author: GORDON, Senior District Judge.

text:
    Howard F. DRAKE, Plaintiff, v. UNITED STATES of America, Defendant.
    No. C-83-76-G.
    United States District Court, M.D. North Carolina, Greensboro Division.
    Nov. 27, 1984.
    Michael C. Stovall, Jr., Greensboro, N.C., for plaintiff.
    Richard F. Mitchell, Atty., Tax Div., Dept, of Justice, Washington, D.C., for defendant.
   MEMORANDUM OPINION

GORDON, Senior District Judge.

This income tax refund suit came before the Court for trial on October 10, 1984. Plaintiff taxpayer Howard F. Drake (Drake), formerly an employee of a tax-exempt section 501(c)(3) organization, had, during this employment, participated in a tax-sheltered section 403(b) annuity program. Under this program, Drake directed that a certain amount of his salary be paid as premiums directly to the annuity company and, under section 403(b)(1), these premium amounts were excluded from Drake’s gross income. On December 15, 1978, pursuant to the loan provisions of his annuity policy, Drake obtained a $4,928.52 payment to alleviate a personal financial emergency. Drake, having been informed by the annuity company that the payment was taxable income, (Plaintiff’s Ex. # 9), included the amount as such on. his 1978 federal income tax return and accordingly paid tax of $1,320.04 thereon. Drake later filed a timely refund claim which was disallowed by the Internal Revenue Service (IRS) and thereafter timely commenced this suit on February 1, 1983.

Drake contends that the $4,928.52 represented a bona fide loan from his annuity policy and thus not taxable income to him. Conversely, the IRS argues that under the literal language of the 1978 version of section 72(e)(1)(B) and Rev. Ruling 81-126, 1981-1 C.B. 206, this alleged loan was an “amount received under an annuity..., [though not] as an annuity” and thus is taxable to Drake. This Court, following the Tax Court decision in Minnis v. Commissioner, 71 T.C. 1049 (1979), and the apparent Congressional intent embodied in the statutory scheme of sections 501(c)(3), 403(b) and 72(e)(1)(B), concludes that the amount received by Drake is a valid indebtedness which was not taxable income to him when received. Accordingly, it is concluded that judgment should be entered for the Plaintiff in the amount of $1,320.04 plus interest. Further, it is the finding of the Court that the Government’s position was “substantially justified”, 28 U.S.C. § 2412(d)(1)(A) (1984), and thus Plaintiff’s claim for reasonable attorney’s fees under the Equal Access to Justice Act, 28 U.S.C. § 2412 (1984), should be denied. The issue of attorney’s fees was left open at the conclusion of the trial. However, it is apparent from the facts and discussion which follows that the Government’s action was not unreasonable. Complicated facts and law are involved. Genuine issues were presented for decision.

FACTS

The Plaintiff, Howard F. Drake, is an individual now residing in Greensboro, North Carolina. From November, 1970 until the office’s closing in January, 1982, he was employed with the Low Income Housing Development Corporation of North Carolina (LIHDC), a charitable organization exempt from federal income tax under section 501(c)(3). On February 1, 1975, he voluntarily entered an annuity purchase plan (annuity plan) under which the LIHDC paid as premiums to the Pilot Life Insurance Company of Greensboro, North Carolina (Pilot) an amount designated by Drake to be deducted from his periodic salary. Under section 403(b) these premium payments, although deducted directly from Drake’s salary at his direction, were excluded from his gross income.

The following table shows the amounts Drake had deducted from his salary and paid as premiums to Pilot’s annuity plan:

Year Monthly Contribution Annual Total
1975 $ 75.00 $ 900.00
1976 100.00 1,200.00
1977 125.00 1.500.00
1978 115.00 1.380.00
1979 157.00 1.884.00
1980 157.00 1.884.00
1981 (thru July) 157.00 1.099.00

Pursuant to the policy loan provisions of the annuity contract, on December 15, 1978, Drake obtained from Pilot a loan in the amount of $4,928.52. Drake needed these, funds to pay off a note for which he was the co-maker which, due to his fellow co-signer’s neglect, was in default. Drake had secured the note with a deed of trust on his personal residence and thus was faced with a clear and present financial emergency. The balance due on the note totaled $5,000.00 and, to meet this, Drake first “made efforts to borrow the money from others (banks & financial institutions) but could not.” (Drake’s Testimony). Thus, Drake resorted to his Pilot annuity plan to obtain the necessary financing. The very favorable 6 per cent interest rate on a policy loan undoubtedly weighed heavily in his decision. ¡

The loan provisions' to which Drake turned provide, in its entirety:

LOANS
While this policy is in force and before annuity payments begin, the Company, upon receipt of a satisfactory loan agreement, will grant loans on the security of this policy. The maximum amount of such loans is the amount which with interest thereon to the end of the current policy year will not be more than the guaranteed cash value plus the cash value of any dividend additions available at the end of the current policy year.
The Company may defer the granting of a loan for the period permitted by law not exceeding six months except for loans to pay premiums to the Company. The loan may be repaid in full with accrued interest, or in part, at any time while this policy is in force and before annuity payments begin, provided payments are made of not less than Ten Dollars each. Interest on such loan shall be at the rate of 6% per annum and will be payable on each subsequent policy anniversary date. If interest is not paid when due, it shall be added to the existing loan and will bear interest at the same rate. If and when the total indebtedness, including interest due or accrued, equals or exceeds the guaranteed cash value of this policy plus the cash value of any dividend additions, and at least thirty-one days prior notice shall have been mailed by the Company to the last known address of the Owner and any Assignee of record, this policy shall terminate and become void. (Plaintiff’s Ex. # 1, p. 7).

Although Drake initially sought the full $5,000.00 from Pilot, under these policy terms, he could only receive an amount equal to, basically, the guaranteed cash value plus any earned but uncredited dividends. So, Drake, by requesting that he receive “as much as [he] could get on loan”, (Drake’s Testimony), ultimately obtained the $4,928.52 now at issue.

When he received this first loan, on December 15, 1978, Drake was 42. The premiums on the annuity policy are payable until he reaches age 65. On February 1, 2001, that is, the “Anniversary of the Date of Issue nearest the Annuitant’s Age 65,” (Plaintiff’s Exhibit # 1), or the “annuity starting date,” Section 72(e)(1)(A), the annuity payments officially will begin. It is concluded that, during 1978, Drake did not begin to receive installments or periodic payments under the annuity policy.

To complete the facts of the particular transaction here, the Court further finds that, as was suggested to him by Pilot in the letter forwarding his $4,928.52 check, (Plaintiff’s Exhibit #9), Drake included this amount as ordinary income on his 1978 federal income tax return. His total income reported on that return was $24,-476.89. Of the total tax he paid on this amount, $1,320.04 was attributable to the amount of the loan.

Subsequent to the filing of his 1978 return, Drake timely filed a refund claim with the IRS for tax paid on his loan. On April 22, 1982, the IRS officially and fully disallowed this claim. (Plaintiff’s Exhibit #6).

As relevant background facts, the Court further finds, first, that Drake from February of 1980 through February of 1982 obtained four additional loans from his Pilot annuity policy. Specifically, on February 20, 1980, Drake received $1,843.60, January 21, 1981 $1,000.00, May 15, 1981 $1,000.00, and February 19, 1982 a final loan of $1,700.36. This final loan was necessitated, according to his uncontradicted trial testimony, by his then unemployed status. The three immediately preceding loans were required by Drake to meet other “personal financial needs” which he could not specifically recall at trial. It is also concluded that at least in receiving the first, second and fifth policy loans, Drake obtained the maximum loan amount available to him at the respective times.

Second, although as his similarly uncontradicted trial testimony revealed, Drake intends as he always has. to repay all the loans, he has not repaid any loan principal nor intérest. In fact, he admitted that his decision to repay hinges on the outcome of this litigation. That is, if it is finally determined that his withdrawals are loans, he will repay Pilot; if they are deemed income, he will have paid the IRS for the largest and will owe tax on the remaining payments.

Finally, the Court finds that, despite the several loan withdrawals Drake has secured from his policy and despite his failure to repay any principal or interest, Drake’s Pilot annuity plan has not been cancelled but instead increases steadily in value due to the higher return yielded on his equity value vis-a-vis the relatively low interest accumulation on his loan balance. Drake’s again uncontradicted testimony highlighted this fact and the more objective records provided by Pilot reveal that on August 6, 1981, Drake, soon after his fourth policy loan, still had a positive equity value in his annuity plan of $1,094.21. (Plaintiff’s Exhibit # 11).

DISCUSSION AND CONCLUSIONS OF LAW

As a threshold matter, the Court concludes that it has jurisdiction, as the parties stipulated, over the subject case under 28 U.S.C. §§ 1340 and 1346(a)(1).

Proceeding to the merits, the issue to be decided can cogently be stated as whether the $4,928.52 received by Plaintiff pursuant to the loan provisions of a tax-sheltered 403(b) annuity plan constitutes taxable income to him under the applicable version of section 72(e)(1)(B). Plaintiff Drake, following Minnis v. Commissioner, 71 T.C. 1049 (1979), argues for a negative response while Defendant United States contends that the Court, under Rev. Ruling 81-126, should rule in the affirmative.

In Minnis the Tax Court concluded that the public school teacher-taxpayer who. had reeeived a loan under her tax-sheltered 403(b) annuity plan to finance home remodeling had not realized taxable income. Mrs. Minnis borrowed $5,000.00 at 4.8 per cent from her annuity policy while ordinary bank loans charged 9 per cent. The IRS argued that since the premiums were, in effect, paid by the taxpayer’s employer, the loan proceeds were income. However, the court, while recognizing the potential for abuse within this statutory framework, found that Mrs. Minnis’ transaction was an ordinary loan and could find no basis upon which to rule that Congress intended to tax such annuity borrowing.

