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App. Div.]

SECOND DEPARTMENT, JULY TERM, 1903.

to this appeal is as follows: "A receiver who, having executed and filed a bond as provided for in this section, before presenting his accounts as receiver, must give notice to the surety or sureties on his official bond, of his intention to present his accounts, not less than eight days before the day set for the hearing on said accounting. The same notice must be given to such surety or sureties where the accounting is ordered on the petition of a person or persons other than the receiver, and in no case shall the receiver's accounts be passed, settled or allowed, unless the said notice provided for in this section shall have first been given to the surety or sureties on the official bond of such receiver."

So far as the cases called to our attention indicate, this exact question does not seem to have been decided. It has been held that where a bond executed under the provisions of this section has run to an individual rather than to the People of the State of New York, it is good as a common-law bond, and may be enforced as such, irrespective of the provisions of that portion of section 715 of the Code, above quoted, provided, of course, a common-law breach of the conditions of the bond is shown. (Carl v. Meyer, 51 App. Div. 5.) And it has also been held that in the case of a bond executed pursuant to this section, where it later appears that the appointment of the receiver, the principal in the bond, was invalid, the receiver acted de facto, and the fact of the appointment being recited in the bond, the obligors were estopped from denying the validity of his appointment and the bond was good. (Thompson v. Denner, 16 App. Div. 160.) The plaintiff would have us hold that these cases are controlling upon the proposition here, but in those cases the court was not called upon and did not attempt to decide the proposition which confronts us here.

It has been recently held in the court of last resort that an action is not maintainable upon a receiver's bond until proceedings for an accounting are had against him, where no reason appears why such accounting could not be had, and that this rule is not qualified by reason of the fact that the bond may not contain any provision for a report or accounting by the receiver. (French v. Duuchy, 134 N. Y. 543.) The decision in that case was arrived at after a careful consideration of the authorities in this and other jurisdictions in relation to accounts. The holding that proceedings for an account

SECOND DEPARTMENT, JULY TERM, 1903.

[Vol. 86.

ing must be had before an action is maintainable cannot be held to mean any other than a valid, regular accounting, authorized by the statute or some rule of law. Section 715 of the Code, when it says that “in no case shall the receiver's accounts be passed, settled or allowed, unless the said notice provided for in this section shall have first been given to the surety or sureties on the official bond of such receiver,” must be held to mean that, at least as against the surety, an attempted voluntary accounting by the receiver or one upon the petition of a creditor cannot be regular and valid, and as against the surety or sureties it could have no effect whatever. This interpretation of those clauses of the section can lead to no conclusion other than that the failure of notice to the enreties works a denial of the privilege of this plaintiff to maintain an action upon the statutory -bond.

The rule might be otherwise, however, as was suggested upon a former appeal in this case (Stratton v. City Trust, etc., Co., 69 App. Div. 322), had any attempt been made to show that the receiver Washburn had in fact converted any of the moneys or property of the estate which had come into his hands to his own use. There is, however, no evidence in the record to charge him with a breach of his trust, or defendant with a breach of the bond, viewing the latter as a common-law obligation, and no suggestion was made in the evidence that this case is within the exception to the rule, allowing actions on receiver's bond, because of the intentional and willful absence of the principal froin the jurisdiction of the court whereby compulsory accounting is made impossible. It is true Washburn did leave the State, but plaintiff's witness Hanfield swears he had returned shortly before the trial.

From all that appears in the record before us, and in the suggestions of counsel by their briefs, there seems to be no reason why plaintiff may not after a proper accounting have his evidence heard, and the disposition of the case made by the trial court dismissing the complaint, but not upon the merits, we think proper.

The judgment should, therefore, be affirmed.
BARTLETT, WOODWARD and HIRSCHBERG, JJ., concurred.

Judgment affirmed, without costs.

App. Div.]

SECOND DEPARTMENT, JULY TERM, 1903.

In the Matter of the Appraisal of the Estate of Maria F. Mills,

Deceased, under the Act in Relation to the Taxable Transfers of

Property JOHN F. Mills, as Sole Executrix, etc., of Maria F. MILLS,

Deceased, Appellant; COMPTROLLER OF THE STATE OF New YORK,

Respondent. Transfer tax where a will directs that land be sold and the proceeds be divided, and

a beneficiary dies before the sale, the interest passing under the benefiwiary's will is

tacable as personal property. Under a will, which directed that the testator's real estate be converted into

personalty, the testator's daughter was entitled to a share of the proceeds of the realty. The daughter died before an actual sale and conversion of the real estate, leaving a will, by which her interest in her father's estate passed to her

husband. Held, that the interest in the proceeds of the testator's real estate to which his

daughter was entitled, and which passed under the daughter's will to her husband, should, for the purpose of the transfer tax assessable on the transfer from the daughter to her husband, be treated as personal property and not as realty.

