Ray Schools-Chicago, Inc. v. Cummins, SCHOOLS-CHICAG

CourtSupreme Court of Illinois
Citation12 Ill.2d 376,146 N.E.2d 42
Docket NumberSCHOOLS-CHICAG,No. 34529,I,34529
PartiesThe RAYnc., Appellee, v. Roy F. CUMMINS, Director of Labor, et al., Appellants.
Decision Date20 November 1957

Latham Castle, Atty. Gen. (William C. Wines, Raymond S. Sarnow, and A. Zola Groves, Chicago, of counsel), for appellants.

McKeown, Trussell & Bolland, Chicago (Edward P. McKeown, and Raymond J. Boland, Chicago, of counsel), for appellee.

DAILY, Justice.

Claims for unemployment benefits filed by three former employees of appellee, The Ray Schools-Chicago, Inc., a nonprofit corporation organized under the laws of Illinois provoked the question of whether, for the calendar year 1950, appellee was a corporation operated exclusively for educational purposes, no part of whose net profits inured to the benefit of any private shareholder or individual, so as exempt it from making employer contributions under the Unemployment Compensation Act. See Ill.Rev.Stat.1949, chap. 48, par. 218(f)(6) (A)(5), (G). Deputies for the Division of Unemployment Compensation found the claimants were eligible for benefits, and appellee appealed to the hearings referee of the Department of Labor on the ground that money earned in its employ in 1950 did not qualify one for benefits, inasmuch as employment in its service was exempt under the statute. The referee concluded appellee was operated exclusively for educational purposes but denied exemption because its operation failed to satisfy the further requirement of the statute that no part of its net earnings inure to the benefit of any private shareholder or individual. The department's board of review affirmed such finding, whereupon appellee filed a complaint for administrative review in the circuit court of Cook County joining the Director of Labor as a party defendant. The circuit court reversed the administrative decision and this direct appeal for further review has been brought by the director, the board of review, and the benefit claimants.

We are first met with the question of whether appellee is an institution operated exclusively for educational purposes within the meaning of the exemption provision of the Unemployment Compensation Act. The trial court refused to pass upon the merits of such issue, indicating, by means of a written opinion, his belief that the finding of the board of review was perhaps binding on appellants and that he considered a decision rendered by a Federal bankruptcy referee in 1944 to be res judicata or estoppel by judgment on the question of appellee's exemption. Inasmuch as we have held that an erroneous construction of a statute by an administrative agency is not binding on the courts (Baptista Films v. Cummins, 9 Ill.2d 259, 265, 137 N.E.2d 393; Winakor v. Annunzio, 409 Ill. 236, 248, 99 N.E.2d 191), the board's construction that appellee is an educational institution is no barrier to our further construction of the statute. However, whether the doctrines of res judicata and collateral estoppel should operate to deny the present benefit claimants their day in court, and to foreclose our authority to construe the statutes of this State, is not so readily concluded.

Pertinent facts show appellee instituted a proceeding in a Federal district court in 1941 to reorganize under the provisions of the Bankruptcy Act. During its course, Francis B. Murphy, then the Illinois Director of Labor, filed a claim for unemployment contributions owing by appellee to the State for the years 1937 through 1943. The claim was disallowed by the referee in bankruptcy who found, after a hearing, that appellee was organized and operated exclusively for literary and educational purposes and was thus, 'within the meaning of Chapter 48, Section 218, Illinois Revised Statutes 1943,' exempt from the payment of all unemployment compensation taxes. No appeal was taken by the Director of Labor. By theorizing that Francis B. Murphy appeared in the bankruptcy proceeding as a class representative of all its employees who might claim unemployment compensation benefits, appellee asserts that the present proceeding is but a relitigation of its exempt status by the same parties, or their privies, which is barred under the doctrine of res judicata.

