Rompel v. United States

• Decision Date: 02 March 1945
• Docket Number: Civil Action No. 621.
• Citation: 59 F. Supp. 483
• Parties: ROMPEL v. UNITED STATES.
• Court: U.S. District Court — Western District of Texas

59 F. Supp. 483

ROMPEL v. UNITED STATES.

Civil Action No. 621.

District Court, W. D. Texas, San Antonio Division.

March 2, 1945.

COPYRIGHT MATERIAL OMITTED

R. N. Gresham, of San Antonio, Tex., Palmer Hutcheson, of Houston, Tex., J. P. Jackson, of Dallas, Tex., and Harry C. Weeks, of Fort Worth, Tex., for plaintiff.

Samuel O. Clarke, Jr., Asst. Atty. Gen., Andrew D. Sharpe, Helen R. Carloss, and James P. Garland, Sp. Assts. to Atty. Gen., and W. R. Smith, Jr., U. S. Atty., of San Antonio, Tex., for defendant.

HANNAY, District Judge.

This suit was brought under the Tucker Act, Title 28 U.S.C.A. §§ 761-765, to recover an estate tax assessed against and collected under protest from the plaintiff with respect to the estate of Ernest Herbst, a Texas citizen, who died November 17, 1943. This tax resulted from the defendant's inclusion in the decedent's gross estate of all of the community property which belonged to the decedent and his wife, and which had been accumulated by them in Texas, at the date of decedent's death, rather than one-half thereof. This, the parties admit, is required by the provisions of Section 402(b) of the Revenue Act of 1942, 26 U.S.C.A. Int.Rev.Code, § 811 (2). Plaintiff timely filed claim for refund, which was rejected, and relies for recovery upon his properly pleaded contention that this Section violates various provisions of the Constitution of the United States. The defendant asserts the Section is valid. If the Section is unconstitutional, the plaintiff is entitled to recover all of the tax paid, for the decedent's separate estate plus one-half of the community estate (less deductions not in controversy) amounts to less than the statutory exemption of Sixty Thousand Dollars ($60,000.) prescribed by the 1942 Act, Section 935(c), I.R.C. as amended, 26 U.S.C.A. Int.Rev. Code, § 935(c). If the Section is not unconstitutional and void, plaintiff admits that he is entitled to recover nothing.

No evidence having been introduced, the Court finds as the facts the allegations of fact contained in the complaint, to the extent they were admitted by defendant's answer, and the additional facts contained in the written stipulation filed herein by the parties. These are incorporated here by reference.

The Court concludes:

1. Section 402(b) of the Revenue Act of 1942 is unconstitutional and void, being in conflict with the requirements as to due process contained in the Fifth Amendment to the Constitution of the United States, as well as with the requirement of uniformity for an excise tax contained in Article 1, Section 8, Clause 1, of the said Constitution.

2. Plaintiff is entitled to recover from defendant the aforesaid sum of Six Thousand Nine Hundred Thirty-Seven and 76/100 Dollars ($6,937.76) heretofore collected from plaintiff, with interest from the date of judgment, as provided by law.

The constitutional questions presented by plaintiff must be decided, for there is no way to construe Section 402(b) of the Revenue Act of 1942 so as to avoid necessity for such a decision. The responsibility thus imposed upon the Court is fully appreciated, and were it possible to decide the rights of the parties by a construction which would avoid the constitutional problems the Court would do so.

The factual situation presented by this record is a typical one—one which, with minor and unimportant variations, exists as to many husbands and wives in Texas. Herbst and wife had no property at the time of their marriage in 1901. Until 1937 neither acquired any property by gift, devise or descent. Neither ever received compensation for personal services rendered to anyone. He, a stock farmer, and his farmer wife, living together on a small ranch acquired after marriage largely on credit, gradually acquired a comparatively substantial estate which, as a matter of common knowledge, was attributable to the joint work of both the decedent and his wife. The separate property acquired by the decedent in 1937 and which was on hand intact at his death, did not contribute materially to the accumulations, and need not enter into the consideration of the problem involved.

Before passing on the constitutional questions raised, it is necessary to examine the rights and title of the decedent and his surviving wife in the community property owned by them at the time of his death.