APPEAL by John F. Mills, as sole executor, etc., of Maria F. Mills, deceased, from an order of the Surrogate's Court of Westchester county, entered in said Surrogate's Court on the 18th day of September, 1900, upon the report of an appraiser, assessing the transfer tax upon the estate of Maria F. Mills, deceased.

Grenville T. Emmet and Maurice Dillon, for the appellant.
Frank M. Buck, for the respondent.

Order of the Surrogate's Court of Westchester county affirmed, with costs, on the opinion of the surrogate.

GOODRICH, P.J., BARTLETS, WOODWARD, HIRSCHBERG and HOOKER, JJ., concurred.

The following is the opinion of THEODORE H. SILKMAN, Surrogate: SILKMAN, S.:

This is an appeal from a decree dated June 13, 1900, entered upon the report of an appraiser assessing the transfer tax upon the succession of the estate of Maria F. Mills, deceased.

SECOND DEPARTMENT, JULY TERM, 1903.

[Vol. 86.

Maria F. Mills was the daughter of William P. Abendroth. The will of Mr. Abendroth directed the sale of his real property, and it thus became in equity personalty.

His daughter, Mrs. Mills, under his will took a share in the proceeds of the realty.

She survived her father a few years, but died before an actual sale and conversion had taken place.

Mrs. Mills left a will by which her interest in her father's estate passed to her husband, John F. Mills, the respondent here.

The appraiser has held that the interest passing to Mr. Mills under the will of his wife was real estate, and the transfer to him, conseqnently, was not taxable. He seems to have felt that the rule adopted in Matter of Sutton (15 Misc. Rep. 659; 3 App. Div. 208), which matter originated in this court, controls the disposition of

this case.

It was determined in the Sutton case that where the property passing from the testator was real estate, and became personalty only by the equitable rnle growing out of the direction to sell, it was not to be considered personal property for the purposes of taxation, but, according to the fact, as it was at the time of the death of the testator, real estate. The reasoning followed that adopted in the case of People ex rel. Hoyt v. Commissioners of Taxes (23 N. Y. 228), that laws providing a system of taxation were to be construed as relating to facts not legal fictions or equitable rules.

The Transfer Tax Law assesses the tax upon the transfer from the testator, and, therefore, it is the character which the property bears at the time that it leaves the testator which is to govern the question as to whether the succession is to be taxable.

Brown, P. J., writing the opinion in the Sutton Case (3 App. Div. 208), which was affirmed by the Court of Appeals upon the opinion below (149 N. Y. 618), says: “There would, I think, be serious objection to the rule which would require the tax in variably to be imposed on the property in the form in which the transferee should receive it. Such a rule might permit personal property which under a will was equitably converted into real estate to escape taxation.

We are, however, of the opinion that the better rule is to assess the tax on the property transferred, as the testator leaves it without regard to the operation

*

App. Div.] SECOND DEPARTMENT, JULY TERM, 1903. or effect of equitable rules that apply only to the administratiou of the estate."

I do not think that the principles decided in the Sutton case have been properly applied here; in fact, I think they are applicable, and, properly applied, sustain the contention of the appellant.

Mrs. Mills did not die possessed of the title to the real estate; she died possessed of a right to a distributive share in the proceeds of real estate which her father's executor was directed to sell. Her legatee could not in law have given a deed of it, nor have reconverted it without the interposition of equitable rules. It was subject to the payment of debts, expenses of administration, general legacies, executor's commissions and the expenses primarily payable out of the personalty.

Mrs. Mills had the right to compel her father's executor to sell and deliver to her her share of the proceeds, and that was all, except that in joining with the other legatees interested she might, by invoking equitable rules, elect to take in specie and thus work a reconversion ; nevertheless, this could only be done provided there were no charges upon the proceeds. Her executor, however, possessed no such power to elect to take the lands in specie without the special sanction of a testamentary provision in her will. An executor has no power to buy real estate without being specially authorized so to do, and to permit an executor to elect to take real estate in place of its proceeds would be substantially sanctioning the purchase of real estate by an executor without special authority.

Whatever right there might have been in Mrs. Mills to reconvert the property, from realty into personalty, died with her. When she died, all that passed to her executor was the right which she had to compel her father's executor to sell the property and distribute the proceeds. The proceeds would pass directly into the hands of her executor as personalty and be distributed as such.

The test as to whether the property was personaity or realty is, whether in the absence of a will the property would have passed under the Statute of Distribution or under the Statute of Descent.

That it would pass to the personal representative seems to be determined in Fisher v. Banta (66 N. Y. 468), in which Judge ANDREWS says: “From the moment of the testator's death the conversion took place, and the land became money for all purposes

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