Century Country Club v. United States, 471-52.

• Decision Date: 01 December 1953
• Docket Number: No. 471-52.,471-52.
• Citation: 116 F. Supp. 727
• Parties: CENTURY COUNTRY CLUB v. UNITED STATES.
• Court: U.S. Claims Court

116 F. Supp. 727

CENTURY COUNTRY CLUB v. UNITED STATES.

No. 471-52.

United States Court of Claims

December 1, 1953.

Allen Blank, New York City, for plaintiff.

H. S. Fessenden, Washington, D. C., with whom was H. Brian Holland, Asst. Atty. Gen., for defendant. Andrew D. Sharpe and Ellis N. Slack, Washington, D. C., were on the brief.

Before JONES, Chief Judge, and LITTLETON and MADDEN, Judges.

JONES, Chief Judge.

The plaintiff, Century Country Club, on behalf of its members seeks a refund of taxes paid during the years 1947, 1949 and 1950 on assessments which the club had made against its members, and which the members had paid.

The facts have been stipulated.

The club had four classes of members —regular, special, non-resident and honorary.

The stated objects in the original certificate of incorporation were

"to promote social intercourse among its members, to encourage and stimulate an interest in outdoor sports, and to provide its members with the conveniences of a Club House and of lands where such outdoor sports may be indulged in, and generally to do and perform any and all acts in any wise appertaining to the specific objects hereinbefore set forth."

Article V of the by-laws which were in force during the period involved, stipulated among other things, that the entire direction, management and control of the club "shall be vested in its Board of Governors", and that "from time to time whenever in their judgment the financial condition of the Club shall require the same" the Board is empowered "to levy assessments" on the members of the club.

Under this authority the Board of Governors levied assessments in 1947, 1949 and 1950 on all members of the club. These were in addition to the regular dues, which were substantial.

These assessments, including taxes, were paid and the taxes remitted to the Collector of Internal Revenue, 14th District, New York.

For the years involved plaintiff reported and remitted taxes on assessments in the sum of $8,731 and included $7,968.50 on club dues, a total of $16,699.50.

Suit was regularly filed for a refund of $16,023.50 on the ground that these assessments were not taxable under section 1710 of the Internal Revenue Code, 26 U.S.C.A. § 1710. Plaintiff claims that under the statutes of New York a membership corporation has only those powers conferred by its charter or certificate of incorporation, and that since the certificate of plaintiff did not confer the power to levy such assessments they were not legally enforceable and therefore not taxable.

The plaintiff cites three cases¹ in which the assessments were held invalid. In each of those cases, however, the club's by-laws did not authorize the Board of Governors to levy assessments. In each of those cases the members were solicited to sign an agreement for an assessment or to make a contribution. Not all of the members were willing to sign an agreement, or to make contributions, and no effort was made to collect from the delinquents.

In the case at bar there was no solicitation, but a fixed assessment which all the members paid.

Plaintiff concedes this distinction but claims that since the certificate of incorporation did not authorize the levy of assessments, the Board of Governors had no such power, the by-laws to the contrary notwithstanding, that as a consequence the distinction disappears, and that thus the levy was not legally enforceable, and therefore not taxable.

We do not regard this position as tenable. If this position were correct neither dues nor assessments would have been enforceable; and since the certificate does not specifically authorize either, there would have been no way to finance the operation of the club or to accomplish its objects. The certificate of incorporation authorized the club, inter alia, to "stimulate an interest in outdoor sports * * * to provide its members with the conveniences of a Club House and of lands where such outdoor sports may be indulged in, and generally to do and perform any and all acts in any wise appertaining to the specific objects hereinbefore set forth."

It seems to us that implicit in this language is authority to do whatever was reasonably necessary to carry out the stated objectives. Otherwise the club could not function and from a practical viewpoint none of its...