text:
    In the matter of the estate of Rynear H. Williams, deceased.
    [Decided March 6th, 1923.]
    An order or decree of the orphans court awarding costs and counsel fee to be paid out of the estate of a decedent upon a contest over his last will and testament, is part of the decree respecting probate, and, whether residing in the terms of that decree, or in the form of an amendatory, or even independent, order or decree (such awards have been made in all three ways in numerous cases), an appeal therefrom must be demanded—that is, taken, within thirty -days after the making and entering of such order or decree, in accordance with the provisions of the statute, or such appeal will be dismissed.
    On motion to dismiss appeal.

      Mr. Ulysses G. Styron and Mr. Theo. N. Schimpf, for the motion.

      Mr. Charles L. Qole and Mr. Clifton C. Shinn, contra.

   Walker, Ordinary.

A caveat having been filed in the office of the surrogate of Atlantic county against the admission to probate of a paper writing purporting to be the last will and testament of Rynear H. Williams, deceased, the testament was admitted to probate after a contest in the orphans court. The order for probate was dated and filed September 25th, 1922. Subsequently application was made to the orphans court for an allowance of counsel fees and costs to counsel for the eaveatrix, and, also, to counsel for the proponents, and by an order made October 12th, filed October 16th, 1922, counsel fees were allowed to both sides, together with certain disbursements by one of the proctors for eaveatrix. An appeal to this court from so much of the order of the orphans court as allowed a counsel fee and disbursements to the eaveatrix and directed the executrix to pay the same, was taken by the executrix, by notice in writing, dated January 6th, filed January 8th, 1923. Motion is now made*in this court on behalf of the executrix, to dismiss the appeal on the ground that it was not demanded, that is, taken, within the time prescribed by the statute '(Comp. Stat. p. 3889, § 204), which is:

“Any person aggrieved by order or decree of the orphans court, of whatever nature, may appeal from the same to the prerogative court; provided, that the appeal, if from an order or decree of the court respecting the probate of a will or right of administration or the fairness of an inventory, shall be demanded within thirty days after such order or decree, and if from any other order or decree, the same shall be demanded within, three months from the malting of such order or decree, unless otherwise specially provided.”

The only question is, is the order for costs and counsel fees one respecting the probate of a will? If it is, it was taken out of time (more than thirty days after the decree) and must be dismissed. If it! is not, then it was within time (less than three months after the decree) and the motion must be denied.

In Hoit v. Hoit, 40 N. J. Eq. 551, a decree was made admitting a will to probate and awarding costs and counsel fees to both sides. Later, an order was entered directing that the decree be amended so as to award a counsel-fee out of the estate to one proctor of the proponent, and later another similar order was made awarding a counsel fee to another proctor of the proponent, and Chancellor Eunyon, as ordinary, held that the provisions of the decree as to costs and counsel fees were part of the decree for probate, from which an appeal was required to be taken within thirty days after entry, and that as to the amendatory decree appeal was required to be taken within thirty days from the time of entering the amendatory decree.

In re Wandell, 92 N. J. Eq. 195, the orphans court admitted a will to probate. After appeal taken from that court to this court from the decree probating the will, and while that appeal was pending in this court, counsel for the caveator applied to the orphans court for an allowance of counsel fees and expenses to be paid out of the estate. The orphans court made an order awarding counsel fee to the caveator to be so paid. Appeal was taken to this court from that order and allowance, and the executors urged that the order should be reversed because the orphans court was without jurisdiction to entertain the application pending the appeal from probate, and also because there was no reasonable cause for contesting the validity of the will. I, as ordinary, observed (at p. 199) that the question of allowance of counsel fees and expenses was a thing apart from the question involved in the appeal from a decree admitting a will to probate, and, as the orphans court had power to make such am. award, even where probate was denied, such an award, if made, cannot be said in anywise to destroy or impair the subject of the appeal, and I concluded, therefore, that the orphans court had jurisdiction to entertain the application pending the appeal. In re Wandell, unlike Hoit v. Hoit, did not concern the question as to whether an order for expenses in a will contest was a decree respecting the probate of a will. It might well be that, namely, part of the decree respecting probate, and yet the subject matter, namely, counsel fees and costs, is doubtless a thing apart from the probate of the will itself. I therefore hold that there is nothing in the case In re Wandell which overrules or departs from the decision of Chancellor Runyon in Hoit v. Hoit.

If this matter camie to me as an original proposition I might be inclined to hold that that part of 'an order or decree awarding costs and 'counsel fees out of an estate in case of a contest over the probate of a will, whether residing in the original decree, or in the shape of an amendatory, or even independent, order (such awards have been made in all three ways in numerous eases) was independent, and not a part of the decree respecting probate, but something ancillary and collateral thereto; but, in view of Chancellor Runyon’s declaration that such an order is part of the decree for probate, I feel that I should follow that precedent. The application of it to the case sub' judice results in granting the motion to dismiss the appeal from the order allowing counsel fee and disbursements to the eaveatrix, because not demanded within thirty days after the making and filing of such order.

Let the appeal be dismissed.


source: Caselaw Access Project

author: Leaming, Vice-Ordinary.

license: Public Domain

text:
    In the matter of the appeal of William H. Kirkpatrick, executor of the last will and testament of Mary Adelaide Jacoby, deceased, from the decree of the orphans court of the county of Camden, ordering distribution of the estate of Henrietta Cooper, deceased.
    [Submitted October 30th, 1922.
    Determined January 3d, 1923.]
    1. Where a testatrix bequeathed to G. and J. all her share and interest in a certain estate, and became insane before receiving such share and interest, and, subsequently, such share and interest was paid to her guardian, who mingled it with other funds of his ward, such payment operates as an ademption of the gift made by the testatrix.
    2. A specific bequest is necessarily intended by a testatrix to become effective only in case the thing exists at the testator’s death. If it does not then exist, the bequest fails.
    3. Wilmerton v. Wilmerton, Executor, 176 Fed. Rep. 896, overruled. Hoke v. Herman, 21 Pa. St. 301, approved and followed.
    On final hearing on appeal from decree of orphans court.

      Mr. Osiris D. McConnell, for the appellant.

      Mr. William D. Lippincott, for the respondents.
   Leaming, Vice-Ordinary.

This is an appeal from an order of distribution made by the orphans court in settlement of a testator’s estate.

No dispute exists touching the facts. The sole inquiry is whether there has been an ademption of a certain gift contained in the seventh paragraph of the will of Henrietta Cooper, decased. That paragraph is as follows:

“Seventh—I give, devise and bequeath all my share and interest in the estate of Ann Nice, deceased, also all my share and interest in the estate of Levi Nice, deceased, including all my interest in lands and real estate which came from the said Ann Nice and Levi Nice, or either of them, to my two sisters Ann N. Cooper and Mary Adelaide Jacoby, share and shax-e alike, to them their heirs and assigns forever.”

Subsequent to the execution of her will testatrix became insane and was adjudged a lunatic by the court of chancery of this state. A guardian of testatrix was then appointed 'in this state and one Adamson was thereafter appointed ancillary committee of her estate in Pennsylvania. Testatrix remained insane until her death.

After testatrix became insane and before her décease the two estates referred to in the paragraph of her will above quoted were settled and the respective distributive shares of those two estates which would have been payable to testatrix was paid to Adamson as her ancillary committee in Pennsylvania.

The present controversy arises from the claim that the payment to Adamson, as committee of testatrix, of the distributive shares due testatrix from'the two estates named in the paragraph of the will above quoted was operative as an ademption of the gift made by that paragraph of the will of testatrix. Accordingly it is claimed that the amount so paid falls into the residuary estate of testatrix and is payable to others under the residuary clause of her will.

Treating the money paid to Adamson as ancillary committee of testatrix, as capable of identification at this time, the primary inquiry arises whether the payment to Adamson after testatrix had become insane was operative to adeem the gift made by the clause of the will of testatrix' above quoted.

Jn this state there appears to be no case in which the question of ademption of a specific legacy has been considered where the act which is claimed to be operative as an ademption has occurred after the testator has become insane. Pew cases of that nature appear to have arisen elsewhere.

In England two distinct lines of cases .of that general nature have arisen. One, where the act which has been claimed to be operative as an ademption of the bequest has been the act of the committee in lunacy of testator in the performance of his administrative duties. In cases of that nature the bequests are declared to be adeemed, even though the proceeds of the conversion are earmarked and intact. The other class of cases is where the conversion of the bequeathed chattel has been the act of strangers or intermeddlers without authority, and the converted proceeds of the bequeathed chattel have been earmarked and preserved. In that class of cases it has been held that the conversion has not' effected an ademption.

The cases of the first class are Freer v. Freer, L. R. 22 Ch. Div. 622, and Jones v. Green, L. R. 5 Eq. Cas. 555. Those of the latter class are Basan v. Brandon, 8 Sim. 171, and Jenkins v. Jones, L. R. 2 Eq. Cas. 323.

