Louis A. Demute, Inc. v. Michigan Employment Sec. Com'n

• Decision Date: 07 June 1954
• Docket Number: No. 38,38
• Citation: 64 N.W.2d 545,339 Mich. 713
• Parties: LOUIS A. DEMUTE, Inc. v. MICHIGAN EMPLOYMENT SECURITY COMMISSION.
• Court: Michigan Supreme Court

Page 545

64 N.W.2d 545

339 Mich. 713

LOUIS A. DEMUTE, Inc. v. MICHIGAN EMPLOYMENT SECURITY COMMISSION.

No. 38.

Supreme Court of Michigan.

June 7, 1954.

[339

Mich. 714] Frank G. Millard, Atty. Gen., Edmund E. Shepherd, Sol. Gen., Lansing, John J. Long and George M. Bourgon, Asst. Attys. Gen., for appellant.

Davis & Thorburn, Royal Oak, for appellee.

Maurice A. Glasier, Detroit, amicus curiae. Harold Helper, Detroit, of counsel.

Before the Entire Bench.

BUTZEL, Chief Justice.

Louis A. Demute, Inc., a Michigan corporation, plaintiff and appellee, is a licensed real estate broker conducting business in the city of Royal Oak, Oakland county, Michigan. During the years 1948 to 1950 inclusive, the period involved herein, eight or more individuals were associated with plaintiff in each of 20 different weeks within each of the calendar years. C.L.1948, § 421.41, Stat.Ann.1950 Rev. § 17.543; 26 U.S.C.A. § 1607(a). One to three of those individuals were salaried employees and were associated with the plaintiff in an undisputed employer-employee relationship. The balance of the eight or more individuals were associated with the plaintiff as real estate salesmen duly licensed under the provisions of P.A.1919, No. 306, as amended, C.L.1948, § 451.201 et seq., Stat.Ann. § 19.791 et seq. The real estate salesmen were associated with the plaintiff under an oral agreement whereby, in consideration for securing listings for plaintiff and for securing purchasers for real estate listed with plaintiff, the salesmen were paid a percentage of the real estate commissions received by plaintiff for consummating real estate transactions. These salesmen had no regular working hours and they attended no sales meetings; they could work or not work as they saw fit; they could secure their own listings for property to be sold, such listings to be in the name of the plaintiff; no quota was required of them; they took their vacations when they desired and could take them at the same time even if it was thereby necessary to close the office of plaintiff; they provided their own automobiles, gasoline and oil and paid for their own public liability insurance; they paid for the printing of their own business cards; they filed no reports; they had no specific desk space in plaintiff's office; they were not reimbursed for business phone calls made on their residential phones. It is the contention of the plaintiff that these salesmen were independent contractors and not employees within the common-law definition of that term.

For the years 1948 to 1950 plaintiff paid to the Michigan Employment Security Commission (at that time named the Michigan Unemployment Compensation Commission), defendant, the total amount of $2,984.26 as required unemployment compensation contributions. During the same period plaintiff was required to pay to the Federal government taxes under the Federal employment tax, 26 U.S.C.A. § 1600 et seq. On December 8, 1950, the Internal Revenue Bureau, following a decision in the United States Court of Appeals, Eighth Circuit, which cited authorities in support of its position, in the case of Dimmitt-Rickhoff-Bayer Real Estate Co. v. Finnegan, 179 F.2d 882, reversed its previous ruling and held that real estate salesmen associated with a real estate broker in a relationship comparable to that of the salesmen in the Dimmitt-Rickhoff-Bayer case, supra, were not to be considered employees for the purposes of the Federal employment tax. In February, 1952, the Federal government returned to the plaintiff the amount of taxes previously paid. These sums were refunded to the plaintiff upon the theory that the taxes had been erroneously collected since the real estate salesmen associated with plaintiff were not employees within the meaning of the Federal employment tax act. Plaintiff was compelled to pay contributions to the Michigan Employment Security Commission under the Michigan statute only because it was compelled to pay under the so-called 'recapture clause' of the State act, C.L.1948, § 421.42(7), Stat.Ann.1950 Rev. § 17.545(7), the Federal tax on the 'employment' of real estate salesmen. Plaintiff, therefore, after the refunding of the Federal tax, exacted through admitted error, instituted an action in the circuit court for the county of Oakland to recover the amount of contributions paid to the defendant under the Michigan statute. Plaintiff's motion for a summary judgment was granted. From that judgment defendant has appealed.

