Swayne v. Department of Employment

• Decision Date: 26 June 1969
• Docket Number: No. 10322,10322
• Citation: 93 Idaho 101,456 P.2d 268
• Parties: Samuel F. SWAYNE dba Orofino Mobile Village, Plaintiff-appellant, v. DEPARTMENT OF EMPLOYMENT, Defendant-Respondent.
• Court: Idaho Supreme Court

Page 268

456 P.2d 268

93 Idaho 101

Samuel F. SWAYNE dba Orofino Mobile Village, Plaintiff-appellant, v.DEPARTMENT OF EMPLOYMENT, Defendant-Respondent.

No. 10322.

Supreme Court of Idaho.

June 26, 1969.

Swayne & McNichols, Orofino, for appellant.

Robert C. Youngstrom, Boise, for appellee.

SPEAR, Justice.

The issue presented by this case is whether a certain lease agreement, to which the appellant is a signatory, gives the appellant control of the lessee's activities so as to constitute the lessee an employee within the terms of I.C. § 72-1316.¹

The undisputed evidence in this case indicates that sometime prior to August 1, 1965, the appellant, Samuel F. Swayne, entered into an agreement to sell to his son, S. David Swayne, a certain piece of property in Orofino, Idaho.The property was, through the efforts of David Swayne and his wife, at least partially converted into a mobile home court.

Subsequently, David Swayne decided to return to school at the University of Idaho, in Moscow, Idaho.In contemplation of the move, the lease agreement in question was executed.The agreement was a tripartite one, made and entered into between Samuel Swayne and his wife as 'owners'; David Swayne and his wife as 'purchasers,' also referred to in the lease agreement as 'lessors'; and Virginia J. Turner, a femme sole, as 'lessee.'The lease was to run from the first day of August, 1965, until the first day of August, 1968.The compensation arrangement was as follows:

'The rental of the said premises shall be on a share of the proceeds basis, to-wit: The said lessee shall receive a sum of Three Dollars ($3.00) for each space rental of Twenty-Five Dollars ($25.00) collected, and the further sum of Fifty Cents ($50) per space for each additional $5.00 increase in the rental charged and collected; the purchasers shall receive the sum of Eight Dollars ($8.00) per space rental collected as rental for their equity, and the owners shall receive all of the rest of the receipts and income from the business.Out of the remainder income paid to the owners they will pay all expenses of the business and apply the overplus, if any, to the unpaid balance of the purchase price and interest of that certain contract of purchase between the owners and the purchasers herein.

'It is further agreed that no charge shall be made to the lessee for one trailer space for her own use and occupancy and as an office, nor for water, electricity, business telephone, gas or TV used in connection therewith.'

The lessors made certain general covenants such as to keep the lessee in quiet and peaceful possession, and to properly co-operate with the lessee 'in all matters requiring any act on the part of the lessors during the term of (the) lease.'

The lessee agreed to incur no indebtedness for capital improvements in excess of $300.00 without the consent of the owners.She also made several covenants with respect to the maintenance and operation of the trailer court business.She was to collect rentals and utility charges and deposit them in a specific bank; keep accurate account of receipts and disbursements; before the 15th of each month submit an income and expense statement; provide for necessary care and maintenance of the grounds and facilities; supervise any construction or improvements; maintain the rules and order of the court; read meters and keep account of the utilities; provide a substitute manager if she were to be away from the premises temporarily; prohibit the accumulation of trash and filth; and prohibit undesirable activites.In addition, she promised not to abandon the premises before the expiration of the lease without adequate notice to the lessors.She was prohibited from subletting or assigning the lease without the consent of the lessors.Finally, she was prohibited, without the consent of the owners, from incurring any expense or lienable charge against the business, other than the usual month-to-month ordinary expenses, in a sum in excess of $300.00.

The lease further provided that in the event of any disagreement between the parties, the matter would be submitted to arbitration for resolution.The last clause in the agreement stated:

'It is further agreed that payment of $3.00 per space, per month, for any space rentals collected shall constitute reimbursement for personal services and management of the business and no deductions shall be made therefrom for expenses in the operation of the business.'

According to the undisputed testimony of the appellant and the successor lessee, Mrs. Lucy L. Wallace, this lease worked in practice substantially as set forth in the agreement.The manager-lessee obtained the necessary services for maintenance and upkeep of the premises.She made the checks out for the business expenses and they were signed by the appellant.Mrs. Wallace furnished and maintained office and other equipment which she used in the performance of her duties.There was no direct supervision whatsoever by either appellant or his son, the lessor.It was the lessee's obligation to see that the trailer court occupancy was maintained at full capacity.She had, and exercised, the right to rent spaces and to terminate rentals.

On the basis of these facts, the Appeals Examiner, in a decision later affirmed by the full Board, decided that this was covered employment.The Appeals Examiner cited I.C. § 72-1316(a) and (d) as well as the Minnesota case of Rochester Dairy Co. v. Christgan, 217 Minn. 460, 14 N.W.2d 780(1944), as the basis for his decision.The Examiner stated that it was the right to control, not actual control, which was material and held that the agreement between the parties was not in fact a lease.The Examiner felt that the appellant still maintained control of the expenses of the business, whereas a true lease would have given control of expenses to the lessee.Furthermore, the Examiner was of the opinion that an individual (in this case the lessee) who was not liable for expenses or subject to the losses which the business might incur could not be considered an operator of the business.Apparently the appellant never provided for the eventuality of losses in the lease, since expenses were directly proportional to income.Very little fixed expense was involved in the operation or maintenance of the property, other than property taxes.Furthermore, it should be noted that the lessee's income was directly proportional to the number of trailer spaces which she rented.

Appellant contends that to be an employer one must be in the business as a proprietor and an operator for one's own pecuniary gain.He maintains that the division of rental income does not constitute the payment of wages.He further argues that the parties must have intended to establish an employer-employee relationship and in order for appellant to be adjudged an employer he must have had the right to control the manner, method and detail of accomplishment of the lessee's work in this case.Appellant relies heavily on the aspect of the right to terminate.He argues that in a case such as this, where the relationship is for a fixed time and neither party can terminate it without liability, the relationship is that of lessee-lessor rather than employee-employer.Finally, he argues that where the lessee furnishes at least some of his or her own equipment, such as a car and office equipment as in this case, there is a strong indication of a lessee-lessor relationship rather than that of an employee-employer.

Respondent urges that the latest amendment of I.C. § 72-1316(d) has broadened the scope of that provision.We agree that in one respect I.C. § 72-1316(d) has been broadened by requiring that a non-employee be both free from control and engaged in independently established business.However, the latest expression of legislative will on...