49 A.D. 541 | N.Y. App. Div. | 1900
Lead Opinion
The sole question presented by this appeal is, were the gifts made by the decedent to his three children, aggregating $1,500,000, made in contemplation of death, within the meaning of the statute ?
Chapter 399 of the Laws of 1892, which was in force when the first gift in question was made, provides:
“ § 1. Taxable transfers.— A tax shall be and is hereby imposed upon the transfer of any property, real or personal, of the*543 value of five hundred dollars or over, or of any interest therein or income therefrom, in trust or otherwise, to persons or corporations not exempt by law from taxation on real or personal property in the following cases:
“ 1. When the transfer is by will or by the intestate laws of this State, from any person dying seized or possessed of the property while a resident of the State.
“ 2. When the transfer is by will or intestate law, of property within the State, and the decedent was a non-resident of the State at the time of his death.
“ 3. When the transfer is of property made by a resident or by a non-resident, when such' non-resident’s property is within this State, by deed, grant, bargain, sale or gift made in contemplation of the death of the grantor, vendor or donor, or intended to take effect in possession or enjoyment, at or after such death. Such tax shall also be imposed when any such person or corporation becomes beneficially entitled, in possession or expectancy, to any property or the income thereof bv any such transfer, whether made before or after the passage of this act. Such tax shall be at the rate of five per cent upon the clear market value of such property, except as otherwise prescribed in the next section.”
These provisions were incorporated verbatim in chapter 908 of the Laws of 1896, section 220, which was the statute in force at the time the second gift in question was made, and at the time of the decedent’s death.
The deceased, at the time of his death (May 5, 1897), was eighty-eight years of age. He had resided during the greater part of his life in the city of Buffalo, and had accumulated a fortune aggregating about $4,500,000, which consisted almost entirely of personal property. His wife died in August, 1895, and his only children living at the time of his death were the respondents Edward R. Spaulding, Samuel S. Spaulding and Charlotte S. Sidway. Some years prior to his death (the exact time is not disclosed) the deceased made a will by which he disposed of his entire estate, and by which he devised his entire property to the respondents above named, share and share alike, with the exception of about $100,000, which he devised to collateral relatives and charitable institutions.
Prior to 1895 the deceased had been an exceedingly strong,
The deceased had never been sick or required the services of a physician until about the middle of March, _ 1897, less than two months prior to his death. In the winter of 1895-1896, a few months after the death of 1ns wife, the deceased became quite feeble physically, which feebleness gradually increased until his death, which was caused, as stated in the certificate of the attending physician, by “ old age.” The deceased was at no time afflicted with an acute disease; there was simply a gradual depletion of physical power, commencing shortly after the death of his wife in August, 1895, which became more and more marked until his death, two years later; but during all that time his mental faculties remained unimpaired.
Cordial and friendly relations had always existed between the deceased and his children. He lived alone after the death of his wife; his children were attentive to his wants and considerate of his wishes, but he had never given them any considerable amount of property prior to 1895.
In November, 1895, the testator called his son Edward R. Spaulding into the banking office, and told him in substance that he (the testator) had gotten to be a pretty old man, or a very old man; that his estate was a burden to him; that he intended to give it ultimately to his children, and proposed to give some of it to them at that time. The deceased thereupon gave to the son securities amounting in value to $1,038,900, to be divided between himself and the other two children equally. The son took the securities, locked them up in a box, labeled it with the names of the three children, and put it back where it had been kept by the father.
These securities were placed in the box containing the securities which had previously been given, and they were all then deposited by the son in the safe deposit vaults of the Marine Bank in the city of Buffalo, deposited in a box taken in the name of the donees, who had the combination, so that any of them had access to it. The testator never saw anj of the securities after they were given to the respondents as above stated; never exercised or attempted to exercise any control over them in any respect whatsoever. All the interest coupons which remained attached to the securities were collected by and paid to the donees; each of the donees was assessed a small amount on account of being the owner of such securities, and the assessment on the testator’s property was reduced proportionately, but such assessments and reduction did not represent the actual value of the securities transferred.
