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applying expressio unius est exclusio alterius, the maxim of construction which holds that the inclusion of one item in a contract implies the exclusion of others not listed
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Sheldon, Bayer, McLean & Glasman, Charles W. Sheldon, Jr., Denver, for plaintiff in error.
Dawson, Nagel, Sherman & Howard, Raymond J. Turner, John T. Gaubatz, Denver, for defendant in error.
SILVERSTEIN, Chief Judge.
This case was transferred from the Supreme Court pursuant to statute.
Plaintiff in error, Mrs. Hutchinson, seeks reversal of an order and decree of the probate division of the District Court dismissing her claim against the estate of her deceased former husband. Defendant in error is the executor of the estate. We affirm the trial court.
The claim was heard on stipulated facts which, in summary, are: that claimant wife and decedent husband were divorced by a decree entered September 8, 1959; that thereafter a special master, after hearings to determine a division of property, entered his order and findings of fact; and that the parties subsequently on January 17, 1961, filed a stipulation in the proceedings which made minor modifications to the master's order and, as so modified, approved and accepted the master's order. On March 7, 1961, the court approved the stipulation and ordered the parties to carry out its terms and conditions.
The master's order directed the husband to pay $200,000 to the wife and directed the wife to transfer to the husband certain of her assets, including stocks in eight corporations, all of which were either owned in part or were managed by her husband, and a note given by one of these companies. Upon transfer of these assets from the wife in 1961, the husband obtained payment of the note in full including accrued interest and attributed various values to the stocks on his books. Later in 1961 the stock in six of the eight corporations was sold by the husband, and in 1962 the two remaining stocks were redeemed by the respective corporations.
The husband used the values he attributed to the stocks as his cost basis on his income tax returns for 1961 and 1962 to determine his capital gains. The Internal Revenue Service audited these returns and accepted the husband's figures. As the wife had not reported the transfer of the stocks on her 1961 return, the Internal Revenue Service thereafter assessed a deficiency against her. Subsequently, the State of Colorado assessed a similar deficiency against the wife. At the time of the hearing on the claim against the estate, the wife had settled the federal tax claim, but the tax claim of the State of Colorado was still pending.
The wife made demands on the husband that he defend against the tax claims and pay the taxes. This he refused to do. The husband died on August 21, 1965, and thereafter the present claim was filed.
Upon receiving the first deficiency assessment, the wife, in 1963, filed, in the divorce action, a motion to amend the master's order and the stipulation in which she prayed 'for the clarification and amendment'. The husband filed a motion to strike the wife's motion. After hearing, the court granted the motion to strike.
There is no dispute as to any of the above facts nor as to the amount claimed. The issue is purely one of law as to whether the husband was legally obligated to defend against the tax claims and to pay the taxes under these facts.
I.
In his answer, the executor denies any liability and, among other affirmative defenses, asserts that the relevant issues were determined by the order in the divorce action striking the wife's motion to amend the master's order and the stipulation, and that therefore the claim is barred by the doctrine of res judicata.
The probate court held that the claim was barred because the order of the divorce court was the final determination of the issues raised by the present claim. To this ruling the wife asserts error on the grounds that the order of the divorce court merely determined that the matter's order and subsequent stipulation could not be modified and that the issue before the probate court was never heard on its merits. The executor asserts that the present issue could have been litigated in the earlier proceeding and, in fact, was litigated, since the present claim is an attempt to modify the stipulation and the master's order by interpretation.
The doctrine of res judicata cannot be applied in this case. In Sloniger v. Rains, 120 Colo. 339, 208 P.2d 941, our Supreme Court, quoting with approval from Fort v. Bietsch, 85 Colo. 176, 274 P. 812, said, 'It is fundamental, and well understood, that the judgment of any court of competent jurisdiction, so long as it remains unreversed, is conclusive upon the parties and their privies when the judgment is rendered Upon the merits, and without fraud or collusion, Upon a matter within the jurisdiction of the court rendering the judgment.' (Emphasis supplied.)
The previous hearing and order was on the motion to strike the motion to amend. The divorce court did not conduct any hearing or make any ruling on the motion to amend. In granting the motion to strike, the court correctly found that Zlaten v. Zlaten, 117 Colo. 296, 186 P.2d 583, and Magarrell v. Magarrell, 144 Colo. 228, 355 P.2d 946, were controlling. Under the rule laid down by these cases, the court had no jurisdiction to change the contractual rights of the parties where, as here, the agreement of the parties was approved by the court and made a part of the decree. Although the court set forth additional grounds for granting the motion to strike, its lack of jurisdiction to rule on the motion to amend was controlling. The court, being without jurisdiction, could not have made any valid or binding determination on the issues raised by the motion to amend. Under these circumstances the merits of the present claim were not heard or determined.