Initially, as did the Minnis court, this Court concludes and cautions that the subject case did not prompt any argument by the IRS that the loan was without economic substance. Indeed, the Government’s counsel in his closing statement admitted that Drake’s was a valid policy loan and “not a sham transaction.” Thus, the Court is not compelled to consider Knetsch v. United States, 364 U.S. 361, 81 S.Ct. 132, 5 L.Ed.2d 128 (1960), and its progeny. See Salley v. Commissioner, 55 T.C. 896 (1971), aff'd, 464 F.2d 479 (5th Cir.1972); Bridges v. Commissioner, 325 F.2d 180 (4th Cir.1963); See generally Wachovia Bank & Trust v. United States, 499 F.Supp. 615 (M.D.N.C.1980) (finding no sham transaction but analyzing Knetsch and Bridges). Indeed, as in Minnis, there is no objective, independent proof that Drake sought to receive tax-free compensation through this or the subsequent loans. Drake borrowed from his annuity plan only after seeking alternative financing and realizing that the interest applicable to commercial loans was twice or more the interest rate available on his policy loans. Upon receiving the loan check, he learned that the payment was thought to be taxable income and he dutifully reported it as such on his return. This reporting and tax payment along with his inescapable recognition — and subsequent IRS confirmation— that such “loans” would at least initially be deemed income negates any conceivable intent by Drake to use his annuity plan as a tax evasion scheme. Furthermore, although he has not yet repaid any of the loans, his needy purpose in acquiring at least the loan in issue — to prevent foreclosure on his personal home — is exceedingly more meritorious than Mrs. Minnis’ desire to remodel her newly purchased house.

As to the statutory argument which the Government did make, the pertinent language of section 72(e)(1)(B) provides that “if any- amount is received under an annuity ... if such amount is not received as an annuity and if [not] received on or after the annuity starting date, [it] shall be included in gross income ... to the extent it exceeds the aggregate premiums paid.” The statute further provides that “dividends ... payments in full discharge ... and refund of the consideration paid and any amount received ... upon surrender, redemption or maturity” of the contract all shall be treated as amounts not received as an annuity.

Thus the applicable version of section 72(e) deems basically every conceivable non-annuity payment from an annuity plan other than a valid loan to be income to the recipient. So, the key inquiry is whether the $4,928.52 is a bona fide loan or instead “an amount received under, [though not] as an annuity.” Section 72(e).

There is no doubt that a policy loan is. somewhat unique and, as the Minnis court recognized, “differs in some respects from an ordinary loan.” Minnis at 1054. For example, Pilot apparently had no discretion in providing the loan and no substantive recourse upon which to turn upon a default by Drake.

However, Pilot was adequately secured in and could even delay extension of the loan so the Government’s argument of lack of discretion is largely illusory. In addition, Drake’s obligation to repay the loans is independently enforced by at least three significant factors. First, the policy, by-the terms of the loan provisions, terminates in the unlikely event that the annuitant’s total loan balance plus accrued interest exceeds the policy’s guaranteed cash value. Second, and more compelling, is the fact that Drake must repay his loans before the regular annuity payments begin or apparently will receive payments lowered commensurately with his outstanding credit balance. Rev. Ruling 81-126, supra and Minnis at 1056 citing Rev. Ruling 67-258, 1967-2 C.B. 68 (the predecessor to Rev. Ruling 81-126 on precisely the same issue). Finally, but equally as burdensome to Drake, he, upon reaching age 65 with the loans still unpaid, would face a large ordinary income tax liability on the entire amount of his loans with no wherewithal to pay the tax rather than the immensely more favorable scenario of, having repaid the loans, receiving periodic annuity payments to be taxed at his presumably lower post-retirement marginal rate and to be paid directly from the very payments being taxed. Thus, while the potential for abuse under the pertinent statutory scheme does exist, the Court, which must, first acknowledge that the question of proper tax treatment of unpaid loans will be dispositively handled at another time, nonetheless proffers the view that these retirement planning and tax disincentives largely mitigate the potential abuse. See also Minnis at 1056-1057.

Perhaps more important to the Court’s conclusion today, “for the purposes of determining a taxpayer’s Federal income tax liability, policy loans have generally been regarded as a valid form of indebtedness.” Minnis at 1054. Accordingly, despite the unique qualities of insurance or annuity policy loans, it seems widely recognized that the interest paid on such loans is deductible under section 163. Minnis at 1054 (dictum); Cameron v. Commissioner, 81 T.C. 254 (1983) (following Minnis and others on the deductibility of such interest but distinguishing non-deductible interest payments on redeposits by a federal employee to the Civil Service Retirement & Disability Fund); Salley, 55 T.C. at 903; Kay v. Commissioner, 44 T.C. 660, 672 (1965) (“the obligation on insurance policy loans is unique ... [but] by making the loans, the owner of the policy becomes obligated in a sense to pay interest thereon and ... such obligation is sufficient to qualify it as deductible interest.”); Dean v. Commissioner, 35 T.C. 1083 (1961). It is only logically consistent to, on the one hand, rule that interest paid on annuity policy loans is deductible and, on the other, to conclude that such loans are equally valid debt for the purpose of defining income to the annuitant. Although, as Emerson observed, some consistencies may be “the hobgoblins of little minds,” they are, overall, a goal to which this Court does and the tax laws should strive.

Furthermore, Drake’s loan was considered by the parties to be and did constitute “a loan in ordinary parlance.” Minnis at 1055-56. As did the Minnis court, this Court recognizes that “common understanding and experience are the touchstones for the interpretation of the revenue laws. Id. at 1056 quoting Helvering v. Horst, 311 U.S. 112, 117-118, 61 S.Ct. 144, 147, 85 L.Ed. 75 (1940), but further acknowledges that the definition of relevant commercial terms “in tax cases [is to be] governed by the economic realities of the transaction rather than the form in which it is cast.” Salley at 900. The subject loan qualifies as such under either test. The “common understanding” of Drake in obtaining the funds, Pilot in its contract and records (Plaintiff’s Exhibits #’s 1, p. 7, 7, 8, & 9), and now ultimately this Court is that the payment here was a valid loan. And, because of Drake’s implicit obligation to repay, the “economic realities of the transaction” weigh significantly in favor of loan treatment. Thus, it is concluded that Drake’s policy loan falls within the common definition of indebtedness as “an unconditional and legally enforceable obligation for the payment of money.” Salley at 900 quoting Autenreith v. Commissioner, 115 F.2d 856, 858 (3d Cir.1940), aff'g 41 B.T.A. 319 (1940).

The Court must agree that, even as a valid loan, Drake’s would be considered income within a narrow reading of the literal provisions of section 72(e)(1). However, the adoption of such a literal construction is rebutted by two dominant factors. First, section 72(e), by defining and providing examples of those distributions (dividends, premium refunds, redemptions, etc.) to be taxed, at least implies that it provides an exhaustive list. More importantly, the legislative history of new section 72(e) confirms this implication by first expressing the Senate’s “concern that widespread use of loans ... from tax-sheltered annuities diminishes retirement savings” and then by concluding that “restrictions on loans ... should be applied to all plan participants.” S.Rep. 494, 97th Cong., 2d Sess. 319, reprinted in 1982 U.S.Code Cong. & Ad.News 1060. In essence, Congress had to, in 1982, treat loans from section 403(b) annuities as income because the statute failed to do so before then. Thus, the new law only substantiates the Tax Court’s 1979 appraisal that, for those annuities in effect before 1982, “Congress considered policy loans to be a valid form of borrowing.” Minnis at 1055.

Congress’ omission of any pre-1982 provision deeming 403(b) annuity loans as income is also recognized, again at least implicitly, in the recent case of Sasser v. Commissioner, 44 T.C.M. 404 (1982). There, the Tax Court, in deciding that annuity loans under an HR-10 retirement plan were taxable income to the owner-employee recipient, observed that “while as a general rule loan proceeds do not constitute taxable income, even in the case of a loan made against the cash surrender Value of an annuity contract, Congress has specifically provided that, in the case of a loan made to an ‘owner-employee’ by the insurance company with whom such [individual] has established a retirement plan described in section 403(a), the amount of the loan is treated as an amount received under the retirement plan.” Id, at 408. Because Congress had specifically deemed 403(a) annuity loans to be income, the court so held. However, prior to 1982, Congress had not so decided for 403(b) plan loans and thus this Court must reach the contrary result.

Finally, the Court must acknowledge that its conclusion is also contrary to that in Rev. Ruling 81-126. However, as was so aptly stated in Estate of Lang v. Commissioner, 64 T.C. 404, 407 (1975), such rulings are “simply the contention of one of the parties to the litigation, and ... entitled to no greater weight.” Having recognized this, the Court leaves the IRS to pursue the consideration it is due in attempting to “free [this policy loan issue] from doubt.” Minnis at 1057.

DISPOSITION

For the foregoing reasons, it is held that the policy loan received by Plaintiff is not an “amount received under an annuity” within the meaning of the 1978 version of section 72(e)(1)(B), and thus the $4,928.52 obtained by Drake was not taxable income to him. Accordingly, judgment shall be entered for Plaintiff in the amount of $1,320.02 plus interest.

      . All section references are to the Internal Revenue Code of 1954, as amended and in effect for the taxable years in issue.

