
    Laura N. Smith, Respondent, v. Edward W. Browning, Appellant.
    First Department,
    January 21, 1916.
    Tax — Transfer Tax Law construed — lien of whole tax imposed on every item of property devised — vendor and purchaser — suit for specific performance — agreement to convey free of liens — amount of transfer tax undetermined at day for closing title —when vendee not required to accept conveyance—when time is essence of contract — subsequent payment of transfer tax by vendor.
    A transfer tax upon the property of a decedent attaches immediately upon his death. In ascertaining the amount of the tax the aggregate of the value of all the items transferred is the basis of computation; the tax is not segregated and an aliquot part thereof collected out of each item, but it becomes payable and is a lien upon all the property transferred to any particular individual.
    Hence, where the devisee of real estate agreed to convey the same free of all liens or charges at the date fixed for closing title, excepting certain specified liens which the vendee agreed to pay, the latter is not required to accept a deed where at the date set for closing title no proceedings had been instituted to ascertain the amount of the transfer tax and the same was still undetermined and unpaid and was not an obligation which the vendee had agreed to assume.
    Where time was of the essence of the contract owing to the fact that the vendee was a builder and had immediate use for the land in connection with the project for the erection of apartment houses, and under the circumstances was obliged to purchase other property in the place of that to be conveyed by the plaintiff, it is immaterial that at the time of the trial of a suit for specific performance thereof he had actually paid the transfer tax.
    Moreover, as the vendee was justified in refusing the title tendered, he is entitled to recover a counterclaim for earnest money paid and the cost of searching title.
    Appeal by the defendant, Edward W. Browning, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 15th day of July, 1915, upon the decision of the court after a trial at the New York Special Term.
    
      Joseph Day Lee, for the appellant.
    
      John Thomas Smith, for the respondent.
   Page, J.:

The plaintiff became possessed of the property in question by virtue of a devise in her husband’s will. The provisions thereof are as follows in so far as they relate to the plaintiff:

1. A bequest of $200,000.
2. A bequest and devise of a dwelling house in New York city (No. 43 West Seventy-second street) with its contents, and also certain real property in Kingston, Ulster county, with the contents of the dwelling house thereon, and also automobiles, carriages, wagons, horses, harnesses and all other personal property in the barn and stables on the Kingston property.
3. A life estate in the residuary estate.

The testator died December 24, 1913, and his will was probated January 4, 1914. On April 15, 1914, the plaintiff agreed to sell the premises 43 West Seventy-second street to the defendant, subject to certain restrictive covenants and such facts as an accurate survey will disclose as to encroachments, for the sum of $69,000, payable $250 on signing the contract, $3,750 upon delivery of the deed, and assuming a mortgage of $65,000 then a lien upon the premises, deeds to be delivered May 2,1914. The contract further provided that at the date thereof certain taxes were due and unpaid, and that the holder of the mortgage had called $15,000 of the principal, which the defendant agreed to pay at the closing of the title. Provision was made for the adjustment of interest, insurance premiums and payment of taxes out of the $3,750, and the plaintiff was to pay any deficiency that might arise, “it being the intent and purpose of this agreement that the purchaser shall acquire said premises as of the date fixed for the closing of title, free and clear of all liens or charges save as regards the principal of said mortgage.” It further provided that the purchaser agreed to adjourn the closing of title for one week if the seller should request such adjournment. The date for closing was adjourned to May 13, 1914.

Prior to the date for closing no proceedings had been instituted to ascertain the amount of the transfer tax, and, therefore, the same was undetermined and unpaid. The defendant refused to accept a tender of the deed upon the ground that the transfer tax was a lien upon the premises. The plaintiff’s attorney then offered to institute within ten days a proceeding to have the property declared free from the tax, to pay the State Comptroller $40 or deposit that sum with the defendant’s attorney, or to give a bond of the plaintiff, with the Southern Surety Company as surety, to the defendant in the sum of $10,000, conditioned upon the payment of any lien that might be assessed against the property by reason of the non-payment at that time or in the future of the transfer tax. These offers were declined.

