Crabb v. Commissioner

HUTCHESON, Circuit Judge.

Unconvinced and undismayed by three defeats, first in the Board of Tax Appeals,¹ next in this court,² and again in the Tax Court³ on remand for the taking of further evidence,⁴ petitioners are here again. Arguing with the same undiminished vigor and apparent confidence that the instrument called an instrument of “agency contract and trust” entered into by them on February 15, 1932, with respect to their separately owned lands, and the transactions under it, created a partnership in their lands, they insist that this made the oil royalty and bonus income each received, on account of leases of them made by their agent and trustee, community instead of separate property. In the alternative, and only in the event that our former decision, that no partnership in the minerals wás created, is adhered to, petitioners insist that at least a trust estate was created and petitioners should be properly taxed not on the $116,983.37 returned by each in 1936 as his distributive share of the income of the trust, but on $95,000.00, the amount actually distributed to each in that year.

The commissioner, insisting that the hearing on the remand developed no new facts having legal significance, urges that -the order appealed from should be affirmed on the authority of our former judgment as the law of the case.

“As long”, said Mr. Justice Holmes, in Guy v. Donald, 203 U.S. 399, 406, 27 S.Ct. 63, 64, 51 L.Ed. 245, where the question of partnership vel non was as furiously debated as here, “as the matter to be considered is debated in artificial terms there is danger of being led by a technical definition to apply a certain name, and then to deduce consequences which have no relation to the grounds on which the name was applied”. The observation has peculiar application and force here. Petitioners, debating in artificial terms the real question to be determined here, which is not partnership vel non but, whether the bonuses and royalties received were community or separate property, have pitched their whole case on deducing consequences from denominating their land arrangement a partnership, which has no relation to the grounds on which the name is sought to be applied. In short, fallaciously assuming that if a partnership resulted from the agreements and acts in question, petitioners’ separate lands lost their separate character and became community, petitioners have directed the whole force of their contentions to establishing that there was a partnership. Instead of assuming the premise that there was a partnership and denying the conclusion that this effected a change in the character of the property, the Board and this court on the former opinion have disputed and found contrary to the premise.

The Board, in its first opinion, found an entire absence on the part of the petitioners of the intention to be a partnership. It thought that the admitted facts had not created a relation contrary to their intentions, Cf. Utter v. Irvin, 5 Cir., 132 F.2d 416, Fink v. Brown, Tex.Com.App., 215 S.W. 846.

The court, on the first appeal, not questioning the conclusion that if there was a partnership the property became community, concluded that whether the result of the arrangements, written and oral, as to the ranching and farming business was a trust or a partnership, the lease and sale of mineral deposits were not included in them, and the revenues derived therefrom were individual revenues derived for them by the trustee acting as their attorney-in-fact. If we could agree with petitioners that there was a partnership, we should still conclude, that the royalty and bonus income was not community but their separate property. For it is quite clear that the consequences which petitioners seek to deduce from the application of the name partnership to their relation, that their separately owned property would cease to be separately owned, do not at all follow therefrom. The rule they invoke applies only to efforts, of wives to enter mercantile business, and this because the property has become so mingled and confused that it has lost its capacity to be identified.⁵ But a-careful, examination of the record as supplemented on the new hearing fails to bring anything-to light which would warrant our departing from the law of the case as it was settled in the former opinion, that there was no partnership ⁶ or trust as to the lands but only an agency. The Board’s judgment is Affirmed.

1 41 B.T.A. 686.

2 5 Cir., 119 F.2d 772.

3 47 B.T.A. 916.

4 5 Cir., 121 F.2d 1015.

5 Miller v. Marx & Kempner, 65 Tex. 131; Smith v. Bailey, 66 Tex. 553, 1 S.W. 627; Middlebrook Bros. v. Zapp, 73 Tex. 29, 10 S.W. 732; Mitchell v. Mitchell, 80 Tex. 101, 15 S.W. 705; Thompson v. Schmitt, 115 Tex. 53, 274 S.W. 554; Brittain v. O’Banion, Tex.Civ.App., 56 S.W.2d 249, 251, where it is said:

“It has long been settled law that the profits derived from a married woman’s separate, property in a mercantile business are community property, and as such are subject to the debts of her husband."

6 Cf. Waddell v. Commissioner, 5 Cir.,. 102 F.2d 503.