Knestis v. Unemployment Compensation and Placement Div.

• Decision Date: 15 February 1943
• Docket Number: 28886.
• Citation: 16 Wn.2d 577,134 P.2d 76
• Court: Washington Supreme Court
• Parties: KNESTIS et al. v. UNEMPLOYMENT COMPENSATION AND PLACEMENT DIVISION.

134 P.2d 76

16 Wn.2d 577

KNESTIS et al. v. UNEMPLOYMENT COMPENSATION AND PLACEMENT DIVISION.

No. 28886.

Supreme Court of Washington

February 15, 1943

Department 1.

Proceeding by Ernest Knestis and another, a copartnership, doing business as Lotus Cafe, against Unemployment Compensation and Placement Division of the State of Washington involving liability for payment of unemployment compensation assessments. From a judgment reversing decision of Commissioner of Unemployment Compensation and Placement Division and relieving the copartners of payment of assessment for year 1939, the Unemployment Compensation and Placement Division appeals.

Affirmed.

Appeal from Superior Court, Cowlitz County; J. E. Stone, judge.

Smith Troy, George W. Wilkins, and Frank W. Foley, all of Olympia for appellant.

Ronald Moore, of Kelso, for respondent.

MILLARD Justice.

During the year 1937 the copartnership of Knestis and Zavales, doing business as the Lotus Cafe in Kelso, had at least eight employees for twenty weeks or more hence were liable employers under Rem.Rev.Stat. § 9998-108(b), which provides for payment of unemployment compensation assessments by an employing unit who employs one or more individuals for twenty weeks or more within either the current or preceding calendar year. The copartnership paid the assessments levied against them for 1937. Their employment record disclosed that in 1938 the copartnership did not have eight employees for twenty weeks or more. During the year 1938 the copartners' petition for termination of coverage as employers, effective January 1, 1939, was granted upon a finding by the unemployment compensation and placement division that there were not twenty different weeks in the calendar year 1938 within which the petitioners employed eight or more individuals in employment subject to the unemployment compensation act. This termination of coverage was granted by the commissioner of the unemployment compensation and placement division pursuant to an opinion of the attorney general that Laws of 1937, chapter 162, p. 590, § 8(b) (amended in 1939 and now appearing as Rem.Rev.Stat.Supp. § 9998-108(b), which reads as follows, should be construed to mean 'employed eight or more individuals,' instead of 'one or more individuals': '(b) Except as otherwise provided in subsection (c) of this section, an employing unit shall cease to be an employer subject to this act only as of the 1st day of January of any calendar year, if it files with the director prior to the 5th day of January of such year, a written application for termination of coverage, and he finds that there were no twenty different weeks within the preceding calendar year, within which such employing unit employed one or more individuals in employment subject to this act. For the purpose of this subsection, the two or more employing units mentioned in paragraph (2) or (3) or (4) of section 19(f) shall be treated as a single employing unit.'

On the theory that the commissioner erroneously exceeded his legal authority in granting the application for termination of coverage, in view of Shelton Hotel Company v. Bates, 4 Wash.2d 498, 104 P.2d 478, 481, where we held that Laws of 1937, chapter 162, § 8(b) (quoted above) should be construed to mean 'one or more individuals,' the commissioner sought to vacate the order.

In 1940 the copartners again became liable employers having eight employees in their employment for twenty weeks or more. Assessments were levied and paid accordingly since that time.

A notice of assessment was served upon the copartners July 31 1941, in which it was alleged that from January 1, 1937, through December 31, 1940, certain additional contributions with interest were delinquent and payment therefor was demanded. The assessment was bottomed upon the theory that one Harry S. Hill, an accountant, was an employee within the meaning of Laws of 1937, chapter 162,§ 19(f)(5), and had not theretofore been reported as an employee. The copartners contended that Hill was not an employee; and, also, that they had been released from liability in 1939. Hearing was had to the appeal tribunal of the unemployment compensation and placement division which concluded that Hill was an employee and that the termination of coverage in 1939 was a nullity because of a misconstruction of § 8(b) (quoted above) by the commissioner leading to the release. The copartners appealed therefrom to the commissioner who reversed the appeal tribunal's holding that Hill was an employee but sustained the finding that the release of respondents from liability for the year 1939 was a nullity. From the order of the commissioner in consonance with the foregoing the copartners appealed to the superior court for Cowlitz county. The trial court expressed the view that the decision of the commissioner terminating coverage in the absence of an appeal therefrom became final thirty days after the date of notification under Laws of 1937, chapter 162, § 6(h), which provides that any decision of the commissioner or appeal tribunal, in the absence of an appeal therefrom, shall become final thirty days after the date of notification or mailing thereof. From the judgment entered reversing the decision of the commissioner and relieving the copartners of the payment of assessments for the year 1939 the unemployment compensation and placement division has appealed.

Counsel for appellant insist that the release of respondents by the commissioner was absolutely void and as the respondents were thereby relieved from payment of taxes due and owing to the state the rule of res adjudicata is inapplicable as a state can not be estopped by the unauthorized acts of its officers....