Freedman v. Commissioner of Internal Revenue, 6327.

• Citation: 92 F.2d 150
• Decision Date: 23 August 1937
• Docket Number: No. 6327.,6327.
• Parties: FREEDMAN v. COMMISSIONER OF INTERNAL REVENUE.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

92 F.2d 150 (1937)

FREEDMAN v. COMMISSIONER OF INTERNAL REVENUE.^*

No. 6327.

Circuit Court of Appeals, Third Circuit.

August 23, 1937.

Wm. A. Schnader, of Philadelphia, Pa., and John W. Townsend, of Washington, D. C., for petitioner.

James W. Morris, Asst. Atty. Gen., and Sewall Key, Norman D. Keller, and Howard P. Locke, Sp. Assts. to the Atty. Gen., for respondent.

Herbert Pope, of Chicago, Ill., amicus curiæ.

Before BUFFINGTON and BIGGS, Circuit Judges, and DICKINSON, District Judge.

BUFFINGTON, Circuit Judge.

This is an appeal by the taxpayer from an order of the federal Tax Board assessing income tax against him, and the question involved is: "Was the annual salary of $3,000 received by petitioner in 1932 for services rendered as an attorney in the Department of Justice of the Commonwealth of Pennsylvania exempt from the Federal Income tax?" The facts, which are not in dispute, are thus stated by the Tax Board:

"The department of justice and the department of banking are administrative divisions of the Commonwealth of Pennsylvania. The head of the department of justice is the attorney general and the head of the department of banking is the secretary of banking, these offices being provided for by statute. The attorney general has statutory power `to appoint and fix the compensation of special deputy attorneys general, and special attorneys, to represent the Commonwealth, for any department, board, or commission thereof, in special work or in particular cases.' Purdon's Penna.Stats. title 71, § 296 71 P.S.Pa. § 296. The secretary of banking is by statute given broad powers over banks within the commonwealth. When it appears to him that a bank is in an unsafe or unsound condition he may, after notice and hearing and with the consent of the attorney general, take possession of the business and property of the bank; under certain conditions he may take possession without hearing and without the attorney general's consent. When he takes possession of a bank, he is vested with `all the rights, powers, and duties of a receiver appointed by any court of equity in this Commonwealth;' while in possession of the bank he is `the representative of the creditors' thereof. The banking law provides that, in the case of banks the property of which is in the possession of the secretary of banking, all expenses in connection with such possession and of continuing the business or of liquidation `shall first be payable out of the funds of' such bank `including the compensation of special deputies, assistants, and others employed by the secretary to assist him in such proceedings; the allowance of all such expenses to be subject to the approval of the court.' Purdon's Penna.Stats. title 7, §§ 29, 49 7 P.S. Pa. §§ 29, 49.

"The petitioner was assigned to work under special deputy attorneys general in Philadelphia County in connection with legal matters pertaining to closed banks in that county. Such closed banks were being liquidated by the secretary of banking pursuant to statute. The petitioner's duties consisted of attempting to collect debts due such closed banks, rendering legal opinions to the deputy receivers in charge thereof, handling the legal matters for the banking department that came up from surrounding counties, prosecuting suits in court, consulting with creditors, depositors, and stockholders of closed banks concerning their claims, procuring substitute trustees for trust estates being administered by such banks, preparing, filing, and presenting accounts in the Orphans' Court, preparing data in connection with the proposed state banking code, and `in general anything that was assigned by the Special Deputy Attorney General at the time.' Such attorneys were considered by the department of justice as `available for any purpose at any time.'

"The petitioner handled legal matters for the state banking department in connection with the liquidation of the Northern Central Trust Co., the Darby Bank & Trust Co., the United States Bank & Trust Co., the Central Trust & Savings Co., the Mortgage Security & Trust Co., the Park Trust Co., and the Wharton Trust Co., among other closed banks in the Philadelphia area. The petitioner was one of approximately twenty lawyers assigned to like work in Philadelphia County.

"The particular work and the matters to which the petitioner gave attention were determined by the attorney general's office. He was free to use his discretion only in simple matters. In regard to all proposed litigation and appeals, he was required first to consult with his superior officers. He was required to follow prescribed forms issued by the attorney general's office as to preparation of documents and pleadings. His legal opinions were reviewed and often revised by his superiors before being issued. Likewise, briefs were reviewed and frequently entirely redrafted. All matters of policy in particular cases were decided by the attorney general and his deputies. The petitioner's advice to depositors of closed banks was limited to matters on which his superiors had ruled. All...