480, § 2, providing for a temporary additional tax. The material words of G. L. (Ter. Ed.) c. 65, as amended, are these: "Section 1. All property within the jurisdiction of the commonwealth, corporeal or incorporeal, and any interest therein, belonging to inhabitants of the commonwealth . . . [and certain property belonging to persons not such inhabitants], which shall pass by will, or by 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 in contemplation of the death of the grantor or donor or made or intended to take effect in possession or enjoyment after his death, and any beneficial interest therein which shall arise or accrue by survivorship in any form of joint ownership in which the decedent joint owner contributed during his fife any part of the property held in such joint ownership or of the purchase price thereof, to any person, absolutely or in trust, . . . shall be subject to a tax at the percentage rates fixed by the following table: . . . [A table of graduated rates appears based upon “Relationship of Beneficiary to Deceased,” of which Class A included “Husband, wife, father, mother; child, adopted child, adoptive parent, grandchild,” and the “Value of Property or Interest.”] Provided, however, that no property or interest therein, which
The legacy and succession taxes here in question were computed on the estate of Charles H. Appleton alone, separately and apart from the property and interests therein passing to the individual petitioners by reason of the death of their mother from her own estate. There is no dispute as to the value of the Appleton estate passing to them. The contention of the petitioners is that no legacy and succession taxes were due upon this estate.
The legacy and succession taxes here in question can be sustained, if at all, only under the provisions of G. L. (Ter. Ed.) c. 65, § 1, as amended, either (a) because brought within the scope of those provisions by the provisions of § 2 of the chapter or (b) apart from the provisions of said § 2. (The validity of the additional taxes assessed under St. 1935, c. 480, § 2, depends upon the validity of the other taxes and requires no independent consideration.) The principal, if not the sole, contention of the commissioner is that the legacy and succession taxes here in question were imposed by the provisions of G. L. (Ter. Ed.) c. 65, § 1, as amended, apart from the provisions of § 2 of that chapter. We, therefore, first consider this contention.
First. The legacy and succession taxes here in question cannot be sustained under the provisions of G. L. (Ter. Ed.) c. 65, § 1, as amended, considered apart from the provisions of § 2 of that chapter.
These legacy and succession taxes cannot be sustained under G. L. (Ter, Ed.) c. 65, § 1, as amended — considered
We are of opinion, however, that the determining date is the date of the death of Charles H. Appleton, that upon the facts of this case he is the person whose death is referred to in said § 36, and that, since he died before May 4, 1920, said c. 65, as amended— considered apart from § 2 thereof — is not applicable to the present case and consequently that the taxes here in question cannot be sustained under G. L. (Ter. Ed.) c. 65, § 1, as amended, considered apart from said § 2.
Said § 36 must be interpreted in the light of other sections of said c. 65, as amended. And the intention of the Legislature in enacting G. L. (Ter. Ed.) c. 65, as amended, including § 36 thereof — or more properly G. L. c. 65, since G. L. (Ter. Ed.) c. 65 is not a revision or reenactment, but is merely a compilation of G. L. c. 65 and subsequent amendments prior to January 1, 1932 — “must be ascertained, not alone from the literal meaning of its words, but from a
We are of opinion that in the present case the legacy and succession taxes claimed by the commissioner are not within the terms of the statute interpreted in the light of other pertinent considerations although the words of said § 36 standing alone might conceivably be susceptible of a different meaning.
1. A legacy and succession tax is imposed upon the succession to property or an interest therein. Various kinds of successions are specifically described in G. L. (Ter. Ed.) c. 65, § 1, as amended. They are successions (a) “by will,” (b) “by laws regulating intestate succession,” (c) “by deed, grant or gift . . . [with a stated exception] made in contemplation of the death of the grantor or donor or made or intended to take effect in possession or enjoyment after his death,” and (d) by the arising or accruing of a “beneficial interest” “by survivorship in any form of joint ownership in which the decedent joint owner contributed during his life any part of the property held in such joint ownership or of the purchase price thereof.” In each instance the taxable succession is a succession to property or an interest therein “within the jurisdiction of the commonwealth” and. “belonging to inhabitants of the commonwealth” or in certain instances belonging to persons not such inhabitants. A taxable succession of the fourth class, above described,
