Opinion · United States Court of Claims
Army and Navy Club of America v. United States
53 F.2d 277
- Type
- Opinion
- Court
- United States Court of Claims
- Jurisdiction
- Federal
- Date
- 1931-11-02
- Topic
- general
GREEN, Judge. The plaintiff in this case seeks to recover $22,591.24 and interest thereon alleged to have been wrongfully collected from it as taxes on club dues and initiation fees in the period from June 29, 1925-, up to and including May 31,1929. The evidence shows that the plaintiff is a club organization composed largely of Army and Navy officers, or those who have served in such capacity. The objects of the club, as stated in its original charter, have been “to encourage military and naval science and for the mutual benefit of its members by social intercourse with those who have served in the military and naval affairs of the United States or foreign governments.” The issue is largely one of fact, and the case is one which, under the ruling of the Supreme Court, the ultimate fact which controls the decision must bo determined by this court. The plaintiff claims that it is not a social club, and therefore is not subject to the tax assessed against it.
Citator
- Cited by
- 27 opinions
ARMY AND NAVY CLUB OF AMERICA v. UNITED STATES,53 F.2d 277(Ct.Cl. 1931)
ARMY AND NAVY CLUB OF AMERICA v. UNITED STATES.
No. L-495.
Court of Claims.
November 2, 1931.
Page 278
Petition dismissed.
This case having been heard by the Court of Claims, the court, upon the evidence adduced, makes the following special findings of fact:
1. The plaintiff is a club incorporated on September 26, 1889, under the laws of the state of New York, under the name of "United Service Club in the State of New York." Having obtained an assignment of the right to use the name "Army and Navy Club" from a New York corporation of the same name organized in 1872, and which thereafter had ceased its corporate existence, the club's name was changed on November 12, 1897, to "Army and Navy Club of the State of New York," and in June, 1921, to "Army and Navy Club of America," its present name. The objects of the club as stated in its original charter have been "to encourage military and naval science and for the mutual benefit of its members by social intercourse with those who have served in the military and naval affairs of the United States or foreign governments."
2. During the period from June 29, 1925, to and including May 31, 1929, plaintiff paid to the collector of internal revenue for the third district of New York as the tax on the yearly dues of its members and as the tax on the initiation fees in accordance with section 501 of the Revenue Acts of 1924 and 1926 and section 413 of the Revenue Act of 1928, a total of $22,591.24.
3. On July 10, 1929, the plaintiff duly filed its claim for refund of taxes paid by members on their dues and initiation fees for the period June 29, 1925, to May 31, 1929, on the ground "that said club was not and is not either in its purpose or actual character a `social, athletic, or sporting club or organization' within the meaning and intent of section 501(a) of the Revenue Acts of 1924 and 1926 [26 USCA § 872note] and section 413(a) of the Revenue Act of 1928 [26 USCA § 872]."
On November 16, 1929, the said claim for refund was rejected by the then Commissioner of Internal Revenue.
4. Paragraph 1 under article I of the plaintiff's by-laws provides:
"The membership is divided into ten classes: Honorary members, founders, life members, service members, associate service members, resident members, nonresident members, nonresident exempt members, associate members, and diplomatic members."
Article III of the plaintiff's constitution provides:
"1. Commissioned officers of the Army, Navy, Marine Corps, Coast Guard, and Public Health Service of the United States and of the National Guard, Naval Reserve, and Naval Militia, officers holding commissions in the Officers' Reserve Corps, and ex-officers of the above services who have been honorably discharged or who have resigned; and any citizen of the United States who served as a commissioned officer in any of the forces of the Allied and Associated Powers of the World War, or in any active military or naval service in, or of the United States; and graduates of the United States Military Academy and the United States Naval Academy who have been honorably discharged or who have resigned, shall be eligible to membership as active members.
"2. Active commissioned officers of any of the forces of the Allied and Associated Powers of the World War, not citizens of the United States, shall be eligible to membership as associate service members, but shall not have the privilege of voting or holding office.
"3. Citizens of the United States in civil life, who have shown a lively interest in the civil and military welfare of the United States, shall be eligible to membership as associate members. They may hold the office of governor of the club, vote at any of the meetings of the board of governors, or of any of the committees of which they may be members, but they shall have no vote at any meeting of the club.
