Haynes v. United States

RESPONDENT: United States
LOCATION: The United States District Court for the Western District of Texas

DECIDED BY: Warren Court (1957-1958)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 353 US 81 (1957)
ARGUED: Mar 05, 1957
DECIDED: Apr 01, 1957

Hilbert P. Zarky - for the respondent

Facts of the case


Media for Haynes v. United States

Audio Transcription for Oral Argument - March 05, 1957 in Haynes v. United States

Earl Warren:

Number 257, Gordon P. Haynes and Essie M. Haynes, Petitioners versus United States of America.

Mr. Hudson.

John H. Hudson:

Mr. Chief Justice, associate justices, may it please the Court.

It is my hope in presentation the case for the petitioners that we will give the Court a rest from some of these abstruse and profound principles.

This case comes to this on a report by which of the fact that a man by the name of Gordon P. Haynes during the year 1949 was an employee of the Southern Bell Telephone Company under what is called here a plan case.

I'm sorry Your Honor, I'm really not able to carry on but it's a proposition where one has to so I do the best I can.

This plan is incorporated in the record.

It has a schedule of payments to its employees fixed on the length of service.

Mr. Haynes suffered an accident prior to the time he become ill with what is known as causalgia or balloon nerve.

During this 1949, he did not perform any service for the Southern Bell Telephone Company.

He was home sick so the record in the evidence show.

Did not so much as go to the office because of his disability.

When the time came for passing upon the question of whether or not the $2100 which he earned that year or which came to him by virtue of the fact that he was home sick, was taxable as income -- gross income or was exempt under Section 22, the fact the Telephone Company itself was not certain about it so they went ahead and turned $318.44 to the tax Commissioner.

Then the case of Epmeier came along and the question rolled as to whether or not this entire fund was what is called under this exemption or under the law, income law whether or not it was income or whether or not it was upon receive because of illness, sickness or was benefit upon received from this plan as such that it was not proceeds from capital on the part of Haynes, that it was not earnings on the part of Haynes and therefore the entire $2100 was exempt from taxation.

And the question before the court is at this time whether or not this is income, gross income and is taxable or whether or not it is fund received from sickness and disability benefits and therefore is exempt.

Now we think and may it please the Court, that we are dealing here with the exemption not so much of the tax statute as funds which are exempt under the 22 (b) (5) that are not taxable.

Our contention is that this cannot be what is known as income from labor because under the plan and Haynes had served under this plan more than the 25-year period and was entitled to what is known under the plan as full compensation or full payment.

Now, the Government takes this view of this entire proposition that the payments which went to Mr. Haynes while he was sick and totally disabled was simply a continuation of salary plan and that it was taxable.

William O. Douglas:

What was it?

The amount of the salary?

John H. Hudson:

The amount of the salary, the total he earned in 1949, may it please the Court was $2100.

Now that, may it please Your Honor was the sum which he would have received if he had been on the job the full 52 weeks of 1949.

That is one point which the Government contends that this is income and it is taxable.

It is not sick and disability benefits which are exempt under the statute involved.

We think among some other contention that it must the intent and purpose of this plan, it really in substance is insurance, although it is not marked or labeled insurance and the Government points out that that is one of the weaknesses of our contention then it is not issued by a commercial insurance company.

No objection that the government has to our contention is that this plan and this -- what we call for petitioners, sick benefit do not require and the company does not require that its employees pay a cash premium for this protection.

Now we don't think that that really makes any difference.

The services which he rendered to the Telephone Company as an employee for more than 25 years, we think is ample payment of what we may term premium.

Now there are several -- there are several other marks of similarities and marks of dissimilarity in -- on both sides of this question.

If I could bring myself to conceive of a person who does not qualify either under receiving something from capitals such as interest or grants on an investment or not receiving something for the labor that he performed.