Pipe Trades v. Rauch

• Decision Date: 17 March 1954
• Docket Number: No. 32661,32661
• Citation: 2 Ill.2d 278,118 N.E.2d 319
• Parties: PIPE TRADES, Inc. v. RAUCH et al.
• Court: Illinois Supreme Court

Page 319

118 N.E.2d 319

2 Ill.2d 278

PIPE TRADES, Inc. v. RAUCH et al.

No. 32661.

Supreme Court of Illinois.

March 17, 1954.

Eusebius J. Biggs, pro se.

Latham Castle, Atty. Gen. (William C. Wines, Raymond S. Sarnow, and A. Zola Groves, Chicago, of counsel), for appellee Director of Labor et al.

James A. Sprowl, Wesley G. Hall, and William B. Davenport, Chicago (Johnston, Thompson, Raymond & Mayer, Chicago, of counsel), for appellee Norbert J. Muller.

DAILY, Justice.

We consider here an appeal from an order of the circuit court of Cook County affirming a decision of the board of review for the Department of Labor that Pipe Trades, Inc., was, during the year 1948, an employer liable for payment of contributions under the Unemployment Compensation Act. (Ill.Rev.Stat.1947, chap. 48, pars. 217-250, incl.; S.H.A. ch. 48, §§ 217-250; Jones Ann.Stat. 45.128.) The appellant is actually Eusebius J. Biggs, who became the sole owner of Pipe Trades, Inc., in 1949, and who appears in this court pro se as the assignee of the company; the appellees are the Department of Labor, certain of its officers, and one Norbert J. Muller, whose claim for unemployment compensation precipitated the action.

The record discloses that Muller filed his claim during the benefit year which began April 1, 1949, and the deputy of the Department who processed it issued a finding that Muller had earned no wages in insured work in 1948. Muller carried the matter to the referee of the Department contending that he had earned more than $225 in wages while employed by Pipe Trades during that year and that Pipe Trades was an employer within the definition of the act. After a hearing, the referee reversed the deputy and entered a decision that Pipe Trades was an employer, that it was liable for contributions and that Muller had earned in excess of $1000 in wages during the last two quarters of 1948. Upon appeal to the Board of Review and upon administrative review in the circuit court of Cook County, the decision entered by the referee was adhered to.

Although somewhat obscured by the manner of appellant's presentation, the chief legal issue presented is whether Pipe Trades was an employer covered by the Unemployment Compensation Act. Under the statute, liability for contributions is imposed upon any individual or type of organization meeting any one of the several definitions of employer found in section 2. (Ill.Rev.Stat.1947, chap. 48, par. 218.) One such definition, contained in section 2(e)(5), is as follows: "Employer' means: * * * (5) Any employing unit which together with one or more other employing units is owned or controlled, directly or indirectly, by legally enforcible means or otherwise, by the same interests, or which owns or controls one or more other employing units directly or indirectly, by legally enforcible means or otherwise, and which if treated as a single unit with such other employing units or interests or both would be an employer under paragraph (1) of this subsection.' The paragraph referred to, which is section 2(e)(1)(B), defines 'employer' as any employing unit having six or more employees within twenty or more calendar weeks in a calendar year, and in the present case it is conceded both that Pipe Trades was an employing unit and that it did not have the work experience prescribed by the said paragraph (1). Thus, the issue presented is whether Pipe Trades was an employer within the meaning of section 2(e)(5). In approaching the facts of the case it is to be borne in mind that the words 'owned or controlled' in the section have been construed to mean 'owned and controlled' and, as thus construed, permit the combination of the employment experience of separate employing units only where they are both owned and controlled by the same interests. Todd v. Annunzio, 410 Ill. 343, 102 N.E.2d 297; McGrew Paint & Asphalt Co. v. Murphy, 387 Ill. 241, 56 N.E.2d 416, 158 A.L.R. 1229; Moriarity, Inc. v. Murphy, 387 Ill. 119, 55 N.E.2d 281.

It is the contention of appellees, and was the apparent basis for the decisions of the lower tribunals, that Pipe Trades, Inc., and the E. J. Biggs Construction Company were owned and controlled by the same interests in 1948 and that the combining of their employment experience made Pipe Trades liable for contributions. While admitting that the combined employment experience would be sufficient to render Pipe Trades liable, appellant Biggs insists that the two organizations were neither owned nor controlled by the same interests within the definition of section 2(e)(5).

