Murphy v. Concordia Pub. House

• Decision Date: 12 June 1941
• Docket Number: 37398
• Citation: 155 S.W.2d 122,348 Mo. 753
• Parties: Andrew J. Murphy, Edward C. Crow and Harry P. Drisler, Appellants, v. Concordia Publishing House, a Corporation
• Court: Missouri Supreme Court

155 S.W.2d 122

348 Mo. 753

Andrew J. Murphy, Edward C. Crow and Harry P. Drisler, Appellants, v. Concordia Publishing House, a Corporation

No. 37398

Supreme Court of Missouri

June 12, 1941

Rehearing Denied July 25, 1941. Motion to Transfer to Banc Overruled, October 30, 1941.

Appeal from Circuit Court of City of St. Louis; Hon. Charles B Williams, Judge.

Reversed and remanded (with directions).

Harry G. Waltner, Jr., Chief Counsel, and Edward D Summers, Assistant Counsel, for appellants.

(1) The Supreme Court has jurisdiction of this case because members of the Unemployment Compensation Commission are parties in their official capacities. Murphy v. Hurlbut Undertaking & Embalming Co., 142 S.W.2d 449. (2) All employers as defined in the Unemployment Compensation Law are required to make contributions to the Unemployment Compensation Fund. Sec. 6, Laws 1937, p. 585; Sec. 3 (h) (1), Laws 1937, p. 576. (3) Exemptions from taxation or other governmental exactions must be strictly construed. 2 Cooley on Taxation (4 Ed.), p. 1403; State ex rel. Y. M. C. A. v. Gehner, 320 Mo. 1172, 11 S.W.2d 30; St. Louis Y. M. C. A. v. Gehner, 329 Mo. 1007, 47 S.W.2d 776; Wyman v. St. Louis, 17 Mo. 335. (4) The Unemployment Compensation Law is remedial legislation and should be liberally construed. Sec. 2, Laws 1937, p. 574; 59 C. J. 1106, sec. 657; Endlich, Interpretation of Statutes, p. 142, sec. 108; Hudgins v. Mooresville Consol. School District, 312 Mo. 1, 278 S.W. 769; State ex rel. Laundry, Inc., v. Pub. Serv. Comm., 327 Mo. 93, 34 S.W.2d 37. (5) The services performed for respondent constitute employment as defined in the Unemployment Compensation Law. Par. 7, subsection 3 (i) (6), Laws 1937, p. 577; 26 U.S.C. A., 101 (6); Trinidad v. Sagrada Orden de Predicadores, 263 U.S. 578, 68 L.Ed. 458, 44 S.Ct. 204; 26 U.S.C. A., 101 (14); Sand Springs Ry. Co. v. Commr. of Internal Revenue, 21 B. T. A. 1291; Jockey Club v. Helvering, 30 B. T. A. 670, affirmed 76 F.2d 597; Herbert E. Fales, 9 B. T. A. 828; J. Noah H. Slee, 15 B. T. A. 710, affirmed 42 F.2d 184; Matter of de Peyster, 210 N.Y. 216; Matter of Corporation of Yaddo, 216 A.D. 1, 214 N.Y.S. 523; Mohawk Mills Assn., Inc. v. Miller, 22 N.Y.S. (2d) 993; Y. W. C. A. v. Baumann, 130 S.W.2d 499, 344 Mo. 898; Fitterer v. Crawford, 157 Mo. 51, 57 S.W. 532; St. Louis No. 9, B. P. O. E. v. Koeln, 262 Mo. 444, 171 S.W. 329; Park Floral Co. v. Industrial Comm., 91 P.2d 492, 104 Colo. 350. (6) Net earnings of respondent corporation inure to the benefit of a private corporate shareholder. People v. McAdams, 82 Ill. 356; Medical College of Georgia v. Rushing, 57 S.E. 1083. 1 Ga.App. 468; Strauss v. Marlboro County General Hospital, 194 S.E. 65, 185 S.C. 425; 33 Words and Phrases (Perm. Ed.), p. 678. (7) The respondent corporation's entity cannot be disregarded in the absence of a showing that fraud or some other type of wrong is sought to be accomplished. Powell on Parent and Subsidiary Corps., chap. 3, p. 40; Erkenbrecher v. Grant, 187 Cal. 7, 200 P. 641; May Department Stores Co. v. Union Electric L. & P. Co., 341 Mo. 299, 107 S.W.2d 41.

Geo. Eigel and Cullen Coil for respondent.

