Case Title: Bauman v. Bauman

Citation: 245 Or. 574, 423 P.2d 181

Docket Number: 

State: oregon

Court: Oregon Supreme Court

Date: 1967-02-01T00:00:00Z

Document:
Reversed February 1, 1967.
David A. Rhoten, Salem, argued the cause for appellant. With him on the brief were Rhoten, Rhoten & Speerstra and George Rossman, Salem.
Orval N. Thompson, Albany, argued the cause for *575 respondent. With him on the brief were Weatherford, Thompson, Horton & Jordan, Albany.
Before McALLISTER, Chief Justice, and PERRY, O'CONNELL, DENECKE and REDDING, Justices.
REVERSED.
DENECKE, J.
This appeal concerns the interpretation of a tax provision in a property settlement agreement. The question was litigated upon an order requiring the defendant husband to show cause why he should not be held in contempt for failure to pay certain taxes plaintiff wife contends are to be paid by him pursuant to a decree which incorporated the property settlement agreement. The court held the agreement did not require the payment of such taxes.
The property settlement agreement was in the form of a stipulation dictated by the attorney for the plaintiff to a court reporter, in the courtroom, in the presence of the parties and their attorneys.
The tax provision is as follows:
In 1964 the defendant paid the plaintiff's income tax liability which was imposed upon her because of her transfer to the defendant of her interest in the businesses. In December, 1964, when the plaintiff's accountant was computing her taxes, he determined that the amount the defendant paid in 1964 to satisfy the plaintiff's tax liability would be construed by the tax authorities as additional income to the plaintiff and would, therefore, require the payment by the plaintiff of additional income taxes. The defendant does not question that the additional taxes were correctly assessed against the plaintiff. He contends such additional taxes are not payable by him under his agreement.[1]
*577 1. The only legal principle applicable to guide our decision is that the language of an agreement should be interpreted to effectuate the intentions of the parties, as those intentions can be determined from the language used and other relevant circumstances.
2. The crucial sentence states that the defendant agrees to hold the plaintiff harmless "for all tax liability of every kind arising out of the transfer to him * * * of her interest in the businesses * * *." We are of the opinion that the most reasonable interpretation of that sentence, in light of all the circumstances, is that it requires the defendant to pay the plaintiff's tax liability arising out of the defendant's initial payment of her tax liability. This subsequent and secondary liability we believe is most reasonably construed as one "arising out of the transfer to him * * * of her interest in the businesses."
Reversed.
[1]  There was testimony that this "tax upon a tax" spiral could be terminated by one payment computed according to a formula approved or promulgated by the taxing authorities. It is not certain, or material, whether both federal and state income taxes are involved.