2. Moreover, a taxable succession of each kind described in G. L. (Ter. Ed.) c. 65, § 1, as amended, is a succession to property or an interest therein of a deceased former owner. This is true, in substance, even of a succession “by survivor-ship in any form of joint ownership” though the deceased former owner was merely a joint owner and the “beneficial interest . . . which shall arise or accrue by survivorship in any form of joint ownership” may not technically be the same interest as was owned by the deceased joint owner. A legacy and succession tax, more specifically an excise, “is levied upon the succession to property which occurs upon the death of the former owner.” Magee v. Commissioner of Corporations & Taxation, 256 Mass. 512, 515. As was said in that case: “Such succession to property comprehends several elements. It includes not only the privilege exercised by the former owner to dispose of his property by will or grant, or to allow it to descend under the laws of intestate succession, but also the privilege enjoyed by the legatee, devisee, donee or heir to succeed to the title, possession and enjoyment of the property according to established laws.” See also Minot v. Winthrop, 162 Mass. 113, 118, 124; Crocker v. Shaw, 174 Mass. 266, 267; Attorney General v. Stone, 209 Mass. 186, 190; Saltonstall v. Treasurer & Receiver General, 256 Mass. 519, 523-524, affirmed sub nomine Saltonstall v. Saltonstall, 276 U. S. 260. The excise is imposed “upon the right to receive property by reason of the death of the testator or donor.” First National Bank of Boston v. Commissioner of Corporations & Taxation, 258 Mass. 253, 255. The death of the deceased former owner is the “generating source” of the succession. See Coolidge v. Long, 282 U. S. 582, 597. This principle is true even where the succession is “by deed, grant or gift . . . made in contemplation of the death of the grantor or donor or . made or intended to
3. Though a taxable succession to property “occurs upon the death of the former owner” and “by reason” of his death, which is the generating source of the succession, the succession may not be completed at that time by the beneficiary entering into possession or enjoyment of the property,, for the “succession comprehends as an essential part possession and enjoyment” of the property. Saltonstall v. Treasurer & Receiver General, 256 Mass. 519, 525. And until the succession is completed the Legislature has broad power to deal with it for the purposes of taxation as by providing for postponement of the time of payment of the legacy and succession tax thereon and for changing the time for valuing the property or interest therein to which a beneficiary succeeds. In Attorney General v. Stone, 209 Mass. 186, the court held constitutional a statute (St. 1902, c. 473, § 1) contaimng substantially such provisions, saying that until '‘ the full exercise of such privilege [of succeeding to property] 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” (page 190). And in Saltonstall v. Treasurer & Receiver General, 256 Mass. 519, 525, the court said that, since “the excise may be levied
4. By G. L. (Ter. Ed.) c. 65, §§ 7, 13, embodying, in substance, the provisions of St. 1902, c. 473, § 1, held constitutional in the Stone case, it is provided that “in all cases where there shall be a devise, descent or bequest to take effect in possession or come into actual enjoyment after the expiration of one or more life estates or of a term of years, the taxes thereon shall be payable by the executors, administrators or trustees in office when such right of possession accrues, or, if there is no such executor, administrator or trustee, by the persons so entitled thereto, at the expiration of one year from the date when the right of possession accrues to the persons so entitled”; that taxes “imposed by this chapter upon property or interests therein, passing by deed, grant or gift to take effect in possession or enjoyment after the death of the grantor or donor, or upon beneficial interests arising or accruing by survivorship in any form of joint ownership, shall be payable by the grantee, donee or survivor at the expiration of one year from the date when his right of possession or enjoyment accrues”; that in “case of any deed, grant or gift of a fife interest or term of years, the donee for fife or years shall pay a tax only on the value of his interest,.and the donee of the future interest shall pay his tax when his right of possession or enjoyment accrues” (§ 7); and that in “case of a devise, descent, bequest or grant to take effect in possession or enjoyment after the expiration of one or more life estates or ofk'a term of years, the tax shall be assessed on the value of ¿the property or interest therein coming to the beneficiary at the time when he becomes entitled to the same in possession or enjoyment” (§ 13). Nevertheless, that the succession occurs upon the death of the former owner of the property, even though the succession is not completed at that time and the tax thereon is not then due, is implied by G. L. (Ter. Ed.) c. 65, § 9,
That the taxable succession occurs upon the death of the former owner of the property, even though the succession is not completed until later, was recognized in the first case decided under the collateral legacy and succession tax law. Minot v. Winthrop, 162 Mass. 113. The statutes then contained no provision for postponement of the time of payment of the tax. In the Minot case the court sustained a tax upon the succession to the remainder in a trust fund although the preceding life estate had not terminated, and the effect of the payment of the tax on the remainder was to diminish both the principal of the trust fund and the income therefrom payable to the life tenant. The court said: “Perhaps a simpler way than that prescribed by the statute would have been to levy the tax at the end of the fife estate upon the whole of the fund to be paid to the legatee in remainder, but the plan adopted is, we think, within the power of the Legislature, and . . . [the life tenant] must be held to take his life interest subject to the law” (page 125). Apparently this suggestion was followed by the Legislature in St. 1902, c. 473, § 1.
