
    O. A. KIRKCONNELL, JR., & W. J. GODFREY, D/B/A KIRKCONNELL & GODFREY v. THE UNITED STATES HARRIS FALGOUT, HARRIS FALGOUT, JR., LOUELLA F. LEMKOWITZ AND M. F. CALLAIS, T/A GRANDE VALLEY BOAT COMPANY v. THE UNITED STATES
    [No. 31-62]
    [No. 142-62]
    [Decided June 11, 1965]
    
      
      Joseph J. Lymam. for plaintiffs.
    
      Mitchell Samuelson, with, whom was Assistant Attorney General Loim F. Oberdorfer for defendant. O. Moxley Featherston, Lyle M. Turner and Philip B. Miller were on the brief.
    Before Laeamoee, Acting Chief Judge, Dubeee, Davis and ColliNS, Judges, and Jones, Senior Judge.
    
   Durfee, Judge,

delivered the opinion of the court :

These tax refund cases involve similar questions of law and fact, and were therefore consolidated by agreement of the parties. Plaintiffs have brought these actions to recover taxes alleged to have been erroneously paid under the Federal Insurance Contributions Act (FICA), 26 U.S.C. §§ 3100 et seq., and the Federal Unemployment Tax Act (FUTA), 26 U.S.C. §§ 3300 et seq., for the quarter ending March 31,1957, through March 31, 1960. Only that portion of the FICA taxes, an excise tax paid by plaintiffs, is sought to be refunded. No part of the fishermen’s FICA taxes, an income tax, is sought to be refunded here. The FUTA tax, an excise tax paid by plaintiffs without contribution by the fishermen, is also sought'to be refunded for the years 1957,1958, and 1959.

Plaintiffs in each case are separate and distinct partnerships. Both plaintiffs were engaged in the period involved here in the business of fishing for shrimp in the Gulf of Mexico, and their headquarters were in Brownsville, Texas. Plaintiffs were the owners of small fleets of fishing boats. The boats were manned by a captain and a small crew of deckhands who also performed fishing services on the boats. The sole issue involved in this case is whether these latter individuals, the captains and deckhands, were employees of plaintiffs under Sections 3121(d) and 3306’(i) of the Internal Kevenue Code of 1954, 26 U.S.C. §§ 3121(d) and 3306(i), (Supp. Y (1952)), or whether they were independent contractors. If the captains and deckhands were employees within the meaning of the applicable sections of the 1954 Code, then plaintiffs rightfully paid the taxes in issue and they are not entitled to a refund. If, on the other hand, these captains and deckhands were independent contractors, then the FICA and FUTA taxes were erroneously assessed against plaintiffs, and plaintiffs are entitled to a tax refund.

Plaintiffs’ shrimp boats were quite expensive commodities, costing about $40,000.00 each. The boats were specifically equipped and were owned and operated solely for shrimp fishing. Maintenance workers, whose status is not in issue here, were hired by plaintiffs to keep the vessels and fishing gear in operating condition between trips. These workers were paid regular wages and worked under the direct supervision of plaintiffs’ managers.

After a boat had been outfitted and equipped, plaintiffs selected an experienced fisherman who was placed in command of the boat as captain. The captains so selected were those in whose ability, production records, and integrity plaintiffs had confidence. It was understood by plaintiffs and the captains that the captains were to be in full charge of the fishing operations. Plaintiff in No. 31-62 had a written agreement setting out the working conditions with its captains. The specifics of the agreement are outlined in Finding 12. This agreement resulted from negotiations between the owners and the Bio Grande Shrimp Fishermen’s Association, the authorized representative of the fishermen and the captains for a number of years prior to the time the agreement was adopted. Not all the captains signed the agreement; this factor is insignificant, however, as many of the provisions of the agreement were rarely enforced, and the general practice of the trade governed. The actual manner in which both plaintiff partnerships conducted business was similar for all practical purposes.

Plaintiffs did not allow the captains to have or permit intoxicating liquor aboard the vessels. The captains were instructed by the owners to avoid any violation of Mexican territorial waters, and to refrain from entering Mexican ports except in emergencies. When a vessel was at sea, the crew of the boat was under the direct and sole control of the captain. The captains usually made the decisions where to fish and in what direction to go, but if a boat was not in safe mechanical condition for long distance fishing, the owner would tell the captain to fish “just off the bar.” In addition, the owners passed on to the captains information obtained as to where fish were being caught. However, the captains were not called in, nor interrupted during their fishing operations. The captains were in complete charge of the boats concerning all matters of operation and maintenance from the time of departure until the boats returned. Once the boats left port the captains were not required nor expected to communicate with plaintiffs with any degree of frequency. Contact between the captains and plaintiffs was infrequent and usually limited to emergencies.

The arrangement between the boat owners and the captains did not specify a term during which a captain would remain in command of a vessel. The parties understood that a captain would be in command of the vessel on a trip to trip basis, and the arrangement could be terminated by either party at the conclusion of any trip or prior to the commencement of another. There was nothing in the arrangement that prohibited a captain from taking a vessel belonging to another owner and thereafter returning to plaintiffs for a boat, and in fact, some captains did just that. However, the relationship was customarily continued for an extended time, and a number of captains made many consecutive trips in command of the same boats for the same plaintiffs. Plaintiffs attempted to keep their vessels in operation as often as was consistent with the condition of the vessel. Usually two or three days elapsed between trips. If a captain was not ready or available to ship out when the boat was equipped to go, plaintiffs would select another captain to take over command of the vessel. The captains so replaced could and thereafter often did take out other boats owned by plaintiffs.

Under the agreement between plaintiffs and the captains, the latter worked or fished the boats on the lay or share basis in accordance with the custom of the fishing industry. In the early portion of the period herein involved, the proceeds from the sale of shrimp from each trip were divided equally between plaintiffs and the captains. During the latter portion of the period each catch was divided 60 percent to plaintiffs and 40 percent to the captains. The captains paid the deckhands on a share basis out of their portion of the share of the catch.