In Freer v. Freer, supra, testator made a specific bequest of stock of a certain railway company. After the date of his will testator was adjudged a lunatic and his committee in lunacy was appointed. The stock being deemed an unsafe investment was subsequently sold in the exercise of the jurisdiction of the lord-chancellor, intrusted with the administration of lunatic’s estates. The proceeds of sale were kept intact by being carried to the credit of the lunatic to an account specially designated as the proceeds of that sale. It was determined that the legacy was adeemed and that the proceeds of sale became payable to the residuary legatees. It is there declared by Justice Chitty that the law places the estate of a lunatic in the same position as if there had been no lunacy; that an administrative act touching the lunatic’s estate is necessarily given the same force as a similar act performed by testator before his lunacy occurred. It is also there suggested that had an order of sale been made by the lord-chancellor -which provided that the proceeds of sale should represent the stock for all purposes, such direction touching the proceeds would not have had any effect in altering the rights of the parties. An exception to that rule is noted in the case of a specific' devise of real estate. By the one hundred and nineteenth section of the Lunacy Regulation act it is provided that proceeds of land shall, notwithstanding its conversion, preserve the character of land and belong to the same person who would have been entitled to the land if there had been no conversion.

In Jones v. Green, supra, testator bequeathed the income of certain shares specifically, and bequeathed the shares to his residuary legatees. Lunacy followed and the shares were sold and the proceeds invested in consols. It was held that the gift of income was adeemed by the sale, and the sum of con-sols fell into the residue. Says Sir G. M. Gifford, V. C.: “All the authorities show that the conversion must be as a lawful convei’sion, exactly as if the testator had himself converted the shares into consols. Such an act on his part would clearly have adeemed the gift.” The suggestion is there made that an order of sale preserving the proceeds for the specific legatees might have been effective. That suggestion is specifically criticised in the later ease of Freer v. Freer, above reviewed.

In Basan v. Brandon, supra, one of the other class of English cases above referred to, testator made a specific bequest of money in the hands of his agent. The agent, without authority, invested the money in certain securities. It was held that the gift was not adeemed. In that case no insanity upon the part of testator intervened. In the case of Jenkins v. Jones, above cited, testator bequeathed farming stock which should be in his possession at his decease. He subsequently became of unsound mind and so remained until his death. After testator became of unsound mind, and before his death, the person named as specific legatee and executor, with the concurrence of the other executor, converted the stock into money, which they deposited in bank in their own and a third person’s names, where it remained until testator’s death. This conversion was held not to be operative, as an ademption of the gift. It will be observed that in both of these cases the conversion was by persons without authority and in both cases the proceeds of the conversion were preserved as such until testator’s death. These two elements were the controlling elements of the decisions.

The English decisions may be said to declare that an ademption occurs where after insanity of testator the thing bequeathed is converted by one with authority to represent testator, irrespective of whether or not the proceeds óf sale are preserved as such until testator’s death, and that no ademption occurs when the conversion has been by one without authority and the proceeds of the conversion have been set apart and preserved as such at the time of testator’s death.

In this country there are two cases in which the subject of ademption has been considered where a conversion of a thing specifically bequeathed has occurred at the hands of a committee in lunacy of testator in the course of the administration of the estate of the lunatic.

The first case is that of Hoke v. Herman, 21 Pa. (9 Harris) 301. In that case testator bequeathed to his nephew a certain promissory note, with interest, which note testator held against his nephew. Testator subsequently became insane. His committee in lunacy, in settling with testator’s nephew for certain services rendered by the nephew to testator after tlie date of the will, credited on the note as a payment of interest the amount due the nephew for the service. Neither the nephew nor the committee knew that the will gave the note and interest to the nephew. The question presented was whether the amount credited on the note operated as an ademption of the note to that extent, or whether the amount so credited should be paid to the nephew, the estate being ample. Touching ademption, Chief-Justice Black said: “If a thing bequeathed in a will by such a description as to distinguish it from all other things be disposed of, so that it does not remain at the death of the testator, or if it be so changed that it cannot be called the same thing, the bequest is gone. If such a legacy be of a debt, payment necessarily makes an end of it. The legatee is entitled to the very thing bequeathed, if it be possible fox the executor to give it to him; but if not, he cannot have money in place of it. This results from an inflexible rule of law applied to the mere fact that the thing bequeathed does not exist, and it is not founded on any presumed intention of the testator.” It was accordingly held that the credit given on the note by the committee operated as an ademption of the note to that extent.

The other case is that of Wilmerton v. Wilmerton, Ex., 176 Fed. Rep. 896. That case specifically repudiates the conclusions reached in Hoke v. Herman, last above cited, as well as the case of Freer v. Freer, above referred to as defining the English rule. In Wilmerton v. Wilmerton, testator had deposited with a bank certain securities and money under a trust agreement whereby the bank was to collect and receive the principal of the securities at maturity, pay the income thereof to testator, on demand, and reinvest the principal speedily, and upon the death of testator to account for all of the property to testator’s estate. Thereafter testator executed his will and subsequently became insane and a conservator of his estate was appointed. Testator’s insanity continued until his death. By his will, testator gave to his daughter and son “notes and moneys to the amount of $75,000, as per contract to be managed by said'.bank'for the benefit of my estate.” This was treated by the court as a specific bequest of the trust funds above referred to. Prior to the death of testator the conservator demanded of and received from the bank the accrued interest on the trust fund, although the money was not needed for the maintenance of the ward or for any other necessary purpose. The judicial inquiry was to ascertain whether that payment to the conservator operated as an ademption of the specific legacy as to the amount so paid. That inquiry was solved in the negative. I think it clear that the views adopted by the learned court afforded a radical departure from all previous adjudications in like circumstances, and have not since received judicial sanction, unless the case of Morse v. Converse (N. H.), 113 Atl. Rep. 214—a case in which insanity does not appear to have occurred—can be said to have measurably approved the views expressed in the Wilmerton Case. The conclusions reached in Wilmerton v. Wilmerton appear to be based upon the claim that the conservator had no power to change testator’s will. In prior adjudications the primary inquiry uniformly has been touching the power of the conservator to convert the thing which has been specifically bequeathed, and where that power has been found to exist the effect of such conversion upon the will has been deemed to have arisen from the application of the long established rules touching ademption of specific legacies. The opinion of the learned judge proceeds as follows: “Upon sound reason, we think that the English and Pennsylvania cases cited ought not to be followed, and upon what appears to us to be sound reason, we think the rule that legacies are adeemed only where such an intention appears on the part of the testator himself ought to be followed. The question, in our judgment, is not whether, as a mere matter of accident, or of purpose outside of testator’s purpose, the thing set apart as the corpus of a special bequest has been changed in specie. The real question is whether, all things considered, the testator’s testamentary disposition did, or did not, remain, with reference to the particular thing embodied in the specific bequest or its proceeds, the same as it was the last moment he was able to exercise a testamentary disposition.”

It is difficult to resist a desire to adopt the test of testator’s intention as above defined; but is this court privileged to adopt it if in so doing the established principles touching testamentary intent and the inherent nature of specific legacies are to be thereby disregarded? In England, legislation has protected specific devises of real estate from the operation of the accepted rules of ademption; until recognized rules touching ademption are modified in this jurisdiction it appears to be the duty of this court to enforce them as they are found to exist. It seems clear that the test adopted in the Wilmerton Case does violence to those accepted rules to a degree that denies1 this court the privilege of its adoption. Obviously the intention of testator at the last moment he was able to exercise a testamentary disposition cannot be made a uniform test. Should a testator make a specific bequest of a certain horse and subsequently become insane, the subsequent death of that horse before testator’s death would necessarily destroy the bequest. This arises from a quality found inherent in all specific bequests. A will not only takes effect at the death of a testator, but it is intended by a testator to take effect at that time, and testator’s intent touching a specific legacy can only be understood as a gift to take effect at that time, and with reference to conditions that may exist at that time, and not as a gift in presente, such as an assignment, nor yet as a gift of a certain amount of testator’s estate, such as a general legacy. A specific bequest is necessarily intended by a testator to become effective only in case the thing exists at testator’s death. The gift of the distributive shares in the two Nice estates, here in question, was intended by testator to become effective should testator die before the shares became payable. The shares became payable before testator’s death; had testator remained sane the shares would have been paid to Mm and an ademption would have resulted. But testator became insane and his lawful representative received the shares for testator that.would otherwise have been paid to testator. Accordingly it seems that the only intent of testator that may be here considered must be regarded as an intent to give the shares to the specific legatees should the shares become payable after testator’s death. The bequest was in its essential characteristics similar to a gift of a debt due or to become due to a testator. When testator died, and at no time thereafter, was there any debt or other obligation due to testator or to his estate from either of the Nice estates; those obligations had been wholly discharged by payment. The thing on which the bequest operated no longer existed. The necessity of transferring to another a testator’s control over his property in the event of his insanity is a contingency always present and a necessity that cannot be escaped. Accordingly the lawful acts of such representative of testator in the performance of his duties in testator’s behalf cannot be considered as other than the acts of testator, and as of like effect; in'such circumstances it appropriately cannot be said that the representative of testator has changed testator’s testamentary intent.

