Martin v. Wichita Cab Co.

• Decision Date: 08 June 1946
• Docket Number: 36550.
• Citation: 170 P.2d 147,161 Kan. 510
• Parties: MARTIN v. WICHITA CAB CO. et al.
• Court: Kansas Supreme Court

170 P.2d 147

161 Kan. 510

MARTIN v. WICHITA CAB CO. et al.

No. 36550.

Supreme Court of Kansas

June 8, 1946

Appeal from District Court, Sedgwick County, Division No. 4; Isaac N. Williams, Judge.

Action by Bessie Lee Martin against the Wichita Cab Company, in which a receiver was appointed for defendant, and Lynn R Brodrick, Collector of Internal Revenue, filed claims for federal taxes assessed against defendant and the receiver. From a judgment sustaining the receiver's objections to allowance of the claims and disallowing them, the Collector appeals.

Syllabus by the Court.

1. The record examined in a receivership action wherein the Collector of Internal Revenue filed claims for federal social security, victory and withholding taxes asserted against the Wichita Cab Company and its receiver under 26 U.S.C.A.Int.Rev.Code, §§ 1400, 1410, 1600, and held, that the finding inherent in the trial court's judgment that the relationship between the company or its receiver and the drivers of cabs was not that of master and servant but one of contractor and contractee akin to a bailment, is supported by the evidence.

2. The record further examined, and held, that the evidence does not compel a conclusion as a matter of law that the relationship shown to exist between the cab company or its receiver and the drivers of cabs was that of master and servant.

Maurice P. Wolk, Sp. Asst. to the Atty. Gen. (Samuel O. Clark, Jr. Asst. Atty. Gen., Sewall Key, Sp. Asst. to the Atty. Gen and Randolph Carpenter, U.S. Atty., and Eugene W. Davis, Asst. U.S. Atty., both of Topeka, on the brief), for appellant.

I. H. Stearns, of Wichita (H. C. Castor and E. P. Villepigue, both of Wichita, on the brief), for appellee.

THIELE Justice.

In an action instituted for that purpose a receiver was appointed for the Wichita Cab Company who was ordered to manage, control and operate the company. Creditors were ordered to file their claims and the Collector of Internal Revenue filed claims for federal taxes assessed against the company and its receiver. The receiver filed written objections to the allowance of the claims and a hearing having been had, the trial court sustained the objections and disallowed the claims. The collector appeals.

In a preliminary way it may be said the issue arises by reason of the relation between the company and the drivers of its cabs, the general question being whether the relation between them was that of employer and employee, bailor and bailee, independent contractor, or some other relation.

The collector filed his claims which set out stated amounts for specified periods in the years 1940 to 1944 both inclusive of federal social security, victory and withholding taxes asserted under federal statutes against the company and its receiver, in an aggregate sum of $46,412.01. Without recitation of detail, the total of these claims was later asserted to be $43,696.13, and a later claim was made for further taxes asserted to have become due subsequent to the commencement of the action in the additional sum of $3,715.88.

The receiver filed lengthy objections to the allowance of the claims, included in which are allegations that the agreements between the receiver and the drivers and owners of cabs and the prior agreements between the company and the drivers and owners of cabs created the relationship of hiring, bailment or other similar relationship, and that neither the receiver nor the cab company was ever an employer within the meaning of the federal tax statutes, and that there never was or became anything due from the receiver or the cab company to any person as wages or otherwise, and that no wages or salaries were ever due or paid by the receiver or the company to any of the drivers. If necessary further objections will be referred to later.

