A “Chicken-and-Egg Problem” of Subject Matter Jurisdiction in an Estate Case

In re Estate of Byung-Tae Oh, 445 N.J. Super. 402 (App. Div. 2016).  In 2001, the decedent in this estate matter, Byung-Tae Oh, at all times a citizen of South Korea, wired $900,000 of his money into the business account of B&H Consulting and Development Company, LLC.  One of the decedent’s sons, Hyung Kee Oh, was the general partner of B&H.  The decedent died in 2012.  His eldest son, Won Ki Oh filed suit in the Probate Part, Bergen County, seeking the appointment of an administrator to marshal estate assets located in New Jersey.  Among those assets, he claimed, was a 40.8% interest on B&H, growing out of the $900,000 that the decedent transferred to B&H in 2001.  Hyung Kee Oh, as defendant, contended, in contrast, that the $900,000 was a gift to him, and that “[a]t no time did [decedent] treat that payment as entitling him to a legal ownership interest in B&H.”

The sons cross-moved for summary judgment, and the Probate Part ruled in favor of plaintiff and against defendant, holding that the $900,000 was an investment, not a gift.  On defendant’s appeal, the Appellate Division affirmed in an opinion by Judge Fisher that applied de novo review to the question of whether the evidence was so one-sided that plaintiff had to win as a matter of law.

The first argument presented was lack of subject matter jurisdiction.  Defendant had not raised that argument below, but Judge Fisher noted that, contrary to the normal rule that does not permit issues to be raised for the first time on appeal, “lack of subject matter jurisdiction may be asserted for the first time on appeal.”  However, he admonished defendant for failing to state that the issue had not been raised below, as required by Rule 2:6-2(a)(1).  The fact that defendant had raised lack of jurisdiction in his responsive pleading did not mean that the issue had been raised in the Probate Part.  “A litigant must do more and cannot expect that a judge who has been asked to rule on a dispositive motion will scour the pleadings for other arguments or defenses a party might once have contemplated but chose not to assert in the motion.”  This is a lesson for appellate counsel: arguments are not raised below unless they are raised in the context of the motion that later gives rise to the appeal.

Judge Fisher characterized the issue of lack of subject matter jurisdiction as a “chicken-and-egg problem.”  The Probate Part has jurisdiction in a matter only if there are assets in New Jersey, but the question of whether the decedent had an asset in New Jersey in the form of an investment in B&H was also the merits issue for decision.  Judge Fisher observed that “the situation is not uncommon; our Supreme Court has recognized that a jurisdictional question may often be intertwined with the underlying dispute and, in that instance, ‘the jurisdictional determination should await a determination of the relevant facts on either a motion going to the merits or at trial.’  Blakey v. Continental Airlines, 164 N.J. 38, 71 (2000).”  The Probate Part correctly evaluated the merits and implicitly ruled that there was subject matter jurisdiction.

Defendant also contended that Korean law should have applied instead of New Jersey law.  But that issue had not been raised below and thus was not to be considered.  Besides, “when posing a conflict-of-law issue, a party is required to demonstrate a difference between the competing bodies of law.”  Defendant did not do that and, indeed, “cited only New Jersey authorities.”  Judge Fisher rejected the conflict of law argument, citing the “that’s ridiculous” rule, Rule 2:11-3(e)(1)(E).

On the merits, Judge Fisher concluded that plaintiff was indeed entitled to summary judgment.  He rejected defendant’s argument that there was a presumption that defendant intended to make  a gift rather than an investment.  Generally, “[t]he burden of proving an inter vivos gift is on the party who asserts the claim,” and the standard of proof is “clear, cogent and persuasive evidence that the donor intended to make a gift.”  Where the transfer is to a child, however, “the initial burden of proof on the party claiming a gift is slight.”  In essence, “a presumption arises that the transfer [to a child] is a gift.”

Here, however, the transfer was made not to a child, but to an entity of which the child was the general partner.  Thus, the presumption did not apply here.  Without the presumption, and given the fact that the decedent confirmed in writing “the existence of this investment in B&H by submitting– every year from 2001 until his death– investment status sheets to the Export-Import Bank of Korea, a quasi-governmental entity, reflecting that he made a direct overseas investment of $900,000 in B&H and that he held a 40.8% interest in B&H,” defendant could not carry his burden of proving a gift.  The Probate Part thus properly granted summary judgment.