
    In re TRACY et al.
    (Supreme Court, Appellate Division, Fourth Department.
    September 29,1903.)
    1. Inheritance Taxes — Time when Taxes Accrue — Payment.
    Under Transfer Tax Law (Laws 1896, p. 795) c. 908, § 222, providing that the taxes imposed shall be payable at the time of the transfer; and section 224, directing that any administrator or trustee having in charge or in trust any property for distribution subject to the tax shall deduct the tax and shall pay it over in 30 days to the county treasurer; and. United States War Revenue Act, June 13, 1898, c. 448, 30 Stat. 448 [U. S. Comp. St. 1901, p. 2286], requiring the taxes levied pursuant to its provisions to be deducted before the legacies or distributive shares chargeable with its payment are paid to those entitled — where testator creates a trust directing the income to be paid to the beneficiary during life, the taxes imposed must be charged to the income, to be paid before any payment to the beneficiary, and cannot be divided into annual payments based on the expectancy of the life of the annuitant.
    2. Trusts — Expenses op Repairs — Payment prom Income.
    Testator, after providing an income for his daughter, devised to her the use for life of his dwelling, directing that during the time she occupied it his executors pay the taxes, the cost of repairs, and the insurance from his estate. By the residuary clause he bequeathed all the rest and residue of his estate to trustees, directing them to collect the income, and pay one half to his daughter, and pay over the other half of the income as prescribed. The residuary estate was a trust fund, and the manner in which the body of the fund was eventually to be disposed of was clearly detailed. Held, that the payments of taxes, repairs, and insurance on the dwelling were to be made out of the income of the fund in custody of the trustees, and were not intended to be deducted-from the principal of the residuary estate.
    McLennan, J., dissenting.
    Appeal from Surrogate’s Court, Onondaga County.
    In the matter of the judicial settlement of the accounts of William-G. Tracy and another, as executors and trustees under the will of George N. Kennedy, deceased. From certain parts of the decree settling the accounts, the trustees appeal.
    Affirmed.
    Argued before ADAMS, P. J., and McLENNAN, SPRING, WILLIAMS, and HISCOCK, JJ.
    James G. Tracy, for appellants executors and trustees.
    John W. Church, for respondent Syracuse University.
    S. H. Farmer, for respondent Hazel Standart.
    Oliver D. Burden, for respondent Eunice Standart.
   SPRING, J.

By his will Judge Kennedy left in trust for his adopt-

ad daughter, Jessie, who was afflicted with blindness, $8o,ooo, to be invested by his trustees, and the income thereof paid for her maintenance and comfort during her natural life. The present value of this annuity was ascertained, and the tax imposed upon it, pursuant to the United States war revenue act of June 13, 1898 (chapter 448, 30 Stat. 448 [U. S. Comp. St. 1901, p. 2286]), was $4,045.67, and that levied pursuant to the state transfer act was $525.27. The decree of the Surrogate’s Court charged these taxes upon the income of the beneficiary to be paid before any payment thereof to her.

It is the contention of the appellants that these sums' should be divided into annual payments, based upon the expectancy of life of the annuitant running along for 30 years. We can discover no warrant for this disposition of the matter. Taxes are levied to meet specified municipal, state, or governmental expenditures, and it is essential for the maintenance of the .body politic that they should be paid promptly after their levy. Every tax law fixes the date of their maturity, and contains drastic and specific provisions for their speedy enforcement. Section 222 of the taxable transfer law (chapter 908, p. 795, Laws 1896) provides that the tax “is a lien upon the property transferred -until paid, * * * and the administrators, executors, and trustees of every estate so transferred shall be personally liable for such tax until its payment.” Again, “all taxes imposed by this article shall be due and payable at the time of the transfer,” with certain exceptions not germane to this case. The transfer under this will became effective immediately' upon the death of the testator, and the income began to accrue and was credited to the beneficiary from that date. Section 224 of the act referred to provides:

“Any such administrator, executor or trustee having in charge or in trust any legacy or property for distribution subject to such tax shall deduct the tax therefrom; and within thirty days therefrom shall pay over the same to the county treasurer or state comptroller as herein provided.”

Even contingent estates are now chargeable with the imposition and payment of the taxes forthwith. Chapter 76, p. 100, Laws 1899; Matter of Vanderbilt, 172 N. Y. 69, 64 N. E. 782.