The deckhands were hired and fired by the captains, who determined the length of time they would work and their duties. However, the owners could request that certain individuals not be hired, which requests were complied with. Plaintiffs themselves had no direct relationship with the deckhands. Generally, prior to sailing, however, plaintiffs knew the names of the crew.

Various expenses were incurred in connection with a fishing trip. Some were paid by plaintiffs, and some by the captains and crew. The crew paid for groceries, one-half of the ice, and all personal items. In addition, the crew paid for shoveling the shrimp out of the holds and the expense of employing a guard to protect the catch when the boat was not to 'be immediately unloaded. The cost of processing the shrimp was deducted from the gross price before the shares were disbursed. All other expenses, including fuel, were paid by plaintiffs.

The captains decided how much, fuel and ice to take aboard. The captains, when placed in command of a boat, customarily-asked plaintiffs where to obtain the fuel and ice. Plaintiffs told the captains to purchase from Valley Fuel and Ice Company. In all instances, the cost of both the fuel and the ice was charged to plaintiffs. However, the cost of one-half the ice was later deducted from the captain’s share.

The captains, on the other hand, could purchase groceries from stores of their choice. However, in most instances the groceries were bought on credit at stores where plaintiffs had credit. The cost of the groceries was then later deducted by plaintiffs from the captain’s share.

Each trip was considered by the parties as a separate transaction for purposes of settlement. The amount received by the captain and crew depended entirely on the proceeds of the shrimp catch. There was no guarantee of any kind made by plaintiffs to the captain regardless of the time and effort expended in fishing. If a trip was unsuccessful, it was known in the trade as a “broker.” If the value of the captain’s share of a catch would not cover his share of the expenses, the remainder would be taken out of the captain’s share from subsequent trips. When a captain, owing unpaid expenses, failed to ship out for plaintiffs on subsequent trips, the unpaid expenses of the “broker” were borne by plaintiffs.

Plaintiffs and the captains had an understanding that the shrimp would be unloaded by Basin Seafood Company, a Brownsville, Texas company partially owned by another Brownsville company, Western Shell Fish Company, Inc. Western would then purchase the unloaded catch. One member of each of the two partnerships held substantial interests in Western. Sometimes necessity dictated that the captain go to another port along the Texas or Louisiana coast. However, when the shrimp were unloaded at a port other than Brownsville, they were sold to fish houses which had been designated by plaintiffs prior to the beginning of the trip, and with whom plaintiffs had credit arrangements. Apparently, only when the captains fished off the coast of Mexico could they send a catch to a port of their choice.

After the shrimp were unloaded, they were sent to the aforementioned Western Shell Fish Company to be weighed. The captains had a right to be present when the shrimp were weighed, bnt they were seldom present. Usually, therefore, neither the captain nor the crew knew how much they earned on a trip until they received a settlement sheet and a check from Western’s bookkeeper, who had been authorized by plaintiffs to keep their books of account and write their checks. The bookkeeper was compensated for these services by plaintiffs. When the bookkeeper received the gross amount of the sale of the shrimp, he deducted the cost of the ice and divided the remainder into plaintiffs’ share and the captain’s and crew’s share. From the captain’s and crew’s share, the bookkeeper also deducted grocery bills, unloading fees, guard fees, union dues, and dues to the Texas Shrimp Association. The evidence shows that there was no authorization by the captains or crewmen for the deduction of union dues and Shrimp Association dues. The checkoff for the union dues was made pursuant to an agreement with the union. The deduction for the Shrimp Association dues was made as a result of 'an agreement entered into between the union and the boat owners.

Occasionally, when the owners had a successful year, they paid year-end or Christmas bonuses to some of their captains. The owners also frequently made advances as loans to the captains and crewmen. The amounts so advanced were deducted from the amount due the individuals at the time settlement was made after a fishing trip.

The owners carried hull insurance as well as protection and indemnity insurance. All repairs and maintenance of the vessels were the responsibility of the owners, and they made the final decisions in these matters.

We have thus attempted to delineate with some elaboration the relationship between the owners and the captains and crewmen. We believe that a thorough discussion of their relationships in context with the workings and customs of the shrimp fishing industry is necessary in order to get the true flavor of this case, and to make the necessary and correct legal determination.

Before beginning our analysis of the facts, one further factor remains to be mentioned. In 1961, plaintiff in No. 31-62 in defending a libel action in admiralty in the District Court of Texas, Brownsville Division, alleged that it “hires the captains on each and every boat operated by the partnership,” under a contract substantially the same as the written agreement hereinbefore discussed. This important factor will also be discussed in our analysis of the facts.

Sections 3121(d) and 3306 (i) of the 1954 Code (see Footnote 2, supra) tell us that the usual common law rules are to be adopted for ascertaining the existence of the employer-employee relationship, or of independent contractor status. The vital factor is, therefore, under the common law whether the person performing the services for another is subject to the other’s control or right to control, or whether under the common law such person is an independent contractor. The Treasury Begulations applicable to § 3121(d) of the 1954 Code speaks in the same vein. Cf. 26 CFB, 31.3121(d)-!.

There are various guidelines used to determine whether or not there is control or right to control in such a situation as we are confronted with here. As we stated in Cape Shore Fish Co., Inc. v. United States, 165 Ct. Cl. 630, 636-37, 330 F. 2d 961, 964-5 (1964). * * * “Degrees of control, opportunities for profit or loss, investment in facilities, permanency of relation and skill required are important in determining status as employee or independent contractor, but no one factor is controlling nor are these factors exclusive.” * * * It is the overall situation that governs, not the presence or absence of any one factor. Other factors indicative of the presence or absence of the employer-employee relation ship which may be considered in viewing the overall situation are the extent of control the employer exercises over the details of the work, amount of supervision, degree of skill required for the work, length of employment, method of payment, and how the parties themselves view the relationship. Cf. Restatement of the Law, Agency, 2d, § 220.

