Neilson v. Russell

• Decision Date: 16 November 1908
• Citation: 71 A. 286,76 N.J.L. 656
• Parties: NEILSON et al. v. RUSSELL, Surrogate, et al.
• Court: New Jersey Supreme Court

71 A. 286

76 N.J.L. 656

NEILSON et al.

v. RUSSELL, Surrogate, et al.

Court of Errors and Appeals of New Jersey.

Nov. 16, 1908.

(Syllabus by the Court.)

Error to Supreme Court.

Action by Alfred Neilson and others, executors, against George E. Russell, surrogate, and others. Judgment for defendants, and plaintiffs bring error. Reversed.

See, also, 69 Atl. 476.

Frank R. Lawrence, Joseph Coult, and John W. Griggs (William A. Smith and Frank Lawrence, on the brief), for plaintiffs in error.

Theodore Backes and Robert H. McCarter, Atty. Gen., for defendants in error.

SWAYZE, J. In a case like this the temptation is strong to pass an opinion upon the fundamental and important questions which were exhaustively discussed at the bar, and in the able opinion of the Supreme Court. We prefer, however, to confine our discussion to the exact point presented by the case, which we think is the much narrower one of the proper interpretation of the statute. For that purpose we assume that shares of stock in a New Jersey corporation have a situs in this state, and that succession thereto or transfer thereof may be taxed by our Legislature, and that the tax imposed by the act of May 15, 1894 (P. L. p. 318) is either a legacy or a succession tax and not a property tax, and therefore not in conflict with our constitutional provision. The question we have to decide is then simply whether the statute reaches the present case.

An examination of the act shows that it imposes a tax (1) upon all property which passes by will or the intestate laws of this state from any person who may die seised or possessed of the same while being a resident of the state; (2) upon all property which shall be within this state which shall be transferred by inheritance, distribution, bequest, devise, deed, grant, sale, or gift made or intended to take effect in possession or enjoyment after the death of the intestate, testator, grantor, or bargainor. The first class obviously affects the succession of residents of this state only. If the present tax is to be sustained, it must be because the succession sought to be taxed comes within the second class.

Our act was modeled after the New York act of 1885 (Laws 1885, p. 820, c. 483, § 1); and, if we had made no change in that act, we should be held upon well-settled principles to have adopted with the act the construction previously placed thereon by the New York courts in the case of Enston's Will, In re, 113 N. Y. 174, 21 N. E. 87, 3 L. R. A. 404. In fact, however, we modified the language of the New York act by inserting at the beginning of the clause the words "all property" in place of the mere relative "which" and by adding the words "inheritance, distribution, bequest, devise." We are not therefore concluded by that decision.

It is clear that the Legislature did not intend to tax all successions of nonresidents. If it had meant that, it would have taxed all property within this state which should be transferred from a decedent by will or intestacy. (We disregard as quite inapplicable to the present case transfers by deed, grant, sale, or gift intended to take effect after death.) Instead of using this general language which was naturally suggested by the use of the words "by will or by the intestate laws of this state," employed in the previous clause, the act limits the taxation upon transfers of the property of nonresidents to transfers by inheritance, distribution, bequest, or devise. The words "inheritance" and "distribution" are apt and proper words to designate the succession of an heir or next of kin; the words "bequest" and "devise," that of a legatee or devisee. The only one applicable to the present case is "bequest." What is to be taxed, therefore, as far as the present case is concerned, is a transfer by bequest from Mills to his legatees, or, to use the language of Mr. Justice Holmes in Blackstone v. Miller, 188 U. S. 189, 207, 23 Sup. Ct. 277, 47 L. Ed. 439, it is the singular succession of the legatee, not the universal succession of the executors. That this is the true construction of the act is indicated further by the provisions of section 6 (Gen. St. 1895, p. 3341, par. 208) authorizing the executors to deduct the tax from the legacy or property for distribution. The tax is not a general charge against the estate, but a charge upon the legacies. Wyckoff v. O'Neil (N. J. Err. & App.) 67 Atl. 32. Section 10 authorizes a refund of taxes where the legatee has been obliged to refund part of this legacy to pay debts proven after distribution. Although there seems to be no provision in the statute authorizing the deduction of debts in making the appraisement we can hardly doubt in the face of section 10 that such a deduction ought to be made. It has never been thought that an insolvent estate was liable to this tax, although no machinery can be provided in this state by which the fact of solvency or insolvency can be ascertained. Such machinery is unnecessary if it is only the value of the legacy that is to be ascertained. These considerations persuade us that it is the legacy that is taxed, and not the estate. The question recurs whether the succession of the legatees in the present case was meant to be taxed.

This succession is a succession under English law by which the validity and amount of the bequest must be determined. Jenkins v. Guarantee Trust & Safe Deposit Co., 53 N. J. Eq. 194, 32 Atl. 208. By that law, as well as by our own, the title to a legacy is not complete and perfect until the executor has assented (2 Williams on Executors, 1372, 1373), and he ought not to assent until creditors are satisfied. This assent must of necessity be the assent of the executors at the domicile. They alone can ascertain whether the estate is solvent or insolvent, and it is only upon a settlement of their accounts that it can be determined whether the legatee will actually...