
    In the Matter of the Appraisal of the Estate of Robert R. Willets, Deceased, under the Acts in Relation to the Taxable Transfers of Property. William C. Wilson, Acting Comptroller of the State of New York, Appellant; Howard Willets, as Executor, etc., of Robert R. Willets, Deceased, Respondent.
    Second Department,
    April 19, 1907.
    Transfer tax—modification of decree and refund of-tax paid—ownership of property question ofifact — decision of Supreme Court subsequent to assessment of tax binding upon surrogate although State Comptroller not a party — when upon modification it is not necessary to remit proceeding for reappraisal.
    In a proceeding to modify a decree assessing and fixing a transfer tax and for a ■refund of tax paid, a decision of the Supreme Court determining that an undivided interest in real estate rvas not the property of the testator when in the transfer‘tax proceeding it had been assumed to be his, is. conclusive upon'the surrogate, although the State Comptroller was not a. party to the action. ..
    The question of ownership of property in a transfer tax proceeding is one of fact, and a mistake as to ownership is a mistake of fact. A payment made under such a mistake is -recoverable. Although due to an erroneous construction Of the will of testator’s father by the appraiser the error is, nevertheless, one of fact. ■
    When newly-discovered evidence is incontrovertible, the surrogate is riot required - to remit, a proceeding for a rehearing and reappraisal, but may ifiodify the original decree assessing the tax.
    Appeal by William 0. Wilson, Acting Comptroller of the State of Mew York, from an order of the Surrogate’s Court of the county of Westchester, énteredin said Surrogate’s Court on the 30th day of June, 19'06, modifying a-prior order of said court fixing a transfer tax. . '
    Order of the Surrogate’s Court of Westchester county-affirmed, with costs, upon the opinion of-the surrogate.
    
      Frank M. Buck, for the appellant.
    
      Wilson If. Powell, for the respondent.
    Woodward, Jenks, Gaynor and Rich, JJ., concurred.
   The following is the opinion of the surrogate.

Silkman,

Surrogate :

. This is a motion by the executor of Bobert B. Willets,. deceased, to modify an order of the surrogate of Westchester county, dated April 30, 1904, assessing and fixing a transfer tax upon the estate of said Willets, and to • direct the State Comptroller to refund a portion of the transfer tax heretofore paid, • , ■ From the moving papers it appears that Bobert ,B. Willets died • on August 22, 1903, leaving a .last will.and testament which was duly admitted "to probate by the surrogate of Westchester county ; ; and letters testamentary théreunder were granted .to this petitioner. Upon his application an appraiser was "appointed to appraise the estate for the purpose of assessing and fixing the transfer tax. The appraiser filed his report bn April 29, 1904; and on the'following, day it was confirmed and by decree of the Surrogate’s Court the transfer tax was assessed and fixed upon the estate, at $4,026.60, which was paid by the executor. ., - .

In the appraiser’s report, as thus confirmed, was" an item ■ of • $33,000, being the appraised value of an undivided onedifth interest, in a house and lot in New York city, owned by the decedent’s . father (also named Bobert B, Willets) at the time of his death in 1879. ' ' "

By the will of-the elder Willets; after certain "specific trusts had been established, and it was provided that the remainder of his estate both real and personal, should be,equally divided among his five "children, one. of whom was Bobert B. Willets, the younger." The- . wifi, also contained the recital: It is my will that in all cases of ■ the death of any of my children before distribution, leaving issue . .then living, such issue shall represent- the parent and receive what shall remain of his, her or their portion.” - >

The children of the elder Willets agreed that his. widow should occupy the house and lot mentioned as her home" and "residence so long as she should live ; and this agreement was carried out, the widow occupying the .premises until her .death on February 9,1903.

" A few -months thereafter, and on August twenty-second, as already stated, Bobert B. Willets, the younger, died . and at that time no distribution had been made of that portion of the elder Willets’ estate represented by the said house and lot.