The first question raised on appeal concerns the propriety of the trial judge's action in granting plaintiff's motion for a summary judgment. Defendant claims that the trial judge was in error in that, (1) plaintiff's affidavit in support of the motion failed to state that it was the affiant's belief that there were no defenses to the action, and (2) plaintiff's affidavit in support of its motion and defendant's affidavit of merits filed in opposition thereto raised factual issues which precluded the trial judge from granting plaintiff's motion. Defendant claims that under the summary judgment statute, C.L.1948, § 618.9, Stat.Ann. § 27.989, and Michigan Court Rule No. 30, the summary judgment granted in this case was improper and cites as authority Gloeser v. Moore, 284 Mich. 106, 278 N.W. 781.

Defendant for the first time in this court claims that the motion for summary judgment was fatally defective in that the affidavit in support of the motion did not follow the statute which provides for the affidavit's statement that it is his belief that there is no defense to the action. Such averment was included in the motion for a summary judgment but not included in the supporting affidavit. There is no question but that plaintiff should have included the necessary averment, the absence of which would have been good grounds for either dismissing the motion or at least not considering it until, by amendment or the filing of a new affidavit, the statutory requirement has been met. Defendant, however, stood by, apparently accepted the affidavit as sufficient, never mentioned the defect during the hearing on the motion, and did not include such omission as error in its statement of reasons and grounds for appeal. The objection on the part of the defendants comes too late. See Michigan Court Rules No. 27, § 6, and No. 66, § 3; DesRoches v. McCrary, 315 Mich. 611, 24 N.W.2d 511; In re Orr's Estate, 297 Mich. 37, 297 N.W. 62.

Defendant asserts that factual issues were raised by its answer and its affidavit of merits in opposition to the motion for the summary judgment. Eight of the eleven paragraphs of defendant's affidavit of merits were in agreement with the facts set forth by plaintiff. Paragraph eleven set forth a conclusion of law determinative of all the issues involved in the litigation. Paragraphs two and four referred to P.A.1919, 1919, No. 306, as amended, C.L.1948, § 451.201 et seq., Stat.Ann. § 19.791 et seq., and asserted that the above statutes and the rules and regulations thereunder subjected the real estate salesmen licensed under the provisions of the statute to the control of the broker by whom the salesmen were employed. This assertion by defendant set forth a conclusion based upon a question of law. The basic facts set forth in plaintiff's affidavit in support of its contention that the salesmen were independent contractors and not employees were not denied by defendant in its affidavit of merits. There were, therefore, no questions of fact preventing the entry of a summary judgment.

Section 42 of the Michigan Unemployment Compensation Act (so named during the period herein involved) provides, in its pertinent portions, as follows, C.L.1948, § 421.42, Stat.Ann.1950 Rev. § 17.545:

'(6) Except as otherwise provided in subsection (7) of this section the term 'employment' shall not include:

* * *

* * *

'(k) Service performed by real estate salesmen and agents of insurance companies who are compensated principally or wholly on a commission basis;

* * *

* * *

'(7) Notwithstanding the provisions of subsection (6) of this section, any services performed for an employing unit, with respect to which such employing unit is liable for any federal tax against which credit may be taken for contributions required to be paid into a state unemployment compensation fund, shall be deemed to constitute employment for the purposes of this act, but only to the extent that such services constitute employment with respect to which such federal tax is payable.'

It is admitted that plaintiff's salesmen were compensated wholly on a commission basis. It is the contention of defendant that plaintiff, although specifically excluded by subsection (6)(k) of the act, is liable for State unemployment contributions in that subsection (7), referred to as the recapture clause, acts as a condition subsequent to the exclusion indicated under subsection (6)(k). Defendant asserts that the real estate salesmen associated with plaintiff were engaged in such a relationship with plaintiff so as to subject plaintiff to liability under the Federal employment tax act. Therefore, defendant contends that plaintiff is liable for contributions to the State unemployment compensation fund. The fundamental issue is to be resolved by a determination of whether or not plaintiff is liable as an employer for taxes under the Federal act.

26 U.S.C.A. § 1600 provides:

'Every employer (as defined in section 1607(a)) shall pay for the calendar year 1939 and for each calendar year thereafter an excise tax, with respect to having individuals in his employ * * *.'

26 U.S.C.A. § 1607(a) provides:

'The term 'employer' does not include any person unless on each of some twenty days during the taxable year, each day being in a different...