      . Section 72 was amended by section 265(a) of the Tax Equity & Fiscal Responsibility Act (TE-FRA) of 1982, Pub.L. No. 97-248, 96 Stat. 324 (codified as amended at 26 U.S.C. § 72(e) (1984)). However, Plaintiff posited and the IRS conceded that the pre-TEFRA language of section 72(e)(1)(B) applies to this suit which stems from a 1978 loan and tax return. The Court did find, in considering this point, that the provi-. sions of post-TEFRA section 72(e)(5)(A), (B) & (D)(ii)(III) could be read as applicable to the subject case. However, the issue presented with the facts at hand in the context of pre-TEFRA section 72(e)(1)(B) arid, alternatively, the more detailed provisions of post-TEFRA section 72(e)(5)(A) through (e)(6) differs only semantically, not substantively. In essence, the Court is still left to decide, for all 403(b) annuity plans, I.R.C. § 72(e)(5)(D)(ii)(III) (1984), commenced before August 14, 1982, I.R.C. § 72(e)(5)(B) (1984), whether the "amounts received under the contract [are] excludable from gross income.” I.R.C. § 72(e)(1)(B) (1978) and I.R.C. § 72(e)(6)(B) (1984) (identical language in each statute). Thus, having noted this and recognizing that the same issue and result would be yielded by application of the 1984 statutory language of § 72(e)(5), the Court concludes that it will base its resolution on the 1978 Internal Revenue Code provision. In the vernacular, a rose, however thorny, is a rose by any other name.

      . Although Drake was employed by the LIHDC through January, 1982, based on all the evidence before the Court, it must conclude that Drake made no annuity contributions after July, 1981.

      . Although to say "loan” begs the question in this case, the Court does so for simplicity of wording.

      . This term is defined in section 72(c)(4).

      . As noted, Drake had requested $5,000.00 instead of the $4,928.52 he did receive as his first loan. Also, Drake, before borrowing $1,843.60 in February of 1980, had requested $2,000.00 (Drake’s Testimony), and, in seeking the final $1,700.36 loan, he simply asked for the maximum loan available to him. (Defendant’s Exhibit # 14).

      . Section 72(e) reads in full:
      (e) Amounts not received as annuities.—
      (1) General rule. — If any amount is received under an annuity, endowment, or life insurance contract, if such amount is not received as an annuity, and if no other provision of this subtitle applies, then such amount—
      (A) if received on or after the annuity starting date, shall be included in gross income; or
      (B) if subparagraph (A) does not apply, shall be included in gross income, but only to the extent that it (when added to amounts previously received under the contract which were excludable from gross income under this subtitle or prior income tax laws) exceeds the aggregate premiums or other consideration paid.
      For purposes of this section, any amount received which is in the nature of a dividend or similar distribution shall be treated as an amount not received as an annuity.
      (2) Special rules for application of paragraph (1). — For purposes of paragraph (1), the following shall be treated as amounts not received as an annuity:
      (A) any amount received, whether in a single sum or otherwise, under a contract in full discharge of the obligation under the contract which is' in the nature of a refund of the consideration paid for the contract; and
      (B) any amount received under a contract on its surrender, redemption, or maturity. In the case of any amount to which the preceding sentence applies, the rule of paragraph (1)(B) shall apply (and the rule of paragraph (1)(A) shall not apply).

      . Section 72(e)(1).

      . Section 72(e)(2).

      . Both parties agreed at trial that this would be the proper tax treatment if all the loans went unpaid.

      . The statute is certainly not, as the Government’s counsel has argued, "clear that the exam-pies in section 72(e)(2) are but additional instances for the application of the general rule, and are in no way restrictive or limiting.” Defendant’s Trial Memorandum, p. 7.


source: Caselaw Access Project

author: LEIGHTON, District Judge.

license: Public Domain

text:
    Thomas RING, Plaintiff, v. R.J. REYNOLDS INDUSTRIES INC., a corporation, Defendant.
    No. 84 C 3208.
    United States District Court, N.D. Illinois, E.D.
    Nov. 27, 1984.

      Gerard C. Heldrich, Jr., Chicago, 111., for plaintiff.
    David J. Parsons, Matkov, Griffin, Parsons, Salzman & Madoff, Chicago, 111., for defendant.
   Memorandum

LEIGHTON, District Judge.

Plaintiff, Thomas Ring brings this diversity action to recover damages for his alleged wrongful discharge as an employee of defendant, R.J. Reynolds Industries. The cause is before the court on defendant’s motions to dismiss and for an award of attorneys’ fees and costs. For the following reasons, both motions are granted. The facts as alleged, and taken as true for the purpose of these motions, are as follows.

I

Plaintiff began working for defendant in 1969 as a salesman and was continually employed until his termination in 1983. His complaint makes no mention of any contract of employment; however, he does allege that defendant had a policy wherein employees would be given a reprimand and/or probation before they were terminated. Defendant also had a written policy whereby supervisors would spot check reports of sales activity; and any defects in performance would be called to the employee’s attention by a written reprimand. He then alleges that during fourteen years of his employment, he was reprimanded twice and placed on probation once. He also alleges that in 1982, one of his supervisors advised him to falsify his sales report; and when he declined to do so, the supervisor filed the false report. In 1983, another supervisor checked his sales calls and discovered some 28 reporting errors and summarily terminated his employment; plaintiff was 39 years at the time.

Plaintiff’s complaint is stated in four counts. In Count I he alléges that a contract of employment existed and that defendant breached the contract by terminating him without first issuing a reprimand or placing plaintiff on probation, pursuant to defendant’s established policy. In Count II plaintiff purports to state a cause of action for retaliatory discharge. He alleges that his termination at the age of 39 violated the public policy embodied in the Illinois Human Rights Act, 68 Ill.Rev.Stat. ch. 68, § 1-101 et seq. Count III alleges that plaintiff’s termination was a violation of an alleged covenant of good faith and fair dealing. As to Count IV, the court is unable to ascertain what cause of action plaintiff is attempting to plead. It appears that he is alleging. a “right” to receive reprimands, probation, notice and a hearing from defendant prior to his termination. It is undisputed that Illinois law controls this diversity action. A review of the relevant Illinois statutes and decisions discloses that each count of the complaint fails to state a claim on which relief can be granted.

II

In Count I plaintiff attempts to state a claim for breach of an employment contract. He does not allege that a written employment contract exists, nor does he allege that there was a specific stated duration to the employment relationship between him and defendant. If an employment contract, whether oral or written, does not specify a duration, then the contract is terminable “at will”, and the employment relation can be terminated by either party at any time and for any reason. See Rynar v. Ciba-Geigy Corp., 560 F.Supp. 619 (N.D.Ill.1983); Lukasik v. Riddell, Inc., 116 Ill.App.3d 339, 72 Ill.Dec. 123, 452 N.E.2d 55 (1983). Because plaintiff has not alleged that his contract of employment had a specified duration, his employment is terminable “at will” and he cannot state a claim for breach of an employment contract.

Plaintiff, although it is hard to discern what his contentions are from his brief in response to the motion to dismiss, apparently is arguing that the company is contractually bound to adhere to the “reprimand and/or probation prior to termination” policy. Thus, this policy modified plaintiffs at will status and imposed a condition which the company had to follow before it terminated plaintiff. Generally, a personnel policy of an employer is not part of an employment contract unless it is “bargained for.” Rynar v. Ciba-Geigy Corp., 560 F.Supp. at 624. In order for the personnel policy to be bargained for and thus included in the employment contract two facts must be established: (1) the terms of the policy itself must establish that a mutuality of obligation was intended when the policy was adopted; and (2) the facts surrounding implementation of the policy must establish that the policy modified a pre-existing employment contract. Enis v. Contential Illinois National Bank, 582 F.Supp. 876 (N.D.Ill.1984); Rynar v. Ciba-Geigy Corp., supra; Sargent v. Illinois Institute of Technology, 78 Ill.App.3d 117, 33 Ill.Dec. 937, 397 N.E.2d 443 (1979); Carter v. Kaskaskia Community Action Agency, 24 Ill.App.3d 1056, 322 N.E.2d 574 (1974). In this case, plaintiffs allegations fail to adequately set forth a breach of contract claim. All plaintiff alleges is the existence of defendant’s policy of issuing reprimands and probation before termination. He does not allege, as he must, that the policy was implemented after he started to work for defendant; Sargent v. Illinois Institute of Technology, supra; or that the terms of the alleged policy specifically or even implicitly suggest mutuality. Rynar v. Ciba-Geigy Corp., supra.

In Count II plaintiff alleges that his termination was a violation of the age discrimination provisions of the Illinois Human Rights Act. Ill.Rev.Stat. ch. 68, § 1-101 et seq. (“IHRA”). He claims that defendant has “consistently, deliberately and maliciously followed a course of conduct of weeding out, culling and terminating their [sic] employees ... when such employees reach or become close to or are over forty (40) years of age____” Plaintiff then alleges that he was wrongfully, maliciously and deliberately terminated at the age of 39.

The IHRA make it unlawful for an employer to discriminate against an employee on the basis of age; however, the Act only applies to individuals who are between 40 and 70 years old. Ill.Rev.Stat. ch. 68, § 1-103. Plaintiff admits that he was 39 years of age at the time of termination; therefore, he cannot claim a violation of the IHRA because he was not in the age group covered by the Act at the time of the alleged violation. Furthermore, IHRA provides for extensive administrative review prior to the filing of a suit. Section 8-111(D) of the Act provides that no party can bring an action until he has first exhausted his administrative remedies. Plaintiff does not allege that he has done so. Therefore, Count II fails to state a claim on which relief can be granted.

