T.C. Memo. 2000-373
UNITED STATES TAX COURT
THOMAS D. BERRY, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 2387-00. Filed December 11, 2000.
Kenneth W. Klingenberg, for petitioner.
Donald E. Edwards and Keith Aqui, for respondent.
MEMORANDUM OPINION
ARMEN, Special Trial Judge: This matter is before the Court
on the parties’ cross Motions for Partial Summary Judgment under
Rule 121(a).1 As explained in detail below, we shall grant
1
Unless otherwise indicated, all Rule references are to
the Tax Court Rules of Practice and Procedure and all section
references are to the Internal Revenue Code in effect for 1996,
the taxable year in issue.
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respondent’s motion and we shall deny petitioner’s motion.
Background2
Petitioner resided in Stillwater, Oklahoma, at the time that
his petition was filed with the Court.
On January 17, 1995, Kay Rogers Berry (Mrs. Berry)
instituted a divorce action against Thomas D. Berry (petitioner)
in the District Court for Payne County, Oklahoma (State court).
Shortly thereafter, on February 9, 1995, the State court granted
Mrs. Berry an award of $6,000 for attorney’s fees. Later that
year, on August 9, 1995, the State court modified its February 9,
1995, order to require petitioner to pay the additional sum of
$30,000 for attorney’s fees and costs.
On August 28, 1996, the State court ordered petitioner to
pay Mrs. Berry the additional sum of $154,000 for attorney’s
fees. This amount was ordered to be paid for services that had
already been rendered by Mrs. Berry’s attorney and not for
services to be rendered in the future. The August 28, 1996,
order did not state whether petitioner would remain liable for
the payment of the $154,000 amount if Mrs. Berry should die
before such amount were paid.
On April 1, 1997, the State court issued a decree of divorce
2
What follows in the text is a summary of the relevant
facts. They are stated solely for the purpose of deciding the
pending cross-motions for partial summary judgment, and they are
not findings of fact for this case. See Fed. R. Civ. P. 52(a);
Rule 1(a).
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to petitioner and Mrs. Berry consistent with the terms of a
settlement agreement that they had previously executed on March
17, 1997.
Petitioner claimed a deduction in the amount of $220,000 for
alimony on his Federal income tax return for 1996. Respondent
subsequently issued a notice of deficiency determining a $62,811
deficiency in petitioner’s income tax for 1996. The deficiency
is based in substantial part on respondent’s disallowance of
$154,000 of the $220,000 deduction for alimony claimed by
petitioner. Petitioner filed a timely petition with the Court
challenging the notice of deficiency.
After respondent filed an answer to the petition, petitioner
filed a Motion for Partial Summary Judgment seeking a summary
adjudication that his payment of $154,000 of Mrs. Berry’s
attorney’s fees pursuant to the State court’s August 28, 1996,
order constituted alimony within the meaning of section 71 that
is deductible under section 215. Respondent filed an objection
to petitioner’s motion, to which petitioner filed a reply.
This matter was called for hearing at the Court’s motions
session in Washington, D.C. Counsel for respondent appeared at
the hearing and made an oral Cross Motion for Partial Summary
Judgment that petitioner’s payment of Mrs. Berry’s attorney’s
fees does not constitute alimony within the meaning of section
71. Although no appearance was made by or on behalf of
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petitioner at the hearing, petitioner did file a Rule 50(c)
statement with the Court.
Discussion
Summary judgment is intended to expedite litigation and
avoid unnecessary and expensive trials. See Florida Peach Corp.
v. Commissioner, 90 T.C. 678, 681 (1988). Summary judgment may
be granted with respect to all or any part of the legal issues in
controversy “if the pleadings, answers to interrogatories,
depositions, admissions, and any other acceptable materials,
together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that a decision may be
rendered as a matter of law.” Rule 121(b); Sundstrand Corp. v.
Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th
Cir. 1994); Zaentz v. Commissioner, 90 T.C. 753, 754 (1988);
Naftel v. Commissioner, 85 T.C. 527, 529 (1985). The moving
party bears the burden of proving that there is no genuine issue
of material fact, and factual inferences will be read in a manner
most favorable to the party opposing summary judgment. See
Dahlstrom v. Commissioner, 85 T.C. 812, 821 (1985); Jacklin v.
Commissioner, 79 T.C. 340, 344 (1982).
Based on our review of the record, we are satisfied that
there is no genuine issue as to any material fact and that
partial summary judgment may be rendered as a matter of law.