The facts pertinent to the issue show that the E. J. Biggs Construction Company was incorporated in September, 1945, and engaged in business as a general contractor. It is admitted that Eusebius J. Biggs has always been in full charge of the business and he is referred to as its manager in the corporate minutes. The officers and directors from the inception of the corporation through 1948 were Cecelia G. Biggs, president and treasurer, and George W. Voltz, secretary. Twenty shares of stock representing a capitalization of $2000 were issued and during the year in question Cecelia G. Biggs held 18 of the shares, while Catherine M. Biggs and Voltz held one share each. Cecelia G. Biggs is the wife of Eusebius J. Biggs and Catherine M. Biggs is his daughter. Early in the proceedings before the referee, Biggs testified that he owned a half share of stock in the construction company but at a later appearance testified that he was in error in so stating. Other evidence was to the effect that Biggs had never invested money in the corporation, that Mrs. Biggs had inherited some money in 1944 and invested approximately $1800 in the business, and that Biggs bought his wife's stock in 1949 for $3000 by paying off a mortgage for that amount on what Mrs. Biggs terms 'her' home.

The evidence shows that Mrs. Bigg's activities in the construction company consisted of signing checks, answering the phone or meeting people in her husband's absence from the office, which was in the family residence, and the keeping of various records. The corporation paid no dividends; Mrs. Biggs received no salary; she could not testify positively whether the company had ever made a profit and she never participated in the profits except to the extent her husband benefited and provided her with a higher standard of living and met his family obligations. Biggs testified that he drew no fixed salary during the year but at the conclusion of each year would pay himself an amount commensurate with the profits. While he stated that he usually advised his wife of the amount he was drawing, that she was always agreeable and that the other stockholders did not object to the procedure, the only interpretation which can come from the facts shown is that Biggs had uncontrolled discretion in fixing the amount of his annual salary from the construction company and in the disposition of the firm's profits.

Turning now to the Pipe Trades organization, it appears that Biggs first adopted the name in approximately 1940, and used it to buy plumbing materials for construction work in which he was engaged. In December, 1945, the Construction Company had difficulty in getting subcontractors to accept its plumbing and heating work and the directors of the company resolved to communicate with one James F. Walsh, a master plumber who had subcontracted at least one job for the company, with a view to having him handle its plumbing and heating. Thereafter, on January 2, 1946, Pipe Trades, Inc., was formed and stock was issued a few days later as follows: Cecelia G. Biggs, 7 shares; James F. Walsh, 1 share; E. W. Kilgore, 1 share, and George W. Voltz, 1 share. At the first hearing before the referee, Biggs testified that he owned a half share of stock in Pipe Trades and that he did not know who owned the remaining shares. At a later hearing, he testified that the seven shares issued to his wife had been immediately assigned by her to him, and the stock certificates so reflected, but that the transfer was not recorded in the Pipe Trades books in order to conceal the true ownership of the shares from a union which had allegedly threatened him with physical violence. In explaining his previous testimony about the ownership of the shares, Biggs stated that he had forgotten about the assignment from his wife; that she had invested nothing in Pipe Trades while he had invested $700 therein; and that he paid his wife nothing for the shares assigned.

Named as officers of Pipe Trades at the time of its incorporation were E. W. Kilgore, president; James F. Walsh, vicepresident, and Cecelia G. Biggs, secretary and treasurer. Biggs likewise carried the title of manager of this corporation and, when testifying, he stated that in 1948, the firm's policies were established by the board of directors and carried out by James F. Walsh. In this respect, the record shows that Mrs. Biggs did not attend the meetings of the board or stockholders and that her sole activity in the corporation was the countersigning of its checks along with Walsh. Although the minutes do not reflect that Biggs attended such meetings, his name is frequently mentioned therein.

Pipe Trades did all of the plumbing and heating work for the E. J. Biggs Construction Company and, in addition, did plumbing work for others. All such work was done under the on-the-job supervision of Walsh, without whose master plumber's license Pipe Trades would have been unable to function. Walsh testified that Biggs gave him no orders with respect to jobs performed for others, which constituted the majority of the work, but that he did, as any general contractor would do, give him instructions with respect to work for the Biggs Construction Company. Walsh handled all estimates and matters pertaining to plumbing and testified that he consulted Biggs in some cases only about prices that should be charged for materials. For his services, Walsh...