The evidence clearly shows that the gifts were of such a character as to immediately pass the title to the property which was the subject of the gifts from the father to the children; that the securities became absolutely their property; were unconditionally in their possession, and were not in any manner subject to the control or domination of the donor. .The securities immediately became subject to levy and sale by due process of law in payment of the debts, if any, of the donees, and they had the absolute right to dispose of them either by sale, gift, devise or otherwise.
The facts are not in dispute, and there is nothing disclosed by the evidence which distinguishes this case from the ordinary transaction where a father, in possession of his mental faculties unimpaired, but
It may be assumed, considering the age of the deceased at the time of his death, his enfeebled condition, the steady and continued failing of his physical powers, what he. said to his son at the time the gifts were made, that the deceased knew he would not long continue to live; that death, at most, was not many years distant, and that he wished his three children to be the absolute owners and possessed of a part of his property before that event should take place; but there is no evidence tending to show that the gifts were made when the donor was in extremis, when he was dangerously ill, in danger of immediate death, in peril, afflicted with an acute disease, or anything of the kind. He was simply an old man, feeble as the result of old age, and he must have known that he could not live many years longer; but whether a few months, one, two or five years, was not known to him and could not be determined with any degree of accuracy.
Were the gifts in question made “ in contemplation of death,” within the meaning of the statute % *
It will not be contended that a literal construction of the provision of the statute would be reasonable, or was intended by the Legislature.
If a person, fully realizing that his death is to occur within a few hours, should convey by deed real estate and receive the full consideration therefor, it would not be claimed that the real estate so conveyed would be subject to the tax in question, notwithstanding the conveyance was clearly made in contemplation of death. Or, if a person under such circumstances should transfer personal property in payment of a just debt, and with the avowed purpose of having the matter adjusted before his death, the statute would not apply, and yet the transaction would be within its provisions if literally Construed.
A man of middle age, in full health and strength, may transfer his house and lot and other property to his wife, for the purpose of securing her against want in case of his death, and declare such purpose in the deed of conveyance. Clearly such conveyance would be
A father may have been engaged in business during a lifetime, in which he has accumulated and has invested therein a fortune; he is becoming old, less active, more infirm and feeble, and less able to conduct the business.. Pie concludes to and does give and transfer the business to a trusted son. It was not transferred or received for the purpose of evading the transfer tax, but because the father wished to observe the, management of the business by the son before his death, and to be relieved of its burden. The father lives five or ten years after the transfer, which was concededly made because he understood and believed that death was not far distant. So far as he knew there was no immediate danger; he was enjoying the same degree of health at the time he transferred the business to the son that he had enjoyed for years previous. Under such circumstances we think it could not be successfully urged that the property and business transferred were subject to tax under the statute in question, and yet such a transfer would fall directly within its provisions if given a literal interpretation.
In the case at bar, as we have seen, there was nothing to indicate to the decedent at the time the gifts in question were made that he was in immediate danger of death. The evidence only tends to show that he was an old man; somewhat enfeebled; gradually declining in physical power. Whether he was to live one, two or five years he did not know and could not have known; that he was to die immediately or within a few days he had no - reason to expect; that he was to die within a few years he knew to a certainty. As a matter of fact, he lived a year and six months after the first gift was made, and ten months after the second gift was made, and up to within two months of his death had never called or required the services of a physician.
It will be remembered that the evidence is uncontradicted that the gifts in question were absolute; that the securities became the property of the donees; that they had a right immediately to sell them and pay out the proceeds in liquidation of their indebtedness, or for any other -purpose, or give the avails thereof to charity. If
The gifts in question were gifts inter vivos, and the distinction between such gifts and gifts causa mortis is clearly pointed out in Ridden v. Thrall (125 N. Y. 572). At page 579 the court says, per Earl, J.: “ Gifts causa mortis, as well as gifts inter vivos, are based upon the fundamental right every one has of disposing of his property as he wills. The law leaves the power of disposition complete, but, to guard against fraud and imposition, regulates the methods by which it is accomplished.
