Watson v. United States

STALEY, Circuit Judge

(dissenting).

I respectfully dissent from the opinion and decision of the majority. I would affirm upon the thorough and well reasoned opinion of the district court,1 which contains both findings of fact and conclusions of law.

At the outset, it should be pointed out that the primary basis for the divergence of opinion in this case lies in the majority statement that “we are not here dealing with an impoverished class.” I do not believe that the law, as it existed prior to the instant case, required absolute poverty by the class to be benefited in order to qualify as a charitable purpose. In overruling Gimbel v. CIR, 54 F.2d 780 (C.A.3, 1931), and reversing the instant ease, the majority fails to examine the social and economic factors which underlie that decision. No FBI investigation is necessary to disclose that, at the time of Gimbel, average employees had no adequate means of accumulating sufficient funds to maintain themselves in their old age. If any authoritative evidence is required to substantiate this, we need only look to the legislative history and stated purpose of the first Social Security Act, 49 Stat. 620 (1935). Nevertheless, the majority opinion, in overruling Gimbel, holds that distributions to a class of retired employees, who may be presumed to be unable to support themselves, are not charitable.

Not content with stating that Gimbel was wrongly decided, the majority seizes upon “the lapse of time and changed economic conditions [since Gimbel]” to condemn the district court’s reliance upon it. The import of the majority’s language is that company pension plans and social security benefits have displaced the need for assistance in this area. Although this may be true to a limited extent, the majority has neglected to discuss that portion of the trust agreement which negates the impact of any such changes. Subdivision (c) of Article Seven of the Will provides that no beneficiary of the trust shall receive in excess of $125.00 per month, and that that amount shall be reduced by any social security and Jacques Wolf & Company retirement benefits for which the beneficiary is eligible. Thus, the settlor’s intent is clearly ascertainable: he sought to supply income to those who did not qualify for either social security or- retirement benefits or to supplement the income of those who could not maintain themselves on the benefits received from social security or retirement funds.

It would appear that the majority’s criteria is misplaced. Had it examined Gimbel in the light of the time it was decided and the then prevailing economic conditions, it would have concluded that not only was its decision correct, but also that the instant case is controlled by it, regardless of the intervening social and economic changes. However, it should be pointed out that I do not read Gimbel as holding that any contribution, regardless of the circumstances, is charitable, merely because it is to a pension fund.

*276Within the limitations imposed by Gallagher v. Smith, 223 F.2d 218 (C.A.3, 1955), the majority attempts to bolster its position that the trust is non-charitable by pointing to an observation made by the New Jersey Supreme Court when this same trust agreement was before it. By quoting the dictum from Watson v. Brower, 24 N.J. 210, 219, 131 A.2d 512, 517 (1957), that “there is a concurring purpose to benefit the company,” the majority appears to adopt the altruistic meaning of “charity” to support its conclusion. While true charity is always impelled by a sense of moral responsibility to aid the less fortunate, this, of course, cannot be the test under the Internal Revenue Code. Otherwise, no deduction would ever be allowed for corporate gifts to community funds, the Red Cross, or other such organizations since such gifts are largely motivated by tax savings, the building of good will in the community and the marketing area, or for reasons other than a sense of moral responsibility. Nonetheless, no one would question the “charitableness” of such donations for tax deduction purposes. Here, true enough, there may have enured to the company certain incidental benefits. However, that should not be dispositive. What is important is that, here, the beneficiaries comprised a class that assuredly needed old age assistance.

One further matter remains. Under the guise of deciding a question of law, the majority has decided a mixed question of law and fact, which the Supreme Court has said remains almost exclusively in the province of the fact-finder. In CIR v. Duberstein, 363 U.S. 278, 80 S.Ct. 1190, 4 L.Ed.2d 1218 (1960) (a case involving the interpretation of the word “gift”), the Court, in an analogous situation, said:

“Third. Decision of the issue presented in these cases must be based ultimately on the application of the fact-finding tribunal’s experience with the mainsprings of human conduct to the totality of the facts of each case. The nontechnical nature of the statutory standard, the dose relationship of it to the data of practical human experience, and the multiplicity of relevant factual elements, with their various combinations, creating the necessity of ascribing the proper force to each, confirm us in our conclusion that primary weight in this area must be given to the conclusions of the trier of fact. Baker v. Texas & Pacific R. Co., 359 U.S. 227 [79 S.Ct. 664, 3 L.Ed.2d 756]; Commissioner of Internal Revenue v. Heininger, 320 U.S. 467, 475 [64 S.Ct. 249, 88 L.Ed. 171]; United States v. Yellow Cab Co., 338 U.S. 338, 341 [70 S.Ct. 177, 94 L.Ed. 150]; Bogardus v. Commissioner, supra, 302 U.S. [34] at page 45 [58 S.Ct. 61, 82 L.Ed. 32] (dissenting opinion).” 363 U.S. at 289, 80 S.Ct. at 1199. (Italics supplied.)

It went on to say that in this type of case

“One consequence of this is that appellate review of determinations in this field must be quite restricted. Where a jury has tried the matter upon correct instructions, the only inquiry is whether it cannot be said that reasonable men could reach differing conclusions on the issue. Baker v. Texas & Pacific R. Co., supra, 359 U.S. at page 228 [79 S.Ct. 664]. Where the trial has been by a judge without a jury, the judge’s findings must stand unless ‘clearly erroneous.’ Fed.Rules Civ.Proc. 52 (a), 28 U.S.C.A. ‘A finding is “clearly erroneous” when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.’ United States v. United States Gypsum Co., 333 U.S. 364, 395 [68 S.Ct. 525, 92 L.Ed. 746]. The rule itself applies also to factual inferences from undisputed basic facts, id. 333 U.S. at page 394 [68 S.Ct. 525], as will on many occasions be presented in this area. Cf. Graver Tank & Mfg. Co. v. Linde *277Air Products Co., 339 U.S. 605, 609-610 [70 S.Ct. 854, 94 L.Ed. 1097].” 363 U.S. at 290-291, 80 S.Ct. at 1199-1200. (Italics supplied.)

For all these reasons, I would affirm the decision of the district court.

. The full text of the district court’s opinion N.J., 1963). may be found in 63-2 U.S.Tax Cas. 90,379 (D.