161 N.Y. 211 | NY | 1900
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *213 Several years before the appearance on the statute books of this state of a Taxable Transfer Law, John H. Harbeck died, leaving a last will and testament, by which he bequeathed the sum of three hundred thousand dollars in trust, the income thereof to be paid to his wife during her life, and after her death the principal to such persons and in such proportions as she should appoint by her last will and testament; and in the event of her failure to exercise the power of appointment, it should go according to the Statute of Descents. The appointor exercised the power thus vested in her, by a will dated October 20th, 1887, and which was admitted to probate shortly after her death and on the third day of February, 1896.
The question for decision is, whether this fund is subject to tax under the Taxable Transfer Act of 1892. It is a question *217 of no special public importance, for, since the death of the appointor, by an act which became a law April 16th, 1897, the legislature has amended § 220 of the Taxable Transfer Act so that it now expressly provides that "whenever any person or corporation shall exercise the 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. * * *"
Apparently this case has no importance other than as to the parties who are interested in the determination which must be made whether this particular trust fund shall be taxed by the state. In such case the rule is said to be that where the question is involved in doubt, the doubt should be resolved in favor of the taxpayer, and against the taxing power (Matter ofFayerweather,
The decision of this court in Matter of Miller (
The legislative declaration in this case, for it amounts to that at least, seems well founded, and we proceed at once to a consideration of the only point of difference between this court and the learned Appellate Division. That court in its opinion, and rightly, as we think, asserted the following propositions:First, that the tax sought to be imposed is not a tax upon property, but upon a right of succession. Second, that the Transfer Tax Act has no retroactive effect. Third, that the beneficiaries, whose succession is sought to be taxed, take by virtue of the will of John H. Harbeck, which went into effect in 1878, long prior to the enactment of the Transfer Tax Law. These propositions are not only well founded in reason, but they are established by authority, the first two by Matter of Swift
(
In Matter of Stewart (supra) the will of the testatrix created a trust for certain purposes, and authorized the trustees, after using so much of the trust fund as should be required for the trust purposes, to appoint any part of the estate among any of the legatees in the will. The will was probated November 13, 1886, and the power was exercised January 16th, 1890, and in determining whether the sum received by one of the appointees was taxable under the law of 1885, the court reached a conclusion which cannot be more briefly stated than in its own words: "We think there can be no reasonable doubt that the appointees under the power of appointment took their interests under and by virtue of the will, and not in a legal sense under the instrument of January 16th, 1890, in execution of the power."
The three propositions to which we have adverted, standing alone, necessarily lead to the conclusion that the right of succession to the property in question is not taxable, for it passed to the beneficiaries under and by virtue of a will that went into effect long before the enactment of a Transfer Tax Law, and as that law is not retroactive, it necessarily follows that the property is not subject to the tax.
In the past, however, there have been a few cases in which the courts have been called upon to decide that while the instrument by which the power is said to be executed becomes incorporated into and forms a part of the original instrument creating the power, yet it takes effect as of the date of the execution of the power, and these cases have been laid hold of to make the final step in the transfer of the property from the testator Harbeck to these beneficiaries operate as the dominating one; the act of the appointor, instead of that of the testator, being treated as the one by which the fund is transmitted to them. In other words, notwithstanding the general rule by which a paper constituting an execution of the power of appointment becomes incorporated into the original instrument creating the power (so that the latter is given the *220 same effect as if the names of the appointees were originally written into the instrument creating the power), it is said that the date of the original instrument is to be ignored, and that upon which the power of appointment is exercised substituted fully in its stead. If the position taken be correct, it follows that the conclusion reached, that the right of succession vested at that time, has support.
But long after the decisions in the cases relied upon by the learned judge who wrote for the Appellate Division to establish the proposition that while title is derived from the act creating the power, it takes effect as of the time of the execution of the power (Jackson v. Davenport, 20 John. 537; 2 Vesey, 61;Commonwealth v. Williams' Exrs., supra), this court had that question before it in Genet v. Hunt (
The court further said: "We think the validity of the suspension under the will of Mrs. Riggs is to be determined by the test whether it would be valid if it had been part of a limitation under the trust deed and had been inserted therein atthe time the deed was executed," and, therefore, the court held that the trusts under the will of Mrs. Riggs, in whom was vested the power of appointment, should be construed as if created atthe date of the trust deed, and, as thus construed, that they were invalid, because they provided for a possible suspension of the power of alienation for three lives.
The Genet case and this one are not readily distinguishable upon the point we have been considering, and the former should control this decision.
Matter of Langdon (
The order should be reversed, with costs.
All concur.
Order reversed.