Kaus v. Huston

• Decision Date: 17 October 1940
• Docket Number: No. 22,22
• Citation: 35 F. Supp. 327
• Parties: KAUS v. HUSTON, Collector of Internal Revenue for District of Iowa.
• Court: U.S. District Court — Northern District of Iowa

35 F. Supp. 327

KAUS v. HUSTON, Collector of Internal Revenue for District of Iowa.

No. 22, Civ.

District Court, N. D. Iowa, Cedar Rapids Division.

October 17, 1940.

Peter J. Kaus, pro se, and William E. Mitchell and Don H. Jackson, both of Council Bluffs, Iowa, for plaintiff.

Edward G. Dunn, U. S. Atty., Wm. B. Danforth, Asst. U. S. Atty., both of Mason City, Iowa, and Thomas G. Carney, Sp. Asst. U. S. Atty. Gen., for defendant.

SCOTT, District Judge.

Findings of Fact.

1. Plaintiff is a resident and engaged in business at the city of Council Bluffs, Iowa, and is the owner of a line of taxicabs with a central garage, shop and office with telephone equipment connected with ten outlying stations maintained for communication with taxicab drivers. That the defendant is the Collector of Internal Revenue for the District of Iowa.

2. Plaintiff's taxicab line consists of ten cabs, which are operated in two twelve hour shifts per day, from 6 A. M. to 6 P. M., and from 6 P. M. to 6 A. M. That the cabs are operated by twenty men, each man driving a cab for one shift during the twenty-four hour period. Each of these drivers operates his cab under an arrangement with the plaintiff, the legal effect of which must be determined in a decision of this case, unless defendant's contention that the case must be determined on the face of the complaint and the defendant's motion to dismiss is upheld.

3. Plaintiff from time to time inserts in Council Bluffs' newspapers an advertisement substantially as follows: "United Cab Co. Prompt, Courteous Service, Call 3434, 628 W. Broadway." And in addition contains a picture of one of the cabs. Each of plaintiff's cabs carries on its sides: "United Cab Co. Tel. 3434."

4. That plaintiff lists his business in the Council Bluffs' telephone directory as follows: "United Cab Co. Prompt, Courteous Service, Call 3434. 628 W. Broadway."

5. That calls for taxicab service are received at plaintiff's central office over the telephone system maintained in Council Bluffs, and when received are transmitted to the outlying taxicab station nearest to the origin of the call, and if the cab there is not available the call is transmitted to the next nearest, and so on. That the usual conversation between patrons and the central office when cab service is called for is substantially as follows:

Operator: "United Cab Co."

Caller: "This is John Doe, 711 Plank Street. Will you send a cab?"

Operator: "Yes, right away."

6. That plaintiff is licensed under the provisions of an ordinance of the city of Council Bluffs to conduct a taxicab business, and each of the drivers of the cabs is licensed under the provisions of an ordinance of the city of Council Bluffs as a chauffeur of a taxicab.

7. That plaintiff carries a policy or policies of liability insurance covering all of his cabs, in which policy or policies plaintiff is named as the assured.

8. That there are no meters or other mechanical devices attached to the cabs for the purpose of computing the fares collected by the driver, but there is a prevailing arrangement between all taxicab companies and their drivers at Council Bluffs for the observance of a particular schedule of charges. This arrangement is not always lived up to and as occasion may be thought to warrant, is deviated from in the discretion of the drivers.

9. That plaintiff does not pay the drivers of his cabs a definite per diem or per shift wage, but orally agrees with each driver that he shall pay or turn in to the plaintiff for each twelve hour shift the sum of $3, and in addition pay for the gasoline consumed, and all repairs of cab or tires occasioned by the driver during the shift, that is, each driver receives his cab at the beginning of the shift with a full tank of gas in good driving condition, and is required to return it at the end of his shift in the same condition, all of the balance of the earnings of the cab during the shift is retained by the driver as his own remuneration. Plaintiff impresses upon the driver that he is a lessee of the cab for the period of twelve hours. The arrangement between plaintiff and each driver may be terminated by either party at any time. If a driver takes a day or days off, or quits, his place is filled by another driver from a waiting list maintained by the plaintiff.

10. Plaintiff's taxicabs are mortgaged and plaintiff's financial condition, as shown by the evidence, is not strong and plaintiff's personal testimony would indicate that to pay the tax in question would be severely burdensome.

11. The undisputed verbal testimony of plaintiff and two drivers tends to show that the drivers may refuse calls in their discretion, and do so on occasions if not deemed remunerative.

