In re Astor — 14 N.Y. St. Rep. 478

Majority

p. 478

Estate of Charlotta A. Astor, Deceased.

(Surrogates Court of New York County,

Filed March 19, 1888.)

Headnote

1. Collateral inheritance—Tax—Laws 1887, chap. 713—Construction.

Qumre whether the expression, “ an estate,” preceding the words, “ which may he valued at a less sum than $500,” in the last sentence of section 2 of chapter 713, Laws 1887, means the whole estate of the 3e-ceased person, or only so much thereof as passes to a person other than one of those exempted from the tax.

2. Same—When tax accrues—When payable.

This tax accrues at the date of the decedent’s death. The executors, etc., are not' in default from the time of said death, hut are relieved at their option from the payment of the tax during eighteen months next succeeding the date of decedent’s death.

3. Same—Decision op surrogate’s court as to whether any tax due PINAL AS TO STATE. '

The decision of the surrogate’s court upon the question whether a tax is due and unpaid is final upon the rights of the state in the premises except for fraud or refusal to act.

4. Same—Procedure por collection.

The surrogate, acting judicially as a court, must, upon the application of an interested party (any person having an interest in the whole estate), and also the county treasurer (in Hew York city the comptroller), and on failure of any such person to apply upon his own motion, appoint some competent person appraiser from time to time, if occasion requires whose duty it shall he to forthwith give notice hy mail to all persons known to have, or to claim, an interest in such property and to such persons as the surrogate may hy order direct of the time and place he will appraise such property. It is the duty of the surrogate to fix the length of the notice, and his order appointing the appraiser should designate the persons upon whom the appraiser shall serve said notices. The appraiser (after hearing

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all persons notified who attend before him upon the question of the value of the property and its liability to the tax) must report to the surrogate the fair market value of th° property he deems subject to the tax, together with his proceedings, and any and all facts known to him germain to the duties imposed upon him by the order of his appointment (he has no right to administer oaths and take testimony upon any of the questions to be considered by him). On the coming in and filing in the surrogate's court of the appraiser’s report, the surrogate shall give notice thereof by mail to the same parties immediately. The notice of the surrogate must fix the day and hour when he will hear any of ’said parties in regard to the subject-matter which had been committed to the appraiser, and thereafter the surrogate must forthwith assess and fix the true cash value of all estates.

6. Same—When it is not necessary to appoint appraiser.

In the case of a will, under the provisions of which the legacies subject to this tax are in cash, the appointment of an appraiser is unnecessary. The surrogate, on application or on his own motion, shall appraise the value of this species of property and assess the tax by order, and thereupon give notice to all persons as hereinbefore shown.

I have already written a memorandum in this proceeding announcing my decision granting the application of the executors for the appointment of an appraiser. I have deemed it proper to supplement that memorandum by some observations upon the construction to be given the act (chapter 713, Laws of 1887), which I believe will be useful to parties interested in estates subject to tax under the provisions of that act; and, also, the act (chapter 483, Laws of 1885), which in all respects now under consideration, is substantially, if not precisely, similar.

This legislation in form and substance is justly entitled to severe condemnation for great looseness and incoherence of expression. There is no symmetry in its provisions and it is impossible to be certain of the intention of the lawmakers in respect of the various steps which it may be necessary to take to effectuate its purpose. And if much is required by me to be done to put in motion the cumbersome and awkward machinery set up for the collection of taxes upon collateral inheritances, etc., which may seem to be unnecesary, the cause, therefore, must be looked for within the halls of legislation where this anomalous statute was invented and sent forth to confuse, and therefore exasperate the personal representatives of deceased persons and the courts, by its glaring inconsistencies and absurdities. After much patient reading and re reading of this act, I have concluded upon a course of procedure which I hope and believe will bear the test of superior judicial investigation.

Fortunately, the constitutionality of the law cannot now be mooted. The court of appeals has settled that. Re McPherson, 104 N. Y., 306 ; 5 N. Y. State Rep., 680.

