The opinion of the court was delivered by: COOLAHAN
The United States commenced this action against Walter J. Cotier, Claire Cotier, Sirgany's Galleries, Inc., and certain other persons
to foreclose federal tax liens against 18 pieces of assorted women's diamond jewelry and one man's gold wristwatch.
Walter, the purchaser of the jewelry, is currently indebted to the United States for unpaid federal income taxes totaling approximately $70,000.
Claire, Walter's wife at the time the jewelry was purchased,
is similarly indebted to the Government jointly and severally with her former husband in an amount totaling approximately $35,000.
Sirgany's, the seller of the jewelry, holds two judgment liens against Walter's property interest in those items totaling approximately $145,000.
The facts underlying the indebtedness of the delinquent taxpayers, as well as those giving rise to the federal tax liens and to Sirgany's judgment liens, have been stipulated by the parties.
The only disputed factual questions concern ownership, between Walter and Claire, of the burdened property.
Claire predicates her claim to ownership upon two bases. First, she urges that the jewelry was transferred to her by her husband as a gift. Second, she claims that, even if no valid gift is found, the jewelry nevertheless became her paraphernalia, and, therefore, her separate property under N.J.S.A. 37:2-14.
After a trial before the Court without a jury, these facts have been found concerning the disputed issue of ownership.
The diamonds were purchased by Walter in Florida from Sirgany's Galleries, Inc., between December 1965 and August 1966.
Walter paid for the diamonds either in cash or by personal note. Tr. 11. He also insured them under a policy naming himself as beneficiary. Tr. 13. Claire was aware that Walter had procured the insurance. Tr. 14. She neither insisted upon being named a beneficiary under Walter's policy, Tr. 14, nor procured a separate policy in her own name. Tr. 13. In 1967, certain diamonds were stolen from the Cotiers' Toms River home. Litigation ensued among various claimants to the insurance proceeds. Claire asserted no claim in the action.
Walter purchased various articles of clothing, furs, and jewelry as gifts for Claire both before and after their marriage. Walter testified that, when he handed these articles to Mrs. Cotier, either he informed her that they were gifts, Tr. 131, or he had them gift wrapped, Tr. 48.
Walter owned six corporations engaged in construction business in 1964. He was reputed to be very wealthy. Tr. 262. His testimony reveals repeatedly that he considered that reputation essential to his continued business success. See, e.g., Tr. 53-54, 59, 101-02. Accordingly, the Cotiers lived, Tr. 100-02, and entertained, Tr. 535, lavishly. They were, moreover, active both socially, See Tr. 117, and civically, see Tr. 578, in the Toms River community. On important business occasions, Walter insisted that Claire wear particular diamond pieces. Tr. 18. She was permitted, moreover, to wear diamonds even when traveling to the local supermarket. Tr. 90-91.
Despite Walter's carefully cultivated reputation for wealth, his corporate complex rested on an unsound foundation. Two of his six corporations were already inactive by 1964. Another two were sold in March 1967 to third parties for $3,000. The last two were transferred in September 1966 to Walter's sons by a prior marriage without consideration. Walter testified that each piece of equipment owned by these enterprises was unpaid for at the time of the 1966 transfer, Tr. 175, and that their condition generally was "not too good," id.
His business career prior to 1964, moreover, had been volatile. He had been victimized both by the vagaries of the business cycle, Tr. 35, and by poor health, Tr. 174. He developed a deep distrust of the Nation's economy. See, e.g., Tr. 34-35. He read business forecasts widely, and became convinced that inflation would erode the value of the dollar. Tr. 147. Despite his concerns, Walter held no personal investments except the diamonds. Tr. 49.
He began purchasing diamonds because he was fearful of inflationary pressures. Tr. 147. He informed various persons, including his wife, on separate occasions that he was purchasing these diamonds for investment reasons. Tr. 148, 193, 277, 286, 566-67. But see Tr. 352. He mentioned his wife's security as a motive behind the investment in certain instances. Tr. 277, 286, 529. Never, however, did he declare that he was purchasing the diamonds as gifts for Claire.