
    In the Matter of the Transfer Tax upon the Trust Created by the Will of Ogden Haggerty, Deceased, for the Benefit of Anna K. Shaw and Remaindermen. James M. Crafts and Sandford Sidney Smith, as Trustees of the Trust Created by the Will of Ogden Haggerty, Deceased, etc., Appellants; The Comptroller of the State of New York, Respondent.
    First Department,
    November 13, 1908.
    Tax — will construed — vested remainderman taking also by power of appointment — election to take as remainderman — transfer tax.
    Where a testator placed a portion of his residuary estate in trust, half to go to a certain beneficiary absolutely and the other half to his executors in trust to pay the income to said beneficiary for life, and on her death the corpus to her issue, but in default of issúe survivingthen to transfer to such personas said daughter should appoint by will, and in default of -such appointment then to transfer to another daughter of the testator if she. survived said beneficiary, and if not, to her issue then living, the latter daughter took a vested remainder at the death of the testator with the beneficiary surviving but without issue; the remainder subject, however, to be divested by the birth of issue to the beneficiary or by an exercise of her power of appointment.
    Although said beneficiary died without issue leaving a will in which she exercised her power of appointment in favor of her sister, already vested with the remainder, the latter has the right to elect to take as remainderman under the original will rather than by virtue of the appointment, and having done so the legacy is not subject to a transfer tax if the original testator died before the statute imposing such tax was enacted.
    Houghton, J., dissented, with opinion.
    Appeal by James M. Crafts and another, as trustees, etc., from an order of the Surrogate’s Court of tiie county of New York, entered in said Surrogate’s Court on. the 4th day of May, 1908, affirming an order of said court entered on the 13th day of March, 1908, subjecting to a transfer tax the interest in the estate of Ogden Haggerty, deceased, which passed to one Clemence H. Crafts upon the death of Anna K. Shaw.
    
      George Á. Strong, for the appellants.
    
      Thomas B. Casey, for the' respondent.
   Ingraham, J.:

Ogden Haggerty died in the city of New York on the 30th of August, 1875, leaving a last will and testament, which was duly admitted to probate by the surrogate of the county of Hew York on the llth day of December, 1875. The testator gave to his executors in trust all his residuary estate, to divide thé same into three equal shares, one of such shares to be for the benefit of his wife and one for the benefit of each of his two daughters, Anna K. Shaw and Clemence H. Crafts. In respect to the share designed for the benefit of his daughter, Anna K. Shaw, one-half of such share he gave to her absolutely, and the remaining one-half to his executors in trust to pay the income and profits thereof to his said daughter, Anna K. Shaw, during her life, and on her death to pay and transfer the principal of one-half of such share to her issue, and in case no such issue shall survive her, then to pay and transfer the said last-mentioned one-lialf share to such person or persons as my said daughter Anna shall by hen last will, or instrument in the nature thereof, executed in the presence of at least two witnesses, direct 'or appoint, and in default of such will or appointment, then to pay and transfer the said last-mentioned one-half share to my said daughter Clemence H. Crafts, if she shall survive the said Anna, or in case she shall not survive the said Anna, then to the issue then living of the said Clemence.” Both of the testator’s daughters survived him. Anna If. Shaw had no children and died without issue on the 17th of March, 1907, leaving her sister, Clemence H. Crafts, surviving.

I think it clear that upon the death of -Ogden Haggerty, the testator, Anna If. Shaw, surviving and having no issue, the remainder vested in Clemence H. Crafts, subject, however, to be divested by the birth of issue of Anna K. Shaw, or by the execution of the power to dispose of this interest in the estate.

By section 30 of the Real Property Law (Laws of 1896, chap. 547), which is in substance a re-enactment of the Beviséd Statutes (1 R. S. 723, § 13), it is provided that “ A future estate is either vested or contingent. It is vested, when there is a person in being, who would have an immediate right to the possession of the property, on the determination of all the intermediate or precedent estates.” Section 31 provides that the existence of an unexecuted power of appointment does not prevent the vesting of a future estate, limited in default of the execution of the power.”

