
    In the Matter of the Appraisal of the Estate of John Palmer Deceased, under the Acts in Relation to the Taxable Transfers of Property. The Comptroller of the State of New York, Appellant; Rufus K. Palmer and Others, as Executors, etc., of John Palmer, Deceased, Respondents.
    Third Department,
    January 18, 1907.
    Tax— gift of property to son on' condition that he provide for donor’s family — when transfer made in contemplation of death.
    The decedent, being ill of a lingering disease which affected both mind and body, about, three months prior to his death made an. assignment of all his property to a son, said assignment being attached to-a schedule' and "reciting . that the son has “absolute control of the assgts herein named.’ The son deposited the securities assigned in a safe deposit in the name of three trustees, one of whom was himself, the other two being the persons named as executors of the father’s will. In a proceeding to assess a transfer tax the son testified that it was mutually understood that he should .look after the welfare of his mother, brother and sister in the same manner as the decedent had always done, and as a matter of fact the securities after the donor’s death were divided among his wife and children by the trustees. The decedent also transferred savings bank accounts so as to stand in, his own name and that of his son “ payable to either or the survivor of either.”1 The son in making affidavit to the amount of the estate in the matter of the collection of an inheritance tax at first included the savings bank accounts, but thereafter maintained that they were included in ignorance of his legal right thereto. Upon all the evidence,
    
      Held, that the gift was in trust for the benefit of the widow and next of kin of the donor and was not a trust for the benefit of the donor or a gift absolute to the son;
    That the disposition of the property was clearly made in contemplation of death and subject to a transfer tax;
    That under the statute, as amended, gifts inter vivos if made in contemplation of death are subject to a transfer tax, the tax not being restricted to gifts cama mortis;
    
    That as attempts to evade the payment of a transfer tax are usually secret, circumstantial evidence may be sufficient to overbear the positive testimony of interested parties as to the intention of a disposition of the property.
    (Per Cochrane and Kellogg, JJ.): Under the circumstances it is not necessary to hold that the alleged gift was made in contemplation of death. The purpose of the disposition was to relieve the owner from the care and management of his property without divesting him of title thereto and hence the property passed under the will of the decedent and was taxable.
    Chester, J., dissented.
    Appeal by the Comptroller of the State of Mew York from' an order of the Surrogate’s Court of the county of Albany, entered in said Surrogate’s Court on the 20th day of July, 1906, affirming an order entered in said Surrogate’s Court on the 16th day of April, 1906, fixing and assessing a tax upon the transfers of property of John Palmer, deceased, under the law relating to taxable transfers, of property.
    John Palmer, of Albany, died upon the 15th day of April, 1905, at the age of sixty-two years. He had been in the War of the Rebellion, and from injuries received in said war he had gradually developed a disease known as multiple neuritis, which was the final cause of his death. About eighteen months prior to his death his mind began to weaken, and about December 1, 1903, be went to a sanitarium at Hew York for treatment, and there lie remained about six weeks!- lie then returned to his home in Albany, .where ' he remained until he died. During the year 1904 he was somewhat improved, and in the summer of 1904 he was in sufficiently good health to go out driving every day. It was difficult for him to. walk, but he was. not confined to his b.ed.. While. the doctor feared that his mental facilities would gradually weaken, and his mind perhaps give way entirely, he thought his physical powers would remain sufficiently unimpaired to allow him to- live .considerable time, and, perhaps, several years. In the month of January, 1905, lie seemed to be Considerably improved and in fair condition, both mental and physical, though it was apparent that he was gradually weakening, both physically and mentally. This was one of his best months.since his return' from the sanitarium. Upon the 10th day of January, 1905, he made; without- consideration, an assignment ,of all of his property to his-son, Rufus. King Palmer. The assignment was in this form :
    “ John Palmer, Senior, ■ residing at 128 Madison.avemie, Albany, H. Y., declares that this is a schedule of his assets alphabetically arranged and assigned to his son, Rufus King Palmer, and that, the said Rufus King Palmer has absolute control of the assets herein named. ' JOHH PALMER.”
    . .The book with this assignment attached was delivered to Rufus Palmer. Ho counsel was called in, and the-instrument was written ou't by the decedent personally. Rufus Palmer swears that at no time was anything said about the" transfer tax or evading, the transfer tax. Rufus was the eldest son of the decedent, and for a period of fifteen years Rufus has had from his father a general . power of attorney, At the time -of the transfer to Rufus ■' he swears that it,was mutually understood, although there was no actual agreement to that effect, that. Rufus should properly look ■ after the welfare of -the mother, brother and sister, and also' said ’ decedent in the ■ same ma/nnér as said decedent had always done.
    
