In re the Transfer Tax Upon the Estate of Gordon

Ingraham, J.: Leonard J. Gordon was a resident of the State of Mew Jersey and died there on the 17th day of .January, 1905, leaving a last will — 203 — and testament which was admitted to probate in that State and letters testamentary upon his estate were issued to William E. Gordon, who was also a resident of the State of New Jersey. The decedent died seized of no real property in this State, hut left certain personal property here, the value of which was appraised in this proceeding. At the time of his death the testator had a policy of life insurance in the Equitable Life Assurance Society, a domestic corporation. This policy was dated June 13, 1889, and by it “ The Equitable Society does promise to pay to Leonard J. Gordon, his executors, administrators or assigns the sum of -Five thousand dollars (any indebtedness to the Society on account of this contract to be first deducted therefrom) at the office of the Society in the City of New York within sixty days after satisfactory proofs of death of said Leonard J. Gordon, of Jersey City, in the County of Hudson, State of New Jersey, shall have been furnished to the Society at its said office.” The testator paid the premiums on this policy and it was in force at the time of his death, and on the 30th day of January, 1905, the insurance company paid the policy by a check of the insurance company drawn" to the order of William E. Gordon as executor of the estate of Leonard J. Gordon, deceased, on the Equitable Trust Company in the city of New York. There was no evidence as to where or how this check was delivered tp the foreign executor. Upon the death of an assured the proofs of death may be received at an agency of the society when they are transmitted to the home office in the city of New York, and when received there a check is issued in payment of the amount due. All premiums are regarded by the company as paid as soon as received at one of its agencies. It further appeared that this policy of insurance was not at any time in the State of New York after it was issued; that at the time of the death of the testator it was deposited in a safe deposit box in the State of New Jersey, and had been so deposited for more than five years prior to his death; that the contract of insurance was actually made in the State of New Jersey and the premiums paid there; that since the passage of the Insurance Law of the State of New Jersey in the year 1902,* the Equitable Life Assurance Society has designated the Commissioner of Banks and Insurance of New — 204 — Jersey as the person upon whom process could be served in that State, and that since the issuance of the j>olicy in question it has had real property in the State of New Jersey of the value of $5,000 or more. This State imposes a tax on the transfer of property of the value of $500 or over “ when the transfer is by will or intestate law, of property within the State, and the decedent was a nonresident of the State at the time of his death.” (Laws of 1896, chap. 908, § 220, subd. 2, as amd. by Laws of 1897, chap. 284). In Matter of Knoedler (140 N. Y. 377) it was held that a policy of life insurance issued by a domestic corporation upon the life of a resident of this State was property and assets of the decedent’s estate at the time of his death and subject to a transfer tax. The court said: “ The burden of the appellants’ effort seems to be to establish that’these policies were not property of which the testator-was seized and possessed at the time of his death. But it must be admitted that they were obligations to pay money at a future date, and every instrument duly executed and having a lawful consideration which secures to the holder the payment of money at a specified time, confers upon him a right of property. The statute has declared what shall he deemed assets of the estate of a deceased person and subject to distribution by his executors or administrators (4 B. S. [8th ed.j p. 2556, § 6*), and includes among them all dioses in action, and ‘ every other species of personal property and effects.’ It is plain that these policies were assets of the estate. The collateral inheritance law'is very broad in its provisions. All property which the decedent owned when he died and which has an appraisable value is to be included, subject, of course, to the payment of debts and to such exceptions as are specifically mentioned, but which have no application here. If these policies were not assets, "then the appellants derived no title to their proceeds under the will, and they cannot make title through any other source. ‘ It is only such property as the testator died seized and possessed of and its increase that they can claim as his legatees.” This decision is thus put upon the ground that the policies being the obligation of solvent debtors, were property which passed to the personal representatives and through them to the legatees under the will. In this case the deceased was a non-resident, and the Comptroller — 205 — is not only required to establish that this policy of insurance was property and passed by the will of the testator under the law of the State of Hew Jersey, but that what passed to the executors or legatees was property within this State at the time of his death. I conceive that the question here is not what the State had power to do by reason of its control over the corporation that was the debtor, but what it has done when it imposes a tax upon property within this State ; and whether the State, as a fací, has by this provision of the statute taken the money that was due to the estate of this non-resident and appropriated a portion of that money under the guise of taxation, when neither the creditor who was entitled to the money, nor the obligation under.which it was payable was actually within this State, at the time of the transfer. The money or property was not in the custody of the Surrogate’s Court, so that the person entitled to it would have to come to this State to receive it from an executor or administrator appointed by the law of this State, as was the case in Matter of Clinch (180 N. Y. 300). Here the money realized by the estate, and which the executor distributed as directed in the will, never was property of the estate in this State. It never became property of the estate until the debtor had