
    J. Romaine Brown and Alexander P. W. Kinnan, as Executors, etc., of Loyal L. Smith, Deceased, Plaintiffs, v. The Lawrence Park Realty Company, Defendant.
    First Department,
    July 13, 1909.
    Tax—transfer tax — equitable conversion—lien upon proceeds of .sale,
    Where a will directs executors to convert real -estate into money within five years and pay certain legacies, the lands themselves are not subject to a lien for the payment of a transfer tax, but such' lien attaches solely to the fund which may come into the hands of the executors after a sale. Hence, one who has contracted to buy such lands from the executor, free of incumbrances, cannot refuse to take title upon the ground that the lands may be subject to a transfer tax.
    A transfer tax is not upon the property of a decedent but is a tax upon the right of succession to such property through gift, bequest, devise, descent or distribution.
    Submission of a controversy upon an agreed statement of facts, pursuant to section 1279 of the Code of Civil Procedure.
    
      Thomas F. Conway, for the plaintiffs.
    
      Philip S. Dean, for the defendant.
   Houghton, J.:

The plaintiffs are executors of the last will and testament of Loyal L. Smith, who died in February, 1908, possessed of a large amount of personal property and seized of several parcels of real property, one of which was situated in the city of Yonkers, and which the plaintiffs contracted to sell to the defendant’s assignor for upwards of $187,000, free from incumbrances.

By his will plaintiffs’ testator bequeathed a large number of legacies to individuals and charitable corporations, and established certain trusts in behalf of individuals and charitable and educational institutions, and directed, for the purpose of carrying out the provisions of the will, that his executors should, within live years, convert all of his real property into money", with the exception of one parcel which he specifically devised to a relative.

Some b£ the legacies provided by the testator’s will were subject to a transfer tax of five per cent, some of one and some of no tax whatéver, and none of the legacies were payable until the expiration of five- years, except in the discretion of the executors. Mo transfer tax upon any of the legacies had been paid by the executors when the contract for the sale of the Yonkers parcel was to be closed by delivery of deed, and the defendant refused to take title on the ground that such transfer tak as might be levied on any or all of the legacies given by the will was a lien on such real property. A compromise was finally arranged whereby a deed of the property was accepted upon plaintiffs paying to the State Comptroller the sum of $20,000' on account of such transfer tax as might be due from legatees and' devisees of testator’s estate, and the deposit of the sum of $10,000 with the Mutual Bank of Mew York to meet any further claim for such transfer tax. This latter sum was to be held by said 'bank until it should be determined whether or not- the transfer tax was a specific lien on the real property conveyed, and this submission is for the purpose of. determining that question.

The stipulated facts recite that the real property contracted to be sold was a part of the general estate of the testator, and that its sale was for the purpose of marshalling assets to pay -debts, expenses of the estate and distribution in legacies according to the terms of the will. The real property in question was not specifically clevised nor was it expressly charged Avitli the payment of any legacy. " On the contrary, it formed a part of testator’s estate, and the executors were specifically directed to sell it and convert it into money for distribution.

The tax imposed by the Transfer Tax Act, in effect in February, 1908 (Tax Law, art.TO, as amended and remodeled by Laws of 1905, chap, 368), is not a tax upon the property of a decedent, but is only a tax on the right of succession to such property through gift, bequest., devise, descent or distribution. (Matter of Dows, 167 N. Y. 227; Matter of Gihon, 169 id. 443; Matter of Wolfe, 89 App, Div. 349; Tax Law, §§ 220, 242, as amd. by Laws of 1905, chap. 368.) It is true that section 224 of the Tax Law provides that every such tax shall be a lien upon the property transferred until paid, and makes both the person to whom the property is transferred and the executor or administrator or trustee through whose hands it comes personally liable for its payment.

The Legislature could not have intended by this language to make the transfer tax a lien upon the specific property of the decedent which would come to the hands of the executor or administrator for administration. Manifestly the lien provided by this section attaches only to the fund to be distributed or the particular property when it passes by specific bequest or devise. The Legislature must have realized that it was necessary for executors and administrators to marshal the assets of their estates for the purpose of paying debts and expenses and to obtain funds for the'payment of legacies.' If a lien were to attach on property, as it came to their hands, it would be impressed upon personalty as well as realty, and it would be impossible for them .to sell bonds or stocks or personal property free of lien, as well as to transfer any real property directed by. the will to be converted into personalty. An intent thus to hamper the marshalling of the assets of the estate cannot be inferred. The statute is amply satisfied, in view of the fact that the tax is upon the right to succession, and not upon the property of the decedent, by holding that the lien attaches upon the fund realized after the assets of the estate have been marshalled or the property is ready for distribution in kind. This interpretation is borne out by other, provisions of the section, which direct an executor or administrator to deduct the tax from the legacy or distributive share, and to pay it, and permit him, where the legacy is specific, to collect the tax upon its appraised value- from the legatee, and exempt him from liability to deliver any specific legacy until he shall have collected such tax thereon. Different rates of taxation are prescribed for different classes of legatees and distributees, and it would be impossible to apportion the different taxes upon the different kinds of property, and manifestly unjust to fasten a lien for all the tax upon any one piece or kind of property.

This view is not weakened by the other provision of the section giving to the executor, administrator or trustee full power to sell so much of the property of the. decedent as will enable him to pay such tax in the .same manner as he might be entitled to sell for the payment of debts. Instances often arise where the testator directs that the general legacies he paid in securities, or that the residue of the estate be turned over in kind to the residuary legatee. In such case, the lien attaches to the transfer, and if the legatee does not advance the money to pay the tax the executor may sell such securities as shall be necessary to do so.

Our conclusion is, that neither the whole nór any part of the transfer tax which the law imposed upon the various legatees under the will of plaintiffs’ testator was a lien upon the real property contracted to he sold, and that the defendant was not justified in rejecting title on the sole ground that such transfer tax was a lien thereon, and that plaintiffs are entitled to a judgment directing the repayment to them of the moneys deposited with accumulated interest thereon.

Judgment is directed accordingly, without costs, as stipulated.

Ingraham, McLaughlin, Lahghlin and Clarke, JJ., concurred.

Judgment ordered for plaintiffs, without costs. Settle order on notice. 
      
      Laws of 1896, chap. 908.— [Rep.
     
      
       Amd. by Laws of 1905, chap. 368.— [Rep.
     
      
       This part of section was transferred by Laws of 1905, chap. 368, from § 222, as amd. by Laws of 1901, chap. 173.—- [Rep.
     