Section 30 of the war revenue act is equally explicit in requiring the taxes levied pursuant to its provisions to be deducted before the legacies or distributive shares chargeable with its payment are paid to those entitled. Knowlton v. Moore, 178 U. S, 41, 67, 20 Sup. Ct. 747, 44 L. Ed. 969.

In the present case serious hardship results from this rule, and that will often be so where the income is paid to a person for life or a fixed period. The adopted daughter, for whose comfort the testator was so exceedingly thoughtful and solicitous, might be left barren of income for the first year after his death, for the taxes levied exceeded the entire income of the general bequest to her. The war revenue tax was large, and was imposed to meet the unusual expenditures of the national government, and its payment was obligatory, and must be met at once. It would undoubtedly be less burdensome to the life beneficiary to have this tax extended along, but the ultimate takers have a right to insist on its payment when due, instead of being deferred until the property passes to them, when the tax might remain unpaid and be ■deducted from the principal before the residuary beneficiaries acquire their shares.

The testator devised the use for life to his daughter of the dwelling "house owned by him, and situate on the corner of Genesee and Plum streets, in the city of Syracuse. By item 24 of his will he provided:

“During the time my said daughter Jessie B. shall occupy my dwelling house as hereinbefore provided, I direct my said executors to pay all taxes which for any purpose may be levied thereon, and that they also keep the premises in repair at the cost of and from my estate, as well also that they pay any insurance thereon.”

By the decree of the Surrogate’s Court the taxes, repairs, and insurance premiums on this dwelling since the death of the testator and ^embodied in the account filed were charged to the income of the fund in the custody of the trustees. The appellants challenge the correctness of this deduction, contending that these charges should be deducted from time to time from the principal of the residuary estate instead of from its income.

Again we agree with the learned surrogate. By the residuary clause of the original will (item 22) the testator bequeathed “all the rest and residue of my estate” to trustees named, directing them to collect "the rents, issues, and profits,” and pay “one equal one-half thereof over to said Jessie B. Kennedy semiannually for her support •and maintenance as long as she shall remain unmarried." Disposition is then made of this portion of his estate in the event of the marriage of his daughter Jessie. His executors, who were the same persons as his trustees, are to collect and pay over, as prescribed in the will, “the rents, income, and profits from the other half of said remaining estate,” or, in other words, the other half of the income from said remainder. The testator, familiar with the general rule that a life tenant must pay the current charges for taxes, ordinary repairs, etc. (Chamberlin v. Gleason, 163 N. Y. 214, 219, 57 N. E. 487; Matter of Albertson, 113 N. Y. 434, 21 N. E. 117), by the direction to his executors to pay these charges out of his estate obviously intended a departure from the principle adverted to, otherwise the direction is surplusage. We apprehend, however, it was not his intention to impose these annual burdens, varying in amount, upon the corpus of his estate. He made direction for the disposition of the principal of his large estate. He was equally explicit, with all his solicitude for his adopted daughter Jessie, to limit her estate in his property to a certain well-defined income. The whole text of the will contravenes any intention to diminish the body of his residuary estate for any purpose, clearly not for the purpose of the payment of these annually recurring obligations. The courts are very chary in permitting the principal of a trust fund to be trenched upon to meet taxes or interest on liens or repairs unless the language of the will unmistakably discloses the intention so to do. Matter of Albertson et al., 113 N. Y. 434, 21 N. E. 117; Woodward v. James, 115 N. Y. 346-360, 22 N. E. 150.

In the Albertson Case the testator by the sixth clause of his will •devised the use and occupancy of a farm owned by him to his wife for life. He directed his trustees to “pay out of my estate from time time” the taxes, expenses for repairing the buildings, and the interest-on the mortgage thereon. The executors paid these charges from tfoeincome of the estate, and upon their accounting the same were imposed upon the capital by the decree of the Surrogate’s Court. The-General Term held these items were properly paid by the executors-from the income, which decision was sustained by the Court of Appeals. That court reasserted the two settled canons of construction^ that ordinarily it is the intention of the testator in creating a truss, fund to keep its corpus intact until the termination of the trust, and? that expenses connected with the management of the trust estate are-payable by the life tenant. After commenting upon the strictness witfc. which these principles have been adhered to by the courts, the court i¡® giving effect to the direction to “pay out of my estate the taxes, interest,” etc., add:

“Such a construction is quite as consistent with the idea that the income-shall be resorted to as that the capital of the trust fund shall be diminishes® for that purpose.”

