Woods v. Nicholas, 3464.

• Decision Date: 05 September 1947
• Docket Number: No. 3464.,3464.
• Citation: 163 F.2d 615
• Parties: WOODS v. NICHOLAS.
• Court: U.S. Court of Appeals — Tenth Circuit

163 F.2d 615 (1947)

WOODS v. NICHOLAS.

No. 3464.

Circuit Court of Appeals, Tenth Circuit.

September 5, 1947.

Morrison Shafroth, of Denver, Colo. (Charles H. Haines, Jr. and John F. Mueller, both of Denver, Colo., on the brief), for appellant.

Arthur L. Jacobs, of Brooklyn, N. Y. (Sewall Key, Acting Asst. Atty. Gen., A. F. Prescott and Maurice P. Wolk, Sp. Assts. to the Atty. Gen., and Ivor O. Wingren, U. S. Atty., of Denver, Colo., on the brief), for appellee.

Before PHILLIPS and BRATTON, Circuit Judges.

BRATTON, Circuit Judge.

Forrest M. Woods, hereinafter referred to as the taxpayer, instituted this action against Ralph Nicholas, Collector of Internal Revenue for the District of Colorado, hereinafter referred to as the collector, to recover social security taxes paid under protest for the years 1941 and 1943 pursuant to section 901, Title IX of the Social Security Act, 49 Stat. 639, section 1600 of the Internal Revenue Code, 26 U.S.C.A. Int. Rev.Code, § 1600.

These facts were established on the trial. For some time prior to 1933, the taxpayer owned and operated the Zone Cab Company in the City of Denver. In 1932, the city passed an ordinance which provided among other things that thereafter licenses to operate taxicabs should issue only to those engaged in the operation of cabs under the municipal code on April 15, 1932. The effect of the ordinance was to grant to those operating cabs on that date a limited franchise to continue in the business, and to exclude others. In 1933, the taxpayer sold all of his cabs but retained the right to the license; and he owned a certificate of convenience and necessity issued by the Public Utilities Commission of Colorado authorizing the operation of cabs within a prescribed radius outside the City of Denver. The business continued under the name of Zone Cab Company, but other individuals owned the cabs operated on the line, all of which were painted alike and bore the name Zone Cab Company. In order to comply with the requirements of the city, the legal title to the several cabs was carried in the name of the taxpayer, and the necessary certificates and other documents relating to the titles were deposited with the Manager of Safety of the city, but he was not the equitable owner of the cabs. He obtained license plates for the cabs, but the equitable owners reimbursed him at least in part for the cost. He carried public liability insurance on all cabs operated in the name of the company, but the equitable owners made reimbursement for the outlay. And he handled all of the advertising connected with the business. He determined in the first instance whether a particular vehicle should become a member of the fleet of cabs. Sometimes cabs on the line changed hands, passing from one owner to another; and in such an event, his records were changed and he took steps to have the records of the city changed accordingly. He maintained a garage at which the cabs were serviced, maintained a switchboard through which calls for cabs were passed, and maintained several call stations at different places in the city. He kept on hand a supply of gasoline, and the drivers of all cabs operated on the line were required to buy their gasoline from him. He employed a manager, a bookkeeper, a mechanic, and three telephone operators who also served as dispatchers. The owners and drivers of the taxicabs reimbursed him for a small part of the rent on the garage and of the salaries of the telephone operators. The manager assisted in the supervision of the garage and the equipment of the taxpayer, and he sometimes dealt with complaints of patrons. The owners of the cabs furnished one mechanic. Some of the owners drove their own cabs for one shift; and in each such instance, the owner had another driver operate the cab on the opposite shift. In some instances, an owner owned more than one cab; and in some, the driver did not own a cab. The owners and drivers held meetings from time to time to formulate policies and to promulgate rules and regulations for drivers. The taxpayer and and his manager attended some of the meetings and sometimes participated in them to the extent of making suggestions. At such meetings, a day boss and a night boss were selected from the drivers who acted as foremen during their regular shift as drivers, but they served without pay. As such foremen, they employed, disciplined, suspended, and discharged drivers; and they posted rules and regulations promulgated by the owners. Whether a driver worked on the day shift or the night shift was determined by agreement of the owners and drivers. The owner of a cab could object to a particular driver operating his cab, and in that event the foreman on that shift placed the name of the driver at the foot of the extra board. The taxpayer was paid a fixed fee for the privilege of operating the cabs under his license and certificate of convenience and necessity. The fee was $3.30 per day for each cab. As the end of a shift, the driver of the cab turned into the taxpayer a worksheet, and paid to him the amount of the fixed fee and the amount due for gasoline. The driver also turned into him an amount representing the contribution of the driver to the crash fund and the sick fund maintained by the owners and drivers for their own benefit, the amount due by the driver to the salary of the dispatchers, and the amount due on rent on the garage. And if the driver did not own the taxicab, he also paid to the taxpayer the amount of a fixed fee due the owner of the cab for its use. These payments were made without reference to the amount the driver had collected from patrons during the shift. The driver kept and retained as his compensation all amounts collected from patrons over and above that paid to the taxpayer, and no accounting was made to the taxpayer of the excess. The taxpayer received the funds paid to him and made disbursement accordingly. While the taxpayer was at the place of business almost every day, ordinarily he remained there only for about an hour. The manager was there more than that, but he too was absent a large part of the time.

