219 A.D. 141 | N.Y. App. Div. | 1927
Lead Opinion
The question here arises over a transfer tax paid September 13, 1912, by the representatives of the estate of William Dick, who died in Brooklyn April fifth of that year. By the provisions of his will a son, J. Henry Dick, was given the life use and income of one-half the estate, the remainder being devised and bequeathed to the lawful heirs at law and next of kin of said son. The tax adjusted by the surrogate on September 6, 1912, aggregated $179,677.83. Of this the tax on the interest of the “ lawful heirs and next of kin of J. Henry Dick,” whose names or degree of relationship could not then be known, was $70,486.99 — it being assessed as a contingent future estate at the highest rate which on the happening of any contingency would be possible, under section 230 of the Tax Law, as amended by chapter 800 of the Laws of 1911. The tax in its entirety, without separation of the amount of any possible refund upon the vesting of the contingent future estate in the heirs of J. Henry Dick, was paid, less the five per cent discount, to the State Comptroller on September 13, 1912.
J. Henry Dick died September 30, 1925, leaving surviving four children as his sole heirs at law and next of kin. On April 14, 1926, one of the executrices made application to the Surrogate’s Court of Kings county for an order modifying the former decree of September 6, 1912, and thereafter a new decree was made fixing the tax on the remainders at a total of $18,759.16. The amount of refund to which the executrices were entitled from the State under that decree was $49,141.44. This was demanded. The State Tax Commission offered to pay it but refused to pay any' interest thereon as demanded by the executrices of the estate. The demand was for such interest as would have accrued if the State Comptroller had made a deposit in the proper amount to the credit of the estate in some savings bank or trust company in 1912, in accordance with -section 241 of the Tax Law, as amended by chapter 800 of the Laws of 1911. The State Comptroller had not made any such deposit to the credit of this estate when the tax was paid to him on September 13, 1912, but paid the entire
The narrow question presented here is: Was the Tax Commission legally required to pay interest?
When the relator in mandamus proceeds to argument upon his petition and the opposing affidavits of the defendant, and demands that a peremptory writ issue, the proceeding is in the nature of a demurrer to the facts set up by the defendant, and the right to the writ must be determined upon the assumption that the averments of the defendant’s affidavits are true. (People ex rel. City of Buffalo v. N. Y. C. & H. R. R. R. Co., 156 N. Y. 570, 575; Matter of Davis v. Sexton, 211 App. Div. 233, 235.) The answering affidavit of William E. Stephens, Deputy Tax Commissioner in charge of the transfer tax bureau of the State Tax Department, must be assumed to set forth the facts 'therein alleged. Such answering affidavit alleges the following facts: “ Since the Tax Law has been amended by chapter 800 of 1911, offering to taxpayers a new and different procedure for paying and adjusting taxes upon future interests, the former practice under section 230 has been pursued in many cases to which the newer procedure under section 241 is applicable also. The two courses have continued to co-exist, and one or the other has been availed of in each case of future interests as the respective taxpayer has elected.
“ Where the estate and its representatives desires to avail itself of the provisions of section 241 it is essential that its representatives seek and procure from the Surrogate making the taxing order an adjudication as to the amount of tax at the lowest possible rate, so that the Comptroller or State Tax Commission may have clear authority for withholding the difference between high and low rates from payment over to the State Treasurer, and for depositing it with a bank to the account of the estate.
“At all times since 1911 it has been common for Surrogates and representatives of estates to ignore the provisions of section 241 and to draw and accept an order fixing tax upon future interests at the highest possible rate only, and in the various counties hundreds of orders have been drawn in such cases in no one of which is
“ Where the order is drawn in contemplation of section 241 and fixes both high and low rates the total amount is allocated accordingly in the receipt and otherwise. In such cases the receipt bears upon its face a recital of receipt of the lowest amount only, and upon its reverse a receipt for the difference to be deposited, typed thereon, in the form given immediately below. This practice has been followed ever since the 1911 amendment became effective, but the earlier receipts were signed by the Comptroller instead of the State Tax Commission.:
“ ‘ Receipt is also acknowledged of the sum of............dollars ($ ) in cash, which represents the difference in tax upon the remainder estates created by the decedent’s will, assessed at the highest rate possible upon the happening of certain contingencies, amounting to $ , and at the’ sum of $ if the remainders aforesaid had vested in possession and enjoyment on the date of the appraisal, pursuant to the order of the Surrogate of County, entered 19 ; which said sum of $ , representing the difference in tax as aforesaid, had been deposited in the First National Bank, of Albany, N. Y., Book No. C in the name of the Comptroller of the State of New York, special account, Estate of , pursuant to Sec. 241 of the Tax Law.
“ ‘ STATE TAX COMMISSION,
“‘By....................
“ ‘ Deputy Tax Commissioner
“ In the case of the estate of William Dick I am informed and believe that the estate was represented upon granting of the original taxing order of September 6, 1912, and in the proceedings incidental thereto by its attorneys, Fisher & Voltz, of 84 Broadway, New York City, and I am informed and believe that they drafted the said order (a copy of which is hereto annexed and made a part hereof) but did not seek any computation of tax at the lowest possible rate as provided in section 241 as amended by chapter 800*145 of 1911, nor did they or the estate allocate or seek any allocation of the payment of $170,693.94 on September 13, 1912, between the amount of tax computed at the lowest rate and the difference available for deposit under provisions of section 241 as so amended. The Comptroller issued to them his receipt in the following form, without any endorsement upon its reverse:
“ ‘ Duplicate „ , gTAmI 0B Nbw Yobk No. S191
Comptroller’s Office
“ ‘ $170693.94 Albany, Sept. 13, 1912
“ ‘ Received from J. Henry Dick — Executor of the estate of William Dick — deceased One Hundred seventy thousand six hundred ninety three and 94/100 Dollars for Amount of transfer tax assessed and fixed thereon by the Surrogate of the County of Kings by Order entered.
