In re Appraisal of the Property of Ogsbury

Majority

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In the Matter of the Appraisal of the Property of William M. Ogsbury, Deceased, under the Act Entitled “An Act to Tax Gifts, Legacies and Collateral Inheritance in Certain Cases.” William L. Ogsbury, Appellant; Ashbel P. Fitch, Comptroller of the City of New York, Respondent.

Headnote

Inheritance tax—a conveyance to a trust company to manage the property, to pay the income to the grantor, and the principal as directed by his will, or, in default of such direction, to his next of kin, creates a naked, revocable trust — the property passes under the will of the grantor and, is liable to tax.

On November 5, 1885, William M. Ogsbury executed and delivered to the United States Trust Company of New York city, an indenture upon a consideration of seven dollars, by which, after reciting that the deceased had certain personal property of whose management he desired to be relieved during life, but to receive during his life the benefits of the income thereof, and to secure the property to his devisees or next of kin, he conveyed to the United States Trust Company of New York city about §25,000 worth of personal property upon the trust that it should receive the income and profits thereof, pay its reasonable charges for executing the trust, and apply the remainder' of the income and profits to the use of the deceased during life, and upon his death transfer all the property to the appointees thereof named in his will, or, in default of such appointment, to his next of kin. The trust company united in the indenture and accepted the trust.

In 1888 the deceased made a will by which, after giving specific sums to four persons, he directed that the residue of his property should be transferred to his nephew absolutely.

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The appraiser appointed by the surrogate decided that the share of the nephew was .taxable; he reported that the executor of the deceased claimed that it was not taxable and offered to prove by parol evidence, that the indenture was not made in contemplation of the death of the grantor, but that he (the appraiser) held that the indenture and will were the best evidence of the intent of the grantor arid testator, and, therefore, rejected the evidence.

Held, that the inference from the indenture and will, that the grantor intended to transfer the legal title to the trust company when the indenture was executed . and delivered, was correctly drawn by the appraiser;

That the legal effect of such intent was the only question left to be determined, as the question whether the indenture was made in contemplation of death or was to take effect in whole or in part after death was, for the purposes' of the tax, rather a question of law than one of fact;

That within the meaning of chapter 483 of the Laws of 1885, as amended by chapter 713 of the Laws of 1887, the property in question never was in fact the property of the trust company, but remained for all intents and purposes the property of the deceased and passed by his will;

That there was a mere naked trust in which no third .parties had any interest whatever, and that the only interest of the trust company in the property was represented by its right to compensation for the services in the execution of the trust;

That the real interest remained in the deceased and that the trust was in no sense irrevocable;

That the indenture was in effect little more than a power of attorney to the trust company.

Appeal by William L. .Ogsbury, a nephew" of William M. Ogsbury, deceased, from an order of the Surrogate’s Court of the county of New York, entered in said Surrogate’s Court on the 13th day of January, 1896, affirming a former order made by said Surrogate’s Court fixing the respective interests of the beneficiaries in the estate of the deceased, and the amount of the tax to be paid thereon under, the legacy and inheritance tax law of the State of New York.

On the 5th day of November,. 1885, the deceased executed and delivered to the United States Trust Company of New York city an indenture, wherein, it was recited that the deceased was possessed of the personal property therein described, and desired to be relieved of the management thereof and to secure the benefits of the income thereof as a continual support during his natural life, and to secute the property to his devisees or next of kin as therein mentioned, and wherein, in consideration of seven dollars, and for the purpose therein set forth, he granted, sold and conveyed to the' trust company, and its successors and assignors, personal property therein

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■described, consisting of bonds and sto'cks and amounting to about $25,000, upon trust to receive the income and profits thereof, to pay the reasonable charges of the trust company for executing the trust, and to apply the remainder of such income and profits to the use of the deceased during the term of his natural life, and upon his death to assign, transfer and convey the property and such other as the trust company might then hold in lieu thereof, to such person or persons and in such shares or proportions as deceased should, in and by his last wilh and testament or instrument in the nature thereof, name, appoint and direct, “ and, in default of such will or instrument legally made, and so far as the same should not extend, then to such person or persons as shall be entitled thereto as next of Icin of the said William M. Ogsbury under the laws of the State of ISTew York then in force” for the distribution of the estates of persons dying intestate, and wherein the deceased empowered the trust company to sell any of the securities therein described, and reinvest the proceeds thereof in other good and approved securities at any time the- trust company should deem it necessary, proper or to the advantage of the deceased to make such sales and reinvestment; such new investments to include bonds of railroad companies that had not made default in the payment of interest within the eight years last past, secured by mortgage upon completed railroads, and also authorized and empowered the trust company to do any other act which might be necessary and proper for the care, management, protection and preservation of the property described therein or of any such new investments. The trust company united in the indenture, accepting the trust created therein and covenanting to faithfully execute the same.

