Robbins v. United States

• Decision Date: 29 April 1925
• Docket Number: No. 17338.,17338.
• Parties: ROBBINS et al. v. UNITED STATES.
• Court: U.S. District Court — Northern District of California

5 F.2d 690 (1925)

ROBBINS et al. v. UNITED STATES.

No. 17338.

District Court, N. D. California, S. D.

April 29, 1925.

Lloyd M. Robbins, Peter F. Dunne, Carey Van Fleet, Robbins, Elkins & Van Fleet, Dunne, Brobeck, Phleger & Harrison, and Preston & Duncan, all of San Francisco, Cal., and O'Melveny, Millikin, Tuller & MacNiel, of Los Angeles, Cal., for plaintiffs.

Sterling Carr, U. S. Dist. Atty., of San Francisco, Cal. (A. W. Gregg, Sol. of Internal Revenue, of Washington, D. C., and Frederick W. Dewart, Sp. Asst. Atty. Gen., of counsel), for the United States.

PARTRIDGE, District Judge.

This is an action to recover the sum of $6,788.03, income tax paid by R. D. Robbins for the year 1918. Admittedly, however, it is presented here as a test case, in order that appeal may be had directly to the Supreme Court, and it is said that, if the suit goes against the government, the treasury will be compelled to refund to citizens of the state of California a sum in excess of $77,000,000.

R. D. Robbins and Sadie M. Robbins were married in 1871, and continued as husband and wife until his death in 1919. During those years a large fortune was accumulated. In 1918, Mr. and Mrs. Robbins attempted to file returns, each for one-half of the income of the property thus jointly accumulated. The collector refused to accept these returns, and insisted that the tax be assessed as if the income all belonged to the husband. Accordingly the amount of tax paid was $11,079.46; whereas, if each had made a separate return, Mr. Robbins would have been compelled to pay only $4,291.43.

The case is submitted upon an agreed statement of facts, and it is conceded that the entire income was from community property and from earnings of the husband. The problem thus squarely presented is: Should community income in the state of California be taxed to the husband alone, or is it taxable one-half to each the husband and wife?

The treasury has rightly refused to answer this question, because it has before it conflicting opinions of its legal advisers, and because of the frequent expressions of the Supreme Court of California, declaring that the wife's interest in the community property is "a mere expectancy." Nor is it surprising that the law department of the government should find itself in doubt, because: (1) The Supreme Court of the United States has declared that the wife has a real interest. (2) The courts of last resort of all the states except California have announced the same doctrine. (3) California alone has named that interest a mere expectancy, like that of an heir.

I think, however, that the differences are of form, and not of substance. At the outset, this much is apparent: (1) The Legislature of California, following the behest of the Constitution of 1849, has, building upon the Spanish-Mexican system, continually extended and broadened the rights of the woman in community property. (2) The Supreme Court of California, however much it may have deemed itself constrained by precedent to label the wife's interest, has never denied her that interest, but, on the contrary, has consistently fortified it when attacked, and granted it when questioned, in all substantial particulars. (3) There is no difference in substance between the views of the Supreme Court of California and the other states having the community system.

The question first came before the treasury in 1920, with regard to Texas. On the 24th of August of that year, Attorney General Palmer rendered an opinion, in which he held that in Texas the earnings of husband and wife are community property, and hence each could make a return of one-half thereof. In accordance with that opinion, the treasury issued its order (T. D. 3071) permitting returns to be made in this manner. On February 26, 1921, Attorney General Palmer extended this doctrine to Washington, Arizona, Idaho, New Mexico, Louisiana, and Nevada, but specifically ruled against its application to California. Upon this, the treasury (T. D. 3138) accepted returns from husband and wife from all states except California; the ruling being placed upon the ground that "in all of the community property states, except California, their own courts have held that the wife has, during the existence of the marriage relation, a vested interest in one-half of the community property." At the time this ruling was made, this court (through Judge Rudkin, then District Judge, and now in the Circuit Court of Appeals) had held that the wife's share of the community property was not subject to the estate tax. Blum v. Wardell, 270 F. 309.

