"When, in consequence of a valid limitation of an expectant estate, there is a suspension of the power of alienation, or of the ownership, during the continuance of which the rents and profits are undisposed of, and no valid direction for their accumulation is given, such rents and profits shall belong to the person presumptively entitled to the next eventual estate."

This provision does not mean, first, that the holder of the next eventual estate is to take if there is no valid accumulation, and then that he does not take if there is an invalid accumulation. The statute cannot have these two inconsistent meanings. The condition that there be no valid accumulation implies that in the absence of a valid accumulation the statute operates. This provision does not exclude the holder of an expectant estate if there is an admitted disposition of the income. The portion of the statute "during the continuance of which the rents and profits are undisposed of" must mean validly disposed of. Otherwise it would conflict with the other portion, "no valid direction for their accumulation is given." The statute would first state that it is not to apply if the income is disposed of validly or invalidly, and then that it is to apply only if no valid disposition of a particular kind, namely, the accumulation, is made. The statute must therefore be held to mean that the only disposition which prevents its operation is a valid disposition. Numerous cases hold that there must be a valid, not an invalid, disposition of an expectant estate before section 63 can apply to undisposed of income and profits. I have often had occasion to refer to these decisions and will not repeat them.

[17-20] An unlawful accumulation does not prevent the statute from taking effect. There is, however, one difficulty which confronts us in thus construing the statute. It is a cardinal rule that in the construction of a statute effect must be given, if possible, to every portion. It is true that the only invalid disposition that can be made of the rents and profits is an unlawful accumulation. An expectant estate must vest within the prescribed time allowed by the statute of perpetuities in order to be valid. The only disposition of the rents and profits which can be made is one pending such permitted period. Therefore as the disposition, if not an accumulation, must be valid, the only invalidity which can be ascribed to a particular disposition is that it is an unlawful accumulation. Thus the words "during the continuance of which the rents and profits are undisposed of" have the same force and effect as the words "no valid direction for their accumulation is given" unless the term "undisposed of" is limited in some way. It is apparent that the draughtsman of the statute meant and intended to say in using the words "undisposed of" a disposition other than through an accumulation. In short, all that is meant is that the persons who are presumptively entitled to the next eventual estate will take, first, unless the rents and profits are undisposed of by some valid. provision other than an accumulation, and second, unless there is at valid accumulation.

Applying the principles laid down, the following should, I think, guide the trustees in their handling of the trust estates. It must, I presume, be conceded that the trustees, by coming into court and asking for a construction of the will so as to enable them properly to constitute the trust funds and properly to distribute the income, ad

mit that they have not definitely established the trust funds, although, under the interpretation which we have placed on the will, they ought to be the first to pass upon the amount of the trust funds. As they have not so done they should, I think, definitively constitute the trust funds for the four trusts mentioned in paragraph eighth of Mr. Kohler's will out of sufficient amounts of corpus so as, in their opinion, to enable them to pay over the net income to the three daughters, as provided by paragraph eighth, of $25,000 per annum, and to pay over to each of them the installments of principal also prescribed in that paragraph. This is also true in the case of the trust for Mrs. Kohler. The trustees should set aside a sum sufficient to enable them to pay her $25,000 per annum. Furthermore, as there has not been any definitive separation of the trust funds it would not be correct to regard any accumulations of income, in excess of the requirements of paragraph eighth, accumulations on a particular trust fund within the rules laid down in Spencer v. Spencer, before cited. Therefore, until such trusts are definitively constituted, this excess income remains a portion of the residuary estate. This is so, not because the trust funds required for the provisions of paragraph eighth are to be deemed varying amounts, but because until they are permanently constituted they are not carried out of the residuary estate so as to prevent the latter from including them in favor of the beneficiary under paragraph eighteenth.

The trustees, having once constituted the trust funds as herein provided, thereafter all accumulations on the four trust funds should be disposed of as follows: In the case of subdivision 1, for Mrs. Florman, all excess income should be applied according to the rule in Spencer v. Spencer. All surplus for a particular year should be paid over to the holder of the next eventual estate, that is, to the issue of Mrs. Florman, at the time of such payment. If at such time a deficit exists in the annual payments made to Mrs. Florman theretofore, such deficit should be payable, first, out of the surplus. In the case of the trust funds for the two minor children, under subdivisions second and third, a similar disposition of the income should be made, except that all accumulations not needed for past deficits should be paid to those entitled to the next eventual estate. That is, if there be issue, they take. If there be no issue, then those entitled under paragraph eighteenth will take.