It was assumed, however — hut not litigated or decided — in appraising the estate of the younger Willets, that under the will of his father the house and lot together with the other residuary estate of the elder Willets passed to his five children, each of whom, including the younger Robert R. Willets, thereupon became possessed of an undivided one-fifth interest therein. It was further assumed that, upon the death of the younger Willets, his undivided one-fifth interest in the house and lot became a part of his estate ' and was subject to a transfer tax.

Kearly a year after the order fixing the transfer tax had been made, and on March 16, 1905, the house and lot was sold under a power of. sale contained .in the will, of the elder Willets for ■ $235,000; and on March twenty-seventh following an action was begun in the Supreme Court by his sole surviving executor to construe his will for the purpose of determining, among other things, whether the title to the house and lot vested in the younger Willets prior to his death so as to become a part of his estate, or whether, upon his death, prior to distribution, the title passed from the father directly to the issue of the younger Willets without vesting, in the latter. To this action the State Comptroller was not a party.

It was tried before Mr. Justice Keogh at a Special Term and, upon December 31, 1905, judgment was rendered therein by which it was determined as matter of fact that “ the true intent and meaning of the will of said Robert R. Willets, the elder, concerning the proceeds of said house and premises is that in case of the. death of either of his five children before the distribution of said proceeds, leaving issue then living, .that in all such cases such issue shall represent the parent and receive his, her or their portion.” The court also found as conclusion of law that the true intent and meaning of the said will of Robert R. Willets, the elder, concerning said proceeds of said premises is that in the case of the respective shares of his children, the said Cornelia W.- Carle, William H. . Willets and Robert R. Willets, Jr., who severally died after the testator’s death and before the distribution of' said procéeds, is that the said respective shares shall be paid by the plaintiff directly to the respective issue of the said deceased children.”

After this judgment had been rendered, and on March Y, 1906, this" motion was made to modify, as already indicated, the order of April 30, 1904, by striking therefrom the amount of transfer tax assessed and fixed upon the item of $33,000,. representing the' value, of the: undivided one-fifth, interest in . the house- and. lot, .the petitioner- claiming that, in' accordance, with the .judgment, of the-Supreme. Court, no interest in'this property was :af any time- vested, in the younger Willets, and it was, therefore, not a--part of .his estate, for which reason, the’surrogate had no jurisdiction to assess- and fix a transfer tax thereon. The petitioner also prays-that the State Comptroller.be directed to refund the.amount of transfer tax paid upon such item.- ' - -. - "

Section 225 of the Tax Law-in force during the period covered by the matters now before me (Laws, of 1901, chap. 173), and under which this inotion is made, provides in part that,.“ If after the payment-,of any-tax in pursuance of. an order fixing such tax,-made by the surrogate having' jurisdiction, such order ' he modified or reversed within.'two-years from, and'after the date of entry of the order fixing the\tax, on due notice to the Comptroller of the State,, the State Comptroller shall, if.such tax was paid in a county in which the. office of appraiser is not salaried, by order, direct and allow the treasurer' of the county to refund, or if paid in any other , county, lie . shall himself refund to the executor,, administrator, trustee, person Or persons, by whom such tax has been paid,' .the amount of any moneys paid or deposited, on, account of stich tax in excess of the amount of the tax fixed by the order modified ¿or reversed.”i

As. the order assessing and-fixing the transfer tax was made April. 30, 19.04, and-the present motion to modify it was made on March 7, 190.6, returnable on" the: twenty-fourth of that month, the application is concededly within the two-year, period specified by the statute.

Under -the facts stated, which are without contradiction, I - must be controlled by .the decision of the learned justice at Special Term who construed the. will of the elder Willets to the effect that t-Iie undivided-otierfiftli interest in the house and -lot situated in the city , of New York passed directly from the elder Willets. to the children of the younger .Willets, and.did not at any time vest in the- latter . or form a part of his estate. It was, therefore, not property over which the.transfer tax appraiser or the surrogate had jurisdiction in assessing the transfer tax on that estate. For that reason, if it he within the power of the surrogate to modify that order, it should be done in,the interest of justice, as otherwise the legatees and devisees of the younger. Willets will have been required to pay to the State of Mew York a-tax upon the' transfer of property which their testator did not own, and which did not .pass to them from him.

