*2583 Held, petitioner, D. F. Strickland, was an employee of a political subdivision of the State of Texas and that his compensation is exempt from tax.
*420 These proceedings, which were consolidated are for the redetermination of deficiencies in income tax for the years and in amounts as follows:
| Docket No. | Taxpayer. | Year. | Deficiency. |
| 23159 | D. F. Strickland | 1923 | $73.84 |
| 1924 | 92.75 | ||
| 1925 | 142.03 | ||
| Olive Strickland | 1923 | 82.81 | |
| 1924 | 135.86 | ||
| 1925 | 120.95 | ||
| 40707 | D. F. Strickland | 1926 | 182.38 |
| 40708 | Olive Strickland | 1926 | 209.22 |
The deficiencies result from the inclusion in the taxable income of the petitioners certain amounts representing compensation received by the husband, D. F. Strickland, for his services as attorney for the Hidalgo County (Texas) Water Improvement District Number Two.
FINDINGS OF FACT.
The petitioners are husband and wife residing at Mission, Tex., and for the years 1923 to 1926, inclusive, filed their income-tax returns on a community basis.
*2584 During the years 1923, 1924, 1925, and 1926, D. F. Strickland was employed under written contracts as attorney by the Hidalgo County Water Improvement District Number Two (hereinafter referred to as the District), a municipal corporation and governmental agency organized in 1920 under the laws of Texas. Until December 8, 1923, Strickland's salary was $3,500 per annum. From then until December 9, 1925, his salary was $3,600, and thereafter is was $5,000 per annum.
The contracts of employment were for one year. The contract entered into in December, 1925, was as follows:
THE STATE OF TEXAS
COUNTY OF HIDALGO
WHEREAS, on the 3rd day of December, A.D. 1925, the Board of Directors of the Hidalgo County Water Improvement District No. Two at its regular meeting passed a resolution employing D. F. Strickland as its Attorney for one year beginning December 9th, 1925, and ending December 8th, 1926, at an annual salary of $5,000.00 per year, payable quarterly as the same accrues.
THEREFORE, KNOW ALL MEN BY THESE PRESENTS, That Hidalgo County Water Improvement District No. Two, a municipal corporation, acting by and through its duly authorized officers, and in accordance with said*2585 resolution, as Party of the First Part, and D. F. Strickland of Hidalgo County, Texas, as party of the Second Part, WITNESSETH:
First: That said Party of the First Part hereby employs the said D. F. Strickland as its attorney for one year beginning December 9th, 1925, and ending December 8th, 1926, at an annual salary of Five Thousand Dollars per year, payable quarterly as the same accrues.
*421 Second: The said D. F. Strickland, for and in consideration of the premises, agrees and obligates himself to faithfully represent the interests of such district as its attorney for said period.
Third: It is understood by and between the parties hereto that the nature of the duties of the said D. F. Strickland as attorney for said District shall be that of General Counsel, and he shall do and perform any and all legal duties entrusted to him by the Board of Directors of said First Party; but it is understood that no collections will be handled by said attorney unless by special request of the Board and with the special permission of the attorney having charge of such collections.
It is further understood that the First Party has heretofore entered into contract with other attorneys*2586 with reference to certain pending law suits and that the said D. F. Strickland shall not be required to handle such law suits unless he be requested by the Board of Directors of said First Party to assist other attorneys with reference to the same, and then only if the attorneys handling such law suit shall consent to his cooperation with them in the handling of such law suits.
The contracts for the preceding years were substantially the same as the foregoing, except as to dates and amounts. The contract entered into in December, 1924, for the year beginning in that month, instead of containing the provisions contained under "Third:" in the above quoted contract, provided as follows:
It is understood by and between the parties hereto that the nature of the duties of the said D. F. Strickland as attorney for said District shall be that of General Counsel, and he shall do and perform any and all legal duties entrusted to him by the Board of Directors of said First Party; it is further agreed that D. F. Strickland shall be reimbursed for all actual expenses incurred by him while performing duties and services for First Party outside of Hidalgo County, Texas.
