Pickett v. United States, 11229.

• Citation: 100 F.2d 909
• Decision Date: 27 December 1938
• Docket Number: No. 11229.,11229.
• Parties: PICKETT v. UNITED STATES.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

100 F.2d 909 (1938)

PICKETT v. UNITED STATES.^*

No. 11229.

Circuit Court of Appeals, Eighth Circuit.

December 27, 1938.

Elmer B. Hodges, of Kansas City, Mo. (Albert F. Hillix and Gage, Hillix, Hodges & Cowherd, all of Kansas City, Mo., on the brief), for appellant.

Paul S. McMahon, Sp. Asst. to the Atty. Gen. (James W. Morris, Asst. Atty. Gen., J. Louis Monarch and Milford S. Zimmerman, Sp. Assts. to the Atty. Gen., and Maurice M. Milligan, U. S. Atty., and Sam C. Blair, Asst. U. S. Atty., both of Kansas City, Mo., on the brief), for the United States.

Before SANBORN, WOODROUGH, and THOMAS, Circuit Judges.

WOODROUGH, Circuit Judge.

James F. Pickett, the plaintiff in the court below, is an attorney who was employed by the Collector of the Revenue for Jackson County, Missouri, to collect delinquent taxes. He appeals from a judgment against him holding that the fees received for this work were subject to federal income tax.

It appears that appellant acted as attorney for the Collector of Jackson County during the years 1932 and 1933, pursuant to a written agreement which provided that the collector, "in accordance with and by virtue of Section 9952, R.S.Missouri 1929, as amended Mo.St.Ann. § 9952, p. 7993 * * *, does hereby employ James F. Pickett * * * as attorney to institute and prosecute all suits for the collection of taxes which are now and shall become delinquent during his present term of office against land or real property located in Range 33, Jackson County, Missouri, said James F. Pickett as such attorney, to receive as compensation for his services 10 per cent (10%) of the amount of taxes actually collected and paid into the treasury on suits instituted by him, and an additional sum of Three ($3.00) Dollars for each suit where publication is necessary." * * * "Said John R. Ranson, as Collector, deems it necessary to employ said James F. Pickett, as such attorney, and the said James F. Pickett does hereby accept the above employment and agrees to institute and prosecute all of such suits and to perform all services necessary as such attorney for the compensation named aforesaid."

It was agreed in the contract that it might be revoked at any time by the Collector.

Judge Truman, Presiding Judge of the County Court of Jackson County, approved the contract, but refused to administer an oath of office to Mr. Pickett, which was requested on the theory that the contract made him a state officer. Mr. Pickett petitioned for mandamus to the Supreme Court of Missouri to compel Judge Truman to administer the oath of office, but that court, sitting en banc, denied the petition. State ex rel. Pickett v. Truman, 333 Mo. 1018, 64 S.W.2d 105.

At the time the contract was entered into appellant had a law office in a suburban community of Kansas City at some distance from the downtown or business district. The Collector advised him that in order to properly discharge his duties as attorney it would be necessary for him to be more accessible to the general public, and appellant accordingly moved his office to one of the better known downtown office buildings where he shared a suite with some other attorneys. Appellant also observed the Collector's notice that a proper discharge of the duties required the attorney to keep regular office hours so that he would be available to taxpayers without unduly burdening them. The duties did not, however, prevent appellant from continuing his private practice, except as performance of these duties might diminish the time he would have available for such private practice. He did some legal work connected with his former practice and at least one or two suits were filed by a young man in his office in his name. There was no proof that appellant turned away any clients who came to him for advice or professional services.

The routine of appellant's service was described by appellant and the chief clerk in the Collector's office. Their testimony was that the Collector's office prepared the statements of various pieces of property upon which the taxes were delinquent and sent the statements to plaintiff's office. Plaintiff left blank petitions with the Collector's office which the employees filled in with the names of the property owners and a description of the property and the amount of the taxes, and the employees of the Collector's office took the petitions to the office of the Clerk of the Circuit Court and filed them. The Collector selected the property upon which suit was to be filed. The Collector told plaintiff not to have service issued on these suits, but to send notices to the property owners that their taxes were delinquent and that suit had been filed thereon. The petitions which were filed were upon a printed form. In preparing these, appellant used as his guide an old form theretofore in use, changing it "to meet certain requirements." The Collector would transmit a stack of notices (copied in multiple) to plaintiff to send out to delinquent taxpayers, and plaintiff would have them sent, and at the end of about a month's time he would send the remaining copies of the notices back to the Collector's office. There the employees of that office would check the ones which had been paid and send the remaining ones back for second notices, continuing this procedure until a total of five notices had been sent, three to the property owners and two to the mortgagee. The Collector selected the parties to whom the notices were to be sent, and appellant never sent notices to any one else. The Collector determined the time when suits should be filed. During all the time that plaintiff was employed as delinquent tax attorney no suits were reduced to judgment and no property was sold. Appellant spent a lot of time talking in his office to the people who were delinquent in their taxes.

