Court Opinion

ID: 9447179
Source: CourtListenerOpinion
Date Created: 2023-08-03 22:27:58.861047+00
Date Added: 2024-06-11T17:30:55.847204
License: Public Domain

HUTCHESON, Circuit Judge
(dissenting) .
I am of the clear opinion that this appeal basically presents a typical Abercrombie situation,1 under which, except as to the income from the interest assigned to Pittman, her counsel in the divorce proceedings, the Tax Court was correct in holding that the taxpayer was the owner of, and taxable on the income in question in this case.
I cannot, therefore, agree with, but must dissent from the majority opinion to the contrary.
The chronological summary, set out in the margin,2 of the critical facts as the record presents them, will serve, I think, at once to point my view up and to demonstrate its correctness.
At the hearing before the Tax Court, counsel for petitioner, as her first ground of assault upon the deficiencies, attacked the Abercrombie case, supra, as unsound and insisted: that the Pierce Withers agreement had vested the titles to the properties and, therefore, the income from them in Withers; and that, because it had done so, petitioner had not in the tax years in question either personally received or been otherwise chargeable with receipt of any of the income charged to her.
*273As her second and main ground of assault upon the commissioner’s determination, she put forward the Refugio County State Court suit and judgment, as to which, in her petition for continuance in the Tax Court, she had stated to the court that she expected it to settle the tax issue in her favor. Thus putting it forward and standing on it, she asserted that the Tax Court was conclusively bound by it.
As her third issue, she urged that certainly the income attributable to the one-third interest assigned to Pittman, her counsel in the divorce suit, should not be held to have been her income.
The commissioner, relying on Anderson v. Helvering, 310 U.S. 404, 60 S.Ct. 952, 84 L.Ed. 1277, and the Abercrombie case, note 1, supra, and on a vigorous insistence that the judgment in the Refugio County district court was not and could not be binding on the Tax Court, indeed was not relevant thereto, urged that judgment must go for him. As to the assignment to Pittman, his position was that he had not been theretofore advised of it.
In view of the fact that the Tax Court’s opinion and the contentions with respect to it have been fully discussed in the majority opinion, it will not be necessary for me to set them out or discuss them here. It is sufficient to say that, while I agree with the petitioner that income attributable to the interest she had assigned to Pittman cannot be attributed to her, I find myself otherwise in complete agreement with the contentions of the commissioner: that, under the undisputed facts the Abercrombie principle and case are controlling here; that the decision in the Refugio District Court, in effect that Mrs. Wood did not own any interest in the properties until it was conferred upon her on June 13, 1957, after and because of the state court judgment, is without sound basis in law and in fact; and that it is not in any manner binding upon the commissioner or the United States. Cf. Saulsbury v. United States, 5 Cir., 199 F.2d 578, where a good discussion of the whole matter appears, and Merchants National Bank & Trust Co. of Indianapolis v. United States, 246 F.2d 410, at page 417, where the Court of Appeals for the Seventh Circuit, citing in note 12 a number of “seemingly conflicting federal courts of appeals cases”, including three from this circuit, held that the proceeding in the case before it was not in law a true adversary proceeding and that the judgment in the state trial court was not binding upon the United States.
It seems to me that under the teachings of the Saulsbury case and the cases it cites, the record as a whole, which is lodged in and available to this court, makes it perfectly clear that, putting the state court judgment forward here, as binding on the federal court, represents an inadmissible effort to bind the United States, with respect to the incidence of federal taxation, in a suit to which it was not a party and in which the judgment was not only directly contrary to the decree in the divorce case, which it purported to construe and give effect to, but contained pronouncements having no bearing on the real issue in the case, the rights of the parties litigant to the funds in court, and was, therefore, not in a real sense an adversary proceeding.
Moreover, if the suit and the proceedings in it are deemed to be in a legal sense adversary and the matters there adjudged are res judicata as between, and binding on, the parties, they are certainly not so as to the commissioner or the United States, neither of whom was a party to the suit. Neither, since the judgment is merely the pronouncement of an inferior state trial court, can it be regarded as stare decisis and binding as law upon this court. Cf. Blair v. Commissioner, 300 U.S. 5, 57 S.Ct. 330, 81 L.Ed. 465. It is my opinion, therefore, that the Tax Court judgment against petitioner should be modified by disallowing the deficiencies as to the income chargeable to the Pittman interest and, as modified, affirmed, and the cause should be remanded to the Tax Court for a redetermination of the deficiencies in *274accordance herewith, and I, therefore, dissent from the decision and judgment of the majority.
Rehearing denied: HUTCHESON, Circuit Judge, dissenting.

. J. S. Abercrombie Co., 7 T.C. 120, affirmed, 5 Cir., 162 F.2d 338. Of. Prater v. Commissioner, 5 Cir., 273 F.2d 124.

. (1) Petitioner and Fred Wood, citizens of and residing in Texas, were married in 1925, and divorced on March 24, 1951. They acquired as community property • certain oil properties which at some time prior to 1946 were placed by oral agreement in a joint venture with Pierce Withers and Robert McCullough.
(2) On June 1, 1946, Wood and McCullough and Carter, as guardian of Withers’ estate, entered into an “Abercrombie” type agreement, set out in full in the Tax Court’s opinion.
(3) On March 24, 1951, the Woods were divorced and incorporated in the decree was the property settlement as set out in the Tax Court’s opinion.
(4) On Nov. 4, 1954, notice of deficiencies in taxes for the years 1951 and 1952, because of the failure of petitioner to report the income from these properties and based on an examination made in 1953, was mailed to Mr. Durant, petitioner’s counsel and attorney in fact in the tax case.
(’5) On Jan. 24, 1955, petitioner, through her present tax attorneys, filed her petition in the Tax Court for a redetermination of deficiencies, and on Feb. 28, 1955, respondent answered and requested a hearing on the Dallas calendar.
(6) Nothing further appears, however, in the record of this suit until an order was entered setting the hearing of the case for April 1, 1957, when the following proceedings ensued.
(7) Prior to March 1, 1957, petitioner, through her present counsel, filed a motion to place the case on the reserved calendar or continue it, stating as grounds that on Nov. 17, 1955, Heard and Heard had filed against Fred and Myrtle Wood and others in the State Court of Refugio County the suit discussed at length in the Tax Court opinion, in which Mrs. Wood was first represented by her present tax counsel and later by another. In the petition counsel advised the Tax Court that the trial of the state case would be held on April 29, 1957, as to the expected result in it, and the effect this result would have on the tax case.
(8) The Tax Court granted this motion for continuance, and the trial was set for October 27, 1957.
(9) On Sept. 18, 1957, petitioner was granted leave to file an amendment to her petition in the Tax Court, and in it she pleaded, among other things, that, in the Refugio County State Court suit, the court had, by its decision, determined the tax question in Mrs. Wood’s favor, in that it had held that, though Mrs. Wood was not, in the tax years in question, the owner of the interest which had produced the income and, therefore, did not own any of the funds impounded in the court, she did, on June 13, 1957, after and because of the entry of the state court judgment, become the owner thereof.