Bente v. Bugbee

• Decision Date: 16 May 1927
• Docket Number: No. 48.,48.
• Parties: BENTE v. BUGBEE, State Comptroller.
• Court: New Jersey Supreme Court

137 A. 552

BENTE

v. BUGBEE, State Comptroller.

No. 48.

Court of Errors and Appeals of New Jersey.

May 16, 1927.

(Syllabus by the Court.)

Appeal from Supreme Court.

Certiorari by Henry Bente and Margaretha Bente against Newton A. K. Bugbee, Comptroller of the State Treasury, to review his action in imposing a transfer inheritance tax on the amount of two judgments recovered by the prosecutors against the Trust Company of New Jersey, executor of the last will and testament of Charles Steinberg, deceased. From a judgment of affirmance (134 A. 185), Margaretha Bente appeals. Reversed.

J. Emil Walscheid, of Union City, for appellant.

Edward L. Katzenbach, Atty. Gen., for respondent.

PARKER, J. The question for decision is whether under the language or the plain intendment of the succession tax act of this state as it now stands on the statute books (P. L. 1922, p. 293, amending P. L. 1909, p. 325 [4 Comp. St. 1910, p. 5301 et seq.], a judgment for debt or damages, based upon breach of a contract to bequeath a specified amount by will supported by valuable consideration —or the money recovered by such judgment —is subject to succession tax.

The facts are stated with substantial accuracy in the per curiam of the Supreme Court, and need not be repeated here at length. It may be noted that the suggestion that Steinberg, the deceased, should compensate the appellant, Mrs. Bente, by a legacy of $15,000 seems to have been at his suggestion and not hers, and that all changes in the household and living quarters were apparently satisfactory to him, so that there was no failure of consideration. She and her husband were to furnish him a home for the rest of his life, and to take their pay in legacies of $15,000 each. They did furnish him a home to all intents and purposes, and the fact that he died after 2 1/2 years in no way impairs the consideration. He might well have lived for 20 years. We need not dwell on this, for the validity of the contract and its breach and the right to recover therefor are res judicata, as the appellant filed her claim with the executor, it was rejected, she sued on it, and had judgment.

Nor is the precise form of the breach material. As a matter of fact, Steinberg did make a will and include the agreed legacies therein, and before his death erased them, and thereby revoked them by a lawful method. Frothingham's Will, 76 N. J. Eq. 331, 74 A. 471; Hilyard v. Wood, 71 N. J. Eq. 214, 63 A. 7, and cases cited. He might have destroyed the will, or made a new one superseding it and omitting the legacies, or revoked the legacies by codicil, or failed to make any will at all. In any of those cases the result would have been legally the same so far as appellant's rights were concerned, viz. a breach by nonperformance of the promise, creating a right of action at law to recover what may properly be called the contract price, due because of the contract itself and its performance by the appellant, Mrs. Bente. Smith v. Smith, 28 N. J. Law, 208, 78 Am. Dec. 49; Updike v. Ten Broeck, 32 N. J. Law, 105, 117; Van Houten v. Van Houten, 89 N. J. Law, 301, 98 A. 251 (a promise to bequeath a specified amount); Grandin v. Reading, 10 N. J. Eq. 370 (accounting). In some cases, the agreement being to devise land, and the statute of frauds standing in the way, recovery was had on a quantum meruit for the value of the services. Updike v. Ten Broeck, supra; Gay v. Mooney, 67 N. J. Law, 27, 50 A. 596, in which the late Justice Dixon, speaking for the Supremo Court, said that the bargain, though specifically unenforceable on account of the statute of frauds, "affords the means of determining that the service was not a gift, but a sale, and out of that determination the law deduces a right in him who sold the service to be paid its value by him who bought it." In other cases the promise was generally to compensate by a legacy without specifying property or amount, and again recovery was had on a quantum meruit for the value of the service. Cullen v. Woolverton, 65 N. J. Law, 279, 284, 47 A. 626; Stone v. Todd, 49 N. J. Law, 274, 8 A. 300, perhaps the lending case on this subject cited repeatedly in this court, wherein, at page 281 (8 A. 303), Justice Scudder, speaking for the Supreme Court, said:

"If it was their understanding that she should be paid, the intended will was but the method of paying an existing and admitted obligation to compensate for the services rendered, and if he failed to pay in the manner indicated, the plaintiff is entitled to recover, as a creditor, for the value of her services."

The Supreme Court has even held that, where there is an express agreement to "pay" for services by a legacy, and there is a legacy, but it is inadequate in amount, the legatee may reject the legacy, and sue on a quantum meruit. Schmetzer v. Broegler, 92 N. J. Law, 88, 92, 105 A. 450. That question is not present in the case at bar, but the decision is cited as in the line of cases holding that the performance of services under a contract to compensate generally by legacy entitled the party to an action at law as for a debt or damages. This line of cases suggests the question, very relevant to the present inquiry, whether, in case of an unperformed general promise to compensate by will for services rendered, etc., without specifying any amount, a tax should accrue on such an amount as a jury determines by way of quantum meruit.

Bearing in mind the nature of the appellant's claim—a claim in debt for contract price, or for damages because of failure to pay it—we turn to the statute in order to ascertain whether such a claim is made taxable. The only clause invoked is that designated as "first" in section 1 of the statute. P. L. 1922, p. 294. It imposes a tax: "First. When the transfer is by will or by the intestate laws of this state from any person dying seized or possessed of the property while a resident of the state." And the crux of that clause is: "When the transfer is [a] by will or [b] by the intestate laws."

It must be perfectly obvious that general debts are not taxable. In fact, they are deducted under the express provisions of the act. So, if Steinberg had promised to pay at a stated date, or even to pay generally, or had given a note at one year, or on demand, or even payable at his death, or at a stated time thereafter (Randolph, Com. Paper, § 113; 8. C. J. 136), it cannot be conceived that a tax would accrue under the statute. The interesting case of Wood v. Chetwood, 44 N. J. Eq. 64, 14 A. 21, affirmed in this court 45 N. J. Eq. 369, 19 A. 622, dealt with a paper of this general character.

There is no distinction between such cases as those just mentioned and the case sub judice, except that in the latter the deceased agreed to pay the contract price by a provision in his will, and failed to do so by will or in any other way. Admittedly, such a case is not within the language of the statute. As we understand the opinion of the Supreme Court, it was held within the legislative intendment, apparently on the equitable theory of regarding that as done which ought to have been done. That maxim is applicable in favor of a party to the original transaction who would be benefited by its application (Goodell v. Monroe, 87 N. J. Eq. 328, 100 A. 238), but it is a novel application of it to invoke its operation in favor of a state tax. Moreover, there is no equity involved in this case. A tax is a legal imposition exclusively of statutory origin (37 Cyc. 724, 725), and, naturally, liability to taxation must be read in the statute, or it does not exist. The prototype of the present act as enacted in 1892 (P....