In re the Transfer Tax of Delano
82 A.D. 147
N.Y. App. Div.
1903
Check Treatment
O’Bbien, J.:

The portion of the Tax Law (Laws of 1896, chap. 908) which it is claimed is applicable to the property appointed to the appellant is sub*151division 5 of section 220, incorporated in the law by amendment by chapter 284, Laws of 1897, and providing that “ 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. * * *”

In terms, the amendment would seemingly apply to the property here in question, because a studied effort has been made by the language employed in the act to destroy any distinction between the disposition of property under a power of appointment made “ before or after.” the passage of the act. The construction of language identically the same taken from subdivision 3 of section 1 of the Transfer Tax Act of 1892 (Laws of 1892, chap. 399) was involved in the Seaman case (Matter of Seaman, 147 N. Y. 69), and therein it was held (head note) that such language “ is to be restricted to the case of grants or gifts causa mortis, mentioned in the preceding portion of the subdivision, and does not extend to transfers by will or intestacy so as to subject to taxation rights of succession which accrued before the statute came into existence.”

There is the same constitutional objection to giving the amendment of 1897 a retroactive effect so as to make it apply to instruments which existed and were in force before its passage, as existed in the Seaman case. Similarly, in Matter of Pell (171 N. Y. 48), with reference to chapter 76 of the Laws of 1899 (amdg. Laws of 1896, chap. 908, § 230), which in terms imposed a transfer tax upon remainders and reversions vesting prior to June 30, 1885, it was decided that such a provision in the law was unconstitutional ; and therein it was distinctly held, following the decision in Matter of Swift (137 N. Y. 77), that the tax could not be. sustained as one upon property^ but must be supported as a tax upon the right of succession. As said in Matter of Pell (supra) : “ This court and the Supreme Court of the United States have held in numerous cases that the transfer tax is not imposed upon property, but upon the right of succession. It, therefore, follows that where there was a complete vesting of a residuary estate before the enact*152ment of the transfer tax statute, it cannot be reached by that form of taxation.”

Under the.deeds of William B. Astor, which are before us for consideration, the rights of the relator were vested and were, under well-settled rules of law, created by the donor of the power, and not by the donee by whom the power was exercised. In Root v. Stuyvesant (18 Wend. 257, 267) it is said: “ It appears to be well settled that until the execution of the power the remainders or limitations over take effect the same as if no such power existed or as in case of default of execution of it. * " * * The doctrine is very clearly and succinctly stated by Fearne; and Sugden, after discussing the cases on the point, observes that the result of the authorities is that the power of appointment does not prevent the vesting of the estates limited in default of appointment. They are, of course, subject to be divested on the execution of the power.” With respect, therefore, to the interests of the relator, we must have in mind the rule that the estate of the appointee under a power is derived from the donor of the power and not from the donee. Under this familiar rule the interests of Arthur Astor Carey became vested under the deeds made by William B. Astor in 1848 and 1849, and he would have succeeded to such vested interests had there been a default in the exercise of • the power of appointment.

It is true .that the donee in the exercise of the power of appointment had the right to determine between the individuals in the class in whose favor she was to exercise the power, but, although this rendered the interests of any of the individuals in the class subject to be divested, it created no distinction different from what would have existed if the property had been originally given to Laura Astor Delano for life with remainder over to persons named whose interests were to be divested in the event of their dying before the termination of the life estate. The relator could have been divested of his interests by the exercise of the power of appointment in favor of any other member of the class to whom it was limited, and he may have obtained a much greater estate by reason of the fact that the power was exercised exclusively for his . benefit. It follows, nevertheless, that his rights were obtained under the deeds of the donor, which were made long prior to the enact-. ment of any inheritance tax law, and, therefore, it is only by regard*153ing the Transfer Tax Act as imposing a tax upon property, which it was held in the Pell Case (supra) could not in the guise of a succession tax be done, that the interests of the relator can be taxed under it.

We have not overlooked Matter of Vanderbilt (50 App. Div. 246; affd., 163 N. Y. 597), wherein the construction of this same subdivision of the statute was involved as bearing upon a case where a testator, who died in 1885, by will gave to his son the income of a trust fund during his life and power to dispose of the principal by will to his issue. This power having been exercised on the death of the son in 1899, it was held that the disposition of the property made under such appointment was taxable under the act. That decision, however, which at first blush might seem to be controlling, is distinguishable in two features, one, that the power of appointment itself was created by will, and the other, that such will was made and went into effect at a time subsequent to the enactment of a collateral inheritance tax law. The power of appointment here involved was not given by will but was conferred by deed, and at the time the interest of the relator vested there was no inheritance tax or transfer tax law in existence.

Upon reading the authorities it will be found that the cases point out specifically the fundamental distinction between the power of appointment created by deed and one created by will, as regards the right of the Legislature to impose a transfer tax. As stated, to impose a tax upon a transfer by deed is the exercise of the general taxing power of the State, while a tax upon a power of appointment which has been created by will is a succession tax depending upon a transfer brought about by death. It is not claimed for this amendment of 1897 that it was the exercise of the general taxing power of the State, and to be supported, therefore, it must be, if at all, upon the theory that it imposes a succession tax.

As said in Matter of Swift (137 N. Y. 83): “ The idea of this succession tax, as we may conveniently term it, is more or less compound ; the principal idea being the subjection of property, ownership of which has ceased by reason of the death of its owner, to a diminution, by the State reserving to itself a portion of its amount, if in money, or of its appraised value if in other forms of property.” And in Matter of Sherman (153 N. Y. 3) it was said: “ The power of a State to tax the right of transfer of property by will or the *154right of succession. under the intestate laws of the State is not an open question. It results from the acknowledged principle that the right to dispose of property by will and of succession thereto in cases of intestacy is derived from and under the municipal law. * * * It is a tax upon the right of transfer by will or under the intestate law of the State.”

It is not, however, within the power of the Legislature merely by calling a tax one upon the right of succession- to impose what in substance and effect is a tax upon property. In terms, unquestionably, the Legislature has called the estate which the relator' has received- a succession and upon the right to such succession has attempted to impose a tax ; but it cannot Change the legal nature or character of the property interest by applying to it a name, nor can it impose a tax upon' property which the relator has received under the deeds of William B. Astor, given in 1848 and 1849, by subsequently enacting that to such property the relator has succeeded under the will of Laura Astor Delano, and that as to it a tax is -due as a tax Upon the right of succession, as though it was property bequeathed or devised by her.

Having in mind, therefore, the fact that the relator obtained his property rights by deed and not by will, and at a time when there was no transfer tax or inheritance tax law in existence, and that he does not obtain his estate by right of succession under the will of Laura Astor Delano,. but acquires it under the deeds of William B. Astor which were in no sense testamentary in character, but were made many years before the grantor’s death, it follows, wé think, that the attempt of the Legislature to tax such property rights cannot succeed, and for the reasons that we have briefly outlined, namely, that to uphold the tax here sought to be imposed under the guise of taxing a right of succession, would, in fact, be to sanction a tax upon property, and for that purpose to give to the amendment of 1897 a retroactive effect which would be violative of the Constitution (Art. 1, § 6). •

The conclusion reached renders it unnecessary for us to discuss or determine the question which has been urged by the appellant with much force, that in the present instance the Surrogate’s Court had no jurisdiction to entertain the proceeding for the purpose of levying the tax.

*155We think that the order of the surrogate should be reversed, with costs, and the proceeding dismissed as to the appellant.

Van Brunt, P. J., Patterson, Ingraham and Hatch, JJ., concurred.

Order reversed, with costs, and proceeding dismissed as to appellant.