
    Matter of the Estate of Joseph W. Bebden.
    
      (Surrogates Court, Rensselaer County,
    
    
      May, 1905.)
    Tbansfeb Tax—Debt Due Stock Bbokeb in This State—Pledge of Taxable and Non-taxable Securities as Collateral—Real Estate and Unpledged Personalty as Offset.
    All bonds, money and stocks of domestic corporations and real estate actually in this State and passing as a part of the estate of a non-resident of this State, are subject to taxation under the Transfer Tax Act, and in ascertaining the value of property, to which the tax attaches, all indebtedness to persons in this State may be deducted.
    Where in proceedings to determine the amount payable upon the property of a non-resident of this State, under the Transfer Tax Act, it appears that deceased upon the day of his death was indebted to brokers in this State for stocks and bonds purchased by them for him. with their own money and that said debt was secured by a pledge of taxable and non-taxable securities and that the executrix, on the day following his death, directed the brokers to close out the account, 1, by a sale of the taxable securities actually purchased by them for said account; 2, by a sale of taxable securities owned by deceased and pledged as additional collateral security for said account, and 3, by a sale of the non-taxable securities actually purchased by them for said account and which in the aggregate amounted to more than enough to satisfy the debt in full, the debt to the brokers must be considered as paid by the application of the pledged collateral, and real estate and unpledged personal property, otherwise clearly taxable, may not be offset against said debt.
    Appeal from an order determining that the above estate was-not subject to ;a transfer tax.
    Jarvis P. O’Brien and George B. Wellington, for State Comptroller, appellant; Henry J. Speck, for executrix, Harriet H. Burden, respondent.
   Heaton, S.

This is an appeal from an. order determining that the estate of Joseph W. Burden, deceased, was not subject to m transfer tax. On this appeal additional facts have been presented which were not presented to the appraiser, the parties, in this proceeding having stipulated as to all the facts.

Joseph W. Burden, at the time of his death, was a non-resident of the State of Hew York. He had a speculative stock account with brokers in the city of Hew York and. on the day of his death owed said brokers $248,328.42 for stocks and bonds purchased by them for him with their own money, which were of the value on that day of $184,780. Of such collateral $28,-255 was the value of the bonds and $156,525' was the value of stocks of foreign corporations. As additional collateral to such account said brokers held bonds of the value of $71,250.50 and stocks of foreign corporations of the value of $24,987.50'. The deceased also bad twenty-five shares of Hew York Central stock pledged to said brokers as bankers for a -loan of $5,510, said stock on the day of bis death being worth $25,450. The deceased 'also had $300 in the bank 'and an equity in real estate situated in Hew York city and Troy, of the aggregate value of $19,000.

The question to be considered here is whether or not real estate and unpledged personal property can be offset in this proceeding against the debt held by the brokers against the deceased and secured by the pledge of taxable and non-taxable securities so that the order determining that the deceased left no taxable property in the State of New York can be affirmed.

It has been settled 'in this State that all bonds, money and stocks of domestic corporations and real estate actually in the State and passing as part of the estate of a non-resident are subject to taxation under the Transfer Tax Act. Matter of Houdayer, 150 N. Y. 37; Matter of James, 146 id. 79.

In ascertaining the amount and value of property which passes iand to which the tax attaches all indebtedness to persons in the State of New York may be deducted. Matter of Westurn, 150 N. Y. 493.

It is claimed by the executrix that the taxable property of the deceased in the State of New York was as follows: Pledged bonds, $99,505, and equity in pledged New York Central stock $19,940; cash in bank $300, equity in real estate $19,000, a total of $138,745, that the debts of the deceased in the State of New York amount to more than $28,000, and that there is, therefore, no property in the State of New York liable to taxation.