5. General Laws (Ter. Ed.) c. 65, § 36, is to be interpreted in the light of the fundamental principle that a taxable succession occurs at the death of the deceased former owner of the property that is the subject of the succession, a deceased joint owner of the property held in joint ownership or a deceased donee of a power of appointment, within the
6. The commissioner, however, seizes upon the word “accruing” in the phrase of said § 36 last quoted as indicating that the word “persons” also includes a tenant for life upon whose death the “right of possession accrues” or the “right of possession or enjoyment accrues” to the beneficiary (§7, see also § 13). The word “accruing,” considered with its context in § 36 and with the other provisions of said c. 65, and in the light of the history of legacy and succession taxation in this Commonwealth, cannot rightly be given this effect. The particular purpose of said § 36 is to fix the date on or after which legacy and succession taxes shall be imposed by § 1 of said c. 65. Said § 1 imposes legacy and succession taxes upon four different kinds of successions — one of them, that “by deed, grant or gift,” including two classes of successions —- three of these kinds of successions being described by the words “property . . . and any interest therein, belonging to inhabitants of the commonwealth,” and in some instances belonging to persons not inhabitants, “which shall pass” by the described kinds of successions. The fourth kind of succession is described as “any beneficial interest therein,” that is, in “property . . . and any interest therein,” so belonging, “which shall arise or accrue” by “survivorship in any form of joint ownership.” And in the provisions of § 1 for exemptions the expression is used “no property or interest therein, which shall pass or accrue,” and also the expression “so passing or accruing,” the words “pass or accrue” and “passing or accruing” obviously being used
The' words "passing” and "accruing,” in the phrase of said § 36 last quoted, as well as elsewhere in the section, are naturally to be interpreted in the sense in which different grammatical forms of these words are used in § 1, that is, in the sense that the word "accruing” applies only to successions by survivorship in joint ownership, while the word “passing” applies to other kinds of successions.
7. The only basis in G. L. (Ter. Ed.) c. 65, as amended, for an interpretation of the word "accruing,” used in § 36, as applicable to any kind of succession other than successions by survivorship in joint ownership, is the use of the word "accrues” in the section of the statute (§7) referring to the accrual of a "right of possession” or a "right of possession or enj oyment.” But in § 36 both the word ‘ ‘ passing ’ ’ and the word "accruing” refer to "property or interests therein,” as is true of the words "pass” and “accrue” in § 1, and not to the "right of possession”, or the “right of possession or enjoyment,” as is true of the word “accrues” in § 7 — materially different conceptions. See Worcester County National Bank v. Commissioner of Corporations & Taxation, 275 Mass. 216, 220-221, and cases cited. More
8. The commissioner relies to some extent on a statement in Saltonstall v. Treasurer & Receiver General, 256 Mass. 519, 524, apparently not necessary for the decision of that case, with reference to the words of St. 1916, c. 268, § 4 — a section closely similar to G. L. (Ter. Ed.) c. 65, § 36 — “making the tax [(imposed by said c. 268] applicable to property or interests ‘passing or accruing’ upon the death of persons subsequent to the act.” “‘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 § 1” of said c. 268. This statement, however, is hardly consistent with the firmly established principle that a taxable succession “includes not only the privilege exer
9. The foregoing analysis of G. L. (Ter. Ed.) c. 65, as amended, including § 36 thereof, leads to the conclusion that the word “accruing” in said § 36 has no application to any kind of succession other than successions by survivor-ship in joint ownership, that the word applicable to other kinds of successions is “passing,” and that the phrase “property or interests therein passing . . . upon the death of persons” means “property or interests therein passing . . . upon the death of” the former owners of such property and interests, that is, in a case like the present case where the “passing” is by will, upon the death of the testator.
11. A statute imposing legacy and succession taxes upon successions by the will of a person dying before its passage, even though the succession is not completed until after its passage, is in one aspect retroactive, although in another it may not be so regarded. See Magee v. Commissioner of Corporations & Taxation, 256 Mass. 512, 517. In the present case the petitioners contend that the successions upon which the legacy and succession taxes were imposed were completed before the passage of G. L. (Ter. Ed.) c. 65, and consequently that these taxes were imposed retroactively and, therefore, were unconstitutional. See Coolidge v. Long, 282 U. S. 582, reversing Coolidge v. Commissioner of Corporations & Taxation, 268 Mass. 443. We need not, however, discuss the constitutional question involved, for, as an examination of earlier legacy and succession tax statutes discloses, the imposition of such taxes which are retroactive in the sense that they are imposed upon successions by wills of persons dying before the passage of the taxing statute would constitute a “radical change in established public policy” and “in the existing law” and G. L. (Ter. Ed.) c. 65, as amended, shows no intention to make such a change.
