soever he should by his last will appoint. | lahan v. Woodbridge, 171 Mass. 595, 597, 51 The son died May 16, 1912, and having exer- N. E. 176; Greves v. Shaw, 173 Mass. 205, cised the power of appointment by his will, 208, 53 N. E. 372; Moody v. Shaw, 173 Mass. allowed by the court of probate for the coun- 375, 53 N. E. 891; Bliss v. Bliss, 221 Mass. ty of Oxford in the state of Maine, the place 201, 207, 109 N. E. 148, L. R. A. 1916A, 889; of his residence, the trust terminated, and Walker v. Treas. & Recvr. Genl., 221 Mass. it became the duty of the trustees to trans- 600, 109 N. E. 647; R. L. c. 109, §§ 32-39. fer the principal to the petitioners who are We thus come to the question whether the the executors of the donee, to be by them property consisting of personalty held in distributed in accordance with his testamen- trust falls within this classification; or in tary directions. Olney v. Balch, 154 Mass. other words, what on the record is the prop318, 322, 28 N. E 258; Tudor v. Vail, 195 erty interest to be taxed. No description of the Mass. 18, 80 N. E. 590. By St. 1909, c. 527, estate impressed with the trust by the testa§ 8: tor and testatrix, or of the power, if any, of investment or reinvestment conferred upon the trustees is to be found; nor do the terms of the will whereby the power has been exercised appear. It is, however, plain from the admitted recitals in the petition, that the trustees appointed originally, as well as the duly appointed and qualified trustees at the date of the death of the donee, held office under our laws applicable to the administration of trusts, and the accountability of trustees for the proper management, investment

"Whenever any person shall exercise a power of appointment derived from any disposition of property made prior to September first, nineteen hundred and seven, such appointment when made shall be deemed to be a disposition of property by the person exercising such power, taxable under the provisions of chapter five hundred and sixty-three * * * of the year nineteen hundred and seven, and of all acts in amendment thereof and in addition thereto in the same manner as though the property to which such appointment relates belonged absolutely to the donee of such power, and had been bequeathed or devised by the donee by will. *

And by St. 1909, .c. 490, pt. 4, § 1:

and distribution of trust funds. Pub. St. c. 141; R. L. c. 147. The trusts were to be

"All property within the jurisdiction of the administered here, and even if the certificates commonwealth, corporeal or incorporeal, and any interest therein, whether belonging to inhabitants of the commonwealth or not, which shall pass by will, or by the laws regulating interstate succession, or by deed, grant, or gift * shall be subject to a tax.

*

of stock or shares of the nature previously described showing the extent of the property, were in the possession of trustees domiciled in a sister state, this did not prevent the levying of a succession tax. Greves v. Shaw, 173 It is settled by Minot v. Winthrop, 162 Mass. 205, 53 N. E. 372; Brandeis v. Atkins, Mass. 113, 38 N. E. 512, 26 L. R. A. 259, 204 Mass. 471, 476, 90 N. E. 861, 26 L. R. A. Minot v. Treas. & Recvr. Genl., 207 Mass. (N. S.) 230; Bliss v. Bliss, 221 Mass. 201, 109 588, 93 N. E. 973, 33 L. R. A. (N. S.) 236, N. E. 148, L. R. A. 1916A, 889; St. 1910, c. and Clark v. Treas. & Recvr. Genl., 218 Mass. 531; Parkhurst v. Almy, 222 Mass. 27, 109 292, 105 N. E. 1055, that under these N. E. 733; Bellows Falls Power Co. v. Com., statutes whether the property disposed of 222 Mass. 57, 58, 59, 109 N. E. 891, Ann. Cas. under the power is subject to an inheritance 1916C, 834; R. L. c. 15, § 12. The record does tax, is to be determined by the test whether not show that title to the principal in whatsuch tax could have been levied if the prop- ever form invested had been transferred by erty devised or bequeathed had belonged to the trustees to the executors. We assume howthe donee. The title in the case at bar pass-ever from the levying and payment of the tax, ed to the legatees by force of the wills of the the abatement of which and recovery back is donors of the power. Raymond v. Com., 192 sought, and from paragraph two of the peMass. 486, 78 N. E. 514; Harmon v. Weston, tition stating, that in accordance with our 215 Mass. 242, 249, 102 N. E. 470. And if statutes applicable to foreign wills ancillary because of the exercise of the power the letters have been issued to the petitioners as property could be applied in payment of his executors by the court of probate for the debts, yet through its exercise "a right of county of Suffolk, that transference and dissuccession to property may come into exist-tribution has been effected. R. L. c. 15, § 12, ence afterwards, which properly may be a c. 143. It also is apparent, that at some perisubject, for the imposition of a tax." Minot od after the death of the donors, but prior v. Treas. & Recvr. Genl., 207 Mass. 588, 591, to the death of the donee, the trust funds in 93 N. E. 973, 974 (33 L. R. A. [N. S.] 236). question comprised the shares of stock in It is true that the donee was a nonresident. different corporations and associations as deBut if the property consisted of shares of cor- scribed in paragraphs eight and nine of the porations or of voluntary associations dom-petition and in the second paragraph of the iciled, or of national banks situated, in this agreed facts. If no changes of investment jurisdiction, the shareholders are the pro- had been made the property would have been prietors of the organizations, and as the nec- subject, under the exercise of the power of essary transfers by way of change of owner- appointment, to an inheritance or succession ship and distribution could not be effectuated tax. Clark v. Treas. & Recvr. Genl., 218 without the aid of our laws, a succession tax Mass. 292, 105 N. E. 1055; Walker v. Treas. could be levied. Minot v. Winthrop, 162 & Recvr. Genl., 221 Mass. 600, 602, 109 N. E. Mass. 113, 38 N. E. 512, 26 L. R. A. 259; Cal- 647. But the petitioners allege that at the