The duties performed*2587 and services rendered by Strickland under the contracts were of a general nature, taking care of the legal matters arising in the operation of the District. He served as legal and business adviser to the manager and Board of Directors of the District. He met with the Board of Directors at their regular weekly meetings and also special meetings, which were held frequently. He prepared or approved all contracts and other legal instruments, handled any litigation that arose against the District, represented it in all court actions, and looked after such other matters as were referred to him by the manager or Board of Directors. In the performance of his duties as attorney he was at all times under the direction and control of the Board of Directors of the District. He never performed any act for the District in connection with his employment except the technical trial of law suits until after consulting with the Board of Directors and being informed by them as to what to do.
While there was not a day that Strickland was not required to render some legal service to the District, his duties under the contract required only about one-half of his time. If he had not availed *422 *2588 himself of the services of other lawyers and employees that he had in his own law office, his duties under the contract probably would have required all of his time.
Neither the Board of Directors nor the manager of the District directed Strickland as to the amount of time he should devote to his work, unless they were in a hurry about some matter, when they would ask him to speed it up. He would have been expected to devote all of his time to the business of the District if the District's affairs had so required. After having taken care of the legal matters referred to him by the Board of Directors or the manager, he was free to dispose of his time and personal efforts in other pursuits without responsibility to the Board. He was not permitted, however, to lave the community on other business or to go on vacations without the Board's approval. In addition to rendering service to the District, Strickland was engaged in the general practice of law, and in the years 1923 and 1924 had in his employment his present partner and another lawyer. In addition to the contracts heretofore referred to, Strickland during the years 1925 and 1926 had a special contract with the District governing*2589 the collection of taxes, whereby he received a fee of 10 per cent of all collections. He considered the amount derived from this contract to be taxable income and so reported it. The income from this source, however, was in excess of the compensation received under the contracts as attorney. In addition to the amounts received under the two contracts with the District, Strickland received legal fees of a considerable amount from other sources.
The petitioners did not report in their returns as taxable income the respective amounts received by Strickland for his services as attorney under his contracts with the District. The deficiencies here involved result from one-half of his salary for each year being included in the taxable income of each of the petitioners for such year.
OPINION.
TRAMMELL: The petitioners contend that the compensation received by D. F. Strickland from the Hidalgo County Water Improvement District Number Two, a political subdivision of the State of Texas, for his services as attorney during the period here involved is exempt from tax. The respondent concedes that the Hidalgo County Water Improvement District Number Two is a municipal corporation and*2590 a governmental agency of the State of Texas. See Article XVI of the Constitution of Texas; Article 7731, Vernon's Revised Civil Statutes of Texas (1925); J. C. Engleman Land Co. v. Donna Irrigation District No. 1 (Texas), 209 S.W. 428">209 S.W. 428; Peyton Creek Irrigation*423 District v. White (Texas), 230 S.W. 1060">230 S.W. 1060. He, however, contends that Strickland was not an officer or employee of such municipal corporation and governmental agency, that his position with reference to the District was not materially different from that of attorney and client, and that the compensation received during the years involved is not exempt from tax.
Article 7652 of Vernon's Revised Civil Statutes of Texas (1925) provides in part as follows:
The board of directors herein provided for shall have control over and management of all the affairs of such district, shall make all contracts pertaining thereto, and shall employ all necessary employees for the proper handling and operating of such districts, and especially may employ a general manager, an assessor and collector, attorneys, a bookkeeper, an engineer, water master and such other assistants and such*2591 other laborers as may be required, * * *; a director may be employed as general manager, and at such compensation as may be fixed by the other four directors and when so employed he shall also perform the duties of a director, but he shall not receive the compensation in this act provided to be paid to directors. (Italics ours.)