The principles of ademption 'as defined in this state appear to accord with the views above expressed. In Wyckoff v. Perrine’s Executors, 37 N. J. Eq. 118, Vice-Chancellor Van Fleet, in discussing whether testator’s intent can be properly considered as. an element of ademption of a specific legacy, gives approval ,to the negative view expressed in Humphreys v. Humphreys, 2 Cox Ch. 185, and the view expressed by Chief-Justice Black in Hoke v. Herman, 21 Pa. St. 301, 305, above cited, in which it is stated' that ademption “results from an inflexible rule of law applied to the mere fact that the thing bequeathed does not exist, and is not founded on any presumed intention of the testator.” In Mecum v. Stoughton, 81 N. J. Eq. 319, 324, it is stated that “the intention to make the legacy specific must include the intention to render the legacy subject to ademption.”

Another circumstance also must be considered. When the distributive shares of the two Nice estates were paid to Adam-son, a,s ancillary committee of testatrix, Adamson united the money so received with other moneys of the estate of testatrix which came to his hands and rendered to the court of his appointment an account of his administration as ancillary committee. In his accounts the items received from the two Nice estates appear and are easily identified and aggregate $2,180.79; but all moneys were treated by him and by the court as one general fund and against that general fund was charged all disbursements and allowances without reference to the several sources of the fund. The general balance in his hands was thus determined and approved by the court. This balance was paid by Adamson to Israel Roberts, the ancillary executor of testatrix in Pennsylvania, in accordance with the award of distribution made by the court. Roberts, as ancillary executor of testatrix, then also mixed or commingled the funds received from the ancillary committee with other funds of the estate of testatrix. Roberts then died and the orphans court of Philadelphia county then ascertained the balance remaining in the hands of Roberts, as ancillary executor of testatrix and by its decree awarded the payment thereof to Central Trust Company of New Jersey, substituted administrator cum testamento annexe of testatrix; pursuant to .that award the administrator of Roberts thereafter paid the ascertained balance to the Central Trust Company. Roberts was also executor in New Jersey of the estate of testatrix and after his .decease the amount of the New Jersey assets remaining in his hands were also paid to the. Central Trust Company as substituted administrator cum testamento annexo of testatrix. The Central Trust Company also' has commingled all funds received by it in one general account. It will .thus be observed that up to this time no effort has been made to preserve as a separate fund the two distributive shares here in controversy, and administration expenses, charges and disbursements have been made against a single fund which consisted in part only of the proceeds of those two distributive shares. In these circumstances it seems iim possible to identify a part of the money now in the hands of the substituted administrator cum testamento annexo of testatrix as the money paid .to the ancillary committee of testatrix as the distributive shares of the two Nice estates and treat it as such. Should the lawful acts of Adamson, as committee of testatrix, in receiving those distributive shares be given only the force of acts of a stranger without authority, it yet • appears that the legacies must be deemed lost by reason of the existing inability to adequately identify the proceeds of sale.

A decree will be advised affirming the decree of the orphans court.


text:
    In the matter of the estate of Susan Quinn, deceased.
    [Submitted October 2d, 1922.
    Decided October 5th, 1922.]
    Under P. L. 1917 p. 844, where a wife died intestate, seized of property inherited from her husband, this property would go to her heirs, as a husband is not an ancestor of his wife.
    Oil appeal from assessment transfer tax.

      Mr. William M. devengar, for the appellants.

      Mr. Thomas F. McCran, attorney-general, for the respondent.
   Leaming, Vice-Ordinary.

This is an appeal from an assessment of a transfer inheritance tax assessed by the comptroller under onr statute. The controversy involves a construction of our Descent act.

November 5th, 1918, Susan Quinn. died intestate as to certain real estate, leaving her surviving two first cousins a-s her lieirs-at-law. This real estate was acquired by her by devise from her husband, who had acquired it by purchase. At the death of Mrs. Quinn there were persons in being of the blood of the deceased husband capable of inheriting and who now claim the inheritance. The sole controversy is as to whether at the death of Mrs. Quinn the title to that real estate vested in her heirs or in the' heirs of her deceased husband.

The solution of this inquiry is‘ to be found in the sixth section of our Descent act as contained in the amendatory act of March 29th, 1917. P. L. 1917 p. 844. By the plain terms of that section the title vested in the two cousins of Mrs. Quinn at the time of her death unless the facts above stated bring the case within the exception contained in that section which relates to estates received by descent, devise or gift from an ancestor of the intestate, in which latter case the title vested in the heirs of the deceased husband. That exception is as follows:

“Unless where such inheritance came to the said person so seized by descent, devise or -gift of some one of his or her ancestors-, in which case all those who are not of the blood of such ancestor shall be excluded from such inheritance, if there be any person or persons in being, although more remote, and however remote, -of the blood or half blood of such ancestor capable of inheriting the said lands, tenements or hereditaments.”

The controversy thus resolves itself into the single inquiry whether real estate purchased by a husband and by him devised to his wife can be said to have come to the wife by devise or gift of some one of her ancestors. If the husband of Mrs. Quinn was not her “.ancestor” within the meaning of the statute the title to the land in question passed to her two cousins at her death, and the assessment which was made by the comptroller on that theory must be affirmed. The claim that the heirs of the husband will take from him as a “first purchaser” under the common law canon of descent is clearly in conflict with the plain terms of our act.

I think it entirely clear that in a statute of this nature a (husband cannot be regarded as an ancestor of his wife. There is between them neither blood relationship nor statutory or other right of either to inherit from the other. See authorities collected in 2 C. J. 1334; 18 C. J. 818; 2 Am. & Eng. Encycl. L. (2d ed.) 319 and 14 Cyc. 28, 47.

I will advise a decree dismissing the appeal.


author: Backes, Vice-Ordinary.

text:
    In the matter of the application for probate of the last will of Jane E. Barney, deceased, late of Union county, New Jersey.
    [Decided March 29th, 1923.]
    1. Probate of a will of a decedent domiciled in this state will be denied on the ground of res adjudicata where it appears that her will had been offered for probate in New York state, where most of her property was located, and where two juries found that she was incompetent to make a will, the New York court having statutory jurisdiction of the subject-matter because the decedent left property in that state, and of the parties who were duly cited and appeared.
    2. In re Rosa E. Spang, N. Y. Law Jour., November 29th, 1922, approved and followed.
    3. Chadwick Case, 80 N. J. Eq. 471, explained and distinguished.
    4. Our probate courts have original probate jurisdiction of nonresident testators’ wills where they‘die seized of lands in this state. P. L. 1921 p. 831.

      On motion to dismiss petition for probate.

      Mr. John J. Fallon, for the motion.

      Mr. William E. 0 si orne, for probate.
   Backes, Vice-Ordinary.

Jane E. Barney, at the time of her death, was domiciled at New Providence, Union county, this state. She died owning land and considerable personal property in New York county, New York. She also had land and personal property in this state, but comparatively of small value. It is said that nearly ninety-five per cent, of her property was in New York. Shortly before her death, in 1915, and while on a visit to New York, she executed in due form a purported last will and testament disposing of her entire estate and appointed Lewis V. Ennis, a legatee and sole residuary beneficiary, executor thereof. The will erroneously recites that Mrs. Barney was “of the city of New York, borough of Manhattan.” The executor offered the will for probate in the surrogate’s court of New York county, where it is still lodged. All parties in interest were duly cited and a bitter. battle was waged on the usual grounds of incompetence and undue influence. Mrs. Barney was past eighty, a widow and childless. Many years of her life had been spent in retreats for the mentally afflicted, but not since 1888. She moved to New Jersey in 1902, two years after her husband’s death. The original petition for probate in the orphans court of New York county alleged that the deceased at the time of her death was domiciled in the county of New York, and upon objection to the jurisdiction of the court on the ground that the deceased was not a resident of New York but of New Jersey, which was opposed but not seriously contested, leave was given to amend and the petition was amended alleging another jurisdictional ground under the New York law, that the deceased at the time of her death was possessed of lands and personal property in the county of New York. Two jury trials were had, one lasting three weeks, the other thirty days, and in each the verdict was that the deceased was incompetent to make a will. The case went to the jury upon that single issue. The first verdict was set aside because of the admission of illegal testimony and erroneous instructions to the jury. In the matter of Barney, 174 N. Y. Supp. 242. The decree on the second verdict was affirmed by the appellate division of the supreme court, which also denied an appeal to the court of errors, and upon application to the latter court it refused to review the case.

After this protracted and expensive litigation the executor. Ennis, joined by two legatees, evidently encouraged by what was said by our court of errors and appeals in the Chadwick Case, 80 N. J. Eq. 471, now applies for probate here because of the. decedent’s domicile in this state. Motion is made to dismiss the application on the ground that this court is without jurisdiction because the alleged will does. not accompany the petition for probate. The petitioners say they will take steps to produce it. The question is one of procedure not of jurisdiction. • Orderly procedure and our common practice call for the document when the applicant prays for its probate. The offer for probate would seem to speak this, but there is nothing in our statute or in our rules that require its lodgment in court with the petition. See Cassidy’s Will, 80 N. J. Eq. 163. A motion to stay the proceedings until, &c., would seem to me to be the proper practice. However that may be, I prefer to put my judgment on the more substantial ground of res adjudicaia presented by the offer in evidence of a copy of the Hew York record, duly authenticated under the- act of congress. It was agreed by counsel that this question should be submitted' on the motion to dismiss.

