Independent Gasoline Co. v. Bureau of Unemployment Compensation

• Decision Date: 09 July 1940
• Docket Number: 13400.
• Parties: INDEPENDENT GASOLINE CO. v. BUREAU OF UNEMPLOYMENT COMPENSATION.
• Court: Georgia Supreme Court

10 S.E.2d 58

190 Ga. 613

INDEPENDENT GASOLINE CO. v. BUREAU OF UNEMPLOYMENT COMPENSATION.

No. 13400.

Supreme Court of Georgia

July 9, 1940

Rehearing Denied July 23, 1940.

Syllabus by the Court.

That portion of section 19(g)(4) of the Unemployment Compensation Law (Ga.L. 1937, pp. 806, 843) which defines an 'employer' under the act to include 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 same interests, and which, if treated as a single unit with such other employing units, would be an 'employer,' is unconstitutional and void, in that it violates the equal protection clauses of the State and Federal Constitutions (Const.U.S. Amend. 14; Const.Ga. art. 1, § 1, par. 2; Code, §§ 1-815, 2-102). The petition in the instant case being based upon the unconstitutional portion of the Unemployment Compensation Law, the court erred in overruling the defendant's demurrer.

The Bureau of Unemployment Compensation of the State of Georgia sued Independent Gasoline Company seeking judgment for $91.50 principal and $11.50 interest. The petition as amended alleged, in substance, that Independent Gasoline Company was incorporated under the laws of Georgia on July 6, 1933, and that it is an employing unit having in its employment five covered workers; that N.D. Arnold Telephone Company was incorporated under the laws of Georgia on November 11, 1929 and is an employing unit having in its employment four covered workers; that H. H. Hardin is the president and treasurer and active manager of each of said corporations that the books and records of both corporations are kept in the office of Hardin in the City of Forsyth, and Hardin owns a majority of the stock of each corporation; that the forty shares of capital stock of the gasoline company are owned by H. H. Hardin, twenty-four shares; Mrs. H. H. Hardin, twelve shares; and N. A. Hardin, son of H. H. Hardin, four shares; that the telephone corporation has fifty shares of stock, thirty-six of which are owned by H. H. Hardin, twelve by Mrs. Hardin, and the other two by persons not named; that neither of the corporations owns any stock of the other corporation; that the gasoline corporation operates filling stations in Gainesville, Georgia, and the telephone corporation operates a telephone business in and around Lexington, Georgia; that while each of the corporations employs less than eight covered workers, they are under the law treated as a single unit, being owned and controlled by the same interest, and together employ more than eight covered workers; that the defendant has failed and refused to pay the amount sued for, which covers the period and amount of liability for the calendar year 1938. To this petition as amended the defendant Independent Gasoline Company filed its demurrers, and as grounds thereof alleged that no cause of action is set out in the petition; and that that portion of the Unemployment Compensation Law, approved March 29, 1937 (Ga.L. 1937, p. 806, section 19(g)(4), upon which the plaintiff's right to recovery rests, which defines an 'employer' under the act to include '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 same interests, * * * and which, if treated as a single unit with such other employing units, * * * would be an employer under Paragraph (1) of this subsection,' is void as contravening article 1, section 1, paragraph 2, of the State Constitution (Code, § 2-102), and the equal protection clause of the United States Constitution (Amend. 14; Code, § 1-815). To the judgment overruling the demurrers the defendant excepted.

Williams & Freeman, of Forsyth, for plaintiff in error.

Clifford Walker and Otis L. Hathcock, both of Atlanta, for defendant in error.

DUCKWORTH Justice.

The only portion of the Unemployment Compensation Law here attacked is section 19(g)(4). Section 19(g)(1) defines as an employer any employing unit having in its employment eight or more individuals, and it is alleged in the petition that by virtue of the provision of section 19(g)(4) the defendant is an employer and should be made to pay as provided by the act. The defendant is a corporation and as such is an artificial person. Code, § 22-101. This legal entity retains its separate and independent character regardless of the ownership of its capital stock, and as such it can not be held liable for the obligations of a stockholder. Nor are the stockholders liable for the obligations of the corporation. Newton Mfg. Co. v. White, 42 Ga. 148; Exchange Bank of Macon v. Macon Construction Co., 97 Ga. 1, 25 S.E. 326, 33 L.R.A. 800; Waycross Air-Line R. Co. v. Offerman & Western R. Co., 109 Ga. 827, 35 S.E. 275; Garmany v. Lawton, 124 Ga. 876, 53 S.E. 669, 110 Am.St.Rep. 207; Central of Georgia Railway Co. v. Manhattan Trust Co., 135 Ga. 472(2), 69 S.E. 708; Liberty Lumber Co. v. Silas, 181 Ga. 774, 184 S.E. 286; Shingler v. Shingler, 184 Ga. 671, 192 S.E. 824; Hollingsworth v. Georgia Fruit Growers Inc., 185 Ga. 873, 196 S.E. 766; Simpson v. Charters, 188 Ga. 842, 5 S.E.2d 27; Pullman's Palace Car Co. v. Missouri Pacific Railway Co.,

115 U.S. 587, 6 S.Ct. 194, 29 L.Ed. 499; Peterson v. Chicago, Rock Island & Pacific Ry. Co., 205 U.S. 364, 27 S.Ct. 513, 51 L.Ed. 841; Interstate Commerce Commission v. Stickney, 215 U.S. 98, 30 S.Ct. 66, 54 L.Ed 112; United States v. Delaware, Lackawanna & Western R. Co., 238 U.S. 516, 35 S.Ct. 873, 59 L.Ed. 1438. But it has been held that where stock ownership has been resorted to for the purpose of controlling a subsidiary company so that it may be used as a mere agency or instrumentality of the owning company, courts will not permit themselves to be blinded or deceived by mere form or law, but will, regardless of fiction, deal with the substance as if the corporation did not exist and as justice may require. United States v. Lehigh Valley Railroad Co., 220 U.S. 257, 31 S.Ct. 387, 55 L.Ed. 458; Chicago, Milwaukee & Saint Paul Railway Co. v. Minneapolis Civic Association, 247 U.S. 490, 38 S.Ct. 553, 62 L.Ed. 1229; Burnet v. Commonwealth Improvement Co., 287 U.S. 415, 53 S.Ct. 198, 77 L.Ed. 399. We do not consider any of the decisions above cited as authority for an arbitrary disregard of the legal status and substantial rights of a corporation which has done no wrong and is seeking to evade no law. The constitutional provisions here invoked by the defendant do not appear to be limited as to parties or circumstances, but are universal and impartial. The exact language of that portion of the United States Constitution which the defendant invokes (Code, § 1-815) is as follows: 'No State shall * * * deny to any person within its jurisdiction the equal protection of the laws.' The provision of the State Constitution invoked (Code, § 2-102) declares that, 'Protection to person and property is the paramount duty of government, and shall be impartial and complete.' We now place the provision of the act as applied to the defendant by the side of these constitutional provisions to determine whether there is a violation. This defendant does not employ the minimum of eight required by the act to render it subject. No competitor of defendant, whether an individual or corporation, having only five employees as does this defendant, is subject to the provisions of the act or required to pay any tax thereunder. Therefore, if this defendant is required by section 19(g)(4) to pay the tax, it is thereby definitely carrying a tax burden from which all others, both individuals and corporations, similarly situated are exempt. There is no room for doubt that in such circumstances this defendant is denied the equal protection guaranteed by the Federal Constitution and the impartial and complete protection of property guaranteed by the State Co...