“ To consummate a gift, whether inter vivos or causa mortis, the property must be actually delivered, and the donor must surrender the possession and dominion thereof to the donee. In the case of gifts inter vivos, the moment the gift is thus consummated it becomes absolute and irrevocable. But in the case of gifts causa mortis more is needed. The gift must be made under the apprehension of death from some present disease or some other impending peril, and it becomes void by recovery from the disease or escape from the peril. It is also revocable at any time by the donor, and becomes void by the death of the donee in the lifetime of the donor. It is not needful that the gift be made in extremis when there is no time or opportunity to make a will. In many of the reported cases the gift was made weeks and even months before the death of the donor, when there was abundant time and opportunity for him to have made a will. These are the main features of a valid gift causa mortis as they are set forth in many text books and reported cases.”
In the case at bar the property was actually delivered to the donees. The donor had surrendered possession and dominion thereof to the donees, ánd the moment the gifts were made the transfers became absolute and irrevocable, and so they fall within the definition of gifts inter vivos. The gifts were not recoverable at any time by the donor; would not become void by the death of the donees before the death of the donor, and had none of the distinguishing characteristics of a gift causa mortis. .
If we bear in mind the distinction between a gift inter vivos and a gift causa mortis, and that a gift which would otherwise be inter vimos may become a gift causa mortis if made in extremis or under circumstances which would entitle the donor to recover it back, we think the rule may be stated to be that the property transferred by gifts inter vivos is not taxable under the provisions of the Taxable Transfer Act, unless made and received with the intent and for the purpose of evading its provisions.
In Matter of Seaman (147 N. Y. 76, 77), in discussing the statute now under consideration, the court says : “ But then comes the third subdivision, introducing a new case. It reads thus: ‘ When the transfer is of property made by a resident or a nonresident, when such non-resident’s property is within this state, by deed, grant, bargain, sale or gift made in contemplation of the death of the grantor, vendor or donor, or intended to take effect in possession or enjoyment at or after such death.’ At this point are evidently referred to grants or gifts causa mortis / that is, those effecting the result of a will or of intestacy by a grant or gift made during life, and so by a different process. The subdivision then proceeds : ‘ Such tax shall also be imposed when any such person or corporation becomes beneficially entitled, in possession or expectancy, to any property, or the income thereof, by any such transfer, whether made before or after the passage of this act.’ If we give this language a general and broad application, making it cover not only grants or gifts causa mortis, but also transfers by will or intestacy, we give the act a retrospective operation, and subject to taxation rights of succession which accrued before the statute came into existence. Of course, we ought not to do that upon any doubtful or ambiguous expression. The words of the statute have their full and natural force when applied to the new case, immediately preceding, of grants or gifts causa mortis. A grantor may have
In Matter of Edgerton (35 App. Div. 125) the court says: “It is argued, by the appellants that the act of 1892 is applicable, and that the transfers in question were made in contemplation of the death of the transferrer, and, therefore, within the provision of that act above quoted. That provision was under consideration in Matter of Seaman (147 N. Y. 69, 76), and was construed to refer to grants or gifts eav.sa mortis. The transfers here in question were not such gifts or grants, for there was no power of revocation. (Doty v. Willson, 47 N. Y. 585 ; 2 Kent Com. 444; Bliss v. Fosdick, 86 Hun, 162, 173 ; 151 N. Y. 625.) In no event was Mr. Edgerton entitled to revoke the transfers or resume the title. He was entitled to the annuities; he could, if necessary, cause a sale of the stock to pay any annuity unpaid, and that was the end of his right. * * * It is hardly claimed that a gift inter vivos, or an advancement simply, would be within the provisions of the law. There would be no succession to title at or after the death. (Matter of Swift, 137 N. Y. 77; Matter of Hoffman, 143 id. 327.) The title would in such a case have passed absolutely before the death in possession and enjoyment. * * * The transfers here, aside from the trust deed as to the monument, were, I think, intended to take effect in possession and enjoyment at the time they were made, and, therefore, were not within the statute.”