■ The State Comptroller contends, however^ that the' surrogate lias no power to modify the order of April thirtieth, as the error there contained in assessing and fixing a transfer tax upon the undivided one-fifth interest in the house'and'lot was not an error of fact, but one of law, which could only be corrected by an appeal from the order itself. - (Matter of Niven, 29 Misc. Rep. 550; Morgan v. Cowie, 49 App. Div. 612.)

I am of the opinion, however, that it can hardly be said that the-error was solely one of law. (Matter of O'Berry, 91 App. Div. 3.) • It is true that the item of $33,000, representing the value of an Undivided one-fifth interest in the property mentioned, was included in the estate of the younger Willets through an erroneous legal construction of the will of his father, but the error was one of fact in including in that estate, property which the testator did not own. The ownership of property is a fact and a mistake in that respect is one of fact. If the ownership is established and a mistake is made - as to the taxability of the transfer, then the error would be one of law. Both the transfer tax appraiser and the surrogate assumed as a fact that the testator owned this property. Mo question as to title was raised or litigated or was' specifically passed upon. Ownership . was assumed,, and this fact, tíien assumed as the* basis for fixing the tax complained of has, since’the making of the order, been found to be erroneous through the judgment of the Supreme Court.

The facts here presented are in legal effect the same as those passed upon by the courts in Matter of Silliman (38 Misc. Rep. 226; revd., 79 App. Div. 98; affd., without opinion, 175 N. Y. 513); and that case, in my -opinion, is authority for holding that I have' the power to modify the order in the respect prayed for.

The learned' attorney for .the State Comptroller, in citing the Silliman Case (supra) upon his brief, quotes at length from the opinion of Surrogate Church (38 Misc. Rep. 226), who originally passed upon the: question there' presented and denied a motion t® modify the order fixing the transfer tax. Upon his brief it is stated thjat the decision -of' the learned- surrogate was affirmed both by the Appellate Division and the Court of Appeals; but an examination of the decision of the two' courts last named, shows that this statement is erroneous—-the same error appears in McElroy on Transfer Tax Law, par.-465, the facts being that the decision, of Surrogate-Church was reversed by the Appellate Division and that the Court of Appeals affirmed the latter court, . The opinion of the learned surrogate is, therefore, without weight.

In the Silliman case the executors therein, in 1901., paid to the Comptroller á transfer tax previously assessed' and fixed 'upon the estate of their testator by the Surrogate’s Court, in fixing which rio deduction was made from, the estate for the commissions to.which, the trustees under the will were entitled,, the'-fax on those commissions amounting-to.'$lj,072..74.. Subsequent to the payment-of the transfer tax; the Court of Appeals, in. an entirely different matter (Matter of Gihon, 169 N. Y. 443), decided that the expenses of administration, including the trustees’ and -executors? commissions, did not pass to the legatees or next of Mri arid, therefore, that such commissions should not be included'-in the estate for the purpose,of fixing the transfer tax. After this decision had been rend bred, the executors of Silliman moved tb modify the. prior order- assessing and fixing the transfer tax by striking therefrom the amount assessed arid fixed as a transfer tax upon the commissions. This motion was denied by the surrogate before whom it Was made, but his decisioh, as already indicated, was reversed by the Appellate Division. Mr. Justice Bartlett, in the course of his.opinion,(saying-: “It would seem, therefore, that the previous assessment .of the tax, so far as it included such- commissions; was: without jurisdiction, and that the Surrogate’s Court possessed power to modify its prior decree so as to exclude such commissions from consideration, as any part of the sum upon which the tax .was "to be assessed. -(Matter of Coogan, 27 Misc. Rep. 563 ; affd. by the Appellate Division, sub nom. People ex rel. Coogan v. Morgan, 45 App. Div. 628, and by the Court of Appeals, 162 N. Y. 613. See, also, Morgan v. Cowie, 49 App. Div. 612.).

