Railroad-Machinery Club of NY v. United States, 48932.

• Decision Date: 06 March 1951
• Docket Number: No. 48932.,48932.
• Citation: 95 F. Supp. 822,118 Ct. Cl. 542
• Parties: RAILROAD-MACHINERY CLUB OF NEW YORK, Inc., v. UNITED STATES.
• Court: U.S. Claims Court

95 F. Supp. 822

118 Ct. Cl. 542

RAILROAD-MACHINERY CLUB OF NEW YORK, Inc., v. UNITED STATES.

No. 48932.

United States Court of Claims.

Decided March 6, 1951.

Alexander H. Elder, New York City, for the plaintiff.

Joseph H. Sheppard, Washington, D. C., with whom was Asst. Atty. Gen. Theron Lamar Caudle, for the defendant. Andrew D. Sharpe and A. F. Prescott, Washington, D. C., were on the brief.

Before JONES, Chief Judge, and LITTLETON, WHITAKER, MADDEN and HOWELL, Judges.

WHITAKER, Judge.

On the ground that it is merely a luncheon club and not a social club, plaintiff sues to recover taxes levied on its members for admissions and dues to the club.

From 1924 to 1928 one of plaintiff's predecessors, the Railroad Club, collected taxes on dues and initiation fees from its members and remitted the taxes to the Federal Government. In 1928 it filed a claim for refund, which was allowed. In 1935 the Railroad Club was consolidated with the Machinery Club. The members of the consolidated club were not required to pay taxes until 1942, when, after the decision of the Third Circuit Court of Appeals in Duquesne Club v. Bell, 127 F. 2d 363, 143 A.L.R. 1377, the Commissioner required it to collect taxes.

Then in 1946 the Deputy Commissioner of Internal Revenue notified plaintiff that it was not a social, athletic or sporting club and was not subject to the tax. Whereupon, plaintiff filed a claim for refund; but in the meantime the First Circuit Court of Appeals in Turks Head Club v. Broderick, 166 F.2d 877, had held that clubs similar to plaintiff were obliged to collect the tax, and following this decision the Commissioner of Internal Revenue disallowed the claim. This suit followed.

One of plaintiff's predecessors, the Railroad Club, occupied the 21st floor and about one-third of the 22d floor of the Hudson Terminal Building, 30 Church Street, New York City. Plaintiff's other predecessor, the Machinery Club, occupied the other wing of the Hudson Terminal Building at 50 Church Street. The operation of the two clubs was not financially successful and they merged in 1935 under the name of the Railroad-Machinery Club of New York, Inc., and the consolidated club thereafter occupied the 21st floor and a part of the 22d floor of the Hudson Terminal Building, 30 Church Street, New York City.

The large majority of the members of the consolidated club were composed of people dealing in railroad supplies, in machinery and tools, and of certain manufacturers of such things. A sizable number of its members were engaged in operating railroads and utilities, and another large segment of its membership was engaged in railroad and steamship engineering and construction. The remaining members were engaged in various activities.

This latter miscellaneous group accounted for a little more than 20 percent of plaintiff's members. About 50 percent of its members were people engaged in the sale of railroad supplies, machinery, and tools, and in manufacturing. The rest were railroad and utility people.

The consolidated club had no predominant business purpose. It was designed primarily to afford a convenient place for its members to get together for luncheon for either social intercourse or to discuss business at that time. It had a number of private dining rooms which could be retained for either social or business purposes. It had a large lounge, attractively furnished, with quite a number of business magazines, and, in addition, such magazines as Time, Life, Esquire, the New Yorker, Colliers, the Saturday Evening Post, Punch, Sketch, the London News, and morning and afternoon newspapers.

In addition to the private dining rooms, it had a grill room accommodating about 150, and a dining room that would accommodate 200 or so.

All of this was on the 21st floor. In addition, the club occupied about one-third of the 22d floor. This floor, except for the manager's office and employees' dining and locker rooms, was designed for the wives, daughters, etc., of the members, but by special arrangement other ladies and their guests could use it, although not of the household of a member of the club. These quarters were quite attractively furnished. There was a lounge, where cocktails were served, and a dining room.

On the 21st floor there was a bar 38 feet long, with tables and chairs, where drinks were served. Two bartenders attended this bar. One came on duty at 10 a. m. and left...