Court Opinion

ID: 7336849
Source: CourtListenerOpinion
Date Created: 2022-07-25 23:13:03.261398+00
Date Added: 2024-06-11T16:20:13.337873
License: Public Domain

ItTG-BAHAM, J.
I concur with Mr. Justice RTJMSEY that the property which came to the deceased from her father and her brother subject to the life estate of her mother was subject to taxation, but I cannot agree with his disposition of the question as to the liability of the tax of the personal property which was actually owned by Mrs. Heyward in her own right at the time of her death. This property in question belonged to Mrs. Heyward, and was, by her last will and testament, devised and bequeathed to the decedent absolutely. That it was property within this state, and subject to its laws, is conceded. Mrs. Heyward, by her will, left all of her property, after the payment of certain specific legacies, to the decedent; and, while the formal legal title of her personal property vested in the executors for the purpose of administration, the beneficial interest in this property passed at once to the residuary legatee. It seems to me.that this residuary legatee had something more than a right of action against the executors to recover a legacy. She had the absolute right to all the personal property of the decedent, except such a portion of it as was necessary to satisfy the specific legacies and pay the expenses of administration. While it is quite true that the situs of an indebtedness is determined by the residence of the creditor, where the question is as to the ownership of specific personal property, the situs of that property does not depend upon the domicile of the possessor, but upon the place where that specific property is situated. The title to this personal property which vests in the executors is merely the formal title, which vests in them for the purpose of administration. The right to the property itself passed to the decedent as residuary legatee under the will of her mother. That will was admitted to probate upon the day of the decedent’s death, and it must be presumed that by the admission of the will to probate the right of the decedent to the property was determined during her lifetime. She thus became the beneficial owner of the property, the formal legal title of which was in her mother’s executors, and it was this ownership or right to the property that passed by her will to the respondent. By section 1 of the transfer tax law (chapter 399, Laws 189-2) it is provided that “such tax shall also be imposed where any such person or corporation becomes beneficially entitled in possession or expectancy to any property, or the income thereof, by any such transfer.” Upon the death of her mother the decedent became entitled to her residuary estate by her mother’s will.
The decision of the supreme court in Re Phipps, 77 Hun, 328, 28 N. Y. Supp. 330, must be read in connection with the decision of the court of appeals in Re Houdayer’s Estate, 150 N. Y. 38, 44 N. E. 718, and the principle established by this latter decision must, I think, be controlling. There the question was as to whether or not a sum of money deposited in a trust company .in the city of *932New York to the credit of a nonresident was taxable as property located within this state. We held in that case that the deposit of this money, creating a mere relation of debtor and creditor between the decedent and the trust company, was not property located within this state, and was not taxable. In reversing that decision, Judge Vann, in speaking of the decision of this court, said:
“In my judgment, this is sound reasoning upon an unsound basis, because it places form before substance. It enables a large sum of money invested and left in this state, and enjoying the protection of its laws, to escape taxation because the decedent had voluntarily commingled his own funds with those of an estate he represented, and for the further reason that his rights as against the trust company were intangible. But what were his rights, or those of his successors, as against the state of New York, in view of the command of its legislature that all property, or interest in property, within the state, susceptible of ownership, should be subject to a transfer tax upon the death of its owner, whether he was a resident or nonresident? What was the real thing, the essence of the transaction, that gives rise to this controversy? * * * A reasonable test in all cases, as it seems to me, is this: Where the right, whatever it may be, has a money value, and can be owned and transferred, but cannot be enforced or converted into money against the will of the person owning the right without coming into this state, it is property within this state for the purposes of a succession tax. Thus the right in question is property, because it is capable of being owned and transferred. It is within this state, because the owner must come here to get it. It is subject to taxation, because it is under the control of our laws. It has a money value, because it is virtually money, or can be converted into money upon demand. It is subject to a transfer tax, because the passing, by gift or inheritance, of ‘all property, or interest therein, whether within or without'this state, over which this state has any jurisdiction for the purposes of taxation,’ comes within the expressed intention of the legislature.”
It is true that this opinion does not seem to have been concurred in in its entirety by a majority of the judges of the court, but the result was concurred in, and the result in that case could only have been reached by a determination that a deposit of money in this state, where the technical relation of debtor and creditor created between the depositor and the bank in which the money was deposited was property within this state, and that the courts would look to the substance, and not to the form, in determining whether or not there was property within this state subject to taxation. Now, in this case it seems to me clear that there was substantial property within this state which belonged to this decedent, and which passed by her, under the will, to her residuary legatee. The specific personal property was here. The beneficial ownership of the property passed by her will to the respondent, and the mere fact that the formal legal title had vested in the executors for the purpose of administration does not affect the right or title that this respondent has to that property under the will of the decedent. Such a right to specific personal property within this state that can be transferred which is subject to our laws, and when the owner, to obtain possession of it, must come within this state, I think is property subject to taxation under the law of this state, and that the order of the surrogate should be entirely reversed, and the order entered upon the report of the appraiser restored.