At the trial on the claims the collector made a prima facie case by offering certified copies of the assessment lists covering the taxes for which the claims were filed. Insofar as the relationship between the company and its drivers was concerned there was no evidence of any written agreements between the company, or its receiver, and the drivers of cabs. The evidence of the receiver showed that the company was formed in 1940, and that it followed the same practice as to drivers as was used by the old Wichita Cab Company before the present company; that the company did not pay cab drivers any sum as salary or wages; that the company owned thirty-four or thirty-five cabs and operated sixteen privately owned cabs; that there were night and day shifts; that the driver of a company-owned cab paid $5.50 per day rental on the day shift and $7 per day on the night shift; that on privately owned cabs the owner, if he drove himself, paid $4 per day and if another driver had the cab he paid $3. Drivers were not compelled to wear uniforms and did not belong to any union. All cabs were painted black and white and bore a distinctive insignia composed of a circular design, with the words 'Wichita Cab' around the circle and the word 'dial' in the center with the telephone number of the company. The name of the owner of a privately owned cab did not appear on the cab. Each cab also bore a number. All cabs were licensed by the City of Wichita and licenses were issued in the name of the company on its cabs and in the names of the owners of the privately owned cabs. The company had a garage and office in the same building. It had a switchboard and call boxes at various locations and a stand at the Union Bus Depot. The company advertised at its own expense. It employed four switchboard operators, who acted as dispatchers, two starters, three mechanics, a grease man and three office workers. The salaries of these individuals were paid by the company (taxes on these employees are not here involved). In the case of company-owned cabs the company paid for up-keep and tires, and all drivers paid for their own gasoline. All drivers of both classes of cabs received the same benefits from advertising, use of call boxes and loading stations. For some time the cab company had operated on a zone system of rates, but at the time of the trial, the system was a mileage system. Rates were set by the City of Wichita. Complaints for overcharge were made to the company, which adjusted them as best it could, the driver was talked to and admonished about overcharges but no driver was discharged for overcharging. Meetings of drivers were held and each driver was given a printed notice that before he took a cob he must see that his gas tank was full and he would be required to pay for a refill when he checked in, and that he must check his head and tail lights; that he must see that he had accident report card and pencil and must report every accident regardless of the amount of damage; that any driver getting a speeding ticket would be discharged at once; that he must call in twice an hour; that he must check his load before leaving depot so that passengers might be unloaded in route as nearly as possible, and that courteous treatment was required in all circumstances. The company could refuse to permit a driver to operate a cab at any time. It may be further noted that there was some testimony with respect to income tax returns made by drivers individually, and it was agreed the deputy collector would furnish a statement to be prepared by him. We note from that statement that during 1943 the total number of drivers of cabs was 170 and during 1944 it was 234.

The taxes mentioned in the claims filed by the collector were imposed under Sections 1400, 1410 and 1600 of the Internal Revenue Code, as amended. 26 U.S.C.A.Int.Rev.Code, §§ 1400, 1410, 1600. These several sections, and pertinent portions of the acts of which they are part, provide for taxes on employers and employees with respect to employment, and while the language of the various acts differs somewhat, it is conceded that if the relationship of employer and employee did not exist, then no tax could be lawfully asserted, and, under the circumstances of this case, the claims of the collector were properly disallowed. We shall not make any detailed analysis of the sections mentioned.

As has been stated, the trial court disallowed the claims of the collector. No findings of fact were made, and under such circumstance, it must be held that any conflict arising from the testimony, and the weight to be given varying inferences from the testimony, were resolved in favor of the receiver; and further, that it is inherent in the trial court's ruling that the relationship of employer and employee was found not to exist.

Although not so specifically stated in his brief, the effect of appellant's argument is that the evidence warranted only a finding that the relationship of employer and employee existed, and a finding to the contrary was against the evidence and erroneous as a matter of law.

Appellant directs our attention to portions of the regulations promulgated by the Commissioner of Internal Revenue, and quotes from Section 402.204 of Treasury Regulation 106 promulgated under the Federal Insurance Contributions Act, 26 U.S.C.A. Int.Rev.Code, § 1400 et seq., and from Section 403.204 of Treasury Regulations 107 promulgated under the Federal Unemployment Tax Act, 26 U.S.C.A. Int.Rev.Code, § 1600 et seq., defining employment as follows:

'Generally such relationship exists when the person for whom services are performed has the right to control and direct the

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