Court Opinion

ID: 5182664
Source: CourtListenerOpinion
Date Created: 2022-01-06 04:44:11.887941+00
Date Added: 2024-06-11T08:26:37.838537
License: Public Domain

Inghaham, J. (dissenting):
I am unable to agree in the affirmance of the decision of the surrogate that the provision of the will by which $5,000,000 in securities is directed to be delivered to George J. Gould is not a transfer by will within the provision of the statute.
The statute provides that “ a tax shall be and is hereby imposed upon the transfer of any property, real or personal, of the value of five hundred dollai’S or over, or of any interest therein, or income therefrom, in trust or otherwise, to persons * * * when the transfer is by will * * * from any person dying seized or possessed of the property while a resident of the State.” (Chap. 399, Laws of 1892, § 1.) By the 8th clause of the 2d codicil to the last will and testament of the testator a statement was made that George J. Gould had devoted himself entirely to the business of the testator, and that the testator fixed the value of such services at $5,000,000, payable a portion in cash and the balance in certain specified securities, to be treated as worth par. The said clause also contained the provision that “ the receipt of the said George J. Gould in full for the said services and all other services down to the time of my death, not otherwise paid for by me during my lifetime, unless I shall hereafter by a different testamentary provision provide, shall be all the voucher required by my executors and trustees.” This codicil was executed November 21, 1892. The testator died December 2,1892. The evident intention of this codicil was that George J. Gould should receive from the testator’s estate this amount of cash and the securities mentioned, and that such legacy should be considered as the compensation for the services rendered by George J. Gould to *362his father during his lifetime. But it seems to me that, considering all of the circumstances, it was in. the nature of a voluntary gratuity to his son, which it was intended should pass by will, rather than the payment of: an obligation to his son for services rendered. I do not' think that we are justified in treating this provision of the will as- a payment of a debt due by the testator to his son. The testimony discloses that, during all this period for which George J. Gould had acted for his father, his father had- paid to him large sums of money which had been used by him, besides making him a regular allowance' of a considerable amount. There is no doubt but that there was some understanding between the father and son that the services that he rendered should be in some way recognized by the father, but that is very different from there being a distinct obligation to pay a specific sum, or an obligation to pay what the services were reasonably worth, which could be considered in settling the estate of the testator as a legal existing liability at the time of his death..
Take the case, of a contract to make mutual wills between two-persons, or a promise that a provision will be made by will as compensation for services to be rendered, there would* I think, be no' doubt but that any provision made under such a contract-would be taxable under the statute. And it seems to me quite clear from the testimony here that tit was such an intention that the testator intended to" express by the' conversations which are detailed in the evidence. They are all . expressive of an intimation on the part of the father to, induce the son to refrain from speculation and to devote himself to protecting his father’s interests rather than a contract or obligation to pay for services rendered. It is not- claimed .that the amount fixed by this codicil was based upon the value of the services rendered, or, that, considering the amount that. George J. Gould received from his father during the period in which the services were rendered, this sum would have been the fair value of such services. The whole intention, as expressed, seems to me to point clearly to the idea that what the testator did was intended as a voluntary gratuity to the son in recognition of, the devotion that the son had shown to his father. It was rather a bequest to the son, in addition to that given to his other children, as a recognition of the devotion that the' son had shown to his father, than the distinct recognition and payment of 'ah existing legal-obligation. The-duty *363of making a proper provision for his children by a parent is recognized by all, and it is quite natural that, in making such provision by will, the devotion to the interest of the parent by a particular child should be recognized in the provision that is made; but this is. nevér looked upon as a legal obligation, but rather the reason for a discrimination by the parent in the disposition of Lis estate. The instrument executed by the testator and delivered to the counsel who' drew the will does not of itself change the legal effect to be given to this provision of the will. It was handed by the testator to his counsel as a memorandum to be used in the preparation of the codicil. The statement to his counsel, “that he had signed that paper to the end that if he should die it would .be binding upon him, and asked me if it would not. be, and I said yes, I did not see why it should not,” is entirely consistent with the idea that it was evidently in the mind of the testator that a provision in the will, or in some legal instrument, which would justify his executors in delivering the securities and money named to his son was necessary to enable his son to receive, what he intended for him. There is not one word in this memorandum, or in the codicil, as prepared, that recognizes an existing legal obligation to pay this sum of money to his son. On the contrary, it was evidently in the mind of the testator that but for this prepared writing, or the codicil which should afterwards be inserted in the will, the legal obligation did not exist. Both the instrument and codicil were testamentary, and intended only to become effectual upon the death of the testator, and the disposition of the property was subject to the tax.
I think, therefore, that on the appeal of the State, the. order of the surrogate should be reversed and the case sent back to him with a direction to ascertain the value of this legacy to the son for the purpose of taxation.