Plaintiff would have this court construe Count II as alleging a cause of action in tort on the grounds that this was a retaliatory discharge which contravened the public policy underlying IHRA. Assuming arguendo, that the court construes this count in the manner urged by plaintiff, it still does not state a claim. While Illinois courts have recognized, in limited circumstance, the tort of wrongful discharge in contravention of public policy, see e.g. Palmateer v. International Harvester Co., 85 Ill.2d 124, 52 Ill.Dec. 13, 421 N.E.2d 876 (1981); Kelsay v. Motorola, Inc., 74 Ill.2d 172, 23 Ill.Dec. 559, 384 N.E.2d 353 (1978); they have not extended this tort to situations where a plaintiff alleges that the public policy violated is the policy contained in the IHRA. Courts which have addressed similar claims have held that no cause of action exists in Illinois for wrongful discharge in violation of the public policy contained in the IHRA. See Brudnicki v. General Electric Co., 535 F.Supp. 84 (N.D.Ill.1982); Dykstra v. Crestwood Bank, 117 Ill.App.3d 821, 73 Ill.Dec. 307, 454 N.E.2d 51 (1983). Accordingly, even if this count is construed as urged by plaintiff, it still fails to state a claim.

Count III alleges that when defendant terminated plaintiff, the company violated a covenant of good faith and fair dealing. Illinois courts, and courts in this district applying Illinois law, have consistently recognized that no cause of action exists for an alleged breach of a covenant of good faith and fair dealing between an employer and employee. See e.g. Gordon v. Matthew Bender & Co., Inc., 562 F.Supp. 1286 (N.D.Ill.1983); Payne v. AHFI/Netherlands, B.V., 522 F.Supp. 18 (N.D.Ill.1980); Manuel v. International Harvester Co., 502 F.Supp. 45 (N.D.Ill.1980); Martin v. Federal Life Insurance Company, 109 Ill.App.3d 596, 65 Ill.Dec. 143, 440 N.E.2d 998 (1982). Accordingly, Count III also fails to state a claim on which relief can be granted.

Count IV consists of a string of vague and conclusory allegations from which the court is unable to determine what kind of claim plaintiff is attempting to assert. In response to the motion to dismiss, he does not address defendant’s contention that it is unable to discern what cause of action he is alleging in Count IV, and in fact, he does not even address this count in his response. This court is not under an obligation to identify a cause of action for plaintiff when his complaint and his response to defendant’s motion to dismiss does not do so. See Clark v. National Travelers Life Insurance Co., 518 F.2d 1167, 1169 (6th Cir.1975). As best as the court can understand the allegations of this count, plaintiff is attempting to allege that he was entitled to some type of hearing before termination. This count, however, shares the same fate as the others. Illinois courts have held that an “employee is not entitled to a prior notice or hearing on the merits of his discharge.” Martin v. Federal Life Insurance, 109 Ill.App.3d 596, 65 Ill.Dec. 143, 440 N.E.2d 998 (1982). Accordingly, Count IV fails to state a claim on which relief can be granted.

HI

Defendant also seeks an award of costs and attorneys’ fees for having to defend this suit. Newly amended Rule 11, Fed.R.Civ.P., provides that the signature of an attorney to a pleading is certification that he or she has made a “reasonble inquiry” that his pleading is well grounded in both facts and law and provides for sanctions, including the ordering of the payment of attorneys’ fees and costs, for its violation. The Notes of the Advisory Committee on Rules state that the new language “stress the need for some prefiling inquiry into both the facts and law to satisfy the affirmative duty imposed by the rule.” The court concludes that plaintiff’s attorney did not discharge this affirmative duty before filing this suit.

As noted in this memorandum, the allegations of plaintiff’s complaint completely fail,- under well established law, to state a claim on which relief can be granted. If plaintiff’s attorney had fulfilled his duty to have made a prefiling inquiry into the law in this area, he would have discovered that these allegations do not state a claim. Plaintiff’s attorney, in response to defendant’s motion to dismiss did not address most of the arguments raised by defendant; nor did he respond to the motion for an award of attorney’s fees and costs.

While this court realizes that the mere fact a complaint is dismissed for failure to state a claim does not make the attorney who files the complaint liable for sanction, a reasonable prefiling inquiry by plaintiff’s attorney would have disclosed that this complaint was not warranted under well settled law; and that this suit should not have been filed. In his response to the motion to dismiss, plaintiff did not attempt to make a colorable argument that under the law these allegations state a claim. Therefore, the court concludes that plaintiff’s attorney has not discharged his duty under Rule 11 to have made a reasonable inquiry into the law applicable to this case. Such conduct warrants the imposition of sanctions. Accordingly, defendant’s motion for an award of attorney’s fees and costs is granted; the award is to be paid by plaintiff’s counsel, Gerald C. Heldrich, Esq.

IV

In conclusion, for the. reasons stated, defendant’s motion tó dismiss is granted and this suit is dismissed in its entirety. Defendant’s motion for an award of attorney’s fees and costs is granted. The award is to be paid by plaintiff’s counsel, Gerald C. Heldrich, Esq. Defendant is directed to submit a petition to this court of the costs and fees incurred, setting forth the amounts and a schedule of time spent with supporting affidavits. Plaintiff will be given an opportunity to respond to the reasonableness of the amount of costs and fees sought by defendant.

So ordered.


author: WEXLER, District Judge.

text:
    HUDSON-BERLIND CORP., Petitioner, v. LOCAL 807, AFFILIATED WITH the INTERNATIONAL BROTHERHOOD OF TEAMSTERS, CHAUFFEURS, WAREHOUSEMEN AND HELPERS OF AMERICA, Respondents.
    No. CV 84-0049.
    United States District Court, E.D. New York.
    Nov. 27, 1984.

      Milman, Naness & Pollack by Martin Gringer, Hewlett, N.Y., for petitioner.
    O’Connor & Mangan, P.C. by J. Warren Mangan, Long Island City, N.Y., for respondents.
   MEMORANDUM AND ORDER

WEXLER, District Judge.

This is an action for a stay of arbitration. Both parties have moved for summary judgment.

I. FACTS

Petitioner is a corporation engaged in the distribution of housewares. Respondent is a labor organization.

Prior to 1981 petitioner was located at Hicksville, New York. Petitioner’s trucking was done by P & Z Transportation Co., Inc., whose drivers were represented by respondent.

Petitioner and P & Z, as joint employers, entered into a collective bargaining agreement with respondent covering the period from December 23, 1980 to December 23, 1983. The agreement had provisions for arbitration.

In 1981 petitioner closed its Hieksville facility and moved to Farmingdale, where petitioner’s parent company is located. P & Z went out of business. Some or all of the former P & Z drivers came to work at Farmingdale. Petitioner’s trucking at the Farmingdale facility was done by Bay Trucking Co., which had a pre-existing agreement with respondent to which petitioner was not a party.

On February 2, 1983 petitioner terminated its relationship with Bay. Bay then terminated its drivers.

On February 10, 1983 petitioner filed a charge with the N.L.R.B., alleging that respondent was illegally picketing petitioner with the object of forcing petitioner to cease doing business with any trucking company whose employees were not represented by respondent, in violation of 29 U.S.C. § 158(b)(4)(i)(B). On June 29, 1983 respondent filed a charge with the N.L.R.B., alleging that petitioner and Bay had-illegally discharged the drivers because of their membership in respondent, and that Bay and petitioner refused to negotiate with respondent concerning the discharges.

On December 2, 1983 respondent sought arbitration of respondent’s dispute with petitioner over the discharge of the drivers, contending that petitioner discharged the drivers in violation of its agreement with respondent. On December 21, 1983 petitioner commenced this action for a stay of arbitration in New York Supreme Court. On December 22, 1983 the New York Supreme Court granted petitioner a temporary restraining order staying arbitration. On January 4, 1984 respondent removed this action to this Court.

On March 30, 1984, following a hearing, Administrative Law Judge Morris of the N.L.R.B. issued a decision on petitioner’s charge, in which he found that petitioner and Bay were not joint employers, that the drivers who moved from Hieksville to Farmingdale “worked off the Bay contract” with respondent and were no longer covered by the agreement between petitioner, respondent, and P & Z, and that respondent’s picketing of petitioner was therefore illegal. On May 1, 1984 the N.L.R.B. adopted this decision. Also on May 1, 1984 N.L.R.B. Regional Director Kaynard summarily dismissed respondent’s charge and refused to file a complaint on respondent’s behalf with the N.L.R.B. Kaynard found that there was no evidence that petitioner and Bay were joint employers; that the agreement between petitioner, respondent, and P & Z was abrogated in 1981 with the acquiescence of respondent; that the drivers who moved from Hieksville to Farming-dale were covered by the contract between respondent and Bay, and that respondent therefore had no claim against petitioner for discriminatory discharge. Respondent did not appeal this decision to the N.L.R.B. General Counsel.

II. DISCUSSION

This Court has jurisdiction over the subject matter of this action, involving the application of 29 U.S.C. § 185, pursuant to 28 U.S.C. § 1331. See Rochdale Village, Inc. v. Public Service Emp., Etc., 605 F.2d 1290 (2d Cir.1979).

Respondent argues that arbitration is required under the agreement between petitioner, respondent, and P & Z. Petitioner replies that the agreement was terminated in 1981, that the agreement did not cover the drivers at the Farmingdale facility, that arbitration is in any event barred by laches, and that the N.L.R.B. actions mentioned above have res judicata or collateral estoppel effect. Respondent replies that petitioner’s contentions are themselves arbitrable.