"4. Former commissioned officers of any of the Allied or Associated Powers of the World War, not citizens of the United States, shall also be eligible to membership as associate members, but shall not have the privilege of voting or holding office.
"5. Persons of distinction whose service entitles them to signal recognition by the club shall be eligible to membership as honorary members.
"6. Military and naval attachés attached to embassies and legations at Washington, D.C., military and naval inspectors, consuls general, consuls, vice consuls, commercial secretaries, commercial representatives, commercial attachés, commissioners, trade commissioners, or agents, stationed in New York, of any foreign country, shall be eligible to membership as diplomatic members, but shall notPage 279have the privilege of voting or holding office."
The diplomatic memberships were created with a view to establishing friendly relationships between those persons eligible for such membership and commissioned officers of the United States.
The plaintiff has approximately 2,400 members. With the exception of the associate service, the associate, the diplomatic, and a small percentage of the honorary, founders, and life members, which together constitute approximately 10 per cent. of the club's total membership, all of the members either are, or have been, commissioned officers of the Army, Navy, Marine Corps, National Guard, or Reserve Corps of the United States. Commissioned officers on active duty in the Army, Navy, and Marine Corps of the United States constitute more than one-third of the total membership. Commissioned officers formerly in the service constitute approximately one-half of the membership. The active service members alone have the privilege of voting at meetings of the club.
5. The governing body is a board of governors consisting of twenty-four members, representation on which is equally proportioned between the services of the Army, Navy, and Marine Corps and the associate civilian members. With the exception of two, all members of the board of governors are service men. There are eight committees provided for in the by-laws, but the only one actively functioning is the house committee, consisting of five members, all of whom are service members except one. Its activities cover everything except finances.
6. The plaintiff has since October, 1925, occupied the twelve-story and basement clubhouse building located at 30 West Forty-Fourth street in New York City, which building prior to its acquisition by the plaintiff was occupied by the Yale Club of New York. The building is owned by the club, and has a value of approximately $550,000. Prior to October 12, 1925, the plaintiff occupied a clubhouse at 112 West Fifty-Ninth street in New York City.
7. In the basement there are located the engine room, trunk rooms, storerooms, receiving departments, and general lavatories.
On the first floor there are located the entrance, the ladies' and gentlemen's reception rooms, cloak room, manager's office, cigar counter, general reception hall, lavatory, telephone booths, and grill. Men alone are admitted to the grill room. That room is forty-five by forty-three feet in size, and the walls are hung with plaques bearing the insignia of the various divisions of the United States Army in the World War. Those plaques were given to the club by the several military divisions represented. A replica of the coat of arms of the United States is hung over the large fireplace. The grill room is very largely patronized as a luncheon place. The general reception hall is decorated with the shields of the Military and Naval Academies and of the Marine Corps.
On the second floor there are located a lounge approximately forty-five by twenty-six feet in size, a reception hall, and a billiard and card room also approximately forty-five by twenty-six feet in size. The lounge is in the front of the building and the billiard and card room is in the rear. The billiard room is equipped with one billiard table, one pool table, and six or seven card tables. It is decorated with swords, guns, and armor.
On the third floor there are located the club library, which is approximately twenty-three by twenty feet in size, the administration office, five bedrooms, a lavatory and bath, and a room for addressograph equipment.
The fourth to eighth floors, inclusive, are given over entirely to bedrooms, lavatories, and baths. There are in all sixty-four bedrooms, having an average occupancy of 60 per cent.
On the ninth floor there are located a dining room approximately forty-five by twenty-six feet in size, to which ladies as well as gentlemen are admitted, a ladies' restroom, and lavatories. There are also located on that floor the board of governors' room, and the proctor room, both of which are sometimes used as private dining rooms, and a third private dining room. The dining room is hung with a number of paintings and colored prints giving a pictorial history of the uniforms worn by the different branches of the service. The governors' room contains a number of engravings of noted generals, admirals, and other officers and a set of the insignia of the various branches of the service in use during the Civil War. There are also paintings of noted officers of the Army and Navy.
On the tenth floor there are located a large general assembly room and a small serving room.
On the eleventh floor there are located the kitchen, the butcher shop, the storeroom, a pastry room, the servants' dining room, the housekeeper's, valet's, and linen rooms, and servants' rooms and lavatories.Page 280
On the twelfth floor and on the roof there are located the squash courts, locker room, and ping-pong room.