GARDINER v. BURRILL

If

the contract, or upon an equal number of similar shares; and until full performance of these obligations, the investment company is to keep in the custody of the trust company certificates owned by the investment company for an equal number of similar shares; and the promisee agrees to protect the trust company "from all liability now or hereafter on account of its ownership of said shares." the investment company makes default, then the trust company is irrevocably appointed "its true and lawful attorney, with power of substitution, in its name and behalf to sell, assign, and transfer over such shares standing in its name, and pay the proceeds to the ever, reserves the right at any time before promisee." The investment company, howdefault, and on reasonable notice, to pay "its obligations hereunder without demand of the promisee, and upon full performance shall be entitled to receive from the promisee a full discharge hereunder and a surrender of this "attached certificate" of deposit issued by the contract and the attached certificate." The trust company shows, that the stock named in the contracts stood in the name of the Gardiner Investment Company and was deposited with the trust company on account of the contracts, "which certificates, or others representing an equal number of similar shares, are to be kept in the exclusive control of this company, and redelivered to the Gardiner Investment Company only on surrender of this certificate duly released by the promisee.'

time of the donee's death, the trustees, Rob-mand, and until retransference to pay the 619 ert H. Gardiner and Robert H. Gardiner, Jr., trustees, who are referred to as the "promhis son, had ceased to hold these shares and isee," on demand, and upon "surrender of only held contracts of the Gardiner Invest- the contract and the attached certificate, the ment Company, a corporation chartered by fair market value at the time of such dethe laws of the state of Maine, by the terms mand, less the actual expenses of sale of an of which the trustees purport to have sold equal number of similar shares," such values the shares to the company. was incorporated with an authorized capital a public or private sale of it, or by an appraisThe company to be fixed at the election of the company by of $1,000, divided into 100 shares of the par al of a disinterested person appointed by it value of $10 each. Of the stock, which had and the promisee. The investment company been fully paid, Robert H. Gardiner, the pres- further stipulates that until payment or reident, held 98 shares, and Robert H. Gard-transference, it will pay to the promisee the iner, Jr., the treasurer, and one Bartlett, equivalent of all dividends in money accrued the clerk, each held one of the two remain- and paid upon the stocks after the date of ing shares; and these officers also constituted the board of directors, as well as the permanent stockholders. While the charter recites that the corporation is organized "to buy, sell, own, hold, manage, and deal in, bonds, mortgages, debentures, notes, scrip, shares of stock or of beneficial interest in any public or private corporations or associations, or other securities or evidences of indebtedness of any person, association, or corporation; and to do any act and all things incidental, pertaining, necessary, or proper to the conduct of said business; but this corporation shall not do any kind of a banking business, or that of a corporation intended to derive profit from the loan or use of money," the company, until dissolved in the year following the donee's decease, and after the enactment of our St. of 1912, c. 678, exempting from the inheritance tax personal property within the commonwealth of nonresident decedents, transacted no business other than to issue "these contracts of Robert H. Gardiner, or of his son Robert to clients H. Gardiner, Jr., including trusts administered by them and persons for whom they were agents." And "contracts accordingly were issued referring to stock of corporations or associations formed or owning property in one or more of most of the states of the United States and of several foreign countries." A small fee was paid to the company when the various stocks were in some form turned over and the contracts were issued, but no consideration passed "except the agreements contained in said contracts." decision to determine whether the transaction We do not find it requisite to a The expenses incidental to issuing the con- set forth in this anomalous instrument is to tracts and depositing the stocks with the be characterized as a sale or as a pledge, or Maine Trust & Banking Company, a corpo- whether if turned over to the executors they ration of Gardiner, Maine, were borne by the could have enforced them, or required the investment company. If the terms of the legatees to accept one or more of the "concontracts are now examined, we find that the tracts" in payment of the legacy. The agreed Gardiners, describing themselves as trustees facts contain the stipulation, that the court under the will of William W. Tucker and may draw all reasonable and proper inferSusan E. Tucker, "for Lawrence Tucker, ences of fact from the facts agreed; and, inhereinafter called the promisee, have sold to dependently of this stipulation, the court upthe Gardiner Investment Company of Gardi- on a case stated by agreement of the parties, ner, Maine," a specified number of shares of "shall be at liberty to draw from the facts the stocks held in trust. The context shows and documents stated in the case any inferthat the company in consideration of the "ex- ences of fact that might have been drawn ecuted sale" agrees with the trustees either therefrom at a trial, unless the parties exto return the identical shares or furnish "an pressly agree that no inferences shall be equivalent number of similar shares" on de-drawn." St. 1913, c. 716, § 5. It is obvious

amounted to nothing more than the formal expression of the will and purpose of the trustees, the corporators and stockholders. Their predominant object although not specified, in the charter, is stated in the agreed facts in these words:

"It was the desire and purpose of Robert H. Gardiner, and Robert H. Gardiner, Jr., in formissuing contracts in its name in the manner and ing the Gardiner Investment Company and in form set forth in the petition, to bring about the result that persons to whom contracts were issued should be subject to the inheritance taxes decedents, and not to those of the jurisdiction only of the jurisdiction of the domicile of the in which the corporations issuing shares of stock referred to in such contracts were respectively formed."

The contracts in question, which contain no provisions for assignment or of transfer were issued to themselves. The trustees reserve the full beneficial interest of dividends and rights to new stock if the capital of any of the corporations is increased, and can demand a return of the shares or the equivalent which is stated to be "the fair market value *

