Opinion
December 11, 1914.
Edward P. Lyon, for the appellants.
Ellwood M. Rabenold, for the respondent.
Charles F. Wright, a resident of the Commonwealth of Massachusetts, died on the 27th day of December, 1909, leaving a last will and testament which was duly admitted to probate in the Commonwealth of Massachusetts and letters testamentary issued thereon. At the time of the death of the testator there was in existence a certain trust which had been created by the will of the testator's mother, Mary E. Wright. By that will one-half of her estate was given to her trustees in trust to pay the income to William J. Wright during his natural life and upon his decease to his children, but in default of children his executors were directed to pay over the entire trust estate to her son, Charles F. Wright, the testator in this proceeding. The securities in which this trust were invested consisted of 1,630 shares of the American Telephone and Telegraph Company, 39 shares of the General Electric Company, and $10,000 in bonds of the American Telephone and Telegraph Company, these corporations being organized under the laws of the State of New York. By the 7th clause of the testator's will he disposed of this property to which he would be entitled upon the death of his brother, William J. Wright, without issue, to his executors in trust, to pay the income thereof semi-annually to Georgianna B. Wright, who was the wife of his brother, William J. Wright, if she survived him during her natural life, and upon her decease directed that the entire principal sum should form a part of the rest and residue of his estate and be disposed of as provided for in the 13th clause of his will. William J. Wright, who was a brother of the testator and entitled to a life estate in this property, survived the testator and died on December 17, 1912, without issue. After the death of William J. Wright the trustees under the will of Mary E. Wright had filed a final accounting in the Probate Court of the county of Suffolk in the Commonwealth of Massachusetts and in accordance with the decree of that court delivered the securities of which the trust fund consisted to the trustees under the will of the testator in this proceeding to be held in trust for the use of Georgianna B. Wright during her natural life and, in accordance with the will, on her death the property to go to her daughter if she survived her. It appeared that there was an appraisal to ascertain the amount of the tax payable to this State after the testator's death. Neither the report of the appraisers nor the order entered thereon is part of this record. The only reference to that appraisement is contained in a supplemental affidavit of the executors, who state that all stocks in corporations of New York and all other property in any way comprising a part of the estate of Charles F. Wright, the testator, at the time of his decease, was duly considered by the State Comptroller of New York, who assessed an inheritance tax thereon, which was paid to said State Comptroller by the deponents as executors of the will of Charles F. Wright on or before June 20, 1911, but it does not appear in this record whether or not a tax was paid on the transfer of this residuary interest that the testator had under the will of his mother. The petition of the Comptroller, however, states that said property, or some part thereof, is subject to the act in relation to taxable transfers of property, and that no payment of such tax has been made, and no proceedings have been brought to fix and determine the same by the representatives of the said decedent. On this petition and answering affidavit of the executors the appraiser appointed by the surrogate fixed the value of these securities as of the 27th day of December, 1909, the date of the death of Charles F. Wright. On appeal to the surrogate the order fixing that tax was reversed, and the proceedings remitted to the appraiser for reappraisement as of the date of December 17, 1912, the date of the death of William J. Wright, who had a life interest in the property, and not of the date of the death of Charles F. Wright on the 27th day of December, 1909, the testator under whose will the title passed. At that date, however, the statute imposing the tax had been repealed, as hereinafter stated. On that reappraisement the appraiser fixed the value of the property as of the date of the death of William J. Wright, the life tenant, and upon that appraisement the order was entered fixing the tax, and it was from that order that the appeal was taken. The situation of this trust fund, therefore, at the time of the death of the testator was that the trustees under the will of Mary E. Wright held certain property during the life of her son, William J. Wright, who was then alive, with a remainder over to the children of William J. Wright, if any, and if he left no children then to pay the said trust fund to the testator, Charles F. Wright. William J. Wright having no children at that time, Charles F. Wright had a contingent remainder in the trust property. Charles F. Wright by his will disposed of this property by the 7th clause of his will, giving the property to trustees, the income to be paid to Georgianna B. Wright, the wife of William J. Wright, and after her death to Anna B.W. Moore.
