164 S.W.2d 285 | Mo. | 1942
This appeal from the Jackson county circuit court presents the question whether the appellant Clara E. Kellogg is an "employer" within the meaning of subsection (h) secs. 1, 4, of Sec. 9423, R.S. 1939, Mo. R.S.A. sec. 9423 (h) 1, 4, of the State Unemployment Law. The constitutionality of these provisions also is attacked, as being violative of the 14th Amendment, Constitution of the United States, and Sec. 30, Art. II, and Sec. 3, Art. X, Constitution of Missouri. The respondent members of the Unemployment Compensation Commission awarded Ross C. Wilson, an employee, monetary "benefits," entailing the payment of an excise tax, called "contributions," by the appellant employer under Sec. 9427, R.S. 1939; Mo. R.S.A., sec. 9427, as against her defense that she was not within the Act. On review the circuit court affirmed the decision of the Commission.
The undisputed facts were that the appellant solely owned and operated an unincorporated general printing business, conducted under the name Kellogg-Baxter Printing Co. at 301 Admiral Boulevard, Kansas City, Missouri. It had seven employees, of whom the claimant Ross C. Wilson was or had been one. She also owned 70% of the capital stock of the Creel Publishing Company, a corporation, located at the same address. That company's sole business was the composition, publication and circulation of a weekly society newspaper called The Independent. It had four employees, making eleven in the two establishments. The Creel company owned no printing machinery. The Kellogg-Baxter Company printed the newspaper for it, receiving pay therefor. For many years there had been no other connection between the two companies. They had separate employees and kept separate books. Mrs. Martha Nichols Gaylord managed the Creel company, or at least was responsible for the publication of The Independent, as appellant's personal representative.
Referring always to said Sec. 9423, subsection (g) provides as follows (italics and parentheses in quotations hereafter are ours):
"`Employing unit' means any individual or type of organization, including any partnership, association, trust, estate, joint-stock company, *1171 insurance company or corporation, whether domestic or foreign, or the receiver, trustee in bankruptcy, trustee [288] or successor thereof, or the legal representative of a deceased person, which has or subsequent to January 1, 1936, had in its employ one or more individuals performing services for it within this state. All individuals performing services within this state for any employing unit which maintains two or more separateestablishments within this state shall be deemed to be employed by a single employing unit for all the purposes of this law."
The mooted subsection (h), paragraphs 1 and 4, further provide:
"`Employer' means:
"(1) Any employing unit which for some portion of a day, but not necessarily simultaneously, in each of twenty different weeks, whether or not such weeks are or were consecutive, within either the current or the preceding calendar year, has or had in employment, eight or more individuals irrespective of whether the same individuals are or were employed in each such day; . . .
"(4) Any employing unit which, together with one or more other employing units, is owned or controlled by legally enforceable means or otherwise, directly or indirectly, by the sameinterests, or which owns or controls one or more otheremploying units by legally enforceable means or otherwise, and which, if treated as a single unit with such other employing units or interests, or both, would be an employer under paragraph (1) of this subsection;"
The referee for the Commission found, and the Commissionadopted the finding, that: "The employer (appellant) maintains and proved that the ownership and separate entity of the two organizations have been in existence for many years and was not created for the purpose of avoiding the tax payments or contributions under the Social Security Act and the Missouri Unemployment Compensation Laws." Nevertheless the Commission made this finding in its decision:
"In this case the testimony shows, and it is admitted, that appellant owned 70% of one corporation and is the owner of the entire interests in the other corporation (the Kellogg-Baxter company was not a corporation) and that the two are operated at the same address and on the same premises; and the publishing company publishes a weekly paper which is printed by the printing company and paid for by the publishing company; and the printing company carries on a general printing business in addition to printing the publication of the publishing company. These two lines of business are conducted by the same interests and owned and controlled by the same interests and are operatedpractically as one business.
"The Commission is of the opinion that it was certainly within the power of the Legislature to declare that under conditions existing in this case, these two corporations should be treated as a single unit *1172 for the purpose of carrying out the objects of the Unemployment Compensation Act of Missouri."
[1] Under Sec. 9432 (i), R.S. 1939; Mo. R.S.A., sec. 9432 (i), we are bound by the findings of the Commission as to the facts, if supported by competent evidence. But we think and hold there was no factual evidence whatever to support the Commission's finding that the two businesses were "operated practically as one business." That conclusion is directly contrary to the finding of its referee, which it adopted. Further, the refereee's conclusion in his report to the Commission did not rest on the theory that the two businesses had been fused and operated as one. He found that in spite of their long continued, bona fide and complete separation the appellant was within the act because the ownership and control of both were fixed in her.