from its limited capital, the character of the, the varying circumstances of each case. business actually transacted, and its eva- Batchelder v. Batchelder, 220 Mass. 42, 44, nescent existence, that neither the stock nor 45, 107 N. E. 455. It is manifest that whatthe contracts of the Gardiner Investment ever corporate action may have been taken Company, which appear to have had no mar- in making and issuing the contracts it ket or intrinsic value, fall within the class of securities ordinarily selected by trustees for the investment of trust funds, which in the case at bar appear to have been nearly sixty-fold more in value than the capital or tangible assets of the company which could be reached and applied in payment of its obligations. The trustees, holding office, as we have said, under the decree of our courts, to which they are accountable, must be presumed to have known the duty required of trustees in the preservation, management and disposition of trust funds. The rule obtaining in some jurisdictions does not permit outside investments by trustees unless permitted by the court, except in cases of necessity to preserve the fund. Perry on Trusts (6th Ed.) §§ 452, 454. The rule in this commonwealth in making investments is different, and well settled. "They are bound to act in good faith and to exercise a sound discretion." "In many • cases investments in stocks and bonds of great corporations organized and doing business in other states have been approved, where it appeared * of an equal number of simthat the investment was made in good faith, ilar shares," while they assume "all liabiland in the exercise of a sound discretion, ity now or hereafter" on account of them. according to the standard of other men of The identical shares are then deposited with prudence, discretion and intelligence in the trust company, and in so far as the recthe management of their own affairs, in ord shows without any indorsement by the regard to the permanent disposition of investment company. And "at the time of their funds with a view to probable in- the death of Lawrence Tucker no demand come as well as the probable safety of the had been made upon the Gardiner Investcapital to be invested." Thayer v. Dewey, 185 | Mass. 68, 69, 70, 69 N. E. 1074. While in law a corporation is a person distinct from that of all the stockholders, and may deal with them and be dealt with by them as by other parties, nevertheless the owners of substantially the entire capital stock, by the dominance conferred by such ownership can wield when acting in unison the chartered powers of the corporation in accordance with their will. Old Colony Boot & Shoe Co. v. Parker, Sampson-Adams Co., 183 Mass. 557, 567, 568, 67 N. E. 870. The instrumentality they use is the legal entity characterized as a corporation. And a court when necessary will "look beyond the corporate form for the purpose of it, and of the officers who are identified with that purpose." It cannot be used successfully as a shield to conceal and pervert the truth. Seymour v. Spring Forest Cemetery Ass'n, 144 N. Y. 333, 340, 39 N. E. 365, 26 L. R. A. 859; Anthony v. American Glucose Co., 146 N. Y. 407, 41 N. E. 23; McCaskill v. U. S., 216 U. S. 515, 30 Sup. Ct. 386, 54 L. Ed. 590; Cook on Corporations (7th Ed.) §§ 663, 664; Machen on Corporations, §§ 1078, 1089; 7 R. C. L. Corporations, § 4. The application of this rule under well recognized modern methods of individuals carry

