Midurban Realty Corp. v. F. Dee & L. Realty Corp.

• Decision Date: 14 February 1928
• Citation: 160 N.E. 380,247 N.Y. 307
• Court: New York Court of Appeals Court of Appeals
• Parties: MIDURBAN REALTY CORPORATION v. F. DEE & L. REALTY CORPORATION.

247 N.Y. 307

160 N.E. 380

MIDURBAN REALTY CORPORATION

v.F. DEE & L. REALTY CORPORATION.

Court of Appeals of New York.

Feb. 14, 1928.

Suit by the Midurban Realty Corporation against F. Dee & L. Realty Corporation. Judgment of Special Term in plaintiff's favor was affirmed by the Appellate Division (220 App. Div. 814, 222 N. Y. S. 601), and defendant appeals.

Affirmed.

Appeal from Supreme Court, Appellate Division, First department.

Alexander Pfeiffer, Louis H. Samuels and Benjamin Weiss, all of New York City, for appellant.

Jay Leo Rothschild and Louis Rivkin, both of New York City, for respondent.

O'BRIEN, J.

The parties entered into a contract for the sale of real property known as No. 306 Fifth avenue in New York City. The terms of the agreement provided that defendant would convey a marketable title, and that all sums paid by plaintiff on account of the contract were to become liens on the premises. When the contract was signed, plaintiff made a payment of $5,000, but later refused to take title, and demanded the return of its deposit. At the time appointed for completion of the sale, an unfixed transfer tax on the estate of Emily A. Watson, a former owner, constituted, as urged by plaintiff, a lien which rendered the property unmarketable. Judgment has been awarded in favor of plaintiff declaring the sum of $5,000 paid by it a lien upon the premises.

[1][2] The estate of Miss Watson, who died February 1, 1924, amounted to more than $12,000,000, of which only $250,000 was invested in realty. About $10,500,000 was bequeathed in legacies. The property at 306 Fifth avenue was appraised at $200,000, and, as part of the residuary estate, was devised in trust to the United States Trust Company as trustee. It was conveyed on April 7, 1925, by the executors, upon whom the will conferred that power, to 712 Holding Corporation. This conveyance was valid. Crittertden v. Fairchild, 41 N. Y. 289. On the same day the property was conveyed by that corporation to defendant. The date for closing of title by the parties at bar had been appointed as June 30, 1925. At that time no transfer tax on the Watson estate had been fixed, but, on July 28, 1924, in anticipation, $728,223.81 had been deposited by the executors. On July 1, 1925, the surrogate made an order assessing the tax, and on December 11, 1925, made another reducing it as originally assessed. The second order finally fixed the tax at $722,274.79, and on January 29, 1926, the state refunded $5,949.02, the excess deposited on July 28, 1924, in anticipation of the assessment. The result is that on June 30, 1925, the date of closing, although the tax was then unfixed, more than enough to pay it had been deposited. The parties could not, however, know on that date whether the tax as finally fixed would exceed the deposit. Pursuant to section 222 of the Tax Law (Consol. Laws, c. 60), the tax was due and payable as of the death of Miss Watson February1, 1924. Matter of Penfold's Estate, 216 N. Y. 163, 167,110 N. E. 497, Ann. Cas. 1916A, 783.

Section 224 of the Tax Law enacts that ‘Every such tax shall be and remain a lien upon the property transferred until paid,’ and makes executors, administrators, and trustees personally liable for the tax until its payment. The same section authorizes such representatives to sell property to enable them to pay the transfer tax. This provision obviously has no application here, because no evidence indicates that the sale of 306 Fifth avenue was effected for any such purpose. Section 224 includes additional directions to executors, administrators, and trustees in relation to their duties respecting delivery of specific legacies and payment of the tax on such transfer. These directions do not apply. No real property, except the homestead at White Plains, was specifically devised, nor was any legacy charged upon or payable out of real property.

Smith v. Browning, 225 N. Y. 358, 122 N. E. 217, cited by both parties,...