State v. Mauritz-Wells Co.

Citation175 S.W.2d 238
Decision Date24 November 1943
Docket NumberNo. 8129.,8129.
PartiesSTATE v. MAURITZ-WELLS CO. et al.
CourtSupreme Court of Texas

Gerald C. Mann, Atty. Gen., and Woodrow Edwards and L. P. Lollar, Asst. Attys. Gen., for the State.

Andrews, Kelley, Kurth & Campbell and Homer Mabry, both of Houston, for Harvey Lumber & Supply Co.

Baker, Botts, Andrews & Wharton and L. G. Zinnecker, all of Houston, for Travelers Ins. Co.

Cullen B. Vance, of Edna, for Union City Transfer et al.

SHARP, Justice.

The Mauritz-Wells Company sued the Tyler Construction Company to recover a debt of approximately $1,200, and in connection with the suit sued out a writ of garnishment against the Humble Oil & Refining Company. The Humble Oil & Refining Company answered that it owed Tyler Construction Company $14,887.06 but, because numerous creditors of the Tyler Construction Company were claiming the fund, it filed a bill of interpleader, in which it asked that various parties be brought into the suit, in order that the Humble Oil & Refining Company might not run the risk of double liability. Humble Oil & Refining Company disclaimed any interest in the fund, and prayed that the parties be required to interplead and have their rights to participate in the fund determined. Among the parties named in the bill of interpleader was the Texas Unemployment Compensation Commission. In its petition of intervention the State asserted that the Tyler Construction Company owed contributions under the Unemployment Compensation Act, Vernon's Ann.Civ.St. art. 5221b — 1 et seq., in the amount of $1,272.15, which amount was claimed to be a lien on all property of the Tyler Construction Company by virtue of Article 5221b — 12 (f), Vernon's Annotated Civil Statutes. Certain of the impleaded parties were awarded the status of secured creditors by the judgment of the trial court, and were paid in full. There remained enough of the money paid into the registry of the court by the Humble Oil & Refining Company to pay the claim of the State in full, if it were paid before the unsecured creditors. However, the trial court decreed that the State occupied the position of an unsecured creditor, and that all of the unsecured creditors should share pro rata in the remainder of the fund. Although the Tyler Construction Company failed to answer in the suit, or to set up any defense or claim to the fund, there is no evidence in the record that it is insolvent or has ceased to operate. The State excepted only to that portion of the trial court's judgment refusing it priority over the claims of the unsecured creditors. Upon appeal by the State alone to the Court of Civil Appeals of the First Supreme Judicial District, the judgment of the trial court was affirmed. 170 S.W.2d 625.

It has been held that the claim of the State for contributions under the Unemployment Compensation Act is for taxes other than ad valorem taxes. Friedman v. American Surety Co., 137 Tex. 149, 151 S. W.2d 570; Lally v. State, Tex.Civ.App., 138 S.W.2d 1111. The contention of the State in this case is not that it is entitled to a lien, but to a priority over the claims of the unsecured creditors of the Tyler Construction Company. Said contention is based upon two statutes, Article 5221b — 12 and Article 7269, Vernon's Annotated Civil Statutes. Article 5221b — 12 reads in part as follows:

"(f) All contributions, penalties, and interest due by any employer to the fund shall become a lien upon all the property both real and personal of any employer, used by such employer in performing or aiding in the performance of the service which his employees have contracted to perform on his behalf. Such lien shall attach at the time any contributions or penalties or interest become delinquent as provided herein."

"(i) Priorities under legal dissolutions or distributions: In the event of any distribution of an employer's assets pursuant to an order of any court under the laws of this state, including any receivership, assignment for benefit of creditors, adjudicated insolvency, composition or similar proceedings, contributions then or thereafter due shall be entitled to the same priority as is now accorded by the General Laws of the State of Texas to other tax claims."

Article 7269 reads as follows: "In all cases where a taxpayer makes an assignment of his property for the payment of his debts, or where his property is levied upon by creditors, by writs of attachments or otherwise, or where the estate of a decedent is or becomes insolvent, and the taxes assessed against such person or property, or against any of his estate remain unpaid in part or in whole, the amount of such unpaid taxes shall be a first lien upon all such property; provided, that when taxes are due by an estate of a deceased person, the lien herein provided for shall be subject to the allowances to widows and minors, funeral expenses, and expenses of last sickness. Such unpaid taxes shall be paid by the assignee, when said property has been seized by the sheriff, out of the proceeds of sale in case such property has been seized under attachment or other writ, and by the administrator or other legal representative of decedents; and, if said taxes shall not be paid, all said property may be levied on by the tax collector and sold for such taxes in whomsoever's hands it may be found."

The Court of Civil Appeals correctly held that Article 5221b — 12 does not apply to a stakeholder's suit. It also correctly held that such statute applies to proceedings which contemplate the winding up of affairs of a business, whether corporate or unincorporated; and that the "distributions" described in such statute are only such as are ordered in (1) receiverships, (2) assignments for benefit of creditors, (3) adjudicated insolvency, (4) composition, and (5) similar proceedings. The Court of Civil Appeals correctly held that a garnishment proceeding which impounded the funds, and where the garnishee brought in claimants asserting conflicting rights as to priority of payment out of that particular fund, was not a distribution within the meaning of the statute. Article 5221b — 12 (i). This was not a distribution of an employer's assets, but was merely the determination of the priority of right to payment out of a particular fund. The statute does not deal with the priorities as to a particular fund, but deals with distribution of an employer's assets, which necessarily means a distribution of all of the employer's assets, other than exempt property.

This is made plain when the entire statute is read, because it refers to receiverships, assignments for the benefit of creditors, adjudicated insolvency, composition, or similar proceedings, as these deal, not with a few of the assets, but with all of the assets, other than exempt property. These proceedings generally have the effect of relieving the debtor from the payment of further sums. In the present instance each of the creditors, including the State of Texas, was given a judgment against the debtor for the payment of his respective claim. The distribution referred to in this statute is a distribution of an employer's assets, and not merely a determination as to who has a prior right to a particular asset. This contemplates a distribution of all of the assets. This proceeding did not constitute a distribution of this employer's assets, because, as shown by the proof, there were other assets. In addition to this, Article 5221b — 12 (f) gives the State a lien on this other property by which the State can secure its money.

It is shown by the record that the Tyler Construction Company had equipment that had been used in its operations which might have been impressed with a lien in favor of the State, but the reason for not following that procedure is not given.

Many other States have Unemployment Compensation Acts which have provisions similar to subsection (i) of the Texas Act, here in controversy, Arizona Code Ann. 1939, § 56-1014(c); Alabama Code 1940, Title 26, § 241; New York Labor Law, Consol.Laws, c. 31, § 522(6); South Carolina Code 1942, § 7035-94(f); South Dakota Code 1939, 17.0826; Remington's Washington Rev.Stat. Supp.1941, § 9998 — 114m. So far as we have been able to ascertain, the question presented in this case has not been passed upon by any court. It is held in some cases that...

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