For reasons similar to those already stated in analyzing and interpreting G. L. (Ter. Ed.) c. 65, particularly § 36, St. 1916, c. 268, cannot rightly be interpreted as changing the existing law so that legacy and succession taxes were imposed upon successions to property or interests therein by wills of testators dying before its passage and before the effective date of St. 1907, c. 563, September 1, 1907. Section 4 of said c. 268 provided that the act “shall apply only to property or interests therein passing or accruing upon the death of persons who die subsequently to the passage hereof [May 26, 19163- Property or interests therein passing or
The word “accruing” as used in said § 4 of c. 268 must be interpreted in the light of the other provisions of the chapter. This chapter, in addition to making certain changes in the law not here significant, was enacted for two purposes. One of these purposes, effected by substituting by § 1 thereof a new § 1 in St. 1907, c. 563, as codified and amended, was to subject to taxation a kind of successions that had not previously been taxable — successions defined by the words “any beneficial interest therein [that is, in “property . . . and any interest therein, belonging to inhabitants of the commonwealth” and certain property belonging to persons not such inhabitants] which shall arise or accrue by survivor-ship in any form of joint ownership,” subject to a described limitation. Doubtless the provision imposing taxes upon such successions was added to the statute by reason of the decision in Attorney General v. Clark, 222 Mass. 291, to the effect that such successions were not taxable under previous law. In defining by St. 1916, c. 268, § 1, this kind of successions, the Legislature used the words “arise or accrue” instead of the word “pass” used in defining all other kinds of successions, apparently for the reason that the word
Section 2 of St. 1916, c. 268, substituted a new § 4 in St. 1907, c. 563, as codified and amended. This section in both its old and its new form dealt with the time for payment of legacy and succession taxes and the persons hable therefor, and the section in its new form contained such a provision applicable to the kind of successions first made taxable by said c. 268, and to successions by deed, grant or gift. But in this provision the word “passing” was used with reference to successions by deed, grant or gift and the words “arising or accruing” were used with reference to successions by survivorship in joint ownership. There were, however, in this section in its new form, as had been true of this section since the original enactment of St. 1907, c. 563, instances where the word “accrues” was used with reference to the accrual of a “right of possession” or a “right of possession or enjoyment.” The use of the word “accruing” in the new
Stress is laid by the commissioner upon the fact that the language of St. 1916, c. 268, § 4, is different from the language of St. 1907, c. 563, where it was provided that the statute should “not apply to estates of persons deceased prior to the date when it takes effect” (§ 25). A natural explanation for the change in language is that the Legislature may have doubted whether property or interests therein in joint ownership, successions to beneficial interests in which were first made taxable by St. 1916, c. 268, were technically part of the estate of a deceased joint owner (see Attorney General v. Clark, 222 Mass. 291, 295), and consequently used in said § 4, for greater caution, language that clearly would include successions to such beneficial interests. Statute 1916, c. 268, merely amended St. 1907, c. 563, as codified and amended, except in one instance where a part of said c. 563 was repealed. But there is no express repeal of § 25 of said chapter. And the “parts of the original statute which are inconsistent with the amended statute, and those only, are repealed by implication.” Wilson v. Head, 184 Mass. 515, 517. McAdam v. Federal Mutual Liability Ins. Co. 288 Mass. 537, 541. Repeal by implication is not favored. Commonwealth v. Bloomberg, 302 Mass. 349, and cases cited. No implication of a repeal of said § 25 is to be drawn from St. 1916, c. 268, § 4, or any other part of the statute, especially where, as here, such a repeal would make a radical change in exist
Statute 1920, c. 396, passed May 4, 1920, made changes in the law applicable to the taxation of successions to property and interests therein not belonging to inhabitants of the Commonwealth, and in so doing amended St. 1907, c. 563, § 1, as codified and amended, and made certain procedural changes, many, if not all of them, applicable to such property and interests therein. It provided that the statute “shall apply only to the estates of persons dying on or after the date of its passage” (§ 6). Statute 1920, c. 548, passed May 27, 1920, substituted a new paragraph in St. 1907, c. 563, § 1, as codified and amended, for the purpose of imposing legacy and succession taxes upon successions to property and interests therein by deed, grant or gift made in contemplation of death, and made certain provisions applicable to such successions. It provided that the statute should “not apply to property or interests therein passing by deed, grant or gift in contemplation of death made prior to the passage of this act” (§ 3). These statutes disclose no legislative intention that they, or the statutes that they amended, should impose legacy and succession taxes upon successions resulting from the death of a former owner of property or interests therein who died before the passage of these statutes. There was no further legislation upon the subject of legacy and succession taxes before the revision of the statutes relating to legacy and succession taxes by G. L. c. 65.
The “existing law” — considered apart from St. 1909, c. 527, § 8, now embodied in G. L. (Ter. Ed.) c. 65, § 2 — at the time that G. L. c. 65 became effective, did not impose legacy and succession taxes upon successions by wills of testators who — as in the present case — had died before
13. The general principle that a statute is not to be interpreted so as to “require a radical change ... in the existing law” if the statute does not disclose an intention that such a change shall be effected (Commissioner of Corporations & Taxation v. Dalton, 304 Mass. 147, 150) is applicable with special force in the case of a general revision of the laws. Medford Trust Co. v. McKnight, 292 Mass. 1, 28. “G. L. c. 65, which was a general revision of the laws relating to taxation of legacies and successions, is to be construed as continuing the previous laws, except in the respects in which a change is indicated.” Worcester County National Bank v. Commissioner of Corporations & Taxation, 275 Mass. 216, 218. No change was indicated by G. L. c. 65 with respect to the application of this chapter to successions by wills of testators dying before the date as of which it was applicable to successions of this kind, May 4, 1920. On the contrary, § 36 of the chapter fixing the dates as of which the chapter should be applicable followed closely the language of St. 1916, c. 268, § 4, which, for reasons already stated, did not make that statute applicable to successions by wills of persons dying before its passage, and even more clearly did not make that statute applicable to successions by wills of persons dying before the effective date of St. 1907, c. 563, September 1, 1907. The references in G. L. c. 65, § 36, to the dates May 4,1920, and May 27, 1920, the dates respectively of the passage of the latest statutes prior to the revision by G. L. c. 65, relating to legacy and succession taxes, furnish a further indication that in enacting G. L. c. 65, the Legislature did not intend to change the statutes but intended merely to codify them. General
14. An interpretation of G. L. (Ter. Ed.) c. 65, as amended, or of St. 1916, c. 268, from which the language of G. L. (Ter. Ed.) c. 65, § 36, was taken in substance, as imposing legacy and succession taxes upon successions by wills of testators dying before 1907 (St. 1907, c. 563), would “require a radical change in established public policy” (Commissioner of Corporations & Taxation v. Dalton, 304 Mass. 147, 150), as disclosed by legislation. And an intention to make such a change is not manifested.
