Matter of James

• Decision Date: 09 May 1950
• Citation: 199 Misc. 44
• Parties: In the Matter of the Construction of The Will of Arthur C. James, Deceased.
• Court: New York Surrogate Court

199 Misc. 44

In the Matter of the Construction of The Will of Arthur C. James, Deceased.

May 9, 1950.

Reese D. Alsop for James H. Larson, as executor of Maud P. Larson, deceased, petitioner.

Pandia C. Ralli for United States Trust Company of New York, as trustee under the will of Arthur C. James, deceased, respondent.

William G. Chambers and Archibald H. Cashion for James Foundation of New York, Inc., and others, respondents.

FRANKENTHALER, S.

The court is asked to determine whether the will of the testator contains a direction that estate taxes are not to be apportioned against an inter vivos trust fund. A preliminary question is raised respecting the admissibility of evidence of extrinsic facts in aid of construction. Both questions have been submitted to the court.

The testator died on June 4, 1941, leaving a will dated August 6, 1931, and two codicils. On April 23, 1915 — many years before the execution of his will — the testator and his wife created a trust for Maud P. Larson, who was one of the sisters of Mrs. James. That trust has now been taxed in the estate of Mr. James. Mrs. Larson received a part of the fund after the death of the testator, the balance being held by the trustee of the inter vivos trust to satisfy estate taxes that might properly be allocated against the fund. Petitioner is executor under the will of Maud P. Larson, now deceased.

The testator made four express references to estate taxes. In the first paragraph of his will he directed payment of debts, expenses and "also of all taxes on the legacies and devises herein." The tenth paragraph of the first codicil related only to gifts of cash made in the will and codicil and it directed that "all estate, inheritance and transfer taxes upon such legacies be paid from my residuary estate, so that said legacies may be received by the beneficiaries thereof, so far as may be lawful, tax free." It is conceded that these directions can have no application to property passing outside the will. The thirteenth and fourteenth paragraphs of this codicil are parallel provisions for two different groups of beneficiaries. The thirteenth paragraph reads as follows: "In the event that my wife, Harriet Parsons James, shall predecease me * * * I direct that my executors and trustees, hereinafter named, set aside in monies, securities or property, * * * an amount equal to one-tenth (1/10th) of my residuary estate, as determined after payment of all legacies and bequests provided by the Third, Fourth, Fifth and Seventh paragraphs of my said will as amended by this codicil, and the legacies provided by the Second and Ninth paragraphs of this codicil to my said will, and of all debts, expenses of administration, taxes (including any estate, inheritance and transfer taxes paid on account of legacies and bequests pursuant to Paragraph Tenth of this codicil to my will), and like charges, and pay over or transfer the same to the personal representatives of my said wife, Harriet Parsons James, in order that the same may be distributed under her last will and testament, and as a part of her personal estate." In the petitioner's construction, the words emphasized above are read together so that the paragraph disposes of "an amount * * * determined after payment * * * of all * * * taxes * * * and like charges."

The fourteenth paragraph of the first codicil is for the benefit of the testator's own blood relatives. It comprised another one tenth of the so-called formula residue and the text emphasized above is repeated verbatim. The shares of these two groups are referred to as portions of a formula residue because each such share is something very different from a like fraction of the true residuary estate. The testator's formula specifically excluded certain property and specified the deductions to be made. (See Matter of James, 189 Misc. 24, 28.) The will does not contain any express disposition of the remaining eight tenths of that theoretical fund. The fifteenth paragraph of the codicil disposed of the actual residuary estate.

It should be noted at the outset that neither the thirteenth nor fourteenth paragraphs contain any direction to pay "taxes * * * and like charges." The true residuary clause makes no reference of any kind to taxes. Had the testator directed his executors to pay "all * * * taxes" and had he then given to the residuary legatee only what remained after payment of all taxes, petitioner's argument might rest upon a solid foundation. The testator, however, made no such direction. It is true that the formula residue was created on a basis which took into account all estate taxes paid by the executors, but the formula residue was not an actual fund that was separately carved out and disposed of completely and separately. It must be understood that what the testator was attempting in the thirteenth and fourteenth paragraphs was the admeasurement...