Petition for Writ of Certiorari — Diehl v. United States

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IN THE Orr rt

Py & 3

SUPREME COURT OF THE UNIT STATES

AUG 21 3572

NO. MICHIEL PCOTK ) Pan 4

72-280

KENT B, DIEHL, SR,,

Petitioner,

v6,

UNITED BYATES OF AMERICA,

Reapendent,

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

POR THE FIFTH CIRCUIT

Dougal C. Pope

Attorney for Petitioner

502 Houston Piret Savings

Building

Heuston, tavae 17007

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Citations to Opinions Below........

INDEX

Sn aceeeoeeeeséososoesvese

Questions Presented.....ccecseccece

Statutes re a

a

ATQUMENE. ccccscccccccvesccsscsecces

1. The Claim for Refund for the

Calendar Year 1957 Which Was

Filed by and Signed by Kent

B. Diehl, Sr., Was Filed for

the Benefit of Beth Koehler

a a a

i. tt eect e ni nemenn ee

Certificate of Service.....ccccccees

12

20

21

LIST OF AUTHORITIES

Cases:

Amarillo National Bank vs. Harrell,

159 S.W. 858, (Court of Civil Appeals

of Texas, 1913), error refused... ..cccce

Aquilino vs. U. S.,

363 U.S. 509, 80 S. Ct. 1277, 5 AFTR

2d 1698, (an 604 eh 6s ebbduuiabiaecaces

Baber vs. Galbraith,

(Court of Civil Appeals of Texas,

1916), 186 S.W. 345, error refused.....

Bothwell, et al, vs. United States,

18 Fed. Supp. 1011, 19 AFTR 650,

(United States Court of Claims, 1937)..

Commissioner vs. The Chase Manhattan

Bank, 259 F., 2d 231, 2 AFTR 2a

6363, (5th Cir. ee ee

Kent B. Diehl, Sr., et al, vs. United

States, 438 F. 24 TOR, CEOTE) on ckccaccs

Ann C. Fields, et al, vs. Commissioner,

32 teGes BOPH660 046 660 b 60666460 bsORE eK eee

Gay vs. Jackman,

254 S.W. 927, (Commission of Appeals

of Texas, BOWel 04068 604 benedsaseecdenas

Howell vs. Bowden, °

(Court of Civil Appeals of Texas,

1963), 368 S.W. 3a 842, error refused,

Bhs ccc ewegeccccccecdecciccccceccaces

RAP LOIRE INR Ps

Cer ee a

oan

LIST OF AUTHORITIES (Continued)

Cases (Continued) :

Iowa Manufacturing Co. vs. Baldwin,

(Court of Civil Appeals of Texas,

1935), 82 S.W. 2a PN tébcbdbeeecKewe 19

Jones vs, Mitchell,

(Court of Civil Appeals of Texas,

1932), 47 S.W. 2a 371, error cefused. 16

Keller vs. Keller,

141 S.W. 2d 308, (Commission of

Appeals of Texas, 1940), opinion

adopted by the Texas Supreme Court... 18

Kemp, et al, vs. United States,

12 F. 2d 7, 5 AFTR 5926, (5th Cir.,

SPOS) vce cccnsecccsccsecccceccceca rc as

Martin, et al, vs. Dial, et al,

57 S.W. 24 75, (Commission of Appeals

of Texas, PO N66 0060 0K CoN be bR bw oc 18

Morgan vs, Commissioner,

309 U.S. 78, 23 AFTR MU iccsseccvcce 3

Owens vs. Drywall and Accoustical

Supply Corp., 27 AFTR 24 71-1085

(United States District Court,

Southern District of Texas, 1971).... 14

Shivel and Stewart vs. Greer Bros.,

(Court of Civil Appeals of Texas,

1909), 123 S.W. SPrdvebtccebkecebe mus 19

United States vs. Durham Lumber CO. ¢

363 U.S. 522, 5 AFTR 24 1703, (1960). 14

FETT RS OT PEN NC ET

: og te

a li

LIST OF

AUTHORITIES (Continued)

Cases (Continued) :

White vs. Tudor,

24 Tex. 639, 76 Am. Dec. 126.........

VERNON'S ANNOTATED CIVIL STATUTES:

Art. 6132b, Sec. ee eeeeeesee

MISCELLANEOUS:

Page on Contracts,

Vol. 3, Sec. 1716, 47 C.J. 1124,

Sec. 794...

