DATE: June 1, 1979.

SUBSEQUENT HISTORY: Disagreed With by: AOD-1979-164 (July 6, 1979)
See: 26 U.S.C. § 911(b)(2)(C) (“Treatment of community income”)

JUDGES: Before DAVIS, Presiding Judge, NICHOLS and KASHIWA, Judges.

PER CURIAM

Order

[*1] This case comes before this panel of the court on defendant’s motion for rehearing of the order entered in the case on June 22, 1978, and on the refusal of the active judges of the court (as indicated in the order of September 29, 1978) to rehear the case en banc.

In our original order of June 22, 1978 we described the case as follows: ‘This pro se personal income tax case comes before the court without oral argument on the parties’ cross-motions for summary judgment. Plaintiff brings suit for the recovery of income taxes paid on the income earned by her husband in Spain in 1975. She is a Spanish national, who has resided in Spain her entire life. Her husband, whom she married in Spain in 1972, is a United States citizen; he regards the United States as his permanent home and is apparently domiciled in Kansas, a noncommunity property state. He is a member of the United States Navy and performed his duties in Spain in 1975. Mrs. West claims that under the Spanish Civil Code, [footnote omitted] if two parties enter into a marriage in Spain with no antenuptial agreement, the marriage is subject to the community property laws of Spain. It is her theory that since the income earned by her husband in 1975 for services performed in Spain is non-United States source income (I. R. C. § 862(a)(3)) and she is a nonresident alien who was married in Spain without any antenuptial agreement, her half share of her husband’s 1975 income is nontaxable.’

We held in the order of June 22, 1978 that (a) the law of Spain determined (for the taxable year 1975)FN1 the ownership of the income, (b) under the community property law of Spain the plaintiff’s wife had a half interest in her husband’s earnings, and (c) under the Internal Revenue Code the plaintiff’s wife, as a nonresident alien, was entitled to exclude from gross income her share of the income earned by her husband outside of this country. On that basis, we ruled that plaintiff was entitled to a refund of $611.82, plus interest as provided by law.

FN1 The Internal Revenue Code was changed for taxable years beginning after December 31, 1976.

Defendant’s motion for rehearing (as supplemented) insists that ownership of the husband’s earnings should be determined by the law of Kansas, his domicile (even though he was then a resident in Spain and the money was earned there) and that under Kansas law he was the sole owner of all of his earnings.

In response to the rehearing motion we have gone into the matter anew but have found no decision and no authority controlling the particular situation now before us. There are, however, certain general rules (with respect to ownership of marital property) which seem to be accepted. First, there is a category of cases in which the spouses, both domiciled and resident in the same state, receive income from the state of residence. In those circumstances, the law of the domicile governs, there being no other state with an equal or predominant interest. See, e. g., United States v. Mitchell [71-1 USTC ¶9451], 403 U. S. 190 (1971); Poe v. Sanborn, 282 U. S. 101 (1930); Restatement (Second) of Conflicts, § 258(2) (1971) (unless there is a contract to the contrary, great weight is given to the law of the state where both spouses were domiciled at the time personal property is acquired).

[*2] A second category of cases consists of those situations in which the spouses, both domiciled and resident in the same state, receive income from a state other than that of their residence. Here, too, the general rule seems to be that the law of the domiciliary state (which is likewise the state of both spouses’ residence) controls. See Zaffaroni v. Commissioner [CCH Dec. 33,662], 65 T. C. 982, 989 (1976), and cases cited; Commissioner v. Porter [45-1 USTC ¶9254], 148 F. 2d 566, 569 (5th Cir. 1945); Shilkret v. Helvering [43-2 USTC ¶9619], 138 F. 2d 925 (D. C. Cir. 1943).

Still another category involves spouses with different domiciles, and the earner receives income in the state of his or her residence and domicile. Again, the earner’s domicile controls ownership, but we think it significant that that is also the state of residence and of the earning of the income. See Birmingham Waterworks Co. v. Hume, 121 Ala. 168, 25 So. 806 (1899); Hunt v. Commissioner [CCH Dec. 20,316], 22 T. C. 228 (1956); Lord v. Commissioner [CCH Dec. 31,967], 60 T. C. 199 (1973), aff’d in relevant part [75-2 USTC ¶ 9799], 525 F. 2d 741 (9th Cir. 1975).

None of these classes includes what we now have before us-husband and wife domiciled in different places (Kansas and Spain), residing in one place (Spain), which is also the jurisdiction where the money was earned. In that situation it may be that the law of the earner’s own domicile (Kansas) determines ownership (see Restatement (Second) of Conflicts § 258, comment c) but it also may be that Spain has the more significant relationship to the spouses and to the earnings-and therefore that its internal law should prevail on ownership. See Restatement (Second) of Conflicts, § 258(1). We need not try to solve that problem in vacuo because it is likewise a recognized precept that in any event the situs state-the place where the income was earned or the movable was acquired-can determine the marital interests by its own law if it affirmatively seeks to do so. See R. Leflar, American Conflicts Law (1968) § 235 at 565; H. Goodrich, Handbook of the Conflict of Laws § 124 at 252 (4th ed. Scoles editor, 1964).