The facts presented in the Silliman case are analogous to those now before- me, and that decision I regard as controlling. ■ In ■. the Sjlliman case it was assumed, when the original taxing order was made,'that- the commissions formed a part of the estate, and a tax was assessed and fixed upon them in accordance witli this assumption. Subsequently, and in an. action involving a different éstate,■ it was adjudged otherwise, and the Cóurt of Appeals then declared it to be not only within the power of the surrogate to modify the order, but that it was his duty to do so.' In the present case it was assumed, when the original- taxing order was made, that a one-fifth interest in the house and lot belonged to the. younger Willets at the time of his death. A subsequent decision of the Supreme Court lias determined that he had no interest in said house'and lot, and therefore it now becomes my duty to' modify the taxing order by striking from it the tax assessed and fixed- upon this undivided one-fifth interest.

In Matter of Coogan (supra),a transfer tax w.as assessed and fixed'upon United States bonds and other personal-property of a testator. It was snbsequéntly held- by the Court of- Appeals,, in. a different matter, that- United States bonds were exempt from taxation under the Transfer Tax Law as it then stood (Matter of Sherman, 153 N. Y. 1; Matter of Whiting, 150 id. 27), and thereupon a proceeding was instituted to modify the taxing order and to compel. ■ a refunding of the tax paid. It was held at Special Term (Chester, J., Matter of Coogan, 27 Misc. Rep. 564).that “the surrogate had no jurisdiction to assess a tax on the transfer of- these bonds, and the tax was not merely an- erroneous one, but illegal for want of any jurisdiction to impose it.” It. was further decided (head note) that the surrogate had power “ to modify his order and direct the tax to be refunded, as its original imposition-- was without jurisdiction.”

'• To the same effect is Matter of Lansing (81 Misc. Rep. 148); ■ Matter of Sorimgeour (175 N. Y. 507, affg. 80 App. Div. 388, affg. 39 Misc. Rep. 128), and Matter of O'Berry (91 App. Div. 3 ; affd., 179 N. Y. 285); and, although I have»carefully examined all the cases cited by the learned counsel for the State Comptroller in opposition to this motion, I have failed to find therein anything, which negatives the conclusion at which I have arrived.

Ordinarily, where, a determination is set aside on the ground of newly-discovered evidence, the order setting it aside should not contain an-adjudication contrary to the former determination, but-,-should provide for a new hearing upon which both parties may be heard. But this rule does not make it improper for a surrogate, when incontrovertible evidence is presented to him, as it is in this '.case, establishing that a transfer is not. subject to the transfer tax which has been assessed and fixed upon it, to modify the order in respect to the erroneous tax, without remitting the -matter to the official appraiser for retaxation. In-the present casé the facts relied upon .by the petitioner to-establish the exemption of the property in question frond a transfer tax are not disputed; and, under such circumstances, it would be an idle ceremony for this court - to send the matter back to the official appraiser for a reappraisal of the estate. (Matter of Cameron, 97 Ápp. Div. 436.) As already stated, the error complained of was disclosed by the decision of the Supreme Court in the action for the construction of the will of the elder Willets. The State Comptroller "contends that he is not bound by the decision, as lie was not a party to the action. That is true. It was not necessary to make him a party to that action, and I do not hold that the decision is res adjudicata as to him. As it is, how-' -ever, an unreversed decision of the Supreme Court upon the direct question presented to me, as to the vesting of the undivided one-fifth' interest in the property mentioned, I feel that I must be-controlled by it and leave it to the respondent here to correct any error by a review of the decision of this court.

It follows, therefore, that the order assessing and fixing thé transfer tax was erroneous in part, and should be modified by striking . from it the tax assessed and fixed upon the transfer of the undivided one-fifth interest in the. house and lot mentioned, and that the tax paid upon its transfer should be refunded, with interest.

Motion granted, with costs. 
      
      
         Laws óf 1896, Chap. 908, § 235, as'nmd. by Laws of 1901, chap, 173. This statute KaS been since amended by chapter 368 of the Laws of 1905..—-[Bee, . .
     