Opinion
March 3, 1920.
Charles D. Newton, Attorney-General [ Alexander Otis and Lafayette B. Gleason, of counsel], for the appellant.
Dixon Holmes [ Jabish Holmes, of counsel], for the respondent.
By the will of William H. Tillinghast, deceased, probated January 2, 1903, he bequeathed his residuary estate to his executors in trust to pay the income to his wife during her life with remainder after her death in fee to his brother, a nephew and a niece. He provided, however, that $100,000 of this residuum should be paid absolutely to such persons as his said wife might by her last will designate. He died on December 9, 1902. Section 230 of the Tax Law provides that in fixing the transfer tax no allowance shall be made on account of any contingency whereby an interest in the estate may be abridged or diminished, but when the contingency arises a return shall be made to the proper person of such amount of the tax as will reduce the same to the amount which would have been assessed if the contingency had occurred before the assessment. (See Gen. Laws, chap. 24 [Laws of 1896, chap. 908], § 230, as amd. by Laws of 1902, chap. 496; since amd. and re-enacted by Laws of 1904, chap. 758, and Laws of 1905, chap. 368; now Consol. Laws, chap. 60 [Laws of 1909, chap. 62], § 230, as amd. by Laws of 1911, chap. 800, and Laws of 1916, chap. 550.) Therefore, the tax was fixed on the residuary interests of the three remaindermen on the theory that the widow would not by will exercise the power of appointment and was paid to the Comptroller of the State on or about May 11, 1904. The widow died December 31, 1913, having by her will exercised the power of appointment and thereupon the contingency arose which required a diminution in the tax against the three remaindermen. The petitioner herein having become the substituted trustee of the estate applied to the Surrogate's Court of New York county for an order modifying the original order fixing the tax and the surrogate made such an order reducing the tax by the sum of $3,358.95. On appeal by the Comptroller from this order to the Appellate Division of the First Department it was affirmed. (See Matter of Tillinghast, 94 Misc. Rep. 76; affd., 184 App. Div. 886.) The Comptroller still refusing to refund the excess tax, this proceeding was instituted to require him to do so.
The order of the surrogate, affirmed by this court in its First Department, determines the correct amount of the tax. In Matter of Parker ( 226 N.Y. 260) the tax was assessed under circumstances similar to those which here exist and the court said (at p. 264): "The remaindermen do not suffer, for when the estate takes effect in possession, there will be a refund of any excess," citing section 230 of the Tax Law. It must be held, therefore, that this case fairly falls within section 230 of the Tax Law requiring the Comptroller to refund the excess tax which he has received.
The order appealed from requires payment of interest on the amount refunded. The Comptroller contends that if he must refund the excess of tax he should not pay interest thereon. He bases his argument on the fact that the portion of section 230 which applies to this case contains the provision: "Such return of tax shall be made in the manner provided by section two hundred and twenty-five of this article," and that section 225 provides that interest shall not be paid on the amount refunded under that section. Section 225 at the time the tax in question was paid to the Comptroller and until the year 1907 was silent as to interest. The right to interest at that time clearly followed. ( Matter of O'Berry, 179 N.Y. 285.) In 1907 section 225 was amended so as to provide that the refund required by that particular section should not carry interest but it was expressly limited to that section. (See Tax Law of 1896, § 225, as amd. by Laws of 1901, chap. 173; Laws of 1905, chap. 368, and Laws of 1907, chap. 323; Tax Law of 1909, § 225, as amd. by Laws of 1911, chap. 308.) Therefore, when it was said prior to 1907 in section 230 that the return of the tax should be made in the manner provided by section 225 clearly there was no reference to interest because section 225 said nothing about interest. Section 230 meant no more or no less after the amendment of 1907 than it did before. The provision in section 230 that the tax should be returned "in the manner" provided by section 225 had reference to the method of restoring the tax to the person entitled thereto and not to its amount.
In the year 1911 (Laws of 1911, chap. 800) section 241 of the present Tax Law was amended requiring the Comptroller to deposit in a bank or trust company so much of the tax as might have to be returned by reason of the happening of a subsequent contingency and to pay the interest thereon to the executor or trustee of the estate and if the contingency happened to return such tax to such executor or trustee. This establishes the right of the trustee herein as the proper party to institute this proceeding. It further indicates the policy of the State that interest shall be paid. The State has had the use of the money and we should not construe the statutes so as to relieve it from the payment of interest unless required to do so ( Matter of O'Berry, 179 N.Y. 285, 293), and no such requirement here exists.
The order should be affirmed, with costs.
Order unanimously affirmed, with costs.