Spalding v. Martin

• Decision Date: 26 February 1936
• Citation: 183 A. 281
• Parties: SPALDING v. MARTIN, State Tax Com'r. In re SPALDING'S ESTATE.
• Court: New Jersey Supreme Court

183 A. 281

SPALDING

v. MARTIN, State Tax Com'r.

In re SPALDING'S ESTATE.

Prerogative Court of New Jersey.

Feb. 26, 1936.

Syllabus by the Court.

1. It is not the function of the prerogative court, on appeals under the Transfer Inheritance Tax Act (4 Comp.St.1910, p. 5301 et seq., § 537 et seq., Comp.St.Supps. § 208— 537 et seq.), to substitute its judgment as to values for that of the commissioner; nor to weigh the evidence and set aside a tax on the ground that the commissioner's determination of value is not in accordance with the weight of evidence.

2. To justify this court in setting aside a tax on the basis of allegation that the commissioner's determination of value is erroneous, it must appear that there has been error as matter of law, resulting (in legal contemplation) in an erroneous determination of value harmful to appellant.

3. It cannot be said that an appraisal by the commissioner of a block of 40,000 shares of stock, at a figure arrived at by multiplying his appraisal per share by the number of shares, is necessarily erroneous as matter of law.

4. It cannot be said that an appraisal is necessarily erroneous as matter of law merely because it is conceded that the executor could not have sold the asset for that figure on the day of decedent's death.

5. It cannot be said that an appraisal of shares of stock at the market price per share on the date of decedent's death is necessarily erroneous as matter of law merely because it is conceded that subsequent to the date of decedent's death the market price of the stock declined continuously for many months.

6. It cannot be said that an appraisal of shares of stock at the market price per share on the date of decedent's death is necessarily erroneous as matter of law merely because it is conceded that such market price was the result of support of the market by the corporation and decedent.

7. The commissioner is not bound as matter of law to adopt as his own judgment and determination of value, the opinions of expert witnesses, notwithstanding there be no conflicting testimony by any other expert witness.

In the matter of the estate of James Walter Spalding, deceased. From a transfer inheritance tax assessed by J. H. Thayer Martin, State Tax Commissioner, H. Boardman Spalding, individually and as executor, appeals.

Affirmed.

Lester C. Leonard, of Red Bank, for appellant.

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

BUCHANAN, Vice Ordinary.

Appellant appeals from the transfer inheritance tax assessed in the above estate. The grounds of appeal set forth in the petition are that the appraisal or determination of value of three specified assets of the estate, as made by the state tax commissioner, were and are erroneous and in excess of the true value of the said assets. The appellant contends, therefore, that the tax, which was computed and assessed upon the basis of those valuations, is erroneous.

The assets in question are as follows:

1. Two promissory notes of Summer Homes Protective Company, appraised by the commissioner at $4,058.51.

2. 1,043 shares of the second preferred stock of A. G. Spalding & Bros., appraised by the commissioner at $106,907.50.

3. 38,910 shares of the common stock of A. G. Spalding & Bros., appraised by the commissioner at $758,745.

No mention is made in the appellant's brief as to the promissory notes mentioned in item No. 1 above; and the appeal is accordingly deemed abandoned in so far as concerns that item.

Under the statute, the commissioner is required to determine and fix the "clear market value" or "fair market value" of the property comprised in the testamentary transfers. Appellants contend that the phrase "fair market value" is the correct meaning and intent of the statute, and we may accept that as the correct principle.

Appellants also contend that by reason of this language, "fair market value," the commissioner is not required to appraise, nor justified in appraising, shares of stock solely at the price shown to have been the actual market value of the stock, on the stock exchange, at the time in question, disregarding any and all other factors, but is required to find and determine the "fair market value." We may accept this also as a statement of the correct principle.

The appellants further contend that the fair market value is "the fair value as between one who desires but is not compelled to buy and one who is willing but not compelled to sell." This is not controverted by the respondent, and we may, for the purposes of this case at any rate, accept that as a correct statement of principle or definition.

The commissioner determined the value of the 1,043 shares of the second preferred stock of Spalding Brothers to be $106,907.50, which is at the rate of $102.50 per share. The stock was not traded in on the stock exchange, nor on any other regular market; there were no sales on the date of testator's death; there were a few scattering sales about three months before and three months after the date of death, to wit, June 10, 1931, 10 shares at $115 each; June 18, 1931, 10 shares at $115 each; January 14, 1932, 10 shares at $90 each; January 19, 1932, 10 shares at $90 each. The date of decedent's death was September 11, 1931.

The commissioner, in making his appraisal, did so on the basis of a consideration of the average price of these sales, the assets and liabilities of the company as shown by its financial statements, and also the fact, in connection with the financial statements of the company for previous years, that the company has paid yearly dividends of 8 per cent. on that stock over a period of many years.

The presumption is in favor of the correctness of the appraisal and assessment, and the burden is upon the appellants to establish the alleged error. In re Pierce's Estate, 89 N.J.Eq. 171, 104 A. 298; In re Grabfeldcr's Estate, 107 N.J. Law, 520, 153 A. 532. They must establish such a situation as will require this court to say that the determination of the commissioner is erroneous as a matter of law. In re Gould's Estate, 105 N.J. Eq. 598, 148 A. 731.

Unless the appellants establish that the result reached by the commissioner is incorrect as a matter of law, the tax must be affirmed. Defects in the steps taken to reach the result are of no materiality unless the result is shown to be incorrect. In re Bottomley's Estate, 92 N.J.Eq. 202, 111 A. 605. Unless, therefore, the appellants establish the fact that the value placed by the commissioner upon this stock is, either in fact or legal presumption, not correct, is not the fair market value of that stock, the tax will not be set aside by this court.

It is not the function of this court on these appeals to weigh the evidence, or substitute its own judgment as to values in place of the judgment of the tax commissioner. In re Pierce's Estate, supra; In re Moore's Estate, 104 N.J.Eq. 400, 145 A. 727. The commissioner acts in the province of a jury in determining the fact of value. This court will not set his determination aside on the ground that it would have arrived at a different conclusion on consideration of the evidence before the commissioner. It will only set that determination aside if it appear that the commissioner declined to receive or consider evidence which as a matter of law he ought to have...