In Re the Appraisal, Under the Transfer Tax Act, of the Estate of Lansing

74 N.E. 882, 182 N.Y. 238, 20 Bedell 238, 1905 N.Y. LEXIS 921

• Court: New York Court of Appeals
• Decided: June 13, 1905
• Status: Published

Opinions

Vann, J.

The property in question belonged to Thomas Suffern when he died in 1869, and there was then no statute in force which imposed, an inheritance or transfer tax. Subsequent legislation could not authorize a tax upon the transfer of property effected solely by means of his will, with no aid from the jpower of appointment. (Matter of Pell, 171 N. Y. 48.) The property under consideration never belonged to the daughter, Mrs. Lansing, although she had the income therefrom during her life through a trust created for her benefit by her father’s will. By the same sentence which created the trust during her life, the property was given after her death to the granddaughter, Mrs. McVickar, subject to ithe exercise of the power of appointment. That power was limited to two classes of persons, consisting of the heirs at law and the collateral relatives of Mrs. Lansing. Mrs. McVickar was her sole heir at law and the power of appointment, as formally exercised, gave all the property to her the same as her grandfather had given it to her more than thirty years before. In other words, the attempt to exercise the power neither increased nor diminished the estate of Mrs. McVickar, and did not affect in'any degree, the value of her grandfather’s gift. It did not effectively transfer any property whatever, for she took from her grandfather and nothing was added to or taken away from the gift by the exercise of the power through the will of her mother. The execution of the power left the title where it was before, and the result is the same as if there had been no power to exercise.

Mrs. McVickar was born before her grandfather died, and upon his death she took a vested interest in remainder, because she was “ a person in being, who would have an immediate right to the possession of the lands, upon the ceasing of the intermediate or precedent estate,” created in trust for the benefit of her mother. (1 R. S. 723, § 13.) It was property which she could convey or devise. (Id. § 35.) While she could not take possession until the death of her mother, the state could not deprive her of the property thus vested in her and she needed no consent from the state that her mother might make a will in order to enter into full enjoyment upon the termination of the precedent estate. Her rights were fixed by the will of her grandfather, and unless changed pursuant to its provisions her estate in expectancy would become an estate in possession upon the death of her mother. While the situation was subject to change under the power of appointment, no change was made. Although the power was exercised in form, her title was perfect without it and she derived no benefit from it. The power was to “ dispose of the remainder” and the remainder was not disposed of but continued where it was. The attempt to execute the power was not effective, because it did nothing. The exercise of a power which leaves everything as it was before is a mere form, .with no substance.

Taxes are generally imposed Upon property, but the transfgr-tax is imposed upon the right of succession to property by means of a will, or through the Statutes of Descents and Distributions. In the case before us it was imposed for the privilege of making a will and thereby exercising a power of appointment. (Matter of Dows, 167 N. Y. 227, 231; Matter of Delano, 176 N. Y. 486, 491.) So far as the will of Mrs. Lansing gave her own property to Mrs. McVickar, there is no controversy as to the transfer tax, but in so far as it purported to give property that she never owned and which came from Thomas SufEern, the tax is resisted because it was imposed upon a mere formality which changed nothing and accomplished nothing and for the further reason. that. Mrs. McVickar elected not to accept under the appointment.

The power as it might have been exercised would have left Mrs! McVickar with no title at all, but as it was exercised it left her the same title that she had before. It gave her nothing and took nothing away from her. She is not -forced to claim through the second clause of her mother’s will, for she took under the will of her grandfather. She had the right of election' and could refuse to take under the appointment and still hold the property, for her title was as good without as with the exercise of the power. Her attitude .in this proceeding, both -now and before the surrogate, is that she took wholly from her grandfather and in no respect through the action of her mother. She claims exclusively under him, so far as the property in question is concerned. She treats the exercise of the power as a mere attempt and not as an effective execution thereof. She declares that the property vested in her under the will of Thomas Suffern "upon hi¡Tcleafh in" 1869, and that she acquired no further interest therein through the will of her mother. She took this position in her affidavit presented to the surrogate, and in her formal objections she insisted that all the property passed to her directly from her. grandfather by the sixth clause of his will; that nothing passed to her through the appointment of her mother by the second clause of her will; that the power was not effectively exercised, and that it is not necessary to resort to the appointment in order to determine her share in the residuary estate of her grandfather. An exclusive claim under the one source" of title is a disclaimer under the other. There is no evidence in the record thatjjifi.ever. accepted the appointment or claimed; title ; through the exercise of the power, but on the other hand, it snf-¡:¡¡ ficiéñtly appears that she elected to réject title from that source.)

