City Athletic Club v. United States

• Decision Date: 08 March 1957
• Docket Number: No. 226,Docket 24336.,226
• Citation: 242 F.2d 43
• Parties: CITY ATHLETIC CLUB, Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

242 F.2d 43 (1957)

CITY ATHLETIC CLUB, Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee.

No. 226, Docket 24336.

United States Court of Appeals Second Circuit.

Argued February 7 and 8, 1957.

Decided March 8, 1957.

Kaye, Scholer, Fierman & Hays, New York City (Jay O. Kramer, New York City, of counsel), for plaintiff-appellant.

Paul W. Williams, U. S. Atty. for Southern Dist. of New York, New York City (Foster Bam, Asst. U. S. Atty., New York City, of counsel), for defendant-appellee.

Before CLARK, Chief Judge, MEDINA, Circuit Judge, and J. JOSEPH SMITH, District Judge.

J. JOSEPH SMITH, District Judge.

Plaintiff City Athletic Club was organized as a Membership Corporation under New York law. Pursuant to a vote of its members, it levied on all its members an assessment in 1948 payable if desired in monthly instalments over a two year period. The assessment, to raise additional funds for repairs, replacements and improvements to the club's property, which was for an amount over and above the regularly collected dues, was billed to the members without the usual reference to suspension for nonpayment of indebtedness. The assessment was paid substantially in full by all the members during the period April 1, 1948 to October 1, 1950 in the amount of $71,837.73. An additional amount of $14,392.27 was collected by the club as tax on the amount paid on the assessment, and paid over by the club to the Collector of Internal Revenue, Third District, New York, as a tax on dues under Section 1710 and 1712(a) of the Internal Revenue Code of 1939, 26 U. S.C.A. §§ 1710, 1712(a). Claim for refund was timely filed on January 8, 1955 by the plaintiff on behalf of its members, rejected by notice of disallowance, and action for refund was brought in the District Court for the Southern District of New York. The action was tried before Judge Walsh and resulted in judgment for the defendant. From this judgment plaintiff appeals.

The applicable sections in force at the time of the payment of the assessment were 1710(a), "There shall be levied, assessed, collected, and paid — (1) Dues or membership fees. A tax equivalent to 20 per centum of any amount paid as dues or membership fees to any social, athletic, or sporting club or organization, if the dues or fees of an active resident annual member are in excess of $10 per year." and 1712(a), "Dues. The term `dues' includes any assessment, irrespective of the purpose for which made, and any charges for social privileges or facilities, or for golf, tennis, polo, swimming, or other athletic or sporting privileges or facilities, for any period of more than six days."

Judge Walsh distinguished Garden City Golf Club v. Corwin, 2 Cir., 62 F.2d 246. He pointed to the "permissive" nature of the assessment in the Garden City case, the irregular response, and the lack of effort there to compel collections. While we agree that the result reached by Judge Walsh is clearly correct, we would so hold even if the cases were not to some degree distinguishable on the facts. The interpretation of the Act in the Garden City case appears to us unsound. That case held the payments voluntary and not assessments within the meaning of the Act. The language of the opinion, followed in Fresh Meadow Country Club, Inc., v. U.S., D.C.E.D.N.Y., 17 F.Supp. 400 and Pendennis Club v. U. S., D.C. W.D.Ky., 20 F.Supp. 758, makes the deciding factor enforceability of...