ment Company by the promisees under the contracts referred to in the petition for any payments thereunder, nor had any default been made by said company under any of said contracts." The parties agreed that all material statutes, and decisions of the courts of the state of Maine printed in the authorized publications of that state, should be taken as proved, and might be referred to by either of them as if set out at length in the agreed facts. But in the brief for the petitioners no reference is found to any statute of that state authorizing the levy of an inheritance tax upon these contracts or the shares of stock, or that in fact such tax has been levied. The inference that the trustees who organized and controlled the corporation, organized and used it in the administration of estates of which they were trustees, in furtherance of their own purposes as previously stated, is fully warranted. If the contracts are viewed in the light of their inception, and environment, the real purpose actuating the trustees in procuring the incorporation was not to avoid double taxation, but on the record to circumvent the laws of this jurisdiction, and to forestall the possibility of a levy of the tax imposed by the tax commissioner. A man may

This succession

621

tax

can be levied and collected only on the theory that the property disposed of by the will of Lawrence Tucker under the power of appointment, was his property. St. 1909, c. 527, § 8. sion tax provided some necessary incident in Such property is subject to a succesthe change of ownership wrought by his will depends upon the actual or moral support of the laws of this commonwealth, and not otherwise.

GARDINER v. BURRILL curing a lower rate of taxation. Thayer v. this commonwealth. Boston, 124 Mass. 132, 148, 26 Am. Rep. 650. But when he endeavors to escape all lawful taxation by the employment of devices similar to those discussed, his conduct will not receive the sanction of the courts, Rubenstein v. Lottow, 220 Mass. 156, 169, 107 N. E. 718. The identity of purpose and unity of interest whether the trustees are con sidered as administering the trust as individuals or as incorporated under the name of the Gardiner Investment Company, is 221 Mass. 600, 109 N. E. 647. The property Walker v. Treas. & Recvr. Genl., complete. We are satisfied, that in making which was the subject of disposition by the these contracts they dealt with themselves will of Lawrence Tucker, in form consisted and intended to retain and did retain full entirely of contracts of the Gardiner Investcontrol of the legal title to the shares of ment Company, a Maine corporation. It is stock which in reality comprised the trust only by declaring these contracts void and property transferred to the petitioners as saying that the property disposed of by his executors to be by them distributed to the will consisted of shares of stock in Massalegatees. Batchelder V. Mass. 42, 44, 45, 107 N. E. 455, and cases cit-posed of by his will can be said to have been Batchelder, 220 chusetts corporations that the property dised; Gadsden First Nat. Bank v. Winchester, subject to a succession tax in this common119 Ala. 168, 24 South. 351, 72 Am. St. Rep. wealth. These contracts were issued by a 904; Evarts v. Killingworth Mfg. Co., 20 legally organized foreign corporation which Conn. 447, 457; Potts v. Schmucker, 84 Md. has no place of business in this common535, 36 Atl. 592, 35 L. R. A. 392, 57 Am. St. Rep. 415; People v. North River Sugar Refining Co., 121 N. Y. 582, 621, 24 N. E. 834, 9 L. R. A. 33, 18 Am. St. Rep. 843; Seymour v. Spring Forest Cemetery Ass'n, 144 N. Y. 333, 340, 39 N. E. 365, 26 L. R. A. 859; Anthony v. American Glucose Co., 146 N. Y. 407, 41 N. E. 23; Economic Fuel Gas Co. v. My

