
    In the Matter of the Appraisal of the Property of the Estate of George Hess, Deceased, under the Acts in Relation to Taxable Transfers of Property. Otto Kelsey, as Comptroller of the State of New York, Appellant; Silas L. Strivings, Individually and as Executor, etc., of George Hess, Deceased, and Mae L. Strivings, Respondents.
    . Fourth Department,
    January 3, 1906.
    Tax Law — when conveyance on covenant to support grantor not subject to. transfer tax.
    A deed of farm lands which reserves to the grantor and Ms wife the-right to-, reside on the farm so long, as they shall live, with the right to harvest the crop then sown and to sell wood then- cut, and in which the grantees Covenant that they will-support the'grantor and his wife so long as they shall live and will not sell the farm during the lives of the grantor and liis wife, conveys a present title to the .grantees,.and is not a conveyance in contemplation of death or intended to take effect in possession after death' and hence is not liable to a. transfer tax. . . ” .
    McLennan, P. J., and Williams, J:, dissented, with opinion.
    Appeal by Otto Kelsey, as Com ptroller of the State of Hew York, - from an order of the Surrogate’s Court qf Wyoming county, entered-, in said- Surrogate’s Court on the 10th day of July, 1905, affirming an Order theretofore made in the proceeding exempting certain real property from taxation, with notice"of an intention to-bring up for review upon such appeal-an order entered on the- 12th day of - June, 1905, reopening the above-entitled proceeding and allowing further - evidence to he taken. ' - v •
    
      
      Frank K. Cook and L. A. Walker, for the appellant.
    
      Irving G. Botsford, for the respondents.
   Spring, J.:

On the 20th day of February, 1904, Silas L. Strivings, who was the party of the first part, and George Hess, party of- the second part, entered into a written agreement whereby Strivings agreed to remove with his wife to the farm of Hess in the town of Castile, occupying the dwelling in common with Hess and his wife, supporting and caring for them during their natural lives. Strivings agreed to reside upon and work ” said farm as long as said Hess “ and his said wife, or either of them, shall live.” By the terms of the contract the party of the second part was to harvest and thresh the wheat growing upon the farm, using whatever remained beyond the needs of the farm and the family use for his own benefit. The party of the first part was to market the “ salable wood now cut on said premises ” for the benefit of said second party and was also to sell “ any surplus of grain not needed for use.”

In consideration of the agreement it was provided that Hess does hereby grant and convey, subject to said agreements, to said Silas L. Strivings and Mae L. Strivings, his wife,” the farm mentioned, describing it by metes and bounds, together with the stock and personal property thereon. The right to support, maintenance and residence on said ” farm was reserved-during the life of said Hess and his wife,, and Strivings and his wife agreed not to sell said premises during the lifetime of the grantor or his wife.

On the same day that this contract was executed Mr. Hess executed his last will and testament, bequeathing the bulk of his property, amounting to about $70,000, to Mrs. Strivings, appointing Silas L. Strivings executor thereof, and also in said instrument ratifying and confirming the agreement now under consideration.

We think that by this agreement and conveyance it was intended to vest the absolute title and immediate possession of said premises in the Strivings, subject to the maintenance of the grantor and his wife. There was no limitation upon the control and management of the farm and personal property or the benefits accruing, therefrom, except in the minor particulars referred to. and which will be adverted to later. It was, therefore, a contract and conveyance founded /upon a good consideration, to wit, the care and mainte nance of these old people until the death of the last survivor, with ■ the enjoyment of, the premises to commence on or before the - first of April after the.execution of the instrument.'

Strivings and his wife went into .the possession of the farm in March, 1904,, and were in the occupancy, thereof wlien Hess, who ivas eighty yeai-s of age, died in August of that year, leaving him , surviving his wife eighty-three-years of age, but no descendants in the lineal line.

Subdivision 3 of section 220 of the Tax Law " (Laws of 1896, chap. 908, as amd. by Laws of 1897, chap. 284) imposes a tax upon the transfer of property by deed, grant, bargain, sale or gift, when “rnazdp in contemplation of the death of the grantor, vendor or • donor, or intended, to take effect -in possession or enjoyment at or after such death.” . ■ - '

There is no suggestion that the conveyance was-in .contemplation of death. The apprehension of impending dissolution which this clause signifies did not exist. (Matter of Baker, 83 App. Div. 530 ; Matter of Spaulding, 49 id. 541 ; affd., 163 N. Y. 607.)

