Bailey's Bakery, Ltd. v. Borthwick

• Decision Date: 19 February 1948
• Docket Number: No. 2639.,2639.
• Citation: 38 Haw. 16
• Parties: BAILEY'S BAKERY, LTD. v. WILLIAM BORTHWICK, TAX COMMISSIONER OF THE TERRITORY OF HAWAII.
• Court: Hawaii Supreme Court

38 Haw. 16

BAILEY'S BAKERY, LTD.

v.WILLIAM BORTHWICK, TAX COMMISSIONER OF THE TERRITORY OF HAWAII.

No. 2639.

Supreme Court of the Territory of Hawai‘i.

Argued October 30, 31, 1947.

Decided February 19, 1948.

ERROR TO CIRCUIT COURT FIRST CIRCUIT, HON. A. M. CRISTY, JUDGE.

Syllabus by the Court

Law liberally construed to effect its object and purpose.

Controlling effect of statutory definitions attributing to terms employed meanings different than those generally applied.

Where individuals are employed by a bakery to make delivery of its products sold by it to retailers with equipment supplied and operated by them and their remuneration is the difference between the wholesale price and the lesser price arbitrarily fixed by the bakery, the relation created between the bakery and the individuals making delivery is that of master and servant under “contracts of hire” as that term is employed in section 5 of the unemployment compensation law as originally enacted or as subsequently amended and not that of vendor and vendee.

The controlling test marking the distinction between the master–servant relation and that of independent contractor–contractee when applied to a contract of service for unemployment compensation purposes need be but a general control.

Upon the undisputed evidence, held that the services performed by the individuals delivering the bakery products sold by the bakery to retailers were “services performed * * * under contract(s) of hire” or, conceding arguendo that “contract(s) of hire” did not exist, constituted “services performed * * * for remuneration” or “wages” within the meaning of the term “employment,” as defined in section 5 of the unemployment compensation law as originally enacted or as subsequently amended without regard to the legal effect of the A, B, C tests appended to the definition by rule or statutory amendment.

R. W. Loomis, Deputy Attorney General (also on the briefs), for plaintiff in error.

S. Kashiwa (also on the brief) for defendant in error.

KEMP, C. J., PETERS AND LE BARON, JJ.

OPINION OF THE COURT BY PETERS, J.

This is an action brought pursuant to the provisions of Revised Laws of Hawaii 1945, section 1575, by an employing unit to recover unemployment contributions assessed against it under the Hawaii unemployment compensation law and paid by it under protest. The contributions assessed cover the period from January 1, 1937 to September 30, 1944, and have relation to contributions required to be made into the territorial unemployment compensation fund by employing units having individuals in their employ.

The plaintiff is a corporation organized and existing under the laws of the Territory with its principal place of business in Honolulu. It will be referred to hereinafter as the “bakery.” It is engaged in the business of manufacturing at its own plant in Honolulu and selling at wholesale bread and other bakery products. Prior to 1935, when the delivery system which gave rise to the present controversy was inaugurated, all its customers were retailers. The bakery did not sell to consumers and sales by the bakery included the obligation on its part to deliver to the purchaser the product sold. Deliveries had been made previously by it with its own equipment, consisting of six delivery trucks which were operated by drivers who worked for the bakery for stated hours and wages. The delivery system inaugurated in 1935 was the outgrowth of the pre–existing system. No express contract between the bakery and the drivers, either written or oral, marked the inauguration of the new system. Contrary to the findings by the trial court that “it [bakery] entered into oral contracts with drivers who owned and operated their own trucks to sell to these drivers a daily supply of bread * * *” the bakery issued its ukase stating the conditions upon which deliveries would thereafter be made and the drivers had no option but to accept it or quit. Whatever is known of their contractual relations upon the inauguration of the new system and their subsequent contractual relations as the system developed is deducible only from what was done by the parties in the performance of their bilateral obligations. But there is no evidence to sustain the finding that oral contracts were entered into, one of the terms of which was the “sale” of bread to the drivers. The proposition as originally presented by the bakery to the drivers was that the bakery would cease to furnish delivery equipment and all drivers would thereafter be required to furnish and maintain their own delivery equipment and pay the cost of operating the same; that the bakery would sell its present equipment to such of the drivers who might desire to purchase the same and where necessary it would itself finance purchases; that stated wages and hours of labor would be discontinued; that the drivers would be required to make deliveries daily to the bakery's present customers and to such additional retailers as might desire its products for retail sale; that the drivers would also be required to collect from the retailer the wholesale price of bread for each loaf of bread delivered, except in cases of certain stores, restaurants and public institutions to which the bakery personally extended credit, from which the driver would be entitled to retain the difference between the wholesale price and the price fixed by the bakery to the driver at the plant, amounting in the case of bread to eight mills per loaf. Delivery slips to credit customers were accepted by the bakery from the drivers as cash at the rate of eight mills for each loaf delivered. There is no evidence as to what the driver was entitled to retain from the wholesale price of bakery products other than bread.