The community law of Texas stems from the civil law, and it has been the law of Texas as far back as any historical record exists. It was the law of the Spanish Empire when Texas was a part thereof. It was the law of the Republic of Mexico when Texas was part of Mexico. It was the law of the Republic of Texas when Texas was a Republic. And it was the law of Texas when Texas was admitted to the Union in 1845. Prior to, and as a condition of Texas becoming a part of the Union, Congress by joint resolution provided that Texas was to adopt a Constitution acceptable to the Congress, and pursuant thereto the Constitution of 1845 was adopted, preserving therein the community property system as then recognized in Texas. It has remained the fundamental law of Texas, without the change of a single word in the Texas Constitution, from that date. It is important to note that this occurred many, many years before any Federal Estate Tax legislation was ever had. Thus Texas community property law is embedded in and forms a part of the State policy of Texas. Hopkins v. Bacon, 282 U.S. 122, 51 S.Ct. 62, 75 L.Ed. 249. And this State law establishes a rule of property which the Federal Court is bound to follow. Warburton v. White, 176 U.S. 484, 496, 20 S.Ct. 404, 44 L.Ed. 555; Tyler v. United States, 281 U.S. 497, 501, 50 S.Ct. 356, 74 L.Ed. 991, 69 A.L.R. 758. It is neither a contractual nor consensual system, but an ancient body of law forming an important and integral part of the fundamental law of Texas, and results, not from voluntary agreements of the parties, but by operation of law, as a vital incident of the marriage relation. Compare Commissioner of Internal Revenue v. Harmon, 323 U.S. 44, 65 S.Ct. 103.

Under this community system, the wife is an equal owner with her husband in all of the community property. Their rights, title and interest are co-equal and of equal dignity. The wife does not take her title through or under the husband. Her interest is an absolute, vested property right. The husband never owned any interest in her portion of the property, inasmuch as she acquired it by onerous title at the very moment of its acquisition and continued uninterruptedly to hold such title as long as the property remained an asset of the community. The husband owns no interest in the wife's portion of the property which terminates with his death. He cannot, and in the instant case he did not undertake to, dispose of her interest by will. On his death, his one-half interest in the property passed to his legatees and devisees. The wife simply retained an equal interest in the property which she owned as co-owner prior to her husband's death.

The wife enjoys full power of testamentary disposition of her one-half interest in the property, having the unqualified right to will it to whom she chooses. At her death without a will her interest passes to her heirs at law.

The relationship of the spouses in Texas during their lifetime is substantially that of partners in a commercial partnership, and the husband and wife are in all respects equal partners, the husband being the managing partner and vested with management powers. The husband, as managing partner, stands in a fiduciary relation to his wife, and must act in good faith in the handling of her interest in the property, and should he defraud or attempt to defraud his wife's interest, she may have redress against him or against her property in the hands of a third party. He must account to her strictly if his power of management is used to impair her community interest. Bad faith is not the criterion. He is the trustee, and is accountable as such. Arnold v. Leonard, 114 Tex. 535, 273 S.W. 799.

In the case of divorce she has the right to her one-half, and if no property settlement is made on divorce the parties each continue to hold one-half thereof as tenants in common.

Should her husband, the managing partner, become insane, imprisoned or otherwise incapacitated, or should he abandon her, she may succeed to the management of the community estate. At his death she, as surviving partner, is charged with winding up the affairs of the connubial partnership.

The wife is liable for income taxes on the property which represents her one-half interest of the partnership income. At her death her legatees and heirs are liable for Texas inheritance taxes on her one-half of the community property, just as the husband is on his half only. Jones v. State, Tex.Com.App., 5 S.W.2d 973. At her death, her estate must pay federal estate taxes upon her one-half interest, even under the terms of the Act in question, just as she and her husband have been paying on their respective half interests only, with full approval prior to the 1942 Act. T.D. 2450 and 3670.

It is clear from the foregoing summary that in Texas the wife is a full equal co-owner with her husband of the community partnership assets. The Supreme Court of Texas has repeatedly so held. Wright v. Hays' Adm'r, 10 Tex. 130, 60 Am.Dec. 200; Burnham v. Hardy Oil Co., 108 Tex. 555, 195 S.W. 1139; Patty v. Middleton, 82 Tex. 586, 17 S.W. 909; Wheat v. Owens, 15 Tex. 241, 242, 65 Am.Dec. 164; Wood v. Wheeler, 7 Tex. 13; Arnold v. Leonard, supra; Jones v. State, supra; Blackmon v. Hansen, 140 Tex. 536, 169 S.W.2d 962. The Supreme Court of the United States has likewise repeatedly recognized that the rights of the two spouses are equal, under community property law. Warburton v. White, 176 U.S. 484, 20 S.Ct. 404, 44 L.Ed. 555; Arnett v. Reade, 220 U.S. 311, 31 S.Ct. 425, 55 L.Ed. 477, 36 L.R.A.,N.S., 1040; Poe v. Seaborn, 282 U. S. 101, 51 S.Ct. 58, 75 L.Ed....