Opinion
No. 42062.
June 4, 1934.
Claude M. Houchins, of Washington, D.C. (Walker Houchins, of Washington, D.C., on the brief), for plaintiff.
Frank K. Dyar, of Washington, D.C., and Frank J. Wideman, Asst. Atty. Gen., for defendant.
Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.
Suit by the Saginaw Club against the United States.
Judgment for defendant.
This is a suit for the recovery of the sum of $13,736.55, with interest, taxes on club dues alleged to have been erroneously assessed and collected by the Commissioner of Internal Revenue, on the ground that plaintiff was not a social, athletic, or sporting club within the meaning of section 501 of the Revenue Act of 1926 ( 26 USCA § 872 note), and section 413 of the Revenue Act of 1928 ( 26 USCA § 872).
This case having been heard by the Court of Claims, the court, upon the evidence adduced, makes the following special findings of fact:
I.
Plaintiff is a corporation organized in 1889 under the name East Saginaw Club. Its name was subsequently changed to Saginaw Club.
The purpose of the club is set forth in its constitution in the following language: "The purpose of this association is to promote social intercourse among its members, and to provide for them the convenience of a club house."
II.
Between August, 1927, and June, 1931, both inclusive, plaintiff paid to the collector of internal revenue at Detroit, Mich., as tax on the admission and dues of its members, the sum of $13,736.55.
Subsequent to the payment of said tax, plaintiff filed with the collector of internal revenue its claim for refund, in which plaintiff contended that these taxes were wrongfully paid since it was not a social, athletic, or sporting organization. On May 24, 1932, the claim for refund was rejected.
III.
Plaintiff adopted a constitution and by-laws. They provided for a board of managers which was authorized to make rules on matters not covered by the constitution or by-laws.
The duties of the president, vice president, secretary, and treasurer were such as usually attached to those offices. The house committee made all purchases authorized by the board of managers.
The house rules provided, among other things, the following: The clubhouse shall be open on week days from 7 a.m. until 12 o'clock midnight; entertainments and receptions may be given at such time as the house committee may determine; the house committee shall, upon application, grant the privileges of the second and third floors of the clubhouse to members for the purpose of holding parties, banquets, or other social functions, under such reasonable requirements and restrictions as to compensation and conduct as the house committee may require; wives, daughters, and sisters of any member of the club shall be entitled to the use of the second and third floors; the board of managers may extend to any distinguished visitor the privileges of the clubhouse, during his stay in the city.
IV.
Membership in the Saginaw Club consisted of resident members, nonresident members, and life members, and women were admitted to special membership. Officers of the Army and Navy in active service and the clergy of Saginaw County might be admitted to the privileges of the clubhouse, if so prescribed by the board of managers. Wives and daughters of deceased members were entitled to restricted membership. Provision was made for a limited number of life members.
The initiation fee of resident members was determined by the board of managers, and was not to exceed $100. The annual dues of resident members, after July 12, 1927, were to be determined by the board of managers at not to exceed $160. Nonresident members were to pay one-half the dues paid by resident members. Fees to be paid by women elected to special membership were to be determined by the board of managers, and were not to exceed $10, and their annual dues, which were to be fixed by the board of managers, were not to exceed $50. Wives and unmarried daughters of deceased members, who cared to take membership in the club, paid one-half of the annual dues of resident members. The annual dues now are $65, and the initiation fee has been waived for several years.
The membership of the Saginaw Club was as follows:
Resident members: Women's membership:
1928 .................... 243 1928 .................. 6 1929 .................... 230 1929 .................. 6 1930 .................... 239 1930 .................. 28 1931 .................... 213 1931 .................. 24 1933 .................... 100
The women's membership in 1930 and 1931 included junior memberships. There were 14 life members on June 1, 1929.
V.
In 1889 plaintiff acquired a lot in the city of Saginaw, Mich., and erected thereon its present clubhouse. The clubhouse and lot cost about $25,000. The lot is 100 by 240 feet. The building is a 3-story structure. In 1925 the building was enlarged by erection of a grillroom on the first floor and two dining rooms and a kitchen on the second floor. The basement was used for bowling alleys until about 1923, at which time they were removed because of waning interest in bowling. There was formerly a bar and barber shop. The bar was discontinued in 1925, and drinks were served in the dining room.
The first floor of the clubhouse is comfortably and attractively furnished and equipped. It consists of a grillroom, cardroom, cloakroom, lavatory, and one large room comprising a lounge, reading room, lobby, and office, in which there is a cigar stand. There is a motto over the door to the cloakroom reading: "We leave the burden of our toil outside the friendly door." The cardroom contains six tables designed to accommodate four or more players each, and one billiard table, which is not in good condition. The club subscribes to ten periodicals and four daily papers.
The second floor is comfortably and attractively furnished and equipped. It consists of a lounge, five dining rooms, ladies' restroom, and the kitchen. The lounge is equipped with writing desks, a piano, and several floor lamps, and is used by both men and women. The dining rooms are used by members principally for family dinners and luncheons, business conferences, and meetings. They are used by wives of members for their sundry activities, such as card parties, family dinners, and luncheons, an occasional wedding, and a few private dances.
The club membership consisted principally of business men, with a number of professional men, particularly lawyers, doctors, and dentists. It is the only downtown club in Saginaw, aside from the lodges. It is the only place of its kind in Saginaw where business and professional men can meet and have luncheon. Many of the charitable and civic organizations in the city of Saginaw have been given the use of the club facilities. Club privileges for outside organizations can be secured only through a member of the club.
VI.
The club sponsored one stag dinner and boxing match at a loss. It served free lunches every Saturday night at a cost of about $3 per night. It conducted a turkey raffle before Thanksgiving and occasionally before Christmas. The ballroom was located on the top floor. Although the club did not sponsor balls, the ballroom was rented for private dances, and was occasionally used for meetings of business organizations. The regular whist, bridge, and musical clubs which held their meetings at the club were composed entirely of women. While the club served as a medium through which various civic organizations functioned in the way of committee meetings and gatherings for luncheons, it also served as a place where friendships were formed and continued, where cards, billiards, and ping-pong were played, and the usual life of a men's city club prevailed.
The social purposes and activities of the Saginaw Club have not been merely incidental to its other purposes, but have been a material and important part of the life and activities of the club.
Upon the foregoing special findings of fact, which are made part of the judgment herein, the court decides as a conclusion of law that the plaintiff is not entitled to recover, and the petition is therefore dismissed. Judgment is rendered against the plaintiff for the cost of printing the record herein; the amount thereof to be ascertained and collected by the clerk, according to law.
See Phi Gamma Delta Club v. United States, 5 F. Supp. 140, 78 Ct. Cl., ___; Union League Club v. United States, 4 F. Supp. 929, 78 Ct. Cl. ___; Quinnipiack Club v. United States, 4 F. Supp. 996, 78 Ct. Cl. ___; University Club, City of Washington, D.C., v. United States (Ct.Cl.) 6 F. Supp. 129, decided March 5, 1934.