In re Cole's Estate

• Decision Date: 27 February 1923
• Citation: 235 N.Y. 48,138 N.E. 733
• Parties: In re COLE'S ESTATE.
• Court: New York Court of Appeals Court of Appeals

235 N.Y. 48

138 N.E. 733

In re COLE'S ESTATE.

Court of Appeals of New York.

Feb. 27, 1923.

Proceeding by the State Tax Department to impose a transfer tax on the estate of Charles K. Cole, deceased. From an order of the Appellate Division (202 App. Div. 546,195 N. Y. Supp. 541) modifying and affirming as modified an order of the Surrogate's Court assessing a tax on the remainders in two trusts, and exempting the corpus of another, Robert A. Shaw and others, as executors and trustees under decedent's will, and plaintiff appeal.

Modified by remitting to Surrogate's Court for assessment of further tax on remainders, and otherwise affirmed.

Appeal from Supreme Court, Appellate Division, Second Department.

Schuyler C. Carlton, of New York City, and W. E. Hoysradt, of Poughkeepsie, for State Tax Department.

Frank M. Avery and Earl A. Darr, both or New York City, for executors and trustees.

McLAUGHLIN, J.

On the 27th of February, 1920, Charles K. Cole, a resident of Dutchess county, N. Y., died, leaving a will and codicil thereto which were there probated, and letters testamentary issued to the executors and trustees therein named. Prior to the making of the will the testator entered into a contract with his son Philip in and by which he gave to him, on stated conditions, the income from certain personal property during his life. The executors and trustees appeal from so much of the order of the Appellate Division as holds that certain remainders or reversions of the corpus of a trust fund created by the will for the benefit of the son Philip and the daughter Virginia are presently taxable and the state tax department appeals from so much of the order as declares that the property held under the agreement between the testator and the son Philip is free from tax.

The will provided, among other things unnecessary to be here considered:

(1) That $200,000 was given to testamentary trustees named, in trust, for the following purposes: ‘* * * To hold the same in trust and to receive the net income of said trust and to pay over the net income thereof to my said daughter, Virginia Garber Cole, for and during her natural life and upon the death of my said daughter Virginia Garber Cole to deliver and pay over the principal of said trust unto such persons and corporations and in such shares, interests and proportions as she shall in and by her last will and testament in that behalf appoint, and in case she shall leave no such valid appointment, then to her issue surviving her, according to their stocks, and in case no issue surviving her, then to her next of kin surviving her, according to their stocks.’

(2) All the rest, residue and remainder of the testator's property he gave to his testamentary trustees in trust to pay the net income ‘* * * to my son Philip Gillett Cole for and during his natural life and upon the death of my said son Philip Gillett Cole, to deliver and pay over the principal of said trust unto such persons and corporations, and in such shares, interests and proportions as he shall in and by his last will and testament in that behalfappoint, and in case he shall leave no such valid appointment, then to his issue surviving him, according to their stocks.’

By a codicil he added to the last sentence in the bequest in trust to Philip after the word ‘stocks,’ the following:

‘In case he shall leave no issue surviving him, then to his next of kin according to their stocks.’

making the ultimate disposition of the property given in trust for the benefit of the son precisely the same as that given for the benefit of the daughter.

Whether the remainders in these two trusts are presently taxable is one of the questions presented. Its solution necessarily turns upon the construction to be put upon section 220, subd. 6, of the Tax Law (Consol. Laws, c. 60), when the same is read in connection with section 230 of the same act, as amended by chapter 800 of the Laws of 1911. These two sections are, apparently, in hopeless conflict, but, when read in the light of judicial constructions placed upon them, it seems to me that each can be given full force and effect, and in such a way as not to make them inconsistent. Undoubtedly, if section 220 be considered in and by itself without reference to section 230, Tax Law (Consol. Laws, c. 60; Laws 1909, c. 62), then these remainders are not presently taxable, and a tax cannot be imposed until the power of appointment has been exercised. Matter of Burgess, 204 N. Y. 265, 97 N. E. 591;Matter of Howe's Estate, 86 App. Div. 286,83 N. Y. Supp. 825, affirmed, 176 N. Y. 570, 68 N. E. 1118. But after these decisions were made section 230 was amended (Laws 1911, c. 800; Laws 1916, c. 550) so as to seemingly change the law on that subject, so that section 230, after these changes were made, provided:

‘* * * When property is transferred in trust or otherwise, and the rights, interest or estates of the transferees are dependent upon contingencies or conditions whereby they may be wholly or in part created, defeated, extended or abridged, a tax shall be imposed upon said transfer at the highest rate which, on the happening of any of the said contingencies or conditions, would be possible under the provisions of this article, and such tax so imposed shall be due and payable forthwith by the executors or trustees out of the property transferred, and the surrogate shall enter a temporary order determining the amount of said tax in accordance with this provision; provided, however, that on the happening of any contingency whereby the said property, or any part thereof, is transferred to a person or corporation exempt from taxation under the provisions of this article, or to any person taxable at a rate less than the rate imposed and paid, such person or corporation shall be entitled to a return of so much of the tax imposed and paid as is the difference between the amount paid and the amount which said person or corporation should pay under the provisions of this article. * * *’

[1] When this statute was enacted the Legislature must be presumed to have known what construction had theretofore been put upon the statutes by the courts; in other words, it was charged with knowledge of certain legal principles in framing the statute. The general rule, as I understand it, is that, when the Legislature amends or enacts anew a statute, it will be assumed that it had full knowledge of all the judicial decisions theretofore made interpreting the statute as then existing, and, that being so, the new enactment must be read in the light of such previous interpretation. Orinoco Realty Co. v. Bandler, 233 N. Y. 24, 134 N. E. 823;Komada & Co. v. United States, 215 U. S. 392, 30 Sup. Ct. 136, 54 L. Ed. 249;Caesar v....