Nothing in the collateral legacy and succession tax statutes as originally enacted, St. 1891, c. 425, or as amended, warranted an interpretation of those statutes as retroactive in this sense, and we are not aware that it was ever contended that these statutes should be so interpreted. The original direct legacy and succession tax statute, St. 1907, c. 563, by its express terms was not so retroactive. § 25. Statute 1909, c. 490, Part IV, was a codification of the direct legacy and succession tax statutes. It is an almost verbatim copy of St. 1907, c. 563, except for provisions with respect to its application. In form it was retroactive to September 1, 1907, the effective date of St. 1907, c. 563, but, in substance, so far as imposing legacy and succession taxes was concerned, it merely codified without change the provisions of St. 1907, c. 563, and did not impose such taxes retroactively. Statute 1909, c. 527, § 8, now embodied in G. L.
The only true departure from the established policy of the Commonwealth not to impose legacy and succession taxes upon successions by the will of a former owner dying before the passage of the taxing statute by any statute involved in any case before this court was by the statute considered in Magee v. Commissioner of Corporations & Taxation, 256 Mass. 512. That statute, which was passed on July 22, 1919, provided that a statute that expired on May 3, 1919, imposing an additional tax upon successions, was “revived and re-enacted, and made applicable to property or any interest therein passing or accruing upon the death of persons who died subsequent to the passage hereof and within one year thereafter or who have died in the interval between the third day of May in the current year and the date of said passage.” (Italics supplied.) Thus the statute was made retroactive for a brief period by express provision. The court held the statute constitutional as applied to the case of a testatrix who died July 6, 1919, on the ground that “the tax was imposed upon a commodity still in existence when the statute went into effect” (page 517). No other statute of this nature has come to our attention. An occasional slight departure of this kind from a general course of
Nothing in G. L. (Ter. Ed.) c. 65, as amended, manifests any legislative intention to depart from the established policy of the Commonwealth not to impose legacy and succession taxes upon successions to property or any interests therein generated by the death of the former owner of the property before the passage of the taxing statute.
15. The cases relied on by the commissioner are not in conflict with the conclusion here reached. See Saltonstall v. Treasurer & Receiver General, 256 Mass. 519, affirmed sub nomine Saltonstall v. Saltonstall, 276 U. S. 260; Boston Safe Deposit & Trust Co. v. Commissioner of Corporations & Taxation, 267 Mass. 240; Binney v. Commissioner of Corporations & Taxation, 293 Mass. 96, affirmed, as to the 1877 trust, sub nomine Binney v. Long, 299 U. S. 280, 286, 288; Boston Safe Deposit & Trust Co. v. Commissioner of Corporations & Taxation, 294 Mass. 551, 553. All these cases involved succession, by “deed, grant or gift, . . . made or intended to take effect in possession or enjoyment after the death of the grantor or donor,” and in each case the grantor or settlor did not die until after the passage of the applicable taxing statute. Notwithstanding the fact that such a “deed, grant or gift” is made in the lifetime of the grantor or settlor, his death is the generating source of the succession, as is the death of a testator in the case of a succession by will. In no one of these cases was a statute interpreted as imposing a legacy or succession tax upon a succession from a grantor or settlor who had died before the passage of the taxing statute.
We conclude, therefore, that G. L. (Ter. Ed.) c. 65 — considered apart from § 2 thereof — was not made applicable by § 36 of that chapter to successions by the will of Charles
Second. General Laws (Ter. Ed.) c. 65, § 36, provides, in part, that “as to all property and interests therein passing or accruing upon the death of persons who have died prior to said date [May 4, 1920] the laws theretofore applicable shall remain in force.” It follows from what has already been said with respect to the laws applicable before May 4, 1920, that the legacy and succession taxes here in question cannot be sustained under those laws considered apart from St. 1909, c. 527, § 8, now embodied in G. L. (Ter. Ed.) c. 65, §2.
Third. The legacy and succession taxes here in question cannot be sustained under the provisions of G. L. (Ter. Ed.) c. 65, § 1, as amended, because brought within the scope thereof by § 2 of said chapter.