Both parties to this controversy have supplied the court with numerous citations supporting their contentions. While these cases are valuable in illustrating the difficulty and closeness of the problem before us, they cannot be used in a dispositive manner to rid ourselves of the responsibility of determining the existence or absence of the employer-employee relationship. For as we stated in Cape Shore Fish Co. Inc. v. United States, supra, at p. 637, “* * * The result in each case must be governed by the special facts and circumstances of the case itself.” * * * The Treasury Regulations bear this out. Of. 26 CFR 31.3121 (d)-1.

Upon close consideration of the salient facts in this case we are of the opinion that the owner-plaintiffs possessed a right to control the captains and deckhands in the degree necessary to establish an employer-employee relationship. Plaintiffs, therefore, correctly paid the FICA and FUTA taxes in accordance with their roles as employers of the captains and deckhands, and may not now recover these taxes.

The first important factor in the analysis of the relationship of these owners and the captains and deckhands is the amount of investment in the facilities. The costs to plaintiffs were greatly disproportionate to the costs to the fishermen. Plaintiffs’ boats alone cost $40,000.00 each. Plaintiffs paid the cost of keeping the vessels and fishing gear in operating condition between trips. Plaintiffs paid for all repairs and maintenance of the boats, and for the cost of all insurance, including hull, liability and indemnity. As opposed to these great expenses the fishermen paid for only one-half the ice, personal items, the cost of shoveling shrimp and employing guards. All other expenses, including fuel, were paid by plaintiffs. It is improbable, although admittedly not inconceivable, that plaintiffs with such a great amount of investment at stake, were willing to divest themselves of employers’ control or to entrust this large investment solely to the control of a number of independent contractors.

There were certain specific restrictions placed on the captains by plaintiffs. These restrictions are consistent with an employer-employee relationship, and included prohibition of liquor on board the boats, instructions to avoid Mexican waters and ports, and instructions on where to fish if the boat was not in safe mechanical condition.

The captains’ autonomy while at sea was not incompatible with the employer-employee relationship. They were presumably hired for their expertise in fishing matters and such freedoms allowed the captains complete charge of the boats while at sea; the decisions as to where to fish, and no requirement for communication with plaintiffs were merely expedient means by which plaintiffs derived the full 'benefit of the captains’ expertise.

This derivation of benefit of expertise is again shown by the fact that the captain was allowed to hire the crew. Certainly, plaintiffs would have been impractical had they thrust upon a captain a crewman who would have been incompatible with the captain. Further, the captains, not plaintiffs, were in a better position to know which crewmen were the more efficient and better workers. However, even in this area, there was a certain amount of control by plaintiffs. The owners had the power to request that certain individuals not be hired, and these requests were complied with.

We believe there was a definite object of continuity of employment between plaintiffs and the captains. While it is true there was no specific term during which a captain would remain in command of a vessel and the captains could quit after the conclusion of any trip and work for another owner, in actuality the relationship was customarily continued for an extended time and a number of captains made many consecutive trips. As we earlier pointed out, continuity of employment is one of the factors to consider in determining the existence of an employer-employee relationship. The continuity of employment is further demonstrated by the practice of reimbursement of a “broker.” When the value of a captain’s share of a catch would not cover his share of the expenses, the remainder was taken out of a captain’s share from subsequent trips. If plaintiffs did not expect the captain to return for subsequent trips, it would seem probable that they would have demanded payment for unpaid expenses at the end of each trip.

There were other areas in which plaintiffs exercised their control. They told the captains when to purchase food and fuel. Plaintiffs’ credit was used by the captains in such purchases, and also in purchases of groceries. It was thus plaintiffs, and not the captains, whose good names and credit were at stake, and who had to guarantee payment to the merchants. A further element of control exercised by plaintiffs pertained to the choice of fish houses for unloading the shrimp. When the shrimp were unloaded at a port other than Brownsville they were sold only to fish houses which had been designated by plaintiffs prior to the beginning of the trip. It was only when the captains fished off the coast of Mexico that the captains could send a catch to a port of their choice.

Another factor indicating that plaintiffs were employers was that payment to the captains and crews was made by an authorized agent of plaintiffs. Compensation to the fishermen was paid by plaintiffs’ checks drawn on plaintiffs’ banks, and not by the buyer’s checks. The captains and crews did not even know bow much they earned on a trip until plaintiffs’ agent paid them by check.

It is time settled law that the lay or share method of payment.does not weaken or change the existence of an employer-employee relationship. The lay system of payment is an ancient custom of the fishing industry. Cf. Cape Shore Fish Co., supra, pp. 642-43, and cases and treatises cited therein.

It is our view that plaintiffs and captains and crews themselves believed that their respective status was that of employer and employee. First, there was an authorized representative union of the fishermen and captains. The union and plaintiff in No. 31-62 negotiated an agreement which set out certain working conditions. While it is true that not all the captains signed the agreement, and it was rarely enforced, we believe that its mere existence is all important. There would have been no agreement had there been no union. The presence of a union shows that the fishermen and captains believed themselves to be in a subordinate status to the owners rather than equals as independent contractors. They felt the need to act in unity against what must have been regarded as the colossus of management.

The presence of the union acting as representative of a group of employees is further shown by the fact that union dues were deducted from the captains’ and crewmen’s shares. There was no direct authorization by the captains and crewmen for the deductions. Instead, the authorization came from the union pursuant to an agreement between the union and plaintiffs. Further evidence of union solidarity and bargaining is drawn from the fact that dues to the Texas Shrimp Association were also deducted from the captains’ and crews’ shares, again as a result of an agreement between the union and boat owners.

