Fourth Department, July, 1911.

App. Div.] lently charged as payments in behalf of the town, whereas in fact he converted the several amounts to his own use. It follows that the amounts which it must be assumed respondents admit were paid out by relator are as follows: For town schedule accounts, $5,049.57; for town hall fund, $26,265.66; for railroad fund, $7,750. Upon these sums he is, therefore, presumptively entitled to his fee of one per centum.

The respondents further state in their return that in auditing and disallowing relator's claims they believed that he had already taken his fees from town funds in his hands and charged the same to the town. This is stated only as a belief and not as a conclusion of fact. Clearly the facts alleged in the return upon which this belief is stated to have been based are insufficient to support a finding or conclusion that he had so taken his fees. They furnish food for suspicion and conjecture, but were apparently not persuasive enough to lead even the town board farther than a belief that such was the fact. Further facts with knowledge of which respondents allege they acted in disallowing the claims are that they had ascertained through the medium of an accountant's examination of the books kept by relator as supervisor that he had received certain sums of town moneys for which he had failed to account, and that he had charged the town with various sums as paid by him on fictitious or exaggerated claims. Specific statements of these items for which he failed to account, and of the overcharges, are set forth in the return; all of these sums he is alleged to have converted to his own use. It is further charged that he did not keep accurate and honest books and did not make honest accounts to the town board. This allegation is specialized by statements of specific instances of dereliction. Taking these charges as true, no legal ground for disallowing his claim for fees is shown. As was said by this court in People ex rel. Hamm v. Town Auditors (43 App. Div. 22, 25): "If the relator is charged with dereliction of duty or with misappropriation of the public fund the town board cannot adjudge him guilty. Its duties are limited to the auditing of the claims presented to it. It is neither a court to inquire into the general management of affairs intrusted to the town officers, nor do its

Fourth Department, July, 1911.

[Vol. 146. members possess the functions of a jury to pass upon the guilt or innocence of the officials of the town. Its investigation is ex parte. With a serious charge inculpating the relator as a public official he is certainly entitled to be heard in court and to be confronted with the witnesses against him." These charges, if sustained before a competent tribunal, might furnish grounds

' for his removal from office, and would be a basis for either a civil or a criminal action against him. But, so long as he is the supervisor of the town of Philadelphia he is ex virtute officii entitled to the emoluments legally affixed to that office. (People ex rel. Leitner v. Sipple, 109 App. Div. 788.)

The determination of the town board of audit should, therefore be annulled, with fifty dollars costs and disbursements, and proceedings remitted to the board of audit to the end that relator's claims may be audited and allowed in accordance with this opinion.

All concurred, except MCLENNAN, P. J., who dissented upon the ground that the relator is not entitled to an audit because he presented a false account to the town, appropriated to his own use certain of its funds and mingled its funds with his

own.

Writ sustained, determination of the town board of audit annulled, with fifty dollars costs and disbursements to relator, and proceedings remitted to the board of audit to the end that the relator's claims may be audited and allowed in accordance with the opinion.

In the Matter of the Estate of SUSAN S. PATTERSON, Deceased. HENRY C. PATTERSON and Others, Appellants; THE COMPTROLLER OF THE STATE OF NEW YORK, Respondent. Fourth Department, July 7, 1911.

Tax-constitutional law-transfer tax-trust-when gifts passing thereunder subject to tax.

The statute imposing a transfer tax is not unconstitutional because transfers to some individuals are taxed at a higher rate than like transfers to others.

App. Div.]

Fourth Department, July, 1911.

Under a deed of trust by which the grantor transferred all her property to trustees to collect the income and pay a certain amount thereof to the grantor for life, the residue, if any, to certain beneficiaries named, with a proviso that if the net income be insufficient to pay the grantor, the principal be applied to that purpose, with a further direction that on the death of the grantor the trustees convert the assets into money and distribute the same in equal shares to persons named, and providing, further, that if a beneficiary should not survive the grantor, his share shall pass to his next of kin, as provided by the statute in cases of intestacy, or that if the next of kin have died before such distribution, his share shall become the property of his next of kin, as provided in the statute, the beneficiaries are only entitled to possession and enjoyment of their shares in the fund if living at the death of the grantor. Hence, it was intended that the transfer should become effective at the grantor's death, and the gifts are subject to a transfer tax.

Such intention on the part of the grantor is further indicated by a provision that if the distribution of any of the shares shall by operation of law or otherwise lapse and become inoperative or void, such shares shali be transferred by the trustees to the legal representatives of the grantor's estate and become part thereof.