We also think it is clear that the transfer does not come within the compass of. the other provision of the statute. The acts which , Strivings was to perform.with reference to the sale of certain prop erty on • hand, when lie went,into possession were required in view of the fact that-Hess had already brought the personal property into being, and it was property which should be converted into cash, He had Cut the wood and had gathered the surplus grain. It was not the product of the labor of Strivings and even then no surplus was created until after the stock had been fed arid the needs of the fann ■ provided for. Nor did it relate to. any crops growh after Strivings became.'vested of the title and possession. These limitations, meager as they are, pertain to personal property,, and the possession and enjoymerit of the same for the benefit of the farm and stock of Strivings are not restricted or interfered with. The possession of the farm is. not limited at ally Strivings was in-control ■ all the time.

There was no joint occupancy or control of the farm. Mr. Hess reserved the right to reside on the premises “ as hereinbefore provided,” that is, he and his wife were to occupy the “dwelling house in common ” with the Strivings. That was the extent of the possession reserved, and the products and stock belonged to the grantees and ■ these products comprised the income from the property transferred.

The support and maintenance of Hess and his wife were not dependent upon the farm. If its avails were inadequate to provide for them, the obligations still existed upon Strivings. The support and maintenance were entirely disconnected with the management of the farm, but constituted one of the chief considerations for the conveyance and transfer.

If the title did not vest imipediately upon the delivery of possession, the restriction upon the sale of the farm during the lifetime of the grantor or his wife is meaningless. If they had no title, they could.not convey, and the mere fact that the grantor insisted upon the ownership remaining in. the Strivings while he and his wife lived indicated that he expected he had'parted with the title-absolutely and to become effective at once. ’>

The conveyance is made “ in consideration of the foregoing covenants and agreements by the party of the first part” and “subject to said agreements.” Support is sought to be found in these clauses, particularly the last one, for the contention that there is no immediate vesting of the title. The agreements referred to are chiefly the common occupancy of the dwelling house and the “ support, board and care ” of Hess and his wife. These are, at the utmost, by the language employed made chargeable upon the premises. When a conveyance is made “ subject ” to any lien or burden the title passes unqualifiedly. If the conveyance had been subject to the annual payment of $500 to Hess and his wife during lifetime, the vesting of the title would not have been delayed. If there had been a failure to pay the. specific sum, the grantor could ' not reacquire the premises. He could enforce his claim. If there had been a breach in failing to support Hess or his wife or in any of the covenants undertaken by Strivings, the possession and ownership would not have been revested in Hess. The title had passed from him for all time, but he had imposed upon it certain burdens or obligations in the nature of liens. The title or possession was unaffected by the impositions cast upon the' grantees. There was no right to revoke the. conveyance in Hess. The covenant to support and maintain Hess and his wife was a' personal one, and for its breach an action for damages would lie, or one,in ecjuity to have the-necessary sum therefor determined and ma.de a charge upon the premises. (Redpath v. Redpath, 75 App. Div. 95 ; Stehle v. Stehle, 39 id. 440.)

Had Hess desired to prevent title passing until the death of himself ancMiis wife and dependent upon.performance of certain conditions by the Strivings, lie would have made an agreement of that kind instead.of executing a conveyance absolute in form, accompanied by possession and without any restrictions relating to the management of the farm or the. disposition of its proceeds.

The title to these premises does not .hang suspended awaiting. the caprice of this old lady, Mrs.. Hess, ' If the board or _ clothing or attention furnished does not exactly suit her whims.-, she cannot te'r- . minate the interest of the grantees, and summarily eject them from-the premises.