The Hew York Code of Civil Procedure, section 2515, confers jurisdiction upon the surrogate’s courts to propound wills not only where the deceased is domiciled in that state but also—

“3. Where me decedent, not being a resident of the state, died without the state, leaving personal property within that county, and no other; or leaving personal property which has since his death come into that county, and no other, and remains unadministered.
"4. Where the decedent was not, at the time of his death, a resident of the state, and a petition for probate of Ms will, or for a grant of letters of administration, under subdivision second or third of this section, has not been filed in any surrogate’s court; but real property of the decedent, to which the will relates, or which is subject to disposition under title fourth of this chapter, is situated within that county, and no other.”

Whatever may be thought of the wisdom of this jurisdictional endowment, it must be conceded that the investment was one of legislative power and policy. This view is sanctioned in the Chadwick Case, supra, where it was held that the orphans courts of this state and this court were without jurisdiction to probate foreign wills, because, as it was there pointed out, there was no inherent power, and none had been conferred by legislative grant. Mr. Justice Bergen, in the course of his opinion, observed that (at p. 473): “We think that upon general principles the due administration of justice demands that last wills should be first probated at the domicile of a testator, and that this rule should prevail in this state, unless the law expressly confers on the ordinary or surrogate probate jurisdiction over wills of non-residents. * * * (at p. 477). That a due regard for state comity favors the correctness of the principle that the courts of the state of the domicile of a testator have the primary right to pass upon the questions incident to the probate of his will even if some of his personal property be found in a foreign jurisdiction, and that there is no statute of this state which vests in our probate court a power inconsistent with this view.” The reasonable, if not necessary, implication of these observations is that the principle of comity would give way to legislative grant of jurisdiction. Power to probate wills of non-residents dying seized of real estate in this state has since been conferred on the ordinary and the orphans court. P. L. 1921 p. 831.

I am of the opinion that the surrogate’s court of New York county had jurisdiction of the subject-matter—the probate, and of the parties, and that they are bound by the decree. 4 N. J. Dig. 7549 § 284. A recent case, substantially on all fours with this one, is In re Estate of Rosa E. Spang, deceased, decided by the orphans court of Allegheny county, Pennsylvania, and printed in full in the N. Y. Law Jour., November 29th, 1922. It may be published later in 51 or 52 Pennsylvania county court reports: The reasoning of the opinion is sound and applicable, and I feel justified in quoting from it at length:

“The petitioner asserts that the proceedings in New York could only concern the disposition of property under decedent’s will located in the State of New York; this conclusion cannot be sustained. The petitioners’ counsel confuses the construction of the will duly probated with the fact of probate itself; the proceeding in New York was on the fact of probate; an essential element to establish the fact was testamentary capacity; this was within the jurisdiction of the New York courts, and the final decision there is conclusive on the question of probate; granted, that if this will had been probated in New York the construction might primarily concern decedent’s property in New York, and that a different construction might be found in other jurisdictions, as to the other property there, and this in no way affects the fact of probate, which necessarily was based, inter alia, upon testamentary capacity. This is not a question of property but a proceeding to determine the factum of a will; it is a proceeding in personami and also in rem-; it is the rem over which the New York court had jurisdiction (Eno’s Estate, 94 Misc. Rep. 100; Horton’s Estate, 217 N. Y. 363; Cochran v. Young, 104 Pa. 333); the supreme court says in the latter case that all persons are parties or privies, and when brought upon the record are concluded by the proceedings;, distinct emphasis is laid upon the fact that the proof of a will is a proceeding in rem touching the thing, to wit, the validity of the will itself. * * * The New York statute gave jurisdiction to its courts when the party either was a resident of the state or was possessed of property in the state. The proponents of Mrs. Spang’s will alleged residence in New York and also alleged property there. It is immaterial upon which ground jurisdiction was based in the proceedings there; that court having jurisdiction to pass upon the probate of a will, no question of the fact of the probate can be raised in any other jurisdiction. At most, for the purpose of this case, domicile and residence are equivalent terms. Raymond v. Leishman, 243 Pa. 64; 19 Corp. Jur. 397. Neither as to the fact of residence nor as to jurisdiction can these petitioners assert one thing in a proceeding before us now contrary to what they asserted in the probate proceedings in New York. * * * The petitioners are estopped from attempting to raise here contentions as to residence and to jurisdiction, the contrary of which they pleaded in the courts of New York. Dr. Chapin, one of the intervening petitioners and an executor named in the decedent’s invalid will, voluntarily submitted himself to the jurisdiction of the probate court of New York, averring residence of the decedent there and the ownership of property there. This gave the court in New York jurisdiction to entertain proceedings for probate for all purposes. He cannot now, because of defeat in the various trials in New York, come into another state and seek to try over an issue settled by a court of competent jurisdiction. Ella B. Hitchcock, the other petitioner and legatee under the paper-writings of Mrs. Spang, was cited under the laws of New York as a party to the will contest there; as such party it was her right to interpose objections to the probate of the will in New York. * * * A legatee who takes no exception to the, action of a nominated executor in proposing an alleged will for probate stands in privity with the executor (Big. Estop. (6th ed.) 250), and the same principle is announced in Pennsylvania in Cochran v. Young, supra. The proceedings in New York are res adjudícala, so far as the rights of these petitioners are concerned. A eoujt of competent and complete jurisdiction on the question of the probate of the decedent’s will has on their application finally and conclusively determined that this decedent did not possess testamentary capacity; that she left no will, therefore, died intestate. It would be a strange proceeding, indeed, if the parties interested, aggrieved because of their defeat, could invoke the original jurisdiction of every other state in the Hnion where property may be located of this decedent and seek to try over in each of these jurisdictions the question of her testamentary capacity.”

The petition will be dismissed.


author: Buchanan, Vice-Ordinary.

text:
    In the matter of the inheritance taxes on the estate of Francis A. Hall, deceased.
    [Decided January 5th, 1923.]
    1. Under the Transfer Inheritance Tax act a transfer, if made in contemplation of death, is taxable, notwithstanding it be by way of bargain or sale, with consideration passing to the transferor.
    2. In such case the transaction is to be examined, and if it appears that a substantial diminution of the transferor’s assets resulted therefrom, the tax imposed by the statute applies thereto.
    3. On appeal from the comptroller’s appraisement and assessment his findings of fact will be set aside only if the evidence be insufficient to sustain them or for other legal error.
    4. Evidence examined—Meld, sufficient to support finding that bargain or sale was made in contemplation of death and was in substance a taxable transfer.
    5. Decedent, shortly before his death, being a partner in a firm whose articles of agreement gave him the right at any time to take over the business and assets of the firm by paying the other partners the value of their shares, exclusive of good-will, executed a dissolution agreement whereby the other partners took over the business and assets, including the good-will, and decedent became a creditor of the new firm to the amount of his capital investment, exclusive of goodwill.—ITeld, that the transaction, in substance, amounted to a gift to the other partners (his sons) of his right to acquire, without payment therefor, the good-will of the business; and that the value of that right was substantially equal to the value of the good-will of the business.
    (1. Comptroller’s computation of the value of good-will examined as to method and evidence, and held not erroneous.
    7. Assessment will not be set aside for mere technical misnomer of property the transfer whereof was assessed.
    On appeal from transfer inheritance tax assessment.

      Messrs. McCarier & English and Mr. Otto Wierum (of the Hew York bar), for the appellants.

      Mr. Thomas F. McOran, attorney-general, and Mr. Francis 27. McGee, assistant attornejr-general, for the state.
   Buchanan, Vice-Ordinary.

The executors of the estate of Francis A. Hall, deceased, have appealed from the tax of $4,567.74 levied *by the comptroller of the State of New Jersey against tire estate of the said decedent under the provisions of the so-called Transfer-Inheritance Tax act. Comp. Stat. p. 5301.

It appears that the comptroller, in Iris computation of the taxable assets of tire estate, included therein an item of goodwill or interest in the partnership business of Frank A. Hall & Sons, upon the ground that a transfer thereof had been made by decedent in Iris lifetime, in contemplation of death or to take effect at death, and assessed the value thereof at $135,860.76.

The appellants contend (a) that no transfer of good-will was in fact made; (b) that if any such transfer was made it was not done in contemplation of death nor to take effect at death, and hence does not come within the statute; and (c) that even if made, and subject to taxation, the comptroller’s valuation was excessive and the tax based thereon therefore erroneous.

(Appeal was taken also in regard to another portion of the tax proceedings, but was not argued, it being stated to the court that a compromise thereasto has been agreed upon.)

Decedent was a manufacturer of beds and bedding, carrjdng on business at some four establishments in New York and one in Philadelphia. In 1910 he took two of his sons into partnership with him; in 1918 this was dissolved and a new partnership entered into which included these three and also decedent’s third son; on May 23d, 1919, this second partnership was dissolved, decedent retiring from the business and the sons forming a new partnership- to take it over and carry it on. On each of these three occasions the interests, rights and liabilities of the several parties involved were specifically provided for in carefully-drawn contracts. On June 14th, 1919, he executed his last will and testament; and on July 18th, 1919,'he died, aged seventy-four, his death being the result of heart trouble, from which he had suffered for some four years.

