
    In the Matter of the Transfer Tax upon the Estate of Sarah M. Althause, Deceased. Walton C. Althause, Administrator, etc., of Sarah M. Althause, Deceased, and Others, Appellants; Bird S. Coler, Comptroller of the City of New York, Respondent.
    
      A tenant’s leasehold interest in land is personal property, and is taxable under thee Transfer Tax Act,
    
    A tenant’s leasehold interest in land is personal property within the meaning of section 321 of the Tax' Law (Laws of 1896, chap. 908), which provides that transfers to children of a decedent shall be exempt from the transfer tax unless the subject thereof is “ personal property of the value of ten thousand dollars or more,” notwithstanding that buildings erected by the tenant and reserved to him by the lease may be assessed against such tenant as land under the Tax Law,
    Ingraham and O’Brien, JJ., dissented.
    Appeal by Walton C. Althause, administrator, etc., of Sarah Ml Althause, deceased, and others, from an order of the Surrogate’s Court of the' county of New York, entered in the office of said Surrogate’s. Court on the 9th day of March, 1901, affirming a previous order of said court entered on the 5th day of December, 1900, which confirmed the report of an appraiser appointed under the Transfer Tax Law.
    
      Lemuel Skidmore, for the appellants.
    
      Edward H. Fallows, for the respondent.
   Laughlin, J,:

The decedent died intestate on the 6th day of March, 1900. Letters of' administration were duly issued, and on the 22d day of October thereafter an appraiser was appointed to fix the fair market value, at the time of the transfer, of her estate, subject to the payment of any taxes imposed by article 10 of chapter 908 of the Laws of 1896, and the acts amendatory thereof and supplemental thereto. The report of the appraiser, which was filed on the 20th day of November, 1900, showed a net personal estate of $18,369.03, and that decedent left as her only heirs at law and next of kin five children. The first order of the surrogate confirming the report of the appraiser and fixing the cash value of the interest of each of the next of kin and assessing the tax thereon was entered pro forma. The second order of confirmation was made after a hearing following notice of the entry of the first order. The appraiser included in the personal estate an item of $12,000 as the value of a leasehold interest in premises No. 66 West Forty-ninth street held by decedent at the time of her death. The lease was made by the trustees of Columbia College and grants a term of twenty-one years from November 1, 1887, and provides that at the expiration of the term the lessor will either pay the value of any buildings erected on the premises, to ■ be ascertained as therein provided, or, at the option of the lessee, grant a new lease for a further term of twenty-one years. There is also provision for a third renewal for the same length of time. The annual rent reserved was $747 and the lessee also covenanted to pay all taxes, ordinary and extraordinary.

The appellants insist that this leasehold interest was not personal property within the intent and meaning of section 221 of the Tax Law (Laws of 1896, chap. 908), and, therefore, was exempt from the transfer tax. This is the only question presented for our determination.

• At the time of the enactment of the Transfer Tax Law, all property was taxable except that which Was specially exempted. It is true that buildings erected by a tenant, provided they are reserved to him by the lease, may be assessed against him as land under the Tax Law. (People ex rel. Muller v. Board of Assessors, 93 H. T. 308; People ex rel. International Navigation Oompcmy v. Bailer, 153 id.. 98.) The value of improvements made by a tenant is not necessarily or ordinarily the full value of the lease,, and this line of authorities stops far short of holding that for all purposes of taxation a leasehold is real property. It is the building and not the lease or the value of the lease that is .taxed as land. It is urged that the purpose of the Transfer Tax Law was to reach personal' property that escapes- taxation from year to year and that it was not intended to extend to leasehold interests on which the buildings are taxed as real property. This may be conceded, but it was also the purpose of the Legislature to impose a collateral inheritance tax upon lands with exemptions in certain cases. It was undoubtedly competent for the Legislature to classify leasehold interests as personal property for the purposes of assessing the transfer tax. It remains to be seen whether the language of the statute indicates that such was the intent of the lawmakers.