This case was affirmed by the Court of Appeals (158 N. Y. 671). (Matter of Masury, 28 App. Div. 580; affd., 159 N. Y. 532; Matter of Bostwick, 38 App. Div. 223.)
In Matter of Bostwick (160 N. Y. 489), in discussing the provisions of the act in question, at page 494, the court says: “ If a person intends in good faith to make an absolute gift of his property during his life to others, and thereby to make a provision for them which shall not be contingent as to its possession or enjoyment upon the event of his death, there is no inhibition in the act in that respect.”
That the gifts in question were gifts inter vivos, were not made
It follows that the order appealed from should be affirmed, with costs.
Adams, P. J., and Laughlin, J., concurred; dissenting opinion by Spring, J., in which Williams, J., concurred.
Dissenting Opinion
Mr. Spaulding made the first gift to his children in November, 1895, of about $1,000,000, and in January following increased it to $1,500,000. ■ The gifts consisted of coupon bonds transferrable by delivery, and the old gentleman detached the coupons so that no interest accrued to his children until January, 1897. He died May 5, 1897, at the age of eighty-eight years. His wife had died in 1895, and the donees were his only children and next of kin and they were in middle life. He had been an active business man of extensive experience, and by dint of thrift and sagacity had accumulated a fortune of $1,500,000, and accordingly after the large sums transferred to his children he still had $3,000,000. He had never before advanced to these children any substantial sums, but with the rigid grasp, so potential with him during his long life, he kept to himself the property he had gotten together. After the death of his wife the physical weakness incident to old age grew upon him perceptibly. While his mind was alert his hand was tremulous, his business to which he had once been attentive was intrusted largely to his elder son. He walked but little and took scarcely any exercise. The son Edward thus described his condition : “ At this time, a year ago, father had got to be quite feeble, physically. The feebleness developed, I should say, along in the winter of 1895-96; I can’t tell just when, but some time in the winter, along about Christmas time or the first of January, when the weather began to grow cold. He was feeling the cold more than he had and was shriveled
Prior to 1891 (Chap. 483, Laws of 1885, § 1, as amd. by chap. 713, Laws of 1887) the imposition of a succession tax could be laid only. where the transfer was “ made or intended to take effect in possession or enjoyment after the death of the grantor or bargainor.” . That is, as the statute was originally enacted it related only to a gift causa mortis, as the essence of such a gift is that the donor retains control over it during life with the right of revocation and the gift does not become fixed until his death.
By chapter 215 of the Laws of 1891 a radical addition was obviously intended by the law-making power, and this was continued when the Collateral Inheritance Tax Act was re-enacted in the law how designated the Transfer Tax Act (Chap. 399, Laws of 1892), and the same provision was engrafted on the general codification of the Tax Law (Chap. 908, Laws of 1896, § 220, subd. 3).
By-this change in the law covering taxable transiera the imposition of the tax was required in two specific cases: First, where the ■ gift or transfer was “ made in contemplation of the death of the grantor, vendor or donor; ” or, second, where it was “ intended to take effect in possession or enjoyment at or after such death.”
It is to be borne in mind that without this amendment every transfer in expectancy which became operative upon the death of the donor or grantor was already provided for, and that, as I have already ‘suggested, applied to. those gifts which were within the' definition of causa mortis. Under the statute as it then existed a-man realizing his death was imminent could make an absolute gift to his children with the manifest purpose of evading this statute and Still not come within its provision. To counteract that hiatus in the law the addition was embodied in the statute making the transfer assessable if “made in contemplation of death.” This could not have been designed to relate solely to gifts which were to take effect Upon, the decease of the donor, for provision was already made for them. To what did it apply % What was the legislative intent h
Therefore, the statute does not encompass every gift inter vivos, but it seems to me plain it was intended to attach to a gift of that class if made “ in contemplation of death.” If a man on his death bed, with mind undimmed, desires to cheat the law, he cannot do so, because the gift is an irrevocable one. If that is not the proper interpretation the addition to the statute is emasculated. Unless this be so, the effect would be to restrict its application to transfers causa mortis, when the aim was to extend it. If the statute, as it exists, does not apply to gifts inter vivos, in any event, then the fact that it was made unquestionably to evade the payment of the tax does not make it subject to it. The intent of the donor is not of the slightest consequence unless the scope of the statute is broad enough to include a gift made “ in contemplation of death,” even though the title passes to the donee immediately and irrevocably upon delivery. If the words interpolated in the statute do relate to gifts among the living, if made in view of approaching death, then the question of the good faith of the donor, the motive actuating the transfer, and the real controlling purpose, inhere in the statute, and are the significant factors in reaching a solution as to the liability to the tax.