Iel dealing with the first issue—as to whether or not a transfer of good-will was in fact made on May 23d, 1919—it is necessary to examine the provisions of'the prior partnership agreements and the legal effects thereof.

By the 1910 agreement the copartnership thereby formed specifically “taires over as of this date the business heretofore conducted by the said Francis A. Hall under the name of Frank A. Hall,” and is to conduct that business under the name of Frank A. Hall & Sons. Decedent “contributed” to the capital stock of the partnership “all the stock in trade, book accounts, money in bank, fixtures and other property not herein specially excepted of the business heretofore carried on by him as a going concern.” Good-will was not amongst the specially excepted property, which consisted of real estate, leasehold interests, patent rights, and the like, all of which the decedent leased to the partnership at certain rentals. Compensation, however (at six per cent, per annum on the book value thereof), was also to be paid to- decedent for the use of the property “contributed” by him to the capital stock. The other parties contributed nothing to the capital stock, but were to receive interest on certain sums which they already had “on deposit with the business.” Each partner was to receive interest on any ascertained profits left by him in the business. The profits and losses were to be shared in certain percentages. The partnership- was to- continue until terminated by death or withdrawal. On the death of Francis A. Hall, his personal representatives were to have the right, at their option, to become partners in his place. On the death of either off the others, the surviving partners bad the right to “purchase the interest of the deceased partner.” If Francis A. Hall desired to terminate the partnership he had the right to “purchase the interest” of the others, or either of them. If either of the other two desired to withdraw, the remaining two had the right to purchase his interest. “Upon and after dissolution” the exclusive right to th-e business use of the name Frank A. Hall, Frank A. Hall & Son, Frank A. Hall & Sons or- Frank A. Hall & Co. “shall belong to and be vested in said Francis A. Hall or his personal representatives.”

Some of the provisions of this agreement are peculiar and to some extent apparently contradictory. Eor instance, the “contribution” of the assets mentioned to the partnership as partnership capital, with the provision that decedent is to be paid annually six per cent, of their value for the use thereof. I take it, however, that under the true interpretation of the contract (which is certainly to be construed most strongly as against Prancis A. Hall, the “grantor”) the assets mentioned were conveyed and became the property of the partnership. The six per cent, which he is to have for the use amounts simply to an additional and perhaps a preferred share of the profits. Certainly, however, he would have an exceedingly difficult task in convincing any court, in an administration of the partnership property and affairs in insolvency or bankruptcy proceedings, that as to such six per cent, payment he was a creditor and not a partner, or that as to the property so “contributed” by him' he would be entitled to the ownership and possession thereof as against a receiver or trustee, or that such receiver or trustee would not have power and right to sell it as partnership property to pay creditors. I think it is not open to question that included among these assets so' conveyed was the good-will of the business. It is not specifically nor even, impliedly excepted, and although not specifically mentioned as being conveyed, certainly passed with the taking over of the business and the conveyance of all of the “other property * * * of the business' * * * as a going concern.” Cf. Lane v. Smythe, 46 N. J. Eq. 443. Even if goodwill in some sense or im some part attaches, to the use of the trade name, there was here no reservation of the use of decedent’s name. That passed to the partnership also, and was expressly embodied in the partnership name provided for. There is the clause as to decedent’s right to the use of the name after dissolution and the provisions which give decedent or his personal representatives the right to acquire or carry on the business on the death or withdrawal of the other partners, but, undoubtedly, the good-will of the business as such became the property of the partnership. There is no evidence to show that any of the good-will in anywise inhered in any of the patents or patent rights which were reserved in the ownership of decedent.

By the agreement of 1918 the old partnership was dissolved and a partnership was formed among the three prior partners and the decedent’s third son, which partnership “takes over as of this date the business heretofore conducted by * * * Frank A. Hall & Sons.” The same name is retained. “Francis A. Hall contributes to the capital stock of the copartnership all the stock in trade, book accounts, money in bank, fixtures and other property of the business heretofore carried on by him (s>ic) as a going concern,” and is to receive the same six per cent, annual compensation on the book value of said property. The other partners contribute to the partnership capital the respective amounts standing to their credit on the books of the old firm. Francis A. Hall also contributes the real estate (which he had reserved in 1910), but reserved and retained the patents, though licensing the- use. All patents, &e., developed or acquired by the partnership “shall also become his sole property.” By another clause the amount contributed by Francis Á. Hall as capital is specified as $300,000, the “balance beyond that to his credit on the books of the old concern being repayable to him as below provided.” The provisions as to profits are peculiar; decedent was to receive six per cent, on said sum of $300,000, “which as between partners shall be treated as an expense; and in consideration of the-priority thus given him he waives all claim to further profits.” The profits—obviously over and above this six per cent.— were to be divided among the other three partners, to the extent of eighty-five per cent, thereof, the other fifteen per cent, to be applied each year to reduce Francis A. Hall’s capital in the firm down to the $300,000, and thereafter to be accumulated as a contingency fund. “All losses shall be charged against and borne by the partners in the same proportion in which they share the profits as aforesaid.” The agreement also contains the same provisions in regard to termination by death or withdrawal and the respective rights in such contingencies, as the agreement of 1910. It also contains the same clause as to the right to- the name after dissolution.

So far as good-will is concerned, it seems clear to me that the situation as between decedent and the partnership was essentially the same after the agreementof 1918 as under .the 1910 agreement. The new partnership was the owner of the good-trill of the business (not only as it had been carried on by decedent prior to 1910, but with such changes and additions as had occurred during the carrying on of the business by the partnership); the decedent had certain rights under the partnership agreement whereby he might acquire the goodwill, together with the business, or, perhaps, some portion of good-will attached to the trade name without the business.

Under this 1918 agreement decedent was of course a partner. He had a large interest, some $300,000 (by far the largest interest), in the firm’s capital, at the risk of the business. He had an interest in the profits, to an amount equal to six per cent, on his share of the capital, which interest was prior to the interests of the other partners in the profits, and might be compared to the interest of a preferred stockholder in a corporation. He was chargeable with a part of the losses which were to be borne by the partners in the same proportion as they shared the profits. He had the majority control, under the agreement, “in all matters of partnership' policy and action.” He had also the right heretofore mentioned (to state the legal effect of it in a different form from that in which the agreement expresses it) to compel all the other partners to withdraw from the business on paying them the book value of their interests; and the right, upon any dissolution, to the exclusive use of the business name.

The agreement of May 23d, 1919, is as follows:

“By mutual agreement the copartnership heretofore existing under the name of Frank A. Hall & Sons is hereby dissolved and terminated, Francis A. Hall now retiring from said business. It is agreed that his capital as shown by the credit to him on the firm books is the amount to which he is entitled, and that the same is no longer capital invested in said business, but is a deposit to his credit, payable to him on demand or as soon as same can be realized in cash. The other partners shall have the right to continue the business under the same firm name and hereby agree to do so, their respective interests and compensation and shares in profits being in the same proportion as heretofore. The old copartnership articles shall apply except as modified by the retirement of Francis A. Hall.”

It does not seem to me that there can be much dispute as to the meaning and effect of this agreement (there might perhaps be ground for argument as to whether or not the new partnership of the three sons was licensed to use .the father’s patents, and whether or not the father would be entitled in future to new patents, inventions or processes developed by the new firm; but that is of little moment in our present inquiry). It operates to transfer, release or surrender to the other three partners all of the rights which Eraneis A. Hall theretofore had in or to the partnership' and the partnership business and assets; and on the other hand it releases him from liability for future obligations of the firm’s business and converts him, as to the capital he has invested in the business, from a partner into a creditor. Unquestionably there was technical legal consideration, therefore, for his transfer or surrender.

- That, however, does not terminate the necessity of further investigation of the transaction. It is the essential character of the transaction which is to be looked at, not the mere legal form thereof. As I had occasion to point out in Re Bottomley, 92 N. J. Eq. 202, the statute specifically applies to transfers made by way of bargain or sale. Appellants would scarcely contend that a transfer made in contemplation of death or to take effect at death, consisting in an exchange, with due legal formality, whereby decedent conveyed .to the beneficiary securities worth $100,000 in return for a building lot worth $500, would not be taxable. The inquiry must be as to whether or not the net practical result and effect of the transaction is a substantial diminution of the assets of the decedent.

Gauged by that standard, therefore, and as to this particular point, it seems to me that the comptroller has not erred in finding a taxable transfer. By the agreement' of May 23d, 1919, the decedent gained, it may be said, relief from risk of loss of his capital in the partnership', and relief from risk of loss of his own individual assets, in the hazards of the firm’s business. As a matter of fact, it would seem from the evidence that he had not terminated these legal liabilities —that there had been no notice to the public or the firm’s creditors that his partnership had ceased. But in 'any event these were obviously technical or theoretical gains to him, for the business had been continuously" and increasingly successful for eight years, at least, and there is nothing to show any probability or possibility of any change in that behalf. The same thing may be said as to his relief from the risk of not getting his six per cent, preferred profit income on his capital. He gained a creditor’s right as against his partners (though this is doubtful, as I have said, as against creditors), to withdraw his capital, but this was payable “as soon as the' same can be realized in cash,” and from the record the amount realized in cash and withdrawn by decedent, from May 23 d, 1919, until his death, July 18th, was the difference between $270,000 and $240,000, or thereabout. But most important of all is the fact that he could have done all this by a dissolution of the partnership (under the terms of the 1918 agreement) without giving up the valuable rights which he did give up by the agreement of May 23d, 1919. He had the right to dissolve the partnership and take over the business himself, paying the other partners for their shares therein, the amounts at which they were carried on the books. And according to the appellants’ own testimony the good-will of the business never appeared on the books of the concern, “was never taken into account in any shape or manner,” and “was not figured among the partners in any shape.” Admittedly there was a good-will which would have been an item of value on a sale of the business to outside parties.

