The opinion of the court was delivered by: COOPER
This is a motion by the debtor to expunge certain parts of claims and amended claims for taxes filed by Harry M. Hickey, as Collector of Internal Revenue for the 14th District of New York, and allowing the claims at the alleged correct amounts.
More specifically the motion is for an order reducing the claim filed by the Collector under the Federal Insurance Contributions Act from $2,261.94 to $942.70, and for an order reducing the claim filed by the Collector under the Federal Unemployment Tax Act from $2,324.88 to $813.83.
Since the service of papers on the above motion the Collector filed a further amended claim. The claim under the Federal Insurance Contributions Act is identical with the claim previously filed; but the claim under the Federal Unemployment Tax Act is increased by $6,834.38 of principal and additional $143.64 of interest, a total additional claim of $6,988.02 for the period from January 1, 1940, to November 26, 1940 (which latter date was the last day before the petition for arrangement was filed). This additional tax arises from the fact that no credit was given the debtor for contributions due and payable to the New York State Unemployment Insurance Fund for the said period last above mentioned.
The debtor moved in open Court to expunge this additional tax and the matter was adjourned one or more times and came on before the Court on June 21, 1941. The difference between $2,261.94, the amount claimed by the Collector, and $942.70, the amount admitted by the debtor to be due, on the first item above mentioned; and the difference between $2,324.88, the amount claimed by the Collector, and $813.83, the amount admitted by the debtor to be due on the second item first above mentioned, arises solely from the contention by the Collector that members of certain orchestras hired by the debtor were employees of the debtor.
The debtor denies that the members of these orchestras were its employees and that it is liable in any way for taxes or contributions on the wages of the members of the orchestras under the Two Federal Acts first above mentioned.
At the final hearing the debtor offered proof both oral and written on the employment of the orchestras in question.
The debtor offered the written contract dated June 2, 1937, between the debtor and Richard Mansfield for the employment of Mansfield's Orchestra for the summer season of 1937 beginning June 5, 1937, for the sum of $590.
The debtor also offered the written contract between itself and Herb Gordon for the services of Herb Gordon's orchestra to furnish dinner music to the patrons of debtor's hotel from 7:00 to 9:00 P.M. and from 10:00 P.M. to the closing each day of the week, except Sunday, beginning October 29, 1937, for the sum of $550 per week.
Herb Gordon, in the contract, guaranteed that the Herb Gordon orchestra of eleven pieces would provide satisfactory entertainment and that the debtor might terminate the contract at any time if the said orchestra was not satisfactory to the debtor.
The contract further provided: "The said "Director" is to have exclusive charge and direction of the persons employed in said orchestra in the performance of their work at said hotel, and is to have the sole right of employing and discharging the said persons so employed by him, and the said "Director" is to be solely responsible for the payment of the wages to said persons employed in said orchestra."
The "Director" also agreed to take out compensation insurance and pay the premium therefor and to hold the debtor harmless from all liability to maintain unemployment and old age insurance and other similar charges growing out of the employment by the "Director" of such employees as render service under the agreement (contract).
The debtor also offered the written contract with the Music Corporation of America, as agent, for the appearance of Nobby Barney's orchestra, called "Men of Note", consisting of himself and three other musicians for $236 per week, commencing October 20, 1939, and continuing indefinitely and subject to cancellation on two weeks notice.
The manager of the hotel testified that orchestras in other years here involved were hired under oral contracts at a lump sum payable weekly or monthly, as the case might be; that such lump sums were paid to the owner or leader of the orchestra as per the agreement; that under neither oral nor written contracts did he have any dealings whatever with the individual members of the orchestra; that he did not know their names; that he never hired or discharged any member of such orchestra; never paid them any money whatever, that he exercised no control whatever over them or the music they ...