This action for specific performance of the contract was commenced on or about July 23, 1914, and trial was held on March 8, 1915. On February 12, 1915, the transfer tax, amounting to $3,887.61, was paid, the tax having been assessed on January 20, 1915. In the report and appraisal, which was confirmed, the value of the property above the mortgage loan was stated to be nominal and that there was no value of the equity at the time of the testator’s death. A decree for specific performance of the contract has been entered.

The principal question to be determined on this appeal is whether the transfer tax as a whole became a lien- upon each item of property transferred by the will of the testator to the plaintiff or did it become a lien upon each specific bequest or devise to the extent only of the amount of the tax as determined by the value of the property included therein. This question does not appear to have been heretofore adjudicated. The Tax Law, so far as is material to this case, provides (Consol. Laws, chap. 60 [Laws of 1909, chap. 62], § 220, as amd. by Laws of 1911, chap. 732): “A tax shall be and is hereby imposed upon the transfer of any * * * property * * * ■ to persons * * * by will * * * from any person dying seized or possessed thereof while a resident of the State.” Section 221a (as added by Laws of 1911, chap. 732): “ Upon a transfer taxable under this article of property * * * of an amount in excess of the value of five thousand dollars to any * * * wife * * * of the decedent * * * the tax on such transfer shall be at the rate of one per centum on any amount in excess of five thousand dollars.” Section 222: “All taxes imposed by this article shall be due and payable at the time of the transfer.” Section 224: “Every such tax shall be and remain a lien upon the property transferred until paid * *

“ The transfer tax is not a tax upon property but upon the right of succession to property "x" * *. It accrues, therefore, at the same time that the estate vests, that is upon the death of the decedent.” (Matter of Penfold, 216 N. Y. 163, 167.) It is the transfer of the property that is taxed. The lien of the tax attaches to the property so transferred immediately upon the death of the decedent. In ascertaining the amount of the tax the aggregate of the value of all the items transferred is the basis for computation, and the tax is not segregated and an aliquot part thereof collectible out of each item, but it becomes payable and is a lien upon all the property transferred to the particular individual. I am of the opinion, therefore, that the premises under consideration were incumbered with the transfer tax and that the plaintiff could not tender a title in accordance with the terms of the contract until she had paid such tax. The offers to indemnify against the tax do not affect the defendant’s position. He was entitled to a title free and clear from all incumbrance, except those specified in the contract, and could not be required to accept anything in lieu thereof.

The respondent claims further that time was not of the essence of the contract, and that the decree should be sustained for the reason that prior to the trial she had paid the tax and there had been no change in the property. The defendant proved, however, that his occupation was that of a builder and that he had told the plaintiff’s representative that he expected to tear down the building and immediately build an apartment house upon the lot. It also appeared that he had made a contract with an architect to build three identical apartment houses; that he had secured two plots and that when he failed to get these premises he bought another plot; that the reason he was willing to assume the mortgage in this case was that he expected to pay it from his building loan; and that he had completed his three houses and did not at the time of the trial have sufficient money to carry out the contract. I am of the opinion that these considerations make time of the essence of the contract, and that it would be inequitable to have required at the time of the trial a performance on the part of the defendant.

The defendant expended $124 for a search of the title and has counterclaimed for this amount and the $250 paid on account of the purchase price. I find nothing in the evidence to sustain the finding that the refusal of the defendant to perform the contract was not made in good faith, which is erroneously embodied in the fifth conclusion of law. That finding and the seventeenth finding of fact, and all the conclusions of law contained in the decision of the Special Term are reversed. The judgment appealed from, therefore, is reversed, with costs, and judgment ordered in favor of the defendant for the sum of $374, together with interest and costs. Conclusions of law, and other findings of fact if desired, may be submitted upon the settlement of the order herein.

Clarke, P. J., McLaughlin, Laughlin and Scott, JJ., concurred.

Judgment reversed, with costs, and judgment ordered for defendant as directed in opinion, with costs. Order to be settled on notice.  