Citizens Bank & Trust Co. v. Glaser

Schreiber, J.

(dissenting). Unfortunately the majority has seen fit to accept the findings of fact and conclusions of one hearing examiner and reject those of the Director of the Division of Taxation. Unfortunately because to adopt the examiner’s findings misconceives the reviewing role by which we should abide. Undue weight is accorded the examiner’s conclusions, particularly since of the five witnesses who testified, he heard only one whose testimony was perfunctory. In addition, a substantial part of the record relied upon by the examiner, admitted into evidence over the State’s objection was not competent. The Director of the Division could and did reasonably reach different conclusions on the basis of this record.

The majority is ambivalent on the proper scope of judicial review. It holds that a trial type hearing had not been held by the Division of Taxation.1 Yet, the record clearly demonstrates that it had. The testimony of Emma DufE, William Trevillian, Eichard Hantzman and Jane Shields had been taken in August 1970.2 The executors of the estate had also submitted numerous affidavits. The examiner who heard the testimony of these witnesses and examined the affidavits found that Mrs. Bishop’s estate was subject to the New Jersey Inheritance Tax. This finding was confirmed by the Director and the executors filed a notice of appeal to the Appellate Division. While this appeal was *84pending, both parties sought and obtained a stay of the appeal, apparently because of our decision in Lyon v. Glaser, 60 N. J. 259 (1972), so that the matter could be remanded to the Division. On remand a second trial examiner heard the matter.

At the opening he said:

Gentlemen, in compliance with the procedures calling for a trial type hearing, we have set this hearing this afternoon. There have been at least two other sessions, I would think, that would qualify, in the broad sense, as trial type sessions: Depositions and oral examinations taken on August 25th in this matter and, in addition, a Deposition taken on August 19th, both 1970, in which cross-examination and so forth took place. It’s my opinion that that would qualify as trial type hearings.
This meeting today is for the purpose of concluding the trial type hearing portion of our matter in this case.

Both parties agreed with the examiner’s comments. The attorney for the Executors, other than introducing some affidavits and producing one witness who testified to his correspondence after Mrs. Bishop’s death with certain companies whose securities she owned, relied upon the testimony adduced at the prior hearings. Under these circumstances we are satisfied that hearings in compliance with the Administrative Procedure Act were held. N. J. S. A. 52:14B-9; compare, Lyon v. Glaser, supra. Neither of the parties has argued otherwise on this appeal and the Appellate Division implicitly reached the same conclusion.3

The Appellate Division was called upon to review the decision of the Director of the Division of Taxation, not that of the second hearing examiner. The initial reviewing court’s function as we have stated so many times was to ascertain “ ‘whether the findings made could reasonably have been reached on sufficient credible evidence present in the record,’ considering The proofs as a whole,’ with due regard to the *85opportunity of the one who heard the witnesses to judge of their credibility, * * * and, in the case of agency review, with due regard also to the agency’s expertise where such expertise is a pertinent factor.” Close v. Kordulak Bros., 44 N. J. 589, 599 (1965), quoting State v. Johnson, 42 N. J. 146 at 161 (1964); see also, Mayflower Securities v. Bureau of Securities, 64 N. J. 85, 92-93 (1973).

Dean Stason in a comprehensive review entitled “ ‘Substantial Evidence’ in Administrative Law,” 89 U. Pa. L. Rev. 1026, 1038 (1941) wrote that:

* * * “substantial evidence” should be construed to confer finality upon an administrative decision on the facts when, upon an examination of the entire record, the evidence, including the inferences therefrom, is found to be such that a reasonable man, acting reasonably, might have reached the decision; but, on the other hand, if a reasonable man, acting reasonably, could not have reached the decision from the evidence and its inferences then the decision is not supported by substantial evidence and it should he set aside. In effect, this is the prevailing rule in jury trials relative to the direction of verdicts, and is also the prevailing rule applied by appellate courts in setting aside jury verdicts because contrary to the evidence.

This has been the test applied by the United States Supreme Court, Universal Camera Corp. v. N. L. R. B., 340 U. S. 474, 71 S. Ct. 456, 95 L. Ed. 456 (1951) and our courts, N. J. Bell Tel. Co. v. Communications Workers, etc., 5 N. J. 354, 377-378 (1950).

Initially we must ask ourselves whether the Appellate Division approached its task correctly. If it did “the question is whether that court was right or wrong” in sustaining the administrative agency’s findings. State v. Johnson, supra, 42 N. J. at 163. Certainly agreement of the agency and the Appellate Division is a factor to be weighed in favor of the factual conclusions, and we should affirm unless both the agency and the court were clearly in error.