delivered it to the foreign administrator, and it was then money in the State of Hew Jersey and under the control of the laws of that State. The Court of Appeals in Matter of Houdayer (150 N. Y. 37) held that money on deposit in a trust company in the city of Hew York, standing to the credit of a nonresident, was property within this State subject to taxation. In that case Judge Yann, in speaking of such a deposit, says : “While the relation of debtor and creditor technically existed, practically he had his money in the bank and could come and get it when lie wanted it. It was an investment in this State subject to attachment by creditors. If not voluntarily repaid, he could compel payment through the courts of this State. The depositary was a resident corporation, and the receiving and retaining of the money were corporate acts in this State. Its repayment would be a corporate act in this State. Every right springing from the deposit was created by the laws of this State. Every act out of which those rights arose was done in this State. In order to enforce those rights it was necessary for him to come into this State. Conceding that — 206 — the deposit was a debt; conceding that it was intangible, still it was property in this State for all practical purposes, and in every reasonable sense within the meaning of the Transfer Tax Act. * * * While distribution of the fund belongs to the State where the decedent was domiciled, as such distribution cannot be made until his administrator has come into this State to get the fund, possibly after resorting to the courts for aid in reducing it to possession, the fund has a situs here, because it is subject to our laws. 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 owing the right without coining 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.” And in Matter of Clinch (180 N. Y. 300) it was said: “ In Matter of Blackstone (171 N. Y. 682) we followed the decision in the Houdayer case and again taxed the deposit of a non-resident in a Hew York trust company. That case was appealed to the Supreme Court of the United States and our decision affirmed (Blackstone v. Miller, 188 U. S. 189). The Supreme. Court took the same broad ground held by Judge Yann in this court. It said that the doctrine that the situs of personal property was the domicile of the owner was merely a fiction which must yield, to facts; that it was the law of the place where the debtor resided which gave the debt validity and forced the debtor to pay, and that it was within the constitutional power of the State where the debtor resided to tax the obligation from him to a non-resident, excepting, however, the case of bonds and negotiable instruments which are considered to be not merely evidence of the debt, but inseparable from the debt itself.” — 207 — The reasons which were stated by Judge Vann to justify the conclusion that a deposit in a trust company was property within this State, except the fact that the insurance company was a domestic corporation, are not presented in this case. Here the obligation, which was an absolute obligation to pay a sum of money to a payee or his personal representatives, was not within this State. The contract was not made in this State. Under the law of the State of Hew Jersey, where the testator resided, the personal representatives of the insured could collect the amount due on the policy without coming into this State. The insurance company had become so far a resident of that State as to have obtained from that State authority under its laws to do business there, had designated a State official upon whom process could be served and had within that State property more than sufficient to satisfy the judgment. The obligation did not pass under the laws of this State to the executor or personal representative of the decedent. Under the contract itself it was never payable to the deceased, nor could he ever have collected it. It was payable upon his death to his personal representa tives or assigns. The right to receive the money after the death of the insured could have been assigned during his life, because the contract was that the money should be paid to his personal representatives or assigns, but the right to receive and the obligation to pay this money did not arise until the death of the insured, when there arose in pursuance of a contract which the company had made with him an obligation to pay to his personal representatives a sum of money after his death. It is quite true that the sum of money when received by his executor passed under the will of the testator and it was bythe personal representatives of the testator to be distributed as therein provided. But it seems to me that what passed under the will and what was transferable was the money which was received by the personal representatives of the deceased, and that iñoney never became property of the estate until it was paid to the foreign executor in the discharge of the obligation which the insurance company had entered into. Suppose the insurance company had refused payment and the executor had sued in the State of Hew Jersey by serving process there upon the person designated by. the insurance company, and had obtained a judgment there and had satisfied that — 208 — judgment out of the property of the insurance company in that State, and then had distributed the money thus received among the beneficiaries named in the will, could it have been said in any sense that anything that passed by the will of the testator was in this State at the time of his decease and passed by virtue of the laws of this State ? The fact that the insurance company voluntarily paid its debt, instead of compelling this New Jersey creditor to proceed to enforce it in New Jersey, cannot substantially change the situs of the property, which was transferred by the will of the testator and over which the courts of this State had no jurisdiction. I think, therefore, that the order appealed from should be reversed and the order fixing the transfer tax modified by deducting from the taxable property the amount realized upon this policy of insurance, with ten dollars costs and disbursements to the appellant. McLaughlin, J., concurred; O’Brien, P. J., and Clarke, J., dissented. Footnotes [*] See Laws of FT. J. of 1902, chap. 134, as amd.— [Rep. [*] Revised in Code Civ. Proe. § 2712.—[Hup.