8. The dining rooms of the club furnish all meals, and the main dining hall is open to ladies, either accompanied by members or as holders of guest cards. Guest cards may be given to friends of members who may have all the privileges of the clubhouse. Some members reside in the clubhouse permanently and nonresident members use it as their home while in New York City. A concession in the way of reduced dues is made to recent graduates of West Point and Annapolis.
9. The club maintains the usual staff of employees in the way of kitchen, dining room, bedroom attendants, call boys, and pages. The service available to members is comparable to that afforded in the average well-equipped and well-managed hotel or clubhouse. The club until 1928, and during the period involved herein, had an entertainment committee, and also a sports and games committee. Although the number and variety of entertainments has varied somewhat from year to year, billiards, cards, dominoes, checkers, squash, and ping-pong have been available to members and their guests. The cardroom is used regularly by only six or eight players. The billiard and pool tables are but little used. The total revenue derived from the use of the tables is insufficient to cover the cost of lighting, heat, and upkeep. A particular effort has been made to stimulate interest in the playing of squash by the employment of a professional and by tournaments, with the result that the squash court has been very largely used by an average of from twenty to thirty members throughout the year. The squash court was located in the building at the time it was acquired from the Yale Club.
The club's committee on entertainment was abolished in 1928. Prior to that time the club had given a dinner and dance on New Year's Eve, Washington's Birthday, St. Patrick's Day, and Armistice Day of each year. Other dances and smokers have been held, and motion pictures have frequently been shown at the club, and entertainments with theatrical talent have been provided for the members. Some of the pictures and some of the entertainments have had to do with military and naval matters, while others have been intended merely as amusement. Many lectures on military and patriotic topics have been given under the auspices of the club. Those lectures have been largely attended by commissioned officers stationed in and around New York City, and by visiting officers. Credit has been given to officers for attendance upon such lectures.
10. The club library which the club maintains is located in a room approximately twenty-three by twenty-one feet in size, and by reason of the space limitation is necessarily a relatively small one. Although some military technical books are included, the library is made up very largely of fiction. The club subscribes to a considerable number of popular, patriotic, and military magazines. The library is not open to the public. The club maintains no charity, scholarships, or beneficences. While the club has no facilities for athletic events or sports other than squash, arrangements have from time to time in the past been made with various country clubs by which members of the club enjoy the privileges which those clubs offer for yachting, surf bathing, tennis, riding, hunting, fishing, and golf.
11. The club is a meeting place for a large number of military and patriotic organizations, such as the American Legion, Loyal Legion, World War Officers, Reserve Officers' Association, D.A.R., Colonial Dames, etc. In addition, the officers of the various regiments have regular meetings at the club. Such meetings are sponsored by a member of the club. Some of these organizations pay for the use of the rooms, and some pay merely for the meals which are served to the members. The rooms used for such meetings are the governors' room, Proctor room, grillroom, and tenth-floor assembly hall. The rooms are used to some extent by ladies who are members of patriotic organizations meeting there.
12. A subsidiary of the club activities is the Army and Navy Institute, which was chartered September 22, 1921, and is under a provisional charter from the regents of the University of the state of New York. The purpose was to establish a memorial to the officers who lost their lives in the World War and to found lectureships for educational purposes. In the course of this work a large amount of data was collected relative to the lives of officers who died in the World War, but the club has not been able to publish this material. An attempt was made to raise a large fund to carry on this work, but the effort was not successful. The comparatively small sum of $45,000 which was paid in ultimately found its way into the treasury of the club.
13. The club operated at a loss in the years 1925 to 1929. Only the funds received from life and founder members have prevented a deficit in each year. It has no other revenuePage 281than that obtained from dues and initiation fees and payments made by organizations for using the rooms and for serving meals to its members.
14. The club serves as a place for military and naval men and men interested in naval and military matters to meet with each other and make social contacts; to thereby promote a closer relationship between the officers of the Army, Navy, and Marine Corps through such meetings and friendships; to aid the activities of such service in every way possible; and to stimulate interest on the part of civilians in the welfare and development of the Army and Navy. The club through its members encourages military training and "preparedness," and keeps up contact between the service life and civilian life of the members. Almost everything connected with the service is discussed at the meetings of the club. It is the only service club for commissioned officers in New York City. The predominant objects and purposes of the club are set forth in this finding.