An appointee under a power has the right of election, the li same as a grantee under a deed. “ It is essential to the legal operation of a deed that the grantee assents to receive it. It cannot be imposed upon him, and there can be no delivery without an acceptance.” (Jackson v. Dunlap, 1 Johns. Cas. 114, 116; Jackson v. Phipps, 12 Johns. 418.) He can accept the title tendered or reject it in his discretion. It cannot be forced upon him' against his will. He cannot be compelled to receive,additional evidence of title when he does not want it, and does not need it because his title is perfect without it.' His consent is necessary before the attempt to exercise the power becomes binding upon him the same as consent is necessary in making a contract or agreement. Declining or refusing to take has the samé effect as incapacity to take, as in the case of a devise to a corporation which has no power to hold any more property because the statutory limit has been exceeded. The title is not affected, but remains where it was before.

Mrs. McYickar, by accepting under her mother’s will property which belonged to her mother at the time of her death, did not accept the title tendered by the appointment, although both gift and appointment were made by the same instrument. She could claim as the devisee of her mother and disclaim as her appointee, because a gift and an appointment are wholly unlike in character and substance. The gift was confined to property of the mother, while the appointment was coyfined to property which she never owned and which vested in the daughter through the will of her grandfather. Ho condition was' attached to either and each was independent of the other. While the mother could appoint, the daughter could l reject. Mrs. McVickar could, therefore, repudiate the action of her mother in attempting to exercise the power and hold the property from her grandfather.

Her position is quite different from that of Mr. Carey, the .appointee under a power in the Dela/no case, for while he could have taken an undivided fourth through the deed of his grandfather and could thus have escaped the transfer tax, in order to get the other three-fourths he was obliged to claim under the exercise of the power of appointment in the will-of his aunt. . He could not claim one-fourth under the deed and the remaining three-fourths only under the will, for he was <ubound to accept or reject under the will as an entirety, so far as it exercised the power of appointment. If he accepted under the power at all, he was obliged to accept all that purported to come to him thereby. Having elected to claim under the power, he was compelled to accept thé appointment as it was made and take all the property covered thereby. He could not take the position that he accepted three-fourths only under the exercise of the power, for if he claimed from that source at all lie accepted the title as a whole. (Matter of Delano, 176 N. Y. 486.)

In the Cooksey case, argued herewith, the devise of the remainder by the will of the grandfather was to such of the children of his daughter as she should appoint by will, and if she failed to thus appoint, title to the remainder was to vest in her children, share and share alike. It was not, however, to he paid over to them all at once but not to exceed $50,000 at the age of 21, a further sum of not to exceed $100,000 at the age of 25 and at the age of 30 the remainder with all accumulations. The power as exercised by the mother directed the payment of the entire sum of $50,000 at the age of 21, the full sum of $100,000 at the age of 25 and the remainder at the age of 30. She thus deprived the trustees of the right to exercise any discretionary power as to the amount of the payments, not exceeding the limit named, for she excluded discretion by exhausting the limit. Under the will of the grandfather a grandchild might have been paid $5,000 instead of $50,000 at the earliest age named and but one dollar instead of $100,000 at the second period named. It, therefore, became necessary for the grandchildren to claim under the power of appointment as exercised by their mother in order to come into the possession of the largest sums mentioned at the ages named. Moreover, title to the remainder was to vest in them only upon the failure of the mother to appoint. If she exercised the power they could take under that source only, for they could not take under the will of the grandfather, as Judge Haight shows in his opinion. (Matter of Cooksey, 182 N. Y. 92)

So in the Vanderbilt and Dows cases the power was effectively exercised and it was necessary to resort to the will by which it was exercised before title could be established to the property claimed. (Matter of Vanderbilt, 50 App. Div. 246; 163 N. Y. 597; Matter of Dows, 167 N. Y. 227.)