Clemence H. Crafts was a person in being, who would have an immediate right to the possession of the property on the determination of the precedent estate, and her interest was, therefore, a vested remainder. The existence of the power of appointment could have no effect -upon this vesting. Section 31 of the Real Property Law, before referred to, was a statement of the common law as it existed prior to its passage. (Root v. Stuyvesant, 18 Wend. 257.) In that case it is said : “ It appears to be well settled that until the execution of the power the remainders or limitations over take effect the same as if no such power existed, or as in case of default of execution of it. * * * The result of the authorities is, that the power of appointment does not prevent the vesting of the estates limited in default of appointment. They are, of course, subject to be divested on the execution of the power.” (See, also, Hawley v. James, 5 Paige, 318, 467.) That under this provision of the Real Property Law Clemence H. Crafts had a vested remainder is sustained by the authorities. (See Knowlton v. Atkins, 134 N. Y. 313.) In Campbell v. Stokes (142 N. Y. 23) Andrews, Ch. J., said: Those entitled under this will as remaindermen took, not because the power of division was given to the trustees, but independently thereof, as primary devisées in remainder under the will. The class may be enlarged or .diminished, or the rights of the issue of any child may be extinguished by the extinction of such issue by death before the termination of the life estate, but this does not'affect the question. The issue living are presumptively entitled in remainder, and during the life of the parent, they living, have a vested future estate in the parent’s shard.”

The interest of Clemence H. Crafts being thus a vested remainder, subject to be divested by the birth of issue of Anna K. Shaw, or by the exercise of the power of appointment contained in the will, Anna K. Shaw died leaving a last .will and testament by which she executed this power of appointment in favor of her sister, Clemence H. Crafts, who, prior to the execution of that power, had a vested remainder in the property. It is clear that the execution of that power only took effect upon the death of Anna K. Shaw. After the will of Mrs. Shaw was admitted to probate Clemence H. Crafts, by a formal instrument in writing, duly verified, claimed the trust funds exclusively under the will of her father, Ogden Haggerty, and in no respect through the action of her said sister, and she refuses to take under the alleged appointment, It is settled that when an estate is vested under a will made before the Transfer Tax Statutes were enacted, no tax can be imposed. (Matter of Pell, 171 N. Y. .48; Matter of Lansing, 182 id. 238.) So, if Clemenee H. Crafts took under the will of her father, her interest in the estate was not taxable ; while, if she took under the power of appointment contained in the will of her sister, the transfer was taxable. The question to be determined, therefore, is whether she received this estate under the will of Ogden Haggerty, admitted to probate in 1875, or under the will of her sister, which was admitted to probate on the 16th of May, 1907. In Matter of Lansing (supra). it was held, where a will provided that a testator’s daughter should have the income from certain property during her life, through a trust created for her benefit which, by the same sentence which created the trust during her life, gave the property after her death to the testator’s granddaughter, subject to the exercise of the power of appointment which was attempted to be exercised in favor-of the person in Whom was vested the remainder, that the “appointee under a power has the right of election, the same as a grantee under a deed. * * * He can accept the title tendered or reject it in • his discretion. It cannot be forced upon him against his will. ' He cannot be compelled to receive additional evidence of title when he does not want it, and does not need it because his- title is perfect without it. His consent is necessary before the attempt to exercise the power bécomes binding upon him, the Same as consent is necessary -in making a contract or agreement. Declining or refusing to take has the same effect as incapacity to take * * *. The title is not affected, but remains where it Was before.” And although in that case there was a strong dissent, that proposition does not seem to have been disputed, the dissent being based upon the contention that there was no valid waiver made by the remainderman, as- she had made no binding election to take under the will of her grandfather.

