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Deubel v. Kervick

Decided: February 29, 1960.

CHARLES C. DEUBEL, JR., AND JEROME FROEHLICH, EXECUTORS, ETC., APPELLANTS,
v.
JOHN A. KERVICK, TREASURER, STATE OF NEW JERSEY, ACTING AS DIRECTOR OF DIVISION OF TAXATION, ETC., RESPONDENT



Goldmann, Conford and Freund. The opinion of the court was delivered by Freund, J.A.D.

Freund

Maurice Froehlich, domiciled in Essex County, died testate on March 10, 1956, naming as executors the appellants Charles C. Deubel, Jr. and Jerome Froehlich. By the eighth article of the will the decedent established a residuary trust estate and directed Mr. Deubel, as trustee, to invest its present value, $228,754.43, in first mortgages on real estate and, for a period of 99 years, to pay the income and interest on such investments into a special trust account entitled "Maurice Froehlich Scholarship Fund." This Fund was directed to be used:

"for the education of poor worthy Roman Catholic young men studying or desiring to study for the Roman Catholic Priesthood of the Order of Saint Benedict and providing proper maintenance and support for them during their courses of study. The class of persons designated meaning poor, worthy Roman Catholic Young Men who are financially unable to pay for such education, maintenance and support themselves and desire to study and prepare themselves for the Roman Catholic Priesthood of the Order of Saint Benedict may

be selected by the Abbot of Saint Mary's Abbey of said Order of Saint Benedict of New Jersey or any Committee of Ordained Priests of the Order of Saint Benedict of New Jersey which the said Abbot may appoint."

At the end of 99 years, the trust will terminate and the corpus will pass, without any limitation on its use, to the Order of Saint Benedict or, in the event of a certain contingency of no importance here, to the Society of the Divine Saviour, St. Nazianz, Wisconsin.

The present value of the income to be produced by the residuary estate over the 99-year period is $226,927.80. After the allowance of an exemption of $5,000 and the application of a 5% tax rate on the balance of $221,927.80, as provided by R.S. 54:34-2, subd. b governing rates of taxation on transfers to "religious, benevolent and charitable institutions," a tax was assessed in the amount of $11,096.39.

The appealing executors contend that the estate should not have been required to pay the last-mentioned sum because the trust beneficiary is not a "religious institution" under R.S. 54:34-2, subd. b , but an "educational institution" within the meaning of R.S. 54:34-4, subd. d as amended, establishing a total exemption from taxation for

"That part of the estate of any decedent which passes to or for the use of any educational institution * * * no part of the net earnings of which inures to the benefit of any private stockholder or other individual or corporation * * *."

The New Jersey branch of the world-wide Order of Saint Benedict was created by a Special Act of the Legislature, Pamphlet Laws 1868, c. 102, p. 229, wherein the Order was cited as being "a society of religious men living in community and devoted to charitable works and the education of youth." It was enacted "that the essential objects of said corporation shall be the education of youth and the establishment of churches and conducting of service therein."

In pursuance of its educational objective, the Order conducts two schools: Saint Benedict's Preparatory School,

520 High Street, Newark, and Delbarton School, Morris Township. The schools have a present enrollment of about 1,000 young men, not all of the Catholic faith. Each school has a headmaster, two deans, and numerous instructors. The instructors are ordained priests of the Roman Catholic Church and members of the Order; all are college graduates. Both schools are conducted in accordance with the requirements of the State ...


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