H. Duys & Co., Inc. v. Tone

• Decision Date: 08 March 1939
• Citation: 125 Conn. 300,5 A.2d 23
• Parties: H. DUYS & CO., Inc., et al. v. TONE.
• Court: Connecticut Supreme Court

5 A.2d 23

125 Conn. 300

H. DUYS & CO., Inc., et al. v. TONE.

Supreme Court of Errors of Connecticut.

March 8, 1939

Appeal from Superior Court, Hartford County; Ernest A. Inglis Judge.

Action by H. Duys & Company, Incorporated, and others, against Joseph M. Tone, State Commissioner of Labor and Factory Inspection, and acting as administrator of the State Unemployment Compensation Act, to review an assessment against the named plaintiff, based upon wages paid by the named plaintiff to persons employed in processing and handling shade tobacco grown by and upon the land of the other (intervening) plaintiffs. The case was tried to the court, and, from a judgment for plaintiffs, defendant appeals.

Error and cause remanded with directions.

Harry Silverstone, Sp. Asst. Atty. Gen. (Francis A Pallotti, Atty. Gen., on the brief), for appellant.

Harry L. Nair, of Hartford (Solomon Elsner, of Hartford, on the brief), for appellee named plaintiff.

Howard W. Alcorn, of Hartford (Hugh M. Alcorn, of Hartford, on the brief), for appellees, coplaintiffs.

Argued before MALTBIE, C.J., and HINMAN, AVERY, BROWN, and JENNINGS, JJ.

HINMAN, Judge.

The named plaintiff is a corporation engaged in the business of dealing in leaf tobacco and among its other activities has conducted a tobacco warehouse in Hartford since 1933. The defendant, the state commissioner of labor and factory inspection, acting as administrator of the state Unemployment Compensation Act, General Statutes Supp.1937, Chapter 280a, under authority of § 814d thereof, made an assessment against Duys & Company, Inc., hereinafter referred to as the corporation, based upon wages paid by it to persons employed at its Hartford warehouse in processing and handling shade tobacco grown by and upon the land of the other (intervening) plaintiffs. The corporation appealed to the Superior Court from this assessment, claiming that the wages were of employees engaged in ‘ agricultural labor’ and as such exempt under the act. The plaintiffs other than the corporation are individual tobacco farmers, with farms in the Connecticut Valley, and are growers of shade tobacco, which is grown under cloth, is a higher grade of leaf than other types of tobacco and is used entirely for cigar wrappers. After shade tobacco is grown, picked, and cured while hanging in the shed, it is taken down and packed into cases for removal to a warehouse for further processing. At this stage it is unfit for use by cigar manufacturers and is not a salable product but must go through the processes of bulk sweating, assorting, sizing and baling in order to make it fit for marketing. After baling, it is again placed in storage for further curing, after which it is sampled by inspectors of the United States department of agriculture and is then ready to be offered for sale. The processing and packing in the warehouse is entirely hand labor.

From 1930 to 1933 crops of shade tobacco grown by the plaintiff growers were processed and packed at a Hartford warehouse which in 1933 was taken over by the corporation and the 1935 and 1936 crops of the plaintiff growers were processed and packed by it at that warehouse. These operations were performed pursuant to separate contracts entered into by each of the growers and the corporation which constituted the latter the agent of the grower to process, pack and market the crop which the grower was to raise, it to receive a specified commission for selling the tobacco and guaranteeing the accounts and to buy, at an appraised price, whatever tobacco remained unsold at the end of two years. Upon the sale of the grower's tobacco the corporation was to deduct from the price received its commission and the cost of insuring, warehousing, processing, sampling, storing and shipping it, including taxes and brokers' commissions, if any, and to pay over the balance to the grower. No crops of tobacco other than those of the plaintiff growers were delivered to or handled at this warehouse. The sales of the tobacco were made in the name of the corporation but title to each grower's crop remained in him until sold. The tobacco known as Connecticut Valley shade-grown is grown only in Massachusetts and Connecticut. About two-thirds of the total production in 1935 and 1936 was processed and packed by the owners and tenants of the land on which it was grown; five corporations, growing approximately half of the total acreage of Connecticut Valley shade, so processed and packed the tobacco grown by them.

