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Carroll v. Social Security Board.

June 10, 1942


Appeal from the District Court of the United States for the Northern District of Illinois, Eastern Division; William H. Holly, Judge.

Author: Major

Before SPARKS and MAJOR, Circuit Judges, and LINDLEY, District Judge.

MAJOR, Circuit Judge.

This is an appeal from a judgment of the District Court, entered June 25, 1941, affirming a decision of the Appeals Council of the Social Security Board which held that plaintiff, as well as his three minor children, was not entitled to primary insurance benefits under the Social Security Act as amended, 42 U.S.C.A. § 401 et seq. It is agreed that a decision as to the rights of the plaintiff (father) is conclusive as to those of the children.

Plaintiff, a citizen of the United States, attained the age of sixty-five years on February 6, 1940. Prior to July 24, 1931, he was engaged in the banking business and served in an official capacity with a number of state banks. On July 24, 1931, he was, by virtue of Chap. 16 1/2, Sec. 11, Illinois Revised Statutes, 1941, appointed by the Auditor of Public Accounts, Receiver for the South Side Saving Bank and Trust Company of Chicago, Illinois. The appointment was confirmed by the Circuit Court of Cook County. The plaintiff proceeded in the ordinary manner to liquidate the property and assets of the bank and distribute the proceeds to depositors. Some sixty persons were appointed to assist in the work of liquidation, most of whom had been employees of the bank prior to its closing.

Plaintiff's compensation and that of all the persons engaged to assist in the liquidation was determined by the State Auditor and paid from the assets of the receivership. Plaintiff's compensation at the beginning was fixed at $6,000 per year, but was subsequently reduced until finally he was receiving $100 per month. For the years 1937, 1938 and 1939, he received compensation in the total amount of $9,000. A Social Security card was assigned to plaintiff and during the period of receivership, Social Security taxes were deducted from his compensation and reported to the Collector of Internal Revenue.

On September 30, 1939, plaintiff tendered his resignation as Receiver to the State Auditor. On February 2, 1940, he filed with the Bureau of Old Age and Survivors Insurance of the Social Security Board an application for primary insurance benefits, and on the same date filed on behalf of his three minor children an application for child's insurance benefits. Plaintiff was notified that neither he nor his children were entitled to such benefits. A hearing was had before a Referee who rendered a decision adverse to plaintiff, which decision, on appeal, was affirmed by the Appeals Council of the Social Security Board. Thereupon, suit was filed in the District Court to review such decision. The appeal is from a judgment affirming the decision of the Council.

There is no occasion to discuss the Act any further than necessary to a decision of the issue presented. Section 210(b), Title 42, U.S.C.A. § 410 note, of the Act states that the term "wages" means "all remuneration for employment." Paragraph (b) of the same section provides: "(b) The term 'employment' means any service, of whatever nature, performed within the United States by an employee for his employer, except * * * (6) Service performed in the employ of a State * * * or an instrumentality of one or more States * * * ." That plaintiff met all requirements so as to entitle him and his children to benefits, is conceded, provided his services as Receiver were those of an "employee for his employer" within the meaning of the Act, and provided further he was not an employee of the State of Illinois.

Plaintiff contends that he was an employee of the bank, while the defendant argues to the contrary. It is defendant's contention, as we understand, that plaintiff's appointment by the Auditor and confirmation by the Circuit Court of Cook County, precludes the idea that he was an employee of the bank. It is pointed out that an essential characteristic of the relationship of employer and employee is that the former retains the right to control and direct the individual who performs the services, both as to the result to be accomplished by the work, and as to the details and means by which that result is accomplished. Undoubtedly, this proposition generally is sound and sustained by the authorities.

The situation presented, however, is so extraordinary that we doubt if it should or can be solved by the application of rules and theories relevant to an ordinary situation. Certainly it must be conceded that plaintiff was rendering service for someone. That he was not working for himself, and that he was not an independent contractor, we assume would also be conceded. It also appears that he was not a court receiver - arm of the court - as that term is ordinarily used. In fact, a court in Illinois is without jurisdiction to appoint a receiver for a banking corporation. People v. Shurtleff, 353 Ill. 248, 261, 187 N.E. 271.

While we need not consider plaintiff's relation with the State or the State Auditor until we have determined that he was an employee, we think it might be helpful to consider that question at this point. It is argued by the defendant that if he was an employee, it was of the State of Illinois and, therefore, proscribed from benefits under the Act. It is true, as pointed out, that the duties, powers and functions of a Receiver are prescribed largely by Statute under the direction and control of the State Auditor. The appointment of a Receiver, however, for the purpose of liquidating a bank, is a discretionary matter with the Auditor, rather than mandatory. People v. West Side T. & S. Bank, 362 Ill. 607, 617, 1 N.E.2d 81. Moreover, plaintiff received no compensation from the state and performed no Governmental service. His compensation was paid from the assets of the bank and his services were performed in the interest of and on behalf of those with a financial interest in the bank, if not the bank itself. In Helvering v. Therrell, 303 U.S. 218, 58 S. Ct. 539, 82 L. Ed. 758, the court decided that a liquidator of a Florida bank, appointed by the State Comptroller, approved by the court and subject to the control of the Comptroller, was not an officer of the state. The question arose on account of the liquidator's contention that he was a state employee entitled to immunity from Federal Taxation. (Under the former rules of Immunity). In deciding adversely to the taxpayer's contention, the court, on page 225 of 303 U.S., page 543 of 58 S. Ct., said: " * * * The compensation of the taxpayers was paid from corporate assets - not from funds belonging to the state No one of them was an officer of the state in the strict sense of hat term. The business about which they were employed was not one utilized by the state in the discharge of her essential governmental duties. The corporations in liquidation were private enterprises; their funds were the property of private individuals." We do not agree with the contention that because the court was considering an income tax question, this pronouncement is inapplicable to the instant situation.

Furthermore, the same section of the Banking Act of Illinois (Sec. 11, Ch. 16 1/2, Smith-Hurd, 1935) which authorized plaintiff's appointment by the State Auditor, also provides: "At any time, whenever twothirds in number and amount of the creditors of any such bank or association, after any such receiver shall have been appointed by the Auditor, shall petition the Auditor of Public Accounts for the appointment of any person nominated by them as receiver, who is a reputable person and elector of the county in which such bank or association is located, it shall be the duty of the Auditor to make such appointment, and all the rights and duties of his predecessor shall at once devolve upon such appointee. * * * "

So we have the situation wherein the plaintiff rendered no service to, and received no compensation from, the state, with the absolute power lodged in the creditors of the bank to effect his removal and require the appointment of a successor of their own choosing. Certainly, under such circumstances, there is little room for the contention that plaintiff's services were performed as an employee of the state.

By the process of elimination, we necessarily find ourselves favorably impressed with plaintiff's contention that he was an employee of the bank, notwithstanding the apparent lack of the element so often stressed in matters of this character - that is, that the bank had no control over plaintiff's activities. We think the absence of this ...

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