We think that, in Articles 1315 and 1325 of the Spanish Civil Code,FN2 Spain has affirmatively elected to have the ownership of Spanish earnings of spouses married in Spain determined by Spanish principles of community property (in the absence of an ante-nuptial contract)-at least where, as here, one spouse is domiciled in Spain, both are resident there, the income is earned there, and the wife’s interest in her husband’s earnings was vested under Spanish law and not a mere expectancy. Cf. Succession of Dill, 155 La. 47, 98 So. 752 (1923); Zaffaroni v. Commissioner [CCH Dec. 33,662], 65 T. C. 982, 988 (1976). This interpretation of Spanish law would seem to be bolstered by the general principle that normally the law of the jurisdiction with the more significant relationship should prevail as to ownership. Spain is far more than a stranger to Mr. West’s earnings there. Indeed, that country can be said to have decided that it has a more important relationship to the husband’s earnings in Spain during his marriage there to a Spanish national than Kansas, the state from which he had come before his marriage.FN3

FN2 The certified translation of the Spanish Civil Code provided by the plaintiff reads as follows:

ARTICLE 1315. Persons to be married can draw up their marriage articles before the celebration of said marriage, stipulating the conditions of the conjugal society, in regard to present and future property, with no other limitations than those set forth in this Code.In the absence of said contract regarding property, it will be understood that the marriage is contracted under the legal system of-community property.

ARTICLE 1325. If marriage is contracted in a foreign country between a Spanish husband and a foreign wife or a foreign husband and a Spanish wife, and no declarations or stipulations are made regarding property, it will be understood that when the Spanish party is the husband, the marriage comes under the community property system, and when the Spanish party is the wife, the marriage will come under the general law in the country of the husband; the aforesaid does not effect [sic] what is established in this Code regarding real property.

FN3 Neither party contends that the ownership of the earnings of plaintiff’s husband should be influenced, by the fact that he was a United States serviceman or that his earnings consisted of Navy pay.

[*3] For these reasons, we deny defendant’s motion for rehearing and adhere to our judgment that plaintiff is entitled to a refund of $611.82, plus interest as provided by law.

IT IS SO ORDERED

PER CURIAM

Concurring Opinion

The husband of Senota West does not present the ordinary case of an American civilian resident in a foreign country, e. g., a missionary, a journalist, or a representative of General Motors. He belongs to the Armed Forces of the United States, and is, or in 1975, was present in Spain on active duty. The court’s order, though it reaches the right result, in my view, ignores this aspect of the case and should not do so.

In Schooner Exchange v. M’Faddon, 11 U. S. (7 Cranch) 116 (1812), Mr. Chief Justice Marshall had occasion to consider the legal status of members of armed military contingents in friendly foreign countries. He had before him an attempted attachment (technically libel) on a French naval vessel in an American port, but, according to his wont, he addressed the problem in its general aspects, and there can be no doubt he meant to state reciprocal rules applicable to American contingents abroad, whenever there might be such. He has been often cited since. According to him, the territorial sovereign could exclude the contingent entirely, or admit it on any terms he pleased, including complete and utter subjection to all provisions of local or municipal law. If however, such terms were not expressed in the act of admission, the friendly foreign contingent carried with it its own laws and enjoyed an almost complete immunity from local law. Marshall said the sovereign’s assent to this was implied, the contrary not being asserted. It was ‘a waiver of all jurisdiction, and permits the foreign general to use that discipline, and to inflict those punishments which the Government of his army may require.’ P. 139.

When, after World War II, it became apparent that the presence of American contingents on friendly foreign soil would long endure, our policy makers determined that legislation was necessary, and legislation was enacted, and they made express agreements with many foreign countries pursuant to or outside the legislation. See Wilson v. Girard, 354 U. S. 524 (1957); Gallagher v. United States, 191 Ct. Cl. 546, 423 F. 2d 1371, cert. denied, 400 U. S. 849 (1970). When the problem raised by Senora West first surfaced, I naturally supposed there would be agreements to cover so foreseeable a case, but if there be any such, government counsel have never been persuaded to divulge them. I am compelled to suppose, and do suppose, that there are no relevant agreements. It does not follow, however, that the status of the American soldier, sailor, or airman, presently on active duty on friendly foreign soil, is assimilated to the status of a General Motors representative. It follows that the Marshall system of implied assents remains the only means of determining the law applicable to the transaction to be dealt with.

[*4] How Marshall would see it we can never know for sure, but it appears to me that the implied assent of Spain to immunity of American military personnel, whatever its full scope may be, primarily relates to internal and disciplinary matters and cannot be extended to transactions with Spanish nationals and voluntarily entered under the very wing of Spanish law. The implications are all the other way, in such a case. An American soldier, sailor, or airman in Spain, wishing to marry a Spanish national, could take her outside the country for the nuptials, or make a pre-nuptial agreement as the Code specifies. The performance of weddings is in civil law countries a governmental function. The American service bridegroom who takes his Spanish bride to a Spanish registry office, or whatever the facility is called in that country, with no pre-nuptial agreement, indicates by the strongest implication that the marriage will be governed by Spanish law in all its incidents. Under the Spanish code, it is plain he has agreed by contract to the system of community property. His superiors could have forbidden such marriages, or they could have made an agreement with the Spanish concerning them, or they could have obtained legislation. In the instance of the Wests, they did none of those things so far as we are told, and, therefore, they consented by implication too.

I am not much concerned by the fact that neither party urged the points above-expressed. Defendant took a stand we all reject as unsound. Plaintiff, pro se, did not argue the law at all, but left it to us to figure the case out. The amicus was interested in his own case, which involved only civilians, It seems to me incumbent on us to put the matter on the soundest possible grounds, and neither the majority nor I come to our conclusions with much outside help. The question of the status of forces, and of plaintiff’s husband being a serviceman, was raised in the Minor order, No. 508-76 (February 9, 1978), and defendant should have dealt with it. It seems to me wrong to argue domicile and residence, and ignore the service connection. The legal rights and duties of a serviceman belonging to a military contingent on friendly foreign soil should be, and I believe are, determined with reference to international law relating to such contingents, in the absence of express agreements. I am sorry to have to come to this conclusion belatedly, but the panel will not disavow the benefits of fresh ‘lucubration’ in this ‘uncharted field.’