Source: https://law.justia.com/cases/federal/appellate-courts/F2/349/666/104466/
Timestamp: 2020-01-21 07:44:14
Document Index: 117500489

Matched Legal Cases: ['§ 22', '§ 23', '§ 170', '§ 22', '§ 1738', '§ 22', '§ 71', '§ 1738']

Estate of Herman Borax, Deceased, Hermine H. Borax, Louis Borax and Benjamin Borax, Executors, Andhermine Borax, Petitioners, v. Commissioner of Internal Revenue, Respondent, 349 F.2d 666 (2d Cir. 1965) :: Justia
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Estate of Herman Borax, Deceased, Hermine H. Borax, Louis Borax and Benjamin Borax, Executors, Andhermine Borax, Petitioners, v. Commissioner of Internal Revenue, Respondent, 349 F.2d 666 (2d Cir. 1965)
US Court of Appeals for the Second Circuit - 349 F.2d 666 (2d Cir. 1965) Argued January 19, 1965
COPYRIGHT MATERIAL OMITTED Julius G. Hirsch, New York City (Stuart M. Berkman, New York City, of counsel), for petitioners.
This rule of validation tends to promote some measure of certainty and uniformity — important goals of the federal tax scheme; see Commissioner v. Lester, 366 U.S. 299, 301, 81 S. Ct. 1343, 1345, 6 L. Ed. 2d 306 (1961), declaring "that it was the intention of Congress, in enacting § 22(k) and § 23(u) of the [1939] Code, to eliminate the uncertain and inconsistent tax consequences resulting from the many variations in state law." Where, as here, the divorcing jurisdiction is not one of the States of the Union, and the decree has only the benefit of comity rather than the Full Faith and Credit Clause of the Constitution, the States are free to take different views as to the validity of the divorce. The possibility of disparity even exists if the divorcing jurisdiction is within the Union. For under the existing pattern of law, a divorce decree is not entitled to full faith and credit unless the rendering state has jurisdiction, and the rendering state's finding of jurisdiction is not itself entitled to full faith and credit. Although federal standards will be applied to determine if there is jurisdiction for full-faith-and-credit purposes, Williams v. State of North Carolina (II), 325 U.S. 226, 231 n. 7, 65 S. Ct. 1092, 89 L. Ed. 1577 (1945) (domicile), the Supreme Court is not in a position to resolve all such sister-state conflicts, see, e. g., Colby v. Colby, 78 Nev. 150, 369 P.2d 1019, cert. denied, 371 U.S. 888, 83 S. Ct. 186, 9 L. Ed. 2d 122 (1962), and it would not be advisable for this court (or the Tax Court) to attempt such a resolution in these most collateral tax-deficiency proceedings. The rule of validation leaves the mobile spouse with the power to obtain a divorce in a jurisdiction whose decrees might not be recognized in every other jurisdiction. Yet by depriving the determination of invalidity of any federal tax significance the rule of validation avoids a measure of unevenness and uncertainty: all those taxpayers who have obtained a divorce in a particular jurisdiction are treated the same, regardless of whether the spouse against whom the decree has been obtained is able to, and does, invoke the power of another jurisdiction to declare that divorce invalid.
The only circuit case law on point, Feinberg v. Commissioner, 198 F.2d 260 (3 Cir. 1952), supports the rule of validation, and it is not without significance that this authority was established in 1952 — at a time when the Mexican divorce was obtained and the New York declaratory proceedings were commenced, prior to the 1954 liberalization of the relevant deductibility provisions in the tax code, and far enough back to justify the accretion of reasonable expectations. The parties in Feinberg were married in New York in 1918 and continued to live there for the twenty years of their married life. In February 1940, after marital difficulties, they entered into a separation agreement; and in March of that year the husband instituted divorce proceedings in a Florida court. The wife did not appear, either in person or through counsel, and service was by publication only. In May the decree of divorce dissolving the marital relationship was obtained and in June the husband married again, this time in New Jersey. In 1941 the first wife commenced proceedings in New York, seeking in part a declaration that the Florida decree is invalid. A consent judgment was entered in November 1942 declaring the first wife to be the "true and lawful wife." The husband sought a contrary determination by raising the issue as a counterclaim in a subsequent action commenced by the wife the next year to enforce the separation agreement, but he failed. On these facts, the Third Circuit declared: "The mere fact that the marital domicile of the parties did not recognize the Florida divorce does not render it a nullity for Federal income tax purposes." 198 F.2d at 263.