We pass without serious discussion that part of the statute which provides, in substance, that the failure or omission to exercise a power of appointment subjects the property to a transfer tax in the same manner as if the donee of the power had owned the property and had devised it by will. (L. 1897, ch. 284, § 220, subd. 5.) Where there is no transfer there is no tax and a transfer made before the. passage of the act relating to taxable transfers is not affected by it, because as we held in the Pell case such an act imposes no direct tax and is unconstitutional since it diminishes the value of vested estates, impairs the obligation of contracts and takes private property for public use without compensation. (Matter of Pell, 171 N. Y. 48; Matter of Delano, 176 N. Y. 486, 495.)

After the death of Mr. Snffern and the vesting of the remainder in Mrs. McVickar no statute could prevent her from entering into the full enjoyment of the property upon the death of Mrs. Lansing. The law sanctioned the gift of Mr. Suffern when it was made and the law cannot'cut down the gift by imposing a transfer tax w'hen there was no transfer.

Even if her interest was contingent, nevertheless, as was said by Judge "Cullen in a late case, “ the interests of the devisee accrued on the death of the testator and at that instant, and were immune from legislative attack whether contingent or vested.” (Matter of Vanderbilt, 172 N. Y. 69, 73, citing Brevoort v. Grace, 53 N. Y. 245.)

It is not at all necessary to determine whether the remainder which Mrs. McVickar took under her grandfather’s will ivas vested or contingent. If we assume that the remainder was contingent, nevertheless it was acquired hv Mrs! McVickar under her grandfather’s will at the instant of his death. It then became a property right in her which was just as sacred and just as immune from legislative attack as any other property right. (Breevoort v. Grace, 53 N. Y. 245.) Of course, it is only for this purpose that that case is cited, no transfer tax having been enacted for many years after it was decided. It is true that Mrs. McVickar’s estate was subject to be defeated by her death before her mother, or by diminution if her mother left other children, but her right to the estate if she survived her mother was indefeasible. I am at a loss to see what bearing the question of a remainder being vested or contingent has to do with the the liability to the transfer tax ivhen that remainder was created prior to the imposition of any transfer tax. The theory of a transfer tax is that it is a tax on the right accorded to take under a null or to succeed in case of intestacy which, it is said in the decisions, are privileges that may be accorded or denied by the state. (Matter of Dows, 167 N. Y. 227; Magoun v. Illinois Trust & Bav. Bank, 170 U. S. 283.) This is the only theory on which the tax can be upheld ; for it is imposed upon United States securities on which, of course, the state cannot impose any property tax. 27oiv, suppose that the state at the time it imposed the inheritance tax instead of enacting that statute had forbidden the making of wills and succession in case of intestacy, itself taking all the property that a decedent might leave at the time of his death, such a statute could have no possible effect on Mrs. McVickar’s rights, for those rights had been acquired long before. There fore, what privilege did she get at that time from „the state for which it can charge or impose a tax ? The ground on which the Dell case proceeded was that a transfer tax could not he imposed on the acquisition of property where the acquisition had taken place prior to the enactment of the taxing statute. The ground on which the Dows case proceeded ivas that the legatees took under a power of appointment in a will made subsequent to the enactment of the Inheritance Tax Law, and that the state could impose a tax on property passing under that will. It was strongly intimated, however, that had the power of appointment not been exercised and the parties had taken under the will of their grandfather, the estate would not have been liable to the tax. -The difference between my brother Haight and myself is that he maintains that Mrs. McYickar’s rights accrued on the death of her mother, while I insist they accrued on the death of her grandfather. It is true that their value would have been destroyed by her death before that of her mother, but for her survival she is in no way indebted for any privilege accorded to her by the state.

The orders of the surrogate and of the Appellate Division should be modified by reducing the appraisement of the estate for the purpose of. the transfer tax by deducting therefrom the sum of $500,672.03, the value of the property passing to Janet L. McYickar under the will of Thomas Suffern, deceased, and as modified affirmed, with costs to the appellants in all courts.