Sec. Trust Co. of Rochester v. State Tax Comm'n (In re Kane's Estate)

• Citation: 159 N.E. 410,246 N.Y. 498
• Parties: In re KANE'S ESTATE. SECURITY TRUST CO. OF ROCHESTER et al. v. STATE TAX COMMISSION.
• Decision Date: 06 December 1927
• Court: New York Court of Appeals

246 N.Y. 498

159 N.E. 410

In re KANE'S ESTATE. ^*SECURITY TRUST CO. OF ROCHESTER et al.

v.STATE TAX COMMISSION.

Court of Appeals of New York.

Dec. 6, 1927.

Transfer tax proceeding by the State Tax Commission against the Security Trust Company of Rochester, as administrator with the will annexed of the estate of John Kane, deceased, and others. From an order of the Appellate Division of the Supreme Court (218 App. Div. 278, 218 N. Y. S. 131), modifying, and, as modified, affirming, an order of the surrogate of Monroe county, the administrator and others appeal.

Order of Appellate Division, in so far as it modified order of surrogate, reversed, and surrogate's order affirmed.

See, also, 217 App. Div. 817, 217 N. Y. S. 918; 218 App. Div. 811, 218 N. Y. S. 787; 217 App. Div. 789,218 N. Y. S. 944.Appeal from Supreme Court, Appellate Division, Fourth Department.

Glenn L. Buck, of Rochester, for appellants.

Seth T. Cole, of Albany, and Milton E. Gibbs, of Rochester, for respondent.

CARDOZO, C. J.

John Kane was a partner in the firm of A. M. Hagen & Co., engaged in the manufacture of laundry machinery at Rochester. In February, 1908, the firm sold out to a New Jersey corporation, American Laundry Machinery Company. For his share of the partnership assets, Kane received 775 shares of common stock, of which 625 were issued in his own name and 150 in the joint names of John Kane and Zetta Kane, his wife. The shares were exchanged in 1909 for a like number of shares in a corporation of the same name organized in Ohio.

From then till 1920 the stock ownership remained the same. In that year 75 additional shares were issued to John and Zetta Kane. Eighteen shares of preferred stock were acquired in the same form. In December, 1922, the par value of the common shares was changed from $100 to $25 per share, and in January, 1923, a stock dividend upon the common shares was declared at the rate of 50 per cent. per share. By force of these changes, the equivalent of the 625 shares then held in the name of John Kane became 3,750 shares, the equivalent of the 150 shares then held in the joint names became 900, and the equivalent of the 75 shares became 450, a total of 5,100 shares. John Kane thereupon, in January, 1923, surrendered all the outstanding certificates of common stock, individual and joint, and caused a new certificate to be issued in the names of himself and Zetta Kane in exchange for the certificates surrendered. He reported to his wife the change thus made. He told her in effect that he had put the shares in the joint names to the end that upon his death they might pass to her as his survivor without will or other formalities. There is evidence that she expressed her approval of the arrangement and her understanding of the fact that, if she did not survive him, the shares would belong to him alone. There is evidence also of a promise on her part that, if she happened to be the survivor, she would give half of the shares upon her death to the children of John Kane by an earlier marriage. If this promise was made, it was merely a voluntary statement of an intention then existing. The transfer to the joint names had already been made. It was made without conditions. No promise limiting the wife's dominion in the event of her survivorship was exacted in return.

[1] John Kane, the husband, died in 1924, leaving a will by which he gave his property to his wife for life, with remainder to his children. The wife, Zetta Kane, surviving him, died in 1925. The question to be determined in this proceeding to fix the transfer tax upon the estate of the husband is whether husband and wife held the shares of stock as tenants in common, on the one hand, or as joint tenants, or with a right of survivorship analogous to that of joint tenants, on the other. If the title was of the latter order, there is a subsidiary question as to the date of its creation.

Section 220, subd. 7, of the Tax Law, as it existed at the death of John Kane, provided as follows:

‘Whenever property is held in the joint names of two or more persons, or as tenants by the entirety, or is deposited in banks or other institutions or depositaries in the joint names of two or more persons and payable to either or the survivor, upon the death of one of such persons the right of the surviving tenant by the entirety, joint tenant or joint tenants, person or persons, to the immediate ownership or possession and enjoyment of such property, shall be deemed a transfer taxable under the provisions of this chapter in the same manner as though the whole property to which such transfer relates belonged absolutely to the deceased tenant by the entirety, joint tenant or joint depositor and had been bequeathed to the surviving tenant by the entirety, joint tenant or joint tenants, person or persons, by such deceased tenant by the entirety, joint tenant or joint depositor by will; except that in the case of tenancies by the entirety the surviving tenant shall be taxable only on one-helf of the value of the property so transferred.’

We see no escape from the conclusion that in January, 1923, if not before, there accrued to Zetta Kane, in the event of her survivorship, a right of succession to all the shares of stock then standing in the joint names, unless otherwise disposed of by the husband during life. We shall consider in a moment to what extent title by survivorship might be established by force of a presumption from the form of the certificates. At this point it is enough to say that, without recourse to presumption, the existence of such a title in January, 1923, is made out, at least for the future, by declarations of intention. The wife took the whole upon the death of the husband with the shares still in the joint names.

[2][3] The question is yet to be answered whether the right of survivorship, confirmed in 1923, had any earlier existence. We have held that section 220, subd. 7, of the Tax Law, is inapplicable to joint tenancies or analogous rights existing before May 20, 1915, the date of its enactment. Matter of McKelway's Estate, 221 N. Y. 15, 116 N. E. 348, L. R. A. 1917E, 1143;Matter of Dolbeer's Estate, 226 N. Y. 623, 123 N. E. 381;Matter of Cossitt's Estate, 204 App. Div. 545, 198 N. Y. S. 560;Id., 236 N. Y. 524, 142 N. E. 268. We must therefore inquire whether at that date some of the 5,100 shares, subject to the right of survivorship since January, 1923, were already held by a like tenure. As to the 3,750 shares in the name of John Kane individually, there is no room for debate. The right of survivorship came into being as to these when the joint certificate was issued in 1923. As to the 450 shares acquired in the joint names in 1920, there is again no room for debate. Even though the title as to these was joint from the beginning, it was a title acquired after May 20, 1915, and hence subject to the statute. Matter of Cossitt's Estate, supra. Different considerations apply, however, to the remaining 900 shares, the equivalent of the 150 shares issued to husband and wife jointly in 1908. Payment for these shares was made solely by the husband. They were part of a total of 775 shares issued in return for his interest in the assets of a partnership. He caused a part of this total (i. e., 625 shares) to be made out...