[21] The learned special guardian for the grandchild, Nils K. Florman, urges in this proceeding that none of the parties are entitled to a distribution of the principal or income in this proceeding as this proceeding is ostensibly one for the construction of the will, not one for an accounting. No direction ought, I think, to be made at present for the payment of the income accumulated, nor for the constitution of the various trust funds. That, as already stated, is for future action by the trustees. No decree awarding specific amounts or directing specific amounts be set aside can, I think, be now made. Upon the next accounting of the trustees, in which they show the separation of the trust funds, if no objection be made in regard to the amount of the corpus of the respective funds, the court can exercise such review

as it deems proper. At that time a decree may also be passed for distribution of the accumulations upon the various trust funds.

If an accounting proceeding be begun at an early date, before the decree in this case is made, such accounting proceeding can be consolidated with this under section 2535 of the Code of Civil Procedure, and then a decree can be made which will be of more service and practical value to the trustees. I am unwilling to go further into the matter at this time. On the accounting the entire contentions may be presented de novo and without prejudice. Settle order accordingly.

(96 Misc. Rep. 531)

In re POST'S ESTATE.

(Surrogate's Court, New York County. July 31, 1916.)

1. WILLS 602(1)—CONSTRUCTION-ESTATES CREATED-BASE FEE.

Under Real Property Law (Consol. Laws, c. 50) § 140, authorizing a devise to grant a power, a will leaving property to a widow with absolute power of disposal during her lifetime, with remainder over, creates a base fee, and the entire estate belongs to the widow for all purposes except that of testamentary disposition.

[Ed. Note. For other cases, see Wills, Cent. Dig. §§ 1351, 1352, 1359; Dec. Dig. 602(1).]

2. TAXATION

895(6)—INHERITANCE TAX-VALUATION-QUALIFIED FEE. Where a will left property to the widow with absolute power of disposal during her lifetime, with remainder over, held that its entire value was liable for inheritance taxation under Tax Law (Consol. Laws, c. 60) § 230, prohibiting allowances for contingencies which may defeat the estate, for the widow could use the entire estate, although such use might be partly defeated by her death before exhausting it.

[Ed. Note. For other cases, see Taxation, Cent. Dig. § 1719; Dec. Dig. 895(6).]

Proceedings to assess an inheritance tax upon property passing under the will of Edward C. Post. From an order fixing the tax Emilie Thorn Post appeals. Affirmed.

Egerton L. Winthrop, of New York City, for appellant Emilie Thorn Post.

Lafayette B. Gleason, of New York City (Schuyler C. Carlton, of New York City, of counsel), for State Comptroller.

FOWLER, S. This is an appeal from an order entered in a proceeding brought to assess a tax upon the transfer of property passing under the will of the decedent. By the third paragraph of his will the testator gave all his estate, real and personal, to his wife Emilie Thorn Post

*

"to have, hold, use, occupy and enjoy the same for and during her natural life, with full power and authority in her absolute discretion to sell all or any part of the realty and to sell or otherwise dispose of the personalty, and to have, use and enjoy the proceeds of any such sales without liability to account for either principal or interest, or the income of said residuum of my estate."

For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

In the fifth paragraph of his will he provided that:

"So much of my estate, including the proceeds of whatever my wife may have sold, as may be remaining in the hands of my said wife at the time of her death, I give, devise and bequeath unto the children of my brother."

The appraiser ascertained the value of decedent's residuary estate to be $297,490.66, and the order entered upon his report assessed a tax on this amount, less an exemption of $5,000, against the widow at the rate of taxation provided by section 221a of the Tax Law (as added by Laws 1911, c. 732), in force at the date of decedent's death. The widow contends upon this appeal that the only interest in the estate which is taxable at the present time is the value of her life estate in the residuary, and that the remainder after such life estate should be suspended from taxation until her death.