If'the widest latitude is given tó this conveyance to .protect -the grantor and his wife, the ownership was transferred by' the deed subject to be defeated at their instance upon failure to perform by the grantees. ' If such be the construction,'and to which. I do. not assent, the title became absolute in .the Strivings. The only manner in which they can be dispossessed and deprived of their freehold, if that version is to prevail, is by a judgment based upon non-performance 'by them. Even with - that interpretation of the conveyance there is no support for the position that the transfer was “ intended •to take effect in possession or enjoyment at or after’’ .the death of Hess and his wife. . .■

The tax imposed in pursuance of this act is upon the right of succession, not upon property (Matter of Dows 167 N. Y. 227), affecting voluntary transfers, those not founded on a good consideration. (Matter of Miller, 77 App. Div. 473, 481 ; Matter of Baker, 83 id. 530 ; affd. on opinion below, 178 N. Y. 575.)

In Matter of Thorne (44 App. Div. 8) Joseph Thorne transferred property of considerable value, to Eunice Hoff, impressing the same with'a trust for his care'during his lifetime, and she.was to furnish him money as he needed, it. The court held her title absolute^ and the- transfer was not subject to the payment of the transfer tax, . To the same effect is Matter of Edgerton (35 App. Div. 125 ; affd., 158 N. Y. 671)

The cases relied upon by the counsel for the appellant are not analogous. ' In Matter of Brandreth (169 N. Y. 437) the donor transferred shares of stock to his daughters upon the express agreement that he was to receive all the dividends declared on the stock during his lifetime, with the right to vote upon the stock “ the same as though no transfer had been made.” The "beneficial enjoyment of the stock was, therefore, postponed until his death. He retained the life estate or use while the remainder passed to the beneficiaries only upon his death. The gift was not “intended to take effect in possession or enjoyment ” until after the death of the donor, and was, therefore,- taxable.

So in Matter of Cornell (170 N. Y. 423) the donor Reserved the right to use whatever of the net income accruing from the securities transferred he-desired, and also the right to dispose of $10,000; of the property assigned.

The dividing line between those cases and the present one is well defined. In the present case the title in possession and the use of the avails and the increment passed to ’the grantees'. In the other class of cases the beneficial enjoyment did not commence until the death of the donor and there is also the further fact that the conveyance to the Strivings -was for an adequate consideration. In each of the cases mentioned the transfer was unquestionably a gift, and' it is to that class of transfers to which this tax relates. (See Cases-cited gupra.)

The order should be affirmed, with costs.

Hiscock and Hash, JJ., concurred, the latter- in a separate memorandum; McLennan, ' P. J., dissented in an opinion; WiLtiÁHs, J., dissented.

Nash, J. (concurring):

= I concur in the opinion of Mr. Justice Spring.

, The conveyance of the fee of the farm to the grantee is in terms absolute.. It.isynade to Silas L. Strivings and Mae L, Strivings in consideration' of the covenants and agreements of Silas L. Strivings tti remove with his wife and family to the farm of Hess, and occtipy the dwelling house in common with Hess and his wife, and support, board and care for them on said premises during the natural life' of both Hess and wife and each of them, except clothing Strivings to reside upon and work said farm so long as Hess and wife, or either of them, should live.

Provision is made for the harvesting and disposal of the crop of ■ wheat growing on the farm, and the salable wood “ now ” cut on the premises, and Strivings further agreed to furnish a horse and conveyance for driving purposes when requested by Hess.

These are the personal covenants and agreements of Silas L. Strivings, in consideration of and subject to which the conveyance in fee is made to Strivings and wife, to them anil their heirs forever, “ Reserving the right to support, maintenance and residence on said premises, as hereinbefore provided, during the life of said second party and his said wife, and each of them.”

Subject to this reservation also, Strivings and wife, as such, took an absolute fee as tenants by the entirety.

The reservation was not of any specific interest of Hess and wife hi the farm, either of title or’ possession, but of the right to' support, maintenance and residence out of or on the farm, which, in case of the failure of Strivings at any time to perform his covenants and agreements, would have afforded Hess, and since his death Mrs. Hess, an equitable remedy in such form as the existing circumstances would at any time in the lifetime of Hess and wife, or of either of them, require. (Stehle v. Stehle, 39 App. Div. 440 ; Redpath, v. Redpath, 75 id. 97.)