In this case, Clemenee H. Crafts has formally elected to take under the will of her father, and refused to accept the benefit of the provision made for her in the will of her .sister; and we think the case is controlled by Matter of Lansing {supra). As was said by Judge Vann in that case: “ Her rights were fixed by the will of her grandfather, and unless changed pursuant to its provisions, her estate in expectancy would become an estate in possession upon the death of her mother. While the situation was subject to change under the power of appointment, no change was made. Although the power was exercised in form, her title was perfect without it and she derived no benefit from it. The power was to dispose of the remainder,’ and the remainder was not disposed of, but continued where it was. The attempt to execute the power was not effective, because it did nothing. The exercise of a power which leaves everything as it was before is a mere form with no substance.”

Matter of Cooksey (182 N. Y. 92) is clearly distinguishable for, as said in Matter of Lansing, in speaking of that case : “ It, therefore, became necessary for the grandchildren to claim under the power of appointment as exercised by their mother in order to come into possession of the largest sums mentioned at the ages named. Moreover, title to the remainder was to vest in them only upon the failure of the mother to appoint. If she exercised the power they could take under that source only, for they could- not take under the will of the grandfather, as Judge Haight shows in his opinion.” The distinction between the two cases is plain. In the Goolcsey case the power was exercised by changing the terms under which the appointees of the power could take, and thus the appointee must take under the exercise of the power or not at all; while in the Lansing case the exercise of the power made no difference as to the estate that the appointee of the power should take, but simply confirmed the provisions in the original will so that the exercise of the power left everything as it was, and, as the court said in the Lansvng case, it was “ a mere form with no substance.”

It follows that the order appealed from must be reversed, with ten dollars costs and disbursements, and the application to tax the transfer denied.

McLaughlin, Clarke and Scott, JJ., concurred; Houghton, J., dissented.

Houghton, J. (dissenting):

In Matter of Lansing (182 N. Y. 238), which is ■ claimed to be controlling in appellant’s brief, the devise was held not subject to transfer tax because it vested through the provisions of the primary will and could be defeated only through exercise of the power of appointment to the contrary. The power having been exercised in conformity with the devise, as-given by the former will, its exercise was treated as a nullity because it passed no title.

In the case at bar it seems to me no such situation exists. By the 10th clause of the will of Ogden Haggerty the trustees in whom title was lodged, the property being personalty, were directed to hold one-half of the share of his estate given to the daughter Anna and pay the income to her during her life and on her death pay over the principal to her issue, and in default of issue then to pay and transfer the said last-mentioned one-half share to such person or p'ersons as my said daughter Anna shall by her last will, or instrument in the nature thereof, executed in the presence of at least two witnesses, direct or appoint, and in default of such will or appointment, then to pay and transfer the said last-mentioned one-half share to my said daughter, Olemence H. Crafts, if she shall survive the said Anna, or in case she shall not survive the said Anna, then to the issue then living of the said Olemence.” To my mind this language comes far short of an absolute bequest to the daughter Olemence, subject to be defeated by the exercise of the power of appointment given to the daughter Anna. No bequest is made at all except upon default of appointment. The appointment having been made it had the effect of ■ passing title. The contingency of failing to exercise the power upon which the title of Olemence depended did not arise for the power was actually exercised. It having been exercised by the daughter Anna the title passed through such appointment, and not by virtue of the primary will.

It is no answer, it seems to me, in avoidance of the imposition of a transfer tax to say that Olemence refuses to recognize title coming to her through the will of her sister Anna. Of course any legatee can refuse to take a legacy and thus avoid the transfer tax upon it. This is not what the appellant has done. She has simply said that she does not recognize title to the legacy as coming through the appointment made by her sister because she gets title through the will of lier father. She does not propose to wholly surrender the legacy, and if title in fact does come to her through the appointment made by her sister the legacy is subject to the transfer tax. I think it does, and that the order of the surrogate was proper and should be affirmed. .

Order reversed, with ten dollars costs and disbursements, and application denied.  