Generally questions of collective bargaining agreement termination are for the court rather than for the arbitrator. Id. at 1295. However, the Second Circuit has stated:

If a court finds that the parties have agreed to submit to arbitration disputes “of any nature or character”, or simply “any and all disputes”, all questions, including those regarding termination, will be properly consigned to the arbitrator: “With that finding the court will have exhausted its function, except to order the reluctant party to arbitration.” United Steelworkers of America v. American Manufacturing Co., 363 U.S. 564, 571, 80 S.Ct. 1363, 1364, 4 L.Ed.2d 1432, 1433 (1960) (Brennan, J., concurring).

Rochdale, supra, at 1295.

In the instant case, the agreement between the parties provided that they would employ the grievance procedures set forth in the agreement for “any controversy which might arise.” The agreement further provided that “[questions or disputes concerning the interpretation application or enforcement of the grievance procedure provided in this Agreement shall themselves be deemed arbitrable before the Joint Local Committees ...” Consequently, in the absence of the N.L.R.B. actions previously mentioned, it would be clear that we should compel petitioner to submit to arbitration, including arbitration of the issue of agreement termination, the issue of whether the agreement applied to the drivers who moved from Hicksville to Farmingdale, and the issues of laches, see International U. of Op. Eng., Loc. 150 v. Flair Builders, Inc., 406 U.S. 487, 92 S.Ct. 1710, 32 L.Ed.2d 248 (1972). We will turn in a moment to consider the effect of the N.L.R.B. actions.

Before proceeding to determine the effect of the N.L.R.B. actions, we must consider a question: Is the issue of res judicata itself arbitrable?

A literal reading of Rochdale, supra, would appear to dictate that where, as here, the parties to a collective bargaining agreement agreed to employ arbitration for “any controversy which might arise”, a contention that arbitration is barred by res judicata must itself invariably be submitted to the arbitrators. For the reasons set forth below, we reject such a literal reading."

Consider first a contention that arbitration is barred by a prior state court judgment. Under 28 U.S.C. § 1738, a federal or sister state court must give a state court judgment the same preclusive effect which such judgment would be given by the courts of the state in which the judgment was entered. Arguably, federal common law under 29 U.S.C. § 185 should be viewed as requiring a state court to submit to the arbitrators a contention that arbitration under a collective bargaining agreement is barred by a prior state court judgment from the same state. If so, 28 U.S.C. § 1738 would pose no barrier to a federal or sister state court submitting to the arbitrators a contention that arbitration is barred by a prior state court judgment. However, such a view of federal common law would greatly undermine the force of 28 U.S.C. § 1738, by taking the power to give res judicata effect to prior state court judgments out of the hands of the courts and placing it in the hands of arbitrators, who might not be as respectful of such judgments as courts would be. We therefore conclude that each state is free to decide for itself (limited only by the Constitution) the situations in which its own prior state court judgments will bar arbitration under a collective bargaining agreement, and that federal and sister state courts should, pursuant to 28 U.S.C. § 1738, stay arbitration whenever they find that a prior state court judgment would bar arbitration under the policy of the state in which the judgment was entered.

Consider next a contention that arbitration is barred by a prior federal court judgment. Both Article III of the Constitution and federal common law require that federal court judgments be given some preclusive effect. A view of federal common law under 29 U.S.C. § 185 permitting a court to submit to the arbitrators a contention that arbitration is barred by a prior federal court judgment would greatly undermine this policy, and would present grave constitutional difficulties. We therefore conclude that a court should decide for itself and not submit to the arbitrators a contention that arbitration is barred by a prior federal court judgment.

Consider next a contention that arbitration is barred by a quasi-judicial administrative agency determination. As will be shown below, federal common law suggests that such determinations should at times be given preclusive effect, at least in federal court proceedings, although the need to respect such determinations is considerably less than the need to respect court judgments. While we recognize the importance of the national policy encouraging arbitration of labor disputes, we believe that a proper respect for principles of res judicata requires that a federal court decide for itself and not submit to the arbitrators the issue of the res judicata effect of such determinations, and that federal law under 29 U.S.C. § 185 should not be viewed as being to the contrary.

A decision by an N.L.R.B. General Counsel not to file a complaint has no res judicata effect. Peltzman v. Central Gulf Lines, Inc., 497 F.2d 332, 334 (2d Cir.1974), cert. denied, 423 U.S. 1074, 96 S.Ct. 857, 47 L.Ed.2d 83. Consequently, the decision by N.L.R.B. Regional Director Kaynard to summarily dismiss respondent’s charge against petitioner rather than to file a complaint before the N.L.R.B. on respondent’s behalf (which decision respondent could have but failed to appeal to the General Counsel) has no res judicata effect in this action.

The decision by N.L.R.B. Administrative Law Judge Morris, adopted by the N.L.R.B., stands on a different footing. When an administrative agency is acting in a judicial capacity and resolves disputed issues of fact properly before it which the parties have had an adequate opportunity to litigate, res judicata and collateral estoppel may be applied. United States v. Utah Construction & Mining Co., 384 U.S. 394, 421-422, 86 S.Ct. 1545, 1559-1560, 16 L.Ed.2d 642 (1966). The Second Circuit, speaking in the context of state administrative determinations, has stated that:

Among the factors that bear on a determination of whether a state administrative proceeding is res judicata of a subsequent judicial litigation are ... the type of hearing which is held and the procedures which are followed by the agency; and ... the intention of the administrative body and the expectations of the parties before it on the question of finality.

Mitchell v. National Broadcasting Co., 553 F.2d 265, 269 (2d Cir.1977). The same factors bear on a determination of whether a federal administrative proceeding should be given res judicata or collateral estoppel effect.

A.L.J. Morris did not specifically state that the agreement between petitioner and respondent terminated. Although the A.L.J. stated that the drivers who moved from Hicksville to Farmingdale ceased to be covered by the agreement, it does not necessarily follow that the agreement terminated. Even if the agreement ceased to cover any workers, the agreement (including the arbitration clause) may nevertheless have remained in force. Consequently, the A.L.J.’s decision cannot be dispositive of the question of whether the agreement (including the arbitration clause) was still in force at the time respondent sought arbitration. However, the A.L.J. did find that no employer/employee relationship existed between petitioner and the drivers discharged by Bay. If this finding of the A.L.J. is given collateral estoppel effect against respondent, respondent cannot prevail on its substantive claim against petitioner (that petitioner improperly “discharged” the drivers) which respondent seeks to arbitrate.

We see no reason to believe that respondent was denied a full and fair opportunity to litigate the issue of the existence of an employer/employee relationship in the N.L. R.B. proceedings, and respondent has in any event presented none. We also see no reason why the parties and the N.L.R.B. could not foresee that a resolution of petitioner’s charge in petitioner’s favor would bar arbitration over the discharges. We therefore find that the A.L.J.’s finding, adopted by the N.L.R.B., that petitioner was not an employer of the drivers who were discharged should be given collateral estoppel effect against respondent, that respondent’s substantive claim against petitioner is therefore barred, and that the petition for a stay of arbitration should therefore be granted.

III. CONCLUSION

Petitioner’s motion for summary judgment is granted, and respondent’s motion for summary judgment is denied. The arbitration sought by respondent is permanently stayed. The Clerk shall enter judgment accordingly.

SO ORDERED.

      . Article 46, § 1 of the agreement provides in pertinent part:
      The Union and the Employer agree that there shall be no strike, lockout, tie-up, work stoppage, or legal proceedings without first using all possible means of a settlement, as provided for in this Agreement, of any controversy which might arise. Disputes shall first be taken up between the Employer and the Union involved. All grievances must be made known to the other party within five (5) days ... In the event that the Employer and the Union involved are unable to adjust the matter the dispute shall, within two (2) days ..., after the request of either party, be reduced to writing arid referred to the Joint Local Committee and the following procedures shall then apply: (a) Where a dispute concerns a matter of discharge the Employer and the Union shall submit the matter to final and binding arbitration ...
      Article 46, § 2 of the agreement provides:

        Questions or disputes concerning the interpretation application or enforcement of the grievance procedures provided in this Agreement shall themselves be deemed arbitrable before the Joint Local Committees subject to the appeals procedures set forth in this Article.


author: CAFFREY, Chief Judge.

text:
    James L. TOWNSEND, Plaintiff, v. GREY LINE BUS CO., a/k/a the Gray Line Inc., Defendants.
    Civ. A. No. 77-1931-C.
    United States District Court, D. Massachusetts.
    Nov. 27, 1984.
    Order Amending Dec. 28, 1984.

      Richard L. Neumeier, Parker, Coulter, Daley & White, Boston, Mass., for plaintiff.
    Alan P. Caplan, George O’Brien, Boston, Mass., for defendants.
   OPINION

CAFFREY, Chief Judge.

This is an employment discrimination action brought pursuant to Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e et seq., and the Civil Rights Act of 1870, 42 U.S.C. § 1981. Plaintiff, James L. Townsend, who is black, alleges that defendant, Grey Line Bus Company a/k/a The Gray Line, Inc. (“Grey Line”), unlawfully discriminated against him on the basis of his race in failing to hire him as a motor coach driver. The case was tried before Senior Judge Anthony Julian on February 16 and 17, 1982. At the stipulation of the parties, the Court received into evidence the transcript of additional testimony which had been presented to the Massachusetts Commission Against Discrimination (MCAD). Following Judge Julian’s death on January 18, 1984, the case was transferred to Chief Judge Andrew A. Caffrey.

I. Facts

On December 10, 1973, plaintiff Townsend went to defendant’s offices in Roxbury, Massachusetts, and completed an application for the position of motor coach driver. Townsend had learned that the company was looking for drivers. At that time, Grey Line employed 53 motor coach drivers, none of whom was black.

