State Comptroller v. Carey (In re Delano's Estate)

• Decision Date: 24 November 1903
• Parties: In re DELANO'S ESTATE. STATE COMPTROLLER v. CAREY.
• Court: New York Court of Appeals Court of Appeals

176 N.Y. 486

68 N.E. 871

In re DELANO'S ESTATE.STATE COMPTROLLER

v.CAREY.

Court of Appeals of New York.

Nov. 24, 1903.

Appeal from Supreme Court, Appellate Division, First Department.

In the matter of the appraisal under the transfer tax act of the estate of Laura A. Delano. From an order of the Appellate Division (81 N. Y. Supp. 762) which reversed an order of the surrogate's court denying a motion to dismiss a transfer tax proceeding as to certain property appointed to Arthur A. Carey, the Comptroller of the state of New York appeals. Reversed.

O'Brien and Werner, JJ., dissenting.

George M. Judd and Edward H. Fallows, for appellant.

Lucius H. Beers, for respondent.

VANN, J.

This appeal presents the question whether the Legislature is prohibited by the Constitution, state or federal, from passing an act to impose a transfer tax upon the exercise by a last will and testament of a power of appointment derived from a deed executed before the passage of any statute imposing a tax upon the right of succession to the property of a decedent. The facts out of which this question arose are as follows: On the 30th of September, 1848, William B. Astor owned a house and lot on Lafayette Place, in the city of New York, and on that day he conveyed the same to his daughter Mrs. Laura Delano for life, and upon her death without issue to her brothers and her sister Alida, or their issue, as they might then survive, per stirpes. By the same deed he conferred upon Mrs. Delano a power of appointment, to be exercised, in her discretion, by an instrument, ‘in its nature testamentary,’ in such a manner as ‘to give the said land and premises, or any share or part thereof, to and amongst her said * * * brothers and sister Alida, or their issue, in such manner and proportions as she may appoint.’ On the 6th of September, 1849, said William B. Astor transferred certificates of the public debt of the state of Ohio, amounting to $50,000, to James Gallatin and another, in trust to receive the income and apply it to the use of his daughter Laura during her life, and upon her death without issue to transfer ‘the capital of the said stock * * * to her surviving brothers and sister Alida,’ or their issue then surviving. This gift was also subject to a power of appointment created by the trust deed, whereby the said Laura was authorized ‘by any instrument duly executed as a will of personal estate to dispose of said capital into and amongst her * * * brothers, sister and their issue in such shares and proportions as she may think fit and upon such limitations, by way of trust or otherwise, as in her discretion may be lawfully devised.’ William B. Astor died on the 24th of November, 1875, about 26 years after the date of the last deed, and neither of said instruments was made by him in contemplation of death. Mrs. Delano, his daughter, died June 15, 1902, without issue, leaving a last will and testament, which has been duly admitted to probate, whereby she exercised the power of appointment contained in said deeds in favor of Arthur Astor Carey, her nephew. A proceeding was commenced before the proper surrogate to make the usual appraisal for the purpose of assessing a transfer tax upon the property transferred and appointed by the last will and testament of Mrs. Delano, and Mr. Carey was notified to appear. He appeared only for the purpose of objecting to the jurisdiction of the surrogate, from whom he procured an order requiring the executors of Mrs. Delano and the Comptroller of the state to show cause why the proceeding should not be dismissed as to him for the want of jurisdiction. The surrogate denied the motion, but upon appeal to the Appellate Division his order was reversed, and the proceeding was dismissed as to Mr. Carey. The Comptroller appealed to this court.

Article 10 of the tax law relates to taxable transfers, and embraces sections 220 to 242, inclusive (Laws 1896, pp. 868-881, c. 908). Section 220, as amended in 1897, imposes a tax upon the transfer of any property, real or personal, not only by will or intestate law, but also ‘whenever any person or corporation shall exercise a power of appointment derived from any disposition of property made either before or after the passage of this act, such appointment when made shall be deemed a transfer taxable under the provisions of this act in the same manner as though the property to which such appointment relates belonged absolutely to the donee of such power, and had been bequeathed or devised by such donee by will. * * *’ Laws 1897, p. 150, c. 284, § 220, subd. 5. The learned Appellate Division held that the statute, as amended, applied to the property in question, but that the appointee took under the deeds, and not under the will, and the attempt of the act to impose a tax upon the property under the guise of a tax upon succession was retroactive and unconstitutional.

The statute, as we read it, does not attempt to impose a tax upon property, but upon the exercise of a power of appointment. The power in this case was exercised by will, in such a way that the appointee became entitled to all the property, instead of an aliquot part. While the property came to him by deed from his grandfather, only a part of it could have reached him, but for the will of his aunt. His title to the most of it depended on the will, as well as upon the deed. He is compelled to resort to the will in order to establish his right, for the deed alone will not suffice. The privilege of making a will is not a natural or inherent right, but one which the state can grant or withhold in its discretion. If granted, it may be upon such conditions and with such limitations as the Legislature sees fit to create. The payment of a sum in gross, or of an amount measured by the value of the property affected, may be exacted, or the right may be limited to one or more kinds of property, and withdrawn as to all others. The Legislature could provide that no power of appointment should be exercised by will, or that it should be exercised only upon the payment of a gross or ratable sum for the privilege. It could exact this condition independent of the date or origin of the power. All this necessarily flows from the absolute control by the Legislature of the right to make a will. Matter of Sherman, 153 N. Y. 1, 4,46 N. E. 1032;Matter of Dows, 167 N. Y. 227, 231,60 N. E. 439, 52 L. R. A. 433, 88 Am. St. Rep. 508; Magoun v. Illinois Trust & Sav. Bank, 170 U. S. 283, 18 Sup. Ct. 594, 42 L. Ed. 1037;United States v. Perkins, 163 U. S. 625, 628, 16 Sup. Ct. 1073, 41 L. Ed. 287;Mager v. Grima, 8 How. 490, 493, 12 L. Ed. 1168.

We do not regard the question presented as open in this court, for we have recently passed upon it in two cases, each of which arose under the statute as amended in 1897....