The Director of the Division of Taxation concluded that Inez' Duff Bishop died a domiciliary of New Jersey. It followed then that all the real and personal property in this *86State and intangible personal property wherever located were subject to the New Jersey Transfer Inheritance Tax. N. J. S. A. 54:34-1 (a). He reached that result because she had voted on twelve occasions between 1943 and 1964 in New Jersey while residing at the Beach Haven address; she had indicated on each federal income tax return filed throughout the years that her legal residence was in Beach Haven; and she had never filed any Virginia income tax returns.

The Appellate Division properly analyzed the record and ascertained that a reasonable person might have reached the Director’s decision on the basis of the substantial competent evidence which supported his findings. While an extended factual description need not be repeated, a brief summary demonstrates the point. Mrs. Bishop and her husband had lived in New Brunswick, New Jersey for 16 years until his death in 1933. They also had a summer home in Beach Haven which she sold on her husband’s death. She replaced both homes with a new two-story residence with central heating which she had constructed in Beach Haven. She also established homes in Virginia and Florida. Exactly what part of each year she resided at her New Jersey, Virginia and Florida homes is not clear. There was testimony that she resided annually in Beach Haven from June 1 usually to mid-October. Her voting record discloses that in the November general elections of 1944, 1945, 1948, 1950 and 1956 she voted in person in Beach Haven. She may well have remained in Beach Haven in those years until November. After leaving Beach Haven she would go to Charlottesville, Virginia for a short stay until sometime in December when she would depart for her Florida home where she remained until March. She would then return to Charlottesville for about two and a half months before traveling to Beach Haven. In addition to voting in New Jersey, she filed federal income tax returns in which New Jersey Avas listed as her legal residence. She never filed Virginia income tax returns or paid Virginia income taxes. She always maintained a bank account *87in Beach Haven and supported a local Methodist Church and some local charities.

The presumption arises from the existence of her permanent New Jersey residency that this State remained her domicile until another was acquired and the New Jersey domicile abandoned. Cromwell v. Neeld, 15 N. J. Super. 296, 300 (App. Div. 1951). Coupled with this presumption, construction of an all year round home in Beach Haven, the continued residence in New Jersey for a substantial period of time each year, the maintenance of a New Jersey bank account, the filing of federal income tax returns in which she designated her Beach Haven home as her legal residence, (see 26 U. S. C. A. § 6091), and voting in New Jersey between 1944 and 1964, (see Annotation, “Significance of place where one votes or registers to vote on question as to his domicile or residence for other purposes,” 107 A. L. R. 448 (1937)), constitute substantial evidence to support the Director’s factual findings and conclusion that Inez Duff Bishop died a domiciliary of Beach Haven, New Jersey. Note, “Evidentiary Eactors in the Determination of Domicil,” 61 Harv. L. Rev. 1232 (1948). It has been said that “[o]f all the formal acts to be scrutinized in ascertaining a person’s domicile, undoubtedly the act of registering and voting is the most important, and, while not necessarily conclusive, it is usually most convincing and persuasive.” In re Curtiss’ Will, 140 Misc. 185, 250 N. Y. S. 146, 155 (Sur. Ct. 1931). Mrs. Bishop’s intent, regardless of whether it was motivated by a desire to escape Virginia income taxes, when coupled with the presumption of domicile, actual residence in New Jersey and the other elements recited above, unequivocally justify the Director’s result.4

In accepting the second hearing examiner’s analysis and findings and rejecting those of the Director, the majority *88of this Court concludes that Mrs. Bishop was domiciled in Virginia and therefore was not domiciled in New Jersey. The fallacy in this approach is two-fold. Eirst the question on appeal is whether the evidence supports a finding that she was domiciled in New Jersey and not whether one could also reasonably conclude from the facts that her permanent residence was in Virginia. It is quite possible that both questions may be answered in the affirmative. Mr. Justice Frankfurter recognized this possibility in Texas v. Florida, 306 U. S. 398, 59 S. Ct. 563, 83 L. Ed. 817 (1939):

>i= * * Two state courts can very legitimately find two different domiciles, in that two equally competent tribunals utilizing the same outward facts in the alembic of the same common law concept of domicile may easily distill contradictory conclusions. [306 U. S. at 432, 59 S. Ct. at 579; dissenting opinion].

Second, the underlying assumption for the antediluvian concept that one may be domiciled only in one state for inheritance tax purposes has long ceased to exist. Nearly forty years ago Mr. Justice Frankfurter in his dissenting opinion in Texas v. Florida, supra, presaged the unsoundness of the single domiciliary principle:

* *• jn view of the enormous extent to which intangibles now constitute wealth, and the increasing mobility of men, particularly men of substance, the necessity of a single headquarters for all legal purposes, particularly for purposes of taxation, tends to be a less and less useful fiction. In the setting of modern circumstances, the inflexible doctrine of domicil — one man, one home — is in danger of becoming a social anachronism. Kecent applications and modifications of this rule to satisfy the vague contours of the due process clause have hardly mitigated its inadequacies for our day. [306 U. S. at 429, 59 S. Ct. at 578].