The object of the act,.as disclosed by its title, is “to tax gifts, legacies and collateral inheritances in certain cases.

p. 480

Section 1. provides that * ‘ all property which shall pass by will, or by the intestate laws of this state, from any person, who may die seized or possessed of the same ” * * other than to or for the use of his or her father, mother, husband, wife, child, brother, sister, the wife or widow of a son, or the husband of a daughter, or any child or children adopted as such in conformity with the laws of the state of New York * * * shall be and is subject to a tax of five dollars on every hundred dollars of the clear market value of such property * * * to be paid to the comptroller of New York for the use of the state; and all administrators, executors and trustees shall be liable for any and all such taxes , until the same shall have been paid * * * provided that an estate, which may be valued at a less sum than $500, shall not be subject to such duty or tax.

It is not my purpose now to attempt to answer whether the expression “an estate,” in the last sentence of this sec-' tian means the whole estate of the deceased • person, or only so much thereof as passes to a person other than one of those exempted from the tax. This question may be presented some time, as for instance in case of a will bequeathing an entire estate worth over $500 to two or more persons in amounts of less than that sum each. Nor shall I speculate upon the office and purpose of the word “ duty,” the last word but two in this section. It seems to be synonymous with the last word, “tax,” but it may be that it was interpolated for the purpose of embellishment.

To my best understanding, section 2 provides that, when any “grant, gift, legacy or succession, upon which a tax is imposed by section 1, shall be an estate, income or interest for a term of years or for life * * * the entire property or fund by which such estate, income or interest is supported, or of which it is a part, shall be appraised immediately after the death of the decedent, at what- was the fair market value thereof at the time of the death of the decedent, in the manner hereinafter provided (see section 13), and the surrogate shall thereupon assess and determine the value of the estate, income or interest subject ■ to said tax, in the manner recorded in section 13, of this act.

By reference to section 13, for “recorded” provisions, we find that the value of the estate is to be ascertained by an appraiser, who shall be some “competent person, appointed for that purpose, who shall appraise the same at its fair market value,” and upon his report the surrogate shall fix the then cash value of the estates, annuities, life-estates, etc.

Thus it seems by section 2, the surrogate is to appraise in

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person, otherwise how can he “ determine ” the value of the estate ? And by section 13, the appraisement is to be made by another officer, whose appraisement ought to be final, if made in good faith. Beading these two section of the act together, I believe the value of all estates subject to the tax must be ascertained by an appraiser, before whom all parties interested have the right to appear. This must be so, ■else why the provisions “ recorded ” in section 13, requiring the appraiser to forthwith give notice to “all persons known to have or claim an interest in such property, of the time and place he will appraise such property.” And the appraiser must also give such notice to such persons as the surrogate may by order direct. Thus it may seem that the appraiser has another duty, separate and apart from the surrogate, viz.: To exercise his own judgment as to what persons shall have notice, and then look to the surrogate’s order for the names of any other persons discovered and designated by him.

I shall not committ myself to such a construction. The act, considered in its entirety, beyond reasonable doubt, I think, intends that the surrogate shall be the superior authority upon all questions, including that of value of the estate subject to the tax; and means that he shall act judicially, although it is a new and strange duty imposed upon a judge, that he shall become an appraiser of the value of all kinds of property which may be the subject of a gift or legacy, and an assessor of taxes to be levied thereon. Nevertheless, such seems to be the additional function bestowed upon the surrogates of this state by this law, and they wifi, no doubt, faithfully strive to do their full duty in this new field of labor.

This section (2) further provides: “And the tax.prescribed by this act shall be immediately due and payable to the treasurer of the proper county, and in the city of Hew York to the comptroller thereof, and together with the interest thereon shall be and remain a lien on said property until the same is paid.” And then in the next sentence of this same section it is declared in effect,. almost in express words, that the tax shall not then become due and payable if the person or persons beneficially interested in the property chargeable with said tax may elect not to pay the same until the happening of an event which may never happen at all, to wit: until they shall come into the actual possession or enjoyment of such property. I am curious to know just how one can come into the “ enjoyment” of a bit of property and not at the same moment come into its “ possesion.” The framer of this act has not given us any information on that point.