It then succinctly states the rule as to the unwisdom of so construing the will as to permit the depletion of the body of the fund, unless,, the instrument plainly requires it, in this language:

“To sustain a construction whereby the capital might be more or less seriously impaired by using it in the payment of taxes and of interest on the-mortgage, and in maintaining the realty used by the beneficiary, we ought te ■ find words of the most unmistakable import, and pointing unequivocally mb. that direction.”

It is urged that because the testator directed his executors to pay these charges his intention was to have the payment chargeable to the capital of the estate. In the first place, the entire estate is disposed of by the will, the residuary estate is a trust fund, and the purposes to which the income is to be applied are set forth, and the manner in which the body of the fund is eventually to be disposed of is also-provided for with clearness and in detail. Again, the testator uses-the terms “executors” and “trustees,” even as to this fund, interchangeably. It is all a trust fund given to designated Astees, and yefc. in providing for the collection and distribution of the income he uses-the expression “executors.” The testator constituted his executors-his trustees, and he apparently had in mind the men he nominated? rather than the particular character which they filled in the management of his estate.

The daughter Jessie is only about 35 years of age, and if she should! live for the time ordinarily to be expected the annual depletion of the-capital would probably diminish it by one-half, if the construction* urged is to prevail, before it reached those to whom it is to pass-eventually. We find nothing in the will indicating that he had any such purpose, but the whole tenor of it is toward the conservation off this portion of his estate unbroken. He had made ample provision for-his daughter in the trust of $80,000, which he was particular should be-invested in good earning securities. He added to this provision by the-one-half of the income of his residuary estate, but. that is confined to.> the revenues, and the same circumspect care is manifested in its final disposition as appears concerning the other portions of his estate.

We further conclude these current charges are to be paid from the entire income arising from the residuary estate. The general bequests are not to await the extinction of the trust estates. They are ¡paid over beyond recall. This is equally true of the trust legacy of $80,000 set apart for the daughter Jessie. That had priority in the testator’s mind' over any other bequest, both in its certainty of being provided for and in the character of the investments to compose it. ‘'Sic executors have fulfilled his expectation in this regard by segregating certain unquestioned securities to comprise the fund designed Dp this bequest. The testator did not intend these current charges to Iks paid solely put of the one-half of the residuary income for her femefit. If so, there was no necessity for the great particularity in providing for their payment out of the estate. It is to be noted also fiSzat the entire corpus of the residuary estate is to compose a trust Ssmd. It is to be kept intact, and only the income is to be paid over, 6&e one half to the daughter, and the other half, as set forth in this paragraph or item, during the lifetime of Elizabeth K. Freeman. No Smal distribution of the estate can be made until the death of the daughter Jessie, for the $80,000 held in trust for her benefit becomes .a part of the residuary estate at her death. The testator, in his clear comprehension of the disposition he was making of his property, of úEae possible long continuance of the trust estate for his daughter, of ti&e provision for the payment of the taxes and repairs in the mainfeaaance of .his residence, left this residuary estate an undivided trust firaad during these years, expecting that the current charges for taking care of the dwelling and other legitimate ordinary expenditures would Srsfc be paid out of the gross earnings, and the net income be disdnibuted as directed. As a lawyer, he knew charges against these earnings would often accrue, and he left the trustees unfettered to meet them- by placing this large fund under their control, and united ámsíead of separated to conform to the divisions of the profits or earn-azmgs of this residuum.

It is obvious that the testator, in providing for the repairs on his premises, contemplated only the ordinary repairs essential to their preservation and maintenance, and the discussion and the decision mow made are based upon that interpretation of the clause authorizing them

The decree of the Surrogate’s Court should be affirmed, with the costs and disbursements of the appellants and the respondents the Syracuse University and Eunice and Hazel Standart on this appeal to be paid out of the income of the residuary estate.

WILLIAMS and HISCOCK, JJ., concur. McLENNAN, J., dissents. ADAMS, P. J., not voting.  