    Upon the fourteenth of February following this assignment Rufus took most of the property assigned from his father’s box and put it in a box to be held in .the name of three trustees, himself, William S. Hackett and Edward G. Sherley, with provision that this box should only be opened in the presence of two of said trustees. These trustees were the same persons mentioned in his father’s will as executors and trustees. A small part of the securities in his father’s box, to wit, the sum of $15,000 or $20,000 he allowed to remain in the box, claiming that he did not accept those, and the value of those securities-has been inventoried as part of his father’s estate. ■ On the eighth day of March, at his father’s request, some slips were given to him, and he directed the transfer of the bank accounts in three several banks to be transferred to an account in the name of “John Palmer or Bufus K. Palmer, payable to either or survivor of either.” From the securities transferred upon March tenth no moneys ever came back to the possession of John Palmer. They were all collected by the trustees and paid over, a part to Mrs. Palmer, the wife' of John Palmer, and the remainder divided among the children of John Palmer. The same proceeding was had after the death of John Palmer, at which time the balance of the property was placed in this trustee box, subject to the control of- the three trustees. Upon January tenth, when the assignment was made, John Palmer, while a good deal crippled, did not expect to die at once, and was even talking about taking a trip to Europe in' the spring. He stated to one of his trustees that the management of his property was getting to be a burden to him and he had every confidence in his son Bufus to whom he after-wards made -the assignment. After the death of John Palmer Bufus Palmer made an affidavit in-the matter of the collection of the inheritance tax, in which lie stated that the property of John Palmer amounted to $84,000. This included some $64,000 which was contained in the three bank accounts, which were then in the name of John Palmer or Bufus Palmer, as before specified. He afterwards explained that hé made this affidavit without discussing the facts with his counsel and understanding that the peculiar situation of those accounts made them estate property notwithstanding the assignment to himself, but that after discussing the facts with his counsel he had discovered that he was the absolute owner in law and that the said $64,000 should not be included in his father’s estate. Upon tliese facts the surrogate has held exempt from taxation all the property transferred to Bufus by the assignment of January 10, 1905, including the funds in the three bank accounts which were afterwards placed in the name of John Palmer or "Rufus Palmer. The report of the appraiser, was confirmed pro forma and upon appeal the pro forma decree was affirmed, and from the order or decree of ■ affirmance the Comptroller has taken this appeal. Further facts appear in the opinion.
    
      George J. Hatt, %d, for the appellant.
    
      Melvin T. Bender and Harold-J. Hinmañ, for the respondents.
   Smith, J.:

