Dommerich v. Kelly

• Decision Date: 26 August 1942
• Docket Number: No. 6498.,6498.
• Citation: 27 A.2d 871,132 N.J.Eq. 220
• Parties: DOMMERICH et al. v. KELLY, State Tax Commissioner. In re DOMMERICH'S ESTATE.
• Court: New Jersey Supreme Court

27 A.2d 871

132 N.J.Eq. 220

DOMMERICH et al.

v. KELLY, State Tax Commissioner.

In re DOMMERICH'S ESTATE.

No. 6498.

Prerogative Court of New Jersey.

Aug. 26, 1942.

Syllabus by the Court.

1. The transfers sub judice were intentionally made by the decedent in lieu of testamentary disposition and in consequence of such a contemplation of death as ordinarily induces a reasonably prudent person to formulate a testamentary disposition to effectuate such a purpose. The preponderance of the evidence sustains this conclusion, hence, the transfers are taxable under N.J.S.A. 54:34-1, subd. c.

2. In analogy to the rule established in Rutgers v. Martin, 127 N.J.L. 603, 23 A.2d 406, that inter vivos transfers made in contemplation of death are to be valued as of the death of the transferor, the mortality table factor used in evaluating the life estates should be applied as of the date of the transferor's death.

Proceeding in the matter of the transfer inheritance tax in the estate of Otto L. Dommerich, deceased, between Caroline C Dommerich and others, and William D. Kelly, State Tax Commissioner, involving the taxability of gratuitous inter vivos transfers of property in trust by the decedent.

Decree in accordance with opinion.

Pitney, Hardin & Ward, of Newark, for appellants.

David T. Wilentz, Atty. Gen., and William A. Moore, Asst. Atty. Gen., for respondent.

JAYNE, Vice Ordinary.

On March 8, 1938, Otto L. Dommerich, a resident of Rumson, Monmouth County, New Jersey, died. Born February 6, 1871, he had lived three score years and seven. Surviving his demise were his wife, Caroline C. Dommerich, two married daughters, Julie Dommerich Okie and Carola Dommerich Elliott, and a son, Louis F. Dommerich. The decedent was relatively wealthy at his death. The volume and synthesis of his estate as determined by the State Tax Commissioner can be summarily exhibited as follows:

1. Real Property

$ 50,000.00

2. Personal Property

4,061,359.56

3. Transfers

909,387.75

4. Gross Taxable Estate

$5,020,747.31

5. Debts, Expenses, etc

363,075.36

6. Net Taxable Estate

$4,657,671.95

A transfer inheritance tax was levied upon the transmissible portions of this estate. The third item entitled "Transfers" is composed of securities which were gratuitously assigned in trust by the decedent to certain beneficiaries on December 10, 1935. The taxation of these transfers as inter vivos gifts made by the decedent in contemplation of death is the root of the present appeal.

Our statutes, Chapter 90, Laws of 1935 in effect when the trusts were created and N.J.S.A. 54:34-1, subd. c, in force when the settlor died, ordain that a transfer inheritance tax shall be assessed on all inter vivos transfers which are made in contemplation of the donor's death. The judicial interpretations of the statute are immediately accessible. The course of legitimate action in the taxation of such transfers seems to me to be distinct. The essential and indispensable factual basis for such an assessment must first be found to exist.

Therefore, the question which assumes precedence in this proceeding is: Were the inter vivos transfers to which the present inquiry relates made by the decedent in contemplation of death, within the established import and purpose of the legislature? Lichtenberg declared "There is nothing more impenetrable than the motivation of our actions." Lord Kenyon was convinced that judicial tribunals should determine a man's motives from his overt acts.

The transcript of the exhibits and other proofs provides the factual material to be explored in quest of some evidential manifestation of the motive which impelled the decedent to accomplish the transfers at that time. The determinant of the taxability of such transfers is the motive of the transferor. Moore v. Martin, 125 N.J. L. 189, 14 A.2d 482; Squier v. Martin, 131 N.J.Eq. 263, 24 A.2d 865; Kavanagh v. Kelly, 131 N.J.Eq. 398, 25 A.2d 547; Plum v. Martin, 132 N.J.Eq. 1, 26 A.2d 529, or, if you prefer, the determinant may be characterized as "the motivating cause" or "a controlling purpose." Vide Schweinler v. Martin, 117 N.J.Eq. 67, 93, 175 A. 71, 82; Cairns v. Martin, 130 N.J.Eq. 313, 22 A.2d 415, 425.