[2] Appellant further contends here that there was no competent evidence showing she owned and controlled the Creel company, although she admittedly held 70% of the capital stock. This contention is based on the theory that a corporation is a legal entity separate and apart from its stockholders; that they have no title to the corporate property; and do not control the corporation because the statute, Sec. 5346, R.S. 1939; Mo. R.S.A., sec. 5346, vests that power in the board of directors. We cannot uphold that contention. It was not made before the Commission. On the contrary, when one of the Commissioners asked appellant's counsel this question: "She admits the fact that she had control of the one (the Creel company) and owns the other (the Kellogg-Baxter company);" the attorney replied, "That's right." There is also substantial evidence in the record that appellant did actually control the Creel company. Furthermore, the owner of a majority of the stock in an ordinary corporation has [289] potential control and can obtain actual control by legally enforceable means.1
We think the proof established that appellant controlled both businesses but that they were in good faith wholly separate and distinct save for physical propinquity, and the publication by the Kellogg company of the newspaper for the Creel company. The ultimate questions are: (1) whether subsection (h) 4, properly construed, means they shall be treated as a single employing unit; (2) and if it does mean that, is the subsection constitutional? But respondents further ask us to uphold their finding, independently of the proof of actual control of both businesses separately, on the sole ground that appellant owned a major interest in both. That issue was squarely put during oral argument. Respondents' counsel were asked *1173 whether it was their contention that if a single individual owned or controlled, say, a barber shop in northwest Missouri with six employees and a hamburger stand in southeast Missouri 600 miles away with two employees, the two businesses would be treated as a single employing unit with eight employees. They answered in the affirmative. In other words it is the respondents' view that the two businesses need have nothing in common except the fact that they are either owned or controlled by the same individual or interests.
The various state unemployment compensation acts stem from the Federal Social Security Act, 42 U.S.C.A., secs. 301-1305, the constitutionality of which was sustained in the United States Supreme Court by a five to four vote, Chas. C. Steward Mach. Co. v. Davis,
It is stated that such acts have now been passed in all the states of the Union, and in at least nine have been ruled constitutional in their fundamental and broader aspects. The legislation was inspired by the economic emergency which threatened this country early in the last decade, and was enacted to relieve the distress of unemployment. Essentially it was directed against industrial ills. Farm laborers, household domestics and a few other occupations were excepted from its operation. It is possible the acts would not have received legislative sanction if their burdens had been spread so widely. Nevertheless they reach the small employer in a rural environment if he has as many as eight employees, or has more than one business with employees in all aggregating that number. The instant case is concerned solely with this so-called "affiliate" or "common control" clause (h) 4 and related provisions in the Missouri Act. And it seems the weight of authority during the last three years supports respondents' contention that constructive affiliation of separate businesses results alone from majority ownership or control by the same interests.
In U.C.C. v. City Ice Coal Co., supra,
But three months later in June, 1940, it was held in Fla. Indust. Comm. v. Gary-Lockhart Drug Co., Inc.,
A month later, in July, 1940, Indep. Gas. v. Bureau U.C.,
The case further declared such a rule of constructive affiliation would prejudice the minority stockholders of both corporations by subjecting their interests to the payment of unemployment contributions, solely because of the purelyexternal and personal act of an individual *1175 in acquiring stock control of both, which they were powerless to prevent, there being no evidence that this power had been exercised within the corporations to unify them. The decision further asserted that if such affiliation should occur the penalties resulting therefrom ought to be charged to the interest of the stockholder responsible therefor, and not be visited upon the innocent minority stockholders. This Georgia decision refused to follow the North Carolina and Oklahoma cases just reviewed. Two of the judges concurred in a separate opinion, holding the further facts should be considered, that the two corporations were in different counties and engaged in entirely different businesses, with the work required of one set of employees not of the same character as that required of the other.
