
    In the Matter of the Collateral Legacy and Inheritance Tax on the Estate of John L. Rogers, Deceased. Wilmer S. Wood and William Jay, as Trustees under the Last Will and Testament of Silas Wood, Deceased, and Others, Appellants; The Treasurer of the County of Orange, Respondent.
    
      Transfer tax — where a power of disposition is exercised, by a life beneficiary in favor of her brother, the tax is one per cent on personal property only — where a creditor of the life beneficiary accepts an appointment in his favor inpayment of his claim, made by the life beneficiary, it is taxable.
    
    A testator who died in 1869, by his will gave his wife a life estate in certain real and personal property together with the power to dispose of such property by will. The widow died in 1900 leaving a will, by which she exercised the power of appointment as to the bulk of the real and personal property in favor of her brother, who was a stranger in blood to her husband.
    
      
      Held, that, under'the provisions of subdivision 5 of section 220 of the Tax Law (Laws of 1896, chap. 908, as amd. by Laws of 1897, chap. 284), the' property should, for the purposes of . the transfer tax, be regarded as passing directly from the widow to her brother, and that under the provisions of section 221 of the Tax Law the transfer was taxable at the rate of one per cent upon the personal property alone, and that it was not taxable at the rate prescribed in section 220 of the Tax Law, to wit, five per centum upon both the- real and personal property;
    That a provision in the widow’s will directing her executors to repay a loan theretofore made to her, out of the property in respect to which the power of appointment was given, constituted, when accepted by the creditor, a transfer upon which the creditor would be subject to pay a transfer tax.
    Appeal.by Wilmer S. Wood and another, as trustees under the last will and testament of Silas Wood, deceased, and others, from an order of the Surrogate’s Court of the county of Orange, entered in said Surrogate’s Court on the 14th day of May, 1901, affirming an order theretofore entered in said court which confirmed the report of an appraiser appointed in the proceeding and assessed the tax upon that portion of the estate of John L. Rogers, deceased, which passed under a power, of appointment exercised by Virginia B. Rogers.
    
      Egerton L. Winthrop, Jr., and Flamen B. Candler, for the appellants Wood and Jay.
    
      George M. Judd [Edward H. Fallows with him on the brief], for the respondent.
   Woodward, J.:

John L. Rogers died on or about December 2, 1869, leaving a last will and testament and codicil which were, on or about February 15, 1870, duly admitted to probate by the surrogate of the county of Orange. By the terms of this will the testator gave a life estate in certain real and personal property to liis widow, Virginia B, Rogers, now deceased, and authorized and empowered her to dispose of such real and personal property by will, and in case of her failure to exercise this power a. life estate- in the said property was given to her brother, the appellant Wilmer S. Wood, with remainders over at his death to the liei-rs at law and next of kin of Virginia B. Rogers according to the laws of FFew York in cases of intestacy..

Virginia B. Rogers died April 30, 1900, leaving a last will and testament, which was duly admitted to probate by the surrogate of Orange county on June 11, 1900, by the terms of which she appointed the appellants, Wilmer S. Wood and William Jay, her executors, and duly exercised the power of appointment as. to all the property,, real and personal, given her by the will of her said husband, John L. Rogers. After directing her executors to pay all her debts, including a loan of $15,000, secured by her bond, and the accumulated interest thereon held by the appellants as trustees of the estate of Silas Wood, deceased, for moneys advanced by them to her, and after making various bequests of money to several persons and corporations, the testatrix appointed all the rest, residue and remainder of the fund so left by her husband and over which she had power of appointment, including any legacies which might have lapsed, to her brother, the appellant Wilmer S. Wood absolutely,

E. E. Roosa, having been appointed appraiser under the Taxable Transfer Act by the surrogate of Orange county, made a report on the 15th day of January, 1901, in which he held that the whole of the fund, amounting to the sum of $115,525.81, passing by virtue of the power of appointment (except the legacy of $2,500 to the Board of Missions of the Protestant Episcopal Church, which was exempt), was taxable as though the same had passed directly from John L. Rogers, the donor of the power, to the several appointees named in the will of the donee of such power; and that, accordingly, the direction of the said donee to pay the principal of the said bond to the trustees of the estate of Silas Wood, deceased, and the accumulated interest thereon, amounting in all to the sum of $22,125, was a transfer under the act and taxable as such, and also that the whole residue of the fund, consisting of $49,007.27 personal property and $32,393.54 real property, which passed to Wilmer S. Wood, the brother of the donee of the power, was taxable as passing to a stranger in blood, viz., at five per centum upon $81,400.81, the total amount of real and personal property passing to him as aforesaid, and, by the order of January 15,1901, the amount of such tax was fixed at the sum of $4,070.

