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Howard Savings Institution v. Kielb

Decided: June 29, 1962.

THE HOWARD SAVINGS INSTITUTION, EXECUTOR AND TRUSTEE UNDER THE LAST WILL AND TESTAMENT OF EVA KIELB, DECEASED, PLAINTIFF-RESPONDENT,
v.
WALTER KIELB, JR. (LEE S. WILSON, ADMINISTRATOR C.T.A. OF THE LAST WILL AND TESTAMENT OF WALTER KIELB, JR., DECEASED), DEFENDANT-APPELLANT, AND SOPHIA RZOCSOC, ET AL., DEFENDANTS-RESPONDENTS



For reversal -- Chief Justice Weintraub, and Justices Jacobs, Francis, Proctor, Hall, Schettino and Haneman. For affirmance -- None. The opinion of the court was delivered by Haneman, J.

Haneman

[38 NJ Page 189] Appeal is herein taken from a judgment of the Superior Court, Chancery Division, declaring that certain bank accounts in the form "Eva Kielb in trust for Walter Kielb, Jr." vested no ownership in the named beneficiary upon the depositor-trustee's death but, on the contrary, were to be administered as part of the depositor-trustee's estate.

The controversy originated in an application by The Howard Savings Institution for a construction of the will of one Eva Kielb under which will plaintiff had qualified as executor and trustee. Testatrix died November 2, 1957 and her will had been executed April 2, 1948.

During her life testatrix had opened four bank accounts bearing the designation "Eva Kielb in trust for Walter Kielb, Jr." Walter was her only child and was one of the original defendants in this action. The first of these accounts was opened October 1931 and carried at testatrix's death a balance of $10,226.69. Numerous deposits in and withdrawals from this account had been made by her. Subsequently, in November 1946, she opened another account from which she made no withdrawals and in which $6,196.78 had accumulated at her demise. A third account in the amount of $6,090.00 at the time of her death was opened during April 1948, on the same day her will was executed. From this account one withdrawal had been made. The fourth account bore an opening date in November 1950, and contained at testatrix's death $7,415.20. No withdrawals from this account are evidenced by the passbook.

Additionally, when testatrix died she owned an account in her own name bearing a balance of $2,270.00, bonds valued at $5,700.00 and realty to the extent of $21,000.00.

The moneys deposited in the trust accounts had belonged solely to Eva Kielb, Walter being unaware of their existence, and she at all times retained possession and control of the passbooks relating to such accounts.

Testatrix's will, after providing an absolute bequest of $2,000 for Walter, established a residuary trust, income to Walter for ten years and thereafter the corpus and accumulations to be paid to him absolutely. Walter, in fact, died without issue in 1960 during the pendency of this action and his administrator c.t.a. was substituted as a party defendant. In the mother's will, provision had been made corpus in such case to be paid over to designated remainderfor his death without issue within the ten year period, the

men, defendants herein, one of whom, Blanche Mytych, a minor, is represented by her guardian ad litem.

The Chancery Division, echoing the principles enunciated in a line of New Jersey cases spanning half a century, held that the accounts opened in trust form were ineffective to vest Walter with any interest in the proceeds contained therein and hence the funds comprised part of Eva Kielb's estate, to be distributed according to the terms of her will. 66 N.J. Super. 98 (Ch. Div. 1961). Walter appealed to the Appellate Division. Prior to argument there we certified the matter on motion.

Walter, and now his personal representative, concedes the correctness of the lower court's interpretation of the prior case law on the subject, attack being directed instead upon the validity of the premise established by those decisions. For ease in treatment the accounts will be considered in the chronological order of their opening.

I.

In existence at the time the 1931 account was opened were two statutory enactments relating to deposits in trust form. The first related solely to trust companies and stated, in part:

"Whenever any deposit shall be made by any person in trust for another, and no other or further notice of a legal and valid trust shall have been given to the trust company, in the event of the death of the trustee, the same or any part thereof, together with the dividends or interest thereon, may be paid to the person for whom the said deposit was made, or to his or her legal representatives; * * *." L. 1903, c. 210, § 1.

Next the Legislature enacted a provision couched in almost identical terms, dealing with similar accounts opened in savings banks:

"* * * whenever any deposit shall be made by any person in trust for another, and no other or further notice of the existence and terms of a legal and valid trust shall have been given in writing to

the bank, in the event of the death of the trustee, the same or any part thereof, together with the dividends or interest thereon, may be paid to the person for whom the said deposit was made, or to his legal representatives; * * *." L. 1906, c. 195, § 26.

During the interval between the enactment of the above statutes the case of Nicklas v. Parker, 69 N.J. Eq. 743 (Ch. 1905), was decided and, following enactment of the 1906 legislation, that judgment was affirmed on the opinion below. 71 N.J. Eq. 777 (E. & A. 1907). The issue there presented was whether a deposit in trust form, made in a savings bank, vested an estate in the named beneficiary sufficient to entitle such cestui to the funds remaining therein at the depositor-trustee's death. The lower court made no mention of the 1903 statute, apparently because the account in question had been opened in a savings bank. Instead, the court decided the case on classic trust and gift principles, holding that where the depositor retained control of the passbook and made withdrawals from the account, there could not be that surrender of dominion by the owner essential to the existence of a valid inter vivos gift or trust. And if the gift were intended to become operative only at the death of the donor, it was equally ineffective because violative of the Statute of Wills. Expressly rejected in this opinion was the contemporary decision of the New York courts in Matter of Totten, 179 N.Y. 112, 71 N.E. 748 (Ct. App. 1904), which had first extended judicial recognition to the "tentative trust."

In 1930 the issues generated by the aforementioned statutes were squarely presented and dealt with in Jefferson Trust Co. v. Hoboken Trust Co., 107 N.J. Eq. 310 (Ch. 1930). In assaying the effect of the 1903 legislation upon an account in trust form opened in a trust company it was there held that the statute was designed only to protect the trust company should it pay over the moneys so deposited to the named beneficiary. No other independent effect could be given the statute, it was held, because the retention of control by the depositor-trustee, evidenced by her possession of the

passbook and by her withdrawal of funds, negated the existence of a valid inter vivos gift or trust. Nicklas v. Parker, supra, was ...


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