Section 71(a) provides the general rule that alimony
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payments are included in the gross income of the payee spouse,
while section 215(a) provides the general rule that alimony
payments are deductible by the payor spouse. Section 215(b)
provides in pertinent part that the term “alimony” means any
alimony, as defined in section 71(b), which is includable in the
gross income of the recipient under section 71. Section 71(b)
defines alimony as follows:
SEC. 71(b) Alimony Or Separate Maintenance
Payments Defined.–-For purposes of this section--
(1) In General.-–The term “alimony or separate
maintenance payment” means any payment in cash if-
(A) such payment is received by (or on
behalf of) a spouse under a divorce or separation
instrument,
(B) the divorce or separation instrument
does not designate such payment as a payment which
is not includible in gross income under this
section and not allowable as a deduction under
section 215,
(C) in the case of an individual legally
separated from his spouse under a decree of
divorce or of separate maintenance, the payee
spouse and the payor spouse are not members of the
same household at the time such payment is made,
and
(D) there is no liability to make any such
payment for any period after the death of the
payee spouse and there is no liability to make any
payment (in cash or property) as a substitute for
such payments after the death of the payee spouse.
The parties agree that petitioner’s payment of Mrs. Berry’s
attorney’s fees satisfies the requirements set forth in section
71(b)(1)(A), (B), and (C). However, the parties disagree whether
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petitioner’s payment satisfies section 71(b)(1)(D); i.e., whether
petitioner’s liability to pay Mrs. Berry’s attorney’s fees would
terminate in the event of her death.
Although Federal law controls in determining petitioner’s
income tax liability in this case, State law is necessarily
implicated in the inquiry inasmuch as the nature of petitioner’s
liability for the payment of Mrs. Berry’s attorney’s fees depends
on Oklahoma law. See, e.g., Sampson v. Commissioner, 81 T.C.
614, 618 (1983), affd. without published opinion 829 F.2d 39 (6th
Cir. 1987), and cased cited therein. In Estate of Bosch v.
Commissioner, 387 U.S. 456, 465 (1967), the Supreme Court
addressed the means for determining State law, in the context of
a Federal tax case, stating:
the State’s highest court is the best authority on its
own law. If there be no decision by that court then
federal authorities must apply what they find to be the
state law after giving “proper regard” to relevant
rulings of other courts of the State. In this respect,
it may be said to be, in effect, sitting as a state
court. Bernhardt v. Polygraphic Co., 350 U.S. 198
(1956).
Petitioner contends that, under Oklahoma law, a divorce
proceeding terminates with the death of one of the spouses and
the court loses all jurisdiction over the matter. Relying on
this principle, petitioner contends that, because the August 28,
1996, order directing him to pay Mrs. Berry’s attorney’s fees was
only temporary, his liability to make such payments would have
terminated upon Mrs. Berry’s death, thereby bringing the payments
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within the definition of alimony under section 71(b). See sec.
71(b)(1)(D).
In contrast, respondent, relying on several Oklahoma State
court decisions, contends that petitioner’s obligation to pay
Mrs. Berry’s attorney’s fees would not have terminated upon Mrs.
Berry’s death.
The parties have not cited any Oklahoma State court case
deciding the narrow legal question presented herein, and we are
not aware of any such case. Under the circumstances, we must do
our best “to discern what such State’s highest court would
decide.” Estate of Young v. Commissioner, 110 T.C. 297, 302
(1998).
We begin our analysis of State law with Okla. Stat. Ann.
tit. 43, §110 A.1.e (West Cum. Supp. 1999), which vests Oklahoma
courts with the authority to issue temporary orders regarding
attorney’s fees in divorce actions.3 In conjunction with this
provision, Okla. Stat. Ann. tit. 43, §110 B. (West Cum. Supp.
1999), provides in pertinent part:
3
Okla. Stat. Ann. tit. 43, §110A.1.e (West Cum. Supp.
1999), provides in pertinent part:
§110. Orders concerning property, children, support
and expenses
A. After a petition has been filed in an action
for divorce or separate maintenance either party may
request the court to issue:
1. A temporary order:
* * * * * * *
e. regarding attorney’s fees * * *
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Any temporary orders may be vacated or modified
prior to or in conjunction with a final decree on a
showing by either party of facts necessary for vacation
or modification. Temporary orders terminate when the
final judgment on all issues, except attorney fees and
costs, is rendered or when the action is dismissed.
* * *
Neither provision speaks directly to the question of the
viability of such temporary orders in the event of the death of
one of the spouses to the divorce proceeding.
Petitioner correctly asserts that in Oklahoma, the death of
a spouse, before entry of a final divorce decree, generally
terminates the cause of action. In Pellow v. Pellow, 714 P.2d
593 (Okla. 1985), the Supreme Court of Oklahoma, the State’s
highest court, held in pertinent part:
A cause of action for a divorce is purely
personal, and it has been held that such a cause of
action terminates on the death of either spouse before
the entry of the final decree. In effect, the trial
court is deprived of its jurisdiction. If, on the
other hand, the trial court has entered a decree, it
has been held that the death of a spouse does not
affect the matter.
