Masonic Country Club v. Holden

• Decision Date: 06 April 1927
• Docket Number: No. 4735.,4735.
• Citation: 18 F.2d 553
• Parties: MASONIC COUNTRY CLUB OF WESTERN MICHIGAN v. HOLDEN, Collector.
• Court: U.S. Court of Appeals — Sixth Circuit

18 F.2d 553 (1927)

MASONIC COUNTRY CLUB OF WESTERN MICHIGAN v. HOLDEN, Collector.

No. 4735.

Circuit Court of Appeals, Sixth Circuit.

April 6, 1927.

William K. Clute, of Grand Rapids, Mich., for plaintiff in error.

Lyndon H. Baylies, of Washington, D. C. (Edward J. Bowman, of Grand Rapids, Mich., and Alexander W. Gregg and Ralph S. Scott, both of Washington, D. C., on the brief), for defendant in error.

Before DENISON and MOORMAN, Circuit Judges, and WESTENHAVER, District Judge.

DENISON, Circuit Judge.

The Revenue Law of 1921 provides in section 801 that a tax shall be paid on "any amount paid * * * as dues or membership fees * * * to any social * * * club * * * or as initiation fees to such a club." Comp. St. § 6309 5/8b. It also provides that life members shall pay no tax upon the amount paid for life membership, but shall pay a tax equivalent to that paid by active annual members upon their dues. The Masonic Country Club, organized after this law was in effect, and as a nonprofit corporation, under Michigan laws, provided in its by-laws for several classes of membership: (a) Honor roll life members were those who purchased from the club ten or more shares of stock. They paid no further sum for such membership and paid no annual dues. (b) Regular life members became such by purchasing at least one share of stock and being elected. If the share was purchased from the club, they paid nothing further for the membership. If the share was purchased from a former stockholder, they paid $50 initiation fee. They paid annual dues. (c) Active annual resident members became such by election. The initiation fee was $100; then there were annual dues.

An applicant for "regular life" membership bought one share of stock, paying into the company treasury $100 therefor. A tax was assessed upon this payment as being upon an initiation fee. He paid the tax under protest and assigned to the club his right to recover. It brought this suit, failed therein, and brought this writ of error. A jury was waived, and the facts were fully found by the trial judge.

This member was by the corporate organization papers declared to be a regular life member; if he was such a member within the intent of the definition in the act, he was by the terms of the law exempted from paying a tax upon an initiation fee; but it is forcefully claimed that to give this appellation to him is a misnomer, and that the attempt of the by-laws thus to classify him is a mere subterfuge, to evade the tax otherwise assessable. We need not consider this contention, because it is immaterial what he is called, if he does not, in substance, pay an initiation fee. He does not do so in form; what he does is to buy corporate stock; and this he continues to own, in most respects like any stockholder in an ordinary corporation. He joins in the election of directors, and, except that his right to sell the stock is limited by the condition that the...