Townsend was interviewed on January 16, 1974, by defendant’s vice president, Patricia Galton. Ms. Galton told plaintiff about the position’s rate of pay, the medical benefits which the company offered, and other job-related matters. She explained that, before being hired, plaintiff would have to take both a written examination and a road test, undergo a physical examination, and apply for a special driver’s license issued by the Department of Public Utilities (DPU). Galton also reviewed plaintiff’s employment history. Townsend had had considerable experience driving both gasoline powered school buses and diesel powered tractor trailers, but he had never before driven diesel powered motor coaches, which were the kind of vehicles used by Grey Line.

After speaking with Ms. Galton, plaintiff took both the written examination and the road test. He received a score of 90% on the written examination. Defendant’s Director of Safety, Robert O’Connell then prepared to give plaintiff his road test. Before doing so, O’Connell asked Townsend to sign a document entitled “Certification of Road Test.” This form had not yet been filled out when plaintiff signed it.

O’Connell then led Townsend a'nd another applicant, Jean Beaulieu, to the bus which was to be used for the test. This bus had mechanical problems and was at the garage awaiting repair. After O’Connell started the bus, he was unable to get it into reverse and had to ask the driver of the bus for help. O’Connell told Beaulieu and Townsend that the clutch needed adjustment, and therefore, they would have to “snatch” it, or yank it, into gear.

Beaulieu took the driver’s seat first. He had difficulty getting the bus in gear. Following O’Connell’s directions, he drove about three miles. O’Connell then asked Beaulieu to pull over, and plaintiff took the wheel. Plaintiff also had trouble changing gears. Other than giving directions, O’Connell said nothing to plaintiff while he was driving. After plaintiff had proceeded about one and one-half miles, the bus stalled in an intersection. Neither of the applicants nor O’Connell could revive the disabled vehicle. O’Connell then decided to walk to defendant’s garage to get help. While he was gone, Townsend and Beau-lieu succeeded in starting the bus, and Beaulieu drove it back to the garage.

O’Connell did not show the applicants their test results or tell them whether they had passed. He did inform plaintiff that the company would contact him, and that he should speak to Patricia Galton before he went home. Plaintiff discovered, however, that Galton had already left for the day.

Townsend returned to see Ms. Galton on Friday, January 18.. At that time, she gave him both an application for a DPU license and a form for a physical examination which was to be given by a local doctor whom the company engaged. Plaintiff immediately filled out the application for the license, underwent the physical examination, and returned the completed documents to Ms. Galton the same day he had received them. Galton then asked plaintiff to come back the following Monday and see George Sullivan, the dispatcher, who would tell plaintiff with which driver he would be working.

On Monday, January 21, plaintiff met the dispatcher and explained the purpose of his visit. The dispatcher stated that he did not “know anything about it.” He suggested that plaintiff go back and see Ms. Galton. Because she was unavailable, Townsend spoke instead to defendant’s receptionist, Barbara Alexander. Ms. Alexander asked plaintiff if he had received a letter from the company. When he replied that he had not, she told him to go home and wait for the company to contact him. Plaintiff subsequently received from Vice-President Galton a letter which stated: “[ajfter examination of the results of your road test, we find that you do not qualify for hire as a Gray Line Bus Driver.”

On January 22, 1974, plaintiff filed a charge of discrimination against Grey Line with the MCAD. He then filed a similar complaint with the EEOC. At plaintiff’s request, the MCAD proceedings were transferred to the EEOC, which issued Townsend a Notice of Right to Sue on May 10, 1977. Plaintiff instituted the present action on July 1, 1977.

II. Statute of Limitations

The first issue, confronting this Court is the timeliness of plaintiffs suit, which he brings under both Title VII of the Civil Rights Act of 1964 and 42 U.S.C. § 1981. In order to maintain a Title VII action, a potential plaintiff must first file a discrimination charge with the EEOC within 180 days of the date on which the alleged unlawful employment practice occurred. 42 U.S.C. § 2000e-5(e). If, after investigating the charge, the EEOC issues the person a Notice of Right to Sue, he or she must institute legal action within 90 days of receiving the Notice. 42 U.S.C. § 2000e-5(f)(1). Plaintiff has plainly met these statutory deadlines. He lodged a complaint with the EEOC immediately after learning that Grey Line had rejected his application for employment. He subsequently filed this action less than two months after being notified of his right to sue.

Plaintiff, however, fares less well with regard to the timeliness of his § 1981 claim. Because the Civil Rights Act of 1870 does not contain a statute of limitations, the appropriate time period is established by the particular state law which is most analogous to § 1981. Johnson v. Railway Express Agency, 421 U.S. 454, 462, 95 S.Ct. 1716, 1721, 44 L.Ed.2d 295 (1975). It is well settled that the Massachusetts statute which supplies the controlling time contraint is M.G.L. c. 151B, whose limitation period is six months. M.G.L. c. 151B, § 5. See Davis v. Sears, Roebuck & Co., 708 F.2d 862, 865 (1st Cir.1983). This interval runs from the date of the alleged discrimination and is not tolled by the filing of administrative proceedings under Title VII. Johnson v. Railway Express Agency, 421 U.S. at 465-66, 95 S.Ct. at 1722-23; Holden v. Comm’n Against Discrimination, 671 F.2d 30, 34 (1st Cir.1982); Davis v. Sears, Roebuck & Co., 708 F.2d at 865. Because I find that plaintiffs cause of action arose in January, 1974, and that plaintiff did not bring suit until July, 1977, I rule that plaintiffs claim under 42 U.S.C. § 1981 is barred by the statute of limitations.

III. Plaintiffs Title VII claim

In order to succeed in a Title VII action, the plaintiff must ultimately persuade the trier of fact that “an employment decision was based on a discriminatory criterion illegal under the Act.” International Brotherhood of Teamsters v. United States, 431 U.S. 324, 358, 97 S.Ct. 1843, 1866, 52 L.Ed.2d 396 (1977). Although the plaintiffs method of proof may vary from case to case, Furnco Construction Corp. v. Waters, 438 U.S. 567, 577, 98 S.Ct. 2943, 2949, 57 L.Ed.2d 957 (1978), the United States Supreme Court has suggested a three part analysis as a “sensible, orderly way to evaluate the evidence ... as it bears on the critical question of discrimination.” Id. According to the Supreme Court’s analytical framework, set forth in McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802, 93 S.Ct. 1817, 1824, 36 L.Ed.2d 668 (1973), the plaintiff may establish a prima facie case of illegal discrimination by showing (i) that he is a member of a racial minority; (ii) that he was a qualified applicant for a position for which there was a vacancy; (iii) that he was rejected for this position; and (iv) that, after his rejection, the employer continued to seek applicants with qualifications similar to plaintiff’s. Id. The defendant employer may rebut plaintiff’s prima facie case merely by articulating some legitimate, nondiscriminatory reason for the plaintiff’s rejection. Id. Although defendant’s explanation of its reasons must be clear and specific, Texas Dept. of Community Affairs v. Burdine, 450 U.S. 248, 258, 101 S.Ct. 1089, 1096, 67 L.Ed.2d 207 (1981), defendant need not prove that it was actually motivated by these reasons. Id. at 254, 101 S.Ct. at 1094. Once the employer has provided a logical explanation for plaintiff’s rejection, plaintiff must then be given an opportunity to show either that an unlawful discriminatory motive more likely prompted defendant’s actions, or that defendant’s proffered reasons are “unworthy of credence.” Burdine at 256, 101 S.Ct. at 1095.

Applying this analysis to plaintiff Townsend’s claim, I rule that plaintiff has succeeded in establishing a prima facie case of discrimination. Defendant admits that it was seeking motor coach drivers at the time plaintiff applied for a job, and that after the company rejected plaintiff, it proceeded to hire other drivers. Stipulation, 1118. Furthermore, defendant’s Director of Safety, Robert O’Connell, testified that Grey Line did not receive enough applications from experienced motor coach drivers to meet its needs, and therefore, it accepted applications from individuals, like plaintiff, who only had experience driving trucks or school buses. O’Connell further testified that the company hired such applicants if they proved to be capable drivers. This testimony indicates that, after rejecting Townsend, Grey Line continued to. seek applicants with driving experience similar to his.

Grey Line rebuts Townsend’s prima facie case by stating that “[pjlaintiff was denied employment.... for the sole reason that [pjlaintiff was unqualified for the position for which he applied.” Answer, ¶ 20. Defendant does not make clear whether it considered plaintiff unqualified because he failed his road test, as the letter of rejection which the company sent him indicates, or because he had no experience driving diesel powered motor coaches. Either reason, however, would be sufficient grounds for refusing to hire plaintiff if that reason were defendant’s true motivation.

Despite' the legitimacy of defendant’s proffered explanations, I find that these reasons are “unworthy of credence.” Burdine at 256, 101 S.Ct. at 1095. I reject defendant’s allegation that plaintiff was denied employment because he lacked sufficient driving experience. Plaintiff testified that defendant’s vice president, Patricia Galton, reviewed his employment history during his initial interview and gave no indication that she found it deficient. Plaintiff’s testimony is buttressed by Robert O’Connell’s statement, discussed above, that lack of experience driving motor coaches was no bar to employment by Grey Line.

I also reject defendant’s contention that plaintiff failed his road test. O’Connell, who supervised plaintiff’s road test, signed a document entitled “Certification of Road Test” which stated: “It is my considered opinion that this driver possesses sufficient driving skill to operate safely the type of commercial motor vehicle listed above,” namely, a coach. In light of the significance of this certificate and the simplicity of completing it, I give no credence to O’Connell’s testimony that, in order to save time, he routinely filled out and signed such certificates while applicants were taking their written examinations, and that he then retained the certificate of any applicant who subsequently failed the road test. O’Connell’s contentions concerning this procedure are further undermined by plaintiff’s testimony that the certificate had not yet been filled out when plaintiff signed it prior to taking his road test.