Rowley on Partnership,

Sec. 582 (1960 Oe er te ee ee

20 R.C.L. 198

af

17

16

18

16

IN THE

SUPREME COURT OF THE UNITED STATES

KENT B. DIEHL, SR.,

Petitioner,

vs.

UNITED STATES OF AMERICA,

Respondent.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

Petitioner prays that a Writ of Certio-

| rari issue to review the Judgment of the United

States Court of Appeals for the Fifth Circuit

entered in the above entitled cause on March 20,

1972,

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CITATIONS TO OPINIONS BELOW:

The opinion of the District Court,

printed in Appendix A of the separate

bound Appendice, apparently is unreported.

The opinion of the United States Court of

Appeals for the Fifth Circuit is printed

in Appendix B of the separate bound Appendice

and is reported at 457 F. 2d 51l. The de-

cision of the Fifth Circuit is an affirmance

without an opinion.

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lanai enneinadmeaemmenninnnnmee remy arom

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3.

JURISDICTION

The Judgment of the Circuit Court of

Appeals was dated March 20, 1972, and

it was entered on the same day.

The Order overruling the Motion for

Rehearing was dated May 31, 1972.

The jurisdiction of this Court is

invoked under 28 U.S.C. Section 1346.

Se Steed aa ad ~~ sy ser

a

QUESTIONS PRESENTED

Whether the claim for refund for the

calendar year 1957, which was filed by

and signed by Kent B. Diehl, Sr., was

filed for the benefit of Beth Koehler

Diehl.

STATUTES INVOLVED

The Statute involved is 28 U.S.C. ,Section

7422. This section of the Internal Revenue

Code of 1954 is printed in Appendix C of the

separate bound appendice.

na a ie lat ‘

. . . — eT

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STATEMENT

This is a civil action for the recovery

of federal income taxes for the calendar year

1957.

Kent B. Diehl, Sr., hereinafter called

Mr. Diehl, and his wife, Beth Koehler Diehl,

hereinafter called Mrs. Diehl, filed their

joint 1957 income tax return with the District

Director of Internal Revenue, Austin, Texas.

The income reported in that return represented

their community income. The income tax lia-

bility on that return was $5,546.21 which

income tax liability was paid from the com-

munity funds of Mr. ‘and Mrs. Diehl. There-

after Mr. Diehl filed a claim for refund for

$5,546.21 for the calendar year 1957. On

September 27, 1962, he filed his complaint

in the Trial Court based on his claim for

refund. The Government filed a timely

answer.

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On December 17, 1962, the parties filed

a joint motion for an order to stay proceedings

requesting that the Trial Court stay all pro-

ceedings until disposition of the criminal pro-

ceedings then pending against Mr. Diehl for

alleged criminal tax violation and which cause

was pending in the Trial Court. An order to

that effect was entered.

On September 22, 1966, Mr. Diehl died

and thereafter the criminal proceedings against

him were dismissed.

On December 8, 1966, Mrs. Diehl, who at

all times pertinent was a resident of Houston,

Harris County, Texas, filed her motion for

intervention alleging that she and Mr. Diehl

filed a 1957 joint federal income tax return

and paid the sum of $5,546.21 in tax with

respect to that return which amount represented

community property of herself and Mr. Diehl,

She further alleged that she was entitled to

a portion of any income tax refund that may be

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recovered in that action and that she was an

indispensable party to that action. Later

the Trial Court entered an order granting her

motion and permitting her individually to

intervene as one of the Plaintiffs in this

cause. Thereafter she fited her pleading

wherein she adopted any and all of the plead-

ings which were previously filed in this

cause by Mr. Diehl as if she had been a

Plaintiff when the original complaint was

filed.