Article 7717 provides that:
The term of office of all officers elected for such district shall be for two years, and until their successors are elected and qualified; provided, however, that all officers elected at the first election held under the provisions of this chapter shall hold office only until the next regular election to be held in said district for the election of such officers.
Article 7720 provides as follows:
All other persons employed or representing said district shall be employed by the board of directors for such time and under such terms and conditions as said board of directors shall deem best for the interest of said district; provided, however, that no contract shall ever be made with any person or employee for a longer period of time, at any one time, than one year, and the salaries of all such employees, or the compensation*2592 to be received by them, shall be fixed by the board of directors at the time of the employment.
In Metcalf & Eddy v. Mitchell,269 U.S. 514">269 U.S. 514, the court said:
An office is a public station conferred by the appointment of government. The term embraces the idea of tenure, duration, emolument and duties fixed by law. Where an office is created, the law usually fixes its incidents, including its term, its duties and its compensation. United States v. Hartwell,6 Wall. 385">6 Wall. 385; Hall v. Wisconsin,103 U.S. 5">103 U.S. 5. The term "officer" is one inseparably connected with an office; but there was no office of sewage or water supply expert or sanitary engineer, to which either of the plaintiffs was appointed. The contracts with them, although entered into by authority of law and prescribing their duties, could not operate to create an office or give to plaintiffs the status of officers. Hall v. Wisconsin, supra;Auffmordt v. Hedden,137 U.S. 310">137 U.S. 310. There were lacking in each instance the essential elements of a public station, permanent in character, created by law, whose incidents and duties were*2593 prescribed by law. See United States v. Maurice,2 Brock. 96">2 Brock. 96, 102, 103; United States v. Germaine,99 U.S. 508">99 U.S. 508, 511, 512; Adams v. Murphy,165 Fed. 304.
*424 In view of the above definition we think that Strickland clearly was not an officer of the State of Texas or a political subdivision thereof and it is not seriously contended that he was, the chief question being whether he was an employee.
Strickland's contract of employment provided that the nature of his duties as attorney for the District should be that of general counsel, and that he should do and perform any and all legal duties entrusted to him by the Board of Directors of the District. The duties performed by him under the contract as attorney were of a general and miscellaneous character, ranging from attendance at regular and special meetings of the Board of Directors of the District to the drawing of legal instruments and the handling of suits in court. When not employed on the District's business he was free to and did accept such other outside legal work as he saw fit, insofar as it did not conflict with his employment by the District. However, *2594 in the performance of his duties as attorney with the District, he was at all times under the direction and control of the Board of Directors and was not permitted to leave the community on other business or to go on vacations without the Board's approval. While ordinarily neither the Board of Directors nor the manager directed Strickland as to the amount of time he should devote to his work, they would, however, when in a hurry request him to perform certain matters within a specified time.
Strickland was not responsible merely for the result to be accomplished, but was employed generally on a time basis for such services as were necessary during the period.
In Blair v. Mathews, 29 Fed.(2d) 892, a question there involved was whether the compensation of the county attorney of Duval County, Florida, was subject to tax. There the court said:
The contract bound the tax payer for a period of two years to attend to all legal matters for the county. He was not engaged to accomplish any particular result in a way chosen by himself, but was obligated to render any legal service for the county to which at any time during the period mentioned he was assigned by*2595 the Board of County Commissioners. One whose services are so at the command of another for a definite time is an employee of the latter, though the services contracted are legal services of a lawyer, who is not forbidden to render professional services to others. Seaboard Air Line Railway v. Continental Trust Co.,166 Fed. 597.
We think that the rule laid down by the court is the sound and correct rule and is in accordance with the principles laid down in the decision of the Supreme Court in the case of Metcalf & Eddy v. Mitchell, supra; and is applicable to the facts of this case. It is, therefore, our opinion that Strickland was an employee of the District, and as such his compensation is exempt.
Judgment will be entered for the petitioners.