Cross-motions for summary judgment in this estate tax case, in which all the facts have been stipulated, present the questions whether
(1) $30,850 paid by the executors to Counsel for successfully contesting the will’s validity should have been allowed as deductible administration expenses; and
(2) $13,822.34 of interest accrued after date of death on income taxes due and unpaid on the date of death is deductible as indebtedness or administration expense in computing taxable estate where the tax deficiencies were not determined until about four years after date of death.
The facts are found as stipulated.
(1) The decedent left a will by which he undertook to cut off his daughter by his divorced wife and the divorced wife with a dollar apiece. The daughter contested the will; she engaged counsel and later displaced him with new counsel. After about three years, the contest was compromised: the daughter got half the residuary estate, the rest of it going to the original residuary legatees in such proportions as they might agree upon. The compromise provided, too, that the fees of counsel for the executors (and temporary administrators) and the fees of the contestant daughter’s counsel were “to be chargeable to the estate, and the executors agree to make partial payment thereof during the calendar year, if possible [i. e., in 1957], and all fees are to be fixed by the Court, except as otherwise agreed upon between the parties”.
Before the compromise was reached, the contestant daughter had moved to substitute new counsel for the counsel first retained and that motion, evidently made on notice to the temporary administrators, was granted — as of course — but with the provisions (a) that the retiring lawyer’s compensation would be determined after the contest ended and (b) that “the lien of the retiring attorney for his fees is to attach to all the assets of the estate”. After the compromise was reached, the Surrogate did fix the retiring lawyer’s fee, by an order that recited that the settlement agreement had provided “that the fee of the former attorney for the contestant is to be fixed by the Court and is to be payable out of the estate”; the order fixed the fee at “$15,-000.00, which sum is hereby allowed him together with disbursements incurred * * * both of which amounts are directed to be paid by the legal representatives of this estate when appointed, out of the estate assets pursuant to settlement agreement dated October 30, 1957 * * •»»
The contestant daughter appealed and the order fixing the fee was affirmed “with costs to respondent, payable out of the estate.” On remand, the direction was carried into effect.
Defendant, in substance, contends that under New York law a contestant’s legal fees are not properly payable out of estate funds and that here the payment of the contestant’s lawyers out of estate funds under the Surrogate’s decrees resulted from the compromise and not from law or from the Surrogate’s order operative as such. Plaintiffs contend that the contestant’s fees are allowable because *509 they were paid out of the estate under valid order of the Surrogate and thus constitute deductible administration expenses.
The difficulty is that New York generally has not allowed contestant’s legal fees to be paid from estate funds when that form of payment has been objected to. Matter of Foreman’s Will, 1st Dept. 1933,
There is not that clarity in New York law that makes it possible to say that the Surrogate in the present case was without power to charge the present contestant’s counsel fee to the estate. Nor is it possible to infer that he did it because and only because of the terms of the' stipulation for compromise. The *510 words' of the instruments, the Surrogate signed are perfectly plain and produced a very plain result that could not have escaped his observation. The first of the orders in particular, signed a year before the compromise, and charging the undetermined fee of the retiring lawyer for the contestant on all the assets of the estate, was not the result of the compromise and could not but be based on the Surrogate’s satisfaction that the contestant’s counsel were benefiting the estate enough to warrant the course taken. The later orders to be sure almost casually charge the fees to the estate, and since the contest was with respect to amount, not with respect to source of payment, it would be harder to say with certainty that the Surrogate was not simply giving effect to an agreement but for the existence of the original lien order and but for the fact that the Surrogate cannot be presumed to be ignorant of, or heedless of, the fact that such matters can affect or at least cloud the revenues of state and nation. The plain inference from the papers is that the Surrogate did what he did because he thought it was right to do so (compare Matter of Bacharach’s Will, supra). References here to collusion, fraud and evasion are, obviously, precluded by the Stipulation of Facts, and, indeed, by the facts stipulated.
That does not settle the matter; possibly not every expense charged as an administration expense under local law is in every circumstance deductible in computing taxable estate. But certainly the nature of the cost here is familiar and in the circumstances inevitable. Wills that are so drafted or drafted in such circumstances that they are set aside without trial to the extent of half their dispositive effect must in the generality of instances provoke special classes of administration expense of which the legal cost of the contest to arrive at the right rule of distribution for the estate is one.
It is easy enough to distinguish verbally Dulles v. Johnson, 2d Cir. 1959,
2. The interest paid in respect of the period after the decedent’s death on the tax debts that antedated his death but were not liquidated until long after is not deductible in computing taxable estate. Old Colony Trust Co. v. United States, D.Mass.1936,
Settle order for judgment on notice.
Notes
. Matter of Bogstrand’s Estate,
. Affirmed on another issue, 3rd Cir. 1942,