Later Mrs. Diehl filed a motion that

she as Independent Executrix of the Estate

of Kent B. Diehl, Sr., Deceased, be sub-

stituted as one of the Plaintiffs in place

of Mr. Diehl. That motion was first granted

but later the Trial Court entered an order

that she was not the Independent Executrix

of the Estate of Kent B. Diehl, Sr., and

dismissed her in her representative Capacity.

_—

Later Donald G. Ritter filed a motion

that he be permitted to be substituted in

place of Mr. Diehl as the Temporary Adminis-

trator of the Estate of Kent B. Diehl, Sr.

That motion was approved by the Trial Court

but later the Trial Court entered an order

dismissing the cause of action cr both Mr.

and Mrs. Diehl as well as the counterclaim

which the Government had filed in this cause.

On appeal to the United States Court of

Appeals for the Fifth Circuit, Kent B. Diehl,

Sr., et al, vs. United States of America,

438 F. 24 705, (1971), certiorari denied,

92 S. Ct. 67, the Fifth Circuit held that

the action of the Trial Court in dismissing

Mrs. Diehl in her representative capacity

and Ritter in his representative capacity

was proper. However, on page 71ll of that

opinion, the Fifth Circuit held that the

record was not clear as to whether Mrs. Diehl

had filed a claim for refund because if she

SE Lee ee ee ee PROMS INL NER ARE E> NE TER ROR

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had then she would be entitled to maintain

suit in her individual capacity for a refund

of one-half (1/2) of any income taxes paid.

The Fifth Circuit gave Mrs. Diehl thirty (30)

days from the receipt of the mandate in the

Trial Court to move for the reinstatement

of the intervention in her persvnal behalf

if such a claim was in fact filed.

Within the thirty (30) day period Mrs.

Diehl filed her motion in the Trial Court for

an order that the claim for refund filed by

Kent B. Diehl, Sr., was filed for her bene-

fit. In her motion, Mrs. Diehl stated that

even though there was only one claim filed

in this matter, which claim was signed by

Mr. Diehl, that since the claim for refund

was for all of the income taxes which had

been paid with that return which represented

| community funds of the parties that the

Claim for refund was filed by Mr. Diehl for

the benefit of both Mr. and Mrs. Diehl.

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Even though at the time that the claim for

refund was filed Mr. and Mrs. Diehl were

divorced, the marriage of Mr. and Mrs.

Diehl in Texas was no more than a partner-

ship and Mr. Diehl had authority to act

for Mrs. Diehl in winding up the affairs

for their former partnership. /7.ct the

time that Mr. and Mrs. Diehl were divorced

in 1959, the claim for refund for the year

1957 was not covered by them in any property

settlement.

On May ll, 1971, the Trial Court entered

its memorandum opinion and order dismissing

the personal intervention of Mrs. Diehl in

her individual capacity, Appendix A of the

separate bound appendice.

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PIT STR NU ARI eg UNNI HL NI ALA KSA YUE Ne REN TS. |

:

6 adh i Vy, fale Sh ea a

ARGUMENT

l.

THE CLAIM FOR REFUND FOR THE CALENDAR YEAR

CH S FILED BY AND SIGNED BY NT

- DI _ WAS FILED FOR THE BENEFIT

Mrs. Diehl's position is that even though

the claim for refund involved in this case was

signed only by Mr. Diehl that it was filed for

both her and Mr. Diehl's benefit, since their

marriage was a partnership under the laws of

the State of Texas, that after their divorce

in 1959 that either party, Mr. or Mrs. Diehl,

had the right to wind up the affairs of that

partnership and that would include filing a

claim for refund for overpayment of income

taxes.

A marriage in Texas is no more than a

partnership. In Commissioner vs. The Chase

Manhatten Bank, 259 F. 2d 231, 2 AFTR 2d 6363,

(Sth Cir., 1958), the Court said on page 6368:

= 12 «

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"A few basic principles characterize

the community property system. Their

application here is determinative of

the issues in this case.