I agree with the Comptroller's contention that what was taxable was the transfer of the property by the will of Charles F. Wright at the date of his death on December 27, 1909, but his right to dispose of this property was contingent upon William J. Wright dying without issue. Charles F. Wright disposed of his contingent interest in the trust property and it undoubtedly passed under his will. By section 220 of the Tax Law (Consol. Laws, chap. 60; Laws of 1909, chap. 62), in force at the death of the testator, a tax was imposed upon the transfer of any property to persons or corporations not exempt by law from taxation: "2. When the transfer is by will or intestate law, of property within the State, and the decedent was a non-resident of the State at the time of his death." And by subdivision 7 the tax was at the rate of five per centum upon the clear market value of such property except as otherwise provided in section 221 which does not affect this question. Section 222, however, provided that "All taxes imposed by this article shall be due and payable at the time of the transfer, except as herein otherwise provided. Taxes upon the transfer of any estate, property or interest therein limited, conditioned, dependent or determinable upon the happening of any contingency or future event by reason of which the fair market value thereof can not be ascertained at the time of the transfer as herein provided, shall accrue and become due and payable when the persons or corporations beneficially entitled thereto shall come into actual possession or enjoyment thereof." By these provisions of the statute a tax was imposed but it did not accrue and become due and payable until after these sections were repealed. The Tax Law, however, was amended by chapter 706 of the Laws of 1910, passed after the death of the testator but before the death of William J. Wright, and sections of the Tax Law were thereby "amended to read respectively as follows:" By this act both sections 220 and 221 were amended in important particulars. These sections were further amended by chapter 732 of the Laws of 1911. That chapter amends section 220 by providing that instead of imposing a tax at the rate of five per centum upon the clear market value of such property, "7. The tax imposed hereby shall be upon the clear market value of such property, at the rates hereinafter prescribed." Section 221 was also amended by providing for certain exceptions and limitations to religious or charitable corporations, and the Tax Law was further amended by adding to it a section known as section 221a imposing the rates of tax. This provided for a tax of a devise or a bequest to children depending upon the amount of the devise or bequest and also upon the transfer of the property to any person or corporation other than those enumerated in paragraph 1 of the section. Section 243 of the Tax Law was also amended. It was there provided that the words "estate," and "property," as used in the article (Tax Law, art. 10), should be taken to mean the property or interest therein passing or transferred to individual or corporate legatees, devisees, heirs, next of kin, grantees, donees or vendees, and not as the property or interest therein of the decedent, grantor, donor or vendor; that the words "intangible property" shall be taken to mean incorporeal property, including money, deposits in bank, shares of stock, bonds, notes, credits, evidences of an interest in property and evidences of debt. The word "transfer," as used in this article, shall be taken to include the passing of property or any interest therein in the possession or enjoyment, present or future, by inheritance, descent, devise, bequest, grant, deed, bargain, sale or gift, in the manner herein prescribed. But by subdivision 2 of section 220 of the Tax Law, as amended by chapter 732 of the Laws of 1911, the tax upon property of a non-resident was expressly limited to a transfer by will or intestate law of tangible property within the State when the decedent was a non-resident of the State at the time of his death. And subdivision 4 of that section as thus amended imposed the tax on the transfer of intangible property, or of tangible property within the State made by a resident or of tangible property within the State made by a non-resident, by deed, etc. Thus, by the act as amended by chapter 732 of the Laws of 1911, there was no tax imposed upon this property as it was, under the definition as prescribed by section 243 of the act as amended, intangible property. And this section as thus amended was in force at the time of the death of William J. Wright, and at the time of the transfer of this trust fund which was held under the will of Mary E. Wright. It seems that up to the death of William J. Wright there was no transfer of the property in these shares of stock, because up to that time all that Charles F. Wright had was a right to the stock if his brother, William J. Wright, died without issue. Section 222 of the act, which remained in force, provided that the tax upon the transfer of any estate, property or interest therein limited, conditioned, dependent or determinable upon the happening of any contingency or future event shall accrue and become due and payable when the person or corporation beneficially entitled thereto shall come into actual possession or enjoyment thereof. Thus, with the statute in force at the time of the death of Charles F. Wright, a tax of five per centum was imposed, which, however, did not accrue and become due and payable until the death of his brother without issue. But before the death of his brother occurred this section appraising this tax of five per centum had been entirely repealed, and there was in force when the beneficiaries became actually entitled to the property no statute which imposed a tax. Thus the tax did not accrue and become due and payable until the statute imposing the tax had been repealed. Considerable stress is laid in the respondent's brief upon the original order of the surrogate taxing the estate of the decedent and it is cited in respondent's brief, but I cannot find that that order is in the record, nor does it appear from the record that whatever interest the testator had in this property was not taxed at that time. The fundamental question is, as before