Secondly, we are not dealing with a situation where the rendering jurisdiction's concept of a divorce is totally alien to that contemplated by the tax laws. The test would not be whether the divorce would be declared invalid in every state, but rather whether the divorce frustrated the revenue purposes of the tax laws. We do not view the Mexican divorce Herman had obtained as failing this test, although it contains certain extreme elements, such as the ground of divorce ("incompatibility of character") and the apparent basis of the court's jurisdiction (the fact that the plaintiff had "submitted himself to the jurisdiction of the court" and that he resided in the jurisdiction long enough to obtain a certificate of residence). It would be most unfortunate if we were to interpret the concept of a divorce, as employed by these provisions of the tax law, to require something more than the incompatibility of character as a reason for dissolving the marital relationship. And it is difficult to understand why this concept of divorce would be inconsistent with lax jurisdictional standards, even if the defendant's connection with the rendering jurisdiction were so minimal as to raise doubts as to whether the assumption of personal jurisdiction would be consonant with due process of law (if the rendering jurisdiction were a State), and even if the requirement that one of the parties be a domiciliary of the rendering jurisdiction is dispensed with. New York, for example, regards the fact that a marriage took place in the state as a sufficient jurisdictional nexus, N. Y. Domestic Relations Law McKinney's Consol. Laws, c. 14, § 170; David-Zieseniss v. Zieseniss, 205 Misc. 836, 129 N.Y.S.2d 649 (Sup.Ct.1954), and a few states have considered residence alone to be sufficient, Note, Divisible Divorce, 76 Harv. L. Rev. 1233, 1248, n. 99 (1963) citing the state statutes. See generally, Alton v. Alton, 207 F.2d 667 (3 Cir. 1953), vacated as moot, 347 U.S. 610, 74 S. Ct. 736, 98 L. Ed. 987 (1954); Rosenstiel v. Rosenstiel, 16 N.Y.2d 64, 262 N.Y.S.2d 86, 209 N.E.2d 709 (1965). An interpretation of the concept of divorce that is expansive enough to accommodate these differences is certainly consistent with the revenue purposes of these provisions of the tax law. We make no pretense of deciding which decrees called a "divorce" would not be consistent with these purposes.
In Commissioner v. Moses, 214 F.2d 912, 913-914 (2 Cir. 1954), cert. denied, 348 U.S. 913, 75 S. Ct. 293, 99 L. Ed. 716 (1955), this Court noted that the wife was "adamant" against divorce and that she did not agree to the separation agreement "in contemplation of any divorce." Yet we held that there was sufficient "nexus" between the divorce and the agreement, quoting language of Lerner (195 F.2d at 298) that "where the payments obviously take the place of alimony and otherwise satisfy the stringent requirements of I.R.C. § 22(k), although not formally incorporated into the decree, they should not be denied effect under the statute merely because there is no evidence that divorce and settlement were not contemporaneously planned and carried out." A further step was taken in Holt v. Commissioner, 226 F.2d 757, 758 (2 Cir.), cert. denied, 350 U.S. 982, 76 S. Ct. 468, 100 L. Ed. 850 (1955), where the wife was so "adamant" against divorce, that, unlike the wife in Moses, she refused "to include in the agreement any reference to a possible divorce or a clause relative to the incorporation of the terms of the agreement in any decree of divorce." This Court nevertheless held that the parties' intent was "immaterial" and that the written separation agreement is incident to the divorce because the "legal obligation to support survives the dissolution of the marital relationship."
Although, as was said of another ruling as to divorce, "I do not suppose that civilization will come to an end whichever way this case is decided," Haddock v. Haddock, 201 U.S. 562, 628, 26 S. Ct. 525, 551, 50 L. Ed. 867 (1906) (Mr. Justive Holmes dissenting), I cannot subscribe to my brothers' disposition of this appeal.
Under the Constitution that judgment not only is binding in New York but is entitled to recognition in every state, as indeed it would be if the challenged divorce had been granted by a sister state. Sutton v. Leib, 342 U.S. 402, 407-409, 72 S. Ct. 398, 96 L. Ed. 448 (1952). By statute, 28 U.S.C. § 1738, coming down from the first Congress, 1 Stat. 122 (1790), it is entitled to full faith and credit "in every court within the United States." I find no basis for believing that when Congress spoke of a wife who is "divorced," 1939 I.R.C. § 22(k), 1954 I.R.C. § 71(a) (1), it meant a wife who had been pronounced to be so by a piece of paper which has been drained of all legal vitality and no court in the land may lawfully respect in a suit between the parties most concerned. I am equally unable to understand how, under modern developments in the law of collateral estoppel, Herman and Hermine can challenge, as against the Commissioner, a proposition which, after full opportunity, they unsuccessfully challenged against Ruth, see Kurlan v. C. I. R., 343 F.2d 625, 628 n. 1 (2 Cir. 1965), and authorities there cited — especially when one result of a successful challenge should be a tax against Ruth on the amounts sought as a deduction by Herman. Yet as to this last, I cannot see how when the Commissioner, confronted with my brothers' decision, presses his protective petition to review the Tax Court decision annulling the determination of a deficiency against Ruth, we could overcome her reliance on the New York judgment consistently with 28 U.S.C. § 1738, save by giving the language of the Revenue Codes a construction which, as indicated, I think indefensible. If that be so, it sufficiently indicates the error in the decision here.
I recognize that my view puts me in conflict with Feinberg v. C. I. R., 198 F.2d 260 (3 Cir. 1952), since I join my brothers in finding the Commissioner's distinctions of that case insubstantial. But my regret in having to part company with another court of appeals is lessened by my inability to follow the majority's distinction of Gersten v. C. I. R., 267 F.2d 195, 199-200 (9 Cir. 1959). The two decisions seem basically inconsistent; indeed, Feinberg, where a judgment had decreed the divorce to be invalid, was in some ways a stronger case for the Commissioner than Gersten. We thus cannot avoid conflict with another circuit, however we decide this case.