Appellant stated that the Collector retained control of the procedure followed after suit had been filed, at least as to preparing and selecting the notices to be sent and the time for sending them. No authority was given appellant to abate or settle taxes upon which suit had been filed. Appellant testified that in all of his activities in the institution of the suit, computation of taxes, notices to the taxpayers, and the final disposition of the suit, he was acting at all times under the instruction of the Collector and was subject to his direction and control.

The compensation of an attorney retained to collect delinquent taxes is fixed by the statute of Missouri referred to in the contract at an amount not to exceed 10 per cent of the amount collected, and this amount, when suit is prosecuted to judgment, is to be collected as costs. Appellant testified that he received his compensation from the Collector who made the payments as "he understood, from the general fund." He received some $49,000 for his services in 1932 and some $26,000 in 1933. He did not return these amounts as taxable, although he did in his returns claim as deductions for expenses some $6,000 for 1932 and $2,000 for 1933, representing largely sums paid to individuals in the Collector's office for assistance rendered and for making his work easier and more pleasant. The Income Tax Commissioner assessed the tax against appellant computed on the basis that the amounts of $49,000 and $26,000 received by him constituted taxable income. Appellant paid the taxes under protest and brought this action to recover the alleged wrongful exaction. A jury was waived in the District Court and the Court found, after trial, that in view of the Missouri statute, appellant's work was not that of a mere employee of the Collector, but was that of an attorney. Relying upon the decision of this court in Burnet v. Jones, 8 Cir., 50 F.2d 14, the Court concluded that appellant had not made an overpayment of taxes and judgment of dismissal was entered. Appellant's contention here is that the amounts he earned for legal services to the Collector were tax exempt as compensation paid to an employee of a state official for services rendered in performance of an essential governmental function of the state.

It is not disputed that taxation and the collection of taxes are essential governmental functions. The issue in the present case is as to the nature of plaintiff's participation in the performance of the function. As was said by the Supreme Court in Helvering v. Gerhardt, 304 U.S. 405, loc. cit. 420, 58 S.Ct. 969, loc. cit. 975, 82 L.Ed. 1427, "even though the function be thought important enough to demand immunity from a tax upon the state itself, it is not necessarily protected from a tax which well may be substantially or entirely absorbed by private persons. Metcalf & Eddy v. Mitchell 269 U.S. 514, 46 S.Ct. 172, 70 L.Ed. 384, Willcuts v. Bunn, 282 U.S. 216, 51 S.Ct. 125, 75 L.Ed. 304, 71 A.L.R. 1260." The argument has centered upon the question whether Mr. Pickett's employment by the Collector ought to be distinguished from the employment of those attorneys whose incomes have been held taxable in Helvering v. Therrell, 303 U.S. 218, 58 S.Ct. 539, 82 L.Ed. 758; Burnet v. Jones, 8 Cir., 50 F.2d 14; Burnet v. McDonough, 8 Cir., 46 F.2d 944, and cases therein cited.

The rights and duties of an attorney retained by a Collector to collect back taxes have been defined by the Supreme Court of Missouri. In State ex rel. McKittrick v. Bair, 333 Mo. 1, 63 S.W.2d 64, the Collector resisted as unconstitutional an act remitting the statutory penalty which attached to delinquent taxes and out of which the attorney was to be paid. The court said, page 14, 63 S.W.2d page 65,

"The attorney's fees are provided for by section 9952 of the Revised Statutes of 1929 Mo.St.Ann. § 9952, p. 7993, which, after providing that the collector shall proceed to enforce the payment of delinquent taxes charged on any lot or tract, by suit to enforce the lien thereon, further provides in substance that for such purpose the collector shall have power, with the approval of the...