Mr. DUNBAR. My learned colleagues have discussed so thoroughly the constitutional aspects of this question that I intend to devote myself entirely to a discussion of the equities of the situation. I hope to be able to demonstrate to your committee that the proposed bill is unfair, inequitable, and discriminatory, and should not be adopted by Congress, irrespective of any question as to whether the legislation might or might not be sustained by the Supreme Court of the United States. I say this, of course, with the reservation that my opinion is in accord with the opinion that has been expressed by my learned colleagues with reference to the constitutional aspects of the bill.

Mr. HILL. You are an attorney?

Mr. DUNBAR. Yes. I may say that, jointly, with Monte M. Lemonn, of New Orleans, I handled the case of Pfaff v. Bender (282 U.S. 129), which is the Louisiana test case, which went to the Supreme Court, and in which a unanimous opinion was given that Louisiana wives have a full half ownership in community property, and that the husband was the managing agent. This case will be put into the record.

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The difficulty about discussing community property is that on the surface there is an apparent inequity and an apparent discrimination, because we are inclined to think only of results and do not analyze the facts and conditions from which the results flow. I am going to try to use the language of the street in illustrating this. Congress is looking at this as a practical matter, and I feel they are entitled to have it discussed in a pratical way. I am not going to quote authorities, but with the permission of the committee I am going to file a short memorandum containing citations of authorities and statutes in support of the statements I am making here today. There seems to be a general feeling in noncommunity-property States that the community-property system is a "theory a fiction", some legislative fiat, which results in our making a different. income-tax return and avoiding certain surtaxes, as distinguished from noncommunity States. I want to say that the community partnership, as created by law, is a real, substantial partnership, more analogous to commercial partnerships, as known to the common law, than any other legal status, and that, as a result of that partnership, the wife has certain practical substantial rights and the husband. has certain burdens, and limitations, and restrictions that are clear, and they do not exist in any noncommunity-property State. If that is true, we are not getting any advantage; we are being treated differently because we are different.

Now, the first phase of the community system I want to discuss, because there has been some confusion about it, is the question of the husband's right to manage the property by making contracts and conveying property in our State, without the joinder of the wife which some States require. Of course, that is not a difficult thing to explain, and it does not mean dominion, because the husband, when he sells a hundred shares of American Telephone & Telegraph Co. stock that belongs to the community and buys a hundred shares of United States Steel stock, the Steel stock also belongs to the community. He is merely the managing agent; or, if you want to adopt another common-law analogy, he is an agent with a general power

of attorney from the wife, given to him by law, with authority to manage with reasonable discretion the community partnership, and this right to manage is similar to the right of a board of directors to manage the property of a corporation. The board of directors of a corporation can buy and sell property and manage the affairs of the corporation, provided they do not use it for their own benefit, and provided they are not fraudulent and provided their mismanagement is not so gross as to warrant the supervision of a court. I propose to show that this is, as a practical matter, similar to the husband's management in Louisiana.

The husband in Louisiana is not only restricted as to gifts of community property and income, but we have an express statute which prohibits him from disposing of the community property in fraud of his wife's rights. The power of our courts of equity is a potential protection to the wife against any misuse or selfish use or private use of the community partnership property by the husband. The husband is a fiduciary; he is an agent; if he attempts to buy an automobile for his mistress, or to spend that money in debauchery, that is a disposition of the community property in violation of the wife's rights and is a fraud on her, just as it would be if the board of directors of a corporation spends the corporation's money for their own private purposes, or if a trustee at common law appropriated for private and selfish purposes the trust property and income. If a trustee in a common-law State has the full power of management of the property, he can sell it, change its form, use his discretion in the investment of trust funds, but he cannot use trust property and income for private purposes.

