Magruder v. Yellow Cab Co. of DC, 5193.
| Decision Date | 03 March 1944 |
| Docket Number | No. 5193.,5193. |
| Parties | MAGRUDER, Collector of Internal Revenue, v. YELLOW CAB CO. OF D. C., Inc. |
| Court | U.S. Court of Appeals — Fourth Circuit |
John W. Fisher, Sp. Asst. to Atty. Gen. (Samuel O. Clark, Jr., Asst. Atty. Gen., Sewall Key and J. Louis Monarch, Sp. Assts. to Atty. Gen., and Bernard J. Flynn, U. S. Atty., and T. Barton Harrington, Asst. U. S. Atty., both of Baltimore, Md., on the brief), for appellant.
John E. Hughes, of Washington, D. C. (William Cogger, of Washington, D. C., on the brief), for appellee.
Before PARKER, SOPER, and DOBIE, Circuit Judges.
Yellow Cab Company of D. C., Incorporated, (hereinafter called Yellow Cab), instituted a civil action in the United States District Court for the District of Maryland against M. Hampton Magruder, Collector of Internal Revenue (hereinafter called the Collector), to recover back $7,490.93 paid by Yellow Cab for federal insurance contribution taxes levied under the Internal Revenue Code, 26 U.S.C.A. §§ 1400, 1410, amending the Social Security Act of 1935. Judge Chesnut, sitting in the District Court without a jury, found in favor of Yellow Cab and entered judgment accordingly. Judge Chesnut wrote an elaborate opinion (49 F.Supp. 605) and made appropriate findings of fact and conclusions of law. The Collector has duly appealed.
In the brief of Yellow Cab it is stated: "This case might well be affirmed per curiam on the able opinion of Judge Chesnut". There is much of force and sweet reasonableness in this suggestion. The question, though, is one of no little public importance so that we shall add a brief commentary on this opinion, with which we find ourselves in hearty agreement, not only as to the conclusions reached but also as to the supporting reasoning and authorities.
It is crystal clear that two essential conditions precedent must concur in order that a valid tax may be here levied: (1) There must exist a relationship of employer and employee; (2) wages must be paid by the employer to the employee. In no uncertain terms, Judge Chesnut negatived the existence of both of these conditions precedent. To say, under the terms of Federal Rules of Civil Procedure, Rule 52(a), 28 U.S.C.A. following section 723c, that Judge Chesnut's findings and conclusions are not "clearly erroneous", is, we think, largely in the nature of an exaggerated euphemism. We proceed to a brief consideration of the two problems: (1) The relationship; (2) wages.
(1) The Relationship.
"The conclusion of the District Court that the relationship between the taxpayer and the drivers was that of lessor and lessee, and not that of employer and employee, rests upon a narrow technical analysis, and particularly the taxpayer's claimed want of control over the drivers." So we are told in the brief of the Collector. We cannot agree.
The applicable Treasury Regulations 106, Section 402.204, does set out as the proper criterion: "control of the employer not only as to what shall be done (by the employees) but how it shall be done." It is perfectly clear here, we think, that any such measure of control, as Judge Chesnut demonstrated, simply did not exist. It is easy to distinguish the case of Jones v. Goodson, 10 Cir., 121 F.2d 176 () by comparing the elaborate elements of control set out in Judge Bratton's opinion (121 F.2d at page 180) with Judge Chesnut's opinion in the instant case.
The contract which forms the basis here for the relationship between Yellow Cab and the drivers is quite clear and utterly lacking in ambiguity. This contract is in form a lease, it is called a lease, it contains the provisions normally found in a lease. The drivers acquire from Yellow Cab the possession and beneficial use of the taxicabs; Yellow Cab receives from the drivers a stipulated sum of money as rent paid for such use. We see in this contract the hired use of a thing, the classical bailment known as locatio rei, only that and nothing more.
And there is nothing here to indicate that this contract is a sham to cloak...
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