In proceedings brought to assess a tax upon estates where the life tenant was empowered by the will to use the principal fund, it was the practice, prior to the decision in the Matter of Zborowski, 213 N. Y. 109, 107 N. E. 44, to ascertain the value of the life estate, assess a tax on such value, and suspend taxation upon the remainder (Matter of Babcock, 37 Misc. Rep. 445, affirmed Id., 81 App. Div. 645, 81 N. Y. Supp. 1117; Matter of Granfield, 79 Misc. Rep. 374, 140 N. Y. Supp. 922). The decision in the Matter of Zborowski, however, appeared to cast some doubt upon the correctness of that practice, and this court has recently held that in such cases the remainder after the life estate should be presently taxed at the highest rate (Matter of Blun, N. Y. Law Journal, March 26, 1916; Matter of Neher, 95 Misc. Rep. 68, 158 N. Y. Supp. 454). The recent decision of the Court of Appeals in Matter of Terry, 218 N. Y. 218, 112 N. E. 931, in which the Matter of Zborowski is distinguished, would seem to indicate that the entire estate should be taxed against the person who has the power to use and dispose of the principal, and that taxation on the interests of the remaindermen should be suspended until they vested in possession. As I understand the decision in Matter of Terry, the court held that where property is given to a legatee with the right of immediate possession and enjoyment, which possession and enjoyment is liable to be defeated or divested by a future contingency, the entire value of the legacy should be presently taxed against the legatee, and the valuation, as well as the taxation of the possible reverter or remainder to other persons, should be suspended until such persons become actually entitled to the possession of the property.

[1, 2] In the matter under consideration the entire residuary estate is given to the decedent's widow for life, with power to use and enjoy it, and without liability to account for either principal or interest. Under secton 140 of the Real Property Law (Consol. Laws, c. 50), this is an absolute power of disposition, except as to any future estate limited thereon in case the power of absolute disposition is not executed. I have repeatedly held that such a power is a base fee. Therefore the entire estate belongs to the widow for all purposes, except that of testamentary disposition. Farmers' Loan & Trust Co. v. Kip, 192 N. Y. 266, 85 N. E. 59. This would seem to bring her interest within that part of section 230 which reads:

"In estimating the value of any estate or interest in property to the beneficial enjoyment or possession whereof there are persons or corporations presently entitled thereto, no allowance shall be made on account of any contingent incumbrance thereon, nor on account of any contingency upon the happening of which the estate or property or some part thereof or interest therein might be abridged, defeated or diminished."

The widow is presently entitled to the beneficial enjoyment of the entire residuary estate, but her right to use it may be defeated by her death before she has used or disposed of it. This contingency will not, however, under the language of section 230 above quoted, prevent the present valuation and taxation of the entire estate. It is transferred to her under the decedent's will, and the state imposes a tax upon the value of the property transferred. There is no authority in the Tax Law for assessing a tax upon the value of her life estate in the residuary, because that is not the interest transferred to her by the will of the decedent; she is entitled, not only to the income from the residuary during her life, but also to the principal. If only a life estate in the residuary were taxed against her, and taxation on the remainder were suspended until her death, and she disposed of the entire estate during her life, the state would then be unable to collect a tax on the remainder, and its right to a tax on the property transferred by the will of the decendent would be defeated. I am therefore inclined to think that the principal laid down in Matter of Terry, supra, applies to this case, and that the appraiser was correct in reporting the value of the entire residuary estate as taxable against the widow. The order fixing tax will be affirmed.

(Surrogate's Court, New York County. August 1, 1916.)

1. COMMON LAW 8-FORCE OF ENGLISH DECISIONS.

Decisions of the English courts subsequent to 1776 are not a part of the New York common law, made binding by constitutional limitation, but have merely persuasive authority, in the absence of determination by the courts of the state.

[Ed. Note. For other cases, see Common Law, Cent. Dig. § 8; Dec. Dig. 8.]

2. GUARDIAN AND WARD 11-APPOINTMENT OF GUARDIAN BY DEED-TESTAMENTARY CHARACTER-STATUTE.

A mother's appointment by deed, under Code Civ. Proc. §§ 2657, 2658, touching the appointment and qualification of a guardian of an infant by will or deed, can take effect only on her death, the deed contemplated by the statute being of a testamentary nature, as the statute is a reenactment of St. 12 Car. II, c. 24.

[Ed. Note. For other cases, see Guardian and Ward, Cent. Dig. §§ 3439; Dec. Dig. 11.]

In the matter of the application for letters of guardianship of the persons and estates of Oliver Wolcott Gibbs and Angelica Singleton Gibbs, Jr. Application denied.

Augustus H. Skillin, of New York City, for petitioner.

For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes