text:
    WOODWARD & LOTHROP v. LINEBERRY.
    No. 5063.
    Court of Appeals of District of Columbia.
    Argued March 9, 1931.
    Decided May 4, 1931.

      G. Bowdoin Craighill, Chas. B. Tebbs, and Prank H. Myers, all of Washington, D. C., for appellant.
    Richard L. Merrick, of Washington, D. 0., for appellee.
    Before MARTIN, Chief Justice, and ROBB, HITZ, and GRONER, Associate Justices.
   GRONER, Associate Justice.

This is an appeal from a judgment entered in the Supreme Court of the District of Columbia in which the appellant was defendant and the appellee plaintiff. Por convenience, the parties will hereafter be spoken of in the positions they occupied below.

Plaintiff was employed at the time of her injury as a saleswoman in defendant’s store in the city of Washington. Her working hours were from 9:15 in the morning to 6:00 in the evening, with a break of 45 minutes, beginning at 2:09 o’clock, for luncheon. On the day of the accident (which was Priday and bargain day) at the recess hour, she met toy engagement at her regular place of work on the fifth floor a friend with whom she purposed doing “some shopping” both in and out of the store, and, with this object in view, they together took the elevator from the fifth to the fourth floor. In the descent, through the carelessness of the operator of the car, plaintiff was thrown against the lattice door of the elevator, and received the injuries complained of.

At the close of plaintiff’s evidence, defendant moved for a directed verdict on the ground that at the time of the injury plaintiff was a fellow servant of the elevator operator. The trial court denied the motion, and, on submission of the whole case to the jury, there was a verdict and judgment for the plaintiff.

The appeal is from the refusal of the trial court to direct a verdict for the defendant.

While counsel for appellee cite a number of state cases which they suggest establish the rule that an employee such as plaintiff was and the operator of the elevator in appellant’s store are not fellow servants, wd hardly think this position can now be seriously urged, for the Supreme Court, as far back as B. & O. R. Co. v. Baugh, 149 U. S. 368, 13 S. Ct. 914, 37 L. Ed. 772, decided to the contrary. See, also, Collins v. Danforth Co., 36 App. D. C. 592, 599, in which we said: “The general rule seems to be that all employees of a corporation, except heads of separate departments, are fellow servants.”

But a more difficult question arises in the position, of appellee that, without regard to this, the facts shown here take the case out of the rule because at the time of the injury plaintiff had suspended her duties as saleswoman, and was engaged during the lunch hour in going from one part of the store to another on her own affairs. The decision therefore turns upon the question whether a temporary stoppage of work, during the period of the workday, for luncheon, or the like, will destroy or interrupt the relationship of master and servant. Precisely this question was before the Supreme Judicial Court of Massachusetts in the ease of White v. E. T. Slattery Co., 236 Mass. 28, 127 N. E. 597, 599, and it was there decided it would not. There the plaintiff was employed, as here, as a saleswoman in a store, and there, as here, she had a regular lunch hour to do with as she saw fit, and there, as here, she was injured through the negligence of the elevator operator. At the time of her injury, she was leaving the store during her lunch hour for the purpose of going out to purchase theater tickets for her personal use. In this state of facts, the Massachusetts court said: “The plaintiff was leaving the store of her employer with th<3 purpose of doing an errand on her own account having no relation to her employment. That fact is of no consequence under these circumstances. She was doing it on her own time and not on her employer’s time. She was in this particular in the same condition as she would have been if leaving the store at the end of her labor for the day. She had. a right under the terms of her employment to go out at the lunch hour on her own affairs. She was as much within the scope of her employment as were any of the employees in the eases cited where they have been held within the protection of the act.”

And so in Archibald v. Workmen’s Compensation Commission, 77 W. Va. 448, 87 S. E. 791, 792, L. R. A. 1916D, 1013, it was said, in a case involving substantially similar facts: “Such acts as are necessary to the life, comfort, and convenience of the servant while at work, though strictly personal to .himself, and not acts of service, are incidental to the service, and injury sustained in the performance thereof is deemed to have arisen out of the employment.”

To the same effect was the decision in Martin v. Metropolitan Life Insurance Co., 197 App. Div. 382, 189 N. Y. S. 467, which was the case of an employee injured in an elevator as she was leaving the building of her employer while using her lunch hour to go outside to buy a birthday present for her sister.

We find ourselves in accord with the reasoning and the conclusion reached in the cases cited. As already indicated, we think there can be no question that plaintiff and the elevator operator were fellow servants, and, there being here no claim that defendant failed in any respect to exercise reasonable care in the selection of the operator, we think it follows that plaintiff assumed as an incident of the employment the risk of injury from his negligence, and likewise we think this assumption of risk- continued while she was at her work in the store, and, since the use of the elevator in going to and from the fifth floor was customary and habitual, wd likewise think the assumption of risk continued while she was going to and coming from her designated place of work in the store. If the injury had occurred through the negligence of the operator of the elevator after she had finished her duties of the day and was leaving her place of work to go home, or for that matter to go shopping elsewhere, the defendant, we think, would not have been answerable in damages, and we cannot discover any difference in principle between such an event, in its legal effect upon the respective rights of the parties, and the one here in suit. Instead of having done her whole day’s work, plaintiff had performed half of it. She was then on the fifth floor because it was her place of work, though it was also the designated meeting ground with her friend with whom she intended to “do some shopping.” Her descent from the fifth floor was due to the fact of her employment there, though the purpose of the descent was personal. As she was following the usual and customary course of .descent from her place of work, and, in so doing, was using a facility provided for that purpose by her employer, it follows, we think, that her presence at the particular time and place of her injury was by reason of her employment, and therefore necessarily within the scope of the employment,

Cases of a nature similar to those cited above may be multiplied indefinitely, but we content ourselves on this subject by referring to the notes in L. R. A. 1916A, pages 232 and 318, in which will be found a long list of eases, both in our courts and in the English courts, holding that injuries received during lunch hours on the property of the employer, whether the servant then he engaged on Ms own or in Ms master’s work, are . to he considered incidental to and arising out of and in the course of the employment.

It is quite true that in most of the eases cited, both English and American, the injured servant was invoking Ms rights under compensation statutes covering injuries “arising out of and in the course of the employment,” but these statutes do not of themselves change or enlarge the relationship of the parties, though they do provide relief to the servant where none existed before. Obviously, therefore-, we think, it would be unfair to adopt a wholly different and contradictory rule of relationsMp in determining the liability of the employer in a jurisdiction in which no compensation law applies — as regrettably was the case in the District of Columbia when the injury here complained of occurred- — for, as was said by Judge Lowell, for the First Circuit Court of Appeals, in Willmarth v. Cardoza, 176 F. 1, 3, 27 L. R. A. (N. S.) 376; “The distinction between employment and nonemployment is the same, whether it works in favor of. the master or of the servant.” To say in the one case that, under a statute providing for compensation based upon injury “in the course of the employment,” the employee is within its terms, where the injury occurs on the employer’s premises, notwithstanding the employee is temporarily — as during the lunch hour or at the dose of the day’s work — engaged in Ms own business, and in the other that, in a suit at law against the master, he is not, would be to establish for the employee’s benefit a rule of recovery based on the mere happening of the injury, and tMs we think we may not do-. Doubtless it was the recognition of this fact and of the injustice wMch it sometimes entailed to the injured employee that resulted in the almost universal adoption of the compensation statutes in lieu of the harsher doetrine of the common law, but, until such changes are made effective by the Legislature, we are compelled to follow the law as we find it.

Nor do we think that there is anything in the point made by appellee that appellant in the operation of its elevator was a common carrier, for, while eases may be found in which the operator of an elevator in an office building is sometimes referred to as a common carrier of passengers, we have heretofore had occasion to examine the question, and to decide the contrary. In Southern Railway Co. v. Taylor, 57 App. D. C. 21, 16 F.(2d) 517, a ease which may not in this respect be distinguished from the present, we reached the conclusion that an elevator id merely an instrumentality furnished for the convenience of those who occupy and use the building, and that it is at all times within the control of the owner, who may shut the door and arbitrarily refuse to carry any except those whom he pleases without incurring liability. This freedom from obligation and from liability for refusal to perform a service in itself furnishes the distinction and avoids the possibility of recourse to the doctrine of liability as common carrier.

From this it follows that the refusal of the lower court to give binding instructions was error, for which, the ease must be reversed, with costs, and the cause remanded to the lower court for a new trial.

Reversed.


source: Caselaw Access Project

author: GRONER, Associate Justice.

license: Public Domain

text:
    WOODWARD & LOTHROP, a Corporation, Appellant, v. Willie E. LINEBERRY, Appellee.
    No. 5064.
    Court of Appeals of District of Columbia.
    Argued March 9, 1931.
    Decided May 4, 1931.
    G. Bowdoin Craighill, Chas. B. Tebbs, and Frank H. Myers, all of Washington, D. C., for appellant.
    Richard L. Merrick, of Washington, D. C., for appellee.
    Before MARTIN, Chief Justice, and ROBB, HITZ, and GRONER, Associate Justices.
   GRONER, Associate Justice.

For reasons stated at length in No. 5063, 60 App. D. C. 164, 50 F. (2d) 314, the judgment in this case must be and is reversed.

Reversed.


text:
    POTTASH BROS. v. BURNET, Commissioner of Internal Revenue.
    No. 5082.
    Court of Appeals of District of Columbia.
    Argued April 9, 1931.
    Decided May 4, 1931.

      Geo. E. H. Goodner, of Washington, D. C., for appellant. .
    G. A. Youngquist, Asst. Atty. Gen., and Sewall Key, Morton K. Rothschild, C. M. Charest, and Shelby S. Faulkner, all of Washington, D. C., for appellee.
    Before MARTIN, Chief Justice, and ROBB, VAN ORSDEL, HITZ, and GRONER, Associate Justices.
   GRONER, Associate Justice.

This is a petition to review a decision of the Board of Tax Appeals.

Max Pottash and Harry Pottash were formerly partners trading as Pottash Bros. We shall call them appellant.

On March 27, 1918, appellant filed its 1917 return for income taxes, and in September, 1924, the partnership was dissolved, and was succeeded by a corporation known as Pottash Bros. Co. This corporation took over all of the assets of the partnership. On December 15, 1925, the Commissioner notified appellant of the additional tax imposed for the year 1917, and, as the .five-year period had expired on March 27,1923, we are met at the threshold by a plea of the bar of the statute of limitations. At the hearing before the Board, the Commissioner offered as his authority to make the deficiency assessment a written waiver of the statute dated December 3, 1924, and signed as follows: “Pottash Brothers, Taxpayer, By Max Pottash — Partner,” and the Board, in its findings of fact, certifies as follows: “Pottash Brothers had filed a chain of waivers or consents extending the time within which deficiencies might be assessed and collected. It filed one such consent dated December 3, 1924 (the one referred to above), which extended the period within which to assess and collect any tax on the partnership.” This waiver, if valid and binding against the partnership, carried the statute over, and the deficiency assessment was in time. Appellant now insists that in December, 1924, when the waiver was signed by Max Pottash, the tax was barred.' The findings of the Board would indicate the contrary, and, if the question were material, we should have to look to the record to determine whether the Board’s finding that there had been filed “a chain of waivers or consents extending the time” is supported by any substantial evidence. United States v. Copper Queen Mining Co., 185 U. S. 495, 22 S. Ct. 761, 46 L. Ed. 1008; Kendrick Coal & Dock Co. v. Commissioner (C. C. A.) 29 F.(2d) 559, 563. But we do not regard the question as material since Stange v. U. S., 282 U. S. 270, 51 S. Ct. 145, 75 L. Ed. 335, in which it was held that a waiver of the limitation is effective, even though executed more than five years after the filing of the return. And so we come to consider the point only on the question whether, after the dissolution of a partnership, one partner can, by acknowledgment or waiver, revive a debt due by the partnership so as to take it out of the statute of limitations. During the continuance of the partnership, the act of a partner within the scope of the business binds all other partners, and this results from an implied, mutual delegation of authority. Ordinarily when the partnership is dissolved, the authority of the individual partners is terminated. The dissolution revokes the power to create new contracts, and one of the partners may not by his sole act, áfter a debt is barred-by the statute, revive it against the other partners, and so it was held in Schoneman v. Fegley, 7 Pa. 433: “After dissolution, the late partners are not agents for each other, except to make good outstanding engagements, or for the purpose of liquidating the affairs of the partnership. They cannot enter into a new contract or engagement for their former associates, nor bind them by a new promise.” As the waiver in question was executed in Pennsylvania, and was to be performed in Pennsylvania, we assume the decisions of the highest court of that state should be followed, and the rule stated is that which has been consistently adhered to by the Supreme Court of Pennsylvania, and this is also the rule in the federal courts. Bell v. Morrison, 1 Pet. 351, 7 L. Ed. 174. But there is another aspect to the question which, we think takes it out of the rule, for it is elemental that "the members of the partnership even after dissolution continue liable to those with whom they have previously dealt as partners, who have no notice or knowledge of the dissolution, 20 R. C. L. page 964, and the effeet of the failure to give such notice in the case of one who has had prior dealings with the firm is to continue the former mutual agency of the partners in spite of the fact of dissolution, Spears v. Toland & Son, 1 A. K. Marsh. (Ky.) 203, 10 Am. Dec. 722. And so the principle is now well established that, where a partnership is voluntarily dissolved and fails to give general notice of the fact, the power of the individual partners to bind all' of the partners, as to third persons wno have no knowledge of the dissolution, remains in full force, and this is particularly the case with those persons who have dealt with the firm before, for in such, case it is universally held that actual notice of the dissolution should be shown, or circumstances from which actual notice may be inferred. In the case under consideration, a careful examination of the record shows that the Commissioner was given no notice of the dissolution of the partnership prior to the signing of the consent or waiver of December 3, 1924, nor does the record show that there was such notice at any time prior to the hearing before the Board on January 21,1928. On the contrary, in its petition filed in 1926 with the Board of Tax Appeals, the partnership is considered as still existing, and the affidavit to the petition made by one of the partners sets out that he is a member of the partnership and is authorized to verify the petition. The Commissioner, on the other hand, treated the partnership as still in existence, as he had a right to do, and - the statement in the affidavit of Max Pottash that he was duly authorized to verify the petition on behalf of the partnership is nowhere in the record- denied by the other partner, Harry Pottash, and, as he too was a party individually to all the proceedings, it is obvious that the question now raised is purely an afterthought and is without substance, and therefore should be denied.

This brings us to consider the other questions raised. These are three. The first relates to the rejection by the Board of an item of $3,326 claimed by appellant as a part of its invested capital as of January 1,1917.. If the amount excluded had been included in appellant’s net worth as of the date mentioned, its taxable income for 1917, under the accounting method adopted, would have been that much less. The sum of $3,326 represented an investment in building and loan stock as of January 1, 1917, and the only question involved is- whether the stock belonged to the partnership or to individual members of the families of the two partners. The Board held it was not an asset of the partnership, and based its conclusion in this respect upon the testimony of a revenue agent, to the effect that the books of the building and loan association were in the names of wives or relatives of the partners. We have had recourse to the evidence to determine precisely what it shows in this respect, and, fairly stated, that on behalf of the Commissioner goes no farther than the fact that the building association books were ' in the names of some of the sons and daughters of the two partners, while, on the other hand, appellant showed quite clearly that all amounts paid into the building association were from the funds of the partnership, and that, as the stoek matured, the proceeds went into 'the partnership business. It ■ likewise showed that the stocks were carried on the books of the partnership as firm assets, and the Board itself appears to have recognized this fact — though it did not give it effect— by itself including all amounts paid 'into the building association during the year 1917 as an asset of the partnership as of the end of that year. While it is true that, in reviewing decisions of the Board, we consider only questions of law and not of fact, we are nevertheless required to ascertain if a particular finding of fact is supported by substantial evidence. In the matter now under consideration, we think there is an absence of evidence upon which to base a conclusion that the building association stoek was not a partnership asset. The mere fact that the stoek was in the name of a particular person is at best only prima facie evidence of the fact of ownership and always yields to evidence of the real fact of ownership. Here the undisputed evidence is that the stoek was regularly carried on the partnership books as an asset, and that the proceeds from the stoek as it matured were paid into and the payments for the stoek until maturity were paid out of the partnership earnings, and this makes such k ease as we think impels our holding' that the Board erred in refusing to give effect to the item in ascertaining the net worth of appellant as of January 1,1917.

The second point is that the Board erred in refusing to allow appellant $2,060.-42 claimed to have been charged off on account of bad debts and losses during, the taxable year. The Board’s finding is that these accounts were not entered in the new ledger opened in January, 1918, but it also found that they were not ruled off the 1917 ledger, though they were eliminated in the balance sheet as of December 31, 1917. The Revenue Act of 1917 (section 206 [40 Stat. 305]) allows deductions in the ease of a partnership for debts actually ascertained to be worthless and charged off during the year. There is nothing in the findings of fact nor is there any evidence in the record from which we are able to say that the action of the Commissioner in this respect was wrong. Appellant has introduced no evidence to show that the debts were worthless, nor anything to show an effort on its part to determine this question. If appellant’s position is correct, then any taxpayer, by dropping debts due him from a balance sheet or from his books, could evade the payment of all taxes, and of course this is not the law. We think there was an obligation on the taxpayer to show by satisfactory evidence that the debts were not collectible, and, in the absence of evidence to’ that effect, and since, particularly, the question is one primarily for the determination of the Commissioner, we affirm the finding of the Board.

This leaves for consideration the action of the Board in increasing appellant’s income $34,323.22 on account of purchases made in 1917. The controversy as to this item grows out of these facts: Appellant during 1917, as in previous years, had purchased secondhand burlaps and bags from peddlers and junk dealers. At the time of delivery,-it was not always possible to determine the exact amount payable to the seller, and so a cash advance was made estimated at approximately 80 per cent, of the purchase value. The bags were then remanufaetured, and went into stoek. The amount of money so advanced in 1917 was $39,495.20, for which no purchase entry had been made. Appellant’s auditor discovered this mistake, and corrected it with an entry as of the end of the year, debiting merchandise and crediting the various accounts by the amounts of the advances. Admittedly, if this entry had not been made, the books would have reflected thirty-nine thousand odd dollars more income for 1917 than was correct. As to this, the Board says: “There can be no question but that the action of the accountant employed by the partnership was correct for the purpose of determining the true net worth of the partnership at December 31,1917. He corrected, however, a practice which had been in existence apparently throughout 1916 and 1917. The same conditions existed in 1916 as in.1917. He did not correct the books at January 1, 1917. To the extent that there may have been unbalanced debits in the accounts payable ledger at January 1,1917, an overstatement of the net worth of the partnership at the beginning of the year 1917 would have resulted, for the merchandise that had been received "up to January 1, 1917 was either reflected in sales of merchandise in 1916 or in inventory at the close of the year. We cannot determine the extent of any error that may have been made at the beginning of 1917. It is evident, however, that the net worth at the close of 1917 was determined on an entirely different basis from that at the beginning of the year and we cannot accept the accountant’s statement as reflecting the true net worth at the beginning of the year.”

Obviously, we think, this criticism of the entry as of the end of the year 1917 is well founded. The mistake corrected at that time grew out of a practice extending through the previous year, so that the same character of mistake which the correction as of the end of the year sought to rectify existed as of the beginning of the year. The amount may have been larger, or it may have been smaller, and in the one ease it would have increased the net worth — in the other it would have reduced it — and proof of the real fact, in view of the Commissioner’s finding, was peculiarly within the knowledge of appellant. In the absence of such proof, the Board was clearly right in disallowing the deduction of the item from the net income of the taxpayer for 1917.

The decision of the Board of Tax Appeals is therefore modified, and, as modified, is of-firmed and remanded for further proceedings not inconsistent with this opinion.

Modified and affirmed.


text:
    Max POTTASH, Appellant, v. David BURNET, Commissioner of Internal Revenue, Appellee.
    No. 5083.
    Court of Appeals of District of Columbia.
    Argued April 9, 1931.
    Decided May 4, 1931.
    Geo. E. H. Goodner, of Washington, D. C., for appellant.
    G. A. Youngquist, Asst. Atty. Gen., and Sewall Key, Morton K. Rothschild, C. M. Charest, and Shelby S. Faulkner, all of Washington, D. C., for appellee.
    Before MARTIN, Chief Justice, and ROBB, VAN ORSDEL, HITE, and GRONER, Associate Justices.
   GRONER, Associate Justice.

The rights of the taxpayer under this appeal are controlled by our decision in case No. 5082, 60 App. D. C. 167, 50 F.(2d) 317. Taxpayer is a partner in the firm of Pottash Bros, holding a 50 per cent, interest therein. To the extent that our decision in No. 5082 modifies the findings of the Board in that .case, the taxpayer is entitled, to the extent of his interest in the income from the partnership, to prevail on this appeal. His tax liability should therefore be recomputed in conformity with our decision as to the correct income of Pottash Bros, for 1917 as decided in No. 5082.

Modified and affirmed, and remanded for further proceedings.


text:
    Harry POTTASH, Appellant, v. David BURNET, Commissioner of Internal Revenue, Appellee.
    No. 5084.
    Court of Appeals of District of Columbia.
    Argued April 9, 1931.
    Decided May 4, 1931.
    Geo. E. H. Goodner, of Washington, D. C., for appellant.
    G. A. Youngquist, Asst. Atty. Gen., and Sewall Key, Morton K. Rothschild, C. M. Charest, and Shelby S. Faulkner, all of Washington, D. C., for appellee.
    Before MARTIN, Chief Justice, and ROBB, YAN ORSDEL, HITE, and GRONER, Associate Justices.
   GRONER, Associate Justice.

The rights of the taxpayer under this appeal are controlled by our decision in ease No. 5082, 60 App. D. C. —, 50 F.(2d) 317. Taxpayer is a partner in the firm of Pot-tash Bros, holding a 50 per cent, interest therein. To the extent that our decision in No. 5082 modifies the findings of the Board in that case, the taxpayer is entitled, to the extent of his interest in the income from the partnership, to prevail on this appeal. His tax liability should therefore be recomputed in conformity with our decision as to the correct income of Pottash Bros, for 1917 as decided in No. 5082.

- Modified and affirmed, and remanded for further proceedings.


text:
    KEKAHA SUGAR CO., Limited, v. BURNET, Commissioner of Internal Revenue.
    No. 5098.
    Court of Appeals of District of Columbia.
    May 4, 1931.
    W. W. Spalding, of Washington, D. C., for appellant.
    G. A. Youngquist, Asst. Atty. Gen., and Bewail Key, John MaeC. Hudson, C. M. Charest, and S. S. Faulkner, all of Washington, D. C., for appellee.
    Before MARTIN, Chief Justice, and ROBB, VAN ORSDEL, HITZ, and GRO-NER, Associate Justices.
   GRONER, Associate Justice.

This is an appeal from a decision of the Board of Tax Appeals holding petitioner liable for a deficiency of income excess profits taxes for 1920 in the amount of $51,475.23.

A brief statement of the facts is necessary. Petitioner is, and has been for more than thirty years, a planter and manufacturer of sugar, with a plantation and factory on one of the islands of the Hawaiian group. Its plantation is owned in fee by the territory of Hawaii, as successor of the kingdom of Hawaii. Up until May 31, 1920, it occupied its land as sublessee of one Knudsen and his assigns, and paid its rentals in percentages from 2% to 9 per cent, of the sugar produced from eane grown on the leased land. In actual practice, it paid the agreed percentages in dollars and cents. In its findings o-f fact, the Board of Tax Appeals says: “The petitioner, with the approval of the Commissioner of Internal Revenue, has for many years kept its accounts and made its federal income-tax returns on the so-called ‘crop basis,’ as permitted by tbe Treasury Regulations. * * * ” In tries Hawaiian Islands, a crop of sugar cane is planted in tbe spring of one year, brought under cultivation in tbe fall of tbe following year, and harvested and manufactured into commercial-sugar in the third year. During each calendar year, work is being performed on three separate crops — the crop that is being harvested, the crop under cultivation which was planted the prior year, and the crop that is then being planted which will be harvested two years thereafter. The crop basis of accounting is in general use on the sugar plantations of the islands, and, under that system, a crop is treated as a venture, and an account kept for each crop. The expenses of the crop from the preparation of the soil to the manufacture of the cane into sugar is charged to the crop account, and all receipts from the crop are credited to the crop account. When the crop is disposed of, it is then determined whether a profit was realized or a loss sustained. ,

In 1918, petitioner paid as rental $114,-159.58, representing the market value of the sugar which the lessor was entitled to receive from the crop of that year. It charged one-third of that amount to the 1918 crop, one-third to the 1919 crop, and one-third to the 1920 crop, and, in its return for 1920, deducted the amount of the payment allocated to the 1920 crop-, and it is this deduction which the Commissioner refused to allow, and the correctness of this is the first question for our decision.

The Board sustained the Commissioner, saying: “In 1918 it paid $114,159.58 as the rental for that year. One-third of this was charged on its books to the 1920 crop and deducted in computing 1920 income. Petitioner contends that, sinee the plantation was used during 1918 for the cultivation of three crops this represented a rental for all of the land and that on the crop system of accounting it may properly allocate one-third of this rental to each of the three crops. The respondent (Commissioner), on the other hand, contends that such a rental payment is unlike other expenses of producing the crop and may not be allocated over three crop years, that the lease provides for a payment in kind which must necessarily be taken from the crop harvested, and that the rental may only be deducted as a part of the cost of such crop. We are of the opinion that the respondent is correct in his contention. The proof of this may be seen if we look at the situation in which the petitioner would have found itself had it not been able to secure the renewal of its leases beyond 1920. In such a situation, following the basis on which the 1918 rental was apportioned, the rental paid in 1919 would have been apportioned one-half fqr the crop of that year and one-half for the crop of 1920 and the rental paid for 1920 would all have been apportioned to the 1920 crop, for the petitioner would not have cultivated any 1921 or 1922 crops and could therefore not have charged any part of the rent for 1920 to such crops. The result would be that the 1920 crop would be charged as rental with one-third of the rent paid in 1918, one-half of the rent paid in 1919 and all of the rent paid in 1920. Such a situation would obviously work a distortion of income.”

And, in the argument before us, the'Commissioner insists, first, that the expenditure so made in 1918, which we understand to mean the rental paid in that year, had no relation to the 1920 crop; second, that to allow one-third of it as a deduction in 1920 would effect a distortion of income for that year; and, third, that in any event it was the payment of a general expense not identified with the crop or crops of any year or years.

We have given the subject careful consideration, and are unable to agree with the Commissioner in any of these contentions'. Section 212 of the Revenue Act of 1918 (40 Stat. 1057, 1064) provides: “(b) The net income shall be computed upon the basis of the taxpayer’s annual accounting period (fiscal year or calendar year, as the case may be) in accordance with the method of accounting regularly employed in keeping the books of such taxpayer; but if no such method of accounting has been so employed, or if the method employed does not clearly reflect the income, the computation shall be made upon such basis and in such manner as in the opinion of the Commissioner does clearly reflect the income.”

And section 234 (a) (1) provides that there may be a deduction of “all the ordinary and necessary expenses paid or incurred during the taxable year * * * including rentals or other payments required to be made as a condition to the continued use or possession of property. * * * ”

And Treasury Regulations 45, article 38, provides: “ * * * If a farmer is engaged in producing crops which take more than a year from the time of planting to the time of gathering and disposing, the income therefrom may be computed upon the crop basis; but in any (all) such cases the entire cost of producing the crop must be taken as a deduction in the year in which the gross income from the crop is realized.”

It is conceded that petitioner’s method ol accounting for rentals paid, namely, thq allocation of such rentals proportionately to the three crop years, was regularly employed in its hooks of account, and that its treatment of this expense had been consistent throughout the many years of its operations, and also that this basis of accounting is in general use on sugar plantations throughout the island, and that, in the determination by the Commissioner of petitioner’s tax liability for the years prior to 1920, no’ attempt was made to treat the entire rental paid in any year as a deduction for that year. We are faced, therefore, at the outset with a tacit approval by the Commissioner of petitioner’s accounting method as it affected its tax liability for all the years except the one in question, and with the fact of settlement by the Commissioner with petitioner of its tax liability for these prior years on that basis. This in itself would indicate that the method adopted as to such prior years was in the opinion of the Commissioner such as fairly to reflect the income. But, without regard to all of this, we find no merit in the argument now made that the method adopted of charging 'the rental paid in a given year against the crops then growing and maturing in different years has no relation to the crops of those particular years. The plantation was leased in its entirety, but, having regard to the nature of the crops for which it was to be used, it was, as to each year, planted in crops maturing that year, the next year, and the year after. The rent payable, it is true, was payable annually 'out of the crop harvested that year, but that crop occupied 'but a third of the total area. The crop of the next year and the crop of the following year each occupied a like portion, and if, as the Board found to be a fact, each crop is to be treated as a separate venture and all expenses incident to its planting, harvesting, and manufacture charged against it when it matures, it would seem to us a normal and reasonable method to charge against it one-third of the total rental paid during each of the three years from its planting to its manufacture. If the lessee, instead of paying in kind, had paid in money at a fixed sum per year, the result, under petitioner’s method, would have been to charge to each crop the same proportion of the annual rent. That it was payable in a percentage of the crop and therefore was larger or smaller as the crop or the price varied, we do not think affects the principle. Nor are we any more impressed with the argument that, because petitioner’s lease would have expired in 1920,. except for a renewal, whieh was secured, the criticized method of allocation of rents would have resulted in a disproportionate charge for that year and would therefore offend the statute. That the amount of rental in such ease would have been disproportionate as between previous years is undoubtedly a fact, and since, in the ease of a lessee of land, this situation must inevitably occur at some time, it may well be that some modification of the method looking to the final expiration of the lease should be adopted, but this it is not necessary now to consider, since, as we have seen, the lease here did not expire in 1920, but was renewed for a further long term. And so we may assume, because it is asserted and nowhere denied, the method of allocation in 1918, whieh is complained of, was repeated in 1920, and, instead of the sup-positive case suggested by the Board, namely, “that the 1920 crop would be charged as rental with one-third of the rent paid in 1918, one-half of the rent paid in 1919, and all of the rent paid in 1920,” it was in fact charged identically on the same basis as during all the preceding .and succeeding years. And so likewise we think there is no point in the suggestion that the rent for the plantation is not allocable to any particular crop because it is a general expense. We think the view is more reasonable that the rent for the land occupied by a crop is as much a charge against that crop as its cultivation, harvesting, or manufacture, and equally as much a charge as certain sums of money paid by petitioner to churches and charitable organizations for welfare work among its employees, and which, though paid in a particular year, were distributed, as the rent was, over the three-year period. As to these, the Board said: “The question then arises as to whether sueh payments must be deducted in the year when paid or may be apportioned to the crops, as the petitioner has done upon its books. These payments were made for the benefit of employees who were working upon three crops, and in such circumstances we are of the opinion that the payments were sufficiently related to the crops so that we may not say that the system of accounting employed by the petitioner did not, in this respect, clearly reflect its income.”

The next question involves an item of $30,000 claimed as an expense for 1920 under the following circumstances: Petitioner, as we have seen, held subleases expiring April 30, 1920. The term of its lessor ran until May 31 of the same year. At that time, there was in effect in Hawaii a law whieh gave the Commissioner of Lands the right to extend the term o£ a lease for one year for the purpose of permitting a tenant to remove crops then under cultivation. Petitioner recognized the desirability of being in possession of the leased property at the termination of the lease from the territory, and therefore of acquiring the right of occupancy for the month of May, 1920. It therefore began negotiations with its lessor in 1918 to accomplish this, and these negotiations resulted in the payment to lessor in December, 1918, of a lump sum of $240,000 for his interest in the entire balance - of the term. Petitioner insists that $30,000 of the sum so paid was rent specifically for May, 1920, and bases its claim on the fact that possession through the month of May would give it the position of a tenant in possession and therefore enable it to avail of the Hawaiian law giving the right of extension for another year, and that this right had a special value. It therefore estimated the commuted value of the rent to accrue during the unexpired term of the lease at $220,000, and added to this sum the further sum of $30,000 as the value of the extension for May, and its board adopted a resolution authorizing negotiations with its lessor on this basis. The representative of the lessor, in the negotiations, claimed a value of $50,-000 for the month of May. Nothing more than this is shown, except that the assignment for the entire remainder of the term, including May, was obtained for $240,000, and a receipt taken in the following words and figures, namely:

"$240,000.00
"Honolulu, Hawaii, December 4th, 1918
“Received of American Factors, Limited two hundred and forty thousand dollars being the consideration for the assignment by Augustus F. Knudsen and Eric A. Knudsen to Kekaha Sugar Co., Ltd., of the balance and full remainder of the term of Government Lease No. 164, dated June 1,1890.
“-- “Bishop Tiust Co., Ltd.
“[Signed] by E. W. Sutton
“Vice Pres.
“Ledger Account
“Kekaha Sugar Company, Ltd.”

The Board found: “The agreement appeal’s to have been reached on the basis of a lump sum of $240,000 for the balance of the term and it is our opinion that the payment must be treated on this basis.”

The question whether any specific amount of the gross sum paid should be charged specifically to the month of May, 1920, is not. we think, free from doubt. That the possession of the property for this month was of importance to petitioner is perfectly clear, but it is by no means clear whether $30,000, or any other specific amount, may properly be said to represent that value. When the transaction was completed, it was, as we have seen, for a lump sum. The commuted value of the rent to accrue for the unexpired term of the lease was estimated by petitioner at $220,000. At what amount it was valued by lessor we do not know. Petitioner actually paid $20,000 in excess of this amount, but whether this $20,000 increase over its estimate is necessarily chargeable to the month of May, or to some other factor or inducement, is not disclosed in the record. So far as we can tell from a careful examination, the lessor and the lessee negotiated on a basis in which the element of speculation was necessarily involved. What different items of value pro and eon induced the one to demand and accept and the other to pay the $240,000 is not shown, and we do not think We should undertake by guesswork, or the application of any rule of our own, to supply this deficiency. The Board having found the entire $240,000 payable for a definite term, and counsel at the hearing apparently having agreed that that term covered a period of 29 months from January 1, 1919, to- May 31, 1921, and should properly be distributed over that period, except as petitioner is entitled to any portion of the total sum for the month of May, we are unable to say that the finding of the Board is not supported by substantial evidence, and we think we should not disturb it. See a discussion of this subject generally in Burnet v. Houston, 51 S. Ct. 413, 75 L. Ed.-, decided by the Supreme Court April 13, 1931.

This leaves for consideration only the decision of the Board in rejecting a claim for special assessment under sections 327 and 328 of the Act of 1918 (40 Stat. 1093). We think that, in the absence of a charge of fraud, abuse of discretion, or other irregularity, we are without jurisdiction to consider this question. The determination whether the taxpayer is entitled to the special assessment was confided by Congress to the Commissioner, with the right of review by the Board of Tax Appeals (Blair v. Machine Co., 275 U. S. 220, 48 S. Ct. 87, 72 L. Ed. 249), and on such review the Board acts, not as a court, but as an administrative agency, and we think the rule is well established that such discretionary aets may not be reviewed by appellate courts except in the special circumstances already mentioned. It has been so held by the Third circuit in Cramer & King Co. v. Commissioner, 41 F.(2d) 24, and in the Fifth circuit in Standard Rice Co. v. Commissioner, 41 F.(2d) 481. In the present case it is not claimed that any of these circumstances exist, and we think the question is foreclosed against petitioner- on the strength of Williamsport Wire Rope Co. v. United States, 277 U. S. 551, 48 S. Ct. 587, 72 L. Ed. 985.

The decision of the Board will be modified in accordance with this opinion by allowing the item of $38,053.19 deduction for the taxable year 1920, and, as modified, affirmed and remanded for further proceedings not inconsistent with this opinion.

Modified and affirmed.


author: GRONER, Associate Justice. HITZ, Associate Justice

text:
    TAKAHASHI v. HECHT CO.
    No. 5062.
    Court of Appeals of District of Columbia.
    Argued March 9, 1931.
    Decided May 4, 1931.
    HITZ, Associate Justice, dissenting.
    W. Gwynn Gardiner, of Washington, D. C., for appellant.
    Wharton E. Lester, of Washington, D. C., for appellee.
    Before MARTIN, Chief Justice, and ROBB, HITZ, and GRONER, Associate Justices.
   GRONER, Associate Justice.

This is an appeal from a judgment of the Supreme Court of the District in an action to recover damages for a false arrest and imprisonment.

Rosa Takahashi, who is appellant here, and whom we shall speak of as plaintiff, sued the Hecht Company, a corporation, appellee, whom we shall speak of as the defendAit, to recover damages for false arrest and imprisonment. Her declaration alleges that in May, 1927, while she was in the store of the defendant, she was arrested at its instance, taken to the common jail, charged with the larceny of a diamond ring, searched, and thereafter confined for eighteen hours, and then, without trial, discharged from custody.

At the trial below, she testified: That she was at the time in question employed as a manicurist in one of the departments of defendant’s store in the city of* Washington. That, on the day of her arrest, she had, in the ordinary performance of her duties, waited on a woman customer, and that shortly thereafter this customer claimed to have lost a ring. That the store detective was sent for and interviewed plaintiff, who denied any knowledge of the ring, or any connection with its disappearance, and was told by him to return to her work and not leave the room. That shortly thereafter, and during the same day, plaintiff was directed to gó up to the main office of the store, where she met a man whom she assumed to be the general manager, but who informed her he was a police officer. To him she repeated her statement previously made to the store detective that she knew nothing whatever about the loss, and was not guilty of the larceny of the ring. She was told by the police officer to remain where she was until he had spoken to defendant’s general manager, and went to the latter’s office for that purpose, and on his return took her into custody and placed her in jail, where she was subjected to indecent and outrageous treatment in an effort on part of the police to find the ring on her person. That she was released about eighteen hours after this. The ring, it appears, was subsequently found by the customer in her own clothes.

At the close of plaintiff’s evidence, the . lower court sustained a motion for a directed verdict, and this action of the court, together with certain exceptions taken to the refusal ' of the court to admit certain evidence offered in behalf of the plaintiff, constitute the only assignments of error.

In the view we take of the case, the trial court erred in the exclusion of the evidence referred to, and likewise erred in giving binding instructions for the defendant, and, since the two questions are closely related, we shall, for the sake of clarity, discuss them together.

While plaintiff was on the witness stand, and had testified that she had Seen instructed to go to the office of the general manager of defendant, and had met the police officer whom she assumed to be the general manager, and had been informed by him that he was a police officer, and had explained to him that she knew nothing about the disappearance of the ring, he said: “Just wait a moment. I am going in the next room and talk to Mr. Marlow” (the general manager), and then was asked by her counsel what happened from this point on. Counsel for defendant objected on the ground that any statement made by the police officer as a result of his visit to- the general manager would be inadmissible, because’neither what the officer said nor what he did would bind defendant, and the court sustained the objection on that ground, and refused to allow the witness to testify further. Counsel for plaintiff then offered to prove, if permitted to do so, that, after the officer had gone to the room of the general manager and talked to him, he came out and told plaintiff to get her hat and coat and go with him, and that at the same time one of the young ladies in the office of the general manager was sent out to go with her to the cloakroom, and stayed by her while she put on her hat, and' walked back with her from that room to where the police officer was waiting, and whence she was taken to the police station.

And again, during the testimony of Mrs. Stewart, who was the manager of the department of the store in which plaintiff worked, the witness was asked by counsel .for plaintiff whether the manager of the store or the police officer had talked with her about what should be done with plaintiff in connection with the matter, and she replied “Yes,” but, upon objection by counsel for defendant, she was not permitted to tell what had been said.

We think that these questions were proper, and that the evidence sought to be elicited thereby was material in determining the real issue in the case; namely, whether plaintiff had been arrested without probable cause at the instigation of the responsible agents of the defendant. It is quite true that defendant’s store detective, when called as a witness by plaintiff, had testified that, when he went to the police station to secure the assistance of the police, he was accompanied by the customer who claimed to have lost the ring, and that he then and there stated to the officer to whom the complaint was made that it was not made at the instance of defendant; but we do not think this mere declaration, which obviously was designed for the purpose of avoiding liability in the event the suspicion attaching to plaintiff as the wrongdoer should prove, in case of her arrest, unfounded, was itself conclusive, or prevented plaintiff from showing by other evidence, if she could, that the arrest was in fact dictated or procured at the direction or request of a responsible agent of defendant acting within the scope of his employment. If such evidence was available to plaintiff, that is to say, if she was able to show that her arrest and imprisonment was directly or indirectly at the procurement of defendant, and was without probable, cause, she would have established a cause of action. She had shown her arrest without warrant, and her detention, and-the abuse of her person, and she had offered to show that this occurred after her denial of her guilt to the arresting officer, and after he had gone into the manager’s office for the purpose of consultation with him. If such evidence had been admitted, the jury might very well have considered, without more, that the hesitation on the part of the officer then and there to make the arrest was due to the lack of evidence of guilt, or indeed of evidence that a crime had been committed, and that his subsequent action in making the arrest immediately after conference with the general manager was the result of instructions received through the latter, and, in this aspect, the burden would then have been on the defendant to establish the contrary, or that probable cause for the arrest existed; arid so likewise we think that the trial court should not have refused to allow the manager of the department of the store in which plaintiff was employed to testify to statements m¿de to her by the general manager or the house detective with relation to their action in connection with the arrest.

[S-5] We do not by any means lose sight of the fact that information given to a police officer, or that statements indicating that suspicion has been directed to a certain person, when made in good faith, are ordinarily privileged, and we recognize fully the duty of every person having any information with relation to the commission- of a crime to bring this information to the notice of the police, but here the inquiry is broader — the question was not only what the responsible agents- of defendant said, but what tljey did, and this fact was apparently within the knowledge of a person in defendant’s employ whose duty it was to supervise plaintiff’s work, and we think plaintiff was entitled to show, if she could, that it was-directly or indirectly the cause of her arrest. There can be no serious contention here but that the general manager of defendant was clothed with authority to act in the premises, and if, without probable cause, he commanded the arrest or instigated the police officer to make it, defendant would be responsible, and we fail to see how else the plaintiff could prove this participation, if there was participation, except through the police officer, which of course would have been the ordinary and proper method of proof, or through the agents or officers of defendant who had participated in the event, or who knew the circumstances through which it was accomplished.

Relevant statements or admissions of an agent of a corporation, which are not confidential and privileged, and are within the scope of the agent’s authority, are always admissible against the corporation.- In such cases they become statements of a fact, and as such are binding on the corporation. This is more particularly true where they explain the acts of» the corporation out of which the injury complained of arose. Steamboat Co. v. Brockett, 121 U. S. 637, 649, 7 S. Ct. 1039, 30 L. Ed. 1049.

Inasmuch as we think there was error in the rejection of the evidence offered in behalf of the plaintiff in the respects mentioned, we must consider the ease on the motion for a directed verdict in the light of the admission of this rejected evidence, and, considered in that aspect, we have this case: A woman employee of previous good reputation and of several years’ service, upon the reported loss of a ring belonging to a customer of her employer on whom she had waited, is first of all interviewed and questioned by the store detective, and told she must not leave the room in which she worked. A little later she is sent to the company’s principal office, where she is confronted by a police officer who interrogates- her, and who then, after privately interviewing the general manager in his private office, is accompanied therefrom by another employee who, obviously for the purpose of preventing either her escape or her concealment of the evidence of her guilt, goes with her while she gets her hat and coat. She is then arrested, without warrant, taken from the store to the police station, treated like a common felon, and detained until the next afternoon, when she is discharged.

If defendant, in an effort to protect its customers from the loss of their property while in its store, believing plaintiff guilty, had set in motion the machinery of the law to have her brought to trial, in. the ordinary course of things it would have acted precisely as the evidence shows it did, and if it did, and with 'no greater cause than is shown by the evidence here to justify its action, then the plaintiff was entitled to recover, and, oil the showing above by her, with nothing to the contrary save the statement of the store detective that he had taken the customer complaining of the loss to the station house with him, and had there declared that his employer was not responsible for the complaint, we think a ease was made sufficient for submission to a jury. As we have already had occasion to say in Adams v. W. & G. R. R. Co., 9 App. D. C. 26, 30: “The court is never justified in directing a verdict except in eases where, conceding the credibility of the witnesses and giving full effect to every legitimate inference that may be deduced from their testimony, it is nevertheless plain that the party has not made out a ease sufficient in law to entitle him to a verdict and judgment thereon.” See Glaria v. Washington Southern R. R. Co., 30 App. D. C. 559, and Chesapeake Beach Ry. Co. v. Brez, 39 App. D. C. 58. It may well be that, when the case is again tried, the acts and things shown to have been done by defendant’s responsible agents will be satisfactorily explained, and the inferences, which it now seems to us the jury might have drawn therefrom, will no longer follow, but, with the case as made, we think there was enough to take it to the jury.

For the reasons stated above, the judgment below must be reversed, and the case remanded for a new trial to be had not inconsistent with this opinion.

Reversed.

HITZ, Associate Justice

(dissenting).

I am unable to concur in the judgment of the court in this case.

While I agree that the appellant was treated with much harshness in view of the event, for which she may well have a cause of action against the complaining witness or the police authorities, I see nothing in the evidence received or proffered sufficient to render the defendant below responsible for the occurrence.

Several minor questions were attempted here, but they mainly concerned rulings of the trial judge in reasonable restraint of fishing excursions, which were clearly within his discretion.

