ALEXANDER v. ALEXANDER, 158 F.2d 429

HUXMAN, Circuit Judge. This was an action on a separation and property settlement contract between Charles Freeman Alexander, the appellant, and Marjorie Longan Alexander, the appel-lee. Prior to March 14, 1939, appellant and appellee were husband and wife. On March 7, 1939, they entered into a property settlement contract which is the basis of this litigation. The contract contained a number of provisions for the support of appellee and the children of the parties, most of which are not involved in this controversy. Only the second provision of Subsection 6 of the contract is involved in this litigation.

It reads as follows: “Second Party shall, on or before April 15th, in each year, until the death or remarriage of First Party, furnish and deliver to First Party, in Kansas City, Missouri, a true and certified copy of his federal income tax return for the preceding taxable calendar year, and if, as shown thereby or otherwise established, Second Party shall have gross income — from whatever source derived, excluding only capital gains — in any calendar year in excess of $7,500.00, then for every such calendar year Second Party, his estate and legal representatives shall pay to First Party, in Kansas City, Missouri, in Twelve (12) equal consecutive monthly installments, commencing on the first day of May following, a further and additional sum equal to twenty per cent (20%) of the amount by which such calendar year income of Second Party exceeds the sum of $7,500.00, as and for the further support and maintenance of First Party, until the death or remarriage of First Party.” Appellee obtained her divorce from appellant on March 14, 1939, and on the same day he married his present wife and moved to Texas, where he established his legal domicile and has continued to live there since.

The complaint in this case alleged that during the years in question appellant’s total income exceeded $7,500, and sought judgment for twenty per cent of such excess under the above provision of the contract. The trial court entered judgment as prayed for and it is from this judgment that this appeal is prosecuted. It was conceded at the trial that for the years in question the total earnings and income attributable to appellant’s efforts and to property which stood in his name exceeded $7,500. To illustrate, in 1943 appellant received by way of salary and otherwise, $14,161.42.

It is his contention, however, that under the Constitution and laws of Texas, where he now lives, this income constitutes community property and that therefore one-half thereof is the property of his wife, and that only one-half, or $7,-080.71, constitutes income to him. The question posed turns upon an

interpretation of the phrase “gross income” as the parties understood and used that term when they executed their contract. Some distinction is attempted to be drawn between the term “gross income” and “gross earnings.” While these two terms are not synonymous, neither _ is there a distinct cleavage in their meaning. Gross income has been defined variously as being the equivalent of gross proceeds, gross receipts, gross profits, gross income, or gross earnings. It is conceded that “gross income” is the broader term.

It includes gross earnings, as well as other items not strictly within the definition of gross earnings. ■ So that, by the use of the term “gross income” appellee got an interest not only in appellant’s gross earnings, but also in other items of his income in addition thereto. The term “gross income” does not carry the same definite and inflexible meaning under all circumstances and wherever used. Its meaning depends upon the subject under consideration, the connection in which it was used, and the results intended to be accomplished.

Our problem, then, is to ascertain the sense in which the parties used this term in their contract. To do this, it is necessary not only to consider the subject matter of the contract, but also the place of its execution, because the place where a contract is executed “governs its nature, validity, and

interpretation, unless it appears that the parties, when entering into the contract, intended to be bound by the law of some other place.” Gossard v. Gossard, 10 Cir., 149 F.2d 111, 112. Admittedly, this is a Missouri contract. The parties lived in Missouri, the contract was executed in Missouri, and was to be performed there. It follows that the contract is to be interpreted under the Missouri law. There is no uncertainty or ambiguity in the subject matter or the result sought to be accomplished by the execution of the-contract. The parties were husband and! wife, and had children.

They were separating, and it is quite apparent from the record that they contemplated a legal dissolution of their marital ties. The husband; recognized his continuing liability to make-financial contribution to the support of his. wife and children. This was the subject of the contract. The contributions were determined and measured by his ability to pay. Definite commitments were made, measuredi largely by his then existing ability to pay..

It is also quite apparent that the parties considered an increased ability to pay, resulting from increased earnings or income, and it was agreed and understood that in that event he should be liable for additional payments measured in terms of the increase. So they provided that in the years-in which his gross income exceeded $7,500-,. he should make an additional contribution, of twenty per cent of such increase. In what sense, then, did they use the-term “income” when they provided for this additional contribution? How shall we define the term to ascertain the sense in which they used it in their contract?

They did not have in mind any technical, dictionary definition or distinction between the terms “gross income”, “gross earnings”, or “gross profits.” Nor do we think that the term “gross income” should be technically defined by us in ascertaining the intent oí the parties under the contract. This being a Missouri coutract, it must be presumed that when the parties used the term “gross income,” they meant and understood “gross income” as that term is understood in Missouri and under Missouri law.

There can be no doubt what appellant’s income was, for instance, in 1943, under the Missouri law, had he remained in Missouri. Admittedly his income for that year in Missouri was $14,161.42, of which he would then owe to the appellee twenty per cent of the excess of that gross income over $7,500. Of course, he could go, to Texas, but when he went he did not take the contract with him. It remained in Missouri so io speak, a Missouri contract subject to Missouri law, and subject to

interpretation under that law. His removal to Texas did not change a Missouri contract into a Texas contract. His obligations under the contract still depended upon the law of Missouri, the place where the contract was made. When he executed this contract in Missouri, he fixed his liability under the canopy of the Missouri law, and he remains thereunder until the performance of the contract is completed. Affirmed. See 31 C.J., p. 401, Sec. 6; 38 C.J.S., Gross Income, p. 1081. See First Trust Co. of St. Paul v. Commonwealth Co., 8 Cir., 98 F.2d 27. See Turner v. New York Life Ins.

Co., 8 Cir., 100 F.2d 193; Sauder v. Dittmar, 10 Cir., 118 F.2d 524; Consolidated Flour Mills Co. v. File Bros. Wholesale Co., 10 Cir., 110 F.2d 926. In Cocke v. Vacuum Oil Co., 5 Cir., 63 F.2d 406, 407, appears the following statement: “We think that he (the district judge) was right in refusing to decide the cause upon the detached dictionary meaning of the terms used. In the field of contract law, perhaps more than in any other, the ‘letter killeth, the spirit givoth life.’ It is therefore the office of

interpretation to fully illumine words used in contracts that their meaning may be found. It is often almost, if not quite, true that in contracts words mean what their users choose them to mean, neither more nor less, for it is trae of most words that their shades of meaning are many, and that they take their color and content from the context and the subject-matter in connection with which they are used.” Naylor v. Baltzell, Fed.Cas.No.10,061; Balfour v. Wilkins, Fed.Cas.No.807.