United States v. Williams, Civ. A. No. 24-56.

• Decision Date: 03 April 1958
• Docket Number: Civ. A. No. 24-56.
• Citation: 160 F. Supp. 761
• Parties: UNITED STATES of America, Plaintiff, v. R. E. WILLIAMS, Special Administrator for the Estate of George D. Stout, and United States Savings Bank of Newark, New Jersey, Defendants.
• Court: U.S. District Court — District of New Jersey

160 F. Supp. 761

UNITED STATES of America, Plaintiff, v. R. E. WILLIAMS, Special Administrator for the Estate of George D. Stout, and United States Savings Bank of Newark, New Jersey, Defendants.

Civ. A. No. 24-56.

United States District Court D. New Jersey.

April 3, 1958.

Chester A. Weidenburner, U. S. Atty., Newark, N. J., by Barbara Ann Morris, Asst. U. S. Atty., Montclair, N. J., for the Government.

Alden Reid, San Bernardino, Cal., for defendant Williams.

Herrigel, Bolan & Herrigel, Newark, N. J., by Joseph Ginsburg, Newark, N. J., for defendant Bank.

WORTENDYKE, District Judge.

In this action the Government sues to recover from defendant Bank the amount of the balance due upon a savings account, No. 142,631 therein, standing in the name of "George D. Stout, in trust for Merritt Lane, friend." The Government's claim arises through a levy and distraint upon the account for income tax deficiencies assessed against Merritt Lane, deceased. 26 U.S.C. §§ 3670, 3678, 3690 and 3692. Demand for payment of the aggregate amount of those deficiencies was made upon decedent's executrix, who made certain payments on account thereof but left a balance unpaid for which said levy and distraint was made. George Stout, the creator of the savings account levied upon, died intestate, a resident of San Bernardino County, California, on April 9, 1947, and defendant R. E. Williams, as Public Administrator of that County, was duly appointed administrator of the estate of said intestate. The beneficiary, Merritt Lane, a resident of Madison, New Jersey, died on or before June 23, 1939. The Government seeks judgment in this action declaring that said administrator has no interest in said savings account. Defendant Bank admits the account which it says was opened September 25, 1933 in the amount of $1,950.29. The following withdrawals from the account were made by the depositor, viz.: $400 on December 12, 1933; $400 on August 25, 1936; and $200 on June 5, 1937. Items of accrued interest were added from time to time through June 30, 1957, when the credit balance was $1,529.38.

On October 9, 1954 the executrix of Merritt Lane duly assigned all her right, title and interest in the bank account to the Government. The Bank concedes its liability to pay the amount due under said Account, but alleges doubt as to whether the Government or Williams is entitled to the balance therein. Accordingly, the Bank has sought interpleader between plaintiff and Williams, and an adjudication of their respective rights in the fund. Service by mail having been effected upon the Administrator (Williams) in accordance with order of this Court, he has answered and claims that the balance in the bank account belongs to the estate of George D. Stout, of which he is Administrator. In lieu of trial, the parties have submitted the case upon a written stipulation of facts, and upon briefs for Government and Bank respectively. No brief has been filed for Williams.

The contract between the Bank and the depositor having been made and to be performed in the State of New Jersey, both the Government and the Bank concede that right to the fund must be governed by New Jersey law. Fidelity Union Trust Co. v. Field, 1940, 311 U.S. 169, 61 S.Ct. 176, 85 L.Ed. 109, Cutts v. Najdrowski, E. & A. 1938, 123 N.J.Eq. 481, 198 A. 885. The single question here presented, therefore, will be answered by a determination of the ownership of the bank account as of June 23, 1939, the latest possible date of the taxpayer's death.

In 1933, when the bank account here in dispute was opened, N.J.R.S. 17:9-4 read as follows:

"When a deposit has been or shall be made in a bank, savings bank or trust company by a person in trust for another, and no other or further notice of the existence and terms of a legal and valid trust has been given in writing to the bank, savings bank or trust company, in the event of the death of the trustee, the same or any part thereof, together with the dividends or interest thereon, shall be paid to the person in trust for whom the deposit was made, or to his legal representative and the legal representative of the deceased trustee shall not be entitled to the funds so deposited nor to the dividends or interest thereon notwithstanding that the funds so deposited may have been the property of the trustee. * * *"

The foregoing statutory provisions were considered and construed in Bendix v. Hudson County National Bank, E. & A. 1948, 142 N.J.Eq. 487, at page 491, 59 A.2d 253, at page 256, where the Court said:

"* * * R.S. 17:9-4, N.J.S.A., does not give rise to a conclusive presumption of the existence of an intention to make an absolute gift inter vivos or to create an irrevocable trust. * * * The statute has application only where `no other or further notice of the existence and terms of a legal and valid trust has been given in writing to the bank;' * * *. The form of the account is but prima facie evidence of a gift or a trust inter vivos; it constitutes presumptive evidence of an intention to make the purported gift or to create the trust which stands until overthrown by proof contra. The statute simply raises a rebuttable presumption of a valid and enforceable gift or trust. * * *"

The evidence in this case does not disclose some unequivocal act during the depositor's lifetime which would give rise to an irrevocable trust, and we are, therefore, relegated to the presumption which arises under the statute. In the absence of any evidence which would rebut the presumption of an intention to create a trust, or a revocation thereof pro tanto by the withdrawal of sums by the depositor, the intended beneficiary, had he survived the depositor, would have been entitled to what remained in the account free from any claim on the part of the depositor's representatives. Abruzzese v. Oestrich, Ch.1946, 138 N. J.Eq. 33, 47 A.2d 883; Hickey v. Kahl, Ch.1941, 129 N.J.Eq. 233, 19 A.2d 33. Where, however, as here, the beneficiary predeceased the depositor, the question presented is whether such survival by depositor of the beneficiary did not terminate the tentative trust. Although the stipulated facts, of necessity, raised this question as an issue, it was not briefed, and my research did not result in the disclosure of any controlling authority explicitly so holding.

Before the passage of R.S. 17:9-4, a deposit of money in a savings account in the name of the depositor in trust for another who was dead at that time did not give rise to a trust. Nicklas v. Parker, Ch.1905, 69 N.J.Eq. 743, 61 A. 267, affirmed E. & A. 1907, 71 N.J.Eq. 777, 71 A. 1135. In New York, where a tentative trust of savings bank deposited money was first sustained, the rule was laid down that the trust, in absence of some unequivocal act on the part of the depositor manifesting an intent to create an irrevocable trust, did not arise unless the depositor died before the beneficiary...