In addition, I give no weight to the document entitled “Record of Road Test,” a preprinted evaluation form on which O’Connell allegedly checked off specific deficiencies in plaintiff’s driving performance. Plaintiff introduced evidence rendering the authenticity of the markings on this document highly questionable.

The conditions under which the road test was given do nothing to engender confidence in either the test’s alleged results or the validity of defendant’s contentions concerning plaintiff's poor driving skills. The test was performed in a mechanically defective bus whose gears did not function properly. The examiner himself was unable to get the bus into reverse or to get it started after it unexpectedly stalled in an intersection for no apparent reason. Although the document entitled “Certification of Road Test” states that plaintiff’s examination consisted of “approximately 15 miles of driving,” plaintiff offered uncontroverted testimony that he drove the bus no more than one and one-half miles.

The actions of Vice President Galton also indicate that plaintiff passed his road test and qualified for hire by Grey Line. Plaintiff went to see Ms. Galton two days after taking the road test. At that time, Galton gave plaintiff both an application for a DPU license and a physical examination form which was to be completed by a physician with whom defendant did business. O’Connell testified that it was “highly unlikely” that Galton would have asked plaintiff to undergo a physical examination at the company’s expense if she had been aware that plaintiff had failed his road test. Moreover, plaintiff offered uncontroverted testimony that, when he returned the completed documents to Galton, she instructed him to report to the dispatcher, who was to tell plaintiff which driver he would be accompanying.

Finally, I give no weight to the contents of defendant’s letter to Townsend indicating that he was rejected because of his poor performance on the road test. Plaintiff proved that defendant sent a letter bearing an identical message to’ Jean Beau-lieu, whom, defendant admits, the company rejected solely because an investigation of his previous employment revealed that he had been involved in a collision while driving a motor coach.

For the reasons set forth above, I rule that plaintiff has proved that defendant discriminated against him on the basis of his race, in violation of 42 U.S.C. § 2000e et seq., as amended.

IV. Damages

The parties stipulated to the earnings of certain Grey Line coach drivers from 1974 to 1982. Stipulation, ¶ 5, 6. Extrapolating from these figures, plaintiff demonstrated that, had he been hired by Grey Line, he would have been paid $145,492.53 from January, 1974, until the date of trial. Over the course of this eight year period, plaintiff earned $62,920.00, and he received an additional $6,900.00 in unemployment compensation.

In calculating the amount of plaintiff’s recovery, Townsend’s earned income must be subtracted from the total sum which Grey Line would have paid him. 42 U.S.C. § 2000e-5(g). Courts, however, have differed about whether unemployment compensation should also be deducted from an award of back pay under Title VII. Compare Abron v. Black & Decker Mfg. Co., 439 F.Supp. 1095, 1115 (D.Md.1977) (unemployment compensation is not deductible) with EEOC v. Kallir, Philips, Ross, Inc., 420 F.Supp. 919, 924 (S.D.N.Y.1976), affd without opinion, 559 F.2d 1203 (2nd Cir.1977) (unemployment compensation should be deducted). The better view of the matter, and that which has been adopted in this District and elsewhere, is that the recovery of back pay under Title VII is an equitable remedy intended primarily to make the victim of discrimination whole. Thurber v. Jack Reilly’s, Inc., 521 F.Supp. 238, 242-43 (D.Mass.1981); EEOC v. Enterprise Ass’n Steamfitters Local 638, 542 F.2d 579, 592 (2nd Cir.1976).

In this case, no double recovery is necessary to compensate plaintiff for defendant’s wrongdoing, nor is an incrementally larger award likely to deter defendant from engaging in unlawful hiring practices in the future. Therefore, I rule that plaintiff’s unemployment compensation should be deducted from his back pay award.

V. Defendant’s Default

As a separate and independent basis for my decision in this case, I rule that defendant should be defaulted for failure to comply with the orders of this Court. Defendant failed to file suggested findings of fact and conclusions of law as ordered by Judge Julian in his memorandum and order of February 23, 1982. Furthermore, an examination of the docket for this case reveals that, on several occasions, defendant demonstrated great reluctance to participate in this litigation and did so only at the coercion of the Court.

The damages which plaintiff is entitled to receive on the basis of defendant’s default are the same as those, discussed above, which result from defendant’s liability for illegal employment discrimination.

Order accordingly.

ORDER

It is ordered:

1. Judgment for plaintiff against the defendant Grey Line Bus Co., a/k/a The Gray Line, Inc. in the amount of $76,672.53.

2. Judgment for defendant Amalgamated Transit Union Local No. 1463.


author: ZIEGLER, District Judge.

text:
    Dorothy N. HUNTER, Executrix of the Estate of Samuel Knox Hunter, Jr., Deceased, Plaintiff, v. UNITED STATES of America, Defendant.
    Civ. A. No. 82-2756.
    United States District Court, W.D. Pennsylvania.
    Nov. 28, 1984.

      William McC. Houston, Pittsburgh, Pa., for plaintiff.
    Thomas A. Daley,'Asst. U.S. Atty., Pittsburgh, Pa., Will E. McLeod, Washington, D.C., for defendant.
   MEMORANDUM OPINION

ZIEGLER, District Judge.

(1) This is a civil action seeking an estate tax refund in the amount of $44,138.97, plus interest. Jurisdiction is predicated on 26 U.S.C. § 7422 and 28 U.S.C. § 1346(a)(1). The parties have submitted a stipulation of facts and each has moved for summary judgment. .

(2) Samuel Knox Hunter, Jr., died testate on October 17, 1978. A proper tax was paid on the undisputed portion of the estate, but not on the corpus of a' trust created for decedent under the will of his mother, Stella T. Hunter. Contending that the corpus of the trust should have been included in decedent’s gross estate, the Internal Revenue Service assessed a deficiency. Plaintiff paid the deficiency and filed a claim for refund, asserting that decedent was only an income beneficiary of the trust. The Internal Revenue Service denied the refund claim and plaintiff filed the instant action.

(3) The Stella T. Hunter will divided her residuary estate into three equal parts. She devised one part outright to decedent. Stella T. Hunter Will, § III(A). She created a trust with the remaining two parts, naming decedent and Mellon National Bank and Trust Company as co-trustees. Stella T. Hunter Will, § III(B). Within Item III(B), paragraph (a) directed the payment of income from the trust to decedent for life. Subparagraph (b)(1) of Item III(B) provided that upon the death of decedent, Samuel Knox Hunter, Jr., the trust estate was to be divided equally into two separate trusts. The net income from the first was to be paid to Dorothy Hunter, decedent’s wife, until her death or remarriage. Stella T. Hunter Will, § III(B)(b)(2). The second half of the trust estate, as well as the remainder interest from Dorothy Hunter’s trust, was designated. the “Residuary Trust.” Stella T. Hunter Will, § III(B)(b)(1), (3). The Residuary Trust was to continue in separate trusts for Stella T. Hunter’s grandchildren with distribution of principal at age thirty (30). Stella T. Hunter Will, § III(B)(b)(4)-(7).

(4) Subparagraph (b)(9) of Item III(B), the invasion clause, is crucial to the taxability of the corpus of the trust created for decedent in paragraph (a) of Item 111(B). It provides as follows:

If at any time the net income from any trust hereinabove established is inadequate for the comfortable support and maintenance of any beneficiary therein, or should any emergency arise, then and in such event my Trustees are authorized to pay to or use and expend for the benefit of any beneficiary so much of the corpus of the trust as in their sole and uncontrolled discretion may be deemed necessary for such purposes.

Stella T. Hunter Will, § III(B)(b)(9).

(5) The threshold issue is whether the invasion clause applies to the trust created for decedent in paragraph (a) of Item III(B) of the will. Is so, decedent had the power to invade principal in accordance with its terms and we must then decide whether the invasion clause constitutes a general power of appointment. 26 U.S.C. § 2041. If it does, the corpus of decedent’s trust must be included in his gross estate and is subject to federal taxation.

I. Does the Invasion Clause Apply to Decedent’s Trust?

(6) Plaintiff contends that the reference in subparagraph (b)(9), the invasion clause, to “any trust hereinabove established” does not include decedent’s trust which is created in paragraph (a). Stella T. Hunter Will, §§ III(B)(a), III(B)(b)(9). According to plaintiff, basic principles of outlining preclude the application of subparagraphs under (b) to (a) because paragraphs (a) and (b) are parallel and equal in rank. Furthermore, asserts plaintiff, the capitalization pattern and distinct labels employed by the scrivener isolate the decedent’s trust from the invasion power.

(7) Under Pennsylvania- law our task is to construe the will according to the intent of the testator. Estate of Reynolds, 494 Pa. 616, 627, 432 A.2d 158, 163 (1981). Absent ambiguity, that intent should be determined from the four corners of the will. In re Blough’s Estate, 474 Pa. 177, 185, 378 A.2d 276, 280 (1977). As the Supreme Court of Pennsylvania stated in Blough’s Estate, “The duty of the court is not to determine what the testator might or should have' said in light of subsequent events but, rather, the actual meaning of the words used, (citations omitted) Only if the language employed by the testator is ambiguous should the court resort to canons of construction.” Id.

(8) The reference in the invasion clause to “any trust hereinabove established” does not, oh its face, appear limited to only those trusts established in paragraph (b) of Item III(B). The usual meaning of “hereinabove” is “above this or at a prior point in this writing or document.” Webster’s Third New International Dictionary (1961). However, the outlining scheme does introduce a degree of ambiguity.

