McGrew Paint & Asphalt Co. v. Murphy

• Decision Date: 18 September 1944
• Docket Number: Nos. 27656-27660.,s. 27656-27660.
• Citation: 56 N.E.2d 416,387 Ill. 241
• Court: Illinois Supreme Court
• Parties: McGREW PAINT & ASPHALT CO. et al. v. MURPHY, Director of Labor.

387 Ill. 241

56 N.E.2d 416

McGREW PAINT & ASPHALT CO. et al.

v.MURPHY, Director of Labor.

Nos. 27656-27660.

Supreme Court of Illinois.

May 16, 1944.

As Modified on Denial of Rehearing Sept. 18, 1944.

Appeals from Circuit Court, Cook County; John Prystalski, Judge.

Certiorari by the McGrew Paint & Asphalt Company and others against Francis B. Murphy, Director of Labor, to review assessments against plaintiffs for contributions under the Unemployment Compensation Act. From adverse judgments, the plaintiffs appeal.

Affirmed in part and in part reversed and remanded with directions.Joseph G. Slottow and Charles Leviton, both of Chicago, for appellants.

George F. Barrett, Atty. Gen. (William C. Wines, of Chicago, of counsel), for appellee.

WILSON, Justice.

The circuit court of Cook county quashed writs of certiorari sued out by the plaintiffs, McGrew Paint & Asphalt Co., Railway Paint Company, Dednox, Inc., Insul-Mastic Roofing & Siding Co., and Insul-Mastic Laboratories, Inc., to review assessments of the defendant, the Director of Labor of the State, against them for contributions under the Unemployment Compensation Act, and entered judgments ranging from $54.23 to $7639.85 and costs, in favor of defendant and against plaintiffs.

The Director of Labor, on June 5, 1941, notified four plaintiffs that he had determined they were employers, as defined by section 2(e)(5) of the Unemployment Compensation Act, Ill.Rev.Stat.1943, chap. 48, par. 218(e)(5), that they were liable for payment of contributions for the periods specified, and that he had assessed the amount of contributions due, together with interest and penalties. Each company filed its written protest and petition for rehearing, making the objection, among others, that section 2(e)(5) violates Federal and State constitutional guarantees. The notice to the fifth corporation, Insul-Mastic Laboratories, Inc., advised the company of the Director's determination that it was an employer, as defined by section 2(e)(2). By its protest and petition for rehearing, this corporation interposed the objection that it was not such an employer as is defined by section 2(e)(2) of the act. No reference to section 2(e)(5) appears in either the notice of determination or the protest and petition for rehearing with respect to the liability of the fifth corporation for contributions. Assessments were made against McGrew Paint & Asphalt Co., Railway Paint Company, and Dednox, Inc., for the years 1937, 1938, 1939 and 1940, against Insul-Mastic Roofing & Siding Co. for the year 1939 and the first half of the year 1940, and against Insul-Mastic Laboratories, Inc., for the period commencing April 1 and ending December 31, 1940. A stipulation between the Director of Labor and the five corporations contains all the evidence presented upon the hearing before the Director's representative. This stipulation recites the factual situation obtaining with respect to each corporation. McGrew Paint & Asphalt Co. was incorporated December 29, 1933; Dednox, Inc., April 18, 1934; Railway Paint Company, July 9, 1934, and Insul-Mastic Roofing & Siding Co., January 25, 1939. Insul-Mastic Laboratories, Inc., succeeded to all of the assets of Insul-Mastic Roofing & Siding Co. by means other than in the ordinary course of business, and, as the successor corporation, assumed a substantial amount of it predecessor's obligations, acquired its good will, and continued its business in the same establishment. According to the stipulation ‘said corporations were, from the date of their incorporation and throughout the periods included in the Director's determinations and assessments, controlled either directly or indirectly by legally enforceable means or otherwise by one O. V. McGrew; that each of said corporations, if treated as a single employing unit together with the other corporations had in its employment a sufficient number of persons to constitute it an employer liable for the payment of contributions under section 2(e)(1) of the Illinois Unemployment Compensation Act.’ No one of the corporations, from the period of its incorporation throughout the period covered by the Director's determinations and assessments, employed in its individual corporate capacity a sufficient number of persons to render it liable for contributions as an employer under the provisions of section 2(e)(1)(A) or (B). If the corporations are liable for contributions, the amount of the assessments is conceded to be correct. O. V. McGrew owns a majority of the shares of stock of each of the four corporations against whom assessments were made pursuant to section 2(e)(5). He is a minority shareholder in Insul-Mastic Laboratories, Inc., owning 247 of its 1000 outstanding shares. The Director's representative filed his report finding that each of the five corporations was an employer liable for payment of contributions and the resultant assessments for the respective periods; that all the corporations were employers liable for payment of contributions under the provisions of section 2(e)(5) of the Unemployment Compensation Act; that he was without authority to pass upon the contentions challenging the constitutional validity of section 2(e)(5), and, since the corporations were employers and liable for the taxes assessed, affirmed the determinations and assessments of the Director. Thereafter, the Director of Labor made his decision overruling the objections of the corporations and adopted the report of his representative. The circuit court, in turn, affirmed the decision of the Director of Labor as to each corporation and rendered judgments against plaintiffs and in favor of defendant. Separate appeals by plaintiffs followed. We have consolidated the causes for consideration and opinion.

Plaintiffs contend that the judgments rendered against them can not stand, since no one corporation, considered alone, employed a sufficient number of persons to render it liable as employer under the Unemployment Compensation Act, and that the record is barren of facts to sustain the conclusion grouping them together and construing them as a unit. The stipulation discloses that O. V. McGrew owns a majority of the shares of stock in four corporations, but less than twenty-five per cent of the shares of the fifth, Insul-Mastic Laboratories, Inc. Accordingly, plaintiffs urge that if the corporation last named be excluded from consideration, a factual basis is lacking for the conclusion that the other four corporations had sufficient employees, for the periods in controversy, calculated collectively, to bring them under the statute. Defendant, to sustain the judgments, maintains that McGrew's ownership of the majority of the outstanding shares of four of the corporations constitutes control, as to them, within the contemplation of section 2(e)(5). To sustain the judgment against Insul-Mastic Laboratories, Inc., defendant insists that it became an employer liable for the payment of contributions by reason of its succession to all the assets of Insul-Mastic Roofing & Siding Co., under section 2(e)(2) of the Unemployment Compensation Act.

The question of the liability of Insul-Mastic Laboratories, Inc., will receive initial consideration. In the light of the conceded facts concerning the dates of incorporation, the issues made by the notices of determination, on the one hand, and the protests and petitions for rehearing on the other, it is apparent that the words ‘said corporations' in the portion of the stipulation previously quoted refer, first, to the coexistence of three corporations in 1937 and 1938 and to the coexistence of four corporations in 1939 and the first six months of 1940. Insul-Mastic Laboratories, Inc., the fifth corporation, so far as the record before us discloses, had never been deemed an employer liable for the payment of contributions under section 2(e)(5). As recounted, it was charged with liability in the first instance under section 2(e)(2), Ill.Rev.Stat.1943, chap. 48, par. 218(e)(2), which provides that ‘Employer’ means: ‘Any individual or employing unit which succeeded to the organization, trade or business of another employing unit which at the time...