1. At the original argument of this case, the commissioner contended that the legacy and succession taxes here in question should be sustained under c. 65, § 1, as amended, because brought within the scope of that section by § 2 of the chapter, but that if they could not be so sustained they should be sustained under said § 1, considered apart from said § 2. Upon reargument, however, the commissioner abandoned the contention that these legacy and succession taxes should be sustained under the provisions of G. L. (Ter. Ed.) c. 65, § 1, as amended, because brought within the scope of this section by § 2 of the chapter, and not merely conceded but contended that these legacy and succession taxes could not be so sustained, contending that said § 2 should be regarded as excised from said c. 65 by reason of the decision against the constitutionality of said § 2 in Binney v. Long, 299 U. S. 280. The petitioners also contend that said § 2 is unconstitutional. Since, however, we hold that these legacy and succession taxes cannot be sustained under G. L. (Ter. Ed.) c. 65, § 1, as amended, considered apart from § 2 of the chapter, and the concession of the commissioner that they cannot be sustained under said § 1,
2. The situation in the present case falls exactly within the terms of the part of G. L. (Ter. Ed.) c. 65, § 2, already quoted in full, providing that “whenever any person possessing” a “power of appointment, derived from any disposition of property made prior to September first, nineteen hundred and seven,” “shall omit or fail to exercise the same within the time provided therefor, in whole or in part, a disposition of property taxable under section one shall be deemed to take place to the extent of such omission or failure in the same manner as though the persons 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.” Mrs. Meyer had a power of appointment “derived” from the “disposition of property” by her father by his will, and this “disposition of property” was made by him as of the date of his death, April 3, 1874 — long before September 1, 1907. Although the power of appointment was a limited one it was within the terms of this section. Burnham v. Treasurer & Receiver General, 212 Mass. 165. The power of appointment was to be exercised by the donee by her will or by some other written instrument effective at her death. Mrs. Meyer died without exercising the power of appointment. Consequently, the appointive property passed in default of appointment to the three children of Mrs. Meyer. According to the terms of the section these children are to be treated as if they had succeeded to this property by a will
3. In determining whether the property passing in default of appointment to the three children of the donee of the power of appointment is subject to legacy and succession taxes by reason of the provisions of G. L. (Ter. Ed.) c. 65, § 2, this court is governed by the decision of the Supreme Court of the United States in Binney v. Long, 299 U. S. 280, so far as that decision is applicable to the facts of the present case, unless that decision has been overruled or modified.
The Binney case involved three trusts, herein referred to respectively as “the 1862 trust,” “the 1877 trust,” and “the 1891 trust.” The facts in the Binney case, with relation to “the 1891 trust” (page 292), were substantially the same as the facts in the present case. A testatrix dying May 27, 1891, by her will created a trust, the income thereof to be paid to her daughter for life, who was also given a limited power to appoint by will among her children and the issue of deceased children. In default of such appointment the property was to go to such children and the issue of deceased children. The donee died August 20, 1931, without exercising the power of appointment, having died intestate. Consequently, the children of the donee of the power of appointment succeeded to interests in the trust property under the terms of the will of the donor by reason of the failure of the donee to exercise the power of appointment. The donee left substantial individual property to which her children succeeded under the laws regulating intestate succession. The children also succeeded to property under the terms of the other two trusts. One of these two trusts, “the 1862 trust” (page 288), was created by an inter vivos transfer made by the father of the donee under “the 1891 trust” by which also she was given a power of appointment by will, in default of the exercise of which the appointive property was to go to her children and the issue of her deceased children. This power was not exercised and consequently her children succeeded to this property. Legacy and succession taxes were certified and paid upon the prop
This court in Binney v. Commissioner of Corporations & Taxation, 293 Mass. 96, sustained the legacy and succession taxes as certified and paid, denying abatement thereof wholly or in part. The Supreme Court of the United States, however, in Binney v. Long, 299 U. S. 280, reversed this decision so far as it related to “the 1891 trust” as well as to “the 1862 trust,” but not so far as it related to “the 1877 trust.”
The governing statutes in force at the date of the death of the decedent, the donee of the powers, in the Binney case — 1931 — were the same as those in force at the date of the death of the decedent, the donee of the power, in the present case — 1935 ■ — ■ except for immaterial changes made in 1933 and the imposition of a temporary additional tax in 1935. In each case the governing statute was G. L. c. 65, with subsequent amendments up to the dates of the deaths of the decedents respectively. The statutes enacted prior to January 1, 1932, were compiled in G. L. (Ter. Ed.) c. 65, which was not a revision or reenactment. Since this compilation included no statute passed after the date of the death of the decedent in the Binney case on August 20, 1931, G. L. (Ter. Ed.) c. 65 may be treated as setting forth the statutory law at that date. The provision contained in § 1 of this chapter, relating to the aggregation of property and interests therein for the purpose of computing legacy and succession taxes, was enacted by St. 1924, c. 128, by adding to G. L. c. 65, § 1, a provision relating to the aggregation of property and interests therein in precisely the terms in which this provision appears in G. L. (Ter. Ed.) c. 65, § 1.