Id. at 597 (emphasis added)(citing Mabry v. Baird, 203 Okla. 212,
219 P.2d 234 (1950)).
Where a spouse in a divorce action dies after entry of a
final divorce decree, however, the action generally is
unaffected. For example, in Mabry v. Baird, supra, the trial
court had entered a final divorce decree reserving the matter of
the wife’s claim for attorney’s fees for further hearing. The
wife died before the court held its further hearing on the issue
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of attorney’s fees. Under the circumstances, the Supreme Court
of Oklahoma held that the trial court had jurisdiction to enter
an order awarding attorney’s fees to the legal representative of
the deceased wife. For a similar holding, see Swick v. Swick,
864 P.2d 819 (Okla. 1993) (where a spouse in a divorce proceeding
died after the entry of a final divorce decree, but before the
court decided the deceased spouse’s motion for attorney’s fees,
the deceased spouse’s attorney had standing to move for the
payment of his client’s attorney’s fees).
The Supreme Court of Oklahoma has recognized that an
attorney’s standing to seek the payment of attorney’s fees in a
divorce action is not always contingent on the trial court’s
continuing jurisdiction over the divorce proceeding. In Kelly v.
Maupin, 58 P.2d 116 (Okla. 1936), a case somewhat analogous to
the instant case, the Supreme Court of Oklahoma held that, where
a trial court had entered a temporary order awarding attorney’s
fees to a wife in a divorce proceeding, the wife’s attorney had
the right to enforce that order through contempt proceedings
brought against the husband, even though the wife had filed a
dismissal with respect to her divorce petition in the interim.
The court held in pertinent part:
We do not think it is essential to a determination of
this case to decide definitely whether this order was
effective as a dismissal of the divorce action.
Regardless of its effect in that particular, it was, in
our judgment, obviously ineffective to destroy the
previous order made by the court, in so far as that
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order was for the benefit of the plaintiff’s attorney.
Id. at 118.
Although the Supreme Court of Oklahoma has not addressed the
narrow legal issue presented in the instant case, the cases cited
above, particularly Kelly v. Maupin, supra, lend support to
respondent’s position that petitioner would have remained liable
for the payment of attorney’s fees, either to representatives of
Mrs. Berry’s estate or directly to Mrs. Berry’s attorney, had
Mrs. Berry died before entry of a final divorce decree by the
State court. Kelly v. Maupin, supra, suggests that the Supreme
Court of Oklahoma considers the award of attorney’s fees to have
continuing viability regardless of the status of the underlying
divorce action.
We note that the majority of State courts considering this
question have concluded that an award of attorney’s fees remains
viable and enforceable notwithstanding the death of one spouse
before entry of a final divorce decree. See Stackhouse v.
Stackhouse, 484 N.W.2d 723 (Mich. Ct. App. 1992); Centazzo v.
Centazzo, 556 A.2d 560 (R.I. 1989); Hirsch v. Hirsch, 519 So.2d
1056 (Fla. Dist. App. 1988); State ex rel. Paxton v. Porter
Superior Court, 467 N.E.2d 1205 (Ind. 1984); Williams v.
Williams, 281 A.2d 273 (N.J. 1971); Spiro v. Spiro, 260 N.E.2d
332 (Ill. App. Ct. 1970); Gunther v. Gunther, 301 S.W.2d 207
(Tex. Civ. App. 1957); Briggs v. Briggs, 1 S.E.2d 118 (N.C.
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1939); Ballard v. Caperton, 59 Ky. 412 (Ky. 1859); see also
Zinsmeister v. Commissioner, T.C. Memo. 2000-364 (interpreting
Minnesota law); Smith v. Commissioner, T.C. Memo. 1998-166
(interpreting Georgia law). But cf. Hogsett v. Hogsett, 409
S.W.2d 232 (Mo. Ct. App. 1966); Greer v. Greer, 130 P.2d 1050
(Colo. 1942).
Courts upholding the viability of awards of attorney’s fees
frequently focus on the public policy underlying the statutory
provisions authorizing such awards; i.e., providing otherwise
needy spouses with the means to retain counsel in divorce
actions. See Stackhouse v. Stackhouse, supra at 726; Williams v.
Williams, supra at 275-276. Such courts point out that a
spouse’s access to counsel would be unduly restricted if counsel
were required to bear the risk that his or her client might not
survive until a final divorce decree is entered. On the other
hand, courts holding that awards of attorney’s fees in divorce
proceedings do not survive the death of a spouse merely seek to
impose a bright line rule that such awards abate with the death
of a spouse before the entry of a divorce decree.
Considering Oklahoma case law, as well as the policy
underlying awards of attorney’s fees in divorce actions, we
conclude that the Supreme Court of Oklahoma would hold that
petitioner would remain liable for the attorney’s fees that the
State court awarded to Mrs. Berry in 1996 even if Mrs. Berry had
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died before entry of a final divorce decree. Consistent with the
foregoing, we shall grant respondent’s oral Motion for Partial
Summary Judgment and we shall deny petitioner’s Motion for
Partial Summary Judgment.
To reflect the foregoing,
An order granting
respondent’s oral Motion for
Partial Summary Judgment
and denying petitioner’s
Motion for Partial Summary
Judgment will be issued.