Durden v. Comm'r of Internal Revenue
| Decision Date | 07 January 1944 |
| Docket Number | 109750.,Docket Nos. 109749 |
| Citation | 3 T.C. 1 |
| Parties | RAY DURDEN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.ROBERT L. STEPHENS, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Petitioners' residences were injured by an unusually violent blast in the course of operations by the county in a quarry about a half-mile distant. Insurance companies denied liability but compromised by paying comparatively small amounts, and the county compensated petitioners by making improvements on the premises. Held, that the losses were deductible as arising from casualty within the language of section 23(e)(3) of the Internal Revenue Code, to the extent of the difference between fair market value of the properties before and after the blast, reduced by the compensation received from insurance companies and the value of improvements made by the county. H. C. Holbrook, Esq., for the petitioners.
Charles P. Bagley, Esq., for the respondent.
These proceedings, duly consolidated, involve income taxes for the calendar year 1939. The Commissioner determined a deficiency of $56.74 against Ray Durden, and of $807.47 against Robert L. Stephens. The income tax returns of both petitioners were filed with the collector for the district of Georgia, at Atlanta, Georgia. Error is urged in the disallowance by the Commissioner of deductions claimed under section 23(e)-3 of the Internal Revenue Code, that is, (1) whether the petitioners have sustained losses of property from a ‘casualty‘ within the meaning of section 23(e)-3, Internal Revenue Code; (2) the amount of such losses, if any; and (3) the extent to which the petitioners have been compensated for such losses.
We make the following findings of fact.
Both petitioners are individuals who reside on Ashford Park Road, DeKalb County, Atlanta, Georgia, between one hundred and two hundred yards apart. They caused two houses of similar construction to be built. The houses were erected by the same builder and were completed about the end of November or the first of December 1938. The cost of Stephens' house was between $15,000 and $16,000 and Durden's house cost between $13,000 and $15,000. The petitioners each commenced occupancy of his house about December 7, 1938.
Each house was two stories high and had a basement. Reinforced concrete was used for foundations. The inner walls were of basic slag and were brick veneered, with one inch space between the veneer and the main wall up to the first floor joist. Steel strips were placed on top of the blocks and all floor joists were landed on those steel strips on top of the blocks. All brick joints were filled with mortar. Cross sections were steel beams and the basement was spanned with steel beams. The openings at the top of the block walls were filled with brick and mortar. Outside walls were 13 inches thick from the basement to the top of the second story. The walls were all waterproofed. The frame of each house was constructed with lumber which had been aged over a period of many years and was the best of material.
About one-half a mile from Stephens' house and about a half to three-quarters of a mile from Durden's house there was a quarry operated by the Works Progress Administration, under the supervision of DeKalb County. The quarry was engaged in day to day blasting operations during the period when these houses were being constructed, and thereafter. One blast during the period of construction shook the whole house. Stephens was advised on this occasion by W. H. Crosby, who was in charge of the construction, to get in touch with the management of the quarry to ask that the blasts be lightened. Crosby also notified Durden after this blast that unless the blasts were eliminated or lightened up considerably it would be useless to go on with the construction. Stephens complained to Paul Matthews, the county engineer, who assured him that there would be no more ‘heavy blasts.‘ A second blast ‘shook the house‘ on the week end prior to January 20, 1939, after the construction of the houses had been completed. Both Stephens and Durden complained to Matthews about it. Matthews stated that he would pass the information on to the Works Progress Administration. A careful search by Stephens revealed no apparent damage caused to his house by this blast. About January 20, 1939, another blast took place. This was a very unusual blast, heavier than a normal charge. Thereafter, the damage of which the petitioners complain herein became apparent.
The damage to the houses of both petitioners was similar. The foundations, and the walls in every room were cracked; the dormer windows leaked; the plastering was damaged; and there were leaks in the basement. The cracks were from about a sixteenth of an inch to an eighth of an inch in width. The walls of Stephens' garage were also cracked. Stephens' house was damaged slightly worse than Durden's. The damage to both has been only partially repaired. Some of the damage to the walls can not be repaired so as to restore them to their original condition.
The amount of the damage to Durden's house was $3,750; to Stephens' house and garage, $4,775. These figures represent the difference in market value of the houses immediately before and immediately after the blast.
At the time of the explosion Durden carried an insurance policy of $10,000, and he made a claim thereunder. The company questioned its liability and compromised by paying $600 for certain repairs.
At the time of the explosion Stephens carried an insurance policy of $10,000 on his house and an additional $1,500 on the garage. He made a claim under the policy. The company questioned its liability and compromised the claim by paying $750 for certain repairs.
Both Durden and Stephens made claim against DeKalb County, Georgia, which refused to admit liability. As a compromise, a driveway 850 feet long by 10 feet wide was built for Durden and a driveway 800 feet long by 10 feet wide was built for Stephens. The fair market value of each driveway is $650.
The damage was caused by the blast, or series of blasts, which occurred on or about January 20, 1939, and not by any prior blast or prior series of blasts. Said damage was not due to the drying out of the framing in the house or to any other form or process of gradual deterioration.
The first question confronting us here is whether the taxpayers have sustained losses arising from a ‘casualty‘ within the meaning of section 23(e)(3) of the Internal Revenue Code.1 Under the doctrine of ejusdem generis, it is necessary to define the word ‘casualty‘ in connection with the words ‘fires, storms, shipwreck‘ immediately preceding it. ‘Casualty‘ has been variously defined, including ‘an undesigned, sudden and unexpected event‘— Webster's New International Dictionary; also as ‘an event due to some sudden, unexpected or unusual cause‘— Matheson v. Commissioner, 54 Fed.(2d) 537. The term ‘casualty‘ ‘excludes the progressive deterioration of property through a steadily operating cause.‘ Fay v. Helvering,...
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