That Rufus King Palmer .took the property under this assignment for the purpose of. passing the property to the widow and children of John Palmer in precise accordance with the plan of distribution in the will of John Palmer seems 'to 'me of irresistible inference. With a widow, two sons and a daughter, John Palmer never gave that property absolutely to his son Rufus. Moreover, Rufus swears upon the stand that there was an understanding which he does not admit amounted to an agreement that lie would tape care of his mother, brother and sister “in the same manner as * * * decedent had always done.” .From the date of the transfer upon January tenth until the time of John Palmer’s death not one act of Rufus in the handling of this property is that of an independent owner. On 'the contrary, every act is in accord with the recognition on his part that the. property was his father’s and that the transfer was simply a means to accomplish the passing of the property to' his father’s heirs. The bank accounts remained in the name of his father until his father directed Rufus to give to him a bank slip upon which he directed the accounts to be transferred to “ John Palmer 'or Rufus K. Palmer, payable to either, or survivor ■of either.” This fact of itself is not without significance of the fact that the act was done “ in contemplation of * * * death.” The securities of the deceased were not changed from the safe deposit box of John Palmer until they' were put into a safe deposit box in the name of Rufus Palmer, William S. Hackett and Edward G. Sherley, who happened tobe the trustees named in the will of John Palmer. These securities were put in this safe deposit box under the condition that they could be drawn, not by Rufus alone, but only by two of the three trustees. The exact nature of that trust is not shown. Upon this point the son Bufus is evasive. If he made the trust of his own volition it is inconceivable that he should be unable to state its exact terms. If the trust were, however, for the purpose of carrying out the provisions of the will of John Palmer there is good reason why the exact terms of the trust should not here be shown and the respondents aré the only ones who have the power of showing by direct evidence just the extent and nature of that trust. After the death of his father the remaining securities belonging to the estate were placed in the same trust box although they must be administered undér the direction of the trust contained in the will. Again, all income collected from securities was divided by Bufus between his mother, his brother and sister, and himself, as is evident, under his father’s direction either under the terms upon which he originally took the property or at tho time of the collection of the moneys. After the death of John Paliner Bufus Palmer makes affidavit in which he states that the property of his father amounts to $84,000 which includes these three bank accounts which had been placed by direction of his father in the name of his father and himself “ Payable to either or survivor of either.” The inconsistency of the position that these bank accounts belonged to the father and that the rest of the property was his absolute property did not appear so clearly to Bufus as it did afterwards to Ins counsel who advised him that the property under the assignment was all his property except ^he small amount which he did not accept and remove from his father’s safe deposit box.

It may be that John Palmer was not anticipating immediate death. He had been sick, however, for many years and for the last fourteen months prior to the making of this assignment he had been much worse. His mind was affected and Ins physical infirmity increased. That he was contemplating the contingency of death when he made this transfer seems to me undoubted. The absolute transfer with the secret trust, the apparent subsequent direction by him of the estate, the grasp that he still held upon the bank accounts, the transfer of the securities to the same trustees designated in his will before his death, pass .beyond suspicion and point unerringly to an intent upon his part to provide for the passing of his estate after he was gone. The - only reason assigned by these respondents for this transfer is that the estate had become a burden upon him and as he had full confidence in Rufus he wanted, to pass' it over to his hands. This reason, however, has little weight when it appears that for fifteen years the son Rufus in whom he had so great confidence held a general power of attorney and could with equal force have accomplished his purposes under that power of attorney as under the formal assignment made. If this order of the surrogate stands, a man facing death has by indirection bequeathed his property and evaded payment of his share of the burden of taxation. As against just such transfers, as I understand, the Legislature intended to provide .when it declared subject to taxation transfers made in' contemplation of death.

The respondents urge certain legal objections to a construction of this gift as made in contemplation of death. That the gift was in form inter vivos rather than causa mortis is clearly shown. The delivery of the inventory with.the assignment thereupon was a. sufficient delivery to complete the gift. That the gift was in trust and1, not to Rufus absolutely would be held by any court, wheresoever' the question should arise, upon the testimony of Rufus himself and upon his subsequent conduct, which gives color to the motive of the ■ gift. That trust, however, was not a trust fór Jphn Palmer so much as it was a trust for his widow and next of kin and, therefore,, that trust does not come within the condemnation of the trust in the case, of Matter of Cornell (170 N. Y. 423) or the case of Matter of Brandreth (169 id. 437).