Prior to the enactment of the Tax Law (Laws of 1896, chap. 908) the Transfer Tax Law was a separate statute (Laws of 1892, chap. 399) and. was held not to be in parri materia with the general tax laws and, therefore, not subject to the exemptions contained therein. (Matter of Knoedler, 140 N. Y. 378.) The Collateral Inheritance Statute was transferred bodily to article 10 of the Tax Law. Subdivision 3 of section 2 of the Tax Law, as amended by chapter 712 of the Laws of 1899, provides that “ the terms 1 land,’ ‘ real estate ’ and real property,’ as used in this chapter, include the land itself above and under water, all buildings and other articles and structures,” etc., erected on it. This is the language that was held to permit the assessment of the buildings reserved to a tenant as land in the eases cited. It is urged that it is exclusive as well as inclusive and characterizes the entire leasehold in question as real property and brings it within the exemptions of sectidn 221 of the act. Subdivision 4, section 2, article 1 of the Tax Law declares that the term “ personal estate,” as used in that chapter, includes chattels, money, things in action, debts due from solvent debtors, whether on account, contract, note, bond or mortgage; debts and obligations for the payment of money due or owing to persons residing within this state, however secured or wherever such securities shall be held; debts due by inhabitants of this state to persons not residing within the United States for the purchase of any real estate, public stocks, stocks in moneyed corporations and such portion of the capital of incorporated companies liable to taxation on their capital as shall not be invested in real estate.”

Leases for years have a definite legal character as chattels. Although called estates in land they have none of its characteristics. Originally the only remedy for ouster was an action for damages. They did not formerly, nor do they now, pass to the heir, but to the personal representative. In the absence of statute they may be transferred without any of the formalities required for the conveyance of realty. (Bouv. L. Dict. [Rawle’s Rev.] ; 2 Black. Com. *142, *386; 3 id. *158 ; Code Civ. Proc. § 2712.) Formerly the terms “ lands, tenements and hereditaments,” which included freehold estates of inheritance and not of inheritance, and “ chattels,” which included chattels real and chattels personal, were employed. (Bouv. L. Diet. [Rawle’s Rev.] ; 2 Black. Com. *104, *120, *386.) The term “ real property ” is now commonly employed in statutes instead of lands, tenements and hereditaments; ” ■ and the term personal property ” is now used to designate chattels and every species of property which is not real estate. (Laws of 1892, chap. 677, §§ 2, 3, 4, being the Stat. Const. Law; Laws of 1896, chap. 547, § 1, being the Real Prop. Law.)

The Tax Law does not in terms designate leaseholds as real property, and this should not be read into the statute merely because buildings, reserved to a tenant, may be included within the statutory definition of real estate therein given. On the other hand, the Legislature has in subdivision 4 of section 2,' which defines personal property, used the word chattels ” in its generic sense as included in the term personal property,” and section 3 of the act declares that all property, real and personal, is taxable unless exempted. Section 220 of the Tax Law declares that a tax is “ imposed upon the transfer ” by intestate succession, among other ways, of any property, real or personal, of the value of five hundred dollars or over,” etc., and it matters not whether the property itself was or was not taxable. Section 221 exempts transfers to children, among others, except “ personal property of the value of ten thousand dollars or more.” It being expressly declared that personal property, ás specified in the Tax Law,- includes chattels, and this leasehold, being a chattel and not specially exempted, is taxable.

The Legislature was providing in this article for transfers both by will and by intestacy. All personal property,, including leaseholds, must pass through the medium of administration, and this lease .passes to the children of decedent as the next of kin and must first go into the hands of the administrator to meet the decedent’s debts and obligations, if any. (Code Civ. Proc. § 2712.) Real estate on the other hand passes directly to the heir or devisee. The collateral inheritance tax is not levied upon the real and personal property of the decedent’s estate as such, but," with certain exceptions, upon each particular portion or share of such estate passing to each of his heirs, devisees or next of kin. In the absence, therefore, of appropriate language indicating a different intent, it is reasonable to suppose that the Legislature in classifying property for the purpose of the transfer tax intended no material departure from the statutes of descent and distribution. The proper construction in the application of this statute is to allow no exemption which does not come fairly within the letter of the express exceptions therein contained. (Matter of Baileis, 144 N. Y. 132 ; Matter of Prime, 136 id. 347.) This, .as has been seen, the leasehold in question does not do. -

Therefore, the order appealed from should be affirmed, with costs to the respondent payable out of the estate.

"Van .Brunt, P. J., concurred; Patterson, J., concurred in result; Ingraham and O’Brien, JJ., dissented.

Order affirmed, with costs, to respondent payable out of the estate.  