In November, 1940, the Indiana Supreme Court followed the Georgia case, quoting from it at length, in Benner-Coryell Lbr. Co. v. Ind. U.C. Bd.,
In the same month, Maine U.C.C. v. Androscoggin, Jr., Inc.,
In May, 1941, another North Carolina case was decided, U.C.C. v. J.M. Willis B. B. Shop,
In July, 1941, New Haven Metal Heating Sup. Co. v. Danaher,
In October, 1941, two decisions came out. The facts in State v. Kitsap County Bank, 10 Wash. 2d 520,
The other decision was Miss. U.C.C. v. Avent (Miss.),
There are two recent Texas cases. In Washington Oil Corp. v. State (Tex. Civ. App.),
One case in this State bears on the question, Murphy v. Doniphan Telephone Co.,
That provision does apply here. Respondents therefore contend we are bound by their finding that the Kellogg company and the Creel company should be treated as a single employing unit because appellant individually owned one and held a majority of the stock in *1178 the other. Indeed they go further. Subsection (h) 4 was amended by Laws Mo. 1941, pp. 566, 578, by the addition of a parenthetical clause: "(and for the purposes of this definition ownership by the same person of the majority of the voting shares of stock of an employing unit shall, among other things, constitute prima facie evidence of control by legally enforceable means)." Respondents assert this amendment also is applicable here (although passed after the trial below) because the Legislature thereby "showed its intent as to the meaning (in) the original statute of the phrase `owned or controlled, directly or indirectly by legally enforceable means.'" Their ultimate contention is that the affiliate clause (h)4 makes ownership of a majority of the stock in a corporation prima facie evidence not only of actual control of that corporation, but also of joint control of that corporation along with any other business in the state owned or controlled by the same interests.
[3] There can be no doubt that the ultimate criterion under subsection (h) 1, 4, is substantial unification of two or more businesses by actual joint control. Thus the Ice Coal Co. case from North Carolina (father of the doctrine and already quoted) construed an affiliate clause like ours as applying when the separate corporate enterprises "have voluntarily waived the benefits of their separate identities by surrendering their control to a common management;" and when "the inter-relationship existing . . . is such that a substantial unification of those enterprises (emanates) from a common source or fountain-head." So also the Avent case from Mississippi said it was immaterial whether the defendant owned both the drug store and dairy if hecontrolled them. The Androscoggin case from Maine was expressly based on actual control. Likewise in the Doniphan telephone case from Missouri actual joint control was treated as the focal point of the evidence. The same is implied in most of the other cases; and there was circumstantial evidence indicating common control, as that: the businesses were conducted on the same premises; or from the same office; or that there was a gratuitous exchange of services or a natural "affinity" between them. On the other hand the Oklahoma case held maintenance of separate places of business and office facilities was immaterial when actual common control was shown.
[4] Furthermore, all of the foregoing cases that touch on the point say the affiliate clause was enacted to preventcircumvention of the law by splitting a business with the required number of employees into smaller units each with less than the minimum number. This implies a homogenious entity to be split up — a business which before the enactment, in circumstances otherwise similar, reasonably might have been carried on as a single unit. The Androscoggin case speculates the clause was aimed at "certain types of business, particularly those where labor costs represent a large part of the total expenses *1179 of operation, and where efficiency would not be materially[293] impaired by the division of the unit." In other words it seems fair to say the law is not intended to cover businesses of such diverse location and nature that there had been no substantial unification and normally would not be if the law had not been enacted — unless, of course, there is evidence indicating actual joint control. The same idea is borne out by the fact that subsection (g) defining an employing unit, provides that employees of any such unit maintaining "two or more separateestablishments within this state," shall be deemed to be employed by a single employing unit, which signifies something of unity and service to a common purpose in the several establishments.
[5] And so we conclude that although subsection (h)4 in terms declares two or more separate employing units (with eight or more employees) shall be treated as a single unit if mainly owned or controlled by the same interests, yet the ownership mentioned is not of itself the test, but is intended to be merely evidentiary of actual common control. There really is little dispute about that. But most of the cases cited above treat the subsection as establishing a statutory rule of prima facie evidence which the courts must follow; or else they regard it as a statutoryclassification of the businesses described and equally binding. The Georgia and Indiana decisions hold the rule or classification, whichever it be called, is too broad; that if followed literally it would in some circumstances deprive owners of due process and equal protection of the law; and they therefore give it a narrower construction to avoid unconstitutionality. This states the basic difference between the two lines of decisions as we understand them.
