In re Estate of Havemeyer, 17 N.Y.2d 216 (1966)

Under New York law, the Uniform Partnership Act dictates that partnership real estate is converted into personal property; therefore, it passes to the surviving partner(s) upon a partner’s death, regardless of the real estate’s physical location, and is subject to estate tax.

Summary

The New York State Tax Commission appealed a decision excluding Connecticut real property from the decedent’s gross estate. The decedent, a New York resident, and his son were partners under a New York partnership agreement. The agreement was subject to New York’s Partnership Law, which includes the Uniform Partnership Act. The core issue was whether the Connecticut real estate, owned by the partnership, should be considered real property (and thus exempt from New York estate tax) or personal property under the partnership agreement. The court held that New York’s Partnership Law converted the real estate into personal property, making it subject to New York estate tax. This decision emphasized that the law of the state where the partnership agreement was made governs the nature of partnership assets for estate tax purposes.

Facts

The decedent and his son were partners under an agreement made in New York State, both being residents of New York.
The partnership owned real property located in Connecticut.
Upon the decedent’s death, the estate sought to exclude the Connecticut real property from the New York gross estate, arguing it was real property situated outside New York.
The State Tax Commission argued that the real property should be included because New York partnership law converted it into personal property.

Procedural History

The Surrogate’s Court initially excluded the Connecticut real estate from the gross estate.
The State Tax Commission appealed this decision.
The appellate court reviewed the Surrogate’s decision, focusing on the applicability of New York partnership law.

Issue(s)

Whether, under New York law, real property owned by a partnership is considered personal property for estate tax purposes when the partnership agreement was made in New York.

Holding

Yes, because New York’s Partnership Law, specifically the Uniform Partnership Act, dictates that partnership real estate is converted into personal property, thereby making it subject to estate tax regardless of its physical location.

Court’s Reasoning

The court reasoned that the New York Partnership Law, which includes the Uniform Partnership Act, is integral to the partnership agreement. Section 12 and sections 51-52 of the New York Partnership Law stipulate that partnership property is co-owned, and upon a partner’s death, their right vests in the surviving partner. This effectively converts real property into personal property for partnership purposes.

The court emphasized that the law of the state where the contract was made (New York) governs its interpretation and validity. Citing Strauss v. Union Cent. Life Ins. Co., the court stated: “All contracts are made subject to any law prescribing their effect, or the conditions to be observed in their performance; and, hence, the statute is as much a part of the contract in question as if it had been actually written into it, or made a part of the stipulations.”

While acknowledging that Connecticut law (where the real property was located) might treat the property differently, the court prioritized the partnership agreement’s governing law (New York). They noted that intent is key but that the New York partnership law effectively dictates that intent, superseding common law principles that might have otherwise applied.

The court distinguished this case from scenarios where the partnership agreement explicitly outlines a different treatment of real property. Since the agreement was silent on this matter, the default provisions of New York’s Partnership Law applied.

The court cited Blodgett v. Silberman, highlighting that a state can tax intangible personal property (like a partnership interest) even if the underlying assets are located elsewhere and potentially subject to taxation in another jurisdiction. The possibility of double taxation was not a bar to New York’s right to tax the partnership interest.