stated, where a tax is imposed but does not accrue and become due and payable, can it be enforced after the statute imposing it has been repealed? There can be no question but what when a law amends a former statute "so as to read as follows" it operates as a repeal by implication of inconsistent provisions in the former law and provisions therein omitted in the latter. ( Matter of Prime, 136 N.Y. 347. See Lewis Suth. Stat. Const. §§ 282, 285, 346.) In Mason v. Sargent ( 104 U.S. 689) the question of the effect of a repeal of a statute imposing a tax was before the Supreme Court of the United States. A testator dying in 1867 left his property to his wife for life with remainder to the plaintiff and another. The wife died in 1872, and in 1873 the internal revenue collector assessed the tax. The law, however, was repealed in 1870, and in that repealing act there was a saving clause which provided: "All acts and parts of acts relating to the taxes herein repealed, and that all the provisions of said acts, shall continue in full force for levying and collecting all taxes properly assessed or liable to be assessed, or accruing under the provisions of former acts, or drawbacks, the right to which has already accrued or which may hereafter accrue under said acts." (16 U.S. Stat. at Large, 256, § 3; Id. 261, § 17.) The act contained a further provision that "this act shall not be construed to affect any act done, right accrued, or penalty incurred under former acts, but every such right is hereby saved." (Id. 261, § 17.) The court below held that the tax was properly exacted and collected on the ground that it accrued to the United States before October 1, 1870, when the repealing act took effect, and was thus within the saving clause. The Supreme Court of the United States, however, held otherwise, saying: "The contention of the plaintiffs in error, on the other hand, is that, until the legacy itself became payable, the tax upon it did not become a claim in favor of the government; and as the legacy was vested in the widow during her life and the payment of it was postponed until her death, which occurred June 17, 1872, after the repealing act had taken effect, no right that could be saved by the exceptions had at that time accrued. It is our opinion that the tax was illegally demanded and collected." (See, also, Clapp v. Mason, 94 U.S. 589.) There was no saving clause in the amendatory statute of 1911, and it seems to me clear that without such a saving clause the right to either impose or collect this tax was destroyed by the repeal of the statute imposing the tax. Section 93 of the General Construction Law (Consol. Laws, chap. 22; Laws of 1909, chap. 27) provides: "The repeal of a statute or part thereof shall not affect or impair any act done, offense committed or right accruing, accrued or acquired, or liability, penalty, forfeiture or punishment incurred prior to the time such repeal takes effect, but the same may be enjoyed, asserted, enforced, prosecuted or inflicted, as fully and to the same extent as if such repeal had not been effected." But I do not think that this provision affects this question. What is here preserved is a right accruing, accrued or acquired, or liability, penalty, forfeiture or punishment incurred prior to the repeal. It seems to me in this case that by the express provision of section 222 of the Tax Law the tax could not then be ascertained, and it, therefore, did not accrue and become due and payable until the persons or corporations beneficially entitled thereto shall come into actual possession or enjoyment thereof. There was no "act done, offense committed or right accruing, accrued or acquired, or liability, penalty, forfeiture or punishment incurred prior to the time such repeal takes effect." The law had provided that a tax should be imposed, but it should not accrue and become due and payable until a future time. Before that time arrived the statute imposing the tax had been repealed, and there was no provision then in force after the repeal by which the tax would ever accrue and ever become due and payable. In Mason v. Sargent ( 104 U.S. 689) the act of Congress under which the tax was imposed and collected (Act of June 30, 1864, chap. 173, § 124; 13 U.S. Stat. at Large, 285, § 124) imposed upon legacies or distributive shares of personal property exceeding the sum of $1,000 passing after the passage of the act from a decedent either testate or intestate in the hands of an executor, administrator or trustee, varying in rate as the party beneficially entitled was less or more remote in consanguinity. And section 125 of the same act (Id. 286), as amended by the act of July 13, 1866 (Chap. 184; 14 U.S. Stat. at Large, 140, § 9), provided this legacy, tax or duty "shall be due and payable whenever the party interested in such legacy or distributive share or property or interest aforesaid shall become entitled to the possession or enjoyment thereof, or to the beneficial interest in the profits accruing therefrom." Now here the tax was imposed at the death of the decedent, but was to become due and payable when the party beneficially interested should become entitled to the possession or enjoyment thereof — this seeming to be in substantial accord with sections 220 and 222 of the Tax Law in force when the testator died. But under a saving clause which provided that all acts and parts of acts relating to the taxes therein repealed and all provisions of said acts should continue in full force for levying and collecting all taxes properly assessed or liable to be assessed or accruing under the provisions of former acts or drawbacks the right to which had already accrued or which may thereafter accrue under said acts (16 U.S. Stat. at Large, 256, § 3; Id. 261, § 17), the court held that the tax was illegally demanded and collected. In Clapp v. Mason ( 94 U.S. 589), under the same act, it was said: "It is manifest that the right does not accrue until the duty can be demanded, that is, when it is made payable; in other words, at the end of thirty days after becoming entitled to possession."
My conclusion, therefore, is that the repeal of sections 220 and 222 of the Tax Law by the amendments of chapter 732 of the Laws of 1911 repealed this tax and that the estate of the decedent was not liable therefor.