The appellants, Wilmer S. Wood and William Jay, as trustees under the last will and testament of Silas Wood, William Jay as executor, etc., of Virginia B. Rogers, deceased, and Wilmer S. Wood personally, appeal from this order and urge that , the property passing by virtue of the exercise of the power of appointment created in and by the will of John L. Rogers must be taxed at the same rate, and is subject to the same exemption as though it belonged absolutely to and. passed directly from the donee of the said power. In this we are of opinion that the appellants are merely asserting their rights under the provisions of the law.

Subdivision 5, section 220, of article 10, chapter 908 of the Laws of 1896, as amended by chapter 284 of the Laws of 1897, provides : “ Whenever any person or corporation shall exercise a power of appointment derived from any disposition of property made either before or after the passage of this act, such appointment when made shall be deemed a transfer taxable under the provisions of this act in the same manner as though .the property to which such appointment relates belonged absolutely to the donee of such power, and had been bequeathed or devised by such donee by will.” This provision of law was before this, court in Matter of Seaver (63 App. Div. 283), and it was there held that section 220 expressly declares that it is the exercise and not the creation of the power of appointment which effects the transfer upon which the tax is enforced ; hence the .fund must, for taxing purposes, be regarded as having passed from mother to son, and the case is governed by section 221 and not by section 220. (Citing authorities at p. 286.)

Wilmer S. Wood is a brother of Virginia B. Rogers, deceased, and, under the appraisal and order as it now stands, is made subject to a tax of five per centum upon both the real and personal property coming to him under the will. If the provision of the statute above cited means anything, it is that, for the purposes of this tax, the property is to be regarded as coming directly from Virginia B. Rogers to her brother; and, under the provisions of section 221 the tax is fixed at one per centum upon the personal property alone.

While the exact question was not before the court in Matter of Vanderbilt (50 App. Div. 246), under a very similar state of facts the surrogate decided and decreed that the fund was subject to a transfer tax of one per centum under and pursuant to chapter 284 of the Laws of 1897; and none of the authorities to which our attention is called gives warrant for the assertion of a different doctrine. This case was affirmed on the opinion below in 163 New York, 597, and again in 166 New York, 640, and undoubtedly establishes the law of this case.

The contention of the appellants, that, under the direction contained in the will of the donee of the power of appointment to repay the loan heretofore made to her and for which she had given her bond, out of the fund over which she exercises such power, was not, within the meaning of the act, a transfer, and was not taxable as such, is not in harmony with the law as we understand it. Aided by the learned brief of the appellants, we are unable to distinguish this case, upon this point, from Matter of Gould (156 N. Y. 423). The theory on which taxation of the devolution of estates at the death of their owners is based, and its validity upheld, is that the right to take property by devise is not an inherent or natural right, but a privilege accorded by the State, which may tax or charge for the same. (Matter of Dows, 167 N. Y. 227, 230, 231.) The amount of the tax is based, not upon the aggregate value of the estate, but upon the amount which passes to the devisee. When, therefore, the statute provides (§ 220, subd. 1) that “ A tax shall be and is hereby imposed upon the transfer of any property * * * when the transfer is by will,” it must be construed to cover any transfer of property made by will, whether such transfer is for the purpose of paying debts or as a gratuity. The language is absolutely unambiguous and free from saving clauses, and affords the best indication that the word “ transfer ” in the statute is used advisedly and according to its ordinary legal signification, which is that the owner of a thing delivers it to another person with the intent of passing rights which he has to the latter. (Matter of Gould, supra, 423, 428.)

It is probably true that debts against the estate may be paid, and that their amount may be deducted before fixing the value of the same for the purposes of taxation, but it is not the estate which is involved in this transaction ; it is the amount transferred under the provisions of the will. (Matter of Westurn, 152 N. Y. 93, 100.) The creditors of Virginia B. Rogers are not obliged to accept this provision of the will for the payment of their debt; but, if they do accept it, we are unable to discover any way by which they may avoid the payment of the. tax which the State imposes as a condition of receiving a transfer under the will of the deceased. This is clearly the doctrine of Matter of Gould (supra), and is not inconsistent with Matter of Westurn (supra).

The order appealed- from should be modified so as to adjudge that the personal property passing under the will of Virginia B. Rogers, by virtue of the power of appointment, given under the will of John L. Rogers, deceased, is taxable at the reduced rate of one per centum, and. as so modified affirmed.

All concurred, except Hirschberg,- J., not sitting.

Order modified so as to adjudge that the personal property passing under the will of Virginia B- Rogers, hv virtue of the power of appointment, given under the will of John L. Rogers, deceased, is taxable at the reduced rate of one per centum, and as thus modified affirmed, without costs.  