(1) Statutes exempting persons and organizations from taxation should be reasonably construed. National Cemetery Assn. v. Benson, 344 Mo. 791, 129 S.W.2d 842; Y. W. C. A. v. Baumann, 344 Mo. 898, 130 S.W.2d 499; Washington University v. Baumann, 341 Mo. 708, 108 S.W.2d 403; State ex rel. Waller v. Trustees of Wm. Jewell College, 234 Mo. 299, 136 S.W. 397; United States v. Proprietors of Social Law Library, 102 F.2d 482. (2) In the application of taxing statutes, the actualities of a particular situation must be sought. Looking to the actualities in this case, respondent is a corporation organized and operated exclusively for religious purposes, no part of the net earnings of which inures to the benefit of any private shareholder and is thus exempt from Unemployment Compensation Tax within the meaning of the provisions of Section 3, Subdivision 6 and Paragraph 7 of the Unemployment Compensation Law. Western Maryland Ry. Co. v. Commr. of Internal Revenue, 33 F.2d 695; Helvering v. Gordon, 87 F.2d 663; Weiss v. Stearn, 265 U.S. 242; United States v. Phellis, 256 U.S. 156; Appeal of United School of Christianity, 4 B. T. A. 61; Roche's Beach, Inc., v. Commr. of Internal Revenue, 96 F.2d 776; Trinidad v. Sagrada Orden de Predicadores, 263 U.S. 578, 68 L.Ed. 458; Lederer v. Stockton, 260 U.S. 3; Philips v. St. Louis & S. F. Ry. Co., 211 Mo. 419.

Bradley, C. Hyde and Dalton, CC., concur.

OPINION

BRADLEY

Plaintiffs constitute the Unemployment Compensation Commission. They brought suit in the St. Louis Circuit Court to recover from the defendant, as an employer, contributions in the sum of $ 4284.58, alleged to be due for the calendar year of 1937. A jury was waived. Most of the facts were agreed upon. The trial court found for defendant and plaintiffs appealed.

Our Unemployment Compensation Law was enacted in 1937, Laws 1937, p. 574 et seq.; amended in 1939, Laws 1939, p. 887 et seq., and now Sec. 9421 et seq., R. S. 1939. Defendant claimed exemption under paragraph (7) of the exemptions set out in Sec. 9423. It is provided that the term employment shall not include "service performed in the employ of a corporation, community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual."

Defendant corporation is a subsidiary of the religious corporation known as the Evangelical Lutheran Synod of Missouri, Ohio, and other states, called the Missouri Synod. The Synod owns all the stock of defendant and receives all of its net earnings. It is admitted that the Synod is exempt from the payment of contributions under the Unemployment Compensation Act.

In 1869, the Synod acquired a printing plant in St. Louis, called the Concordia Publishing House, and operated the plant until May 28, 1891. On that date the Concordia Publishing House was incorporated as a Missouri business and manufacturing corporation under Art. 8, Chap. 42, R. S. 1889, now Sec. 5338 et seq., R. S. 1939. The capital stock was $ 196,000, divided into 196 shares of the par value of $ 1000 each. The stock was issued to seven individuals, twenty-eight shares to each, but such individual did not in fact own the stock. The seven individuals, in whose name the stock is issued, constitute defendant's board of directors.

Defendant's directors are selected triennially by the Synod, three at one triennial meeting and four at the next. The term of a director is six years. Upon selection of new directors the stock ostensibly held by their immediate predecessors is issued to the new directors, twenty-eight shares to each. Printed on the back of the stock certificate issued to a director, is a declaration which he signs, and this declaration recites that he has no right or interest in any of the assets of the company, and that all the net proceeds are to be delivered to the Synod. The director signs the declaration, and also endorses the stock certificate to the Synod and it (the certificate) is delivered to the treasurer of the Synod. Under such modus operandi, the Synod has, at all times, the actual possession of all the stock.

The purpose of the Concordia Publishing House corporation was, as stated in its articles of incorporation, as follows: "The object, purpose and business for which this corporation is formed shall be to purchase the property and assets of the Concordia Publishing House (the printing plant) of the City of St. Louis, Missouri, and to carry on the publishing business lately carried on by said house, including a general printing, publishing and bindery business; and to do and perform all other acts necessary or proper in connection with such business."

During the calendar year 1937, defendant had 155 employees, and paid out wages in the sum of $ 238,031.97, and on May 20, 1937, its board of directors declared a dividend of $ 100,000 to be paid to the Synod. And it is conceded that defendant would be liable for contributions as to all these employees except for the exemption provision of the Unemployment Compensation Act.

The agreed statement of facts recites that the following from page 755 of defendant's 1939 catalog, in evidence, is "a true and complete description" of defendant's activities:

"Concordia Publishing House, unlike other business institutions, exists solely in the interest of the Lord's kingdom. We produce such materials as are helpful to the maintenance and the advancement of the Christian Church, the school, and the home. We engage exclusively in the manufacture and sale of articles necessary for the welfare of these institutions. While we are a business institution in every sense of the word, our earnings flow into the general treasury of the church.

"Concordia Publishing House supplies everything a congregation uses except building materials and church furniture. We provide Christian day schools, of which there are several thousand in the United States alone, as well as an even greater number of Sunday schools, with all necessary materials. We furnish homes with Christian literature of every description and with whole libraries of select secular reading matter. We produce the necessary tools for the professional men of the church -- its ministers and teachers. We issue twenty-three periodicals -- for the preacher and the teacher, for the Sunday school and the missionary worker, for the layman and church choirs. We print Bibles, hymn books, catechisms, school and college textbooks, professional books,...