Other evidence of the parties’ belief in the existence of the employer-employee relationship consists of the Christmas bonuses, payment of insurance and one plaintiff’s admissions. Year-end or Christmas bonuses are not ordinarily paid to independent contractors, but are frequently paid to employees. Plaintiffs, therefore, in paying these bonuses undoubtedly regarded the captains as employees. Plaintiffs, in carrying the indemnity and protection insurance, undoubtedly recognized their responsibility as employers and, a fortiori, the captains in acquiescing in this arrangement, realized these matters were not within their cognizance as mere employees. Finally, plaintiff in No. 31-62, in defending a libel action in admiralty specifically stated that it “hires” each captain. “Hires” is not a word of art. It is an act an employer performs in obtaining an employee. Independent contractors are not “hired.” They are contracted for, or with.

Accordingly, based on all the above mentioned factors which we have considered in our attempt to establish the overall situation in regard to the relationship of the parties, we hold that the captains and crewmen were employees of plaintiffs. Plaintiffs, therefore, rightfully paid the taxes in issue and are not entitled to a refund. The petitions are dismissed.

Jones, Senior Judge,

concurring in the result:

This is a very close case. It is true that there are elements of similarity between the facts of this case and Cape Shore Fish Co., Inc. v. United States, supra, on which the defendant relies and which is cited in the majority opinion. However, there are several vital differences between the two cases which will be discussed briefly.

This case is much more like the situation of an independent contractor or a charter boat contract than was the relationship in the Cape Shore decision.

I am persuaded to believe that most of the restrictions in the instant case were the natural ones that would be written by any careful owner into a contract; restrictions that would be mainly for the protection of the owner’s property. For instance, the right to forbid the taking of liquor onto a ship, that for an indefinite period of time would be completely out of the supervision and control of an owner, is a most natural restriction in the leasing or letting of any property. One extreme drinking party might result in great damage to any ship that was in good condition. Also, due to local conditions affecting the fishing industry, the owner was justified in instructing the captain to avoid Mexican waters and ports. If the boat’s mechanical condition was unsatisfactory for a long trip, the owner could restrict the captain to. a nearby fishing area. The owner could also request that the captain not hire certain objectionable crew members. These examples are not necessarily consistent with an employer-employee relationship.

Some of the vital differences between the facts in this case and in the Cafe Shore case are as follows: In the latter case the union contract required the boatowner (taxpayer) to pay certain minimum wages to the captain and crew whenever an individual’s share of the voyage was less than $10.00. If a different crew sailed on the next trip, the expenses of the “broker” were borne by the owner. The same union contract called for the owner to provide “maintenance and cure” to the captain and crew for sickness or'injury occurring in service. These owner-provided benefits were not present in the instant case.

Also, in the instant case the captain and crew had to bear the expense of their groceries and one-half of the bill for ice. In addition, the owner-taxpayer here had no control over the operation of the boat. In Cafe Shore the owner controlled the time of departure, the duration of the voyage, and the time of return. The working hours of the captain and crew while underway were also regulated by the union contract. None of these elements of control exist in the instant case.

It is difficult to lay down a sharp dividing line. On the other hand, there are some elements that tend to take this case out of the charter boat or independent contractor classification.

The cost of fuel, of repairs to the boat, hull insurance, and protection and indemnity insurance were carried by the boat-owner. The owner paid one-half the docking charges whenever the boat docked somewhere other than its home port. The owner-taxpayer had a financial interest in the company that sold fuel and ice to the captain, and the company that purchased the shrimp. He required the captain to deal with these companies. If the captain had to unload his shrimp in another port, the owner still designated the purchaser, and the market price for shrimp in the home port was still used in determining the shares for the captain and crew members.

There are other facts favorable to both the plaintiffs and the defendant, most of which are listed in the majority-opinion.

As indicated in the majority opinion, there is no sharp dividing line in these employee-independent contractor cases. Each one must be determined on the facts developed and on the particular set of circumstances.

I feel that the captains of these shrimp boats are very near to being independent contractors. However, in an effort to balance all of the facts present in this case, I have reached the conclusion that the result set out in the majority opinion is the correct one and I therefore concur in that conclusion.

Collins, Judge,

joins in the foregoing concurring opinion.

FINDINGS OF FACT

The court, having considered the evidence, the report of Trial Commissioner Wilson Cowen (now Chief Judge), and the briefs and argument of counsel, makes findings of fact as follows:

1. Plaintiffs brought these actions to recover taxes alleged to have been erroneously paid under the Federal Insurance Contributions Act (fica) , 26 TJ.S.C. §§ 8100 et seq., and the Federal Unemployment Tax Act (futa), 26 U.S.C. 88 3300 et seq., for the quarter ending March 31,1957, through March 31,1960.

2. Only that portion of the fica taxes, an excise tax paid by the plaintiffs, is sought to be refunded. No part of the fishermen’s fica taxes, an income tax, is sought to be refunded here. The futa tax, an excise tax paid by the plaintiffs without contributions by the fishermen, is also sought to be refunded for the years 1957,1958, and 1959.

3. By agreement these cases were consolidated for trial because of the similarity of the issues of law and fact in each. Except where otherwise indicated, these findings are applicable in both cases.

4. The trial was limited to the issues of law and fact relating to the right of the plaintiffs to recover, reserving the determination of tlxe amount of recovery to further proceedings.

5. The issue is whether the fishermen, comprised of captains and deckhands, who performed fishing services on plaintiffs’ boats, were employees of the plaintiffs under Sections 8121(d) and 3306 (i), Internal Revenue Code, Title 26, United States Code, §§ 3121(d) and 3306 (i), or independent contractors.

6. The plaintiffs in each case were separate and distinci partnerships.

(a) One was composed of two individuals, O. A. Kirk-connell, Jr., and Walter Godfrey, hereinafter referred to as Kirkconnell in these findings. O. A. Kirkconnell actively managed the shrimp boats of his partnership. During the period involved, the plaintiff-partners owned from five to eight shrimp boats. They dissolved their partnership in 1962, subsequent to the period involved in this litigation.