I want to give practical illustrations in answer to the point referred to by Mr. Frear. I am going to take one practical typical case and eliminate for the moment the wife's separate earnings and profits from her separate business which also fall into the community in Louisiana. It has already been suggested that an amendment might be made to eliminate this particular inequity. I am going to eliminate it temporarily, for the purpose of discussion, to show that the proposed bill would still be unfair, and of course, it would be unconstitutional, even if it is confined to property acquired by the husband during the marriage because it will for Federal Tax purposes treat as the property and income of the husband, property and income which in law and practical fact belongs to the wife. The case I take is a simple case of a husband and wife who, through thrift, have accumulated a business, the balance sheet of which shows it is worth a half million dollars. The wife, we will assume, has not earned anything or contributed financially to the business. The business has been built up with community property but was earned by the husband, physically earned and saved by the husband. Under the law of Louisiana the wife has a present existing half ownership in that business; the husband, as I have already explained, cannot give away that business, at least to the extent of the wife's half interest; he cannot dispose of any part of that business, or dissipate it in fraud of his wife's rights. Further than that, if he is incompetent and I want to emphasize this-if he is incompetent, or if he mismanages the business, or if he is reckless and a gambler, and our Supreme Court has said that if he has a "speculative disposition ", the wife has under such circumstances, the right in Louisiana to ask for what we call a separa

tion of property, which involves a dissolution of the community partnership and a liquidation of the community partnership property which is similar to the liquidation of a commercial partnership for mismanagement at common law. Upon a showing to the court that the husband is mismanaging the community partnership property, or is incompetent, or that he is physically incapable, or of a speculative disposition, she can go into court and obtain a separation of property which dissolves the community and removes the husband from management and control; she immediately obtains possession and the administration of her half, and thereafter she has the same rights with respect to her half as she would have in a noncommunity-property State.

She takes all her property away and the agency of the husband ceases; his half of the property is his but her half is free from any further administration or management on the part of the husband. That is as substantial a right as anyone can have in a partnership, to dissolve the partnership for fraud or mismanagement and revoke the agency, and the Louisiana law gives her these various rights. If the husband is fraudulently disposing of community property a separation will be granted. Please remember he does not have to defraud her and he does not have to spend it in debauchery, to give her this right of separation of property, because even if he is mismanaging the property the court will grant a dissolution of the community partnership and force an accounting.

I want to say at this point that if you have a business with a balance sheet of $500,000, that means you have to borrow, in these times, $250,000 to pay to the wife, or you have to liquidate a concern, which is a very destructive process, if it is an accumulated business. If the husband has a salary-and we have been talking about only the small salaries, we have not been talking about the salaries where there is a large bank account-that salary has to be divided and delivered over in case of a separation of property. Moreover, if the husband has a bank account he cannot give away the wife's half in fraud of his wife's rights and he cannot donate her half in fraud of his wife's rights. I would like to emphasize that a separation of property does not involve a divorce and can be granted while the spouses are living together.

Mr. SHALLENBERGER. On that question of salary distributionMr. DUNBAR (interposing). I am coming to that.

Mr. SHALLENBERGER (continuing). She could not be denied her right in that salary under certain conditions, if it is not expended. If a man has been receiving a large salary and in his spending of that money he has not accounted to her for her half, after he has wasted his salary, does she have any claim thereto?

Mr. DUNBAR. Of course, any money spent for the upkeep of the family and children is considered a legitimate community expense. If you can show that he has spent it on a mistress or in taking a trip to Europe with his mistress, he is accountable for it in connection with the liquidation of the community partnership when the separation of property is granted.

Mr. SHALLENBERGER. For her half?

Mr. DUNBAR. Yes; for her half. Moreover in Louisiana a husband can only will half of his property, and that is true in prac

tically all the other community States. When he sits down to will his property-and I am still talking not about her side of it, but the property they want to say under this bill is so under the control of the husband that he owns it; he cannot will, but half of it. The other half is subject to the testamentary disposition of the wife. She can, if she chooses, will it to her lover, and in the business situation that I have mentioned, if the wife dies the husband, having acquired the $500,000 business which the proposed bill will tax as his property, is compelled to liquidate his $500,000 business, if he cannot adjust the matter with the lawyer of the lover, and give $250,000 to the legatee of the wife. I give this extreme case to show that the wife's ownership is not a fiction but a practical rugged fact.