It is strenuously urged, however, that this expression in contemplation of * * * death ” under the authorities refers simply to a gift causa mortis and does not include a gift inter vivos. This contention is not unsupported by authority. Such a construction was given to the phrase in Matter of Seaman (147 N. Y. 76, 77). In that case,, however, the'question did not arise in the same way as it,, is here presented. It was not necessary there -to decide that a gift inter vivos made before death and for the purpose of avoiding-the payment of this tax would not be a gift in contemplation of. death. In Matter of Edgerton (35 App. Div. 125), Merwin, J., in our own court seems in part to recognize this as the rule of law Other cases in the Appellate Division, may be cited where,, in the: prevailing opinion, this'rule of. construction is in part relied-upon,, which .have been affirmed in the Court of Appeals without: opinion^, but the affirmance in the Court of Appeals was not in any case a necessary approval of this construction of the statute.

On the other hand, in Matter of Cornell, decided in this court and reported in 66 Appellate Division, 169, Mr. Justice Chase, in writing for the court, says : “ If a transfer of property is made for the purpose of cheating the law and avoiding payment of the transfer tax, it may well be that a gift so made, although absolute and unconditional, is made in contemplation of death, and _tkat a tax should be paid thereon although the grantor, vendor or donor may live for many years thereafter, but with such exception the rule fairly to be deduced from all the authorities is that the words ‘ in contemplation' of the death ’ refer to a gift causa mortis.” While this decision was reversed the construction of the statute thus given was not overruled. Under chapter 713 of the Laws of 1887 (amdg. Laws of 1885, chap. 483) the language of the statute (§ 1) provided for the taxation of gifts “ intended to take effect * * * after * * * death.” This language was construed in Matter of Edwards (85 Hun, 436) to include gifts causa mortis. In 1891, however, the statute was amended to make subject to the tax also transfers made in contemplation of * ■* * death.” (Laws of 1891, chap. 215, amdg; Laws of 1885, chap. 483, § 1, as amd. by Laws of 1887, chap. 713.) If, under the act of 1887, gifts causa mortis were taxable, it would seem that the amendment of 1891 intended to add something to the statute. To hold that that refers alone to gifts causa mortis would be to hold that such amendment was surplusage and added nothing. This is the view taken of the statute in Matter of Birdsall (22 Misc. Rep. 180), wherein Surrogate Woodbury holds that a gift inter vivos made for the purpose of avoiding the tax was taxable under the statute. (See Laws of 1892, chap. 169, amdg. Laws of 1885, chap. 483, § 1, as amd. supra, and Laws of 1892, chap. 399, § 1, subd. 3.) This decision was affirmed in the fourth department in 43 Appellate Division, 624. The authorities in this State upon this question are not entirely satisfactory. In Illinois, however, a similar statute has been construed and the phrase “ in contemplation " of death ” has been clearly interpreted. In Rosenthal v. People (211 Ill. 309), Mr. Justice Cartwright, in writing the opinion of the court, says: “A gift is made in conteniplation of-an event when it is made in expectation of that event and having it in view, and a gift made when the donor is looking forward- to his death as impending, and in view of that event is within the language, of the statute. With that understanding óf-the law there is no doubt that.the gift in this case was-made in contemplation of death. - The preparation of -the will under the circumstances, and in view of the rapid progress of the-disease, is strong evidence that death was expected, and no other moving cause than the expectation of death is apparent. While the widow and physician testified that the deceased did not expect to die, they also said that it was not the subject of conversation at all, and in view of his condition it is a fair inference that he was not so dull of comprehension as to suppose that he would get well.” In that case a gift inter vivos was held taxable. The same rule is held in Estate of Merrifield v. People (212 Ill. 405), where Mr, Justice Hand writes: “It is said,'however, by appellants, that a transfer of property made without consideration, in contemplation of death, is a gift causa mortis, and- that, the stipulation is that the gift was absolute, hence it could not be a gift causa mortis, as a gift causa mortis is conditioned upon the death of the donor. . A gift •causa mortis, strictly speaking, applies only, to personal property, and the gift is defeated if the donor recovers. In this case the subject-matter of the transfers .was both real 'and personal property, and the transfers were absolute, and not upon the condition that they should be revocable in case of the recovery of the donor. They were, however, made in contemplation of his death. They fall, therefore, more nearly within tire description gifts inter vivos made in contemplation of death, than, within the designation gifts causa mortis.”

