Prudential Ins. Co. of America v. Powell

• Decision Date: 01 May 1940
• Docket Number: 456.
• Citation: 8 S.E.2d 619,217 N.C. 495
• Parties: PRUDENTIAL INS. CO. OF AMERICA v. POWELL et al.
• Court: North Carolina Supreme Court

8 S.E.2d 619

217 N.C. 495

PRUDENTIAL INS. CO. OF AMERICA v. POWELL et al.

No. 456.

Supreme Court of North Carolina

May 1, 1940

This is a proceeding under the North Carolina Declaratory Judgment Act, ch. 102, P.L.1931.

Plaintiff admitting that it is an employer within the meaning of the North Carolina Unemployment Compensation Law, ch. 1, P.L Extra Session 1936, alleges that there is a bona fide controversy between plaintiff and defendants as to its liability for contributions or taxes based upon sums paid to certain of its special agents which it contends are independent contractors.Plaintiff contends that the contracts with such special agents constitutes such special agents independent contractors, and it alleges in support thereof various facts in respect to the absence of control and the right of direction and the like.

The defendants answered and admitted that it claimed contributions based in part upon remuneration paid such special agents and other groups of agents employed by plaintiff.It further admitted the plaintiff is now paying contributions to the defendants upon the basis of remuneration paid to its managers, clerical assistants, and certain other employees.They further allege that on 19 May 1938, the defendant Commission, at the request of the plaintiff, held and conducted a hearing for the purpose of determining whether the services performed by plaintiff's soliciting agents and special agents should be deemed to be employment subject to and covered by the Unemployment Compensation Law; that a hearing at which the plaintiff was represented by counsel was duly held; and that after the introduction of evidence and argument of counsel the Commission rendered an opinion that the services performed by such agents should be deemed to be employment.

When the cause came on to be heard in the Court below, after the reading of the pleadings, the defendants demurred ore tenus to the complaint upon the grounds "that this proceeding is a proceeding against the State, and the Court does not have jurisdiction to determine or hear this action or does not have jurisdiction of the parties or subject matter and second, that the State has consented and provided a method by which the matters alleged may be adjudicated and has provided special statutory remedies.

"First, under Section 11 M of the Unemployment Compensation Law, found on page 29, whereby the Unemployment Compensation Commission may hear and determine the matters, status and all questions concerning said agents, and,

"Second, that another statutory remedy has been provided by the Legislature, the same being Section 14 E of the Unemployment Compensation Law providing, in substance, that petitioners in this cause have a right to pay the taxes claimed under protest and institute a regular action in the Superior Court to recover same from the Commission."

The Court below, being of the opinion that the proceeding is in fact an action against an agency of the State and that the State has never consented to this form of proceeding against it and being further of the opinion that the Unemployment Compensation Law provides the plaintiff with adequate statutory remedies which are exclusive, sustained the demurrer and entered judgment dismissing the action.The plaintiff excepted and appealed.

Smith, Leach & Anderson, of Raleigh, for plaintiffappellant.

Adrian J. Newton, Ralph Moody, and J. C. B. Ehringhaus, Jr., all of Raleigh, for defendantsappellees.

BARNHILL Justice.

This appeal presents for determination the one question: Is the Unemployment Compensation Commission an agency of the State and is this proceeding in fact a proceeding against the State?

The determination of this question is not affected by the fact that individual officers of the Unemployment Compensation Commission are made partiesdefendant.Their acts in respect to which the plaintiff complains were performed and are being performed in their official capacity.If the Unemployment Compensation Commission is a State agency then in essence the proceeding is against the State.16 Am.Jur. 331;North Carolina v. Temple,134 U.S. 22, 10 S.Ct. 509, 33 L.Ed. 849;Louisiana v. Steele,134 U.S. 230, 10 S.Ct. 511, 33 L.Ed. 891;Smith v. Reeves,178 U.S. 436, 20 S.Ct. 919, 44 L.Ed. 1140;Bell Telephone Co. v. Lewis,313 Pa. 374, 169 A. 571.

In section 2, ch. 1, P.L. Extra Session 1936, known as the Unemployment Compensation Law, the Legislature has declared that: "Economic insecurity due to unemployment is a serious menace to the health, morals, and welfare of the people of this State.Involuntary unemployment is therefore a subject of general interest and concern which requires appropriate action by the Legislature to prevent its spread and to lighten its burden ***.The achievement of social security requires protection against this greatest hazard of our economic life.*** The Legislature, therefore, declares that in its considered judgment the public good and the general welfare of the citizens of this State require the enactment of this measure, under the police powers of the State, for the compulsory setting aside of unemployment reserves to be used for the benefit of persons unemployed through no fault of their own."The act then creates the Unemployment Compensation Commission and vests it with authority under the provisions of the Act to accomplish the purpose thus declared, which purpose is of public interest and a proper subject matter for legislative action.

Provision is made for the assessment, levy and collection of compulsory contributions by employers as defined in the Act.The moneys thus collected are paid into the Treasury of the State and are disbursed by the Treasurer of the State on warrants duly issued by the Auditor upon requisition of the Unemployment Commission, and detailed regulations are provided for the receipt, deposit, use, investment and disbursement of said fund thus created.The members of the Commission are appointed by and are accountable to the Governor and are required to file reports and otherwise account to the State in respect to the discharge of their duties under the law.It is likewise provided that there shall be no vested private right of any kind existing as against the power of the Legislature to amend or repeal the law and "all the rights, privileges, or immunities conferred by this Act or by acts done pursuant thereto shall exist subject to the power of the Legislature to amend or repeal this Act at any time."Section 20.It seems to us that the express provisions of the Act itself, without further argument, are sufficient to clearly designate the Unemployment Compensation Commission an agency of the State.

The contributions, by whatever name designated, are not voluntary but are compulsory and constitute a tax.Nor does the fact that the Legislature has seen fit to segregate the funds derived from the collection of the contributions assessed in a special fund and for a special purpose alter this conclusion.It, in its discretion, has the power to so segregate and ear mark revenues of the State.It has done so in other instances, signally in respect to the gasoline and automobile license tax revenue.

It is axiomatic that the sovereign cannot be sued in its own courts or in any other without its consent and permission.Except in a limited class of casesthe State is immune against any suit unless and until it has expressly consented to such action....