(b) The other partnership was composed of Harris Fal-gout, Harris Falgout, Jr., Louella F. Lemkowitz and M. F. Calíais, who traded under the name Grande Yalley Boat Company, hereinafter called Grande Valley. The boats were managed by Marcial Calíais, the husband of one of the partners.

(c) Both plaintiffs were engaged during the period involved here in the business of fishing for shrimp in the Gulf of Mexico and their headquarters were in Brownsville, Texas. There activities included the ownership of the shrimp fishing boats, fishing for shrimp, and the sale of shrimp to Western Shell Fish Co., Inc., which purchased and processed them.

7. The plaintiffs’ shrimp boats weighed about 60 gross tons and cost about $40,000 each. These boats were specially equipped, and were owned and operated solely for shrimp fishing, although occasionally fish other than shrimp were taken incidental to the shrimping activities.

8. In connection with the ownership and operation of the vessels, the plaintiffs hired maintenance workers (shore personnel) to keep the vessels and fishing gear in operating condition between trips. Such personnel were paid regular wages and worked under the direct supervision of the plaintiffs’ managers. Their status is not at issue here.

9. Walter Godfrey and Harris Falgout, in addition to their interests in their respective partnerships, held substantial interests in Western Shell Fish Co., Inc., a shrimp processing-plant. Western Shell Fish Company and three individuals unrelated to plaintiffs, held an interest in Basin Seafood Company. The latter company performed the service of unloading the shrimp from the various vessels of plaintiffs and others when the boats returned to port from the fishing grounds.

10. After a boat had been outfitted and equipped, plaintiffs would select from among those who applied to them an experienced fisherman who was placed in command of the boat for the purpose of fishing for shrimp in the Gulf of Mexico. The captains so selected were those in whose ability, production records, and integrity plaintiffs had confidence.

11. It was understood by the plaintiffs and those selected that the latter were to be in full charge of the fishing operations and were to be responsible as the boats’ captains until the boats returned to port.

12. The Kirkconnell plaintiffs had a written agreement, setting out the working arrangement with its captains. It provided as follows:

1. Crews will pay one-half of ice. M
2.Crews will pay all groceries. Groceries charged to account must be from Pace or Pollock. fcO
3. Crews must pay for bouy [sic] batteries, lights, and sockets. 05
4. All boats must have three man crews or will be charged three dollars per barrel to compensate for being short handed.
5. Company boats will pay half of all port charges incurred in any other port than Brownsville and should not enter any other port than Brownsville.
6. Crews will be responsible for all equipment loaned or borrowed.
7. Crews shall clean and maintain .pilot house, mast, booms, engine room, and deck. If this is not done satisfactorily a shore crew will do it at the crews’ expense.
8. No settlement of less than ten boxes will be made. co
9. If third man is paid by the barrel, his pay is the a responsibility of the other two men on-a short trip.
10. When in port, full crew must visit ship to check and .... pump boat at least once a day, unless arrangements are otherwise made. .
11. Absolutely no advances will be made unless we have shrimp to crews’ credit.

13.. The above-quoted contract resulted from negotiations between the owners and the Kio Grande Shrimp Fishermen’s Association, which was the authorized representative of the fishermen and captains during a period of approximately 11 years prior to the time the agreement was adopted.

14. Not all the Kirkconnell captains executed the agreement. Nevertheless the working arrangements between that plaintiff and the non-signing captains did not differ in practice from the working arrangements between the plaintiff and signers of the agreement, because many of the provisions of the agreement were rarely enforced and the general practices of the trade actually governed. The Grande Yalley plaintiffs and their captains entered into oral understandings concerning the duties of the parties with respect to the shrimp fishing activities. The actual manner in which both plaintiff partnerships conducted business was similar for all practical purposes.

15. There was no express agreement specifying the extent of plaintiffs’ control over the captain’s fishing activities. Ordinarily, while the vessel was away from Brownsville, the crew of the boat was under the direct and sole control of the captain upon whose skill and expertise the owners depended for a good catch. The captains usually made the decision where to fish and in what direction to go but, if the boat was not in safe mechanical condition for long distance fishing,, the owner would tell the captain to fish “just off the bar.” In addition, the owners passed on to the captains information obtained as to where fish were being caught.

16. Under the terms of the working arrangements between plaintiffs and the captains, the latter were not allowed to have or to permit intoxicating liquor aboard the vessels. They were also instructed by plaintiffs to avoid any violation of Mexican territorial waters, to refrain from entering Mexican ports except in emergencies, and to comply with Mexican fishing regulations when the boat was in Mexican waters. These precautions regarding Mexican territorial waters and regulations were taken to avoid the imposition of fines and the confiscation of the catch and the ship’s gear by the Mexican authorities.

17. The working arrangements between the captains and the plaintiffs as they existed and were practiced did not specify a term during which the captain would remain in command of the vessel.

18. The plaintiffs attempted to keep their vessels in operation as much and as often as was consistent with the condition of the vessel. Usually two or three days ashore elapsed between trips. If a captain was not ready or available to ship out when the boat was equipped to go, plaintiffs would select another captain to take over command of the vessel. The captains so replaced could and thereafter often did take out other boats owned by plaintiffs.

19. The arrangement contemplated that the captain would command the vessel on a trip-to-trip basis. The arrangement could be terminated by either party at the conclusion of any trip or prior to the commencement of another. A captain was not called in, nor interrupted during his fishing operations, nor required to surrender his boat. However, on one occasion, the captain docked a boat at Aransas Pass to avoid impending bad weather, left the boat with the crewmen and spent the night on shore with friends. Mr. Kirk-connell was notified that the captain had disappeared and had abandoned the boat, whereupon the owners directed the mate to return the vessel to Brownsville.

