In re the Taxation of the Estate of Miller (77 A.D. 473, 1902)

Goodrich, P. J.:

The surrogate of Dutchess county made an order adjudging that a transfer of stock in an Illinois corporation by the testator, Charles Miller, to Gertrude B. Tefft was made in contemplation of his death, and that the stock or its equivalent is subject to the payment of the tax imposed by section 220 of the Tax Law (Laws of 1896, chap. 908, as amd. by Laws of 1897, chap. 284), under the 3d subsection, reading: “ 3. When the transfer is of property made by a resident or by a nonresident, when such nonresident’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.”

The facts out of which this controversy'arises are practically undisputed. On April 7, 1893, Miller made an ante-nuptial written agreement, reciting his intended marriage with Miss Tefft and his desire to make pecuniary provision for her and providing that in consideration thereof he “ doth assign, transfer, grant and set over and deliver at the time of the delivery hereof, unto the said party of the second part, two thousand (2,000) shares of the preferred capital stock of the Phcenix Horse Shoe Company of Illinois and the certificate therefor numbered thirteen (13).”

On April eighth Miller and Miss Tefft entered into another agreement stated to be in duplicate, wherein, “ in consideration of the intended inter-marriage of the parties,” Miss Tefft “ doth assign, transfer, grant and set over unto ” Miller “ two thousand (2,000) shares of the preferred capital stock of the Phoenix Horse Shoe Company of Illinois and the certificate therefor numbered thirteen (13),” upon the trust, “ to invest and re-in vest the same in the purchase of real or personal property, and to change the investments as he may in his discretion, subject to the approval of the said party of the first part (Miss Tefft), think most advantageous, free from any limitations or restrictions prescribed by law relative to the kind of investments allowed for trust funds, and to receive, appropriate and apply to the mutual use of the parties to these presents the interest and income arising therefrom during the joint lives of said parties. Upon the death of either of the parties hereto the trust hereby created shall terminate and come to an end; and in case the party of the first part should first die, leaving the party of the second part (Miller) surviving her, the said property hereinabove granted and assigned, and the investments representing the same, shall thereupon become and be the absolute property of the party of the second part, freed from all trusts and conditions whatsoever; and in case the party of the second part should first die, leaving the party of the first part surviving him, then and in that case, the said property and the said investments representing the same, shall revert to the said party of the first part, and she hereby reserves-the same in that event to herself in absolute ownership, free from all trusts and conditions whatsoever. Said party of the second part, in consideration of the premises and of the sum of One Dollar to-him in hand paid by the said party of the second part, the receipt-of which is hereby acknowledged, does hereby acknowledge the-delivery to him of the preferred stock and the certificate therefor-within described, and does accept the same upon and subject to the-trusts hereinbefore specified, and hereby agrees to hold, use, -manage and account for the said property and the investments representing the same, subject to the terms, conditions and provisionshereinbefore recited.”

The parties have stipulated in the record that Mr. Miller and Miss TefEt were married on April eighth, subsequently to the executions of said instruments; that Miller died on January 19, 1901, leaving a will dated January 17, 1900, which has been admitted to-probate by the surrogate of the county of Dutchess.

The will contained the following provision: 11 Second: Whereas-I have heretofore set apart and transferred to my wife Gertrude Benchley Miller two thousand (2,000) shares of the capital stock of the Phoenix Horse Shoe Company of Illinois of the par value of two hundred thousand dollars ($200,000) which stock I now hold under a certain deed of trust executed by my said wife to use (sic), bearing date the 7th day of April, 1893, I do hereby reaffirm the-said transfer and do give and bequeath all the right, title and interest I may have, if any, in and to the said two thousand (2,000)-shares of stock and in and to all the property in which the same-may stand invested under the said trust deed at the time of my ■death, to my said wife absolutely.”

There is in the record also an affidavit by Elisha H. Miller, one -of the sons of the testator and one of the executors of his will, and apparently considered a part of the evidence, in which he says: “ The two thousand shares of the stock of the Phoenix Horseshoe Company mentioned in the second clause of the Will were transferred by my father to Gertrude B. Tefft by a deed of absolute assignment dated April 7th, 1893, in contemplation of his marriage with her. On the following day Gertrude B. Tefft conveyed the said shares to my father by a deed of trust dated April 8th, 1893.” This comprises the entire evidence upon which the learned surrogate based the following findings :

“ I. That the transfer by Charles Miller to Gertrude B. Tefft, made on or about April 8th, 1893, of two thousand (2,000) shares of the preferred stock of the Phoenix Horseshoe Company of the par value of $100 per share was made in contemplation of the -death of the said Charles Miller and was not intended to take effect in possession or enjoyment until at and after his death.

“ II. That the said 2,000 shares of stock referred to valued at $180,000 or its equivalent, is subject to a transfer tax of one per ■cent, amounting to $1,800.00.”

