Estate of Prout — 22 N.Y. St. Rep. 334

Majority

p. 334

Estate of William J. Prout.

(Surrogate’s Court, New York County,

Filed February 8, 1889.)

Headnote

1. COLLATERAL INHEBITANCE TAX—INTEREST ON—RATE OF—LAWS 1885,,

CHAP. 483.

The act of 1885 provides for the payment of interest on the tax upon decedent’s estates from the date of his death to the time of payment, with the exception of a rehate, if payment is made within six months; if, liow- ' ever, the tax is not paid until after the expiration of a year, the law imposes as a penalty that the interest to be paid shall be ten per centum pelannum for the whole time, dating back to the death of the decedent, excepting that in certain cases specified in section five of that act, the-penalty may be remitted, and only six per centum shall be charged.

2. Same—Penalty of ten peb cent—Exception—Object of.

Section 5 of the act of 1885 provides that the penalty of ten per centum, imposed by section 4 of that act for the non-payment of the tax, shall not be imposed where, by reason of necessary litigation or other unavoidable causes of delay, the estate cannot be settled at the end of a year from decedent’s death; in such cases, only six per cent is to be charged until the-cause of delay is removed. The object of the exception is merely to relieve the estate from the penalty and not from the interest.

3. Same—Power of district attorney ob surrogate to belease tax..

It seems that neither the district attorney nor the surrogate has power to release or to compromise the tax or the interest imposed by the act of 1885; and an order made by the surrogate which fails to provide for the-payment of such tax and the interest, will be opened, and the order modified accordingly.

p. 335

G. H. Crofoot and A. C. Hockeneyer, for the executors and heirs; The District Attorney, for the comptroller.

—The district attorney moves on his affidavit setting forth that the order entered in this proceeding, on the 20th day of December, 1888, was wrong, in that it did not provide'for the payment of interest on the tax found due for one year from the date of decedent’s death, September 8, 1886, and asks leave to have the decree reopened and modified by providing for that year’s interest.

He claims that the district attorney has no right or power to compromise or release the tax or any interest imposed by the act, and that sections 4 and 5 do not authorize its remission, and that section 5 merely gives the court power to remit the ten per cent penalty when necessary litigation has caused delay, but it gives no power to remit the whole year’s interest imposed by section 4, and refers to the case •of Almira Hutchins, deceased in which Surrogate Rollins entered an order similar to the one herein of December 20, 1888, and when the point was called to his attention he ordered, in the decree settling the estate,'“the administrators to pay to the comptroller the sum of $59.25, being the amount of one year’s interest upon the legacy taxes already paid to him, and which interest, amounting to said .yum, the surrogate adjudges to be still due from the estate.”

Counsel for the administrators contends that the order of December 20, 1888, should stand as entered, and insists that sections 4 and 5 shall read strictly, and that by so reading them the interest for one year from the date of death will be found not to be due.

“Section 4,” he claims, “divides all cases of interest to be paid into two classes, to wit:

“Case 1. Where the tax is paid within one year from decedent’s death.

“Case 2. Where payment is not made until after the expiration of the year.”

That in each case interest runs from the date of death.

In the latter part of section 4 an exception to case 1 is ■created, as a reward for prompt payment.

That section 5 creates an exception to case 2.

That six per cent is to be charged when taxes are paid within one year after decedent’s death; the moment the year has passed the rate changes to ten per cent, and retro-acts so as to begin with the date of death. When the year has expired without payment of the tax, the estate passes from case 1 to case 2, and must pay the ten per cent penalty, unless relieved by the exception created by •section 5

p. 336

That section 5 declares: That in cases included within the exception “the penalty of ten per cent per annum, imposed by section 4 hereof for the non-payment of said fax, shall not be charged.”

He then argues that the penalty is at an end, and says: “At the end of one year that estate passed by operation of' law out of the six per cent class into the ten per cent class, and no way is provided by which the estate is to pass back.” “On the contrary, after abolishing the penalty in the excepted one’s cases, the statute declares exactly what interest such cases shall bear, to wit: ‘And in such cases-only six per cent interest shall be charged upon the said tax from the expiration of such year until the cause of.' such delay is removed.’ If the legislature had intended to> impose six per cent from decedent’s death, here was the place to say it. The provision last quoted is, under the rules of statutory interpretation, a substitute for the ten per cent penalty in certain cases. It is a substitute for the whole and not for a part of such penalty. The decree of December 20, 1888, should stand as already entered.”

To agree with the ingenious argument advanced by counsel for the administrators would be to put a premium upon delay and rather induce litigation, so that the estate-could not be settled within the year.

The act of 1885 provides for interest from the date of death, with an exception of rebate for payment within six months, but nowhere does it release the property from Ínteres^ absolutely, but only from the penalty if a proper-case, in the opinion of the surrogate, is made out. The-amendment of 1887 does absolutely provide that if the tax is paid within eighteen months from the date of death no-interest shall be charged. This case is to be considered under the act of 1885.

Section 4 provides that if the tax is paid within one year from the death, interest at the rate of six per cent shall be charged and collected thereon, but if not so paid, interest at the rate of ten per cent shall be charged and collected from the time said tax accrued.

Section 5 provides that the penalty of ten per cent imposed by section 4 hereof for the non-payment of said tax shall not be charged where, in cases, by reason of claims,, necessary litigation or other unavoidable cause of delay,, the estate cannot be settled at the end of a year from the-death; in such cases only six per cent shall be charged upon said tax from the expiration of such year until the cause-of such delay is removed.

Reading the two sections together, it seems plain that the intention here is merely to relieve the estate from the penalty, and not from the interest. For the year succeed

p. 337

ing the decedent’s death six per cent interest is charged; a Eter that a penalty is imposed, and that if good reason is. shown why the estate could not be settled before the penalty was incurred, section 5 authorizes the surrogate to remit the penalty by providing that only six per cent shall bo charged from the expiration of the year during which the’ interest was six per cent, making the interest continuously six per cent from the death of the decedent until the cause of such delay is removed, and from that time the penalty of ten per cent begins to run until paid.

An order should be handed up modifying the order of December 20, 1888, by providing for the payment of interest on the tax at six per cent from the date of death of decedent.