
    In the Matter of the Appraisal under the Taxable Transfer Act of the Estate of David Kennedy, Deceased. Eliza B. Kennedy and Others, Individually and as Executors, etc., of David Kennedy, Deceased, Appellants; The Comptroller of the State of New York, Respondent.
    Third Department,
    May 2, 1906.
    Tax Law — Transfer Tax Law strictly construed — amount of estate must be proved to warrant assessment—when evidence thereof insufficient—executors refusing to answer should.be compelled to db so by contempt proceedings;
    The so-called Transfer Tax Law should be. strictly construed. While, holding that it is not necessary that tlie appraiser or surrogate identify the property in- order to make an assessment thereon, an estate should not be ta-xe'd" except upon clear proof of the amount of the property passing under tlie will or by transfers made before death and in contemplation thereof.
    
      When the only evidence of the amount of an estate is the testimony .of a-witness hostile to the testator, who says that five years before the testator’s death he showed'the witness a box which he said contained securities worth'$700,000, the evidence furnishes no basis for an assessment at that amount, for it is impossible to tell with any accuracy whether the testator, who was engaged in speculation, may not have wasted the securities or given them away so as to exempt them from taxation.
    On such proof there .is no presumption that the testator continued in possession of the securities until his death, so as to cast the burden upon the executor to show what became of them.
    A person assessed for a transfer tax who refuses to answer material questions does not forfeit his right to have the assessment reduced under section 36 of the Tax Law. He should be compelled to answer by contempt proceedings.
    (By Cochrane, J.): The proof that the testator once possessed property worth $700,000, while not casting on the executors the burden of showing What had become of it, required them to show that it had not come into their hands and that they had no knowledge thereof.
    Appeal by Eliza B. Kennedy and others, individually and as executors, etc., of David' Kennedy, deceased, from a decree of the Surrogate’s'Court of the county of Ulster, entered in said Surrogate’s Court on the 3d day of October, 1905.
    David Kennedy died upon the 5th day of August, 1901. Upon, the 14th day of November, 1901, these appellants, who are the executors under-his will, petitioned the-surrogate of Ulster county for the appointment of the county treasurer to appraise the .estate of said decedent. Upon that day an order was made. Proceedings were thereafter had before the said appraiser and upon the 18th day of May, 1903, the appraiser made his report in which he found the sum of $652,615 as the amount of property transferred and subject to the tax. The surrogate confirmed tins report'¡pro forma and upon an appeal taken by the executors the assessment .as stated by the" appraiser was affirmed upon the 12th day of June, 1905. Thereafter and upon October 2, 1905, the assessment was .modified "by a supplemental decree which deducted the sum of $40,000 from the amount of property assessed as having been transferred under the will by deceased, the said $40,000 being stock in the Dr: David Kennedy Corporation, which meantime had gone into bankruptcy, and become valueless. From this final decree as thus modified, except as to the modification itself, these executors have appealed to this court.
    
      
      William D. Brinnier and John W. Searing, for the appellants.
    
      W. N. Gill and G. D. B. Hasbrouck, for the respondent.
   Smith, J.:

. Before the appraiser certain securities were presented by the executors valued by them in the aggregate at $78,066.25. These were assessed at.the valuations put upon'them by the executors. To this sum was added $40,000, the par value of 400 shares of stock in the Dr. David Kennedy Corporation, also $21,000, the value of twenty Union Pacific Convertible bonds which were found in a safe deposit box and.which were claimed, by the executors to belong to the, widow. One ,other item is thus stated, “ Other personal, property, bonds, stocks, notes and cash, which I ani unable more particularly to, describe, of the value of $560,933.75.”. This made the total valuation exactly $700,000.

It is not claimed that any stocks, bonds or . notes or other property were presented to the appraiser or to the surrogate to make up this last item. In 1896, more than five years prior to the death of David Kennedy, he' exhibited some securities in a safe deposit, box which were stated by David .Kennedy at that time to be worth $700,000. Because these executors did not account for that sum or explain what had become of that property the surrogate has charged the estate, there with in finding a basis for the assessment of this tax.

The first contention of the appellants is that neither the appraiser nor the surrogate is authorized tó appraise any property which, is not discovered. The appellants further contend that if this be hot so the finding of the appraiser and the surrogate 'that property to this amount passed by the will is against the weight of evidence.

That article 10 of the Tax Law (Laws of 1896, chap. 908, as amd.), known as the Transfer' Tax Law, is a special .tax law and requires a strict construction is held in Matter of Enston (113 N. Y. 174) and Matter of Miller (77 App. Div. 473, 479). In Matter of Estate of Wolfe (137 N. Y. 205) Judge Gray discusses quite fully the nature of the act and likens the power of the surrogate in proceeding to assess ,to that of tax assessors in the assessment of persons or property for taxation. It is not necessary in the case at bar to hold that no property can be appraised by the appraiser or assessed by the surrogate unless that property be identified. However liberal may be the interpretation given to-this statute it is clear that an estate should not be. taxed except upon clear and convincing proof of the extent of property passing under the will 'or by transfers made before death and in contemplation thereof.