15. The club could not exist or satisfactorily carry on its activities in the way of promotion of preparedness or the furtherance of military and naval interests without the clubhouse and its facilities. The dormitories, restaurants, lounging rooms, library, as well as the facilities for and participation in games and other entertainments, are necessary and essential to the functioning of the club. The social activities of the club are extensive, and form a material part in the furtherance of the life of the organization. These social activities are not merely incidental to the patriotic work of the club, but are used for the purpose of attracting new members who will aid in the maintenance of the club and join in its purposes, and have in this way become an essential part of its activities and a material factor in its continued existence.
Fred K. Dyar, of Washington, D.C., and Charles B. Rugg, Asst. Atty. Gen., for the United States.
Before BOOTH, Chief Justice, and GREEN, WHALEY, WILLIAMS, and LITTLETON, Judges.
The evidence shows that the plaintiff is a club organization composed largely of Army and Navy officers, or those who have served in such capacity. The objects of the club, as stated in its original charter, have been "to encourage military and naval science and for the mutual benefit of its members by social intercourse with those who have served in the military and naval affairs of the United States or foreign governments."
The issue is largely one of fact, and the case is one which, under the ruling of the Supreme Court, the ultimate fact which controls the decision must be determined by this court. The plaintiff claims that it is not a social club, and therefore is not subject to the tax assessed against it. The commissioner ruled otherwise, and the only question in the case is whether his ruling is correct under the facts shown by the evidence.
The evidence shows that the club has about 2,400 members and occupies a twelve-story and basement clubhouse building in the city of New York of the value of approximately $550,000. It would take too much space to set out in the opinion the manner in which this building is equipped, which is described in finding 7, and also in finding 9. It is sufficient to say that it is the practice of the club to give numerous and varied entertainments. Besides this, lectures on military and patriotic topics have been given under the auspices of the club. The club was operated at a loss in the years 1925 to 1929, and a deficit would have occurred had not funds been received from life and founder members. It has no other revenue than that obtained from dues and initiation fees, payments made by organizations for using the rooms, and serving meals to its members.
The purpose of the club and what it accomplishes are set out in finding 14, from which it appears that it serves to enable military and naval men and men interested in military and naval matters to make social contacts, and thereby promote and aid the activities of the Army and Navy service and stimulate interest on the part of civilians in the welfare and development of the Army and Navy. Also, the club, through its members, encourages military training and "preparedness," which is evidently one of its main purposes. Preparedness is generally understood to mean the possession on the part of this country of a larger and better Army and Navy.Page 282
It is contended on behalf of the plaintiff that the predominant purpose of the club is patriotic and professional and not social. This may be conceded, but this fact is not necessarily controlling. We think it quite clear that the numerous and varied social features of the club show that they are a material part of its activities and not merely incidental to the patriotic work of the club, which could be carried on without them. The evidence shows that they are made an inducement to bring additional members into an organization that needs their financial aid in order to continue its existence, and in this way have become an essential part of those elements which go to determine whether or not a club is a social organization within the meaning of the law.
It has been requested in the argument for the defendant that the court define the meaning of the term "social club," but it ought to be obvious that no exact definition thereof can be given. If it had been possible to do so, the Treasury Regulations would have defined it long before this time. The word "social" itself has no exact definition. A faint and shadowy line separates activities which are social from those which are not. Another feature that adds difficulty in these cases is that the mere fact that a club has some social activities does not necessarily make it a social club within the meaning of the law, for no club can exist without having something social in its nature, and this must have been well understood by Congress. The only rule that can be laid down, as we think, is that, if the predominant purpose of the organization is not social, and its social activities are merely incidental to the furtherance of this different and predominant purpose, then the club is not a social one within the meaning of the law. But both of these matters must exist in order to create an exemption from the tax.
This case presents more than the usual difficulties in the way of its decision. It appears that the predominant purpose of the club was to further the interests of the Army and Navy and to advocate and create a public sentiment in favor of "preparedness." Had the social element been merely incidental to this purpose, the club would have been exempt from the tax. But, as we have already shown, the social features became an essential element of its activities for the purpose of increasing its membership, aiding in its financial support, and thus helping to carry out its purposes. When the social features are numerous and so used, we think they are not merely incidental, and the club is subject to the tax.
It follows that the petition must be dismissed, and it is so ordered.