Entertaining the view that the individuals driving the taxicabs operated under the name of Zone Cab Company were employees of the taxpayer within the scope and meaning of the Social Security Act, and that the taxpayer was liable for the excise tax upon the remuneration earned by the drivers, the court entered judgment for the collector, and the taxpayer appealed.

The Collector presents the preliminary contention that the appeal should be dismissed because it was prematurely taken. On July 18, 1946, the court filed findings of fact and conclusions of law. These concluded with the statement that "judgment will be entered against the plaintiff and in favor of the defendant. Counsel will draw up a proper form of judgment." On the day of the filing of the findings of fact and conclusions of law, the clerk made the following entry in the docket, "July 18, 1946: Order: Findings of fact and conclusions of law and dismissal of action at pltf's costs." The clerk wrote the attorneys advising that findings of fact, conclusions of law, and decree were made and entered in the cause. On July 27, the taxpayer filed a motion for new trial; on September 3, the motion for new trial was denied; and on November 27, notice of appeal was filed in which it was recited that the appeal was from the final judgment entered July 18. On January 10, 1947, the court entered a formal judgment expressly reciting that the action be dismissed with prejudice as of July 18, 1946; and that the records be corrected in accordance therewith. The point now urged is that no final judgment was entered until January 10, 1947, and that the appeal previously taken was premature. Rule of Civil Procedure 58, 28 U.S.C.A. following section 723, provides in material part that when the court directs that there be no recovery, the clerk shall enter judgment forthwith upon receipt by him of the direction, and that the notation of a judgment in the civil docket as provided in Rule 79(a) shall constitute the entry of the judgment. Rule 79(a) provides among other things that the clerk shall keep a book known as civil docket, and that all judgments shall be noted therein on the folio assigned to the action. The entry made in the docket on July 18, constituted a judgment within the intent and meaning of the rules of civil procedure. The formal judgment with its nunc pro tunc provision was not necessary as a prerequisite to the taking of the appeal. The appeal was properly taken from the original judgment and therefore it was not premature in time.

Coming to the merits, section 1600 of the Internal Revenue Code, supra, lays an excise tax upon every employer, as defined in section 1607(a), equal to three per cent of the total wages, as defined in section 1607 (b), paid by him during the calendar year with respect to employment, as defined in section 1607(c). Section 1607(a) defines the term "employer" to mean a person having eight or more individuals in his employment for the time therein specified. With certain exceptions not having any material bearing here, section 1607(b) defines the term "wages" to mean all remuneration for employment, including the cash value of all remuneration paid in any medium other than cash. Section 1607(c) provides in material part that the term "employment" means any service of whatever nature performed by an employee for the person employing him. And Treasury Regulation 107, promulgated under the statute provides in substance that generally the relationship of employer and employee exists when the person for whom the services are performed has the right to control and direct the result to be accomplished and the details and means by which the result is accomplished; that it is unnecessary that the employer actually direct and control the manner in which the services are performed; that it is sufficient if he has...