This good-will was the property of the firm1, as I have hereinbefore pointed out. The decedent, however, had the right ¡to acquire it, with the business, without paying anything for it, since it in nowise figured in the book entries or the book value of the partners’ shares, and it was the latter only which decedent would have to pay if he dissolved the partnership and took over the business, good-will, name and all.

The value of that right, therefore, seems to be practically equal to the value of the good-will. If decedent had wished to realize to the fullest extent on everything that he owned, he could have taken over the business, acquiring the good-will for nothing, and then sold the business, including good-will to an outside purchaser. It is of course begging the question to say that he did not want to do- that and never would have done it. There is almost no possibility that he would have done so. But the important fact is that he could have done so up until the agreement of May 23d, 1919; and that then and thereby he, in effect, transferred to his three sons-that right which he then had, and the value of which was approximately co-extensive with the value of the good-will.

The comptroller has perhaps committed a technical error in assessing under the name of “good-will of firm of Frank A. Hall & Go.” this asset of decedent which was not good-will, but strictly speaking a right or interest—a right to acquire the good-will. This, however, is a mere matter of words and not of substantive error; and does not warrant a reversal. It clearly appears from the report of the comptroller’s appraiser that that which was appraised was decedent’s right and interest in the firm passing under and by the dissolution agreement.

Upon the second issue, as to whether or not the transfer was made by decedent in contemplation of death, I find no ground for disturbing the findings of the comptroller that it was so made. It has already been laid down in Re Pierce, 89 N. J. Eq. 171, that the function of this court on these appeals is not to weigh the evidence or substitute its judgment for that of the 'comptroller, but to determine whether or not error has been committed. So the comptroller’s finding in this behalf is not to be reversed if there was -before him sufficient evidence to support -that finding. That there was sufficient evidence therefor is apparent from the record. It appears that' decedent was seventy-four years old; that he suffered from heart trouble for several years, which was particularly serious because of his age; the nature of this trouble was such that clearly it would within a few years -result in death; it had been explained to him two or three years before his death, but he at that time made rather light of it, and refused to follow the advice to abstain from exercise; the condition of his health had nothing to do with his withdrawal from active work in the firm in January, 1918; but in April or May, 1919, he became worse, was confined to- his house and never left the house thereafter; the agreement of May 23d, 1919, was proposed by himself, drawn by the same lawyer who drew his will executed three weeks later; and finally, July 18th, 1919, he died from a culmination of the same heart trouble. It may also be noted that- it seems from the record that decedent had made some statements at the time of the May 23d, 1919, agreement, which might have been evidential of his intent and state of mind, and that testimony as to what those statements were was precluded by the refusal or failure of the executors and the beneficiaries to authorize the attorney to waive the attorney’s privilege.

We come now to- the last contention of appellants, namely, that the appraisement of the good-will or interest was erroneous and excessive and the tax computed thereon therefore likewise erroneous and excessive. As already noted, the value of the right to acquire the good-will, free, is essentially the same as the value of the good-will itself. The value of the good-will of a business is naturally not susceptible of determination with exactitude. The usual method is to- take the actual annual net profits of the business for a period of years, add them and divide by the number of year’s, thus obtaining the average annual net profit, and then to multiply that average profit by a certain number of years. This last multiplier is called the “number of years purchase” and varies, of course, with the particular circumstances in each case. In some instances two years has been taken, in others, three, four and five. Three years purchase seems fairly well accepted as a reasonable and conservative figure in ordinary cases. Cf. In re Ball, 161 App. Div. (N. Y.) 79.

In the ease sub judice the comptroller computed the average annual net profit from the net profits of the years 1916, 1917 and 1918, first deducting, however, six per cent, interest on the respective amounts of invested capital, in those years, and took a “three years purchase,” that is, multiplied the net average annual profit by three, and took that as the value of the good-will. The appellants take no issue with the general method or principle in arriving at this valuation, but insist that the comptroller erred in using the net profits of 1916, 1917 and 1918, to determine the average net profit, saying that those three years were abnormal because of conditions due to the world war. They contend that the years 1913, 1914 and 1915 should also have been taken in computing the average, and that the result—with a three years purchase—had this been done, would have given $63,301.68 as the value of the good-will, instead of the $135,860.76, found by the comptroller.

The question as to what years are to be taken, in computing the average, is, however, a question of fact and of judgment under the circumstances and the proofs before the comptroller, and is not for tire judgment of this court in substitution for that of the comptroller. In re Pierce, supra. Appellants fail to prove that error was committed by the comptroller under the evidence. True it is that the net profits during the years 1913, 1914 and 1915 were considerably less than during the next three years; but the record shows that the annual profits had been continuously increasing since the original formation of the partnership in 1910. Moreover, even if the profits in the years 1916-18 were abnormally large, due to war conditions, the transfer .was made in the early part of 1919, and the same conditions apparently continued, inasmuch as the profits for 1919 were $118,000, as against $72,000, $67,000 and $68,000 for the previous years.

The tax will be affirmed.


text:
    In the matter of the transfer inheritance tax upon the estate of Charles F. Dellinger, late of the city of New York.
    [Decided February 15th, 1923.]
    1. In interpreting the so-called “ratio tax” clause of the Transfer Inheritance Tax act (P. L. 1909 ch. 228, and amendments) regard must be had for the general scheme of the statute as a whole.
    2. The statute provides for a tax which, although imposed upon the immediate transfer or succession from the decedent or transferor, is measured by, or computed as. to amount upon, the value of the property ultimately passing to the beneficiaries.
    3. The ratio tax clause in providing fon a tax upon the transfer of the New Jersey property of a non-resident decedent, involves the same intent that it shall be measured by thei value of the amount of the New Jersey property ultimately passing to the beneficiaries.
    4. The “New Jersey property,” and the “entire estate” which are specified as factors in the proportion prescribed by this clause mean, respectively, “the value of the portion of decedent’s New Jersey assets which ultimately passes to the beneficiaries” and “the value of the portion of decedent’s entire assets which ultimately passes to the beneficiaries.”
    5. To ascertain the value of the portion of decedent’s New Jersey assets which ultimately passes to the beneficiaries, there must be deducted from the total value of such assets such sum as represents the amount by which, in legal contemplation, those assets will be diminished before they shall be receivable by the beneficiaries.
    5. The principles involved in the ascertainment and determination of the amount so to be deducted.
    Transfer inheritance tax appeal. On final hearing.

      Mr. William Byrci, for the appellant, executor.

      Mr. William Newcorn, assistant attorney-general, for the state.
   Buchanan, Vice-Ordinary.

The executor of the estate of Charles E. Dellinger, deceased, appeals from the so-called transfer inheritance tax assessed against that estate hy the comptroller. Appellant’s testator died March 20th, 1922, a non-resident of New Jersey, but having amongst his personal property certain stocks of New Jersey corporations, the transfer whereof is made taxable under our statute. P. L. 1909, p. 325, and subsequent amendments.

Admittedly the estate is subject to tax under the so-called “ratio clause” of the act, the last paragraph of section 12, which read as follows:

“A tax shall be assessed on the transfer of property made subject to tax as aforesaid in this state of a non-resident decedent if all or any part of the estate of such decedent wherever situated shall pass to persons or corporations taxable under this act, which tax shall bear the same ratio to the entire tax which the said estate would have been subject to under this act if such non-resident decedent had been a resident of this state, and all his property, real and personal, had been located within this state, as' such taxable property within this state bears to the entire estate wherever situated; provided, that nothing in this clause contained shall apply to any specific bequest or devise of any property in this state.”

Adopting for the sake of convenience briefer (and therefore inexact) designations to represent the several members of the proportion set forth by the statute, the statutory proportion may be expressed thus:

Tax to be levied New Jersey property

Tax on entire estate Entire estate

and it is obvious that the performance of the mathematical operations indicated by the following formula:

New Jersey property

Entire estate

X Tax on entire estate

gives as the result the amount of tax to be levied.

In other words, the tax imposed is a certain fraction of the hypothetical tax on the entire estate, which fraction has for its numerator the amount of the New Jersey property, and for its denominator the entire estate. In practice, this fraction is reduced to a decimal before applying it to the hypothetical “entire tax.” *

This method was followed by the comptroller. In doing so, however, he took as the figure for the “entire estate,” the net value of decedent’s total estate, after deducting the total debts and administration expenses, while as the figure for the “New Jersey property,” he took the gross value of the New Jersey property without any deduction whatsoever; whereas he should have deducted, appellant contends, a proportionate share of the total debts and administration expenses, to wit, such part thereof as is equal to the ratio between the gross New Jersey property and the gross entire estate; or else, as an alternative contention, he should have taken as the figure for the “entire estate” the gross value of decedent’s total estate without any deduction. (The actual result under each of these contentions would be identical.)

