Winthrop Astor Chanler v. Otto Kelsey

• Decision Date: 15 April 1907
• Docket Number: No. 240,240
• Citation: 205 U.S. 466,27 S.Ct. 550,51 L.Ed. 882
• Parties: WINTHROP ASTOR CHANLER, Thomas T. Sherman, as Committee for John Armstrong Chanler, et al., Plffs. in Err., v. OTTO KELSEY, Comptroller of the State of New York
• Court: U.S. Supreme Court

205 U.S. 466

27 S.Ct. 550

51 L.Ed. 882

WINTHROP ASTOR CHANLER, Thomas T. Sherman, as Committee for John Armstrong Chanler, et al., Plffs. in Err.,

v OTTO KELSEY, Comptroller of the State of New York.

No. 240.

Argued March 14, 1907.

Decided April 15, 1907.

Statement by Mr. Justice Day:

This is a writ of error to the surrogates' court of the county of New York, state of New York, but its real purpose is to review a decision of the court of appeals of the state, sustaining an order of the surrogates' court, which imposed a transfer tax upon certain estates arising under appointment by Laura Astor Delano, deceased. 176 N. Y. 486, 64 L.R.A. 279, 68 N. E. 871.

Laura Astor Delano was the daughter of William B. Astor. Upon the occasion of her marriage, in 1844, to Frank H. Delano, Mr. Astor executed a deed in the nature of a marriage settlement, conveying certain real and personal property to trustees in trust to pay the income to said Laura Delano for life, with remainder to her issue in fee, or, in default of issue, to her heirs in fee; and giving her power, in her discretion, to appoint the remainder 'amongst her said issue or heirs, in such manner and proportions as she may appoint by instrument in its nature testamentary, to be acknowledged by her as a deed, and in the presence of two witnesses, or published by her as a will.'

In the years 1848, 1849, and 1865 William B. Astor made other deeds, by way of addition to the original marriage settlement, substantially similar in their terms. That of 1848 conveyed certain real estate to Mrs. Delano for life, with power of appointment as to said premises, or any part thereof, 'to and among her said issue, brothers, sister Alida, or their issue, in such manner and proportions as she may appoint by instrument in its nature testamentary, to be acknowledged by her as a deed in the presence of two witnesses, or acknowledged by her as a will.' The deed of 1849 conveyed to trustees certificates for $50,000 of the public debt of Ohio; 'to hold the same in trust for the benefit of Laura Astor Delano during her life, and at her death to transfer and convey the capital of the said stock to her issue; but, in case she left no issue, then to her surviving brothers and sister Alida and to the issue of any of them who died leaving issue; and said instrument contained a power of appointment to Laura Astor Delano as follows: 'Provided, however, that it shall be lawful for the said Laura, by any instrument executed duly as a will of personal estate, to dispose of the said capital unto and amongst her issue, 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." These deeds were absolutely irrevocable, took effect upon delivery, and were not made in contemplation of the death of the grantor.

Laura A. Delano died June 15, 1902, in Geneva, Switzerland, leaving no descendants. By her last will and testament, duly admitted to probate in the county of New York on October 14, 1902, she exercised the power of appointment conferred in the deeds from her father in favor of the plaintiffs in error.

One of the plaintiffs in error, Arthur Astor Carey, a grandson of William B. Astor, and an appointee to whom Mrs. Delano had appointed the property originally conveyed by the deeds of 1848 and 1849, took an appeal from the order of the surrogates' court refusing to dismiss the petition to the appellate division of the supreme court, where it was held that the act under which the tax was imposed, as applied to this case, was unconstitutional. Re Delano, 82 App. Div. 147, 81 N. Y. Supp. 762. The state comptroller appealed to the court of appeals from the decision of the appellate division.

That court sustained the right to impose the transfer tax upon the interests appointed by Mrs. Delano under the powers created by the deeds above referred to. Subsequent decisions were made pro forma and a final order on the last remittitur of the court of appeals was made in the surrogates' court, and the case brought here by all the plaintiffs in error.

Mr. Lucius H. Beers for plaintiffs in error.

