
    In the Matter of Cornelia M. Stewart, Deceased. Appeal of Charles J. Clinch.
    
      (Supreme Court, General Term, First Department,
    
    
      Filed November 13, 1891.)
    
    1. Collateral inheritance tax—Time of determination of question.
    The question of taxation of estates must he determined by the condition of things which arises immediately after the death of the decedent, and subsequent events by which uncertainties are rendered certainties cannot be appealed to in determining that question.
    2. Same.
    Where a will confers power upon the executor to distribute a fund among such of certain persons named and in such proportions as he deems best, some of which persons would not be subject to tax on legacies bequeathed directly to them, the amounts appropriated under such power are not subject to taxation under the act.
    3. Same—Interest.
    Where the settlement of the estate has been delayed by proceedings for the revocation of the will, interest at the rate of ten percent is not recoverable, but interest can only be charged at the rate of six per cent from the expiration of the eighteen months from the death of decedent until the cause of delay is removed.
    Appeal from order of the surrogate assessing collateral inheritance tax.
    
      H. Russell and Jabish Holmes, Jr., for app’lt; I. H. Maynard, for resp't.
   Van Brunt, P. J.

Cornelia M. Stewart died on the 25th of October, 1886, leaving a will and four codicils, which were duly-admitted to probate by the surrogate of the county of New York on the 13th of November, 1886, upon which day Henry Hilton and Charles J. Clinch qualified as executors.

The questions arising upon this appeal are presented by the last codicil to the will. By this codicil, which revoked certain of the trust powers which had been conferred upon the executor Hilton by the previous codicils, the said trustee was given the power to endow a seminary of learning for women in connection with the Cathedral of the Incarnation of the diocese of Long Island, theretofore mentioned in said will and codicils, and also to endow such other buildings and institutions connected with said cathedral as he should deem necessary or proper.

The codicil then provided, as to the property not necessary in the judgment of the trustee for any of these purposes, that he should have the power to distribute the same among such of the legatees mentioned in the will and in such proportions as he saw fit. The legatees amongst whom this discretionary power of appointment might be exercised were nineteen in number, consisting of half sisters, nephews and nieces and grand nephews and nieces. On the 25th of April, 1887, the surrogate, upon motion of the executors, assessed and fixed the collateral inheritance tax upon the legacies given by the will; and on like motion appointed an appraiser to appraise, for the purposes of said tax, the clear market value at the death of the decedent of the property which passed by the residuary clause of the will; and further provided that he report the amount of said residuary estate of said deceased subject to the said tax, the names of the different parties whose shares were subject thereto, the amount of their respective shares and the amount of the tax for which they were respectively liable. On the 28th ox October, 1887, one of the next of kin and heirs-at-law filed her petition to revoke the probate of said will and codicils, and it was not until January 16, 1890, that a decree" was entered dismissing said proceeding. On the of January, 1890, Hilton executed the trust and power of appointment imposed on him by the will. After endowing the cathedral with the sum of §500,000 and certain lands at Garden City, lie exercised the discretionary power of appointment by transferring to ten of the nineteen legatees the remainder of the estate in the following proportions: “ One-tenth to Charles J. Clinch, the nephew of the deceased; one-tenth to Sarah N. Smith, a niece of the deceased; three-fifths to Anna and Emma Clinch, half sisters, and one-thirtieth to each of six nephews and nieces.

On the 19th of February, 1890, the appraiser filed his report, by which he found that the value of the one-tenth received by Charles J. Clinch under the power of appoi nent was $248,-540.16, and that it was subject to a tax of $12,427. The appraiser also reported that the one-fourth received by Clinch directly under the will was subject to a tax of $74,942.14, and interest was charged upon this latter amount after the expiration of the eighteen months allowed by the statute of 1887 for the payment of the tax without interest.

The questions presented on this appeal are:

First. Whether the amount received by Charles J. Clinch under the power of appointment is subject to the collateral inheritance tax; and

Second. The executors being prevented by the contest in respect of the will from paying the tax upon the legacies given by the will, whether such interest should be charged, such contest having been initiated prior to the expiration of the eighteen months ■allowed by statute.

Upon an examination of the statute we are of opinion that the amount received by Charles J. Clinch under the power of appointment is not subject to the collateral tax, and this conclusion it seems to us necessarily arises from a consideration of the language of the statute.

It should be borne in mind that it is the established law of this state that this tax being a special and not a general tax, a citizen cannot be subjected to it without the clear warrant of law. Matter of Enston, 113 N. Y., 174; 22 St. Rep., 569.

The substance of the first section of the statute as applicable to this case is that all property which shall pass by will from any person who may die seized or possessed of the same while a resident of this state, to any person in trust or otherwise, or by reason whereof any person shall become beneficially entitled in possession or expectancy to any property, or to the income thereof, other than to and for the use of mothers, fathers, brothers or sisters, etc., shall be and is subject to a tax upon the clear market value of such property. The statute, however, exempts estates which may be valued at less than $500 from the payment of such tax. The second section sets forth the method by which the amount of the tax is to be ascertained, and provides as follows: “ When any grant, gift, legacy or succession upon which a tax is imposed by § 1 of this act, shall be an estate, income or interest for a term of years or for life, or determinable upon any future or contingent event, or shall be a remainder, reversion or other expectancy, real or personal, 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 and clear market value thereof at the time of the death of the decedent in the manner hereinafter provided, and the surrogate shall thereupon assess and determine the value of the estate, income or interest subject to such tax in the manner recorded in § 13 of this act, and the tax prescribed by this act shall be immediately due and payable to the treasurer of the proper county, and in the city and county of Mew York to the comptroller thereof, and, together with the interest thereon, shall be and remain a lien upon said property until the same is paid.”