Thereafter, and March 10, 1888, the deceased made a will, wherein, among other things, he directed that the property held by the trust company under the indenture of November 5, 1885, at the time of his death, should be transferred and conveyed by the trust company, $1,000 to each of his three aunts named therein, $1,000 to a Mr. Martin and $2,000 to a Mrs. Youngs, and the balance to his nephew, the appellant herein, to have and hold the same absolutely.

Thereafter, and April 19, 1889, the deceased died and his will was admitted to probate.

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' The appraiser, appointed by the surrogate, decided that the residue of the property, held in trust that went to the appellant, amounted .to $19,491.42. ITe also stated in his report that the executor under ■deceased’s will claimed that the trust property did not belong to deceased, and was not subject to taxation,, but that he had disallowed • the claim, and that the executor offered to prove by parol evidence that the' indenture of November '5, 1885, was not made in contemplation of the death of the grantor, and that he held that the indenture and will were the best evidence of the intent of the grantor and testator and rejected the evidence. There does not appear to be any proof in the papers that the property described in the indenture of November 5, 1885, was actually delivered to the trust company, or that the trust company executed the trust during the:.lifetime of the deceased, or made any transfers of the property, after the death, to the beneficiaries named in the will, except such Inference as may be drawn from the indenture and will themselves.

The report of the appraiser was filed and the surrogate made the orders hereinbefore referred to, wherein, among other things, he determined that the property referred to in the indenture was taxable under the laws of the State hereinbefore referred to.

Eugene L. Bushe, for the appellant.

Emmet R. Olcott, for the respondent.

We suppose it should be assumed, for the purposes of this appeal, that the property in question was actually delivered to the trust company at the time of the execution and delivery of the indenture, November 5, 1885 ; that the trust company executed the trust according to its terms during the lifetime of the deceased, and that after the death, the trust company transferred the property to the persons named in the will pursuant to the terms of the indenture and of the will. We find nothing in, the record to support the contention of the appellant, that the report of the appraiser does not accurately express the ruling made by him Upon the: question of the intent with which the indenture of November 5, 1885, was made. It does' not appear that the executor offered to show the precise reason for

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mating the indenture ; or that the appraiser ruled out the evidence not upon the grounds of its incompetency or immateriality, but upon-the ground that the onus probandi to show the intent with which the indenture was made rested upon the" comptroller; or that the-point that the record was incorrect upon this question was urged upon the surrogate before the report was confirmed. So far as the-record discloses, the only offer made by the executor was to prove-by oral testimony that the indenture was not made in the contemplation of the death of the grantor, or to take effect after his death, and the only' ruling made was that the indenture and the will were the-best evidence of the intention of the grantor and testator, and-rejecting the oral testimony.

We cannot assume that the record is incorrect in the absence of' any evidence to that effect. ¡Nor can we assume that any point was. made before the surrogate as to the incorrectness of the report in the absence of anything in the record to show that any such point was made.

The inference to be drawn from the indenture and will is that the-grantor intended to transfer the legal title to the property to thetrúst company at the time the indenture was executed and delivered upon the trust specified therein, which was to hold the property during the lifetime of the deceased and pay the income, over and', above the charges of the trust company executing the trust, to the-deceased for his use during his lifetime, and at his death to transfer-the property itself to the persons referred to therein. We do not-see how proof could be made of any different intent. This intent was plainly expressed and carried out by the trust company, and we-think no error was committed by the appraiser in ruling as he did.

What the legal effect of such intent, so expressed, was, is the only question left to be determined. Whether the indenture was made-in contemplation of death, or to take effect, in whole or in part, after-death, for the purpose of the tax, is rather a question of law than of fact. The act of 1885 (Chap. 483), as amended by Laws of 1887 (Chap. 713), which was in force at the time of the death of the-deceased, provided : “ § 1. After the passage of this act all property: which shall pass by will, or by the intestate laws of the State,,from-a/ny person, who may die seized or possessed of the same, * * * or a/ny interest therein or income therefrom, which shall be trans

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ferredby deed, grant, sale or gift, made or intended to take effect in possession or enjotjment after the death of the grantor or bargainor to any person or persons, or to any body politic or corporate m trust or otherwise,, or by reason whereof any person or body politic or corporate shall become beneficially entitled in possession or expectancy to any propert/y or to the income thereof, * * *. shall be and is subject to a tax,” etc.