II.
For the reasons above stated, we hold that the doctrine of res judicata is not applicable in this action, but we affirm the judgment of the trial court. The facts establish, as a matter of law, that the husband did not breach the property settlement agreement, and he was not obligated to pay the wife's income taxes arising from her transfer of the stock to him.
Our authority for considering this matter on its merits is that, since all the facts were stipulated by the parties, the matter has become one of law and a proper subject of our review. McClellan v. Morris, 71 Colo. 304, 206 P. 575; See Klutts v. Parker, 158 Colo. 594, 409 P.2d 275, and Stephenson v. Stephenson, 134 Colo. 96, 299 P.2d 1095.
The wife relies on two theories to support her claim, neither of which is supported by the record or the law.
A.
The first theory is based on a sentence in the master's order which reads;
'* * * Reasonable steps and adequate security should be assured to Mrs. Hutchinson, that she should receive the full $200,000 complete and free of any liens or encumbrances, pledges, limitations, to do with as she desires.'
The rule is well recognized that in construing a document, the entire instrument must be considered as a whole. Brown v. Brown, 161 Colo. 67, 419 P.2d 444. Further, where the writing to be construed consists of two or more parts, the courts must construe them together as if they were a single instrument. Aronoff v. Western Federal Savings and Loan Assn., 28 Colo.App. 151, 470 P.2d 889. Therefore, the master's order and the stipulation of the parties must be construed together.
In the stipulation, the parties provided for payment of the $200,000 in installments and provided that, in order to secure payment of the full amount due, the husband should place securities approved by the wife in the hands of an escrow agent approved by the wife. Also, the stipulation provides that the husband will hold the wife harmless 'on any federal or state income tax returns for the years of the marriage, on account of income received by the defendant (husband) in the event that the plaintiff (wife) is assessed additional payments, * * * or other charge by the taxing authorities.' This indemnity was limited to the 'years of the marriage' which terminated in 1959. However, the taxable event in issue here occurred in 1961.
The fact that the parties carefully provided for tax indemnity during the marriage years and not otherwise, under the maxim of construction Expressio unius est exclusio alterius, leads to the inference that they did not intend that the husband should indemnify the wife for the tax consequences here at issue. See In Re Estate of Buchman (Buchman v. Morse), 132 Cal.App.2d 81, 281 P.2d 608, 53 A.L.R.2d 451, In Re Estate of Minier,
Furthermore, the funds were free of liens and encumbrances when paid to the wife. The lien arose from the wife's failure to pay the tax on her transfer of the shares to the husband on demand, 26 U.S. C.A. s 6321, and did not arise until the assessment was made by the government on the asserted delinquency. 26 U.S. C.A. s 6322.
In the absence of a specific agreement to the contrary, the tax burden of property settlement payments rests on the party receiving the payments. In Estate of Borax v. Commissioner of Internal Revenue, 2 Cir., 349 F.2d 666, the court stated that the tax law places 'the tax burden of all general marriage settlement payments on the party entitled to their enjoyment.' Nothing in the master's order or stipulation shifts that burden.
B.
Her second theory is that the deceased (and his estate) will be unjustly enriched unless compelled to reimburse her for the taxes arising from the transaction assessed against her. This theory is incorrect for two reasons.
First, it is generally held, as was stated in Russell v. Russell, 79 U.S. App.D.C. 44, 142 F.2d 753, 153 A.L.R. 1037, 'It is not the function of a court of equity to readjust the tax burden in a way not intended by Congress simply because it considers it more equitable for the husband to bear all or part of the tax burden.'
Second, the wife's argument is based partly on the fact that the stock was practically worthless in her hands while it had considerable value when owned by the husband who had a controlling interest in the corporations. However, the master took this into consideration in arriving at the $200,000 figure to be paid to the wife. In his order he pointed out that although her assets had a value of $120,000, most of this was based on the book value of the stocks and that in her hands their value was drastically reduced. However, in light of their value in the hands of the husband, he directed that the $200,000 sum be paid.
In view of the above facts, and considering the other transfers made and the alimony award provided for in the order, we find that under the order and stipulation the husband was not obligated to pay the wife's taxes assessed on the stock transfer.
Judgment affirmed.
DWYER and PIERCE, JJ., concur.