meals are served. The Club has forty-four dining rooms with a seating capacity of about twelve hundred persons, and more dining capacity is needed.
Save for its business purpose, the Club offers little to maintain membership. There are practically no social activities, amusements, or entertainments. There are facilities for cards and billiards; but the use of these is insignificant. The Club has no entertainment committee. Ladies are not permitted in any part of the Club, except in a dining room designated for wives and families of members. The only exception to this rule is that on New Year's Day, when wives of members are admitted to all parts of Club. There is, however, no New Year's party. The Club has no place for dancing. There are no dances, receptions, card parties, or anything of that sort. There are no facilities for golf, hand-ball, tennis, or other sports. The Club maintains a health department, with a physician in charge, with facilities for massage, electrotherapy, and hydrotherapy. There is certainly nothing of a social nature in that. Liquor is served in the Club, but there is no cocktail lounge or cocktail hour in the Club. The liquor, like the food served at the Club, are adjuncts only to the predominant business activity of the Club.
The Club does not sponsor any social functions, entertainments, or amusements. There are no lectures, dances, theatricals, motion pictures, teas, club lunches, or dinners.
The Court of Claims, in the case of Duquesne Club v. United States, 23 F.Supp. 781, dismissed claims of this plaintiff for taxes paid by it from June, 1929, to August, 1935. The Court of Claims, in these cases, held that the predominant purpose and use of the Duquesne Club, during the period involved in these cases, was a meeting place for business and professional men for luncheon, where they can meet and discuss business matters with associates and competitors, as well as make acquaintances and social contacts of value in future business relations. The Court of Claims then went on to hold that in order to serve that predominant purpose, many features were provided which were of a social nature, including means for amusement, relaxation, and conveniences, such as pool, billiard and card facilities, health department, bar-rooms, lounges, bedrooms, and extensive furnishings; and that these social features were not merely incidental to the life of the Club, but were material to its operation and existence.
We are unable to find from the evidence in these cases that during the period involved in the present suits, towit, from September 1, 1935, to July 1, 1938, the Club provided any social features that were material either to its operation or existence; that the facilities and conveniences which the Club provides are merely incidental to the predominant purpose of the Club, which is the promotion and advancement of business and professional interests. In the case of Houston Club v. United States, Ct.Cl., 58 F.2d 487, the court held that, although there were billiard and pool tables available, and that private bedrooms were maintained by the Club, those features did not make it a social club, where the prodominant purpose of the Club was the promotion of business interests. In Builders' Club of Chicago v. United States, Ct.Cl., 58 F.2d 503, the club operated a billiard room, and the court, in holding that it was not a social club, said that Congress had no intention of making every club that served luncheons to its members, and permitted them to remain afterwards in the club-rooms for purposes or reasons not connected with the predominant object of the club, subject to the tax. In Cosmos Club v. United States, Ct.Cl., 42 F.2d 321, the club maintained a billiard room used by ten members each day, maintained a cardroom for its members, and forty-eight private bedrooms. Yet, the court held that the few social features of the club were but incidental to its predominant purposes. In the case of Bankers' Club v. United States, Ct.Cl., 37 F.2d 982, the court held that although the club's furnishings were elaborate and expensive, its quarters, inviting and its resources great, it was not taxable as a social, athletic, or sporting club or organization. In that case, the court said, on page 985 of 37 F.2d: "* * Neither the Taxing Act nor the regulations of the Bureau discriminate between an imposing organization and one less ornate and attractive."
The same thing can be said of the Duquesne Club, as the court said of the Union Club of Pittsburgh in Union Club v. Heiner, supra, that the Club was necessarily under the Pennsylvania statute chartered as a social club; but that does not prevent the Club, in its subsequent operation, functioning as a business club. Except that the Duquesne Club is more expensive and elaborate, and has more resources, there is nothing to distinguish it from the Union Club of Pittsburgh, as described in the Union Club case cited above.
The decision of the Court of Claims in the case of Duquesne Club v. United States, supra, being for different tax period than the one involved in these suits, would not justify the application of the doctrine of res adjudicata. The determination that the plaintiff was a social club during an earlier tax-period would not be res adjudicata of the question of whether it was such a club in a subsequent period. These suits are analogous to those involving questions as to whether a corporation's activities were "charitable" or whether a corporation was "doing business" in the respective taxable years: Peck v. Commissioner, 34 B.T.A. 402; Phillips v. International Salt Co., 274 U.S. 718, 47 S. Ct. 589, 71 L. Ed. 1323. A case involving the depreciation of certain machinery has been held to be free from application of the rule of res adjudicata, on the ground that it necessarily involved a continuing judgment as to the depreciation rate, which judgment might properly and honestly vary from year to year.
An order for judgment in accordance with this opinion, and our findings of fact and conclusions of law, may be submitted upon notice to opposing counsel.
© 1992-2004 VersusLaw Inc.