Therrell v. Commissioner of Internal Revenue

• Decision Date: 09 March 1937
• Docket Number: No. 8212.,8212.
• Citation: 88 F.2d 869
• Parties: THERRELL v. COMMISSIONER OF INTERNAL REVENUE.
• Court: U.S. Court of Appeals — Fifth Circuit

88 F.2d 869 (1937)

THERRELL v. COMMISSIONER OF INTERNAL REVENUE.

No. 8212.

Circuit Court of Appeals, Fifth Circuit.

March 9, 1937.

H. M. Voorhis, of Orlando, Fla., and H. M. Hampton, of Ocala, Fla., for petitioner.

Howard P. Locke, J. Louis Monarch, and Sewall Key, Sp. Assts. to Atty. Gen., Robert H. Jackson and James W. Morris, Asst. Attys. Gen., and Herman Oliphant, Gen. Counsel, Dept. of Treasury, and Christopher A. Ray, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., for respondent contra.

Before FOSTER, SIBLEY, and HUTCHESON, Circuit Judges.

SIBLEY, Circuit Judge.

An additional tax was assessed by the Commissioner and sustained by the Board of Tax Appeals against John H. Therrell for the years 1931 and 1932 because of income received by him in those years as liquidator of a number of Florida banks and trust companies. The only question is whether the Federal Constitution prohibits taxation by the United States of this income earned in the service of the State of Florida. The Board held that Therrell was neither officer nor employee of the State of Florida, but an independent contractor whose compensation was taxable, relying directly on Davie et al. v. Com'r, 26 B.T.A. 1007, and Metcalf & Eddy v. Mitchell, 269 U.S. 514, 46 S.Ct. 172, 70 L. Ed. 384.

We judicially notice the statutes of Florida and their provisions for the establishment of banks and trust companies, for their supervision, and for their winding up. Comp.Gen.Laws Fla. § 6053 and following, and especially sections 6102, 6102 (1), 6104, 6105, relating to liquidators. The State Comptroller when a bank or trust company is found insolvent or threatened with insolvency, or is in an unsound condition or violating the banking laws, "may * * * appoint a liquidator to take charge of the assets and affairs of such bank, and require of him such bond and security as the Comptroller deems proper * * * and such liquidator shall be subject to dismissal by the Comptroller. * * * Such liquidator under the direction and supervision of the Comptroller, shall take possession of the books; records and assets of every description of such bank * * * and in his name shall sue for and collect all debts, dues and claims belonging to it, and upon the order of a court of competent jurisdiction may sell or compound all bad or doubtful debts, and, on a like order, may sell all the real and personal property * * * and * * * sue for and enforce the individual liability of the stockholders. Such liquidator shall pay all money received by him to the State Treasurer to be held as a special deposit * * * and shall also make quarterly reports to or when called upon, to the Comptroller." Comp.Gen.Laws Supp.Fla. § 6102. The appointment is, after notice to the bank, confirmed by the circuit court. The expenses of liquidation are paid out of the fund in the Treasurer's hands. "The compensation of the liquidator shall be fixed by the Comptroller, and shall be based upon the amount of work actually necessary and performed, and shall in no case exceed five per cent. of the cash collections." Comp.Gen.Laws Supp.Fla. § 6105. Therrell was appointed liquidator of a number of banks, and gave substantially all his time to the work. He had no commission from the Governor and took no oath of office, but he had formal appointments by the Comptroller under his official seal confirmed by the court, and gave a bond for his faithful conduct touching each bank approved by the Comptroller.

The case of Davie et al. v. Com'r, cited by the Board, was of attorneys at law who under leave of a statute were employed by the Georgia Superintendent of Banks to do certain legal work touching failed banks, their duties and compensation being entirely matters of private agreement. The conclusion reached that they were independent contractors, mere lawyers practicing their profession though having a public officer as a client, is well supported by the cases of Lucas v. Howard, 280 U.S. 526, 50 S.Ct. 87, 74 L.Ed. 593, and Lucas v. Reed, 281 U.S. 699, 50 S.Ct. 352, 74 L.Ed. 1125. Metcalf & Eddy v. Mitchell involved in much the same way consulting engineers. But such is not the case here. The liquidator does not contract with the Comptroller for a desired result, nor do they fix by agreement the liquidator's duties or compensation. The Comptroller appoints him to a public position created by law with duties and responsibilities fixed by law and guaranteed by a bond, and with a compensation also regulated by law. There is a formal commission signed, not by the Governor but by another high state officer. The work to be done includes collecting and suing, but extends to rehabilitation of the bank if possible and to conserving and safeguarding its assets in every way, and if finally insolvent to distributing its assets in conjunction with the Comptroller. He becomes the representative not of the bank or its creditors but of the Comptroller, the instrument of the state for executing its banking laws and doing justice to the bank's creditors and stockholders in its liquidation. He is not chosen by the bank or its creditors, but over their heads. It is superficial to say that they pay him. The state by its officer does that out of the bank's money, not by the consent of the bank or its creditors but by the state's power, an exaction not unlike the levying of a tax for the purpose. He has no contract rights with any one, for the Comptroller may remove him at any time. All he does is under the direction and subject to the revision of the Comptroller. In Florida Bank & Trust Co. v. Yaffey, 102 Fla. 723, 136 So. 399, 401, it is said: "A bank liquidator in this state, under the statutes providing for his appointment and controlling his duties, is a representative or agent of the comptroller and is not an officer of the court." He takes title to the assets and though the Comptroller has complete power over him a judgment against the liquidator binds the Comptroller. Amos, Compt., v. Powell, 108 Fla. 139, 146 So. 195. This court said in Amos v. Trust Co. of Florida, 54 F.(2d) 286, 288: "Like the receiver of a national bank, the liquidator, though confirmed by a court, is not an officer of the court, but the representative of the comptroller." His appointment, powers, and compensation are in complete analogy to those of a national bank receiver under 12 U.S.C.A. §§ 67, 191, 192. Of such a receiver it was said in Re Chetwood, 165 U.S. 443, 458, 17 S.Ct. 385, 391, 41 L.Ed. 782: "The receiver was not the officer of any court, but the agent and officer of the United States." And in Auten v. United States Nat. Bank, 174 U.S. 125, 141, 19 S.Ct. 628, 634, 43 L.Ed. 920: "A receiver of a national bank appointed by the comptroller of the currency, and is an officer of the United States" as respects the jurisdiction of a federal court. In United States v. Weitzel, 246 U.S. 533, 541, 38 S.Ct. 381, 382, 62 L.Ed. 872, the court asserts: "The receiver, unlike a president, director, cashier, or teller, is an officer, not of the corporation, but of the United States. * * * As such he gives to the United States a bond for the faithful discharge of his duties; pays to the Treasurer of the United States moneys collected; and makes to the Comptroller reports of his acts and proceedings. * * * Being an officer of the United States he is represented in court by the United States attorney for the district, subject to the supervision of the Solicitor of the Treasury. * * * And because he is such officer, a receiver has been permitted to sue in the federal court regardless of citizenship or of the amount in controversy." The function of a national bank receiver could not be taxed by a state by taxing his compensation, and no more can the function of the State bank liquidator be taxed in the same way by the United States.

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