p. 482

Section 4 also restates the point of time when “ all taxes imposed by this act become due and payable, unless otherwise herein provided for,” viz: at the death of the decedent; and then we find, in the very next sentence, that if they are paid within eighteen months, no interest shall be charged and collected thereon; but if not so paid, interest at the rate of ten per cent per annum shall be charged and collected from the time said tax accrued, provided if it (the tax) is paid within six months from the accruing thereof, a discount of five per cent shall be allowed and deducted from said tax; and, further, that if the executors, administrators or trustees do not pay such tax within eighteen months from the death of the decedent, they shall be required to give a bond in the form and to the effect prescribed in section 2.

We have here, in the same section, certain conditions and hmitations, all dependent upon the point of time when the tax accrues, and another condition and a positive requirement dependent upon the date of decedent’s death. It seems reasonably certain that the tax must be said to have “accrued” at the date of decedent’s death, although it might be insisted, with force of reason, that it has not accrued until the appraisal has been made and the amount finally assessed by the surrogate, after the numerous hearings upon the one question—that of value of property and liability for the tax—have been given to all persons interested. It seems equally certain, however, that a tax cannot be said to be “due and payable” at a time when the party liable for its payment is not bound to pay it.

When we have applied the provisions of this act to real cases in the varied phases of the rights of persons, as they will no doubt be made to appear, we may unfathom its hidden mysteries, and that which now seems so dark and dubious may then become clear and open to our mental vision. No doubt remains, I think, but that for the full period of eighteen months from the date of decedent’s death, the-persons liable to pay the tax may be relieved from its payment, although by section 16, it is made the duty of the surrogate’s court (not the surrogate), if it shall appear to that court “that any tax accruing under the act has not' been paid according to law,” to issue a citation, etc. And further, by section 17, we find that whenever the treasurer or comptroller of any county shall have reason to believe any tax is due and unpaid under this act (and we have seen twice provided that it shall be “ due and payable ” at decedent’s death), he shall notify the district attorney in wri ting, and then that officer is required to sit in judgment on the case made out by the treasurer or comptroller to see whether he (the district attorney), has probable cause to

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believe a tax is due and unpaid. Mark the expression “a tax,” instead of “ the tax.” This may be a sidelight to be regarded upon the question—to whom has been committed the final appraisal and assessment so far as the state is concerned ? But it seems to me that the decision of the surrogate’s court upon that subject is final upon the rights of the state in the premises, except, of course, for fraud or refusal to act.

For present purposes we may now pass on to section 13, of this act (chap. 713), and briefly as may be possible for our attempt to a fair understanding of its provisions, consider how it shall be carried out. This section provides the mode of fixing the “value of property of persons whose estates shall be subject to the payment of said tax.”

I fancy that the phrase “whose estates shall be subject to the payment of said tax,” means the estates of decedents; although we must admit that this is not literally true, for if anything can be said to be clearly expressed in this law, it is the fact that only certain parts and portions of such estates are subject to it. Nevertheless, I hold as above stated. But for execution of the law we should read this section as 'if the words of this phrase were not there. I hold, therefore, that the surrogate acting judicially as a court must, upon the application of an “interested party,” who may be any person having an interest in the whole estate, who is now designated by law, and also the county treasurer, and in New York, the comptroller, represented by the district-attorney, and on failure of any such person to apply upon his own motion (no time is named when he shall move himself) appoint some competent person as appraiser from time to time if occasion requires, whose duty it shall be to forthwith give notice by mail to all persons known to have or claim an interest in such property, and to such persons as the surrogate may by order direct, of the time and place he wilt appraise such property.

Under my construction of this • section and procedure spelled out, I fail to perceive that there would ever be more than one occasion to appoint an appraiser. I hold also that the order of the surrogate appointing the appraiser should . designate the persons upon whom the appraiser shall forthwith serve notice by mail; and these persons, for the sake of certainty and finality of proceeding, should be all who are now by law interested in the whole estate, and by law entitled to notice of all proceedings affecting the same. This section does not provide for the length of notice. I hold, therefore, that it is the duty of the surrogate to fix it; and the facts in each case must be his guide in that regard.