“ ‘ Sealed and Sept. 6, 1912
“ 1 Countersigned less $8983.89 disct.
“ 6 (signed)
“ ‘ Comptroller of the State of New York.’
“ ‘ (signed)
(( (
“ ‘ Treasurer of the State of New York.’
“ This receipt was accepted by the estate and by its representatives without protest or objection, and they have never, until the present proceeding, sought an allocation of the amounts taxable at the lowest rate and the remainder subject to deposit under provisions of section 241, nor have they sought such deposit.
“ The entire sum of $170,693.94 so paid by the estate of William Dick was thereafter and in the year 1912 paid over by the Comptroller to the State Treasurer and in that year passed into the general funds of the State, and it is impossible to say what, if any, interest and profit has been earned and accumulated upon it. The estate of William Dick and its representatives have had no interest from it, semi-annually or otherwise, and until Mr. Cochrane’s letter of June 11, 1926, have not asked or demanded interest or profits upon any part of it.”
I have carefully reviewed the statutes and find there is much of sound reasoning by the Attorney-General in support of the practice adopted by the Comptroller at all times since the 1911 amendment became effective, when a new method of saving interest was made available to an estate by amendment of section 241 of the Tax Law. (Laws of 1911, chap. 800.) It is a matter of
But that is not all. Mandamus is unavailable in the absence of a clear legal right. Where are we going to get the money for this refund and interest? We cannot direct the Comptroller to repay principal or interest unless the statutes authorize the payment and supply the fund. The Constitution provides that no moneys shall be paid out of the treasury of the State except pursuant to an appropriation by law. (N. Y. Const. art. 3, § 21.) Chapter 144 of the Laws of 1925, in effect March 16, 1925, struck out of section 230 the provision that “ Such return of overpayment shall be made in
First. We must examine section 225 to see whether that general section for the “ Refund of tax erroneously paid ” is broad enough to apply without any reference to it in section 230. The first sentence does not apply, because it deals exclusively with debts. The second sentence is of broader application. It applies to a refund of an excess tax where, after the payment of a tax pursuant to an order fixing such tax, such order is later modified or reversed. In our case a preliminary order was later modified by the surrogate upon the vesting of the remainder. The difficulty is that section 225 limits the effect of that provision to a modifying or reversing order granted “ within two years from and after the date of entry of the order fixing the tax.” That has been the law since 1911. Fifteen years have elapsed in our case- before granting a modifying order. Therefore, our case does not come within the general provisions of section 225. If it did come within such general provisions, interest, under the express terms of that section, would be denied. If section 230 still required that return of the overpayment should be made pursuant to section 225, we might say that the intent of the Legislature was to do away with the limitation of two years for the modifying order of the surrogate set forth in section 225 as a prerequisite to a refund under the latter section. That would require the interpretation that no interest be paid. The fact is, however, that the law has been changed by strildng out that provision in section 230. My conclusion is that we must seek another remedy.
Second. Section 241 was amended by the Laws of 1921, chapter 476, section 21, by adding the following provision: “ If on account of the time or manner of payment of a tax under this article it be impossible to identify or separate the portion thereof paid on account of a contingent remainder pursuant to this section and the whole of such payment shall have been deposited in the State treasury, the portion of the tax on account of such contingent remainder to be held or deposited on account of the estate pursuant to this section shall be deemed a refund under this article, and shall be drawn, on the certificate of the Tax'Commission and approval of the Comptroller, from moneys deposited with the State Comptrol
We will not assume to direct the State Tax Commission and the Comptroller to issue a certificate in this case pursuant to section 241 of the Tax Law, as amended by the Laws of 1921, chapter 476, section 21, since the petitioners have not applied for any such certificate and it is to be assumed that the State Ta“x Commission proposed to adopt that method as its only available recourse under existing statutes when it offered to make the refund without interest.
The order should be reversed upon the law and the facts and the proceeding dismissed, with costs.
Cochrane, P. J., Van Kirk and McCann, JJ., concur.
Concurrence Opinion
I concur in the conclusion of Hinman, J., on the narrow question that the Comptroller is not liable for interest on the facts showri in this particular case. Beyond that I do not go. I think it likely that there may be liability for interest where the Comptroller has accepted a tax with knowledge that a definite portion thereof is a tax on contingent interests and the matter of determining the high and low tax is mere matter of computation. If under such circumstances he does not invest the difference between the high and low tax as provided in section 241 of the Tax Law, and the aggrieved party moves with reasonable promptness, liability may follow under familiar doctrines based on equity and justice. (People ex rel. Bank of Monroe v. Canal Comrs., 5 Den. 401; Matter of O’Berry, 179 N. Y. 285; Procter & Gamble Distributing Co. v. Sherman, 2 F. [2d] 165; People ex rel. Metropolitan Trust Co. v. Travis, 191 App. Div. 129.)
Order reversed on the law and proceeding dismissed, with costs.