On appeal from the Division of Taxation, Transfer Inheritance Tax Bureau.
Pressler and King. The opinion of the court was delivered by Pressler, J.A.D.
This is an appeal from a determination by the Transfer Inheritance Tax Bureau, following a hearing, that certain real property, title to which was in the name of the decedent Anna Rauch, is fully subject to the transfer inheritance tax, N.J.S.A. 54:34-1 et seq. Appellant Sophie Kalivoda, decedent's sister, executrix and sole beneficiary of the estate, resisted the assessment on the ground that she had a one-half interest in the property by virtue of a resulting trust in her favor to that extent. We agree with her contention and are satisfied that the determination below rejecting her claim was based on legal error.
The relevant facts are not disputed. The property in question, consisting of a house and lot in Wallington, New Jersey, was originally owned by Joseph Rauch, Sr., father of decedent and appellant. In 1942 appellant moved into the house with her family to assist decedent with the nursing of their father, who was then ill. Joseph Rauch died testate in that year. By the terms of his will, his son Joseph Rauch, Jr., inherited the house plus one-fifth of the residuary estate consisting of personalty, and each of the daughters inherited two-fifths of the residuary estate, the two-fifths share amounting
in value to $2,150. The son did not desire the house which at that time was the home of his two sisters, and the three accordingly agreed that he would convey his interest to them in exchange for their payment to him of their respective cash legacies. According to the testimony of appellant and her husband, appellant was concerned about protecting her interest in the property from her husband, who then had what they described as something of a drinking problem. Their concern was that he might have an accident while intoxicated, which might subject the property to claims of his creditors. They consulted with an attorney who advised all three that the best plan would be for decedent to take title to the property in her name alone rather than having title taken in the name of both sisters. It was his further advice that appellant's interest be evidenced by her grant to decedent of a mortgage showing an underlying obligation of $2150. This advice was accepted and moneys paid and title transferred in accordance therewith. The sisters continued to reside in the house, sharing all expenses equally, until decedent's death in 1976. Appellant's husband, as it turned out, overcame his drinking problem and never did incur any debts.
The hearing examiner rejected appellant's claim of title to one-half of the property on two grounds. The first was his view that the otherwise manifest plan to create a resulting trust was defeated by reason of the fact that the mortgage was dated two days after the deed. It was his reasoning that a valid purchase money resulting trust requires payment by the alleged beneficiary prior to or simultaneously with taking of title by the trustee. He further concluded, however, that even if a resulting trust had been created by these circumstances, appellant would be barred from asserting her beneficial interest therein because the purpose of the trust was to defraud creditors. We are satisfied that he erred in respect of both of these conclusions.
It is well settled that a resulting trust will be declared in favor of the one paying the purchase price of
property transferred to another unless it is shown that the one paying the price did not so intend. Weisberg v. Koprowski , 17 N.J. 362, 371 (1955). This principle is equally applicable where a portion of the purchase price is paid by another. In that case the interest of the payer in the property will be proportionate to the percentage of the purchase price he has paid. See 2 Restatement, Trusts 2d, § 454 at 416 (1959). There is certainly here not the slightest suggestion that appellant's payment of one-half of the purchase price arose from any other purpose, motive or circumstance other than the securing to herself of a one-half ownership interest. Nor is there any contrary presumption arising out of the circumstances here requiring rebuttal. Compare Restatement, supra , §§ 443, 445, 446 and 447.*fn1 The fact that the mortgage here was executed two days after the deed in no way alters the actual and intended relationship between the sisters in respect of the property. The real consideration here, unaffected by the subsequent mechanics of its implementation, was the separate but mutually dependent promise of each of them to the brother to pay him their respective and identical cash legacies in exchange for the property. This is not a case of either subsequent payment or a mere assumption of obligation of payment. See Restatement, supra , § 457 at 423. We are accordingly satisfied that a classic resulting trust in respect of a one-half interest was here both intended and effected.
We are also satisfied that there was here no illegality of purpose such as would bar appellant from now making her claim. The general rule, as stated by the Restatement, supra , § 444 at 405, is that
Where a transfer of property is made to one person and another pays the purchase price in order to ...