But the ease turned on his refusal to permit the plaintiff to testify as to what the detective officer from police headquarters said and did to her after the owner of the ring had complained to him at headquarters of its supposed theft.

After the customer discovered the disappearance of her ring, the matter was called to the attention of Mrs. Stewart, manager of the manicuring department, and of Mr. Evans, the store detective in the store.

Mrs. Stewart told the plaintiff to go back to her work and not to worry; Mr. Evans told her to go back to work and not leave the room, all of which she apparently did.

Shortly thereafter the customer and Mr. Evans went to police headquarters together, where they saw Detective O’Day, who gave the following clear aeeo.unt of their interview:

“Mr. Evans told witness at headquarters that this woman with him ‘lost some jewelry down in the store and he wanted me to — impressed upon me the Hecht Company had nothing at all to do with it.’
“Q. Repeat as nearly as you can what was said ? A. He said, ‘This woman wants to report a ring that she claims has been stolen from her while having her hands manicured.’ I took the report and went to the Hecht Company—
“Q. Was that all that he said to you? A. Yes, sir.
“Q.. Now you also said a minute ago he tried to impress upon you. Tell us what he said. A. He said, ‘You know Hecht & Company ain’t making this complaint, we ain’t in this at all.’ ”

Detective O’Day then had a further conversation with the customer, concerning which the reeord is silent, and three quarters of an hour thereafter went to the Hecht store.

A little later Mrs. Stewart told the plaintiff to go down to the manager’s office, where she went alone, and where she found detective O’Day, to whom she talked, thinking he was the manager, and who later arrested her.

The plaintiff was then asked what Mr. O’Day said and did to her, but the court declined to admit such testimony on the ground that the plaintiff had not yet shown any connection of the defendant, Heeht Company, with the arrest; whereupon the plaintiff made the following tender of testimony:

“Plaintiff went to the office of the manager where she saw a man who told her he was Mr. O’Day from police headquarters. He took her in a room and asked her about the matter and she told him what she had told Mr. Evans. He then came out of the room and told her to go and get her hat and coat. One of the young ladies in the office of the general manager of the Hecht Company, whose name plaintiff does not know, came out of the office and went with her to the cloak room and stayed by her while she put on her coat and hat and walked with her from that room back to where Mr. ■ O’Day was. She then accompanied Mr. O’Day to police headquarters where she was again asked about the transaction. She was then locked up. * * *”

If all this tendered testimony had been received and added to the testimony given, it would still fall far short of establishing the liability of the defendant for what was done.

The plaintiff declined to offer anything further, and a verdict was directed for the defendant under the rule long ago established by this court in Prigg v. Lansburgh, 5 App. D. C., at page 37, where it was said:

“3. The court did not err in directing the the return of a verdict for the defendants upon the evidence submitted by the plaintiff. This evidence is stated with sufficient fullness in the preliminary statement and need not be repeated. Without intending to intimate an opinion as regards the guilt or innocence of the appellant of the offense charged against him, or to decide that there was probable' cause for his prosecution, we hold that there is not sufficient evidence in the record to warrant a finding that .the appellees actually arrested the appellant or commanded or requested the officer, Raff, to do it. It is true that the facts were reported to Police Headquarters, and Raff came to investigate them. He heard the statements, examined the accused and made the arrest. There is no evidence to show that he did so at the request or under the persuasion of appellees, or any one of them, and the reasonable inference from all the evidence is that he made the arrest in the exercise of the discretion conferred upon him, according to the evidence of the chief of police.
“Mere information to the officers of the law by a citizen tending to show that an offense has been committed and that some person named may be suspected of its commission, is not sufficient, of itself, to warrant the inference that the informer or his agents participated in the unlawful arrest and imprisonment of the accused by the officer.”

To increase the hazard of a citizen reporting a suspected crime to the public authorities is not in the publie interest, but the present decision extends that hazard to the bystanders, even while they protest.

I think the judgment should be affirmed.


author: ROBB, Associate Justice.

text:
    UNITED STATES ex rel. BOWLING v. HINES, Director of the United States Veterans’ Bureau.
    No. 5224.
    Court of Appeals of District of Columbia.
    Argued March 2, 1931.
    Decided May 4, 1931.

      S. T. Ansell and G. M. Wilmeth, both of Washington, D. C., for appellant.
    Leo A. Rover, James T. Brady, Annabel Hinderliter, and B. L. Guffy, all of Washington, D. C., for appellee.
    Before MARTIN, Chief Justice, and ROBB, VAN ORSDEL, and HITZ, Associate Justices.
   ROBB, Associate Justice.

Appeal from a judgment in the Supreme Court of the District overruling the demurrer to the answer to appellant’s petition for a writ of mandamus and dismissing the petition; appellant’s contention being that he is clearly entitled to receive the pay of a retired enlisted man of the regular army as well as the pay of a retired einergency officer.

Long prior to the World War, appellant was an enlisted man of the regular army. During the World War he was commissioned and served as a first lieutenant in the emergency army, from which service he was honorably discharged February 14,1919. He reenlisted in the Army, and was retired in 1923 after more than 30 years’ service.

Following the passage of the Act of May 24, 1928 (45 Stat. 735 [38 USCA §§ 581, 582]), known as the Emergency Officers’ Retirement Act, appellant applied for retirement thereunder on account of permanent physical disability incurred by him in the line of duty during his commissioned service. The Veterans’ Bureau found, and so advised appellant, that he had incurred a permanent disability of not less than 30 per cent, as a result of his military sendee during the World War, and was entitled to retirement with the rank held by him at his discharge. He was already receiving the pay of a retired enlisted man, and claimed, in addition, the pay of a retired emergency officer. The Bureau ruled that he was entitled at his election to either, but not to both.

Under section 8 of the Act of June 6, 1924 (43 Stat. 470, 472 [10 USCA § 981]), amending the National Defense Act of June 3,1916 (39 Stat. 166), a retired enlisted man of the Army who served honorably as a commissioned officer of the Army at some time between April 6, 1917, and November 11, 1918, was entitled “to receive the pay of retired warrant officers of the Army; * * *' Provided, That such enlisted .man retired pri- or to July 1,1922, shall be entitled to receive the pay provided by law for retired warrant officers of equal length of service retired pri- or to that date, and that any such enlisted man retired subsequent to June 30,1922, shall be entitled to receive the pay provided by law for retired warrant officers of equal length of service retired subsequent to that date: Provided further, That nothing in this Act shall operate to prevent any person from receiving the pay and allowances of his grade, rank, or rating on the retired list when such pay and allowances exceed the pay to which he would be entitled under this Act by virtue of his commissioned service.” •

Under the Emergency Officers’ Retirement Act (May 24, 1928, 45 Stat. 735 [38 USCA §§ 581, 582]), an officer of that class, by making application within'one year from the date of the act, was entitled to be placed upon the emergency officers’ retired list with the rank held by him when discharged from his commissioned service, and to receive, from the date of receipt of his application, retired pay at the rate of 75 per centum of the pay to which he was entitled at the time of his discharge from his commissioned service, such pay to “be in lieu of all disability compensation benefits to such officers or persons provided in the World War Veterans’ Act, 1924, and amendments thereto. * * * ”

It is not disputed that in computing the retired pay of an enlisted man his base pay at enlistment is increased from time to time for length of service. Appellant’s 30 years’ service included both enlisted and commissioned service. In computing the retired pay of an emergency officer, credit is given for service as an enlisted man. Thus appellant would receive as retired emergency officer 75 per cent, of the base pay at discharge from the emergency commissioned service, and that base pay includes an additional allowance for long enlisted service.

Congress has imposed upon the Director of the Veterans’ Bureau (now Administrator of Veterans’ Affairs, Act of July 3, 1930, c. 863, 46 Stat. 1016 [38 USCA §§ 11-11f]) the duty of administering the various statutes here involved, and no court may control his action by mandamus in the absence of capricious or arbitrary rulings. Work v. United States ex rel. Rives, 267 U. S. 175, 45 S. Ct. 252, 69 L. Ed. 561. In the present ease the Director has found that it was not the intent of Congress that a retired emergency officer, who also • served as an enlisted man, should receive the retired pay of both an enlisted man and an emergency officer. Certainly that finding is not unreasonable, and may not therefore he characterized either as arbitrary or capricious.

It results that the judgment must be affirmed.

Affirmed.

Mr. Justice HITZ took no part in the consideration or decision of this ease.


author: HITZ, Associate Justice.

text:
    ANDRUS et al. v. BURNET, Commissioner of Internal Revenue.
    Nos. 5057-5060.
    Court of Appeals of District of Columbia.
    Argued April 8, 1931.
    Decided May 4, 1931.
    J. S. Seidman, of New York City, for appellant in all.
    Sewall Key, C. M. Charest, and Stanley Suydam, all of Washington, D. C., for ap-lellee.
    Before MARTIN, Chief Justice, and ROBB, VAN ORSDEL, HITZ, and GRO-NER, Associate Justices.
   HITZ, Associate Justice.

These four eases are here on petitions to review decisions of the Board of Tax Appeals.

- Petitioners are a brother and three sisters, interested alike in the question presented.

March 1, 1913, Julia Dyekman Andrus, their mother, died in Yonkers, N. Y., and the petitioners with their brothers and sisters became possessed of approximately 112% acres of land there, as remaindermen; their mother having had a life estate therein.