This is the only controversy involved in this appeal. The determination thereof is a question of interpretation of the statute, since the legislative phraseology is not definitively explicit. Eeference to the particular paragraph of the act (quoted supra) discloses that that member of the proportion which was hereinabove briefly designated as “entire estate,” is therein described as decedent’s “entire estate, wherever situated.” Nothing is said about “gross” or “net,” or the making of any deduction; and the same thing is true as to the member of the proportion which we have termed briefly “New Jersey property,” and which is described by the statute as decedent’s “taxable property within this state.” There is no express differentiation or discrimination in this behalf to be found in the legislative language as bétween these two members of the proportion.

It will be noted that the description of the third member of the proportion is qualified by the word “such”—“such taxable property within this state.” That to which this word “such” refers, the only thing to which it can refer, is evidently the phrase “property made subject to tax as aforesaid in this state,” which appears near the beginning of the paragraph. Iel this phrase again, by the words “as aforesaid,” we are referred to something still further antecedent, and the quest to locate it takes us all the way back to the beginning of the statute.

Section 1 of the act is the only section (except this ratio clause which was not originally in the statute) which imposes any tax, or makes anything taxable. It imposes a tax upon “the transfer of any property,” &e., in certain cases, including (subsection second) transfer, by will or intestate law, of certain kinds of property within this state, of a non-resident decedent, and (subsections third, fourth and fifth) certain other transfers of Hew Jersey properly from non-resident decedents. All these transfers of Hew Jersey property of nonresident decedents would be taxed under, and at the rates specified in, this section 1, if the “ratio clause” had not been added to the statute. It is of course these taxes and these transfers and this property, mentioned in section 1, to which the “ratio clause” refers.

The tax imposed by this section 1 is not a tax on property but on the transfer of property, the amount of the- tax on the transfer being calculated on the value of the property transferred. Carr v. Edwards, 84 N. J. Law 667; MacMiller v. Bugbee, 115 Atl. Rep. 341. Likewise, obviously, the tax provided in the “ratio clause” must be a tax on transfers of the same kind, not a tax on the property in this state of the nonresident decedent. And indeed the wording of this “ratio clause” is so expressed—-“a tax on the transfer of property m-ade subject to tax as aforesaid,” &c. The words “as aforesaid” must have been intended to qualify the word “transfer” rather than the word “property,” because by the preceding portion of the statute no property has been “made subject to tax,” but transfers of property have been.

In consequence, when we come to consider the words “such taxable property within this state,” farther down in this ratio tax paragraph, we must necessarily conclude that the -words “taxable property” have been used carelessly or with inexactitude, for there is no prior mention in the paragraph of any taxable property. The legislature evidently used these words as a short way of saying, and they therefore must be deemed to mean, “such property within this state the transfer whereof has been hereinbefore made taxable.” There are a number of other instances throughout the statute of a similar confusion of language referring to the property, instead of the transfer thereof, as the thing taxed. They are readily discoverable and I will not take the time to point out all of them; it will suffice to cite the instance in the last paragraph of section 1, where it is stated that “property” passing to the state, &c., “shall be exempt from taxation under this act,” and that “property” passing to certain charities and certain relatives of decedent “shall be taxed” at a certain rate, and so on.

The “transfer” (from non-resident decedent), which is mentioned in and made taxable by section 1, and therefore also by the “ratio clause,” includes every transfer which this state has the power to tax, from a decedent to his successors. Carr v. Edwards, 84 N. J. Law 667 (at p. 668). As to Few Jersey real estate, it includes the. succession of the devisee and of the heir-at-law, both of whom derive from our law their right to take title to such property. As to the personal property in this state, it includes not the succession of the legatee or distributee (for they derive their rights from the law of decedent’s-foreign domicile), but the transfer of title from the decedent to his domiciliary executor or administrator (or to the Few Jersey ancillary administrator, if one be appointed), for that transfer is the creature of, and controlled by, the law of this state. Carr v. Edwards, supra. Cf., also, Neilson v. Russell, 76 N. J. Law 655 (at p. 659).

The tax which was before the court in Carr v. Eckuurds was one imposed solely under the “ratio clause,” as the record in the case discloses. The language of that clause was then different from its present form. It reads (see P. L. 1909 p. 332): “Such property located in this state shall be subject to a tax,” &c.

The amendment of that part of its language to its present form (P. L. 1914 p. 96; Ibid. p. 273), apparently was done for clarification of the wording to accord with the intent, and proves that the legislative intent was precisely what the court had, in Carr v. Edwards, held it to be. The other changes of language by the amendment of P. L. 1914, p. 96, were obviously because of the decision in Beers v. Edwards, 84 N. J. Law 32, and pursuant to the intimation in the opinion in that case.

The tax, then, which is imposed by 'this “ratio clause,” as well as that imposed by section 1 of the act, is upon the transfer; the amount of that tax is determined by the value of the property transferred or passing. What is the property transferred or passing?

The whole scheme and intent of the statute seems to be that the measure of the taxes which are imposed by it shall be the value not of that property which is the subject of the technical transfer upon which the tax is levied, but of that portion thereof which passes to the ultimate respective beneficiaries. This is particularly evident in the last paragraph of section 1, above referred to, wherein it is provided that “property passing” to so and so shall be exempt or be taxed at certain rates. The distinction, and the significance thereof, between the meaning of a “transfer” and a “passing” of property is pointed out in Carr v. Edwards, supra (at p. 670); and the language used there: “This determination of the rate- of taxation by the ultimate beneficial succession to the property, * * ,” would seem to indicate quite dearly that the court of errors and appeals conceived that that property, the value whereof was to be the measure of the tax, was the property ultimately passing to, or receivable bjq the ultimate beneficiary. It is worthy of observation that by the language of this ratio tax clause itself, no tax can be imposed under its provisions unless there is property passing to an ultimate beneficiary who is not exempt from paying tax for such transfer. The tax on the transfer is to be assessed if (and only if) “all or any part of the estate of such decedent, wherever situated, shall pass to persons or corporations taxable under this act,” i. e., persons not included within the exempt class in the last paragraph of section 1; which exempt class was originally much larger than it now is under the later amendments.

The same conclusion is reached, on consideration of the design of the statute that the respective taxes on the several transfers shall be paid by the respective recipients of the property transferred, or out of the property transferred (see Parrot v. Rogers, 86 N. J. Eq. 311, and In re Diehl, 88 N. J. Eq. 310), and from the fact that the rates specified by the statute for the calculation of the tax, vary with the identity of classification of the respective persons who receive as ultimate beneficiaries the several portions of the estate. We may go hack, indeed, to the original, general, basic idea and theory of these transfer tax acts, including our own. They were thought of and called “collateral inheritance tax” statutes; the original intention (modified more and miore in later years) was to tax the “collateral” kindred of the decedent, not his immediate kin or direct descendants. See section 1 of the act of 1894 as originally passed. The idea, of course, was that persons who took property from a decedent did so by grace and virtue of the laws of the state and not by any inherent right; that distant relatives h'ad much less of a meritorious “claim” upon the assets of the decedent; and that an opportunity therefore existed for the state to derive revenue by collecting a tax or a toll out of such property as might be received from a decedent’s estate by others than his immediate kin or descendants.

So, in Neilson v. Russell, 76 N. J. Law 655 (at p. 657), the court of errors and appeals says:

“Although there seems to be no provision in the statute authorizing the 'deduction of debts in making the appraisement, we can hardly doubt, in the face of section 10, that such a deduction ought to be made. It has never been thought that an insolvent estate was liable to this tax, although no machinery can be provided in this state by which the fact of solvency or insolvency can be ascertained. Such machinery is unnecessary if it is only the value of the legacy that is to be ascertained. These considerations persuade us that it is the' legacy that is taxed and not the estate.”

Mr. Justice Swayze was there dealing with the case of a non-resident decedent under the act of 1894, which at that time did not contain the ratio tax clause. The changes which were made in the statute because of the decision in that case, however, were changes which may be said to have had the sole design of correcting the statute so that it might legally be valid and sufficient to accomplish the legislative purpose. That purpose, and the general basic idea of the legislation, remains to-day as it was in the original act.

Again, in Bugbee v. Roebling, 94 N. J. Law 438, the court of errors and appeals, dealing with the statute after the changes of 1914, says (at p. 442) : “We think these provisions indicate that the tax is to be calculated on the beneficial interest actually received by the legatee and not on what he. would receive if there were no federal tax.” The tax then under consideration was not under the ratio clause, but, as already pointed out, the language of the ratio clause refers back to the prior tax-imposing section, and the legislative intent and meaning is the same.

It may therefore, I think, accurately be said that the legislative design is to collect in all instances a tax computed on the value of the property received by the decedent’s beneficiaries, and on nothing else; although (for reasons of legal expediency or necessity) the tax is in legal form and contemplation actually imposed, in some instances, on a transfer which is antecedent to, and inclusive of a greater amount of property than, the transfer whereof the ultimate beneficiary is the transferee. This being the general design, it is, of course, to be read into the “ratio clause,” unless there be found some indication to the contrary, either express or implied. None such is apparent to me.