Finally, the respondents contend that the burden of proof is with the Comptroller to show that this gift was made in contemplation of. death and'that the only positive evidence is to the contrary. Efforts to evade the law are secret and hot public. Witnesses are not called" in to attest them. . The- evidence to prove the same must of necessity be'circumstantial rather than direct and such circumstantial a x evidence may overbear the positive testimony of an interested party Who swears to the contrary. The effect of this transfer is to pass . the property to the next, of kin- of the deceased exactly as it' would •have passed by will had this transfer not been before made. There. is no moral reason why this property should not be taxed as though the property had passed three months later by the will of the deceased. Courts should not be over zealous to protect an estate from taxation and to shield parties by a presumption of innocence where no other rational motive for a transfer is shown, and no reason appears why the estate itself should not bear its just proportion of the public burden. The final order ■ or decree of the surrogate should be reversed on the law and facts, and the matter be remitted to .the surrogate for disposition in accordance herewith.

Kellogg and Cochrane, JJ-., concurred in result; Chester, J., dissented; Parker, P. J., not sitting.

Cochrane, J. (concurring)

I concur in the result. I do not think, however, that it is necessary to hold that the transfer in question was made “in contemplation of * * * death” within the meaning of the Tax Law. But it is quite clear to me that under the instrument of January 10,1905, Rufus King Palmer, the son of the decedent, took no title to the property therein mentioned. The transaction in form was sufficient to constitute a gift inter vivos. But the law penetrates beneath the surface of a transaction and considers not its form but its purpose. That purpose is correctly indicated by Rufus himself in the following language in his affidavit taken before the appraiser and used as evidence in this proceeding, viz.: “ To relieve himself of the burden of his estate in view,of his illness and through fear that his illness might be a lingering one, attended by weakened mental capacity which might incapacitate him to look after his own and his family’s welfare, all of which was so expressed to deponent by said decedent, said decedent desired to and did transfer to deponent all of his personal property absolutely on or about the 10th day of January, 1905.” The evidence clearly shows that Rufus was to be the custodian or manager of the property and that the transfer to him although absolute in form was merely for the accomplishment of such purpose. He was already acting under a power of attorney. It taxes human credulity to the utmost to suppose that General Palmer intended to make a gift of this large proportion of his property to one son to the exclusion of his widow and his other children.' Such an inference- is inconsistent with the' provisions of his will ratified by a codicil made only four months prior to the instrument of January, 1905, in which no" such purpose is disclosed. It is also inconsistent with every act of Rufus after the transfer both before and after his father’s death, which acts are confirmatory of the provisions of the will in respect to the disposition of the estate. Rufus would find it extremely difficult under the evidence before us to maintain his title to the property against the testamentary provisions of his father. - It is unnecessary to give rein to the imagination to reach the conclusion that a gift was not- intended. It requires an extremely lively imagination to reach the contrary conclusion. The deceased did not intend to exclude his family from" participation in his estate and make them dependent on the. bounty or liberality of one member thereof. Having due-regard to the form of the transaction nevertheless the actual purpose thereof, as clearly indicated by the evidence, was to relieve the owner of the property from the care and management thereof without divesting himself of the title thereto. Such property, therefore, passed under the. will of the deceased and is subject to the tax.

Kellogg, J., concurred. •

Order or decree of surrogate reversed on law and facts, and matter remitted to the surrogate for further disposition, without costs. 
      
       These statutes were revised in Tax Law (Laws of 1896, chap. 908) § 220, subd. 8, as amd. by Laws of 1897, chap. 284.— [Rep.
     