"The community property system comes

from the custom of the women of the

Visigoths and other Germanic tribes

sharing the fighting and spoils of

war with their men; it owes its strength

to the civilized view that marriage is

a full partnership. Husband and wife

are eaual partners. Each has a present,

vested half interest in all community

property. All property accumulated

during marriage is community property,

unless it is received by gift, devise

or inheritance. In Texas even income

derived from separate property belongs

to the community including interest

and dividends from separately owned

securities. The husband is the manager

of the community. But this management

is not equivalent to ownership. He

acts as a managing agent or trustee

or managing partner of a limited part-

nership. The husband may sell or

donate community property but not

in fraud of his wife's rights. The earn-

ings of the husband during marriage

are community, and property purchased

with such earnings is also community.

The wife's rights aside from managerial

control, are the same as the husband's,

Thus, on death or divorce the community

is divided equally. . . ."

The determination of property rights is

a question to be decided on under State law.

oe 33 «

In Owens vs. Drywall and Accoustical Suppl

Corp., 27 AFTR 2d 71-1085, (United States Dis-

trict Court, Southern District of Texas, 1971),

the Court said on page 1091:

"The determination of property rights is

a question to be decided under state

law, Aquilino v. U.S., 363 U.S. 509

[5 AFTR 2g 1698] (1960)... ."

In Aquilino vs. U.S., 363 U.S. 509, 80

S. Ct. 1277, 5 AFTR 2d 1698, (1960), this

Court said on page 1699:

"The threshold question in this case, as

in all cases where the Federal govern-

ment asserts its tax lien, is whether

and to what extent the taxpayer had

"property' or ‘rights to property'

to which the tax lien could attach.

In answering that question, both

Federal and State courts must look to

state law, for it has long been the

rule that'in the application of a

federal revenue act, state law controls

in determining the nature of the legal

interest which the taxpayer had in the

property . . . sought to be reached by

the statute.' Morgan v. Commissioner,

309 U.S. 78, 82, [23 AFTR l046]."

See also United States vs. Durham Lumber Co.,

363 U.S. 522, 5 AFTR 2d 1703, (1960), to the

same effect.

«= 14 «

to are

In connection wath whether a consent

extending the statute of limitations is ap-

plicable against 4 taxnayer corporation

which has been dissolved, the Courts look

to the State law to see if those signing

the consents had authority to sign. In

et vs se. i2 F. 24a 7,

5 AFTR 5926, (Sth Cir., 1926), the cuestion

was whether a consent extending the statute

of limitation for the year 1917 was valid

which had been executed by the former presi-

dent and secretary of the taxpayer corporation

which was dissolved at the time that the con-

sent was executed. The Court looked to the

Texas law which in general provided that for

a period of three years after the dissolution

of the corporation that the president and

directors of the dissolved corporation were

trustees of the creditors and the stockholders

| of the corporation with full power to settle

its affairs. See Ann C. Fields, et al, vs.

= 1§ «

Commissioner of Internal Revenue, 32 T.c.

187; and Bothwell, et al, vs. United States,

18 Fed. Supp. 1011, 19 AFTR 650, (United

States Court of Claims, 1937), to the same

effect.

In Texas, on the dissolution of a part-

nership, either partner has the right to

settle outstanding accounts and to do any-

thing else necessary for the winding up of

the partnership affairs. In Jones vs.

Mitchell, (Court of Civil Appeals of Texas,

1932), 47 S.w. 24 371, error refused, the

Court said on page 373:

". « « On the dissolution of the part-

nership existing between appellant

and appellee, either party could settle

outstanding accounts, compromise out-

Standing debts due to the partnership,

complete the performance of contracts

previously entered into, and reduce

the assets to cash or its ecuivalent,

another partner on a new contract, nor

execute notes of the partnership for

ji —

eee a aaah onan rt RNR os

Appeals of Texas, 1963), 368 S.W. 2d 842, error

refused, N.R.E., the Court said on page 847:

the renewal of a pre-existing firm debt

without the consent of the other member

or members of the firm. White v. Tudor,

24 Tex. 639, 76 Am. Dec. I26; Page on

Contracts, Vol. 3, Sec. 1716, 47 C.J.

1124, Sec. 794; 20 R.C.L. 198, p. 968.