(9) The scrivener employed considerably more precision when describing trusts in other provisions of the will. In subparagraph (b)(3) of Item III(B) “hereinabove” is used in conjunction with words of limitation: “the ‘Residuary Trust’ hereinabove referred to in Paragraph (b)(1).” Trusts are specified as follows in other numbered subparagraphs of (b): “each separate trust so set aside for each grandchild,” “the trusts created under subparagraph (b)(4) above,” and “any trust created or administered under this Item III.” Stella T. Hunter Will, § III(B)(b)(5)-(8). The lack of any words of limitation modifying “any trust hereinabove established” in the invasion clause, § III(B)(b)(9), suggests that the testator intended “any trust hereinabove established” to mean any trust.

(10) Turning to the trust labelling and capitalization pattern, plaintiff asserts that decedent’s trust is referred to exclusively as the “Trust Estate.” However, in sub-paragraph (b)(8) and paragraph (c) of Item 111(B) the lower case “trust” is used to refer, in part, to decedent’s trust. Even more damaging to plaintiff’s argument, the scrivener frequently used “Trust Estates” in Item IV to refer to all trusts created under the will. Stella T. Hunter Will, § IV(2)-(5), (8). Rather than bolster plaintiff’s position, the labeling and capitalization indicates that the will was not carefully drawn, casting doubt on the wisdom of placing too much emphasis on outline structure.

(11) Extrinsic factors do not aid interpretation. Stella Hunter knew that her son had considerable financial resources at the time she executed her will, suggesting perhaps that she would not find it necessary to grant him invasion power. Stipulation of Facts No. 9. Conversely, Stella’s great concern for her son indicates that Stella would desire to grant invasion power to decedent in an emergency. Stipulation of Facts No. 7. We find that these extrinsic, factors, being highly speculative, shed little light on a proper interpretation of the will.

(12) We believe that the reference in the invasion clause to “any trust hereinabove established” must be given its plain meaning. Consequently, the invasion clause, § III(B)(b)(9), does apply to decedent’s trust created in § III(B)(a). We hold that decedent possessed the power to consume the corpus of his income trust according to the terms of the invasion clause.

II. Does the Decedent’s Invasion Power Constitute a General Power of Appointment?

(13) If decedent’s power to consume principal, as limited by the invasion clause, constituted a “general power of appointment,” the principal or corpus of the trust is includible in his gross estate and subject to federal estate tax. 26 U.S.C. § 2041(a)(2). Section 2041 defines a “general power of appointment” as follows:

(1) General power of appointment —The term “general power of appointment” means a power which is exercisable in favor of the decedent, his estate, his creditors, or the creditors of his estate; except that—
(A) A power to consume, invade, or appropriate property for the benefit of the decedent which is limited by an ascertainable standard relating to the health, education, support, or maintenance of the decedent shall not be deemed a general power of appointment.

26 U.S.C. § 2041(b)(1)(A).

(14) The extent of decedent’s power over the trust corpus must be determined by Pennsylvania law. Miller v. United States, 387 F.2d 866, 868 (3d Cir.1968). Decedent’s failure to exercise the power during his lifetime is irrelevant to this inquiry. Once the boundaries of the power are defined, the taxability of the interest is governed by federal law. Id.

(15) The issue here is whether the grant of power to decedent in the invasion clause is “limited by an ascertainable standard relating to the health, education, support or maintenance of the decedent.” 26 U.S.C. § 2041(b)(1)(A). Defendant concedes that power to invade for “comfortable support and maintenance” constitutes such an ascertainable standard and thus creates no general power of appointment. The dispute focuses on whether power to consume “should an emergency arise” is related to health, education, support or maintenance.

(16) Defendant contends that In re Dobbin’s Estate, 148 Pa.Super. 177, 24 A.2d 641 (1942), is dispositive of the meaning of “emergency” in Pennsylvánia. In Dobbin’s Estate the testator granted his daughter, the income beneficiary of the trust, a personal right to invade corpus “in the. event of an emergency.” The court permitted invasion when the beneficiary needed funds to prevent foreclosure upon one of her apartment houses. Id. at 181-82, 24 A.2d at 643-44. Noting that the invasion clause did not limit “emergency” to any particular character or kind, the court found the clause “operative in any pressing situation, personal to the donee, which the payment of money will relieve.” Id. at 180, 24 A.2d at 643. This interpretation of “emergency” appears to go beyond the confines of health, education, support and maintenance.

(17) We are not bound to apply Dobbin’s Estate. The Pennsylvania Supreme Court has never considered the extent of power granted by authority to invade principal in an “emergency.” While we must give “proper regard” to the,rulings of lower state courts, we are, in effect, sitting as a state court and must apply state law as we find it. Commissioner of Internal Revenue v. Estate of Bosch, 387 U.S. 456, 465, 87 S.Ct. 1776, 1782, 18 L.Ed.2d 886 (1967).

(18) The vitality of Dobbin’s Estate, a 42-year-old precedent, is questionable today. The Superior Court’s interpretation of “emergency” was influenced in part by knowledge that the remainderman was a corporate charity. The court noted that a will should be interpreted in favor of heirs or next of kin. Dobbin’s Estate, supra, 148 Pa.Super. at 180, 24 A.2d at 643. Also, the testator’s restriction on withdrawals from principal to $2000 per year may have lessened the court’s concern that allowing invasion could lead to a dissipation of principal. Id. at 181, 24 A.2d at 643. Finally, our research discloses that Dobbin’s Estate has never been cited by any court. We find Dobbin’s Estate unpersuasive and we conclude that the Pennsylvania Supreme Court would not follow the decision today.

(19) The Pennsylvania Supreme Court construed the word “emergency” in Scaccia v. Old Forge Borough, 373 Pa. 161, 163, 94 A.2d 563, 564 (1953):

It is difficult to define an emergency, but as a generalization it is a sudden or unexpected event which creates a temporarily dangerous condition usually necessitating immediate or quick action, [cites omitted] Ordinary conditions or customarily existing conditions are not emergencies.

Although the facts of Scaccia are unrelated to the present case, the Pennsylvania Supreme Court made clear that “emergencies,” within its understanding, are “dangerous” situations. This suggests a narrower construction of the term than the Superior Court employed in Dobbin’s Estate; foreclosure upon a real estate holding, not one’s primary residence, cannot be considered dangerous.

(20) Having examined the meaning of “emergency” under Pennsylvania law, we must consider federal law to determine whether the term “emergency” limits invasion power sufficiently to constitute an ascertainable standard relating to health, education, support or maintenance. 26 U.S.C. § 2041(b)(1)(A). We are mindful that the Court of Appeals has held that the grant of power to a decedent must be “clearly limited” in its exercise to matters relating to health, education, support, or maintenance in order to avoid taxation. Strite v. McGinnes, 330 F.2d 234, 238 (3d Cir.1964).

(21) The Treasury Regulations illuminate the meaning of the standard set forth in § 2041(b)(1)(A):

A power is limited by such a standard if the extent of the holder’s duty to exercise and not to exercise the power is reasonably measurable in terms of his needs for health, education, or support (or any combination of them). As used in this subparagraph, the words “support” and “maintenance” are synonymous and their meaning is not limited to the bare necessities of life. A power to use property for the comfort, welfare or happiness of the holder of the power is not limited by the requisite standard. Examples of powers which are limited by the requisite standard are powers exercisable for the holder’s “support,” “support in reasonable comfort,” “maintenance in health and reasonable comfort,” “support in his accustomed' manner of living” ...

Treas.Reg. § 20.2041-1(c)(2) (1984). Note that the regulations require only that “emergency” be “reasonably measurable” in terms of health or support. More importantly, “support” can mean “support in his accustomed manner of living.” Allowing invasion in order to support the beneficiary in his accustomed manner of living is surely a more liberal standard than that embodied in the term “emergency.” We can envision no emergency which would not be reasonably measurable in terms of health or to support, a beneficiary’s standard of living. Furthermore, a testator should not be required to use the exact words set forth in the statute and regulations in order to avoid creating a general power of appointment. Given the foregoing, we hold that permitting invasion of corpus “should an emergency arise” constitutes an ascertainable standard within § 2041(b)(1)(A).

(22) Case authority supports our finding that “emergency” fulfills the requirements of 26 U.S.C. § 2041(b)(1)(A). The court in Estate of Sowell v. Commissioner of Internal Revenue, 708 F.2d 1564 (10th Cir.1983), found that power to invade “in case of emergency or illness” did not constitute a general power of appointment. Noting that the key characteristic of the meaning of “emergency” is that of need, the court concluded that “emergency” has no meaning broader than health, education and support. Id. at 1566. In Doyle v. United States, 358 F.Supp. 300, 302 (E.D.Pa.1973), the court found a general power of appointment where trustees could invade principal to pay testator’s wife “as may be necessary for her comfort, maintenance and support, or in the event of illness, accident or other case of necessity or emergency as the result of which she may be in need.” However, the court stated that if “comfort” was eliminated, an ascertainable standard would remain, necessarily implying that “emergency” falls within § 2041(b)(1)(A). Id. at 307.

(23) We hold that the limitation on invasion of corpus set forth in. the Stella T. Hunter Will, Item III(B)(b)(9), is an ascertainable standard related to health, educa-tion, support or maintenance. Therefore, the corpus of the decedent’s trust is not includable within his estate and not subject to federal estate tax. We will order that the estate tax paid on the trust be refunded to the estate of Samuel Knox Hunter, Jr., with interest.