On appeal from the Supreme Court, whose opinion is reported in 105 N.J.L. 89.
For the appellant, Haines & Chanalis (Addison S. Pratt, of the New York bar, on the brief).
For the respondent, William A. Stevens, attorney-general.
The opinion of the court was delivered by
CASE, J. The comptroller of the treasury assessed a tax of $5,590.52 against the estate of May Logan MacClurkan, deceased, upon the interest of Thereon Logan Rathje, a life beneficiary under a trust deed made by the decedent in her lifetime. Under writ of certiorari the Supreme Court affirmed the assessment. The administrator appeals.
On August 26th, 1921, in the city of Chicago, Mrs. MacClurkan, then May Logan, executed a trust deed to Frank C. Rathje, wherein she, as donor, transferred and conveyed certain securities to the trustee, he to pay the income therefrom to the donor during her lifetime and after her death to the donor's children, but if there were no children then to Theron Logan Rathje and if the latter should afterwards die then the income was to "revert" to his mother, Josie Logan Rathje. The instrument gave the trustee "as wide latitude in the selection and making of any investments as if he, as an individual, were the absolute owner of the trust property" but reserved to the donor the right to revoke the agreement after a period of five years from the date thereof. The donor died within the five-year period and, therefore, had no exercisable right of revocation at any time during her subsequent life. The trust deed contained no provision for the disposition of the corpus after the termination of the life estates.
At the execution of the trust deed May Logan was a resident of the State of Illinois. The trustee, the beneficiary (Theron Logan Rathje), and the latter's mother were then and have constantly remained residents of that state. All of the trust property was then and has ever since been physically present there. The trust property consisted of Liberty bonds, corporate stocks and bonds, and promissory notes of individuals. It did not include any shares of stock of corporations organized under the laws of New Jersey, or of any national banking association located therein, or any obligations owing by a resident thereof. Subsequently, May Logan married Samuel MacClurkan, became a resident of New Jersey and
so remained until her death, without issue and intestate, March 4th, 1924.
The appellant contends that the State of New Jersey, at the time of the execution of the trust deed, had no jurisdiction over either the person of the donor or the property of the trust; that the title to the property passed forthwith under the terms of the trust deed to the trustee independent of any rights conferred, and free of any obligations imposed, by this state; and that the succession tax laid upon the transfer is, therefore, illegal because it violates the first clause of article 1 and paragraph 16 of article 1 of the New Jersey constitution and also contravenes the due process clause of the fourteenth amendment to the United States constitution. Respondent counters with the argument that the transfer was intended to take effect in beneficial possession and enjoyment after the death of the donor and that the law of the jurisdiction where the donor was domiciled at the time of her death is effective for the taxation of intangible personal property so transferred. The issue differs from that of any decided case brought to our attention in that the decedent, though resident in this state at the time of her death, was not so resident at or prior to the execution of the trust deed and, during the period of her residence here, had no exercisable power of revocation. We consider that a determination may be reached without reference to either the state or the federal constitution.
The comptroller assumed to act under the authority of "An act to tax the transfer property of resident and non-resident decedents by devise, bequest, descent, distribution by statute, gift, deed, grant, bargain and sale in certain cases," approved April 20th, 1909, as variously supplemented and amended, and particularly as amended by chapter 174 of the pamphlet laws of 1922. By that amendment section 1 of the act is reframed to provide for a transfer tax on decedents' estates in five instances classified numerically. Under the admitted facts of the case, it is apparent that, if the statute justifies the tax, the authority is to be found in the following provision from the third subdivision: "A tax shall be and is hereby imposed upon the transfer of any property * * * or of
any interest therein or income therefrom in trust or otherwise * * * in the following cases * * * Third. When the transfer is of property made by a resident * * * by deed, grant, bargain, sale or gift made in contemplation of the death of the grantor, vendor or donor, or intended ...