valuable consideration

In December 1927, the taxpayer contemplated trading in the stock market during 1928 after deciding that conditions were favorable. He consulted a lawyer who advised that it was possible for him to trade in trust for his children and other members of his family. He stated to them that he declared a trust of his stock trading during 1928 for the benefit of his family. Taxpayer agreed to assume personally any losses resulting from the venture, and to distribute the profits, if any, in equal shares to his wife, mother, and two minor children after deducting a reasonable compensation for his services. The taxpayer’s two children were one and three years of age at the time. During 1928 the taxpayer carried on the trading operations contemplated. At the end of the year he determined his compensation at slightly less than $10,000, which he reported in his income tax return for that year. The profits remaining were then divided in approximately equal shares among the members of his family, and the amounts were reported in their respective tax returns for 1928. The amounts allocated to the beneficiaries were credited to them on the taxpayer’s books, but they did not receive the cash except to a small extent in the case of the taxpayer’s mother. The Board of Tax Appeals held that the income in controversy was taxable to the petitioner as a part of his gross income for 1928 and decided that there was a deficiency. The petitioner seeks review of that decision in this court.

The suit was instituted on several covenants contained in a deed made by John Peck, the defendant in error, conveying to Robert Fletcher, the plaintiff in error, certain lands which were part of a large purchase made by James Gunn and others, in the year 1795, from the state of Georgia. The contract for which was made in the form of a bill passed by the legislature of that state. The first count set forth a breach in the covenant that the legislature of the state of Georgia at the time of passing the act of sale had good right to sell and dispose of the same in manner pointed out by the said act. The second count assigned as a breach that the original grantees had promised and assured members of the legislature an interest in the lands if they voted for the bill. The third count alleged that a subsequent legislature passed an act annulling and rescinding the law under which the conveyance to the original grantees was made. The fourth count assigned as a breach that the right to the soil was in the United States and not in Georgia. In the circuit court there were demurrers to three pleas and a special verdict found on an issue joined on the fourth plea. The pleas were all sustained and judgment was rendered for the defendant. After the opinion of the court was delivered on the initial demurrers, the parties agreed to amend the pleadings and the cause was continued for further consideration. The special verdict found the grant of Carolina by Charles the second to the Earl of Clarendon and others. It found the subsequent erection of Georgia as a colony. It found the surrender of the grantees to the crown in 1752. It found the appointment of governors with commissions describing the boundaries. It found the 1763 proclamation creating new colonies and reserving lands on the western waters for the use of the Indians. It found the 1787 convention between South Carolina and Georgia settling their boundary line. The verdict described the situation of the lands in such manner that their lying within the limits of Georgia as defined in the proclamation of 1763, in the treaty of peace, and in the convention between that state and South Carolina has not been questioned. The case comes before this court on the amended pleadings consisting of sundry demurrers and the special verdict.

In February 1911, thirty out of thirty-nine owners of property fronting both sides of Labadie Avenue between Taylor Avenue and Cora Avenue in St. Louis signed a recorded agreement. The agreement restricted the use and occupancy of the properties for fifty years to persons of the Caucasian race. It excluded occupancy by people of the Negro or Mongolian race. The district included fifty-seven parcels of land. The signers held title to forty-seven parcels. At the time, five parcels were owned by Negroes, with one occupied by Negro families since 1882. On August 11, 1945, the Shelley petitioners, who are Negroes, purchased one parcel from Fitzgerald by warranty deed for valuable consideration without knowledge of the restriction. On October 9, 1945, respondents sued in the Circuit Court of St. Louis to restrain the Shelleys and divest title. The trial court denied relief, but the Supreme Court of Missouri reversed and directed enforcement. In June 1934, Ferguson and his wife executed a contract restricting their Detroit property to Caucasian occupancy. The restriction was effective only if at least eighty percent of the lots in the block were subjected to similar restrictions. The restrictions were to remain in effect until January 1, 1960. Similar agreements covered eighty percent of the lots. By deed dated November 30, 1944, the McGhee petitioners, who were Negroes, acquired and occupied the Detroit property. On January 30, 1945, respondents sued in Wayne County Circuit Court. The court ordered them to move within ninety days and enjoined future occupancy. The Supreme Court of Michigan affirmed. Petitioners claimed that judicial enforcement violated the Fourteenth Amendment.

Kansas adopted a constitutional amendment in 1880 prohibiting the manufacture and sale of intoxicating liquors except for medical, scientific, and mechanical purposes. To implement this, the legislature passed an act in February 1881, effective May 1, 1881, that criminalized manufacturing or selling such liquors without permits for the permitted purposes and declared violating establishments common nuisances subject to abatement. An 1885 amendatory act further detailed the nuisance procedures. Peter Mugler faced two indictments in Saline County for selling and manufacturing intoxicating liquors without the required license or permit after the 1881 act took effect. He was convicted in both cases, fined one hundred dollars each, and ordered jailed until payment. The Supreme Court of Kansas affirmed both judgments. In a separate proceeding, the State of Kansas petitioned in Atchison County court to declare the brewery of Ziebold & Hagelin a common nuisance, abate it, and enjoin prohibited uses. The defendants removed the case to the United States Circuit Court for the District of Kansas on federal question grounds. After recasting pleadings for equity, the circuit court dismissed the suit, prompting the State's appeal. Mugler and Ziebold & Hagelin had constructed their breweries specifically for beer production years before the 1880 amendment and continued operations without permits after the 1881 statute. The buildings and machinery held little value for other uses, and Mugler's single proven sale involved beer made prior to the act's effective date.