McLennan,. P. J. (dissenting) :

The sole question presented by this appeal is, "did the grantees named in the contract in question acquire an absolute title to the real and personal property described therein upon its execution and delivery to them % If they did, clearly the determination of the learned Surrogate’s Court that the transfer of such property was not taxable under the Tax Law was correct, arid the orders appealed from should be affirmed. It is equally well settled that if such title did not vest in the grantees until at or after the death of the grantor, -such transfer is taxable. Such is the language of the statute. Subdivision 3 of section. 220 of the act (Laws of 1896, chap. 9Ó8, as am'd. by Laws of 1897, chap. ’284) provides n “ When the transfer is of property made by a resident, or by a nonresident when such nonresident’s property is within this State, by deed, grant, bargain, sale or gift made in contemplation of the death of the grantor, vendor or donor, or intended to take effect in possession or enjoyment at or after such death,” such transfer is subject to taxation. (Matter of Brandreth, 169 N. Y. 437 ; Matter of Cornell, 170 id. 423.)

In Matter of Green (153 N. Y. 223) the court said : “ It matters not whether the transfer is by grant or by gift, so long as it was intended to take effect in possession or enjoyment at or after the death of the grantor or donor"; the devolution of title is subject to the tax.” , • '

Whether a transfer of property by grant is taxable does not depend upon the manner of paying the consideration. Such payment may be made in annuities; it may be postponed until after the death of the grantor. ' If adequate it may be made in such manner and at such time as the parties may agree upon. The test is, was the transfer intended to take effect in possession or enjoyment at or after death ? As was said by Mr. Justice Hatch in Matter of Thorne (44 App. Div. 8): If the testimony given upon the proceeding establishes that the testator did not intend that Mrs. Huff - should have the possession and enjoyment of the property until his death, then the case is brought within subdivision 3 of section 220' of the Tax Law.” In that case it was held that the transfer was not taxable, solely because the evidence failed to show that the gift to Mrs. Huff by the testator was subject to any legal limitation. In the case at bar it is not claimed that the conveyance was made in contemplation of death, or that the consideration expressed in the agreement was not adequate; so that we have only to inquire whether the transfer was intended to take effect in possession or enjoyment at or after the death of the grantor. The intent must be ascertained from the language of the contract, if not ambiguous, or, if its meaning is in doubt, the situation of the parties and the surrounding circumstances may be considered in connection with the language in determining its true meaning, and the purpose and intent of the parties in making it..

The agreement was dated February 20, 1904. One Silas L. Strivings was named as party of the first part, and George Hess, 'now deceased, party of the second part. The first party agreed in substance that he with his wife and family would remove to the farm and residence of the second party on or before the first day of April following ; that he would thereafter with his wife occupy the dwelling house of the second party in common-with him and his . wife; would board and care for them, reside with .them and work the farm so long as the second /party and his wife Or either of them' should live. He also assumed certain other minor obligations. The income of the farm was to belong to him,, subject, as we think, to the support and maintenance of the second party and his wife. Só far the contract was a most simple one. Strivings and -his family' were to live with, care and provide' for Hess and his wife in Hess’*

dwelling, house on the farm during their natural lives. He was also to work the-farm during such time, and for such care, support, maintenance and work he was to have the avails of the farm. But, in addition, it was provided that in consideration, of the covenants and agreements to be kept and performed by Strivings,.Hess- “does hereby - grant and convey, subject to said, agreements, to Silas L. Stri'vings.and' Mae L. Strivings, liis wife, of Gainesville, H. Y., all of the following described property, real estate and premises: ” Then follows" a description of the premises. The agreement then continues: “ With the appurtenances thereto, and together-with all the farming ' tool's, wagons, sleighs, conveyances and stock and all household furniture belonging to said second party, * "-' - "x" to them and their heirs forever. Reserving the right to support, maintenance and residence on said premises, as hereinbefore, provided, during the"life of ■ said second party and his said wife and each of them.” It is then provided' that the grantees shall not sell or convey the premises , during the lifetime of the grantor or his wife.;

We think it clear that by the agreement the ..title to the property in question did not vest in the grantee's upon the execution and " delivery of such instrument, and that it was not the intention of the parties that it should so vest. The -true meaning and interpretation" of the instrument is that the grantees should not become vested with the title until after the death of George Hess and his wife, and then ■ only in case they had kept and performed the covenants and obligations which they assumed. Such, we think, is the express language of the agreement. .The grant is made “subject to said agree-meats.” Such language is susceptible of no other meaning than that the grantees will become the owners of the subject of the grant if they live in the farmhouse with the grantor, and support the grantor and his wife in sickness and in health, and work the farm for and during their natural lives.