The Superior Court, from the facts found by it, including the foregoing, concluded that the employees on whose wages the assessment was made were not the employees of the growers but of the corporation, but that ‘ the regulations adopted by the administrator in respect to agricultural labor, in so far as they provide that in order to procure exemption from the tax the employees doing the processing and packing must be the employees of the owner or tenant of the land upon which the crops have been raised, are not consonant with the Act itself,’ and held that the wages in question were from ‘ agricultural labor’ within the meaning of that act. The controlling issue on this appeal relates to the conclusion above quoted-in effect that the provision in the regulations that in order to procure exemption from the tax, the employees doing the processing and packing must be employees of the owner or tenant of the farm on which the materials in their raw or natural state were produced, rendering exemption dependent upon performance by employees of the grower himself, as distinguished from employees of those engaged distinctively in the processing and packing alone, is invalid because beyond the purview of the statute. The Connecticut act was adopted in consequence of the enactment of the federal social security acts. 42 U.S.C.A. § 901 et seq., § 1101 et seq., 49 U.S.Stat., pp. 626, 635. Many other states have adopted similar acts and under them regulations similar to that here involved have been promulgated.

The federal act, § 907(c), 42 U.S.C.A. § 1107(c), defines ‘ employment’ as meaning ‘ any service, of whatever nature, performed * * * by an employee for his employer, except-(1) Agricultural labor; * * *’ and § 908, 42 U.S.C.A. § 1108, provides that the commissioner of internal revenue, with the approval of the secretary of the treasury, ‘ shall make and publish rules and regulations for the enforcement of this title [sections 1101 to 1110 of this chapter].’ Pursuant thereto regulations were made (approved February 17, 1936), including one, Art. 206(1), which is printed as a footnote. ^[1] This was followed verbatim by the Connecticut administrator in adopting, under authority of § 811d(a), the regulation (3) here under consideration. While the pertinent section of the federal act, 907 (c), and the corresponding provision of our act, § 803d(a), differ somewhat in phraseology, we find nothing in those differences which would affect the admissibility and construction of the respective identical regulations. Such light as may be obtained as to the reason and purpose of the federal act and regulation therefore is of significance as to the attributes of this state regulation. The reason assigned in the reports of the congressional committees was ‘ difficulties in collecting the tax.’ House Report No. 615, p. 33, Senate Report 628, p. 45, 74th Congress, 1st Session. Intimation to the same effect is afforded in Carmichael v. Southern Coal & Coke Co., 301 U.S. 495, 57 S.Ct. 868, 81 L.Ed. 1245, 109 A.L.R. 1327, concerning the Alabama Unemployment Compensation Act, wherein it is said (page 513, 57 S.Ct. page 874): ‘ Administrative considerations may explain several exemptions. Relatively great expense and inconvenience of collection may justify the exemption from taxation of domestic employers [also exempted in the same section of the federal and state acts], farmers, and family businesses, not likely to maintain adequate employment records, which are an important aid in the collection and verification of the tax. * * *’ It seems reasonable and probable that the practical reason so indicated-avoidance of administrative difficulties in ascertaining and collecting the tax, involving expense disproportionate to the resulting advantages-was the one motivating the exemption here involved rather than a paramount purpose to benefit and encourage agriculture.

As to the logical and legal distinction between agricultural and industrial employees, Davis & Co. v. Mayor and Council of Macon, 64 Ga. 128, 37 Am.Rep. 60, is relevant. In that case, in sustaining an ordinance taxing the sale of meat and milk but exempting farmers selling their own products, it is said (pages 131, 132): ‘ The business of a farmer is production, not trade, and the sale directly by himself of what he rears or produces is merely occasional or incidental. * * * The producer whose trade is incident to production, and the middleman whose trade is intermediary between the producer and the consumer, belong not to the same class, but to different classes of subjects in a scheme of taxation. At least, the difference is wide enough to justify, if not to compel, its recognition in shaping the scheme.’ The corporation's situation is analogous to that of the middleman in that case, and we discern no difference in principle between sales by the latter and operations such as are here involved. American Sugar Refining Co. v Louisiana, 179 U.S. 89, 21 S.Ct. 43, 45 L.Ed. 102, sustained the constitutionality of a state statute imposing a license tax on the business of refining sugar and molasses but exempting planters and farmers doing their own grinding and refining, saying (page 95, 21 S.Ct. page 46): ‘ The Constitution of Louisiana classifies the...