Obviously, the bakery exercised no control over the equipment furnished by the driver or the manner of its operation, but it exercised complete control over deliveries. The retailers supplied by the bakery were scattered over the city of Honolulu and vicinity. The bakery divided the urban and suburban areas containing the retailers purchasing its products into districts or routes and assigned a driver to each route. No competition existed between drivers and they were confined to the districts or routes to which they were assigned. All bread delivered was sealed at the bakery's plant in a wrapper bearing the name of the bakery and the trade name applied by it to the particular type of bread enclosed therein. Sales slips bearing the name of the bakery and the bakery products to be delivered accompanied all deliveries. All prices were arbitrarily fixed by the bakery, viz., the price charged against drivers at the plant, the wholesale price to retailers and even the retail price to be charged by the retailer. These prices in course of time were changed by the bakery. The differential that the drivers were entitled to receive was the amount which the bakery allowed to them, they having no part in the determination of the rates for the delivery service performed by them and upon which their remuneration was computed. All settlements between the bakery and the drivers were made after and not before deliveries and as far as the record discloses the price of bread to drivers at the plant was never paid by the drivers when the bread was taken from the plant for delivery. The bakery, with the exception heretofore noted, required that cash be collected by the driver upon delivery and any credit extended by the driver was upon his own responsibility. Unsold bread was returnable to the bakery on the basis of the price at the plant to the driver and the quantity of bread to be delivered to each retailer was subject to limitation by the bakery. The drivers from time to time met with the management of the bakery at the latter's instance upon details of the delivery system. The bakery solicited new business and that secured independently by it was assigned to the driver of the appropriate district or route. The drivers also solicited and secured new business within the district to which they were assigned. Agents of the bakery upon occasion rode with the drivers to learn their routes and sometimes supplied relief drivers. In 1936 and 1937 the bakery paid bonuses to its drivers based upon service and annual income. In one instance a driver was secured by the bakery from a local employment office.

The drivers did not hold themselves out to the public as engaged in a delivery service. There is nothing to show that they were public carriers of goods. Upon occasion they did make deliveries for persons other than the bakery but this was done mainly in conjunction with their deliveries of the bakery's products. When not engaged in making deliveries of the products of the bakery their time was their own but most of their working time was taken up with deliveries for the bakery. They did not maintain or operate an independent business, had no independent place of business––not even a telephone. Deliveries of the bakery's products were made by them personally and they employed no assistance except when, through illness or otherwise they were unable to work, they employed relief drivers. The deductions from the wholesale price to which the drivers were entitled averaged from $300 to $750 a month per driver. Their arrangement with the bakery was terminable at the will of either party.

During the period covered by the assessment the pertinent provisions of law applicable to the tax imposed were supplemented by rule and amended from time to time so that during the period covered by the disputed assessment different provisions of the existing law applied, namely, from January 1, 1937 to February 1, 1938, the provisions of the unemployment Act as originally enacted;¹ from February 1, 1938 to May 12, 1939, the provisions of the original Act supplemented by a rule of the territorial unemployment compensation board to which was committed the administration of the Act and whose rules had the...