In re Baker's Estate

The claim leads one .to wonder what would have been the attitude of the transaction if the decedent at her death had been possessed of a sum of money which was then about to be paid for Nebraska lands under her contract for their purchase. In the case supposed there would be as much conversion of money into land as in the case at bar there is a conversion of lands into money, and, if the tax imposed can be sustained, it must be upon reasoning which would inevitably lead to an escape from the tax whenever the decedent dies while under contract to purchase nontaxable property.

The doctrine of equitable conversion, in its application to a decedent’s estate, concerns only those who have come into relations of contract or privity with the decedent or his estate. The fiction of conversion adjusts rights .and imposes equities, but it cannot change facts or work inequity. In adopting it the law makes belief that the things which have been arranged to be done have been done, but this amiable pretense must be confined by the impulses which inspire it to the persons in privity with the transaction. There is no equitable need for its extension to others. Strangers have nothing to do with the reason for its being' and nothing to do with its operation. In the best defined case of equitable conversion the legal owner of the lands retains as to persons not in equitable relations to himself all the rights and duties which belong to his seisin.

Though his land be equitably converted into'money, he will still be prosecuted for its unlawful use and made liable for injuries resulting from its negligent or unlawful condition, and strange would be the defense that he no longer owned the land because it had been equitably converted.

The term itself, by which the conversion is expressed, confesses that the person whose lands are converted remains the legal owner. “He is deemed in equity to stand seised of the land for the benefit of the purchaser.” Williams v. Haddock, 145 N. Y. 144 , 39 N. E. 825 . His legal estate descends to his heirs, although they, in turn, take their estate burdened with the equity under which they may be compelled to convey. It is not only impossible that a legal estate can be extinguished by the law’s imagination, but it is essential to the operation of the doctrine itself that the legal title remain in the original owner.

In Matter of Swift, 137 N. Y. 77 , 32 N. E. 1096 , 18 L. R A. 709 , this question was determined. The-observations in that case are none the less controlling because the conversion there resulted from the directions of the testator’s will. The teaching of the case doubtless is that, however the equitable conversion may have been effected, by will or contract, the property is to be taxed or exempted according to its nature and tenure at the decedent’s death. It is there said:

“The question of the jurisdiction of the state to tax is one of fact and cannot turn upon theories or fictions which, as has been observed, have no place in a well-adjusted system of taxation. * * * If the property in the foreign jurisdiction was in land, or in goods and chattels, when, upon the testator’s death, a new title, or ownership, attached to it, the bringing into this state of its cash proceeds, subsequently, no matter by what authority of will, or of statute, did not subject it to the tax.”

To the same effect is Matter of Sutton, 3 App. Div. 208 , 38 N. Y. Supp. 277 , affirmed 149 N. Y. 618 , 44 N. E. 1128 .

The rule that the transfer tax should be imposed upon property in the form in which it stands at the testator’s death has been applied to the advantage of the taxing power where the equitable conversion changed a portion of the estate from taxable to nontaxable property. Matter of Offerman, 25 App. Div. 94 , 48 N. Y. Supp. 993 ; Matter of Bartow, 30 Misc. Rep. 27 , 62 N. Y. Supp. 1000 .

The order appealed from should be so modified that no tax shall be fixed upon the sum of $26,400, reported by the appraiser as additional personal property.

Decreed accordingly.