The opinion of the court was delivered by: KNIGHT
This is an action by the plaintiff as administrator of the estate of Helen Hall Vail, deceased, to recover $466,912.27 from the defendant as Collector of Internal Revenue for the Twenty-eighth Collection District, New York. Plaintiff, under protest, paid the aforementioned amount, which included interest, on account of the federal estate tax liability in respect to the estate of Helen Hall Vail, deceased, under Section 302(c) of the Revenue Act of 1926, as amended, 26 U.S.C.A.Int.Rev.Code, § 811 (c). Plaintiff filed a claim for refund, which was rejected by the Commissioner of Internal Revenue, and thereafter this action was commenced to recover sums paid as aforesaid.
The deceased was duly adjudged to be an incompetent person by the Supreme Court of the State of New York in August, 1926, and plaintiff was appointed committee of her property. Thereafter a daughter, MaBelle H. Plumb, petitioned the New York Supreme Court for allowances for herself and others out of the surplus income of the incompetent. By order of the Court, January 14, 1927, the committee as directed to make annual payments of $50,000 to the incompetent's daughter and $50,000 to the guardian of three infant grandchildren and smaller amounts to collaterals of the incompetent, out of the incompetent's income. The order included a finding of fact that the incompetent would have made such allowances if she had been in possession of her mental faculties. By later order, June 3, 1932, the Court directed the committee to increase the amounts to be paid to the incompetent's daughter and the guardian of three infant grandchildren to the extent of $25,000 per annum and made these increased allowances retroactive to the extent of five and one-fourth years. This order, like the earlier order, was based on a finding that the incompetent would have made such allowances if she had been possessed of her mental faculties. Pursuant to these orders there were paid out of the surplus income of the incompetent to the persons therein named allowances aggregating the sum of $1,377,866.67.
The Committee of the property of the incompetent, in 1933, filed an intermediate account for the period from August 12, 1926, the date of its appointment, to July 1, 1933, which embraced and reflected all payments made during this period pursuant to the orders of the Court. Thereafter an order was made and entered which approved, ratified and confirmed all the payments made by the Committee, as set forth in its account.
The incompetent, Helen Hall Vail, died on December 27, 1935, and thereafter the Committee rendered a final account that embraced and reflected all payments made by the Committee for the period July 1, 1933, to December 27, 1935, which was confirmed, ratified and approved by a final judgment of the New York Supreme Court.
There were two sets of objections interposed by the defendant to the introduction of certain evidence on the trial upon which the Court then reserved decision. The first set of objections was to the reception in evidence of certain exhibits of records of the Surrogate's Court of Orleans County purporting to show the fixation of a transfer tax by the State of New York, and also the proceeding upon the intermediate and final accounting of the Committee of the incompetent in the Supreme Court in New York State. The objections are sustained and the evidence given relative thereto excluded upon the ground that the evidence is immaterial. The sense in which it is immaterial hereinafter appears.
The second set of objections relates to the admission of the deposition of Mr. Justice Lydon.While counsel for the plaintiff argues that such testimony is admissible, counsel for the Harris children, appearing amicus curiae, contends that such testimony is inadmissible. There is no claim that the orders of the Supreme Court of the State of New York are in any way ambiguous, and the only purpose of the introduction of the depositions of Justice Lydon is to prove that in the 1927 proceeding the Court had no intent to make a testamentary transfer in contemplation of death. Mr. Justice Ingraham is deceased, so any claim as to his motive in granting allowances must be found in the records of his court. In my opinion the deposition of Justice Lydon is incompetent for any purpose. In so far as the proceedings looking to the payment of the money out of the estate are concerned, the records thereof are the best evidence. There is no claim made of any ambiguity in the records.
"The rule under discussion is stringently enforced to forbid the admission of any parol or extrinsic evidence to contradict, impeach, vary, or explain judicial records, especially where the right of third persons acquired under a judgment would be affected. * * * It also precludes the admission of evidence showing the grounds of a judgment, order, or decree, or to show that the grounds on which a judgment was apparently based did not exist, or that a verdict was improper." Corpus Juris, Section 1388, Vol. 22, p. 1077.
The following cases are also in point on the specific question presented: Matter of Flagler, 248 N.Y. 415, 162 N.E. 471, 59 A.L.R. 649; Agan v. Hey, 30 Hun., N.Y., 591; Blue Mountain Iron & Steel Co. v. Portner, 4 Cir., 131 F. 57; Lyon v. Perin & Gaff Mfg. Co., 125 U.S. 698, 8 S. Ct. 1024, 31 L. Ed. 839; Doyle-Kidd Dry Goods Co. v. Sadler-Lusk Trading Co., D.C., 206 F. 813.
This action arises over the interpretation of Section 302 of the Revenue Act of 1926, as amended by Section 803(a) of the Revenue Act of 1932; now Section 811(c) of Internal Revenue Code. So far as material, its provisions are as follows:
"The value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated, except real property situated outside of the United States --
"(c) Transfers in contemplation of, or taking effect at death. To the extent of any interest therein of which the decedent has at any time made a transfer, by trust or otherwise, in contemplation of or intended to take effect in possession or enjoyment at or after his death, or of which he has at any time made a transfer, by trust or otherwise, under which he has retained for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death (1) the possession or enjoyment of, or the right to the income from, the property, or (2) the right, either alone or in conjunction with any person, to designate the persons who shall possess or enjoy the property or the income therefrom; except in case of a bona fide sale for an adequate and full consideration in money or money's worth. Any transfer of a material part of his property in the nature of a final disposition or distribution thereof, made by the decedent within two years prior to his death without such consideration, shall, unless shown to the contrary, be deemed to have been made in contemplation of death within the meaning of this subchapter; * * *."
One contention made by the plaintiff is that the statute is to be construed literally and, since Mrs. Vail was an incompetent, there could not have been made any transfer in contemplation of death. Such contention is controverted both by the defendant and counsel for the Harris heirs. It is without merit. The issue is whether the transfers were in contemplation of death within the scope and meaning of the law, and the determination here is to be found in the proceedings had leading to the deduction from the estate of the incompetent. Any question in this regard is answered in the decision of City Bank Farmers Trust Co. v. Hoey, Collector, etc., D.C., 23 F.Supp. 831, 833, affirmed, 2 Cir., 101 F.2d 9, 10, relative to the transfers here in question. In the District Court decision, Judge Patterson ...