Orr v. Gilman, 183 U.S. 278 (1902)
Orr v. Gilman
No. 361
Argued November 25-26, 1901
Decided January 6, 1902
183 U.S. 278
ERROR TO THE SURROGATE’S COURT
OF THE COUNTY OF NEW YORK
Syllabus
The provisions of subdivision 5 of the tax law of the State of New York, which became a law April 16, 1897, are not in violation of the Fourteenth Amendment to the Constitution, nor of Section 10 of Article I of the Constitution.
The opinion in Carpenter v. Pennsylvania, 17 How. 466, although decided before the adoption of the Fourteenth Amendment to the Constitution, correctly defines the limits of jurisdiction between the state and the federal governments in respect to the control of the estates of decedents, both as they were regarded before the adoption of the Fourteenth Amendment, and have since been regarded.
The holding of the Court of Appeals of New York that it was the execution of the power of appointment which subjected grantees under it to the transfer tax is binding upon this Court.
The Court of Appeals did not err when it held that a transfer or succession tax, not being a direct tax upon property, but a charge upon a privilege, exercised or enjoyed under the laws of the state, does not, when imposed in cases where the property passing consists of securities exempt by statute, impair the obligation of a contract within the meaning of the Constitution of the United States.
The view of the Court of Appeals in this case must be accepted by this Court as an accurate statement of the law of the state.
David Dows, Sr., a citizen and resident of the City and State of New York, died March 30, 1890, leaving a last will and testament, which was duly admitted to probate by the Surrogate’s Court of New York County on April 14, 1890. The will provided that the legal title to the property mentioned and described in the sixth clause thereof should vest in the executors’ names as trustees during the lifetime of testator’s son, David Dows, Jr., with power to manage and control the same, and with the duty to pay the net income therefrom the said David Dows, Jr. The will further provided that, upon the death of David Dows, Jr., the property should vest absolutely and at once in such of his children him surviving and the issue of his deceased children as he should by his last will and testament designate and appoint, and in such manner and upon such terms as he might legally impose. In and by the eighth clause or paragraph of his said will, David Dows, Sr., devised and bequeathed the legal title to his residuary estate to his executors as trustees, to hold and manage the same, one-eighth part in trust during the lifetime of testator’s widow and one eighth in trust for each of testator’s seven children, one of whom was the said David Dows, Jr. It was made the duty of the trustees to pay over the net income to the respective persons named during their respective lives, and it was provided that, upon the death of each of said persons, the said one-eighth part of the residuary estate, with any accumulations and profits, should vest absolutely and at once in such of his or her children, or the issue of such children, as he or she might by his or her last will and testament designate and appoint, and in such manner and upon such terms as he or she may legally impose. It was provided in both the sixth and eighth clauses that, if the legatee for life shall die intestate. then the property should vest absolutely and at once in his or her children surviving, share and share alike.
David Dows, Junior, died January 13, 1899, leaving a last will and testament, which was duly admitted to probate by the Surrogate’s Court of Westchester County, New York, by the third paragraph or clause whereof, in the exercise of the power of appointment given him in his father’s will, he provided that the property mentioned and described in the said sixth and eighth clauses of the will of David Dows, Sr., should vest upon his death in his three children, David, Robert, and Kenneth, in a manner therein described.
On October 31, 1900, Bird S. Coler, Comptroller of the City of New York, and Theodore P. Gilman, comptroller of the State of New York, filed a petition in the Surrogate’s Court of New York County in which, after reciting the foregoing facts, they alleged that the transfer of funds and property of which David Dows, Junior, had the life use, and over which he had exercised the power of appointment given him in his father’s will, was taxable, and they therefore prayed for the appointment of a transfer tax appraiser, in order that the transfer tax might be duly assessed and imposed. Thereupon Charles K. Lexow was so appointed, and on January 31, 1901, after having given notice to the said comptrollers and to the executors and trustees of the last will of David Dows, Senior, and to the executors of the last will of David Dows, Junior, and to the guardians of the minor children of David Dows, Junior, the appraiser filed in the surrogate’s office a report of his valuation of the interests of the three sons of David Dows, Junior, under the respective wills of their father and grandfather. Certain exceptions to this report were filed on behalf of the executors and guardians, the nature of which will hereafter appear. Thereafter, on February 15, 1901, the surrogate, on the basis of the report of the said appraiser, assessed a transfer tax of upwards of $7,000 against each of the respective interests of the three sons of David Dows, Junior. The exceptions to the appraiser’s report and to the assessment were, on March 6, 1901, after argument by counsel, overruled, and the surrogate entered the following order and judgment:
It is ordered, adjudged, and decreed that said report and order so appealed from be, and they are hereby, affirmed, and that the date when the transfers now taxed were effected was January 13, 1899, that date being fixed because it was the date of the death of David Dows, Junior, the donee of the power contained in the will of David Dows, Senior.
An appeal was taken from the order and decree of the surrogate to the appellate division of the Supreme Court of New York, and by that court, on March 22, 1901, the order of the surrogate was affirmed. On appeal duly taken, the Court of Appeals of the State of New York, on May 17, 1901, affirmed the order and judgment of the appellate division of the supreme court, and the judgment of the said Court of Appeals and the record of the proceedings were remitted into the Surrogate’s Court of New York, to be enforced according to law, and the judgment of the Court of Appeals was, on May 28, 1901, made the judgment and order of the Surrogate’s Court. And on June 13, 1901, a writ of error to that judgment was allowed, and the cause was brought to this Court.