12. That plaintiff in arranging with his drivers uses expressions resembling a verbal leasing of the cab, the purpose being, as the Court finds, to avoid liability to the taxation in question.

13. That each of the drivers had knowledge and were familiar with all of the facts heretofore found.

14. That plaintiff is not a mere lessor of taxicabs, but operates his line of taxicabs as a common carrier of passengers for hire.

Conclusions of Law.

From the foregoing facts found, I conclude as matters of law the following:

1. That when a patron for taxicab service calls plaintiff's telephone number he receives the response of plaintiff's operator, asks for the furnishing of a cab, and is assured that the cab will be furnished in response to and in conformity with his call, a contract for taxicab service is concluded with the plaintiff on the one part as a carrier and the patron on the other part as the passenger or the representative of the passenger.

2. That plaintiff assumes and is obligated to fulfill all obligations of a carrier to passengers hiring and riding in his cabs, and plaintiff is entitled to the protection of an assured with respect to liability policies carried in connection with the operation of his cabs.

3. That the plaintiff's arrangement with the drivers of his taxicabs when all related facts are considered does not amount to a true leasing of the respective cabs, but to an ingenious method of determining and fixing a fair remuneration to the drivers for their service.

4. That neither the tax provision in § 1400, 26 U.S.C.A. Int.Rev.Code, nor the tax provision in § 1600, 26 U.S.C.A. Int.Rev.Code, are shown to be illegal.

5. That neither the tax provision in § 1400, 26 U.S.C.A. Int.Rev.Code, nor the tax provision in § 1600, 26 U.S.C.A. Int. Rev.Code, are shown to be illegal as applied to the plaintiff.

6. That the circumstances which the evidence in this case tends to establish are not sufficient to exclude the case from the prohibition of § 3653 of 26 U.S.C.A. the Internal Revenue Code.

7. That in order to be excluded from the prohibition of § 3653 of 26 U.S.C.A. the Internal Revenue Code and obtain the extraordinary remedy of injunction, plaintiff has the burden of establishing two propositions: first, that the tax challenged is illegal; and second, that the circumstances of the case are so peculiar that his administrative remedy under existing law together with the right of action to recover in a court the amount paid is not an adequate remedy at law.

8. That in view of the last preceding conclusion, the Court is warranted in taking and considering evidence on the trial bearing upon both of the propositions stated in Conclusion No. 7.

9. That plaintiff has not established his right to the equitable remedy of injunction to restrain the assessment or collection of any of the taxes in question.

10. That the defendant is entitled to a judgment dismissing the plaintiff's complaint at plaintiff's costs.

This is an action to enjoin the assessment and collection of taxes under Title VIII, § 801, and Title IX, § 901, of the Social Security Act approved August 14, 1935 (Chap. 9, 26 U.S.C.A. Int.Rev.Code, §§ 1400 and 1600), and also praying for general equitable relief. Defendant filed motion to dismiss upon the ground that relief by injunction is prohibited by § 3653 of 26 U.S.C.A. Internal Revenue Code, approved February 10, 1939, and that § 274d of the Judicial Code, 28 U.S.C.A. § 400, prohibits entering a declaratory judgment with respect to Federal taxes, apparently assuming that such might be urged under the general prayer. The motion was assigned and a pre-trial conference called for the same time. The conference was held, and by Order hearing and determination of the motion was deferred until the trial. Thereupon the defendant answered in three divisions, first, setting up the same defenses specified in his motion; second, pleading failure to state a claim upon which relief can be granted; and, third, admitting, denying knowledge and information, and denying factually the respective paragraphs of plaintiff's complaint.

Plaintiff's complaint comprises fourteen numbered paragraphs alleging in substance as follows: (1) that plaintiff is an individual doing business as United Cab Company; (2) that defendant is Collector of Internal Revenue for the District of Iowa; (3) that defendant is charged with the duty of assessing and collecting taxes levied under the Social Security Act of 1935; (4) that Title VIII provides (then setting forth the definitions of the terms "wages", "employment", etc.); (5) further allegations relative to the meaning of the terms "employer" and "wages". (6) That plaintiff is engaged in the business of renting automobiles to be used as taxicabs for hire, such renting being under oral leases to the individuals for period of twelve consecutive hours at $3.25 per period. That plaintiff agrees to furnish the respective automobiles in good running order, to supply the individuals with telephone and switchboard service, connected with various points in the City of Council Bluffs, Iowa, and to assist said individuals in conducting their business as taxicab operators. The individuals renting agree to furnish gas and tire...