Section 13 provides that in order to fix the value of the property of persons whose estate shall be subject to the payment of said tax, the surrogate on the application of any interested party, or upon his own motion, shall appoint some competent person as appraiser, whose duty it shall be forthwith to give certain notices, and appraise the property, and make a report to the surrogate, who is thereupon, required forthwith to assess and fix the then cash value of all the assets, etc.

It further provides that the value of every future or limited estate, income or interest shall, for the purposes of this act, be determined by the rule, methods and standards of value which are-applied by the superintendent of the insurance department in ascertaining the value of policies of life insurance and annuities, save that the rate of interest to be assessed in computing the present value of all future interests and contingencies shall be five percent per annum.

It will thus be seen that by the provisions of the statute referred to it is evidently intended that the appraisement for the purposes of taxation shall take place immediately after the death of the decedent and that the tax shall be levied and become immediately due and payable.

If there was any doubt upon this proposition, § 4 is explicit upon this point, which provides that all taxes imposed by this act, unless otherwise provided for, shall be due and payable at the death of the decedent, and if the same are paid within eighteen months no interest shall be charged and collected thereon, but if not interest at the rate of ten per cent per annum shall be charged and collected from the time said tax accrued. Then follows a. curious provision, giving a premium to an executor for violating the law.

It thus clearly appears that the whole theory of the act is that the question of taxation is to be determined by the condition of things which arises immediately after the death of the decedent.

It is true that the learned surrogate suggests that in certain cases the assessment of the tax may be postponed until contingencies happen by which the value of the estate may be ascertained. But there seems to be no warrant whatever in law for such postponement.

We have then in the case at bar a power of appointment over a fund which may be appointed to persons who are not subject to the tax. Therefore the appraisement for purposes of taxation cannot be had until the exercise of the power of appointment, because it is only then that it is ascertained whether or not any portion of the-estate could by any possibility come within the terms of the act. Now, there being no authority conferred in the act for a postponement of the appraisement until the determination of this question, it seems to us clear that the appraisement must speak as of the time of the death of the decedent, and subsequent events by the happening of which uncertainties have become certainties cannot be appealed to in determining whether a tax should be imposed or not.

The case of the Matter of Cager, 111 N. Y., 343; 19 St. Rep., 497, seems to be in entire harmony with this view. The question in that case arose under the act of 1885, which in the respects affecting the tax under consideration is the same as the act of 1887. The will of Gager gave his residuary estate to his wife, to be used and enjoyed and at her disposal during the term of her natural life. One-third of the estate that might remain at the decease of his wife, the testator gave to an adopted daughter during her life and the other two-thirds and the remainder of the one-third he gave to four persons named, who are described as the heirs of said adopted daughter. Held, that upon the death of Gager his wife took a life estate with a limited power of disposition during her life for her use and enjoyment, and any interest in the other beneficiaries was dependent upon the exercise by her of this power of disposition, and that while said gifts were sustained as valid executory devises, and the beneficiaries might eventually take a valuable estate, yet as this contingency rendered the present value of such interest incapable of any correct or reasonably approximate valuation, there was no basis for the imposition of the tax; and it is expressly held that where the question as to whether any property will pass under the limitation over depends upon the will of the first taker, there is no rule by which its value can be determined. It is true that the court held that they were not called upon to determine whether the appraisal of the value of the devises for the purposes of taxation might not be made when they eventually came to the possession of the devisees ; but the intimation is reasonably clear that such was not the then opinion of the court. The idea of postponement of appraisal and payment is entirely opposed to the precise language of the statute. As has already been intimated, the tax becomes due and payable immediately after the death of the decedent, and if paid within eighteen months after the death no interest is charged, and if not interest at the rate of ten per cent shall be charged from the time such tax accrued, namety, from the death of the decedent. And it is further expressly provided that in all cases where executors, administrators or trustees do not pay such tax within eighteen months, they shall be required to give a bond in the form prescribed in another section of the act, for the payment of the tax together with interest. Thus the whole scope of the statute looks to the payment of this tax under severe penalties within the time ordinarily allowed for payment of claims against the estate. The running of interest from the time of the death of the decedent in case the payment is not made within eighteen months is not predicated upon the fact of an appraisement having been made. The party is liable for the tax, and if it is not paid he is liable to the penalty.

We are of opinion therefore that whatever expectancy the appellant had, it was of such a character that it had no market value, and could not be appraised at the time of the death of the decedent, being dependent upon the exercise of a power of appointment by the trustee which he might execute in his favor and might not, and that there was no basis upon which the tax could be assessed ; as has already been stated, the happening of subsequent events not bringing that within the scope of the law which at the death of the decedent was not within its terms.

Upon the question of interest we think the learned surrogate was clearly right. The statute is explicit that if the tax is paid within eighteen months no interest shall be charged; and if it is not paid within that time interest at the rate of ten per cent per annum shall be charged and collected from the time said tax accrued. The next section however provides a partial saving clause. The penalty of ten per cent imposed by § 4 for the nonpayment of such tax it is provided shall not be charged where in cases by reason of claims made upon the estate, necessary litigation or other unavoidable causes of delay, the estate of any decedent or a part thereof cannot be settled at the end of eighteen months from the death of the decedent, and in such cases only six per cent per annum shall be charged upon said tax from the expiration of said eighteen months until the cause of such delay is removed.

The proceedings for the revocation of the probate of the will came within this excepting clause, but it did not exempt entirely from the payment of interest; only reducing the penalty from ten per cent, to six per cent., and postponing the running of interest until the expiration of eighteen months from the death of the decedent.

The order of the surrogate should therefore be reversed as to the tax upon the amount appointed to the appellant, and affirmed upon the question of interest, without costs.

Ingraham and Daniels, JJ., concur.  