Their father, John E. Andrus, Sr., conceived the idea of a memorial to his late wife by her children and suggested and encouraged the application of the land to that purpose.

The three sons of the decedent seem to have been willing to meet their father’s wishes in the matter from the first, but the five daughters were unwilling.

Thereupon the father offered to buy the share of any unwilling child and contribute it himself - to the foundation, whereupon a price of $400,000 was placed upon the whole land for this purpose.

Subsequently, and on March 26,1923, the Julia Dyekman Andrus Memorial, Inc., was chartered under the laws of New York to care for needy children and others in a suitable home, and to help establish and maintain them as useful members of society.

On December 31, 1923, the land was conveyed to the corporation, which on that day in return gave its notes aggregating $400,-000 to the eight grantors, $50,000 to each, in denominations of $10,000, maturing 1, 2, 3, 4, and 5 years after date.

The eight notes first due were canceled, and the amounts thereof submitted by their owners in connection with income tax returns as charitable contributions to the corporation for the first year, and a like disposition and return was made of the like notes for each of the four succeeding years. Section 214 (a) (11), Revenue Act of 1921, c. 136, 42 Stat. 227, 241, 321.

The collector, commissioner, and Board o£ Tax Appeals disallowed the items as claimed and all held that the transaction as carried out constituted gifts by each contributor of his entire interest in the land to the corporation at one time, namely, December 31, 1923, when the title passed.

They further held that the petitioners were entitled because of the gift to deduction from net income for one year alone.

If all parties had actually given all their interests in 1923, they would have been liable for the tax as claimed; but the terms and conditions of the gift were otherwise, as evidenced by the notes passing contemporaneously from the corporation to the donors.

This transaction was bilateral, the land passing from one side and the notes from the other, and while these notes were not secured by a mortgage, they were notes of a solvent maker, and might themselves have been given away, possibly negotiated, or presented for payment at maturity, as the holders might elect or their subsequent necessities require.

In our opinion the transaction was not a wrongful evasion of the tax, but even if conceded to have been an arrangement of properties to minimize taxation, it was lawful, and the advantage thus resulting may have had its weight in bringing the reluctant daughters into the transaction.

While .these notes were. held by the payees, there was no completed gift. Allen-West Commission Co. v. Grumbles (C. C. A.) 129 F. 287, 290.

And as said by Mr. Justice McReynolds, in Gould v. Gould, 245 U. S. 153, 38 S. Ct. 53, 62 L. Ed. 211: “In the interpretation of statutes levying taxes it is the established rule not to extend their provisions, by implication, beyond the clear import of the language used, or to enlarge their operartions so as to embrace matters not specifically pointed out. In case of doubt they are construed most strongly against the government, and in favor of the citizen. U. S. v. Wigglesworth, Fed. Cas. No. 16,690, 2 Story, 369; American Net & Twine Co. v. Worthington, 141 U. S. 468, 474, 12 S. Ct. 55, 35 L. Ed. 821; Benziger v. U. S., 192 U. S. 38, 55, 24 S. Ct. 189, 48 L. Ed. 331.”

Because the method of establishing the memorial saved the petitioners taxes was no reason why it should be condemned. Weeks v. Sibley (D. C.) 269 F. 155, 158.

As any man may sell tax burdened securities and invest the proceeds in those exempt from taxation, these petitioners could lawfully arrange their gift in a manner incidentally diminishing their taxation instead of increasing it.

At the most, that was all that was done in this case, and consequently the decision appealed from should be reversed.

Reversed and remanded for further proceedings in conformity with this opinion.

Reversed.


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    UNITED STATES v. SEAGREN.
    No. 5320.
    Court of Appeals of District of Columbia.
    Argued April 7, 1931.
    Decided May 4, 1931.
    Henry H. Glassie, Alex H. Bell, Jr., and Arthur G. Lambert, all of Washington, D.' C., for the United States.
    G. E. Sullivan, Paul B. Cromelin, Bolitha J. Laws and Francis C. Brooke, all of Washington, D. C., for appellee.
    Before MARTIN, Chief Justice, and ROBB, VAN ORSDEL, HITZ, and GRONER, Associate Justices.
   HITZ, Associate Justice.

This is an appeal from a decree of the Supreme Court of the District of Columbia in a condemnation proceeding brought under the Act of Congress of January 5, 1927 (44 Stat. 931) for the relocation of the Botanic Garden in the eity of Washington.

The act authorizes the taking of “all of the privately owned land, buildings and other structures” in square numbered 576 and 578.

The appeal concerns a portion of parcel VII in the condemnation proceedings, described as lots 808, 809, 810, 811, and 812 in square 576.

At the time the proceedings were instituted, and long prior thereto, these lots were owned by the Saegmuller family, but leased to Seagren, appellee here, and hereafter referred to as the tenant, who built and conducted thereon a gasoline filling station on a large scale, with the usual equipment of such an establishment, consisting mainly of two small fireproof houses; _ a work shop; divers tanks for gasoline and oil three feet underground, with the pipes,' pumps, and other paraphernalia for operation, the property being covered with a concrete surface or roadway and inclosed by an iron fence five feet in height.

Seagren’s first lease for any portion of the land in question was for lot 812, described as a “vacant lot,” leased for one year from July 1, 1919, at a rental of $30 per month, with option of renewal for another year at the same rent, if the property should not have been sold in the meantime, and provided that, in the event of a sale of the land during the second year, the tenant would give possession on sixty days’ notice.

This lease gave the tenant authority to erect buildings, implant tanks, and other structures, and “to take away and remove the said buildings and other structures” within thirty days from the termination of the lease.

By subsequent'leases and renewals the tenant took over other lots on increasing rentals, so that, when the condemnation occurred, in August, 1930, he had possession of lots 808 to 812, inclusive, for which he was paying a monthly rental of $305, always reserving the right to remove all structures placed upon the land by him at the termination of his tenancy.

Before this time, however, a controversy had arisen between the landlord and tenant, the latter asserting a right of renewal for a further term of five years upon a reasonable rental to be determined by the parties, the landlord denying any right of renewal, and asserting the tenant to be holding over by sufferance after the expiration of all his leases.

This controversy is pending in the court of equity upon a bill of complaint filed by the tenant, but apparently has never been decided.

In the condemnation proceedings, the tenant made no claim in respect of any unexpired term, on the theory that, since Ids obligation was to pay a reasonable rental which had never been fixed, there was no ascertainable value in his term over the obligations of his lease, in view of the imminent taking of the property by the United States.

But he did assert a right to the reasonable value of his structures upon and within the land taken, the United States contesting such claim on the ground that the tenant’s right of removal, reserved in the lease as against the landlord, precluded his recovery in condemnation as against the United States.

The landlord disclaiming- any right or interest in the tenant’s structures, the issue was considered and decided by the court as between the United States and the tenant.

The commissioners of appraisal, as between the government and the landlord, appraised the landlord’s interest in parcel VII at $320,040, which included $48,050 as “the extent to which the present use of the land as a gasoline station enhances the value thereof.”

As between the United States and the tenant, the commissioners found the present value of his structures to be $35,000, subject to " the Opinion of the court as to his leg d right, this sum to be in addition to the allov anee to the landlord.

This verdict being approved and ratified by the court, the United States took this appeal against the landlord in respect of the allowance of $48,050 for enhanced value because of the licensed use of the land as a 'gasoline station; and against the tenant in respect of the allowance of $35,000 for his structures.

, The appeal against the landlord was compromised and dismissed by the United States, thus leaving for decision here only the question of the tenant’s allowance.

On this question the evidence tended to show an outlay by the tenant of $60,000 upon the structures and equipment of his establishment, the commissioners allowing $35,000 as the present value thereof.

No question is made here on the arithmetic, the United States apparently conceding the values, and that the structures were of a character by their nature to become part of the realty, except for the provisions of the leases giving the tenant the ultimate right of removal against the landlord upon the termination of the lease.

The question thus becomes whether or not this private stipulation for removal between the landlord and the tenant inures to the benefit of the government when condemning the estates of both? Can the United States, exercising its right of eminent domain, change the essential character of structures from realty, which it must pay for, to personalty, which it may order removed without payment, because a landlord and tenant, dealing upon private considerations of reciprocal interest and expenditure, have years before agreed as between themselves that upon their termination of their lease the tenant might remove his structures?

In support of its contention the United States mainly relies on the decision of the Supreme Court in Boston Chamber of Commerce v. Boston, 217 U. S. 189, 30 S. Ct. 459, 460, 54 L. Ed. 725, but the facts in that ease differ so substantially from the facts here that we do not regard that decision as controlling this.

In the Boston Case the city condemned for use as a public street a parcel of land owned in fee by the Chamber of Commerce, but over which an abutting owner had an easement of way, light, and air. The owners of the dominant and servient estates, together with a mortgagee, being all the parties having any interest in the land, agreed among themselves by stipulation filed in the cause that the property should be appraised in condemnation as arf unrestricted fee, and paid for accordingly by one lump sum.

The city contended that the land and the titles must be taken as they actually stood, and not as stipulated by the parties in interest, that the servient estate must be valued as diminished by the servitude, and that the dominant estate could not be substantially injured by adding a public easement for way, light, and air, over property already subject to the private easement for the same purposes.