We may take judicial notice of the fact that many people now have two permanent homes, in each of which they spend substantial amounts of time at different periods of the year.5 *89Eor purposes of certain rights and duties it may well be that the laws of one state should be exclusive, but the predicate cannot and should not necessarily be founded on the rationale of a single domicile, a concept which functioned well in a day gone by.

Modification of the unitary concept has been recognized and advocated. Worden et al. v. Mercer Cty. Bd. of Elections, 61 N. J. 325, 343-344 (1972). See also W. Cook, The Logical and Legal Bases of the Conflict of Laws 19-D-210 (1942); Beese, “Does Domicil Bear a Single Meaning?”, 55 Colum L. Rev. 589 (1955); Weintraub, “An Inquiry into the Utility of ‘Domicile’ as a Concept in Conflicts Analysis,” 63 Mich. L. Rev. 961, 983-986 (1965).

Chief Justice Weintraub aptly observed in Worden, et al. v. Mercer Cty. Bd. of Elections, supra:

The concept of domicil is not constant. It is designed to assure fairness to the individual or the State or both in a given setting. Its ingredients, therefore will vary, depending upon what is just and useful in a given context. [61 N. J. at 349; concurring opinion].

The weight of the anachronistic past should not foreclose adoption of a rational concept of domicile particularly appropriate as the basis for imposition of a transfer inheritance tax. Besidence in fact and other sufficient additional contacts with the taxing state render imposition of the tax fair and proper where the decedent has received the benefit and protection extended by that state. See Tax Commission of Utah v. Aldrich, 316 U. S. 174, 178-179, 62 S. Ct. 1008, 1010-1011, 86 L. Ed. 1358, 1369 (1942); Curry v. McCanless, *90307 U. S. 357, 366-368, 59 S. Ct. 900, 905-907, 83 L. Ed. 1339, 1347-1348 (1939). The appropriate question which should be asked and answered is whether Inez Duff Bishop had a sufficient relationship with New Jersey so that it is reasonable to charge her estate with an inheritance tax on its intangible property. Such a domiciliary concept eliminates the anomalous consequences resulting from application of the traditional concept in the inheritance tax field. See Reese, supra at 592-593. A finding that an individual was “domiciled” in two states for inheritance tax purposes is recognizable and realistic if that individual enjoyed during his lifetime a sufficient degree of benefit and protection extended by each sovereign. See Parage, “Multiple Domicils and Multiple Inheritance Taxes — A Possible Solution,” 9 Geo. Wash. L. Rev. 375, 377-380 (1941); W. Cook, supra at 195-210 (1942). This is particularly true where the choice to establish residences in more than one state has been made by the decedent. No charge of surprise can be raised for it has long been recognized that there may be “conflicting” judicial decisions concerning domicile, each of which will be binding. Riley v. New York Trust Co., 315 U. S. 343, 349-350, 62 S. Ct. 608, 86 L. Ed. 885 (1942). No constitutional infirmity blocks the path of this doctrine. Worcester County Trust Co. v. Riley, 302 U. S. 292, 299, 58 S. Ct. 185, 82 L. Ed. 268 (1937); In re Dorrance’s Estate, 309 Pa. 151, 163 A. 303 (1932), cert. den. 287 U. S. 660, 53 S. Ct. 222, 77 L. Ed. 570 (1932); In re Dorrance, 115 N. J. Eq. 268 (Prerog. Ct. 1934), aff'd 13 N. J. Misc. 168 (Sup. Ot. 1935), aff’d 116 N. J. L. 362 (E. & A.), cert. den. 298 U. S. 678, 56 S. Ct. 949, 80 L. Ed. 1399 (1936). As a matter of fundamental fairness the outmoded principle that no person has more than one domicile which precludes inheritance tax applications of more than one state should be discarded.6

*91The Executors’ claims that the Virginia judgment that the decedent was domiciled in that state is entitled to full faith and credit under Article 4, Section 1 of the U. S. Constitution, and that imposition of the New Jersey tax would constitute double taxation in contravention of the due process clause of the Pourteenth Amendment of that Constitution, have no merit. See In re Dorrance, supra; Worcester County Trusdst Co. v. Riley, sufra. Substantial reliance for the Executors’ position is placed upon Western Union Telegraph Co. v. Pennsylvania, 368 U. S. 71, 82 S. Cl. 199, 7 L. Ed. 2d 139 (1961) in which the Supreme Court upheld Western Union’s objection to Pennsylvania escheating unclaimed money orders. But the short answer to that “analogy” is that it involved the diverse claims of many jurisdictions to the whole of a precise obligation. The distinction is obvious. Here, we are concerned with a tax on intangible personal property. In this respect in Texas v. Florida, supra, the Court stated:

* * * That two or more states may each constitutionally assess death taxes on a decedent’s intangibles upon a judicial determination that the decedent was domiciled within it in proceedings binding upon the representatives of the estate, hut to which the other states are not parties, is an established principle of our federal jurisprudence. [306 U. S. at 410, 59 8. Ct. at 569].