The appeal of the executors should, I think, also be sustained. The estate consisted principally of stocks and bonds of various rail-, road corporations and debts due to the testator from such corporations. In making this appraisement the appraiser concluded that he was bound by section 1 of chapter 31 of the Laws of 1891 to take the quotations of the Hew York Stock Exchange and fix the market value by ascertaining the price at which such securities had been there sold. Conceding that a rule is provided by this statute *364for the appraisal of the estate of the testator, it must be read in connection with the act which imposes the tax upon this property. By that statute the appraiser is directed to appraise the property at its fair market value, and it is to he fixed as of .the death of the testa*tor. It is .the fair market value of the right of such succession that' the appraiser is required to fix ; and while under the act of 18.91, before cited, lie is to fix ■ that valúe, according to the range of the market and average prices at which.such securities are bought and sold in .open market in the city of New Yoi% this rule, I think, applies only to cases where there is' stich a market for securities; and the mere fact that there have been isolated sales of a small amount of particular stocks or bonds would not justify an appraiser, in disregarding all the evidence relating to the said sales, the amount of the stock and bonds sold in comparison with the amount of the property to be appraised or any other fact which would tend to show that the particular- sale or sales quoted is not a fair criterion of the market'value of the legacy, or the right to succeed to the personal property which passes under the will or the intestate law. ■
Now, the testimony in this case is quite conclusive and uncontra-' dieted that many of these securities, had no real market value in New York at anything like the quotations; while the opinion oE a witness that an attempted sale at the Stock Exchange of such a mass of securities as that held by this estate would decrease the value as to make a-serious depreciation in the, price should not, of itself,; be sufficient to show that the price at which- stocks Were sold is not; a fair criterion of their market value; and. this would evidently apply to such stocks as Missouri Pacific, Metropolitan Railway and Western Unión Telegraph.
There were, however, other securities as to which ihe evidence shows that the appraiser relied too exclusively upon a simple sale of a small amount of stock or the quoted prices at the Stock Exchange as fixing a. fair market value. Take the securities that- are known in the' report.. as. Missouri Pacific trust five per' cent bonds.-. Of; those the testator held upwards of $10,000,000 at par value,'and the value fixed by the appraiser was eighty-nine per cent. George J. Gould testified that .for those securities sixty cents on the dollar was much more than, he could sell them for, and he also testified as to the Missouri Pacific first collateral-bonds, of which the estate held *365bonds to the par value of $2,333,000, that fifty cents on the dollar was much more than they could be sold for. These last the appraiser valued at seventy cents.
Now, the evidence of Mr. Keppler and Mr. Pierce was that there was absolutely no market value of these bonds; that it would have been impossible to sell $10,000,000 of the bonds at any price, and that what were called sales at the exchange were merely nominal quotations, and that there was actually no market for these securities.
It seems to me that the appraisement of these securities at the amount fixed by the appraiser was clearly-excessive. So, in regard to the Iron Mountain five per cent consolidated bonds, the value was fixed by the ajjpraiser at eighty-three, and yet it seems, from the testimony of Mr. Keppler, that the fair market price for these bonds at this time was not above seventy-five per cent.
As to the various unlisted securities, upon which there is no market value proved, it seems to me that the appraisement was entirely too high and much more than the evidence justified. This is especially true in regard to the debts due from the Missouri Pacific and Iron Mountain Companies. I think the record entirely fails to show that the value of seventy-five cents on the dollar placed upon the indebtedness of the Missouri Pacific Railroad Company and the St. Louis, Iron Mountain and Southern Railroad Companies was sustained by the evidence. This indebtedness was entirely unsecured, and while Mr. Gould stated in his examination that he considered the fair market value-of the Missouri Pacific loan at the'time seventy-five cents on the dollar, it is entirely evident that, from his subsequent testimony and the other testimony in the case, the market value, of that loan at the' time of the death of the testator was not over fifty cents on the dollar, and there is no evidence at all as to the. value of the loan to the Iron Mountain Railroad Company being over fifty cents on the dollar.
I have merely indicated what seems to me to be the erroneous views adopted by the appraiser in "fixing the value as he has of this estate. I have examined the testimony carefully with a view of indicating what in my opinion should be a correct appraisement, but in view of the fact that I think the case should -go back to the appraiser for an appraisement of the'value of the interest acquired by George J. Gould in the legacy to him of $5,000,000, it seems to *366me that the best plan would be. to send the whole ease back to him for appraisement as to the value of this property at the time of the death of the. testator, with a direction that where the sales.upon the Stock Exchange are proved to be boriafide sales of securities which indicated at the time the fair market value of such securities, they are to control him in fixing their value. But in the case of - those securities^ where it is proved that -there were no actual transactions, or that the reported transactions were, of .such a character that they furnished no fair indication of the market price, other evidence of the value- should be considered,, and the securities or indebtedness ■appraised, at the fair market value, the value which, considering all of the circumstances, the property would have sold for at the time of .the death of the testator.
As both parties have appealed, I think there should be no costs of this appeal.
Order affirmed, without costs to either party.