The opinion
Black,
dissenting: The amount of 2 percent commission on annual sales to the president of the corporation, allowed as a deduction of accrued expense to the corporation by the majority opinion, was not payable by the corporation, (1) as long as the corporation was indebted to finance companies on account of its own insufficiency of working capital, (2) as long as the corporation was indebted to any bank. And with the further understanding that “ said 2% of the net sales to be due to Benjamin Ginsberg be subordinated by him to the indebtedness to all other creditors of this corporation.” This latter condition I do not think destroys its accruability. The mere fact that certain other creditors of the debtor are granted priorities of payment does not affect accruability if the obligation to pay is definite and certain. Automobile Ins. Co. of Hartford, 72 Fed. (2d) 265. But I doubt if any expense liability is accruable within the taxable year and can be used as a deduction from income of that year, which has so many contingencies as to' its future payment as are embodied in conditions (1) and (2). Of course it will be *272 readily admitted that where the liability to pay is definite and certain, the mere fact that the time of payment is postponed does not make any difference, such for example, as payment due in two years from the date of the obligation, but in the instant case I am impressed that there is merit in the Commissioner’s contention that “ the 2 percent of net sales was only a contingent liability which was not to be paid in 1929 and might never be paid because the corporation might always be indebted to finance companies and banks on account of its own lack of working capital.”
Under these circumstances, I believe that the conditions attached in (1) and (2) to the agreement for payment of the additional compensation are conditions precedent to the fixing of liability. If the liability does not become fixed until the specified event or events occur, it is contingent. “ Except as otherwise specifically provided by statute, a liability does not accrue as long as it remains contingent.” Brown v. Commissioner, 291 U.S. 193 . Whether the condition is one precedent, is a question to be determined by the intent of the parties, which is to be gathered from the contract and the facts, circumstances, and conditions under which it is executed and the situation it is intended to meet. Rannels v. Rowe, 145 Fed. 296 ; Ketchum v. Belding, 68 N.Y.S. 1099 ; Blodgett v. Hall, 32 N.Y.S. 788 .
It appears to me that the most reasonable construction of the resolution of the corporation set out in the findings of fact is that it expresses an intent that the additional compensation shall become due and payable to this petitioner only if and when the corporate finances are so improved that it has become possible to retire finance company and bank loans in very large amounts.
The case of Blodgett v. Hall, supra, is one resting on facts very similar to the present case. There the defendant, who was the receiver for the business, employed the plaintiff at a specified weekly salary which was duly paid him and agreed to pay him an additional amount for each week’s service, this latter amount to be payable “ as soon as the affairs of the company are straightened up.” The services called for were duly rendered and the amount of the deferred salary was definitely fixed, but on a suit to recover this amount the court held that it was incumbent upon plaintiff to both allege and prove the occurrence of the event of the straightening up of the affairs of' the company, as this condition was one precedent to the fixing of the liability.
The court, in discussing the rule which governs in such a situation, said:
The rule is that, where a promisor obligates himself to pay “ when able to do so ”, the promise is conditional, and, to entitle the promisee to recover thereon, he must plead and prove the fact of such ability. Work v. Beach (Sup.) 12 N.X. Supp. 12, affirmed in 13 N.Y. Supp. 678 . And so, too, where the promise is to pay “ the moment he was able.” Tebo v. Robinson, 100 N.Y. *273 27 , 2 N.E. 383 . And see Wakeman v. Sherman, 9 N.Y. 85 , where the promise was “that at the end of one year, if successful in business, he would commence paying ”; held a condition precedent, and that plaintiff should have been nonsuited, because no evidence had been given to show the result of the year’s business succeeding the promise.
It is my belief that the 2 percent commission involved in the instant case represented only a conditional (contingent) liability of petitioner, and, therefore, cannot properly be used as a deduction by petitioner within the taxable year, and that the ruling of the Commissioner should be sustained.
Aeundell, Matthews, Leech, and TURNER agree with this dissent.