Jacklin v. Commissioner

Whitaker, J., concurring: I agree with the majority that the agreement here is not insufficient as a matter of law for failure to state within the four corners of the instrument a definite amount for the support payments. I think it important, however, to go beyond the comment of the majority that the agreement here is "not wholly without some standard for the wife’s support and maintenance.” The narrow issue which we have resolved in these motions for summary judgment is whether section 71(a)(2) requires that the agreement state explicitly the dollar amount of the support obligation. We have determined that it does not. However, if the document did not provide some mechanism for determination of the support obligation, which would be deemed to be sufficient under general principles of contract law to create an enforceable bilateral contract, we should, nevertheless, find at this june-ture that the agreement in this case does not constitute a "written separation agreement,” and, therefore, hold for the movants. I conclude that this contract is sufficient as a matter of law, and I believe that the majority has reached the same conclusion. 1 We should affirmatively so hold on the rationale set forth herein.

Section 71(a)(2) uses the terminology "written separation agreement.” One would normally assume that such a document would be required to reflect a meeting of the minds of the parties enforceable under applicable contract law in the appropriate State forum. 2 However, the legislative history underlying section 71 includes a statement that payments under such an agreement are taxable to the spouse "whether or not the agreement is an instrument enforceable in a court of law.” S. Rept. 1622, to accompany H.R. 8300 (Pub. L. 591), 83d Cong., 2d Sess. 171 (1954); H. Rept. 1337, 83d Cong., 2d Sess. A21 (1954). The regulations simply parrot the legislative history. Sec. 1.71-l(b)(2), Income Tax Regs. Neither the Committee reports nor the regulations give us any help as to the intent of Congress in directing that we should not be concerned with "legal enforceability.” However, some indication of congressional intent may come from the Senate report 3 on the 1939 Code predecessor provision which explains that uniformity of treatment of alimony or payments in the nature of alimony is intended "regardless of variance in the laws of the different states concerning the existence or continuation of an obligation to pay alimony.”

I do not believe that payments made by one spouse to another under an instrument wholly unenforceable under normal rules of contract law were intended to be deductible by the payor and taxable to the payee. The majority recognizes that there is a distinction between the facts of this case and a situation where one spouse makes payments gratuitously or voluntarily as a unilateral act and not pursuant to "a written separation agreement executed by both” parties. Where the language of an "agreement” is so vague as to indicate there was no meeting of the minds on the amount of support and no basis for determining the nature or extent of the obligation, any payment would be gratuitous. The Court of Appeals for the Fifth Circuit has recognized this distinction. See Taylor v. Campbell, 335 F.2d 841, 846 (5th Cir. 1964).

We cannot and should not ignore the use in the statute of the term "written separation agreement.” Neither should we be misled by the brief and obscure reference to the issue of enforceability under State law. One can surmise with some foundation that Congress was concerned with oddities of State laws such as those of Texas, which are discussed in Taylor v. Campbell, supra. Thus, it makes sense to ignore peculiar quirks of State divorce law, but still to apply normal contract law principles. Since we do not have a Federal common law, we are dependent upon the common law principles recognized in State court decisions. Unless we can find that the parties have intended to make a contract, as the term "contract” is normally used, we should not find that they have entered into a written separation agreement. However, "that the parties have left some matters to be determined in the future should not prevent enforcement, if some method of determination independent of a party’s mere 'wish, will, and desire’ exists, either by virtue of the agreement itself or by commercial practice or other usage or custom.” 1 A. Corbin, Contracts sec. 95, at 401-402 (West 1963). Extraneous facts are frequently pertinent in the interpretation of a contract.

Under the facts of this case, the omission of a fixed amount of support is immaterial since there is in the written separation agreement an obligation referable to the existing standard of living of the wife, which fact is capable of independent proof. I believe that the foundation of the Court’s opinion must be that the standard set forth in paragraph 5 of the agreement herein is sufficiently measurable that it can be applied by the Court to determine the amount of alimony. Therefore, we can, and should, characterize the instrument as an enforceable bilateral contract (assuming, of course, that it is what it purports to be). 1 A. Corbin, supra at sec. 9. 4 See and compare Ithaca Trust Co. v. United States, 279 U.S. 151 (1929); State Street Bank & Trust Co. v. United States, 313 F.2d 29 (1st Cir. 1963).

Tannenwald, Featherston, Sterrett, Wiles, and Nims, JJ., agree with this concurring opinion. There remains for decision at trial on the merits several fact questions conceded by the wife for purposes of this proceeding only. See note 2 in the majority opinion.

See generally 1 A. Corbin, Contracts sec. 9 (West 1963).

S. Rept. 1631, to accompany H.R. 7378 (Pub. L. 753), 77th Cong., 2d Sess. 83 (1942), 1942- 2 C.B. 568 .

"In the process of negotiating an agreement, a term that is most frequently left indefinite and to be settled by future agreement, or by some other specified method, is the price in money — the compensatory exchange for the subject matter of purchase. This is true both of agreements for the rendition of service and of those for the purchase and sale of goods. If the parties provide a practicable, objective method for determining this price or compensation, not leaving it to the future will of the parties themselves, there is no such indefiniteness or uncertainty as will prevent the agreement from being an enforceable contract. * * * [A. Corbin, supra sec. 97, at 423-425. Fn. ref. omitted.]”

"An agreement is not unenforceable for lack of definiteness of price or amount if the parties specify a practicable method by which the amount can be determined by the court without any new expression by the parties themselves. [A. Corbin, supra sec. 98, at 433-434. Fn. ref. omitted.]”