The question is whether, under this statute, the principal of this property, which .concededly came to the appellant and others after the death of the deceased, was taxable under this statute, considering the way in which it was transmitted from the deceased to these persons, and whether the property really passed by will or by the indenture. The property in question -was -whollypersonal in its -character.

Mo question is made by either party as to the legality of the trust established by-the. indenture in question. The only question we are interested in is as to the effect of the indenture upon the question of taxation under the statute. The claim made by the appellant is that by the indenture the absolute title passed to the trust company at the time the indentiire was executed and delivered, and that no interest therein remained in tho deceased, or passed under the will. These questions are not free from, difficulty, but it seems to us that it can hardly be said that under the indenture all interest in the property which finally came to the appellant,' passed to the-trust company -at the time the indenture was executed and delivered, and nothing remained in the deceased, so as to pass under his will, It was a mere naked trust, in which no third parties had any interest' Whatever. . • . .

The trust company had no interest in the property, but only an interest in the income for the purpose of compensating itself for its -services in the execution of the trust. While the technical legal title may be said to have passed under the indenture to the trust -company, still the property and all interest therein really remained in the deceased, ás much as though the indenture had not been made or delivered.

It is not true that the trust was irrevocable. • It is only in cases where other parties, besides the persons creating the trust have' an interest therein that the trust becomes irrevocable. We see nothing

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that would have prevented the deceased from revoking the trust if he had desired to do so. Ho one had any interest to prevent his doing so. The appellant and other appointees under his will had no such interest, because the deceased could have revoked this will and made another in favor of other parties, if he desired, to do so. His next of kin referred to in the indenture had no such interest, because the deceased had power by will to secure the property to others and entirely exclude them from all interest therein. The property was to all intents and purposes the property of the decased, and subject to his sole power of disposition at any time before his death, or by will to take effect at his death, the same as if this indenture had not been made. In The N. Y. Life Ins. & Trust Co. v. Livingston ( 183 N. Y. 125 ) the testator executed and delivered to the trust company, plaintiff, a deed of trust of real and personal property with directions to pay the income to himself during his life and upon his death to convey- tlie property to such persons and in such shares as he should designate by his last will, and in default of such appointment, to his heirs at law and next of kin. By his will he gave all his estate, real and personal, which he owned, or was in any manner entitled to, to an uncle. There was no other execution of the power conferred by the trust deed, aside from this general provision of his will, and the court held this amounted to an execution of the power, Andrews, J\, saying in his opinion: “ The testator owned the property embraced in the trust, prior and up to the time the deed was executed. He reserved therein the beneficial, interest, during his life, and a power of appointment by will. This was little less than ownership, and the statute for the purpose of construing a disposition by will under a power of appointment treats the subject of the power as the property of the donor of the power and conclusively infers an intention in a testator to execute the power where the will, disposes of all his property, and the inference is not rebutted by express language or necessary implication,” etc.

It is true this decision was made under section 126 of the Statute of Powers, which provides that “Lands embraced in a power to devise shall pass by a will purporting to convey all the real property of the testator unless the intent that the will shall not operate as an execution of the power shall appear expressly or by necessary impli

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cation.” (1 R. S. 137.) But the trust was the same precisely as in. the case at bar, except that- it related to real as well as personal property; and the theory of this decision was'that, though the power Avas not by the will expressly executed, still it was effectually acted under, because really the property covered by the trust deed remained the property of the testator, and he had an interest as owner therein, notwithstanding, the trust. The property was held to have passed under the will, which merely disposed of all the property which he owned or was entitled to.

We think the deceased retained after the execution and delivery of the indenture in question the OAvnership of, or an interest in the property, which passed to the- appointees under-the will so as to render it taxable under the provisions of the statute. The indenture made and delivered by the deceased to the trust company was in effect but little more than a poAver of -attorney. Possession of and the formal legal title to the property was presumably given to the trust company to enable' it to collect the income and profits, and to pay them to deceased during his lifetime, and after his death to deliver the property to his appointees named in the will) or in default thereof to next of .kin. There Avas no gift to the trust company, for there was no irrevocable disposition or delivery of the property to it. It never became owner of the. property. A fair construction' should be given to the statute and not a forced or technical one. No opportunity should be given parties to evade the statute, and prevent the taxation of the property fairly Avithin its provisions, and we are unAvillitig tó give any-construction to the statute which will aid parties in the evasion of the law

The order appealed from should be affirmed, with costs".

Van Brunt,. P. J., Patterson, O’Brien and Ingraham, JJ., concurred.

Order affirmed, with costs.