Opinion
Argued January 7, 1908
Decided January 21, 1908
William J. Roche and A. Page Smith for appellant. Edgar N. Dollin and Joseph F. McCloy for respondent.
On the 19th day of December, 1903, Charles Ramsdill died intestate, a resident of Malden, Massachusetts, and leaving him surviving a brother and certain nieces and nephews. His personal estate, amounting to about $72,000, was all outside of this state, except some shares of stock in two corporations. In the course of administration in this state application was made to the surrogate of New York county for the usual appraisal under the Transfer Tax Act. That proceeding resulted in a report to the surrogate showing that the decedent's total personal estate amounted to $72,642, of which only $6,460 was within this state, and that the total charges against the estate for funeral expenses, debts and cost of administration, were $12,041.66. According to this appraisal the assets within this state amounted to nine per cent of the decedent's total personal estate, and the appraiser, therefore, deducted therefrom nine per cent of the debts and expenses referred to, which amounted to $1,084. Computed upon this basis the decedent's net assets within this state were valued at $5,376, upon which the share of the intestate's brother was reported as exempt from tax, and the shares of the nephews and nieces were reported as taxable at the rate of five per cent. The report of the appraiser was confirmed by the surrogate and an order made fixing the tax. Subsequently the administrator applied to the surrogate to vacate his former order fixing the tax. In support of that application the administrator averred that he had elected to appropriate all the assets situate within this state, and the proceeds thereof, in payment of the distributive share of the intestate's brother. The application was granted by the surrogate, and from his order thus made an appeal was taken to the Appellate Division, which resulted in an unanimous affirmance of the surrogate's decision.
Upon this brief statement of the facts it is at once apparent that the only question at issue is, whether the administrator of a foreign intestate can so apply that portion of the estate which is found within our jurisdiction as to avoid the payment of a tax upon a transfer that is taxable under the statute. The administrator in the case at bar claims the right to do so under the authority of Matter of James ( 144 N.Y. 6), and this claim is challenged by the state comptroller.
In Matter of James ( supra) the decedent was a resident of England, although he died in Africa. He left a will in which he disposed of a large estate, the greater portion of which was within this state. The will provided for specific legacies to various collateral relatives and foreign charitable institutions, subject to the payment of which the residue of the estate was given to executors in trust for the decedent's two brothers. The legatees, with the exception of the two brothers who lived in this country, were residents of England. The portion of the estate located in Great Britain was more than sufficient to pay the specific legacies, and the executors appropriated that portion of the estate to the payment of the legacies, and decided to place in the residuary fund that portion of the estate which was within our jurisdiction. Under the statute as it then stood, legacies to brothers were exempt from taxation. (L. 1887, ch. 713.) It may be suggested in passing, that the specific legacies in that case had been subjected to a succession tax in England, so that if they had been taxed here there would have been double taxation; but the controlling fact was that the property appropriated to the payment of the specific legacies was in Great Britain and never came within our jurisdiction. The persons entitled to the legacies could have compelled their payment out of the English fund without resort to our courts, and they were at no time dependent upon our laws for their collection.
In the case at bar the situation is radically different. Upon the intestate's death his estate passed eo instanti to the persons who, by virtue of the intestate law, were entitled thereto. Our statute (L. 1896, ch. 908, § 220) imposes a tax upon transfers by will or by virtue of the laws governing intestacy which, in the case of a non-resident decedent, is based upon that portion of his estate found within our jurisdiction. This is not a tax upon the specific property which passes, but upon the devolution in cases of intestacy and upon the right of succession under wills. ( Matter of Swift, 137 N.Y. 77; Matter of Hoffman, 143 id. 327.) "The devolution of the property and the right of the state have their origin at the same moment of time. The ascertainment of the value of the taxable interest and the fixing of the tax necessarily takes place subsequent to the death. But the guide is the value at the time of the death, when the interests were acquired." ( Matter of Westurn, 152 N.Y. 93, 102.) The right of the state to the tax is, therefore, coincident with the devolution of title or interest; and the right of the state to exact a tax, as well as the obligation of the transferee to pay it, depend not upon a formal, complete and immediate change of title or possession, but upon the instant right to a beneficial share or interest subject only to the due administration of the estate. This is the rule recently enunciated by the Supreme Judicial Court of Massachusetts, under a similar statute, where that court said: "The rights of all parties, including the right of the commonwealth to its tax, vest at the death of the testator. It is true that the interest of a legatee is subject to an accounting; but it is an interest in the existing fund and it is analogous to that of a cestui que trust." ( Kingsbury v. Chapin, 82 N.E. Rep. 700.) The Massachusetts court went so far as to hold that in no case can an executor so marshal the assets of an estate as to deprive the state of its tax; but the facts which clearly differentiate the case at bar from Matter of James ( supra) incline us to a confirmation of the views expressed in the latter case, which we emphasize by repeating them. When a specific foreign legatee of a foreign testator can obtain satisfaction of his legacy in a foreign jurisdiction, the executor cannot be compelled to pay such a legacy out of the assets within our jurisdiction. This is the necessary result of the practical and obvious distinction between testacy and intestacy as applied to this subject of taxation. If a specific legatee needs not the intervention of our laws or courts to obtain what comes to him under a foreign will through foreign assets, in a foreign jurisdiction, our laws cannot coerce an executor into paying his legacy out of funds within our jurisdiction for the sole purpose of exacting a tax. But in a case of intestacy the rule is essentially different, because the distributee takes an undivided interest in the whole estate; and if part of it happens to be within our jurisdiction, he can only get his share of what is here under our laws and through our courts. This is the theory upon which the nephews and nieces of the intestate in the case at bar are clearly taxable under our statute.
The order of the Appellate Division and the final order of the surrogate should be reversed, and the surrogate's proforma order upon the report of an appraiser should be affirmed, with costs to the comptroller in all courts.
CULLEN, Ch. J., GRAY, VANN, WILLARD BARTLETT, HISCOCK and CHASE, JJ., concur.
Ordered accordingly.