APPEAL by Henry C. Patterson and others from an order of the Surrogate's Court of the county of Chautauqua, entered in said Surrogate's Court on the 19th day of December, 1910, fixing a transfer tax upon the decedent's estate, and also from a decree of said Surrogate's Court entered on the 20th day of February, 1911, affirming said order of assessment, except so much as fixes a tax upon the property passing by the will of said decedent.

The notice of appeal also states that an appeal is taken from the appraisal of the values of the transfers to the next of kin of said deceased and the distributees under a certain deed of trust, which appraisal was filed on the 16th day of December, 1910.

William L. Marcy [William T. Plumb and Helen Z. M. Rogers of counsel], for the appellants.

William Lau Stout for the respondent.

ROBSON, J.:

Susan S. Patterson, a resident of Westfield, N. Y., on May 22, 1903, executed an instrument in the nature of a deed of trust, by which she transferred to three trustees therein named all of her property except her real estate in the town of West

Fourth Department, July, 1911.

[Vol. 146. field, her household furniture and chattels in her home, carriages, harnesses and live stock on said real property and also her wearing apparel and jewels. Contemporaneously she made her will, disposing of her residuary estate practically in the same shares to the same people who were beneficiaries under the trust deed, and naming as executors the same persons who were made trustees under the trust deed. She died September 27, 1909.

The inducement clause of the trust deed is as follows: "Whereas the party of the first part is possessed of divers properties, which she desires to transfer, assign and convey to the Trustees for the purpose of taking possession thereof and title thereto, collecting the income therefrom, and applying such income in part to the use and benefit of the party of the first part during her life, and any residue of the income to be distributed to certain beneficiaries, and upon the decease of party of the first part the entire estate to be distributed to certain beneficiaries." The transfer is then made in trust for the uses thereinafter expressed, to wit: To take possession and collect the income thereof and apply the same by paying to the grantor from the net income, if sufficient for that purpose, $1,000 each month during her life, and any surplus net income to be divided annually amongst the beneficiaries thereafter in the deed named in the same proportion that the principal of such trust estate is directed to be apportioned and divided as thereinafter provided. The trustees are then required, in the event the income in any year shall be insufficient to pay the monthly $1,000, to take and use part of the principal of the fund to make up the deficiency and pay the same to her. The trustees are further directed to take and apply from the income, if sufficient for that purpose, and if not, then from the principal thereof, sufficient to pay be a memorial receiving vault, and such additional sum as may necessary to lay out and embellish the grounds surrounding. Then follows a direction to the trustees upon the death of the grantor to convert all the assets of the trust estate into money and out of the proceeds to pay one dollar to George Sutherland, "and to divide the rest, residue and remainder thereof into eight hundred and eighty (880) equal shares and distribute and pay over said shares to the following persons, to wit:" Then fol

for

App. Div.]

Fourth Department, July, 1911.

lows the designation of persons who are to receive the same, with the number of shares each is to have.

The surrogate has held that the transfer of the corpus of this estate, passing by the trust deed, was taxable, because it was intended by its terms to take effect in possession and enjoyment upon her death. Appellants assail the tax imposed and claim the same to be unlawful upon two grounds: First. Because the statute under which the tax was imposed is unconstitutional and void. Second. That the possession, enjoyment and right to the trust fund in excess of such part thereof as was necessary to provide the monthly payment to the grantor passed to the beneficiaries designated in the deed upon the execution thereof, and, therefore, the transfer of that portion of the fund was not subject to tax.

That such a tax is not unconstitutional so far as the right and power of the State to fix some tax upon such transfers has been decided by the Court of Appeals in Matter of Keeney (194 N. Y. 284). It is true that the court did not then pass upon the effect of the statute in a case where the transfers to different individuals were under the law taxed at a higher rate than like transfers to others. But the court in its opinion seem to indicate that discrimination to that extent, if it be discrimination, would not invalidate the statute.

If the transfers of the corpus of the estate to the beneficiaries named in the trust deed were, as the statute expresses it, "intended to take effect in possession or enjoyment at or after such death" of the grantor, then they were liable to the tax imposed. (See Tax Law [Gen. Laws, chap. 24; Laws of 1896, chap. 908], § 220, as amd. See, also, Tax Law [Consol. Laws, chap. 60; Laws of 1909, chap. 62], § 220.) It is admitted by appellants that, if the statute is constitutional, so much of the corpus of the estate as was necessary to produce an income sufficient to make the monthly payments of $1,000 to the grantor is subject to tax. It seems to have been determined that a fund of $220,000 would have been sufficient for that purpose. The appraiser so finds as his report states. I have not discovered in the record any evidence, or stipulation, upon which this finding is based. But the surroAPP. DIV.-VOL. CXLVI. 19