It follows that the order appealed from must be reversed, with costs to the respondent, and the proceeding dismissed, with costs.
SCOTT and DOWLING, JJ., concurred; HOTCHKISS and LAUGHLIN, JJ., dissented.
In the original taxation proceedings under the will of Charles, the appraiser reported the existence of the deceased's conditional interest under the will of Mary dependent upon the death of William without issue, and it was ordered that further proceedings in the matter of the taxation of this interest be suspended until the determination of such event. By his will Charles specifically bequeathed this interest. By chapter 732 of the Laws of 1911, going into effect July twenty-first of that year, section 220 of the Tax Law (Consol. Laws, chap. 60; Laws of 1909, chap. 62), which had been amended by chapter 706 of the Laws of 1910, and under which an inheritance tax against non-residents on shares of stock had previously been imposed, was amended so as to exclude that species of property, thus repealing the previous act in this regard. There was no repeal, however, of those portions of the law which provided the machinery for ascertaining the amount of and for collecting any tax theretofore imposed. It is contended by the appellants that inasmuch as Charles died prior to William, nothing passed to his estate under the will of Mary. But it appears that the appellants as representatives of Charles took and retained possession of the securities in question claiming the same by virtue of the will. Under such circumstances they cannot now be heard to deny the title under which their possession rests.
The only other question arises out of the claim of the appellants that inasmuch as the repeal of the statute on which the tax was based took place prior to the death of William, which determined the right of Charles, the right to collect the tax fell with the repeal. Section 220 of the Tax Law, on which the tax in question was based, imposes a tax on the "transfer" of property passing by will or intestacy. It has been long settled that the inheritance tax of this State is not a tax upon property but upon the right of succession to the property and that the "transfer" occurs on the death of the testator and not at the time when the devisee acquires his right to possession. ( Matter of Davis, 149 N.Y. 539; Matter of Sloane, 154 id. 109.) Also that the tax is to be determined by the law in force at the time of such death. (Id.) In Matter of Vanderbilt ( 172 N.Y. 69) it was held that under an amendment to the former Tax Law taking effect in 1899 (Laws of 1899, chap. 76, amdg. Gen. Laws, chap. 24 [Laws of 1896, chap. 908], § 230, as amd.), remainders whether vested or contingent were presently taxable at the highest rate which on the happening of the contingencies provided for, could be imposed under the provisions of the act — now section 230 of the present Tax Law (as amd. by Laws of 1911, chap. 800). (See, also, the Zborowski Case, post.) Section 222 of the Tax Law is as follows: "All taxes imposed by this article shall be due and payable at the time of the transfer, except as herein otherwise provided." By a subsequent clause it is provided that taxes upon the transfer of certain estates in expectancy dependent "upon the happening of any contingency or future event by reason of which the fair market value thereof can not be ascertained at the time of the transfer as herein provided, shall accrue and become due and payable when the persons * * * beneficially entitled thereto shall come into actual possession or enjoyment thereof." It was under these latter provisions of section 222 and in pursuance of a course approved by this court affirming the decision of the surrogate of this county in Matter of Zborowski ( 84 Misc. Rep. 342; 163 App. Div. 947) and before the reversal of our decision in that case ( 213 N.Y. 109), that the proceedings for the appraisal of the estate in question were suspended. In the Zborowski case the Court of Appeals held that future estates determinable upon lives were ascertainable by "deducting the value of the precedent estate determined by the method and standard of mortality and value employed by the Superintendent of Insurance," and that the appraisal of the value of the expectant estate was not to be postponed under the provisions of section 222, which did not apply. It seems clear from the foregoing that at the time of the death of Charles his interest under the will of Mary was subject to tax, and that the amount of such tax was then ascertainable and should have been ascertained and computed in accordance with the principles of the Zborowski case, and should not have been postponed to await the death of William. In these circumstances I think the right of the State to impose and collect the tax was preserved by section 93 of the General Construction Law. (Consol. Laws, chap. 22 [Laws of 1909, chap. 27], § 93; People ex rel. City of Buffalo v. N.Y.C. H.R.R.R. Co., 156 N.Y. 570; Village of Champlain v. McCrea, 165 id. 264; Cameron v. N.Y. M.V.W. Co., 133 id. 336; O'Flynn v. Powers, 136 id. 412; Matter of Village of Le Roy, 35 App. Div. 177; People ex rel. Standard G.L. Co. v. Gilroy, 67 Hun, 323; People v. England, 91 id. 152.)
The order should be affirmed, with costs.
LAUGHLIN, J., concurred.
Order reversed, with costs, and proceeding dismissed, with costs. Order to be settled on notice.