If Silas L. Strivings had died immediately after moving into Hess’ dwelling house and it then became impossible for him to perform his “ agreements,” could it "be claimed, notwithstanding, that the farm and all the property thereon'would belong to his estate, and that Hess would have been relegated to an action at law to recover damages as for breach of contract? Hess never agreed that Strivings and his wife should ever become the owners of his farm by paying a money consideration, but in consideration of their society, their personal care and attention, and of working the farm during the natural lives of Hess and of his wife. Such obligation could not be discharged by Strivings by procuring some one else to work the farm, or by inducing some other man and his wife to reside vpth the grantor and his wife during their natural lives. The contention of the respondent can only prevail by holding that by the agreement in question it was intended that Hess had parted with all title to his farm, notwithstanding every item of the consideration which induced the grant failed. If, as before suggested, Strivings and his wife died the day following their removal to Hess’ dwelling house, how would it be possible to realize any of the advantages which induced the conveyance ? Hess and his wife could not have for companions the persons selected by them, could not be cared for, maintained and supported by those whom he deemed proper to render such service to him and his wife as long as they, or either of them, might live. “ Subject to said agreements ” means that" the title to the farm should not vest until their performance.

The other clause in the contract is equally significant — “ Reserving the right to support, maintenance and residence on said premises ” during the life of Hess and of his wife. That clearly effected a reservation out of or from the thing ■ granted, and conclusively indicates that it was not intended that an absolute title should vest in the grantees until the obligations assumed by them had been performed. By the instrument the grantor conveyed all his household furniture. Is it reasonable to suppose that the title to it vested

absolutely'in the grantees, and'that the morning after they came to live with him the.grantor did not own the bed upon which he and his wife slept? That the title to all the furnishings and conveniences in his house was absolutely vested in the grantees and could be sold to satisfy a judgment against Strivings, unless he should claim and could establish their exemption?; We think it was not the intention of the agreement in case of the failure of Strivings and his wjfe to perform the essential, features of the oblk. gat-ions which Strivings had assumed, perhaps because of his death or insolvency, that Hess should be deemed to' have parted with the title to his farm, and his only remedy for redress would be to recover a money judgment as for breach of contract against Strivings or his estate. We think such interpretation of the contract is Unreasonable; that it is not warranted by any language contained in the agreement or by any of the .surrounding circumstances. -As was said in Matter of Cornell (supra): “In case of the death or. insolvency of the donee, or of his failure to comply, with his agreement, a court of equity would have appointed a new trustee of the fund and the testator would not have been.relegated to the position of a mere creditor of the donee.” In the contingency suggested a new trustee might have been appointed in this case, were it not for the fact that the consideration-for the transfer and all of it was of a personal character; was of..a character that could not be performed by any' persons other than the grantee' and his wife. As before suggested, they were to have the farm only upon condition, that they should reside with, care for, maintain and support the grantor and his wife and work their farm during -the natural lives of the grantor and liis wife. The grantees named \yere the persons selected by the grantor to perform such services, and the performance of such obligation could not be delegated by them.

We conclude that by -the contract in question only a conditional sale and transfer- of the property in question was effected; that it did not become absolute until the death of the grantor and his wife, .and then only provided the grantees had reasonably performed the obligations assumed by them; that the transfer was “ intended to take effect in possession or enjoyment at or after” the-deatli of the grantor. . ■ ■ '

It follows that the orders appealed from should be reversed, with costs payable by Silas L. Strivings individually, and the order of the Surrogate’s Court affirming the report of the appraiser providing for the tax of the property in question should be affirmed.

Decree and order of the Surrogate’s Court affirmed, with costs.  