In the part of the opinion of the Supreme Court of the United States in the Binney case relating particularly to “the 1891 trust,” the court said: “The act of 1909 . . . [embodied in G. L. c. 65, particularly § 2, and appearing
4. The decision in the Binney case with respect to “the 1891 trust,” that the legacy and succession taxes imposed upon successions to property and interests therein resulting from the nonexercise of the power of appointment were invalid by reason of the aggregation of such property and interests therein for the purpose of taxation with interests in the individual property of the donee to which the same beneficiaries succeeded by the laws regulating intestate succession, has not been overruled or modified by any later decision of the Supreme Court of the United States. In Whitney v. State Tax Commission of New York, 309 U. S. 530, 542, the court sustained an estate tax imposed by a New York statute making a change in the State tax law relating to death duties .applicable only to a narrow class of cases involving special powers of appointment created prior to a fixed date. With respect to the Binney case the court said: “Acceptance of Binney v. Long, 299 U. S. 280, would not constrain us to hold differently. In the circumstances confronting the New York Legislature, as the Court of Appeals pointed out, the discrimination affecting special powers was
5. In the present case the constitutional objection to the aggregation of property and interests therein, which was the ground of the decision in the Binney case, is avoided. The legacy and succession taxes upon the successions by the children of Mrs. Meyer to property over which she had a power of appointment, created by the will of her father, who died in 1874, by reason of the nonexercise of the power of appointment, were certified by the commissioner without the property and interests therein to which each of the children so succeeded being aggregated with the individual property of Mrs. Meyer which passed to each child by her will. Whether or not there is constitutional objection to imposing a legacy and succession tax upon such a succession upon the nonexercise of a power without aggregation of property and interests therein apparently was not decided by the Supreme Court of the United States in the Binney case. But whatever constitutional principles may be involved in determining the validity of such a legacy and succession tax without the aggregation of property and interests therein, the validity of such a tax without the aggregation of property and interests therein depends in part, at least, upon the interpretation of the statute imposing taxes upon succession to property by reason of the nonexercise of powers, that is, G. L. (Ter. Ed.) c. 65, § 2, embodying by reference the provisions of § 1 of that statute.
The underlying principle of G. L. (Ter. Ed.) c. 65, § 2, is that, with respect to powers of appointment within its scope, the appointive property shall be treated for purposes of
The legacy and succession taxes imposed by said § 1, as amended, are imposed upon successions to near relatives as well as upon successions to remote relatives and to strangers. And these taxes are imposed at varying rates depending, in part, upon the relationship of the beneficiary to the former owner of the property and, in part, upon the value of the property or interests therein passing to the beneficiaries respectively, whatever the form of the taxable succession. The applicable rates are dependent upon a combination of these two factors. Exemptions also are determined by a combination of these two factors. And for the purpose of determining the value of the property and interests therein upon which the exemptions and the rates of tax, in part, depend, it is provided by said § 1, as amended, that “All property and interests therein which shall pass from a decedent to the same beneficiary by any one or more of the methods hereinbefore specified and all beneficial interests which shall accrue in the manner hereinbefore provided to such beneficiary on account of the death of such decedent shall be united and treated as a single interest for the purpose of determining the tax hereunder,” a provision that was first enacted as an amendment to G. L. c. 65, § 1, by
Clearly it was the legislative intention disclosed by G. L. (Ter. Ed.) c. 65, § 2, that, for the purposes of the legacy and succession taxes imposed by this section, the donee of a power of appointment within the scope of the section should be treated as the owner of the appointive property, not only for the purpose of determining whether the property — if within the jurisdiction of the Commonwealth, see Walker v. Treasurer & Receiver General, 221 Mass. 600 — is subject to legacy and succession taxes (Clark v. Treasurer & Receiver General, 218 Mass. 292, 293), but also for the purpose of determining exemptions and rates of tax. If this were not
6. The legacy and succession taxes here involved were not determined in accordance with G. L. (Ter. Ed.) c. 65, § 1, as amended, for the method thereby prescribed for determining rates of tax was not followed since, although individual property of Mrs. Meyer passed to her children by her will, the principle of aggregation of property and interests therein was not applied — a principle that under the decision of Binney v. Long, 299 U. S. 280, could not constitutionally be applied — and the legacy and succession taxes certified and paid were computed solely on the basis of the property and interests therein to which the children of Mrs. Meyer succeeded by reason of her failure to exercise her power of appointment by the will of her father. The question is thus presented whether, since the principle of aggregation of property and interests therein could not constitutionally be applied, the statute is to be interpreted as imposing legacy and succession taxes without the application of the principle of aggregation of property and interests therein.
