Kelly v. Kelly

• Citation: 35 A.2d 618
• Decision Date: 25 January 1944
• Docket Number: No. 6879.,6879.
• Parties: KELLY v. KELLY, State Tax Com'r. In re KELLY'S ESTATE.
• Court: New Jersey Prerogative Court

35 A.2d 618

KELLY

v. KELLY, State Tax Com'r.In re KELLY'S ESTATE.

No. 6879.

Prerogative Court of New Jersey.

Jan. 25, 1944.

Proceeding between Matilda Kelly, executrix of the last will and testament of Richard Kelly, deceased, and William D. Kelly, State Tax Commissioner, to determine the legality of a transfer inheritance tax assessment.

Assessment affirmed.

1. In the absence of any evidence as to the foreign law, it is presumed that the common law principles prevail in that state.

2. The requisite elements of an inter vivos gift are (a) donative intent on the part of the donor; (b) an actual (or symbolical) delivery of the subject-matter of the gift; and (c) an absolute relinquishment by the donor of all ownership and dominion over the subject-matter of the gift, at least to the extent practicable or possible, considering the nature of the thing given.

3. Proof of the existence of these essential elements of a gift should be clear, cogent and persuasive.

4. One who deposits his own funds in a new account in the name of himself and another is not to be thereby conclusively presumed to have made a gift of one-half of the account to the other or to have created a joint tenancy in the account. A simple and uncompounded joint account might be intentionally originated and maintained solely for the expendiency of the one depositor.

5. A joint account, i.e., one entered merely to the credit of two individuals, is not inevitably to be recognized as inherently a joint tenancy.

6. Held: In the circumstances of this case, the decedent, in originating the bank account, intended to retain dominion over it, use it at his own pleasure and for his own purposes, and yet, also, clothe his wife with power only to draw upon it, if, in any contingency, it became necessary or convenient. Accordingly, the moneys withdrawn by decedent's wife were properly incorporated at a part of his taxable estate.

Lum, Fairlie & Wachenfeld, of Newark, for petitioner.

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

JAYNE, Vice Ordinary.

This appeal pertains to the legality of a transfer inheritance tax assessment. The transcript of the antecedent proceedings before the Tax Commissioner discloses the facts from wich the discordant views have arisen.

On June 18, 1929, one Richard Kelly with his own personal funds opened an account, commonly known as a checking or commercial account, with the Royal Bank of Canada, at No. 68 William Street in the City of New York, payable to himself or to his wife, Matilda Kelly. The signature card evidential of the contractual engagement expresses the terms as follows: ‘We, the undersigned, hereby agree, jointly and severally, and each with the other, and with the Royal Bank of Canada, that all moneys deposited by either or both of us to the credit of our joint names, and the interest thereon, shall be subject to withdrawal by either of us. And each of the undersigned hereby authorizes the said Bank to pay any moneys which may be at any time so deposited, and any interest thereon, to either of the undersigned.’

It is immediately noticeable that the declaration of the type and character of the account does not embody the more familiar ‘belongs to us as joint tenants and will be the absolute property of the survivor of us,’ or ‘payable to either or the survivor,’ or ‘in the event of death of either to belong to the survivor,’ or ‘the balance at the death of either to belong to the survivor.’ Whether the account was entitled ‘Richard Kelly and Matilda Kelly’ or Richard Kelly or Matilda Kelly is not definitely revealed. It is characterized, however, in the stipulation of facts as a joint account.

It is acknowledged that all deposits to the credit of the account during the suceeding years were made by Mr. Kelly with his own moneys, and all the numerous withdrawals from the account were made by him except that of July 11, 1942, to which reference will again presently be made. The balances at recent dates were:

September 4, 1939 $106,562.60

July 1, 1940 82,719.89

July 10, 1941 98,316.55

July 10, 1942 135,158.64

On or about July 7, 1942, at the age of sixty-nine years, Mr. Kelly was advised by his physician to undergo a surgical operation. On July 11, 1942, Mrs. Kelly withdrew from the bank account the sum of $120,000 and deposited the funds to her own credit. Incidentally, I discover from the tax report subsequently submitted to the Commissioner that the sum so withdrawn was ninety per cent or more of the cash assets of Mr. Kelly. He died at the Orange Memorial Hospital on August 18, 1942, thirty-eight days after the event of the withdrawal of the $120,000 from the account. The causes of his death are authentically certified to have been ‘Chronic myocarditis, General arterial sclerosis and Ca. of Sigmoid.’ A credit balance of $5,718.68 remained in the joint bank account on the date of the decedent's death. The decedent made a testamentary disposition of his entire estate to his widow.

Mr. Kelly was a resident of West Orange, Essex County, New Jersey, and the Tax Commissioner, in computing the tax to be levied on the transfer of the assets of the decedent's estate, incorporated the sum of $120,000, withdrawn by Mrs. Kelly, in the gross estate of the decedent. The criticisms of that assessment, as presented by the petition of appeal, are that (6a) ‘the said withdrawal was not a transfer or a gift made by decedent at all and hence could not be in contemplation of death,’ and (6b) ‘the decedent made a gift to your petitioner (Mrs. Kelly) of one-half of the amount of each deposit made by him (Mr. Kelly) in said account at the time of each deposit.’

Since it is conceded that all credits to the account were derived from the individual moneys of the decedent and there is an absence of any supplementary proof, by what means other than by some form of a voluntary gift was the account or any part of it transported from the ownership of the decedent to that of his wife? Therefore the controversial issue introduced by this appeal may be solved, I think, by initially determining whether there was a valid inter vivos gift of the account, wholly or in part, by Mr. Kelly to his wife.

I have not ignored either the fact that the account was established and had its situs in the State of New York, or the principle that a gift of money or choses in action is governed by the law of the jurisdiction where the gift is made. Cutts v. Najdrowski, 123 N.J. Eq. 481, 198 A. 885. The pertinent law of New York is neither pleaded nor disclosed. The presumption will therefore be indulged that the common law principles prevail in that state. Waln v. Waln, 53 N.J.L. 429, 22 A. 203; Coral Gables, Inc., v. Kretschmer, 116 N.J.L. 580, 184 A. 825; Franzen v. Equitable Life Assurance Society of U.S., 130 N.J.L. 457, 33 A.2d 599; P.L. 1942, c. 104, p. 365, sec. 1, amending P.L. 1941, c. 81, p. 193, sec. 1, N.J.S.A. 2:98-28, supplementing R.S. 2:98, N.J.S.A. 2:98.

The principle of law relevant to the theme of inter vivos gifts of both tangible and intangible things is at present...