After the issuance of T. D. 3138, the Circuit Court of Appeals for this circuit affirmed the decision of Judge Rudkin. Wardell v. Blum, 276 F. 226. The government filed a petition in the Supreme Court for certiorari, which petition was denied March 6, 1922. 258 U. S. 617, 42 S. Ct. 271, 66 L. Ed. 793.

After certiorari was denied in Wardell v. Blum, the government moved the Supreme Court to revoke or recall its order, upon the ground that there was pending in the California courts a case which might dispose of the question. That was Roberts v. Wehmeyer, which had been decided by the District Court of Appeal of California November 21, 1921, and which was then pending in the state Supreme Court on rehearing. This case was decided by the California Supreme Court September 13, 1923. Roberts v. Wehmeyer, 191 Cal. 601, 218 P. 22.

It was evidently deemed by the government, however, that there was nothing in Roberts v. Wehmeyer which affected the decision in Wardell v. Blum, and accordingly the Solicitor General consented that the motion to revoke the order denying certiorari should be denied. After Wardell v. Blum thus became final, and on March 8, 1924, Attorney General Daugherty rendered an opinion, holding in effect that the same rule should be applied in California as in other community property states. The treasury (T. D. 3568), in accordance with this opinion, put this state in the same category as the others. However, on May 27, 1924, Attorney General Stone withdrew the opinion of Mr. Daugherty for further consideration. On the 9th of October, Judge Stone gave his opinion, and on February 7, 1925, the treasury published T. D. 3670, applying the rule in the matter of estate taxes, but denying its application to income.

In the opinion of Judge Stone, it is noteworthy that he calls attention to the fact that in 1921, and again in 1924, the treasury presented bills to Congress on this subject. His language is as follows:

"While the act of 1921 was under consideration, I am informed that officials of the treasury attempted to have a provision inserted making community property a part of the gross estate. The ways and means committee refused to accept this proposed amendment. In the bill which was prepared in the Treasury Department, and which as amended became the act of 1924, there was a provision requiring so-called joint income of husband and wife under the community property law of California to be returned, for purposes of taxation, as a single income of the husband.

"After hearings before the ways and means committee and the submission of extensive briefs in opposition t the proposal, the committee struck from the bill the provision for taxing community income as single income, and the bill, as enacted, did not set aside or modify the application of the legal rule laid down in Blum v. Wardell. Notwithstanding the fact that there have been two general revisions of the Revenue Act, and the question involved in the decision of Blum v. Wardell has been distinctly presented to the legislative branch of the government, the principle of that decision has been left undisturbed by Congress."

It is also apparent that neither Mr. Daugherty nor Judge Stone considered that there was any settled principle in California by which the matter could be determined. Mr. Daugherty said: "In fact, I am of the opinion that no established rule can be gathered from the decided cases in that state." The view of Judge Stone is as follows:

"The confusion in the decisions of the California courts has undoubtedly arisen from the fact that the courts have been attempting, in their opinions, to apply the terminology of the common law to community property, which embodies a legal concept wholly foreign to the common law, and to which the terminology of the common law cannot be applied with accuracy and precision. In most of the California decisions in which it was asserted that the right of the wife is a mere expectancy or right of inheritance, the same result could have been reached if the court had rested its decision upon the view that the wife had a vested interest in the community property subject to a power of disposition vested in the husband. See Spreckels v. Spreckels, 116 Cal. 339; Estate of Wickersham, 138 Cal. 355; Dargie v. Patterson, 176 Cal. 714. Whereas, in other cases holding that the wife's interest in the community is a vested interest, it seems to be necessary to describe the legal relationship of the husband to the wife's interest as a power of disposition in order to justify the decisions actually rendered. See Estate of Brix, 181 Cal. 667; Taylor v. Taylor, 218 P. 757. This, however, only suggests that a common-law term may be resorted to, to describe the incidents of community property in some aspects, but be wholly inappropriate to describe them for other purposes."

California was carved out of territory which had but lately been a part of Mexico; that is, Spanish in language, customs, and laws. It is probable that, in 1849, the vast majority of the land was owned by people of Spanish ancestry, and held by Spanish or Mexican title. The influence of the language survives in the names of many of our cities — San Francisco, Los Angeles, San Jose, Monterey. It was, perhaps the most typically Spanish of any part of American territory. When it came to framing a constitution, however, the tide of...