In re Dow's Estate

• Decision Date: 17 May 1901
• Citation: 60 N.E. 439,167 N.Y. 227
• Parties: In re DOWS' ESTATE.
• Court: New York Court of Appeals Court of Appeals

167 N.Y. 227

60 N.E. 439

In re DOWS' ESTATE.

Court of Appeals of New York.

May 17, 1901.

Appeal from supreme court, appellate division, First department.

In the matter of the transfer tax on the estate of David Dows. From an order of the appellate division affirming an order of the surrogate at the suit of the comptroller of the state of New York and others, imposing a transfer tax, Alexander E. Orr and others, executors of decedent, appeal. Affirmed.Horace E. Deming and Julius Henry Cohen, for appellants.

Jabish Holmes, Jr., and Joseph W. Middlebrook, for respondents.

CULLEN, J.

David Dows, Sr., died March 30, 1880, leaving as a part of his estate a valuable piece of real property, which he devised to his trustees in trust to pay the income to his son, David Dows, Jr., during life, ‘and upon the death of my said son the said property, with all accumulations of interest, income, and profits, shall vest absolutely and at once in such of his children him surviving, and the issue of his deceased children, as he may by his last will and testament designate and appoint, and in such manner and upon such terms as he may legally impose. But, in case my said son, David Dows, Jr., die intestate, then said property, with all accumulations of interest, income, and profits, shall vest absolutely and at once in his children him surviving, share and share alike, and the issue of his deceased children (such issue to take, share and share alike, the portion which the parent would have received if living), to be paid to them at the times and in the proportion following, to wit.’ A similar devise was made of a share of the testator's residuary estate. The will gave the trustees a power of sale over the real property, which was exercised during the life of David Dows, Jr., and a large portion of the proceeds invested in the stocks of corporations. David Dows, Jr., died January 13, 1899, leaving a last will and testament, by which he exercised the power of appointment given him by the will of his father in favor of his three sons. By his will he gave to each of his sons the income of three undivided forty-eighths till his son Robert attained the age of 21 years, or sooner died, of four forty-eighths until Robert attained 25 years, or sooner died, and nine forty-eighths until Robert attained 30 years, or sooner died. Thus each son was given the income of sixteen forty-eighths, or one-third, of the property. At the termination of these life estates the principal was given to another son. That is to say, to B. was given the principal of the share, the income of which A. had been receiving, to C. the principal of what had been B.'s share, and to A. the principal of C.'s share. In result each son receives one-third of the property absolutely, for the will provides ‘that each interest for life or remainder shall vest absolutely and at once upon my death, in legal, and not equitable, ownership, and without contingency.’ But each son, instead of being given the remainder in his own share after Robert arrives at the age of 30 years, is given the remainder in another son's share, though the shares are exactly equal. The learned surrogate imposed a tax on the property passing under this power of appointment both on the life estates and on the remainders. His order was affirmed by the appellate division and an appeal has been taken to this court.

The first objection raised to the order of the surrogate's court is that the tax imposed under the amendment of April 16, 1897 (Laws 1897, c. 284), to the taxable transfer act of 1896, upon transfers made under a power of appointment, is a tax on property, and not on the right of succession, and that, therefore, so much of the fund as was invested in incorporated companies liable to taxation on their own capital, and in certain bonds of the state of New York and bonds of the city of New York exempt from taxation by statute, was not subject to the tax. On this question we are concluded by the previous decisions of this court (In re Vanderbilt's Estate, 163 N. Y. 597, 57 N. E. 1127, affirmed on opinion of Justice Patterson below in 50 App. Div., at page 246,63 N. Y. Supp. 1079; same case decided without opinion, 166 N. Y. 640, 60 N. E. 1121), and little need be now said thereon. The theory on which taxation on the devolution of estates at the death of their owners is based and its validity upheld, even in cases where the state seeks to reach United States securities, is clearly established, not only by our own decisions (In re Swift, 137 N. Y. 77, 32 N. E. 1096,18 L. R. A. 709;In re Sherman's Estate, 153 N. Y. 1, 46 N. E. 1032), but by those of the supreme court of the United States (Magoun v. Bank, 170 U. S. 283, 18 Sup. Ct. 594, 42 L. Ed. 1037;Plummer v. Coler, 178 U. S. 115;Murdock v. Ward, 178 U. S. 139, 20 Sup. Ct. 775, 44 L. Ed. 1009). In Magoun v. Bank it is said of such taxes: ‘They are based on two principles: (4) An inheritance tax is not one on property, but one on the succession. (2) The right to take property by devise or descent is the creature of the law, and not a natural right,-a privilege; and therefore the authority which confers it may impose conditions upon it. From these principles it is deduced that the states may tax the privilegé, discriminate between relatives and between these and strangers, and grant exemptions, and are not precluded from this power by the provisions of the respective state constitutions requiring uniformity and equality of taxation.’ The same doctrine was again asserted in Knowlton v. Moore, 178 U. S. 41, 20 Sup. Ct. 747, 44 L. Ed. 969. It is insisted, however, that the title of the present owners is deduced from the will of David Dows, Sr., and not from that of his son, David Dows, Jr., and in support of this claim are cited the cases of Genet v. Hunt, 113 N. Y. 158, 21 N. E. 91, and In re Harbeck, 161 N. Y. 211, 55 N. E. 850. The proposition is doubtless true to a certain extent. For the purpose of determining whether the execution of a power is in contravention of the statute of perpetuities the estate created under such power must be referred back to the instrument granting the power. This is settled law, and was so held in Genet v. Hunt, supra. Any other rule would permit the evasion of the statute against perpetuities by the grant of powers. The decision in Re Harbeck, supra, proceeded on the ground that at the...