Fid. Union Trust Co. v. Martin

• Decision Date: 12 May 1937
• Docket Number: Nos. 201, 202.,s. 201, 202.
• Parties: FIDELITY UNION TRUST CO. v. MARTIN, State Tax Com'r (two cases). In re DAY'S ESTATE.
• Court: New Jersey Supreme Court

192 A. 74

118 N.J.Law 277

FIDELITY UNION TRUST CO.

v. MARTIN, State Tax Com'r (two cases).

In re DAY'S ESTATE.

Nos. 201, 202.

Supreme Court of New Jersey.

May 12, 1937.

Certiorari by the Fidelity Union Trust Company, as executor and trustee under the last will and testament of Frederick K. Day, deceased, against J. H. Thayer Martin, State Tax Commissioner, and by J. H. Thayer Martin, State Tax Commissioner, against the Fidelity Union Trust Company, as executor and trustee under the last will and testament of Frederick K. Day, deceased, to review a decree of the Prerogative Court entered on the appeal of the executor from the assessment of inheritance taxes by the State Tax Commissioner in the Estate of Frederick K. Day, deceased.

Cause remanded to the Prerogative Court, with direction.

Argued January term, 1937, before BROGAN, C. J., and CASE and PERSKIE, JJ.

Hood, Lafferty & Campbell, of Newark (Harry Schaffer, of Newark, of counsel), for appellant. David T. Wilentz, Atty. Gen. (William A. Moore, of Trenton, of counsel), for respondent.

PERSKIE, Justice.

Are the gifts of decedent (concededly not made in contemplation of death), taxable on the ground that they constituted transfers intended to take effect in possession or enjoyment at or after his death? Were the gifts supported by such adequate valuable consideration as to take the full value of each transfer, or a portion thereof, out of the taxable class? If so, how is the amount of that consideration to be determined? These are the questions presented, and requiring decision, in the two causes which are consolidated by stipulation of counsel for the respective parties.

In case No. 13856, the Fidelity Union Trust Company, as executor and trustee in the last will and testament of Frederick K. Day, is the prosecutor, and shall be hereafter referred to as "Trust Company," and in case No. 13859, the state tax commissioner is prosecutor and shall be hereafter referred to as "Commissioner." The third (second) caption follows the practice in the Prerogative Court; it identifies the estate involved, and facilitates the proper reporting of the cause.

Frederick K. Day, a resident of Elizabeth, N. J., died on January 15, 1932. Between May 28, 1926 (he was then about 78 years of age), and May 3, 1930, he made 28 transfers, evidencing gifts of money to various religious, bible, and tract societies or organizations, totaling $196,000. Each transfer was effected by a written instrument, ("annuity bond or agreement") wherein the donees agreed in effect, that in consideration of, and exchange for, the specific sum transferred to it, to pay the donor an annual sum for life. The amount of each annuity is not the same; it is variously based on percentages, ranging from 6 to 9 4/10 per cent. of the respective sums transferred.

The date of each instrument, the name of each donee, the amount of each gift the specific annuity, are as follows:

(a) American Bible Society of New York, dated January 17, 1930, gift of $10,000 annuity of $900 for life.

(b) American Bible Society of New York, dated April 4, 1929, gift of $10,000 annuity of $900 for life.

(c) American Bible Society of New York dated May 28, 1926, gift of $3,000. annuity of $264 for life.

(d) American Tract Society, dated July 24, 1929, gift of $5,000, annuity of $450 for life.

(e) Board of National Missions, Presby., dated July 3, 1929, gift of $10,000, annuity of $860 for life.

(f) Philadelphia School of the Bible, dated May 29, 1926, gift of $3,000, annuity of $270 for life.

(g) Stony Brook Assembly, Inc., dated April 5, 1929, gift of $10,000, annuity of $860 for life.

(h) Stony Brook Assembly Inc., dated June 15, 1926, gift of $3,000, annuity of $249 for life.

(i) Bible Institute of Los Angeles, dated July 2, 1929, gift of $5,000, annuity of $455 for life.

(j) Bible Institute of Los Angeles, dated July 6, 1929, gift of $7,000, annuity of $637 for life.

(k) Board of Foreign Missions, Presby., dated July 3, 1929, gift of $10,000, annuity of $860 for life.

(l) Christian and Missionary Alliance, N. Y., dated April 1, 1929, gift of $10,000, annuity of $800 for life.

(m) Christian and Missionary Alliance, N. Y., dated November 6, 1929, gift of $5,000, annuity of $400 for life.

(n) Evangelical Theological College of Dallas, dated May 3, 1930, gift of $10,000, annuity of $900 for life.

(o) Evangelical Theological College of Dallas, dated June 4, 1926, gift of $3,000, annuity of $255 for life.

(p) Evangelical Theological College of Dallas, dated April 8, 1929, gift of $10,000, annuity of $900 for life.