In upholding the contentions of the city, the court rejected the agreement of the parties as creating a fictitious title that no one owned, and a theoretical loss that no one suffered.

The court thereupon dealt with the property, and the interests therein, as they actually stood, and not as the agreement provided they might be taken to stand.

The court there stated that the constitutional provision controlling the right of eminent domain “merely requires that an owner of property taken should be paid for what is taken from him. It deals with persons, not with tracts of land. And the question is, What has the owner lost? not, What has the taker gained?”

So, in this ease, we are not dealing merely with a tract of land, but with the persons holding interests therein, and the verdict as confirmed allows to the landlord and to the tenant the appraised value of each estate.

And so the agreement for removal made by these parties at another time, for another purpose, and affecting no interests but their ,own, must be rejected here as irrelevant, when set up by the United States to control its condemnation proceedings against the tenant’s interest in the land.

But applying the general language of the Boston Case as quoted above to the present controversy, the United States contends that the tenant here has lost nothing by the taking of the property.

He reserved the right to remove his structures whenever the landlord should terminate his tenancy; now that the United States has terminated his tenancy by taking .the land, he may exercise his right and remove his structures.

Nothing has been taken from him. Only his performance of an inevitable obligation has been accelerated.

But much' the same argument could be made in support of murder, for all that any murderer ever did was to accelerate the debt that every mortal owes to nature.

If the structures here in question had been built by the landlord, they would have been taken and paid for by the government without question, as the government concedes they are now part of the realty. Is the tenant’s reserved power of removal as against the landlord’s termination of the lease to work a forfeiture in favor of the government? We think not.

The inherent character of these structures is real estate; no agreement can change that character, though the landlord may waive the right which might otherwise accrue to him from the character of the structures placed upon his land. At the most, that is all that this agreement did.

We find the controlling rule well stated in Nichols on Eminent Domain; “It frequently happens that, in the case of a lease for a long term of years, the tenant erects buildings upon the leased land or puts fixtures into the building for his own use. It is well settled that, even if the buildings or fixtures are attached to the real estate and would pass with, a conveyance of the land, as between landlord and tenant they remain personal property, and, in the absence of special agreement to the contrary, may be removed by the tenant at any time during the continuation of the lease provided such removal may be made without injury to the freehold. This rule is however entirely for the protection of the tenant and cannot be invoked by the condemning party. If the buildings or fixtures are attached to the real estate, they must be treated as real estate in determining the total award, but in apportioning the award they are treated as personal property and credited to the tenant.” Nichols on Eminent Domain (2d Ed.) vol. 1, § 234.

And the New York courts have frequently considered the question, and stated the rule very precisely:

“As the property now exists, it is real property, and so remains until the structure is severed from the soil. This act the tenant is not bound to perform at the time the property is taken. As it then is, so it may always remain ; and, when the city makes the compensation for the property, it steps into all the rights possessed by both parties. * * *

“No reported case in this state is called to our attention, and none found after diligent search, where the right of the tenant to receive compensation for permanent improvements made by him upon leased land, taken by right of eminent domain, has been denied.” In re Appointment of Park Commissioners (Super. Buff.) 1 N. Y. S. 763 at page 766, 767; In re Post Office Site (C. C. A.) 210 F. 832; Matter of the City of New York, 118 App. Div. 865, 103 N. Y. S. 908; In re Mayor, 39 App. Div. 589, 57 N. Y. S. 657.

“The city took the entire buildings as they stood, including the trade fixtures therein, and for the purposes of this proceeding they must all be regarded as real property; that is, as between the tenant and the city, the trade fixtures were real property * ,s * and the tenant was under no more obligation to remove them than he would be to remove a building if he were the owner. As between the tenant and the owner, however, the trade fixtures were personalty, and could be removed, and therefore any award made for them would go to the tenant.” In re Block Bounded by Avenue A, etc., 66 Misc. Rep. 488, 122 N. Y. S. 321, 339.

We find no error in the record, and. the decree is affirmed.

Affirmed.


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    JOHNSON & WIMSATT, Inc., v. REICHEL-DERFER et al., District Com’rs.
    No. 5275.
    Court of Appeals of District of Columbia.
    Argued March 3, 1931.
    Decided May 4, 1931.
    George E. Sullivan, of Washington, D. C., for appellant.
    _ _ William W. Bride and Vernon E. West, both of Washington, D. C., for appellees.
    Before MARTIN, Chief Justice, and ROBB, VAN ORSDEL, HITZ, and GRO-NER, Associate Justices.
   HITZ, Associate Justice.

This is an appeal from a final decree of the Supreme Court of the District of Columbia in a condemnation proceeding instituted by the Commissioners of the District of Columbia for the acquisition of a school site.

The land to be taken is all of squares numbered 415 and 439 in the southern part of the city of Washington near the Potomac river.

The appellant here was a respondent be- • low, as owner of all of square 415, and nearly one-half of square 439, holding lots 4, 6, 7, 8, and 803, in square 439.

This property was improved by a small office building; certain fences; and other facilities for its use as a lumber yard, wherein the appellant has for many year's conducted its lumber business.

The petition was filed and the decree made under the Act of Congress approved March 1, 1929 (45 Stat. 1437 [D. C. Code 1929, T. 25, §§ 41-50]), amending the Code in respect of the condemnation of land for school sites and certain other municipal purposes of the District of Columbia.

The petition is dated September 6, 1929; the award of the jurors, January 31, 1930; exceptions thereto by the appellant, February 19, 1930; the final decree overruling the exceptions, confirming the awards, and allowing this appeal on April 8, 1930. The record on appeal was filed in this court August 12, 1930.

The exceptions below and the contentions here are based upon alleged inadequacy of the awards to the appellant, and upon the testimony of the assessor of the District of Columbia as an expert witness for the District.

The first assignment of error rests upon the ruling of the court permitting Mr. Richards, assessor of the District of Columbia, to testify for the District as an expert witness on the market values of the lands involved; the objection going both to his official character and to his alleged lack of sufficient familiarity with the land to qualify him as an expert on its market value.

It is widely recognized that appraisements of property by tax assessors for purposes of taxation are not reliable guides of market value, and consequently not admissible in condemnation proceedings.

“The assessment of property for taxation, being made for another purpose, and not at the instance of either party, and not usually at the market value of the property, is not admissible as evidence in condemnation proceedings.” Lewis, Eminent Domain, § 668.

“This court knows judicially and as a part of the financial history of the state that land is never assessed for purposes of taxation at its real cash market value, though that may be the law, but only in comparison with other lands around it.” Wray v. Ry. Co., 113 Tenn. 544, 82 S. W. 471, 475.

To the same effect are Fort Collins Development Co. v. France, 41 Colo. 512, 92 P. 953; Brown v. Providence, etc., Ry. Co., 5 Gray (Mass.) 35; Martin v. Ry. Co., 62 Conn. 331, 25 A. 239; Birmingham, etc., Ry. Co. v. Smith, 89 Ala. 305, 7 So. 634; Texas & St. L. Ry. Co. v. Eddy, 42 Ark. 527.

And in the Washington Market Case, this court held it error to consider tax assessments in a condemnation proceeding. In re United States to Appraise Washington Market Co. Property, 54 App. D. C. 129, 295 F. 950.

In recognition of this doctrine the trial judge in this ease instructed the commissioners of appraisement that: “You are instructed that you shall not take, into con- ' sideration the assessed value of the land in question or give any consideration thereto or permit yourselves to become so informed in respect thereto in any manner; nor shall you make any private inquiries as to the value of such land, or anything concerning the same or relating thereto, but you shall rely only upon the evidence adduced and upon your view of the premises as hereinafter instructed.”

But the record does not show that any cautionary instructions were given the commissioners in connection with the assessor’s testimony.

The foregoing instruction, or the substance thereof, has long been used in such cases in this jurisdiction, as in many others, and while the assessor’s testimony may differ from the assessori’s assessments, it seems wholly impracticable to preserve the landowner’s fundamental right of cross-examining him as a witness without violating the instruction of the judge to the jury.

For if his testimony agrees with the assessment, then the jury is indirectly considering the assessment, and becoming informed in respect of the assessment.

While if his testimony differs from the assessment, the difference cannot be brought out on cross-examination without considering the assessment, and without informing the jury in respect to the assessment.

Furthermore, the assessor of the District of Columbia is also ex officio chairman of the “Board of Equalization and Review,” consisting of the assessor and the six assistant assessors. D. C. Code, Title 20, §§ 694, 702.

His duties in this capacity may thus make him the umpire in any question of disputed assessment between the taxing authorities and any taxpayer, while our statute requires condemnation juries or commissions to be composed entirely of freeholders.

In view of the widespread and growing distrust of expert witnesses in our courts, we cannot view with approval the practice of calling a salaried officer of the District of Columbia to give opinion evidence in a cause where the District is a party litigant, and especially where the assessor of taxes testifies to a jury made up exclusively of the payers of taxes.

For these reasons we are of opinion that it was error to receive the assessor’s testimony in this case, though, of course, we do not mean to intimate any criticism of the assessor, whom we have long recognized as an industrious and efficient public servant.

In view of our conclusion on the first assignment of error it becomes unnecessary to consider the others.

The decree is reversed with costs, and the cause remanded for further proceedings not inconsistent with this opinion.