20. After a captain took command of a vessel, he would take the boat’s identification papers to the Bureau of Customs and would register the vessel, listing himself as captain according to law. At times the Kirkconnell plaintiffs would make an arrangement with an alien who would then be recognized as the captain of a boat, although he was ineligible to sign the vessel’s papers as captain under the customs laws. In such instances, a citizen crewman would execute the boat’s identification papérs as captain to satisfy the customs law requirements. Such a person was known as a “paper captain” or a captain in name only. The plaintiffs considered the alien, captain as the party responsible for the boat and the conduct of the fishing operations.

These aliens later acquired citizenship and then commanded vessels as regular captains properly registered under the Federal customs laws.

21. It' was customary for the captain to determine which deckhands he would hire, their qualifications, the length of time they would work, their duties, and the amount they would be paid. On occasions, the owners requested that certain individuals not be hired by the captain, and these requests were complied with.

' 22. Usually, the captain selected two deckhands but some captains hired three crewmen. The Kirkconnell contract required that a captain select a minimum of two deckhands.

23. There was a considerable turnover in personnel, both with respect to the captains and the deckhands, although a number of captains made many consecutive trips in command of the same boat for either of the plaintiffs. The turnover was greater in the Kirkconnell operations than in those of Grande Valley.

24. Plaintiffs had no direct relationship with the deckhands in respect to their fishing activities. As previously stated, they were selected by the captain who fixed their conditions of work and paid them by negotiating on a share basis out of his share of the whole catch.

25. The deckhands frequently changed from trip to trip and plaintiffs did not know who the deckhands would be at the time they were selected by the captains. Generally, the names of the crew were given to plaintiffs, however, prior to sailing.

26. In any event the names of the deckhands became known to the plaintiffs at the time of settlement. At that time a settlement'sheet was drawn up by plaintiffs to compute for the captains and the deckhands their respective participation in the captain’s share as agreed upon between the captain and his crew.

27. While in port the captain was responsible for keeping the vessel in a clean condition, either with his deckhands or with others with whom he made an arrangement. No payment was made by the plaintiffs for this work other than as such payment came out of sharing in the shrimp caught from the boat.

28. The length of a trip depended upon various factors, such as the capacity of the boat for fuel and ice, the weather, food aboard, the inclinations of the captain to prolong or terminate the trip, and general shrimping conditions. A trip off Texas waters would last from three to eight days after which a settlement was made. If the vessel fished off Cam-peche, Mexico, the trip might last as long as 60 days.

29. The captain not only determined where to fish, how to fish, and when the boat was to return to port, but he was in complete charge of the boat concerning all matters of its operation and maintenance, including the mechanical process of operating the nets, gear, and other equipment from the time of departure until the boat returned from a particular trip. These were the prerogatives of the captain and the deckhands took their orders exclusively from him.

30. The captains were not required nor expected to communicate with the plaintiffs with any degree of frequency once they left port. The communication facilities aboard the vessels were used by the captains to communicate with other boats to obtain information about fishing grounds and prices of shrimp and for weather reports. Contact between the captain and plaintiffs was infrequent and usually limited to emergencies,

31. Under the agreement between the plaintiffs and the captains, the latter worked or fished the boats on the lay or share basis, consistent with the long standing custom in the fishing industry. During the earlier portion of the period, the proceeds from the catch of shrimp from each trip were divided equally between the plaintiffs and the captain, but during the latter part of the period, each catch was divided 60 percent to plaintiffs and 40 percent to the captains.

32. Various expenses were incurred in connection with a fishing trip. Some were paid by plaintiffs and some by the captains and crews. The crew paid for groceries, one-half of the ice, and for all personal items such as rainwear, boots, gloves, and laundry. The cost of processing the shrimp was deducted from the gross price before the shares were disbursed. In addition, the crew paid for shoveling the shrimp out of the holds, and paid the expense of employing a guard or watchman to protect the catch when the boat was not to be immediately unloaded. All other expenses were paid by the plaintiffs.

33. It was the captain’s function to decide how much fuel or ice to take aboard, depending on the distance he contemplated going and the time he planned to remain away from port. When the boats were in Brownsville, Texas, fuel and ice were obtained from the Yalley Fuel and Ice Company, with which concern plaintiffs had credit arrangements. Mr. W. J. Godfrey was a stockholder in the company. When a captain was placed in command of the boat, he customarily inquired of plaintiffs where to obtain his fuel and ice and was told to purchase them from the Yalley Fuel and Ice Company. In all instances shown in the record, the cost of both the fuel and the ice was charged to plaintiffs. When settlement was made after the conclusion of the fishing trip, one-half of the cost of the ice was deducted from the captain’s share of the proceeds from the sale of the shrimp, but the cost of the fuel was paid by plaintiffs.

34. The captains had a right to purchase groceries from stores of their choice for cash. However, in most instances, the groceries were bought on credit. The captains would inquire where to purchase groceries and plaintiffs would give them the names of stores where plaintiffs had established credit. The choice of groceries and food items was the captain’s prerogative. The stores allowed plaintiffs a discount ranging from two to five percent of the purchase price if the account was paid on presentation, but the captain was charged for the full price of the groceries when settlement for a fishing trip was made.

35. The plaintiffs did not share in the fish caught or objects dredged from the water incidental to shrimp fishing.

36. The captains were paid only for shrimp actually caught, for other fish caught incidental to the shrimping and which belonged to the crew, and for heading the shrimp. Heading was a necessary step in processing the shrimp for packing and ultimate sale. It could be done by the deckhands before the catch was unloaded or by others at the fish-house after unloading. If done before unloading, it served two beneficial purposes. First, it would reduce-.the weight of the shrimp and thereby permit a larger catch to be canght; second, it would help prevent the shrimp from spoiling and would thus permit a longer trip and insure a fresher product. In addition to the captain’s share of the catch, plaintiffs agreed to pay him two cents per pound for heading the shrimp. It was optional to the captain whether the heading would be done on the boat, but if it was not performed there, the captain was charged for it. In the latter part of the taxable period involved here, the captains were not paid for heading, the cost thereof being deducted from, the captain’s share.