We are of opinion that G. L. (Ter. Ed.) c. 65, § 2, in substance incorporating the provisions of § 1, cannot be so interpreted. The effect of disregarding the principle of aggregation of property and interests therein — which is embodied in said § 2 by the reference to the provisions of said § 1 — by reason of the unconstitutionality of the principle as
The legacy and succession taxes here involved obviously were based upon reading into the statute a provision that, for the purpose of determining rates of tax, only the appointive property passing by reason of the nonexercise of the power of appointment to the children, respectively, of the donee was to be considered. But there is no basis for reading such a provision into the statute. Whatever provision the Legislature might have made if it had known that the application of the principle of aggregation of property and interests therein to a case like the present was unconstitutional, there is nothing in the statute that discloses any intention on the part of the Legislature as to the method to be used in determining the legacy and succession taxes when the statutory method involving aggregation of property and
The case in this aspect is governed by Harrison v. Commissioner of Corporations & Taxation, 272 Mass. 422. That case arose under G. L. c. 62, § 10, providing in part for an income tax upon "income received by estates held in trust by trustees, any one of whom is an inhabitant of the commonwealth.” There were three trustees, one of whom was a resident of the Commonwealth, and the other two were nonresidents. The court said that the “language of § 10 is broad enough to include taxation on income in the circumstances here in issue; ‘But it is a rule of law that a statute which would be unconstitutional as applied to a certain class of cases, and is constitutional as applied to another class, may be held to have been intended to apply only to the latter class, if this seems in harmony with the general purpose of the Legislature.’ Knowlton, C.J. Attorney General v. Electric Storage Battery Co. 188 Mass. 239, 241. W. & J. Sloane v. Commonwealth, 253 Mass. 529, 534 and cases cited” (page 426). But the court held that the fact that one of the three trustees was a resident of the Commonwealth would not support a tax on the entire income of the trust. In answer to the argument that "if the tax is bad to the extent
The result here reached is not affected by the fact that G. L. (Ter. Ed.) c. 65, § 2, was originally enacted — by St. 1909, c. 527, § 8 — after G. L. (Ter. Ed.) c. 65, § 1, in its original form was enacted — by St. 1907, c. 563, § 1. The case of Binney v. Long, 299 U. S. 280, whatever its practical effect, did not purport to hold § 2 unconstitutional in all respects but merely held unconstitutional the provision of § 1 embodied in § 2 for the aggregation of property and' interests therein. If § 2 is unconstitutional in all respects — as we need not decide — of course the legacy and succession taxes here in question cannot be sustained thereunder. But even if the section is not unconstitutional in all respects the fact that it was originally enacted after the original enactment of § 1 furnishes no ground for the severance of the unconstitutional feature of § 2 embodied therein by reference to the provisions of § 1. Nor does the fact that the principle of aggregation of property and interests therein was first expressly embodied in said § 1 by St. 1924, c. 128, furnish a ground for such a severance and for the determination of legacy and succession taxes under § 2 by a different method from that prescribed by said § 1 involving the principle of aggregation of property and interests therein. Even if the decision in the Binney case should be
We conclude, therefore, that, for the reason here stated, the legacy and succession taxes here in question cannot be sustained under G. L. (Ter. Ed.) c. 65, § 1, as amended, considered in connection with § 2 of the chapter. And it is unnecessary to decide whether for any other reason these legacy and succession taxes cannot be sustained under said § 1 considered in connection with said § 2.
It follows that the legacy and succession taxes certified and paid “on legacies, devises or distributive shares in the Trust under will of Charles H. Appleton for the benefit of Alice A. Meyer, (donee of the power) late of Hamilton,” were illegally exacted and a decree must be entered that these legacy and succession taxes be wholly abated. G. L. (Ter. Ed.) c. 65, § 27. Since the matter of interest is covered in express terms by G. L. (Ter. Ed.) c. 65, § 27, it will be unnecessary to deal with this matter in the decree. See Flint v. Commissioner of Corporations & Taxation, 312 Mass. 204, 213.
Ordered accordingly.
The considerations stated in the Binney case in respect of “the 1862 trust” were, in substance: “The 1862 contract was not made in contemplation of the grantor’s death; it became effective when executed. Such a transfer made to-day would result in no tax upon the interest acquired by the life tenant or upon those interests resulting from her exercise or non-exercise of her power of appointment. By the act of 1909, however, (§ 2, supra) the legislature, while not attempting to tax the interests of the appellants as derived in succession to . . . [the grantor], does essay to tax those interests as derived from the intestate as the holder of a power of appointment under . . . [the grantor’s] contract. But the statutes do not tax similar interests the enjoyment of which depends upon the exercise or non-exercise of a power embodied in a deed effective after September 1, 1907. The law, therefore, creates two classes, — the one composed of beneficiaries who take at the death of the donee of a power created by an instrument antedating 1907, who are taxed, — and the other of beneficiaries who take in succession to the donee of a power conferred by a deed executed subsequent to 1907, who are not taxed. Upon its face the statute arbitrarily selects a past date, taxing the beneficiaries of an act if done prior to, and leaving untaxed beneficiaries of a precisely similar act if done subsequent to that date. . . . The succession to non-testamentary gifts made subsequent to the effective date of the act of 1907 is not taxed whether the person coming into.ownership and enjoyment of property does so by virtue of the direct gift of the former owner or by virtue of the exercise or non-exercise of a power of appointment vested by