Court Opinion

ID: 4010823
Source: CourtListenerOpinion
Date Created: 2016-07-06 11:13:07.247544+00
Date Added: 2024-06-11T07:44:43.861031
License: Public Domain

I cannot agree to the conclusion of the court that Mr. Ryan was an employee of Mr. Russell. To my mind he was as much an independent contractor as is any attorney employed to render services as an attorney in connection with a given case.  The concluding paragraph of *Page 502 
the court's opinion concedes that "in the ordinary case of attorney and client the relationship is that of principal and independent contractor."  This to my mind concedes the decision of the case to appellant.  Mr. Ryan to my mind stood in precisely the same relation to Mr. Russell that an attorney stands to his client in the ordinary case.
To make my position clear let us compare Mr. Ryan's situation to that of his attorney, Mr. Sutherland, in the instant case. Theirs is "the ordinary case of attorney and client."  Mr. Sutherland's relation to Mr. Ryan is precisely the same as that of Mr. Ryan to Mr. Russell.  Could not Mr. Ryan control the instant litigation precisely as Mr. Russell controlled that litigation in the case in which he retained Mr. Ryan?  Could not Mr. Ryan require Mr. Sutherland to do in connection with this litigation precisely as Mr. Russell required Mr. Ryan to do in the other case?  Could not Mr. Ryan discharge Mr. Sutherland at any time, as Mr. Russell might have discharged Mr. Ryan?  Mr. Ryan's situation in the case in which he rendered service to the federal agency is precisely that of a lawyer "in the ordinary case of attorney and client."  The client in the ordinary case may control his attorney if he wants to, precisely as Mr. Ryan could have done in this case and precisely as Mr. Russell did or could have done in the litigation in which Mr. Ryan was retained.
It is to be noted that the only instances cited in Restatement, Agency, cited in the opinion of the court holding attorneys to be "employees" as distinguished from "independent contractors" in which an attorney is held to be an employee is "where a firm of attorneys employs an attorney as a member of its office staff" and "an attorney employed as a subordinate in a law office."  Mr. Ryan was not so employed.  The adjudicated cases involving exemption from taxation in like situations supporting the view that Mr. Ryan was not an employee areHoward v. Commissioner (5th Cir.), 29 F.2d 895, and Reed v. Commissioner (3d Cir.), 34 F.2d 263, which *Page 503 
held the attorney to be an employee, both of which were reversed by the supreme court of the United States, the former in 280 U.S. 526, 50 Sup. Ct. 87, 74 L. Ed. 593, and the latter in 281 U.S. 699, 50 Sup. Ct. 352, 74 L. Ed. 1125.  Both United States supreme court decisions are per curiam, the former only saying:  "Judgment reversed upon the authority of Metcalf  Eddy v. Mitchell, 269 U.S. 514," and the latter only says:  "Judgment reversed upon the authority of Lucas v.Howard, 280 U.S. 526."  The opinion of the court herein states in effect that Metcalf  Eddy v. Mitchell, supra, is distinguishable in its facts, and therefore the two United States supreme court decisions are erroneous.  The only difference in the factual situations involved that I can perceive is that theMitchell Case involved an engineer engaged by a local subdivision of a state instead of a lawyer engaged by the federal government and the one involved a federal tax on a person engaged by the state to perform a particular service for a federal agency and the others involved persons engaged in the one case by the state, and the other by a state local subdivision to perform a particular service for the state or its subdivision. Neither difference in my view so distinguishes the MitchellCase from the Reed and Howard Cases as to make the principle of it inapplicable to them.  Anyhow the supreme court of the United States has twice had the matter under consideration and has considered the principle of the Mitchell Case applicable to the Reed and Howard Cases.  I think that court was right in so considering.  All the cases decided subsequent to the disposition of the Howard and Reed Cases
by the United States supreme court, except one, hold the relation not to be that of employee.  Those holding the relation of an attorney employed by the state in connection with particular litigation to be that ordinarily existing between attorney and client are, Norcross v. Helvering (D.C.App.),75 F.2d 679; Buckner v. Commissioner (2d Cir.),77 F.2d 297; Medalie v. Commissioner (2d Cir.), *Page 504
77 F.2d 300; Haight v. Commissioner (7th Cir.),52 F.2d 779; McNulty v. Commissioner (2d Cir.), 95 F.2d 1008; Commissioner v. Murphy (2d Cir.), 70 F.2d 790; Watson v. Commissioner (3d Cir.), 81 F.2d 627;Burke v. McGowan (D.C.), 39 F. Supp. 174.  The exception above referred to is Burnet v. Livesey (4th Cir.),48 F.2d 159, 161.  In that case the attorney was employed by a public service commission of a state, at a yearly salary, payable monthly.  His services were not limited to specific litigation but included rendering of opinions, advising with the commission, and trial of all causes to which the commission was a party.  He was permitted to conduct private practice, but his employment was continuous and he gave preference to the commission over private clients.
I think the judgment should be reversed for another reason. An attorney cannot claim an exemption from income taxation because of receipts for professional services rendered by him for the federal government or its departments, unless those receipts belonged to him as part of the income received by him from the practice of his profession.  Under the evidence of this case the money paid by the federal government for the services of Mr. Ryan did not belong to him and was not received by him but belonged to and was received by the law firm of which he was a member.  True the checks for his services ran to Mr. Ryan by name and were received by him in the mail, but he turned them directly into the bank account of the firm, and the amount thereof was disbursed by the firm as all other receipts of the firm were disbursed.  The proceeds of the checks no more belonged to him than money paid to him for services rendered by him for any other client.  Mr. Ryan's income from the practice of his profession was fixed by his partnership contract, and his income from such practice was the amount received by him from his firm pursuant to that contract.  The situation is entirely different than it would be had Mr. Ryan been practicing alone as distinguished from practicing as a member of a law firm.  A lawyer cannot exempt *Page 505 
from his income tax receipts from the federal government unless they were comprised in that income, and the instant receipts were not so comprised, any more than money belonging to the firm paid to him by a private individual for whom he performed professional services as compensation for such services was so comprised.
I am authorized to state that Mr. Justice FRITZ concurs in this dissent.
BARLOW, J., took no part.