[6] Whether the affiliate clause (h)4 establishes a rule of evidence or classification, it cannot rest on a foundation which is so arbitrary, unreasonable, unnatural or extraordinary as to make it unconstitutional.2 However, the burden is on the assailant of the statute to show it is arbitrary, when applied to him; and not on its proponent to show it is reasonable. In the Shelby case cited in the margin, a statute of this State provided (without any time limit) that the failure of a bank should be prima facie evidence of knowledge on the part of its officer receiving deposits that it was insolvent or in failing circumstances. Division 2 of this court held the statute was of doubtful constitutionality unless it be read as meaning that the bank failure must occur recently after the receipt of the deposit — soon enough to prevent the *1180 statutory connection between the event and the imputed guilty knowledge from being unreasonable and arbitrary. Furthermore, we have the additional factor in this case that Sec. 9432(i) makes the Commission's findings of fact conclusive when supported by competent evidence, which in practical effect makes the rule conclusive, in view of respondents' theory that common majority ownership of two or more separate businesses in this State is competent and sufficient evidence of unified control regardless of any other facts proven.
[7] Some rules of presumption or prima facie evidence arepurely procedural. They do not rest on a fact basis having substantial probative value, but merely shift the burden of evidence for reasons of judicial policy. With respect to certain of these it has been held in this State that a prima facie case founded solely thereon must fail if the adversary party adduces substantial controverting evidence which is not rebutted.3 On the other hand if the basic facts underlying the presumption (alone or with other evidence) are strong [294] enough to support the required inference independent of the presumption, the case does not fall before controverting evidence.4 In either instance the presumption as such (being addressed to the judge, not to the jury or trier of facts) adds nothing to the weight of the evidence,5 but passes out of the case when the evidence pro and con enters in.
[8] When the rule of evidence, or presumption, is statutory the courts cannot question the reasonableness or wisdom of the legislative policy prompting it unless it transcends legislative power.6 But in our opinion a statutory rule evidentially is no stronger than a similar judicial rule; and cannot authorize the imposition of a liability or penalty, civil or criminal through the device of declaring certain facts shall be prima facie evidence of another decisive or incriminating fact — when the rule is wholly arbitrary, unreasonable, lacking in logical connection between the initial and imputed facts, and has been met by substantial controverting evidence. True, a rule of procedure or a police regulation may be established, but even the Legislature cannot by law make black white to the eyes of thejury *1181 or other trier of the facts. It is conceded everywhere that a presumption of fact cannot be made conclusive7 except by entering the field of substantive law. It is our view that the effect is similar but in a lesser degree when the lawauthorizes a verdict or finding resting on pure fiction as against substantial evidence to the contrary. The jury may so find. Whether the statutory showing is fiction or not is a judicial question much like that constantly confronting courts in ordinary cases when they are required to determine whether evidence is sufficiently substantial to take the case to the jury.
[9] On the classification theory respondents say: that statutory classifications made to prevent evasions of law are constitutional; and that tax legislation, particularly, need not be free from discrimination: citing the Connecticut and Washington cases and Purity Extract Co. v. Lynch,
[10] We agree proof of major ownership, or control, of two separate businesses (corporate or otherwise) by the same employing unit sometimes would be sufficient to make an inference of unified control not unreasonable or arbitrary. Sometimes it would be wholly insufficient, depending on the proven history, location and nature of the two businesses. Hence we are unable to approve respondents' broad and unrestricted formula that any two or more businesses anywhere in the State are prima facie brought under the Unemployment Compensation Act by the sole fact of common major ownership or control, regardless of any evidence to the contrary. Neither do we agree that the formula is warranted, as held in the case from Washington, because it would be more difficult to prove the fact of unified control or natural affinity between the several businesses than to prove common ownership. Under subsection (g) an employing unit may be either an individual or a partnership, corporation, association, trust, joint-stock company, [295] receivership, state in trust, bankruptcy *1182 or probate, with one or more employees. Does it really simplify the issue to trace title through these various and complicated forms of ownership, especially where the title instrument is ambiguous or challenged? We think not.
[11, 12] We hold the affiliate clause subsection (h)4 should be construed to refer to businesses which by location, nature or common experience might not unreasonably be expected to operate under substantial unification in the absence of such a statute; and to those where there is evidence of actual unification. The Legislature also would have the right to make a classification on that basis. But it is our conclusion that the two businesses involved in this case come within that rule — a general printing business and a newpaper publishing business conducted at the same address and under common major ownership. This is true although they were and previously had been operated as separate entities. As in the Hann case, supra,
Judgment affirmed. All concur.