[Argument of Counsel from pages 468-470 intentionally omitted] Mr. David B. Hill for defendant in error.

Mr. Justice Day delivered the opinion of the court:

The tax in controversy was imposed under an amendment of the general transfer-tax law of the state of New York, chapter 284, Laws of 1897, which provides as follows:

'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; and whenever any person or corporation possessing such a power of appointment so derived shall omit or fail to exercise the same within the time provided therefor, in whole or in part, a transfer taxable under the provisions of this act shall be deemed to take place to the extent of such omissions or failure, in the same manner as though the persons or corporations thereby becoming entitled to the possession or enjoyment of the property to which such power related had succeeded thereto by a will of the donee of the power failing to exercise such power, taking effect at the time of such omission or failure.'

The validity of this tax was attacked in the courts of New York upon objections pertaining to both the Federal and state Constitutions. The latter are not open here, and we shall consider the case only so far as it relates to the objections made to the validity of this statute by reason of alleged violations of the Federal Constitution. These are: First, that by the imposition of the tax the property of the beneficiaries is taken without due process of law, in violation of the 14th Amendment; and, second, that such taxation violates the obligation of a contract within the protection of § 10 of article 1 of the Federal Constitution.

The objection that the property is taken without due process of law is based upon the argument that the estate in remainder was derived from the deeds of William B. Astor, and not under the power of appointment received from those deeds by Mrs. Laura A. Delano. In support of this contention, common-law authorities are cited to the proposition that an estate created by the execution of a power takes effect in the same manner as if it had been created by the deed which raised the power; that the beneficiary takes, not under the execution of the power by the donee, but by authority and under grant from the grantor, in like manner as if the power and the instrument which created it had been incorporated into one instrument. 4 Kent, Com. 327; 2 Washb. Real Prop. 320. The argument is that the estate which arose by the exercise of the power came from William B. Astor, and not from Laura A. Delano, and was vested long before the passage of the amendment of 1897, under the authority of which the tax was imposed, and to tax the exercise of the power therefore takes property without due process of law.

However technically correct it may be to say that the estate came from the donor, and not from the donee, of the power, it is self-evident that it was only upon the exercise of the power that the estate in the plaintiffs in error became complete. Without the exercise of the power of appointment the estates in remainder would have gone to all in the class named in the deeds of William B. Astor. By the exercise of this power some were devested of their estates and the same were vested in others. It may be that the donee had no interest in the estate as owner, but it took her act of appointment to finally transfer the estate to some of the class and take it from others.

Notwithstanding the common-law rule that estates created by the execution of a power take effect as if created by the original deed, for some purposes the execution of the power is considered the source of title. It is so within the purpose of the registration acts. A person deriving title under an appointment is considered as claiming under the donee within the meaning of a covenant for quiet enjoyment. 2 Sugden, Powers, 3d ed. 19.

'So, on an issue to try whether the plaintiff was entitled by two writings, or any other, purporting a will of J. S., and the evidence was of a feoffment to the use of such person as J. S. should appoint by his will, in which case it was contended that the devisees were in by the feoffment, and not by the will, the court held that this was only fictione juris, for that they were not in without the will, and therefore that was the principal part of the title, and such proof was good enough and pursuant to the issue, and a verdict was accordingly given for the plaintiff.' Sugden on Powers, vol. 2, p. 19, citing Bartlet v. Ramsden, 1 Keble, 570.

So, in the present case, the plaintiffs in error are not in without the exercise of the power by the will of Mrs. Delano.

By statute in England, for the purposes of taxation, it has been provided that the donee of the power shall be regarded, in case of a general power, as the one from whom the estate came. In Atty. Gen. v. Upton, L. R. 1 Exch. 224, the court of exchequer had under consideration the succession duty act (16, 17 Vict. chap. 51), and it was held that the appointee under a general power of appointment, taking effect on the death happening since the commencement of the act, takes succession from the donee of the power. The testator, Admiral Fanshawe, by will devised certain lands to the use of his wife, Caroline Fanshawe, for life, remainder to such use as she should by deed or will appoint, and, in default of appointment, for the use and benefit...