The justification for the assessment depends most frequently upon the inferences to be logically and reasonably drawn from the relevant facts adequately established by the plausible and credible evidence of the individual case. MacGregor v. Martin, 126 N.J.L. 492, 20 A.2d 427. In Kavanagh v. Kelly, supra, I divulged that in these cases much illumination is derived from evidence exhibiting the personal qualities of the transferor, his habits and propensities, his age and state of health at the time, the pertinent circumstances amid which he was situated, his conduct both prior and subsequent to the transfers, the intrinsicalities of his inter vivos gifts, the fashion of his former and ultimate testamentary dispositions of his estate, to which may be added the coordinate relation of inter vivos gifts of a testamentary character to those bestowed by his will.

This decedent was evidently an intelligent and perspicacious person. He was opulent as early as 1922 and he managed his fortune prudently. Assuredly, he was not communicative concerning his personal affairs, his transferences and his state of health. His demeanor supports the proverb.

"The words of a silent man are never brought to court." He disclosed no articulate reason for the creation of the three inter vivos trusts except to his son to whom he merely remarked that he made the transfers to "avoid" income taxes. He never informed his daughters of the trusts established for their benefit. Their nebulous information concerning the gifts was imparted to them by their mother who frankly confesses that she knew little about them. None of his children was acquainted with the terms of the trust indentures or aware of the particular securities comprising the corpus or of the amount of income actually derived from them. Such knowledge was acquired by them after the death of their father. Whatever the motive, the decedent had no recognizable accomplice.

The decedent was likewise taciturn regarding his maladies and indispositions. It was his nature to depreciate them. This quality reminds one of Clarence Day's delightful memoir of his father who despised disease, regarded illness as imaginary but ultimately became convinced that he was in fact ill. Similarly, the consciousness of failing health broke in upon the meditations of this decedent.

The transcript of the evidence is profuse with enlightenment relative to the declining health of the decedent. A superfluous recital of all this evidence will not be undertaken. The evidence has been thoughtfully examined. The inferences are that in November, 1935, the decedent became aware of some debility. In January, 1936, he learned that during a few months then last past he had lost eleven pounds in weight. In February, 1936, the infections presaging his fatal illness were objectively manifest. In June, 1936, he was admitted to the hospital where he underwent surgical operations and from which institution he was not discharged until the ensuing October. In August, 1936, the amputation of his leg was under advisement. He is reported to have died from "chronic nephritis and contributory tuberculosis of the lymph glands and bones." The hospital discharge sheet records that he "also has chronic pulmonary tuberculosis." From these facts, it is entirely probable that the decedent noticed some insuspicious signs of approaching ill health before, in point of time, he definitely resolved to effectuate the transfers. Cf. Kunhardt v. Bugbee, 130 A. 660, 3 N.J. Misc. 1107, affirmed 134 A. 118, 4 N.J. Misc. 692. It is not incumbent upon the taxing authority to prove that the transfers were made because of a conviction that death was imminent. Schweinler v. Martin, supra; Nicholas v. Martin, 128 N.J.Eq. 344, at page 346, 15 A.2d 235; Cairns v. Martin, supra.

Certain transactions which the decedent completed shortly before the collapse of his health are also revelatory. They too may be expository of his state of mind. In the late summer and early fall of 1935, he acquired additional life insurance in the sum of $150,000. During the months of August and September of that year, he assigned to his wife policies on his life of the face value of $500,000, also relinquishing not only his right to change the beneficiary but also his right to obtain the cash surrender value of the policies. Incidentally, his wife already possessed considerable resources. It was in December, 1935, that he established the trusts to which this appeal relates. Obviously, he is lending an ear to the admonition "Set thine house in order."

It was during this season of 1935 that the decedent requested his accountant to present to him a list of his securities. The decedent selected certain of them of the existing value of $909,387.75 and thereupon instructed his accountant to divide them equitably into three portions. On December 10, 1935, the decedent transferred by formal declarations these securities in trust for the benefit of each of his children in the values here stated: to Louis, $254,426.25; to Julie, $324,250.00; to Carola, $330,711.50.

The character of the gift always deserves attention. There is discernible in these gifts a purpose to provide for the future. The trust originated for Louis directs the payment of the income of the corpus to him for life and at his death the corpus is distributable as Louis may prescribe by his will, or failing such disposition, to the lawful issue of Louis or if Louis dies intestate and without issue, to the then surviving children of the settlor or their issue, per stirpes. The terms of the other two trusts make the income in each case payable to the daughter for her life and at her death the corpus passes to her issue, per stirpes, or in default of issue, to the then surviving children of the...