As there was no oral but only documentary evidence, we are in just as good a position to form an opinion as to the main point on which the decision of the appeal must rest as was the surrogate. He rested his decision absolutely and necessarily upon his finding that the agreements of April seventh and April eighth were contemporaneous and were made in contemplation of the death of Miller. If the instruments were not parts of the same transaction, and if the transfer of the stock to Miss Tefft on April seventh was a completed transaction, the reasons of the surrogate do not control the situation. In order to an intelligent discussion of the subject, I quote a portion of his opinion :

“ Ho evidence as to the intent of the parties is presented except ■such as is contained in the agreements and in the will of Charles Miller. It is evident to me that the agreements were drawn with a view to the situation that has since arisen. The evidence of the second agreement being contemplated when the first was executed, so far as the instruments themselves furnish, is their proximity of execution; the transfer of precisely the same property for the same consideration. It may he reasonably inferred from the character of the property that Mr. Miller would be disinclined to divest himself of all authority over it and not only lose the value of its influence to him as a stockholder, but make it possible for it to pass into the hands of those who might antagonize his interests. Irrespective of this evidence and inference I am unable to supply any reason for the execution of the second agreement before the consideration for the first had become operative, if the second was not in contemplation when the first was executed. Certainly the lapse of a few hours between their execution, if such is the fact, will not suffice to defeat the legislative intent to apply a tax to transfers of personal property made in contemplation of death or intended to take effect in possession or enjoyment at or after such death. The provision in the will indicates that the testator did not intend to divest himself of the rights of ownership, possession and enjoyment which must pass by a transfer to take it without the scope of the act.”

His first proposition, and this seems to me to be the crucial point of the whole matter, is that the agreements and transactions of April seventh and April eighth were contemporaneous and parts of one transaction, and were so intended by Miller. Of this he correctly says there is no evidence except the agreements themselves and the will. This being true, I think the learned surrogate has given rein to his imagination and has permitted surmise and suspicion to take the place of presumption and legal deduction. As the instruments were executed on different days, the presumption is that they were separate and distinct. (See Dechert v. Municipal Electric Light Co., 9 App. Div. 573.) The instrument of April eighth does not even refer to the transfer of April seventh and in no sense is conditioned upon it. It must be assumed, in the absence of oral testimony, that the agreement of; April seventh, was executed and "the stock delivered to Miss Tefft on the day of its date, and it appears by the affidavit of the executor that the agreement of April eighth was not executed until the next day after the agreement of April seventh. If this is so, the transaction was a completed transaction of the day of its date, April seventh, and Miss Tefft became the absolute owner of the stock by assignment and delivery. It would not even have been defeated by the death of Miller before the marriage had occurred. (Smith v. Allen, 5 Allen, 454.)

It is true that it has been held that where two instruments are intended to embody a contract between the parties, they must be read and construed together, and the fact that they bear different dates is not material if the contract is not carried into effect until both are executed. Respondent cites Knowles v. Toone (96 N. Y. 534). In that case a note indorsed by a married woman was presented to the plaintiff for purchase. He refused to purchase until she had answered certain questions. Her written answer was dated three days after the date of the note, and thereupon the plaintiff purchased the note. The court held that the note had no inception until the time of the purchase, and, as this occurred after her written answer, the note and the answer were part of one transaction. But in the present case the transaction of April seventh was a completed sale and transfer of the stock accompanied by delivery of the certificate on that day.

The State has the burden of proving the facts under which the transfer tax may be imposed. In Matter of Enston (113 N. Y. 174, 177, 178) it was said, .Judge Andrews writing: “The tax imposed by this act is not a common burden upon all the property or upon the People within the State. It is not a general, but a. special tax, reaching only to special cases and affecting only a special class of persons. The executors in this case do not, therefore, in any proper sense, claim exemption from a general tax or a common burden. Their claim is that there is no law which imposes such a tax upon the property in their hands as executors. If they were seeking to escape from general taxation, or to be exempted from a common burden imposed upon the People of the State generally, then the authorities cited by the learned counsel for the People, to the effect that an exemption, thus claimed must be clearly made out, would be applicable. But the executors come into court claiming that the special taxation provided for in the law of 1885 is not applicable to them, or the property which they represent. In such a case they have the right, both in reason and in justice, to claim that they shall be clea/rly brought within the terms of the law before they shall be subjected to its burdens. It is a well established rule that a citizen cannot be subjected to special burdens without the clean' warrant of the law. The following authorities furnish the true rule applicable to such a case : Cooley on Taxation (2d ed. 275); United States v. Wiggleworth (2 Story, 373); Powers v. Barney (5 Blatch. 203); United States v. Watts (1 Bond, 583); Doe v. Snaith (8 Bing. 152); Green v. Holloway (101 Mass. 248).” 'This decision was cited and reannounced in Matter of Vassar (127 N. Y. 1, 12), where it was said: “And the rule is that -special tax laws are to be construed strictly against the government ■and favorable to the taxpayer, that a citizen cannot be subjected to special burdens without clear warrant of law.”

So, also, in Matter of Thorne (44 App. Div. 8), this court, Mr. •Justice Hatch writing, said (p. 10):