In examining the evidence in this case the finding of the appraiser and of the surrogate is based almost exclusively upon the testimony of the witness Phillips. This witness swears that in 1-891, ten years before the death of David Kennedy, he brought into witness’ presence a box containing securities some of which he saw and which David Kennedy then stated amounted to $420,000. Afterwards; and in 1896, more than five years prior to the death of David Kennedy, witness Phillips swears that he was taken by him to a, safe, deposit vault at the corner of Wall and Nassau-streets in the city of New York and there a box of securities was brought forth and it was stated by David Kennedy-that the securities in that box were -x of the. value of $100,000. The witness -did not handle these securities, did not estimate them or count up their value, and all he knows as to the aggregate value was the statement made by David Kennedy at the time. . In addition to this-" are. some statements of accounts with some brokers and with the Chemical National Bank, showing considerable amounts of money passing through the: account. It is impossible to tell with any accuracy from these statements how often the moneys were turned over or how much money was at any time upon, deposit or involved therein. Evidence was given of the statements of David Kennedy as to the profits that he made from -certain transactions and as to the. value of certain stocks in certain corporations.. There is, however, no evidence whatever which could be made the basis of any substantial addition to the amount claimed by the executors to be the amount of property which belonged to David Kennedy at his death except the evidence of the witness Phillips hereinbefore referred to. It further appears that the witness Phillips was a hostile witness and had been in litigation with David Kennedy in his lifetime and was in litigation with his estate after his death. His testimony upon the stand is not that of a candid witness. He made no estimate of \ the value of the securities shown to him in 1891 or in 1896. Declarations of this nature are always regarded as uncertain evidence and, when ..sworn to by a hostile, witness, as having been made five years before the death of decedent, they can have little weight as against the positive oath of the executors as to. the assets actually found. Respondent claims that upon the presumption of continuance the possession by appellants’ testator of $700,000 in 1896 put upon the executors the burden of proving what became of that money before the death of their' testator. The presumption of continuance varies in its strength according to circumstances. It appears that David Kennedy was speculating in the stock market. It would be a harsh and unreasonable rule to hold these executors bound tp account for all of these moneys which might either have been. wasted or have been given away prior to the death of their testator so as to be free from the burden of this tax. It is true that the executors were not frank. Doth of them declined to answer questions as to gifts to themselves from the testator. One of them did thereafter answér some questions in reference thereto.Under the laws for the assessment of personal property what may be called a tentative assessment is first made, and this the person assessed is hound to -swear off if he would relieve himself from the ' burden of the assessment. If upon liis application for relief he shall willfully neglect or refuse to attend and be examined, or to answer any material question put to him, he is punished by forfeiting his.right to have his assessment reduced. (Tax Law [Laws of 1896, chap. 908], § 36.) There is no such provision in the Transfer Tax Law. A witness refusing to answer a material question can be punished for 'contempt,, and the surrogate, if applied to for that > purpose, would undoubtedly have exercised the power in such a way that the offense would, not have been repeated thereafter. Any apparent -attempt, however, upon -the part -of the executors to evade the payment of a just tax, however reprehensible it may be, does not authorize cither the appraiser’ or surrogate to make an assessment upon suspicion or otherwise than upon convincing evidence -of the -transfer of property for which the tax is imposed by the statute.

We are of opinion, therefore, that the decree of the surrogate should be reversed upon the law -and facts, and the matter remitted to the surrogate for a reassessment, -without -costs to either party.

All concurred, Cochrane, J., in opinion.

Cochrane, J. (concurring) :

The testimony of the witness Phillips Was sufficient to place on the executors the burden not necessarily of showing what had become of the property of the deceased during the. lapse of time which had intervened between the occurrence’s when Phillips saw or was told about the said property by the deceased' and the death of the latter, but of showing that such property had not comic into their hands under such circumstances as would render it liable to taxation, in this proceeding and also of showing that they had no knowledge or. information on the stibject beneficial to- the State. This they failed to do. Their refusal to answer proper questions before the appraiser was contumacious. If the two' executors who thus defied the court were the only ones- affected by the decree fixing the tax I would fa-vor an affirmance of such decree on the theory that the appraiser and surrogate were ¡justified in finding that the information which the executors improperly withheld would have corroborated the testimony of .Phillips. One of the- executors- did subsequently recede from liis contemptuous attitude,, but not the other. An affirmance of the decree^ however, would visit- the misconduct of the- executors upon innocent legatees who- must bear tiie greater part of the tax which has been imposed. For this reason I concur in the reversal.

Decree of the surrogate reversed upon law and facts and matter remittedi to the surrogate- for reassessment, without costs to either party. - ’ -  