It is unnecessary for me to repeat as I go along that in the first case I mentioned, in noncommunity States, if you acquire a $500,000 business, you can give it to anybody you please; you can give it to your mistress, or your friend, or your church. If you want to mismanage it, that is your business; if you want to speculate with it, you can speculate with it and the wife has no complaint for the very good reason that it all belongs to the husband. In Louisiana the husband cannot do these things because the wife is the owner of half of the community-partnership property and income.

Mr. HILL. You are talking about non-community-property States? Mr. DUNBAR. Non-community-property States by way of comparison. The reason the husband can give it away in a noncommunity-property State is because all of it belongs to him. The reason that he can will it all away, the reason he can speculate and gamble with it or dissipate it, is because it belongs to him. The reason he cannot do any of these things in Louisiana is because half of it does not belong to him but to his wife.

Moreover, in Louisiana, if the wife dies without a will, the heirs of the wife inherit half the property because the wife owns half of the property. In a common-law State or non-community-property State the wife's heirs do not inherit anything because all of the property is owned by the husband. We have a case cited in our brief where the illegitimate children of the wife whom the husband did not know anything about, inherited the wife's half of the community partnership property and income, on the death of the wife, to the exclusion of the husband, and he had to divide the community property and deliver half of it to the illegitimate children of the wife. Of course, in a common-law State or a non-community-property State that would not result, because the property acquired by the husband during marriage all belongs to the husband. And, by the way, in this connection, if the husband happens to be the legatee of the wife, if he happens to be named in her will, in connection with this $500,000 business he has built up, which I mentioned, if she dies, the law is clear that the wife owns half of it and that he inherits it from her. The husband is not only in the unfortunate situation of having lost his wife, but he pays an inheritance tax to both the State and the Federal Government for the privilege of receiving something which the Government says is his in substance. In short, he pays inheritance taxes for receiving this property which the Federal Government says the wife owns, yet at the same time the Treasury Department and the sponsors of

the pending bill say the husband ought to pay an income tax on the same property because it is in substance his.

In Louisiana, if the husband improperly pays his separate obligations, or improves his separate estate with money belonging to the community, his separate estate is accountable to the community and must reimburse the community partnership for the diversion of funds. Of course, in a noncommunity State this would not be possible, because it is his money and the husband can do anything he wants with it, but because in Louisiana the wife has a half interest in it, the husband cannot take money out of the community which is not to be used for the benefit of the community, but is to be used for his private benefit in violation of his duty as an agent and fiduciary.

In Louisiana, if there is a divorce, irrespective of cause, the divorce automatically dissolves the community and results in a liquidation of the community partnership property. The wife immediately gets one half of the liquidated value and the husband gets one half of the liquidated value, and this division of property has no relation to alimony at all. She gets half of the community property because she is the owner, and irrespective of who is at fault. A wife in Louisiana can run away with her lover and at the end of the divorce proceedings she can leave her lawyer behind, and in the example I have given, the husband either has to borrow $250,000 if he does not have it, or liquidate his $500,000 business and give $250,000 to the wife who can live thereafter with her lover in luxury. I do not want to be extreme, but in common-law States the wife could not even get alimony under such circumstances, because being guilty of adultery she would not be entitled to alimony. The reason she gets half in Louisiana is not because she has any merit before the court; it is because the management and control of the husband ceases, and being owner of half of the community partnership property, it is given to her when the partnership is dissolved, no matter what her character is or her guilty activities might have been.

I have illustrated and emphasized the practical aspects of the community partnership law because people talk about the husband in the common law States reporting all of the property acquired by him during marriage as his and in the community property States they say, due to some fiction or theory of half ownership on the part of the wife, he devides it. I wanted to show that the community partnership is real and substantial and not a fiction. It is divided because the wife owns half and she is entitled to divide it. You say you are going to produce uniformity by making us pay taxes according to a system of law that exists in the noncommunity-property States, but you are not going to, even if you could, restore to our husbands the rights which the husbands in the common-law-property States have with respect to property acquired during marriage. The proposed bill is obviously discriminatory and disregards the practical attributes of ownership resulting from the community system of law.

Judge Donworth said yesterday that he doubted that commonlaw States would adopt the community system. If community States were getting a tremendous advantage for tax purposes and the community partnership property system was a mere fiction,