State ex rel. Okl. Employment Sec. Com'n v. Tulsa Flower Exchange

• Decision Date: 16 March 1943
• Docket Number: 30428.
• Citation: 135 P.2d 46,192 Okla. 293,1943 OK 109
• Parties: STATE ex rel. OKLAHOMA EMPLOYMENT SECURITY COMMISSION v. TULSA FLOWER EXCHANGE et al. SAME v. TINGER.
• Court: Oklahoma Supreme Court

135 P.2d 46

192 Okla. 293, 1943 OK 109

STATE ex rel. OKLAHOMA EMPLOYMENT SECURITY COMMISSION v. TULSA FLOWER EXCHANGE et al.

SAME v. TINGER.

No. 30428.

Supreme Court of Oklahoma

March 16, 1943

Syllabus by the Court.

The Oklahoma Employment Security Act (40 O.S.1941 ch. 6) does not purport to group as affiliate businesses a corporation and the business of an individual for the purpose of imposing upon them as a single employer the tax therein provided merely because the individual owner also owns the majority stock in the corporation.

Appeal from Court of Common Pleas, Tulsa County; Wm. N. Randolph Judge.

Action by the State of Oklahoma, on relation of the Oklahoma Employment Security Commission, against Tulsa Flower Exchange, a corporation, and another, consolidated with an action by the State of Oklahoma, on relation of the Oklahoma Employment Security Commission, against G. J. Tinger, an individual doing business as Sand Springs Greenhouse, to collect taxes allegedly due under the Oklahoma Employment Security Act, 40 O.S.1941 § 211 et seq. Judgments for defendants, and plaintiff appeals.

Affirmed.

Mac Q Williamson, Atty. Gen., Randell S. Cobb, Asst. Atty. Gen and Peyton Ford and Bruton Wood, both of Oklahoma City, for plaintiff in error.

Hughey Baker, of Tulsa, for defendants in error.

GIBSON Vice Chief Justice.

The State appeals from a judgment for defendants rendered in two consolidated cases wherein the State sought to collect certain taxes allegedly due under the Oklahoma Employment Security Act (40 O. S. 1941, ch. 6).

The defendants, respectively, were Tulsa Flower Exchange, a corporation, and G. J. Tinger, an individual, doing business as Sand Springs Greenhouse. Each defendant was an "employing unit" within the meaning of the Act. 40 O.S. 1941 § 229(d). But neither employed as many as eight persons and was therefore not an "employer" subject to the tax within the meaning of the Act, sec. 229(e)(1).

Under said paragraph (1) an "employer" is defined as an employing unit which employs eight or more persons. The employing unit is not subject to the tax unless it employs eight or more persons. In other words, in order to become an employer within the Act, the employer must employ eight or more.

As stated above, neither of the defendants employed as many as eight persons, and was therefore not an employer. However, it was charged that they were so interrelated in ownership and management that the two together became an employer within the meaning of the Act, employing more than eight persons and therefore subject to the tax. The liability, the State alleges, arises by reason of paragraph (4), subdivision (e), said section 229, which reads as follows: "Any employing unit which together with one or more other employing units, is owned or controlled (by legally enforceable means or otherwise) directly by the same interest, or which owns or controls one or more other employing units (by legally enforceable means or otherwise), and which, if treated as a single unit with such other employing unit, would be an employer under Paragraph (1) of this Subsection."

The facts which allegedly make the two defendants a single employer are that the defendant Tinger as an individual owns the Sand Springs Greenhouse outright, and owns also seventy per cent of the capital stock of the Tulsa Flower Exchange, a corporation, and as such stockholder controls the corporation, which, it is said, makes the two defendants "controlled *** directly by the same interest" within the meaning of said paragraph (4).

It is shown, however, that the two businesses are operated separately and are related in no way, except Tinger controls the one outright, and exercises indirect control of the other as majority stockholder. Tinger is said to be the "interest" which controls the two "employing units" "by legally enforceable means or otherwise."

According to said paragraph (4) the control of the separate units must be "direct control", or the immediate right to enforce the right to direct control, by the same "interest" in order for the combined units to constitute a single "employer" within the meaning of the statute.

The word "control" should be accorded its full and complete meaning with due regard to the general purpose for which it was used in the statute. The statute in no way limits its meaning. The word as there used should be held to mean full power and authority to manage and direct every act, and to formulate every business policy, of the employment unit, without right of legal interference from any one with respect to all lawful pursuits.

The owner or owners of the majority of the capital stock of a corporation can never have direct control of the corporation merely by reason of such ownership. Direct control is always in the board of directors. 18 O.S. 1941 § 104. The majority stockholders may name the board of directors and thereby exercise a more or less indirect control. The board of directors can never be composed of less than three stockholders, sec 104, supra. Therefore, it is a legal impossibility for a single individual ever to acquire direct control of a corporation as a business entity.

This should be sufficient answer to every argument advanced by the State in this particular case. Tinger, by virtue of his majority stock, held certain powerful advantages, and may have exercised certain influences over the other stockholders that would border on something akin to indirect control, but he could never exercise direct control of the corporation by any "legally enforceable means or otherwise." Personal influence was the only instrument at his command in dealing with the board of directors concerning control of the corporation. It was said, however, in Gaines v. Gaines Bros. Co., 176 Okl. 583, 56 P.2d 863, 868, that "the law has always recognized the right of majority stockholders of a corporation to control its business and affairs." No authority for the statement was cited. And the statement itself was unfortunate, for our statute, supra, provides otherwise. The majority may exercise indirect control by naming the directors who actually control the corporation.

It might be said within some degree of...