In the early case of Markley v. People ex rel. Kochersperger, 171 Ill. 260, 49 N.E. 502, 503, the court asid: 'Where the former adjudication is relied upon as an absolute bar, there must be, as between the two actions, identity of parties, of subject-matter, and cause of action.' Under the facts of the present case we do not find that the identity of the parties or the cause of action is the same. This is a cause of action by employees to collect benefits from the unemployment compensation fund; the cause in the bankruptcy court, on the other hand, was a claim by the State for an employer's contribution to the fund. Viewed from a standpoint of time, the former action concerned liability for unemployment taxes for the years 1937 through 1943; the present action concerns appellee's liability for such taxes for the year 1950. As recently as Chicago Historical Society v. Paschen, 9 Ill.2d 378, 137 N.E.2d 832, we reiterated the finding of People ex rel. Llcyd v. University of Illinois, 357 Ill. 369, 192 N.E, 243, that a cause of action for taxes for one year is not the same as or identical with a cause of action for taxes for subsequent years. This was also the view of the court in Henricksen v. Seward, 9 Cir., 135 F.2d 986, 150 A.L.R. 1, where an erroneous judgment that the taxpayer was not a manufacturer, and hence was entitled to recover excise taxes paid under protest, was held not to be res judicata in the taxpayer's action to recover taxes for subsequent periods, even though there was no appeal from the judgment in the first action. The philosophy of that court was that res judicata, as applied in tax litigation, is sufficiently elastic to permit of the balancing of conveniences and the weighing of other considerations as against that of desired repose. Other considerations in the present case show that the parties claiming benefits were not parties to the action in the bankruptcy court, and were we to hold them bound by that proceeding merely because the Director of Labor was a party, the effect would be to deny them their day in court on their claim. Because of the dissimilarity of parties and causes of action, it is our opinion that neither the doctrine of res judicata nor collateral estoppel may be applied.

Nor can it be said that the construction placed by the referee upon the exemption provision of the Unemployment Compensation Act, viz., that appellee is a corporation operated exclusively for educational purposes within the meaning of the act, is binding upon us. When a statute has been judicially construed by the highest court having jurisdiction to pass on it, such a construction is as much a part of the statute as if plainly written into it originally, particularly where the meaning of such statute is in issue in a court of another jurisdiction. Guaranty Trust Co. of New York v. Blodgett, 287 U.S. 509, 53 S.Ct. 244, 77 L.Ed. 463; Gulf, Colorado & Santa Fe R. Co. v. Moser, 275 U.S. 133, 48 S.Ct. 49, 72 L.Ed. 200; 50 Am.Jur., Statutes, ses. 221; 21 C.J.S. Courts § 214. Where a statute has not been construed by the courts of the State in which it was enacted, a court of another jurisdiction in which a question with respect to the effect of such statute arises may place its own construction thereon. However, such construction is no authority as precedent in the courts of the State where the statute was enacted. Commercial Investment Trust v. Eskew, 126 Misc. 114, 212 N.Y.S. 718; 21 C.J.S. Courts § 204 b; also see Western Life Indemnity Co. of Illinois v. Rupp, 235 U.S. 261, 35 S.Ct. 37, 59 L.Ed. 220. Still other cases hold that where Federal questions are not involved, as where State constitutions and statutes are to be construed, State courts are not required to follow Federal court decisions although they may be persuasive. State Public Utilities Commission ex rel. Quincy R. Co. v. City of Quincy, 290 Ill. 360, 125 N.E. 374; Lewis v. Braun, 356 Ill. 467, 191 N.E. 56; and cases cited at 21 C.J.S. Courts § 205. Thus it is held that State courts are free to decide for themselves all questions of the construction of State constitutions and statutes and are not bound by the construction arrived at by a Federal court, even though that court is the Supreme Court of the United States. Ryerson & Son v. Peden, 303 Ill. 171, 135 N.E. 423, 24 A.L.R. 1273; Gourley v. Chicago & Eastern Illinois R. Co., 295 Ill.App. 160, 14 N.E.2d 842; Parsons v. Federal Realty Corp., 105 Fla. 105, 143 So. 912, 88 A.L.R. 275; 14 Am.Jur., Courts, sec. 121; also compare Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188; West v. American Telephone & Telegraph Co., 311 U.S. 223, 61 S.Ct. 179, 85 L.Ed. 139; Fidelity Union Trust Co. v. Field, 311 U.S. 169, 61 S.Ct. 176, 85 L.Ed. 109. Particularly demonstrative of this principle is Smithpeter v. Wabash R. Co., 360 Mo. 835, 231 S.W.2d 135, 143, 19 A.L.R.2d 950, where the Missouri Supreme Court, in refusing to follow the construction placed upon a Missouri statute by the United States District Court for the State, concluded as follows: 'It is our duty to construe Missouri statutes and declare the law of this state. Missouri statutes...

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