I do not recall that there has ever been any doubt—at any rate since the opinion in Neilson v. Russell, supra (see the excerpt above 'quoted)—that in the calculation of the tax under section 1 the debts of decedent and administration expenses were to be deducted from the assets in arriving at the estate or property upon the value of which the tax was to be computed. To those there is added, by the decision in Bugbee v. Roebling, supra, as likewise deductible in such a case, the amount of tire federal estate tax. And the legislature has now, by the amendment of 1922 (P. L. 1922, ch. 174), added, 'in the next to the last paragraph of section 1 of the act, a specific provision for, and a list of, such deductions; these include debts, funeral * * * and administration expenses, including commissions and attorney’s fees, a proportion of property taxes accrued but not due and the federal estate tax. In every calculation of the tax under section 1, therefore, the comptroller must start with the preliminary fact that the assets, the proper appraised value whereof he is to fix and thereon to compute the tax, have been diminished to the extent necessary to satisfy these deductible items or charges against the estate.

How, let us turn again to the ratio clause, and the language • therein as to the "entire tax” member of the proportion: "The entire tax which the said estate would have been subject to under this act if such non-resident decedent had been a resident of this state, and all his property, real and personal, had been located in this state.”

This "entire tax” is necessarily to be calculated upon the value of an “entire estate.” I think it is perfectly clear that such “entire estate,” in view of the prescribed hypothetical conditions, is to be the total assets of decedent, diminished by the deductions above mentioned. I think it is also clear that precisely the same thing is meant by the “entire estate wherever situated,” which is specified as the fourth member of the statutory proportion. It has in fact been heretofore decided that in determining the sum to be taken as the amount or value of the “entire estate,” both as the fourth member of the proportion and as a factor in the determination of the “entire tax” member, there must be subtracted from decedent’s assets the aforesaid deductions; this by two independent, contemporaneous decisions—MacMiller v. Bugbee, 115 Atl. Rep. 341; In re Kountze, 115 Atl. Rep. 93 (affirmed on certiorari, February term, 1922, sub nom. Bugbee v. Kountze, but not reported), except that of course at the date of these decisions the 1922 amendment of the next to the last paragraph of section 1 had not been-enacted.

Coming now to the third member of the proportion—the Hew Jersey property—since the general design of the statute' is to collect tax only on the value of the property actually received by the beneficiaries, and this design is inherent also in this ratio clause; and since the tax by this clause imposed in respect of the Hew Jersey property is a fractional part of a hypothetical tax on an entire estate determined after deducting debts and other expenses from decedent’s total assets; and since in the statutory proportion the Hew Jersey property is placed in ratio with an entire estate similarly determined after such deductions, it seems to me there can be no logical doubt that the figure to be taken for this third member is to be the value of the Hew Jersey assets diminished by their proper share of the total debts and expenses.

It appeared to be the impression of counsel, upon the argument, that MacMiller v. Bugbee, supra, and In re Kountze, supra, were authority against deducting from the Hew Jersey property anything other than special pledge debts (and, of course, the Hew Jersey property, if any, specifically devised or bequeathed). Certainly, In re Kountze affords not the slightest ground for that impression; no such issue was raised or considered in that case, and no such expression or implication is to be found in the opinion; neither, in my opinion, does the MacMiller Case, although a colorable argument might be made to the contrary. This issue was not before the court in that case; of the alleged errors specified by the reasons on certiorari only one relates to the “Hew Jersey property” member of the statutory proportion, and that one has to do only with the propriety of the comptroller’s method of ascertaining the value of decedent’s interest in the pledged Hew Jersey stocks. The whole of the opinion is in line with the conclusions which I have reached in this case, and the court there actually sajrs: “It is manifestly fair to deduct the debts in ascertaining the value of the Hew Jersey property.” It is true that that language probably has reference to the special pledge debts which the court had under consideration; non constat, however, that the pronouncement would have been otherwise if the court had had other debts in mind.

Indeed, it may be pointed out that the deduction of special pledge debts from the value of the securities pledged therefor is not strictly a deduction of debts from decedent’s assets. Hot the pledged securities themselves but only an interest or equity of redemption therein are assets of the decedent’s estate. Cf. Security Trust Co. v. Edwards, 90 N. J. Law 558.

The conclusion reached, of course, leads to the setting aside of the tax assessed in the present ease. It does not, however, lead to the acceptance of appellant’s primary or first contention, i. e., that the amount to be deducted from the value or the Hew Jersey assets is that figure which bears the same ratio to the total amount of the debts and expenses that the Hew Jersey property bears to the total assets. (Appellant’s second or alternative contention is of course negatived by the decisions in MacMiller v. Bugbee, supra, and In re Kountze, supra.) The amount to be deducted from the value of the Hew Jersey assets is that sum by which those assets will be diminished, in legal contemplation, prior to their reaching the hand of the ultimate beneficiaries.

The same sovereign jurisdiction and control over all assets within its borders which gives this state the right to levy the taxes under this statute, gives if the right to determine and provide what disposition shall be made of assets in this state, on the death of the owner thereof, whether that owner’s domicile be in this state or a foreign state. By comity this state has adopted as the law of this state that in the case of a non-resident decedent his assets in this state, so far as they are not required for the payment of his creditors, shall be distributed according to the law of the decedent’s domicile. This distribution may be made by the ancillary administrator in this state, if there be one, or the ancillary administrator may transmit the balance to the domiciliary administrator for distribution. If the balance in this state, after the payment of creditors in this state, should be needed to pay creditors at the domicile, it would be transmitted to the domiciliary administrator. But the duty of the person who administers the assets in this state is to collect such assets and out of them to pay the creditors in this state. The administration of the assets of a decedent, as to creditors, is controlled and governed by and according to the law of the state where such assets are situate. See Varnum v. Camp, 13 N. J. Law 326; Banta v. Moore, 15 N. J. Eq. 97; Normand’s Executor v. Grognard, 17 N. J. Eq. 425; Pisano v. Shanley Co., 66 N. J. Law 1 (at p. 7); Westl. Priv. Int. Law (3d ed.) § 110. Cf., also, Wall v. American Smelting Co., 91 N. J. Eq. 131.

It is, I take it, immaterial that in the case of a non-resident decedent with assets in this state, local administration may not be (and, indeed, probably only infrequently is) applied for or granted in this state; that it is not or may not be required; and that when not granted the domiciliary administrator has title to the assets here. Re Cape May Navigation Co., 51 N. J. Law 78; Neilson v. Russell, 76 N. J. Law 655 (at p. 659). It is within the power of those persons interested in the estate in Few Jersey to force local administration here—section 29, Orphans Court act—and it can never be certain that the domiciliary administrator can administer without taking out local letters. When local administration be taken out, if subsequent to the grant of letters at the domicile, the title of the domiciliary administrator is divested in favor of the local administrator. The material point is that it is tire duty of the person who administers the assets in this state, whether that person be the domiciliary administrator or an administrator appointed here, to collect the local assets and out of them to pay the local creditors, before either distributing the balance to beneficiaries or transmitting it to the domicile to pay other debts there.

It would seem that a modification of, or exception to, this rule may exist in the case of insolvent estates. 2 Schoul. Wills, tit. “Executors and Administrators" (5th ed.) § 1015a); 24 C. J. 1125. But even so, the relaxation or modification affects only the claims of general creditors; it does not extend to deprive preferred local creditors of payment in full out of the local assets. Smith v. Union Bank, 30 U. S. 518; 1 Wms. Exrs. (10th ed.) 754; and whether such modification exists in this state need not be considered, because in the case of an insolvent estate no tax would be assessable, as we have seen, since nothing would pass to any beneficiary.

In the simplest case, then, that of intestacy, and involving assets and creditors only in the state of the domicile and in this state, and the assets in each state exceeding the debts due citizens of that state, it would seem that the proper deduction to be made from the total New Jersey assets in order to obtain the figure for the numerator of the ratio clause fraction, would include the aggregate of the New Jersey debts. Doubtless, the federal estate tax would be deemed ratably divided in respect of the two states. Expenses of funeral and last illness are probably classifiable as debts, and so also accrued portions of state and municipal taxes according to the situs of the property taxed. Administration fees and expenses and attorney’s fees in the matter of the administration in this state would also be included.

If the domiciliary assets were insufficient to pay the domiciliary debts and expenses another factor would thereby be added to be considered in the computation; and still others, if there were assets and creditors in several other states. If the decedent died testate, still further complications might result from testamentary provisions charging the debts upon particular portions of his estate, either by special provisions or as the resultant effect, in the particular case, of the ordinary residuary clause.

The possible combinations of circumstances are so varied that the impropriety, and, indeed, the impossibility, of attempting to prescribe in advance the proper procedure covering individual cases, is evident. Neither can the proper assessment be specifically directed in the case sub judico, for the reason that the record does not contain the necessary findings or information upon which such assessment can be based. What has been said will, however, indicate to the comptroller the -lines of the additional inquiries to be made by him, and the general principles to be observed in dealing with the facts which shall thereby be ascertained.

The tax will be set aside and the record remitted to the comptroller for further proceedings and reassessment.