in full.

the

wealth. place of business in this commonwealth, was The Maine Banking & Trust Cominvolved in the transaction by reason of repany, another foreign corporation with no ceiving the stock in Massachusetts corporations to hold as collateral security for the contracts of the Gardiner Investment Comers, 168 Ill. 139, 48 N. E. 66; Donovan v. pany according to the terms of a receipt isPurtell, 216 Ill. 629, 639, 75 N. E. 334, 1 sued by it. There were legitimate advanL. R. A. (N. S.) 176; State v. Standard Oil tages in simplicity of bookkeeping and ease Co., 49 Ohio St. 137, 30 N. E. 279, 15 L. R. of investment, arising out of the organizaA. 145, 34 Am. St. Rep. 541; First National tion of the Gardiner Investment Company. Bank of Chicago v. Trebein, 59 Ohio St. The Gardiner Investment Company was a 316, 52 N. E. 834; J. McNeil & Brother Co. real corporation. Its capital stock was paid v. Crucible Steel Co., 207 Pa. 493, 56 Atl. 1067; Milbrath v. State, 138 Wis. 354, 120 arate legal being even though organized for A corporation is a single and sepN. W. 252, 131 Am. St. Rep. 1012; U. S. v. express purpose of taking over the busiMilwaukee Refrigerator Transit Co. (C. C.) ness or conducting the business of one man. 142 Fed. 247, 255; Holbrook, Cabot & Rollins England v. Dearborn, 141 Mass. 590, 6 N. Corp. v. Perkins, 147 Fed. 166, 77 C. C. A. 462; E. 837; Salmon v. Salmon & Co., 1897 A. C. Simmons Creek Coal Co. v. Doran, 142 U. S. 22. As was said in Peterson v. C., R. I. & 417, 12 Sup. Ct. 239, 35 L. Ed. 1063; McCaskill Pac. Ry., 205 U. S. 364, 392, 27 Sup. Ct. v. U. S., 216 U. S. 504, 515, 30 Sup. Ct. 386, 513, 522 (51 L. Ed. 841), the corporation "was 54 L. Ed. 590. A majority of the court are therefore of opinion that the contention of have been the motives leading to its creation, a separate legal entity, and, whatever may the petitioners that as the shares of stock it can only be regarded as such for the purbelonged to the Gardiner Investment Com-pose of legal proceedings." pany, and continued in its ownership, leaving only the contracts in the hands of the trus- of the scheme here disclosed that affords no tees as the property of the trust of which complete succession could be effected without the aid of our laws, cannot be sustained. The tax assessed having been lawfully levied and collected, the decree of the court of probate dismissing the petition should be affirmed.

Ordered accordingly.

RUGG, C. J. (dissenting). I cannot concur in the opinion in this case and feel constrained to express my dissent. Tucker was a resident of Maine and not of Lawrence

Whatever may be said as to the motives

basis for a legal tax upon property and per-
sons not within the commonwealth. One has
the legal power to change his domicile. If
there is any distinction in principle between
changing it within the state for the purpose
of securing a lower rate of taxation which
was held to be not unlawful in Thayer v.
Boston, 124 Mass. 132, 148, 26 Am. Rep. 650,
and removing from the commonwealth alto-
gether for the purpose of avoiding a kind of
another jurisdiction, that distinction is wholly
tax imposed here which may not prevail in
a tax depends on jurisdiction and not on mo-
against the present tax. The power to levy