All parties notified by the appraiser have the right to at

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tend before him and to be heard upon the question of value of the property and its or their liability to the tax. The appraiser must report to the surrogate the fair market value of the property he deems subject to tax, together with his proceedings, and any and all facts known to him germain to the duties imposed upon him by the order of his appointment. He has not, however, any right under this act to administer oaths and take testimony upon any of the questions to be considered by him. This seems a most regretful lack of power, which should have been conferred upon him for obvious reasons.

On the coming in of the appraiser’s report, the surrogate, it is provided, shall forthwith assess and fix the then cash value of all estates. Whether there might not be a real difference between the “fair market value ” and the “ cash value ” of all estates, and hence more confusion, I do not stop to discuss. I hold that the two expressions mean the same thing in this act.

The section provides that the surrogate shall first assess, etc., and then mail notices, etc., I hold that just the reverse of this shall be our practice.

On the coming in and filing in the surrogate’s court of the appraiser’s report, the surrogate shall give notice thereof by mail to the same parties immediately. He must act “immediately”—the appraiser “forthwith” in respect of the same thing precisely. I feel compelled, however, to determine that the law makers intended these to be convertible terms, and that the requirement in this regard will be met by such prompt notice as the surrogate shall deem reasonable under the facts of each proceeding.

The notice of the surrogate must fix the day and hour when he will hear any of said parties in regard to the sub ject-matter which had been committed to the appraiser by the order for his appointment, and thereafter the surrogate must forthwith assess and fix the true cash value of all estates.

The last paragraph of this section pretty plainly points out the grounds and mode of appeal from this assessment by the surrogate. But it is remarkable that the appeal is. from the surrogate to the surrogate. One advantage has been gained, however, by the state, which in these devious ways has been seeking this tax—persons dissatisfied must give security for whatever tax shall be fixed by the court, and their time to appeal is limited to sixty days.

Section 16 of this act makes it the duty of the surrogate’s-court to issue a citation citing the persons interested in the property liable to.the tax to appear before the court on a day certain, to show cause why the said tax should not be paid.

Section 17, which might well have preceded section 16, I

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think, makes it the duty of the county treasurer or comptroller, whenever he shall have reason to believe that any tax is due and unpaid under the act, after the refusal or neglect of the persons interested in the property liable to the tax to pay the same, to notify the district attorney in writing.

Section 18 provides that “the surrogate and county clerk of each county shall, every three months, make a statement in writing to the county treasurer or comptroller of his county of the property from which, or the party from which [sic], he has reason to believe a tax under this act is due and unpaid.”

Reading these three sections (16, 17 and 18) as one, and having due regard to the other provisions of the act, I hold that the surrogate should not take any steps upon his own motion until the expiration of eighteen months after the date of the decedent’s death.

At that point of time he should ascertain from the proceedings generally in his court relating to the estate, from the will, if there be one, and from any source open to him, whether “any tax accruing under this act has not been paid according to law,” and if it shall appear to him that it has not been paid, to issue the citation and take the proceedings provided for in section 16. I am of opinion also that, until the expiration of eighteen months after the date of decedent’s death, the comptroller and district attorney ought not to initiate any proceeding except on the farmer’s application, as I have already shown, for the appointment of an appraiser; because the intent of the act is undoubtedly to relieve the estate and persons interested therein, and the administrators, executors or trustees, at their option, from the payment of the tax during eighteen months next succeeding the date of decedent’s death.

I hold that in the case of a will, under the provisions of which the legacies subject to this tax are, in cash, the appointment of an appraiser is unnecessary. The surrogate, on application, or on his own motion, shall appraise the value of this species of property and assess the tax by order, and thereupon give notice to all persons, as herein-before shown.

Section 20 seems to exclude from record in the book to be kept by the surrogate, cash, subject to the tax: This is not true of the real intent of this section read in the light of the other provisions of the act. This book must contain all that is specially mentioned in this section and also the property in cash subject to the tax and the tax assessed thereon.