37. Each trip was considered by the parties as a separate transaction for purposes of settlement. The amount received by the captain and crew depended entirely on the proceeds of the catch of the shrimp. There was no guarantee of any kind made by plaintiffs to the captain regardless of the time and effort expended in fishing for shrimp.

38. If a trip was unsuccessful, it was known in the trade as a “broker.” Where the value of the captain’s portion of the catch was insufficient to cover his share of the expenses, the.remainder would be carried over and taken out of the captain’s share from subsequent trips. These unpaid expenses were regarded as the personal obligation of the captain and were uniformly treated as such by the plaintiffs. In those instances where a captain owing unpaid expenses failed to ship out for plaintiffs on subsequent trips, the unpaid expenses of the “broker” were borne by plaintiffs. -

39. Prior to the commencement of the trip, it was understood by the plaintiffs and the captain that the boat would return to Brownsville whenever possible, that the shrimp would be unloaded at Basin Seafood Company, and that the catcb would be purchased by Western Shell Fish Company, which was owned by W. J. Godfrey, a partner in Kirkconnell and Godfrey, and Harris Falgout, a partner in Grande Valley, and his brother Tillman Falgout. The evidence shows that in all instances Western Shell Fish Company paid the prevailing market price for the shrimp purchased by it. The captains made it a practice to inquire over the radio about the price of shrimp before coming into port and thus they knew the market price at the time the boat was unloaded.

40. Often a captain who fished off Campeche, Mexico, would send his catch on another boat returning to the United States and continue fishing if he desired. The captains tried to find a boat returning to Brownsville, but they sent the catch back on the first boat returning to port and, in the captain’s discretion, the catch could be sent on a boat going to Florida, or to Aransas Pass, or Freeport, Texas.

In some instances also, necessity dictated that the captain go to another port along the Texas coast or to Louisiana. When the shrimp were unloaded at a port other than Brownsville, they were sold to fishhouses which had been designated by plaintiffs prior to the beginning of the trip and were fish-houses whom plaintiffs considered to be reliable and with whom plaintiffs had credit arrangements. As a rule, the captain called plaintiffs to inform them where the shrimp were being unloaded. Also, plaintiffs’ boats were serviced in these ports with fuel, ice, and groceries. The costs were initially charged to plaintiffs but when settlement for the trip was made in Brownsville, the captain’s share of the expenses was deducted from the amount due him. Settlement was made on the basis of the prevailing market price of shrimp in Brownsville at that time.

41. When a boat returned to port, the shrimp were unloaded and sent to Western’s processing plant where they were sized and weighed. The captains had a right to be present when the shrimp were weighed but they seldom did so and, as a rule, neither they nor the crewmen knew how much they earned on a particular trip until they received the settlement sheet and check from Western’s bookkeeper. He was a salaried employee of Western but was authorized by both plaintiffs to maintain their books of account and to write checks on their bank accounts. The bookkeeper was compensated for these services by the plaintiffs. All partnership bills, including bills for groceries, ice, fuel, and compensation to the fishermen were paid by partnership checks drawn on the partnership bank account. When the bookkeeper received the gross amount of the sale of the shrimp from Western, he deducted the cost of the ice and then divided the remainder in two shares — SO percent (later 60 percent) for the boat owner and 50 percent (later 40 percent) as the share due the captain and the crew. From the latter share the bookkeeper also deducted grocery bills, cost of heading (where the shrimp were not headed by the crew), unloading fees, guard fees, union dues, and dues to the Texas Shrimp Association.

42. The Texas Shrimp Association was a trade association composed of suppliers to the industry, boat owners, processors, and some captains. Its income was derived by the collection of a certain amount per box or per barrel of shrimp. If a boat was seized by the Mexican authorities or was otherwise in distress in Mexican waters, the association, which had representatives in the Republic of Mexico, rendered assistance. When fishermen were seriously ill, the association would make arrangements to return them home by airplane. In addition, a portion of the funds received by the association was spent for advertising shrimp.

With respect to the deductions made for dues to the union and the association, the evidence shows that there was no authorization by the captains or crewmen in advance of each trip for plaintiffs to make such deductions. The checkoff for the union dues was made pursuant to an agreement with the union. The deductions for the Texas Shrimp Association were made on the basis of an agreement entered into between the union and the boat owners. Some of the fishermen were informed of the agreement and favored it because it helped to maintain the price of shrimp. However, most of the fishermen were not members of the association and were not consulted regarding the deduction of association dues from their share of the catch.

43. While the arrangement between the plaintiffs and the captains could be terminated at the conclusion of any fishing trip or prior to the commencement of another, the arrangement was customarily continued for an extended time, the length thereof differing among the various captains. There was nothing in the arrangement which prohibited a captain from taking a- vessel belonging to another owner and thereafter returning to plaintiffs for a boat. Thus, some captains would complete a series of trips for plaintiffs, act as captains on boats belonging to other owners, and then return to sail a vessel belonging to plaintiffs. No recrimination resulted because of the fact that the captains took shrimp boats for others between trips for plaintiffs.

44. Occasionally when the owners had a successful year they paid year-end or Christmas bonuses to some of their captains. On one occasion, the Kirkconnell plaintiffs gave a captain $100 to divide between himself and the crew after a “broker.”

45. The owners frequently made advances to captains and crewmen with the understanding that they were loans to be repaid without interest. The amounts so advanced were deducted from the amount due the individuals at the time settlement was made after a fishing trip. If the settlement check was not sufficient to pay the amount advanced, the owner carried the excess on his books as an account receivable. On occasions, a captain owing such a debt would return to take a vessel from plaintiffs and would either repay the outstanding loan or pay it out of his share of the catch.

46. The owners carried hull insurance, as well as protection and indemnity insurance. The protection and indemnity clauses in these policies indemnified the owners against any liability incurred by them for loss of life or personal injury or for life salvage.