Ho sound principle warrants our extending the Western Union doctrine applicable to escheats to possible multistate inheritance taxation.

The unfair and illogical consequences that can result from application of the traditional but ill-suited and now outmoded single domicile concept to inheritance taxation is *92demonstrated by the result reached today. The effect is to permit the estate of the decedent, who during her lifetime avoided Virginia state income taxes by claiming and enjoying the benefits of a New Jersey domicile, to now escape payment of New Jersey’s higher inheritance tax rate by claiming a Virginia domicile.7 Such a result unjustly enriches the estate and deprives this State of its lawful revenues.

In passing it should be noted that a shifting of the burden of proof to the estate under the circumstances of this case is warranted. The facts are in the possession of the estate and the witnesses are interested persons. Justice Jacobs advocated a shifting of the burden in Lyon v. Glaser, supra, and commented:

So Iiere, the shifting of the burden of establishing a transfer of long-standing New Jersey domicil may serve towards containing some of the evasions which impose so unfairly on other New Jersey domiciliaries. [60 N. J. at 281].

Both from the standpoint of substance and policy the onus should be placed on the estate to establish by a fair preponderance of the evidence that Mrs. Bishop had abandoned her New Jersey home. It is true of course that in light of the Director’s findings, supported as they are by substantial credible evidence, the result would be the same whether or not the burden is shifted. Reference is made to this principle because it is appropriate in a case of this type.

At the outset of this opinion, reference was made to the factual analysis and findings of the second hearing examiner which are adopted by the majority and are themselves subject to infirmities. Over objection, the examiner had admitted into evidence 14 affidavits, all of which constituted hearsay. He relied upon some of these affidavits. He also placed great weight on the testimony of Richard G. Hantz*93man, an accountant, who never met or spoke with Mrs. Bishop. He accepted the most favorable inferences from the standpoint of the estate, although its witnesses were beneficiaries or employees of or persons engaged by the co-executor, Citizens Bank and Trust Company. Suffice it to say the Appellate Division’s review and analysis of the record and its approach to the problem before it were eminently correct.

I would affirm.

Justice Pashman joins in dissent.

For reversal — Chief Justice Hughes, Justices Mountain, Sullivan and Clifford and Judge Cocord — 5.

For affirmance-Justices Pashman and Scheeirer — 2.

A11 proceedings are before the Transfer Inheritance Tax Bureau which is a part of the Division of Taxation.

Duff was Mrs. Bishop’s sister-in-law, co-executor of the estate, co-trustee of a testamentary trust, a beneficiary under the will. Trevillian was president of the Citizens Bank & Trust Co., the executor, co-trustee of a testamentary trust, and a beneficiary under the will. Hantzman was the accountant retained by the executor. Shields was an employee of the Citizens Bank & Trust Co. Her family had benefitted from Mrs. Bishop’s generosity.

The appellants concede the trial type hearing was held. Their objection is directed to the failure to make adequate factual findings.

In Lyon v. Glaser, supra, 60 N. J. at 264, Justice Francis recognized that a person may select a domicile “to avoid taxation.”

The 1970 Census of Housing, Supplementary Report, Characteristics of Second Home Owners for the United States: 1970, Bureau *89of the Census, U. S. Dept, of Commerce advises that of the nation’s 63.4 million households in 1970, 2.9 million or 5% owned a second home. Ownership of a second home was directly related to income and of those in the group whose income was §50,000 or more nearly 20% owned a second home. M. Clawson, Suburban Land Conversion in the United States (1972) notes that there is a tendency for second homes to become permanent residences.

At her death the value of Mrs. Bishop’s estate was approximately $1,800,000. The Virginia and New Jersey inheritance taxes in *91the aggregate totaled about $125,000. Under N. J. S. A. 54:38A-1, the Director of the Division of Taxation is authorized to enter into an agreement with the taxing authorities of another jurisdiction and the executor in which the taxes due each state is settled. This mechanism is available to avoid an inequitable result where an estate may he unduly burdened by the claims of several states. That situation does not exist here.

The New Jersey inheritance tax was $89,000 and the Virginia tax $36,000.