(q) Moody Bible Institute of Chicago, dated June 5, 1926, gift of $3,000, annuity of $264 for life.

(r) Moody Bible Institute of Chicago, dated April 16, 1929, gift of $10,000, annuity of $920 for life.

(s) Moody Bible Institute of Chicago, dated January 31, 1930, gift of $10,000, annuity of $940 for life.

(t) National Bible Institute of N. Y., dated May 28, 1926, gift of $3,000, annuity of $264 for life.

(u) National Bible Institute of N. Y., dated April 24, 1929, gift of $10,000, annuity of $900 for life.

(v) American Mission of Lepers, Inc., dated July 23, 1929, gift of $5,000, annuity of $430 for life.

(w) Bible Institute of Los Angeles, dated June 2, 1926, gift of $3,000, annuity of $255 for life.

(x) Oriental Missionary Society, dated July 9, 1929, gift of $10,000, annuity of $800 for life.

(y) Wheaton College, dated June 10, 1926, gift of $3,000, annuity of $240 for life.

(z) Wheaton College, dated April 1, 1929, gift of $10,000, annuity of $800 for life.

(aa) Eliada Orphanage and Rescue Home, dated April 1, 1929, gift of $10,000, annuity of $600 for life.

(bb) Eliada Orphanage and Rescue Home, dated July 22, 1929, gift of $5,000, annuity of $300 for life.

In addition to the foregoing data concerning the gifts, it may be advisable, in light of its controlling importance, even though it may protract this opinion, further to amplify that data as to variations in the provisions of the several bonds or agreements with respect to income and corpus. A detailed exhibit, dividing the gifts into five groups, appears in the brief of the Attorney General (between pages 6 and 7) for the Commissioner. They are grouped as follows:

"Group No. 1, covering gifts (a to h, inclusive) totaling $54,000, involved eight annuity agreements wherein there is no mention of the yearly sums reserved as being interest on the funds transferred and wherein no provision has been made for the suspension of the vesting of title to the gifts until the donor's death, or for the use of the funds transferred as a guarantee for the payment of the annuities."

"Group No. 2, covering gifts (i to u, inclusive) totaling $96,000, involves thirteen annuity agreements wherein there is no mention of the yearly sums reserved as being interest on the funds transferred, but wherein it is specifically provided that the gifts are either 'subject to the agreement hereinafter expressed,' or 'upon the terms aforesaid.'" (That is, in effect, to pay the annual sum therein mentioned).

"Group No. 3, covering gifts (v to w, inclusive) totaling $8,000, involves two annuity agreements wherein there is no mention of the yearly sums reserved as being interest on the funds transferred, but wherein it is specifically provided that the gifts are either not to be devoted to the general uses and purposes of the donee until maturity (viz., the date of the death of the donor), or wherein it is provided that all obligation to return any portion of the gifts in installments, or otherwise, does not cease until the death of the donor."

"Group No. 4, covering gifts (x to z, inclusive) totaling $23,000, involves three annuity agreements wherein the annuity guaranteed is referred to either as interest or income on the fund donated, and further, that the gift is subject to the 'payments aforementioned' or that the 'obligation' under the agreement does not cease until the donor's death."

"Group No. 5, covering gifts (aa to bb, inclusive) totaling $15,000, involves two annuity agreements wherein it is specifically provided that the annual payments thereunder, which are at the rate of 6% per annum, are 'interest on the principal,' but wherein there is no provision as to corpus which could possibly be construed as suspending the vesting of title to the gift until at or after the death of the donor."

The Commissioner determined that all of the aforesaid bonds or agreements constituted taxable transfers of gifts, and, while those transfers were not made in contemplation of death, yet, they were made by the decedent to take effect in beneficial possession and enjoyment after his death, and, therefore, were properly taxable against his estate. Section 1, sub-sec. 3, chap. 228, P.L.1909, p. 325, as amended by chapter 303, P.L.1931, p. 749, § 1 (N.J.St.Annual 1931, § 208—537 (3).

The Trust Company appealed to the Prerogative Court from the assessment thus made. Generally stated, that appeal was rested on the grounds that the transfers in issue were not intended to take effect in possession or enjoyment at or after the death of deceased, and, therefore, were not taxable; and, even assuming that they were so intended, nevertheless, they were supported by such adequate valuable consideration so as to take them out of the purview of the statute.

The Vice Ordinary had, at the time, before him the matter of the estate of Laura H. Ellis, deceased. We are told by the Vice Ordinary that the issues in the instant case are "practically identical with those in the appeal in the Ellis case." A study of the conclusions reached in the Ellis case, and the conclusions reached in the instant case, both of which are marked "Not for publication in any Report," discloses that the argument advanced for the Commissioner in both cases is substantially the same, and that the determination of the question here first stated was chiefly based upon the decision of our Court of Errors and...