47. The owners were responsible for all repair and maintenance of the vessels owned by them. Although the captains made suggestions from time to time concerning repairs or replacements, the owners made the final decision as to what repair or maintenance work should be done.

48. On June 29, 1961, Kirkconnell and Godfrey filed two answers in the United States District Court for the Southern District Court of Texas, Brownsville Division, in two separate libel actions in admiralty (Lonnie Spears v. “Big Dahlia” and B. B. Eckersley Jr. v. “Big Dahlia”) in which Kirk-connell alleged that it “hires the captains on each and every boat operated by the partnership” and “requested” each captain “to sign and agree to a contract” prior to working for the partnership. The contract referred to contained substantially the same provisions as the agreement quoted in finding 12.

49. At the time settlements were made with the captain and the crew, plaintiffs made deductions for Federal income taxes and for Federal Insurance Contributions Act taxes Cfica) from the amounts due the fishermen. In connection with the withholding of income taxes, plaintiffs had the captain and the crewmen to execute Treasury form W-4, Employees Withholding Exemption Certificate. The bookkeeper for the plaintiffs kept a book of account for each year entitled “Employee Earning Kecords” in which each fisherman was denominated as an “employee” and the amount paid him was designated as “wages.” In the Federal income tax returns for both plaintiffs during the period involved in this action, plaintiffs deducted the net earnings of the captains and crewmen as “Salaries and Wages.”

50. Plaintiffs duly filed employment tax returns with the Internal Revenue Service during the period in issue and paid employment taxes on the earnings of regular employees and also upon the earnings of captains and fishermen. They now contend that the captains and fishermen were not employees for tax purposes.

■51. Plaintiffs withheld income and fica taxes from the amounts due the fishermen, had the fishermen sign the Employee Withholding Exemption Certificates, filed income and employment tax returns and paid the taxes shown to be due therein, in the belief that if they failed to do so, penalties would be assessed against them by the Internal Revenue Service.

52. Plaintiffs filed timely claims for refund on that portion of the fica taxes and the futa taxes which were paid solely by them on the earnings of the captains and crewmen. The claims were disallowed by the Commissioner- of Internal Revenue, and the suits were timely filed.

CONCLUSION OP LAW

Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes as a matter of law that plaintiffs are not entitled to recover, and their petitions are therefore dismissed. 
      
       The Kirkconnell and Godfrey partnership in No. 31 — 62 was dissolved in 1962, subsequent to the period involved in this litigation.
     
      
       The definitions of employees in these two sections of the 1954 Code are as follows:
      § 3121. Definitions.
      
      *****
      (d) Employee.
      
      Nor purposes of this chapter, the term employee means—
      *****
      (2) any individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee ; or
      *****
      § 3306. Definitions.
      
      * * * * *
      (i) Employee.
      
      For purposes of this chapter, the term “employee” includes an officer of a corporation, but such term does not include—
      (1) any individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an independent contractor, or
      (2) any individual (except an officer of a corporation) who is not an employee under such common law rules.
     
      
       A trip to Texas waters would last from three to eight days. If a vessel fished off Campeche, Mexico, the trip might last as long as 6,0- days.
     
      
       The Texas Shrimp Association was a trade association composed of suppliers to the Industry, boat owners, processors and some captains.
     
      
       § 31.3121 (d)-l Who are employees—
      (c) Common law employees. (1) Every individual is an employee if under the usual common law rules the relationship between him and the person for whom he performs services is the legal relationship of employer and employee.
      (2) Generally such relationship exists when the person for whom services are performed has the right to control and direct the individual who performs the services, not only as to the result to be accomplished by the work but also as to the details and means by which that result is accomplished. That is, an employee is subject to the will and control of the employer not only as to what shall be done but how it shall be done. In this connection, it is not necessary that the employer actually direct or control the manner in which the services are performed; it is sufficient if he has the right to do so. * * *
     
      
       Plaintiffs especially rely upon Williams Packing and Nav. Co. v. Enochs, 176 F. Supp. 168 (S.D. Miss., 1959), aff’d 291 F. 23 402 (5tn Cir. 1961), rev’d on jurisdictional grounds, 370 U.S. 1 (1962) ; Crawford Packing Co. v. United States, (S.D. Texas, 1962), Civil No. 2773, Vol. 1 Unemp. Ins. Rept. (CCH, 1962) Fed. ¶14,451; Star Fish and Oyster Co. V. United States, (S.D. Ala., 1963) Civil No. 2633, 1 Unemp. Ins. Rept. (CCH, 1963) Fed. ¶16,061.
      Defendant’s main authority is Cape Shore Fish Co. v. United States, supra; Capital Trawlers Inc. v. United States, 216 F. Supp. 440 (Maine, 1963), aff’d 324 F. 2d 506 (1st Cir., 1963) ; O’Hara Vessels, Inc. v. Hasselt, 60 F. Supp. 672 (Mass., 1942).
     
      
      §3121(d)-1 Who are employees—
      *****
      (c) Common lato employees—
      (3) Whether the relationship of employer and employee exists under the usual common law rules will in doubtful cases be determined upon an examination of the particular facts of each case.
     
      
       Our discussion will mainly concern itself with the relationship between the plaintiffs and captains. The deckhands were hired by and were under the control of the captains, and since the greater includes the lesser, a designation of employee assigned to the captains would logically extend the same designation to the deckhands.
     
      
       When a captain failed to ship out on a subsequent trip, plaintiffs paid the captain’s share of the unpaid expenses. It Is not conceivable to us that the debts of an Independent contractor would be borne by plaintiffs. On the other hand, those of an employee would be more apt to be absorbed.
     
      
       On one occasion a captain, who had only one deckhand, caught an unusually large quantity of shrimp in a short time and had to return to port to get extra help for heading the shrimp. The Kirkconnell plaintiffs located two headers, who performed the work and were each paid $24 out of the captain’s share. The evidence is not clear as to how or by whom their compensation was determined.
     