To summarize the situation, the law, as it stood prior to 1891, did not reach property which had been transferred, unless its devolution was deferred until the death of the donor or bargainor. It did not pertain to the disposition of property made by a man of advanced years, who, appreciating that the damp of death was upon him, absolutely transferred his property just before the cord of life was severed, though done, probably, to avoid the tax. To meet eases of that kind the law was amended, and, as I read it, nothing was added at all unless cases like the present were brought within its compass.
I do not find that the authorities cited countervail this construction of the statute. In the Masury Case (28 App. Div. 580), and, also, in Matter of Bostwick (160 N. Y. 489), the only question in each instance was whether the gift was one causa mortis. There was no claim that it was “ in contemplation of death.” That provision of the statute was not in question, but the sole inquiry was whether the tax should be imposed pursuant to the 2d clause, making it dependent upon transfers to take effect upon the death of the transferrer. The extract from the opinion of the court in 160 New York, 494, to wit: “ If a person intends, in good faith, to make an absolute gift of his property during his life to others and thereby to make a provision for them, which shall not be contingent as to its possession or enjoyment upon the event of his death, there is no inhibition in the act in that respect,” has been referred to as implying that the statute is to be restricted to gifts causa onortis. It is not susceptible of that interpretation, foi the pith of the sentence is that a gift “ in good faith, * * * to make a provision ” for the donees, is not within the inhibition of the • statute. That is the meat of the amendment to the law. If made in apprehension of death it lacks the element of good faith, and that is unquestionably true if the purpose is to evade the payment of the tax.
The criticism is urged that if the transfer is made absolutely and
In this case the proof depended upon the recipients of the old gentleman’s bounty. Their interest was averse to the imposition of the tax. Their ipse dixit that the gifts were not in expectation of death would, of course, not be controlling. If Mr. Spaulding was covertly striving to keep from the tax-gatherer this large property, he would not proclaim that purpose from the house tops. "We must gather his intention from the circumstances surrounding the transaction. He had large means; he was very old; he was shrewd, economical and evidently inimical to the visits of the assessor; he had been careful in retaining possession of his property, but now, with death at hand, the thrifty habits of a lifetime pressed close upon him, and he sought to place a portion of his large property beyond the reach of this tax so offensive to men of his mould. He would not transfer it all. The hoarded wealth of a long life could not all be turned over to his children. The acumen and frugality of the aged financier, however, were disclosed in the fact that when he delivered the bonds, he retained the coupons assuring himself the interest until January 1, 1897. He did not wish to bring himself within the statute by making the gifts contingent upon his death, but he did, in a measure, retain his hold on his property by reserving the income to himself.
The conclusion to me seems inevitable that these transfers were made “ in contemplation of death ” and to avoid the payment of this tax. '
This statute should receive a fair construction. Not a broadly liberal one which will render every disposition of property by a father to his children amenable to the tax, for such gifts should be encouraged, not obstructed. Nor, by a contrary sweep of the pendulum, a narrow interpretation, whereby it is made effective only upon the gifts of those who are in the throes of death. Each case .must be determined by its own peculiar facts. The aim is to reach property where by a reasonable deduction the donor, in apprehension
The order should be reversed and a new trial ordered in Surrogate’s Court, with costs to the appellant to abide the event.
Williams, J., concurred.
Decree of surrogate affirmed, with costs.