In making this claim the executrix disregards the fact that there were pledged to the brokers, as collateral security for the payment of this debt, stocks of foreign corporations of the agreed value of $181, 512-.50 and that if such stocks so pledged were applied with the taxable stocks so pledged to the payment of the stockbrokers’ debt, such debt would be paid and there would be a small balance in the hands of the brokers to the credit of the deceased. The executrix has stipulated in this-, proceeding as follows: “ In closing out the speculative or stock-account on the day following Mr. Burden’s death, the executrix-directed the brokers to close out said account in the following-manner: First, by a sale of the taxable securities actually purchased by the brokers for said account and which amounted in4 the aggregate to $128,255. Slecond, ¡by the sale of the taxable securities owned by Mir. Biurden .and pledged by him as additional collateral for said stock -account and which amounted in the aggregate to $71,250'. Third, by the sale of the non-taxable securities actually purchased by said brokers for isiaid speculative account 'and which 'amounted in the 'aggregate to $156,525, or more than enough to satisfy the debt in full.”

Under this stipulation then, the debt to the brokers must be considered as paid by the application of the pledged collateral and there remains no debt against which to offset the otherwise clearly taxable real estate, money in bank and the equity in the Hew York Central stock except some floating indebtedness of about $2',500 and administration expenses.

The deceased was under contract with the brokers to apply the pledged securities to the payment of the debt and the executrix performed that contract. He .also had an option to pay the debt and take Ms securities but of that option the executrix did not avail herself. She argues that having paid a portion of the debt with pledged non-taxable securities, which are not under the Transfer Tax Law considered as property ” in this State, she has a right to treat such portion of .the debt as still existing for the purpose of offsetting against it property otherwise taxable. Having paid part of the debt with those securities which were property ” and the balance thereof with those securities which were not property ” in this State, and having received for .the general purposes of the estate as parti of the property passing hy the will of the deceased the equity in the Hew York Central stock, the equity in the areal estate and the cash in hank, such property, less some unsecured debts', commissions and expenses of administration, if .any shall be allowed in the State of Hew York, is subject to tax. The executrix cannot now successfully argue that the balance of the debt, after applying the taxable property pledged, which has actually been paid, with tion-taxable securities pledged for that purpose, should be earried as a debt to create an offset .against clearly taxable property. ¡Neither can ishe claim that, in determining whether or not there is any debt to he offset against property ” we cannot consider the non-taxable property. While for the purposes of taxation that class of property is not treated as taxable “ property,” yet it was part of the estate of the deceased which passed to the executrix and she chose to cause its sale and application to the debt of the deceased.

The Comptroller relies upon the Pullman case, 46 App. Div. 574, as being an authority directly in- point and tais being a complete answer to the 'argument of the executrix. In that case ¡Mr. Pullman was a resident of Chicago, where Ms will Was proved. He left a large estate. He owed brokers in the State of Hew York a debt of more than $800,000, and as collateral to such debt the brokers held bondsi and stocks of Hew York corporations of the value of $58,430, and also stocks of foreign corporations of more value than the amount of the whole debt. In addition thereto Mr. Pullman had in the State of HeW York: bonds, taxable stocks, cash and other real and personal property of the value of more than $774,000. It was sought in that ease to set off 'against the $774,000- of taxable property the whole debt of over $800,000, and the claim was made that he had no taxable property. The claim of the executors was not sustained except as to the amount of the pledged taxable property of $58,-430, and in that case the court announced this principle, that where domestic creditors have in 'their hands the legal title and the right to resort for- the payment of their debts to securities belonging to- a non-resident decedent which are not taxable under the laws of this State, the indebtedness due such creditors is not to be offset against the value of property of such' decedent otherwise taxable under the Transfer Tax llaw of tMs State.” This decision would seem to govern the case under consideration except that it appears in the Pullman case that at the time of the appraisal the laceounti had not been dosed out while in tMs ease it is expressly stipulated that the account was closed out on the day after the death of Hr. Burden. But the executrix in this case has done just what the court in the Pullman case reasoned that the parties would have done in that case had the account been closed out before the appraisal, viz., paid the debt with the pledged property, leaving unpledged! property liable to taxation.

It would, therefore, seem that the decision here must be governed by the decision in the Pullman ease.

Let this matter go back toi the appraiser to appraise and assess the taxable property in accordance with the stipulation of the parties and the views ’herein expressed.  