In short, after a dissolution of a part-

nership, none of the partners can do any

act or make any disposition of the part-

nership property or funds in any manner

inconsistent with the primary duty, then

resting upon all of them, of winding up

the partnership."

In Howell vs. Bowden, (Court of Civil

ee Dissolytion does not terminate a

Se peg The relationship continue

uring the winding up period. This is

especially true when one of the parties

is still in charge of the business. He

occupies a fiduciary relationship to

the other partner until the winding up

of the partnership affairs is complete.

It is interesting to note that the Texas Uni

form Partnership Act which went into effect

in 1962, too late to control this case, so

provides. See Art. 6132b, Sec. 30, Vernon's

Annotated Civil Statutes.

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7"

"Rowley on Partnership, Sec. 582 (1960

Ed.) says there are three steps in the

termination of a partnership: (1) dis-

solution, (2) winding up, and (3) termin-

ation and accounting. See also Jones v.

Mitchell, Tex. Civ. App., 47 S.W. 2a 371;

Am. Jur. 388, 393; 80 A.L.R. 15; 55

A.L.R. 2d 1424."

In Keller vs. Keller, 141 S.W. 2d 308,

(Commission of Appeals of Texas, 1940), opinio

adopted by the Texas Supreme court, held that

in connection with a divorce that the former

wife would be entitled to 1/2 of the proceeds

of salaries and a loan which were collected by

the husband after the divorce and on which no

property settlement had been made. See also

Baber vs. Galbraith, (Court of Civil Appeals

of Texas, 1916), 186 S.W. 345, error refused,

to the same effect.

The Texas law is that on the death of a

partner that the surviving partners have the

duty of winding up the partnership affairs.

Martin, et al, vs. Dial, et al, 57 S.W. 2d 75,

(Commission of Appeals of Texas, 1963);

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ea. |

IP NA TI IN LO RR INE ae

7"

Amarillo National Bank vs. Harrell, 159 S.W.

858, (Court of Civil Appeals of Texas, 1913),

error refused; Iowa Manufacturing Co. vs. Bald-

win, (Court of Civil Appeals of Texas, 1935),

82 S.W. 2d 994; Gay vs. Jackman, 254 S.W. 927,

(Commission of Appeals of Texas, 1923); and

Shivel and Stewart vs. Greer Bros., (Court of

Civil Appeals of Texas, 1909), 123 S.W. 207.

At the time Mr. Diehl filed the claim

for refund he was doing so as one of the part-

ners of his and Mrs. Diehl's former partnership

(marriage) and the clsin for refund is for the

benefit of both Mr. Diehl and Mrs. Diehl.

Since one-half of the income taxes which were

paid for the year 1957 are presumed to have

been paid by Mrs. Diehl, then Mrs. Diehl is

entitled to maintain her suit for the refund

claimed to the extent of one-half of the

amount of the overpayment of income taxes

for the calendar year 1957.

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i ial ie » % a Tay AP PORN AU oP FF ren |

CONCLUSION

For the foregoing reasons, Petitioner asks

this Court to reverse the decision of the

United States Court of Appeals and hold that

the claim for refund filed on behalf of Mr.

Diehl was filed for the benefit of Mrs.

Diehl and that Mrs. Diehl should not have

been dismissed by the Trial Court in her

individual Capacity.

Respectfully submitted,

Dougal C. Pope

Attorney for Petitioner

502 Houston First Savings

Building

Houston, Texas 77002

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CERTIFICATE OF SERVICE

I, Dougal C. Pope, the attorney for

Petitioner, hereby certify that on the

15th day of August, 1972, I served copies of

the foregoing Petition for Writ of Certiorari

and the separately bound Appendice on the

several parties thereto as follows:

1. On the United States by Mailing a

copy in a duly addressed envelope with air

mail postage prepaid to the Solicitor General,

Department of Justice, Washington, D. Cc. 20530,

and by mailing a copy in a duly addressed

envelope with air mail postage prepaid to

the Assistant Attorney General, Tax Division,

United States Department of Justice, Washington,

D. C. 20530.

Dougal C. Pope

o 29 w