Texas Unemployment Compensation Com'n v. Bass

• Decision Date: 09 April 1941
• Docket Number: No. 7795.,7795.
• Citation: Texas Unemployment Compensation Com'n v. Bass, 151 S.W.2d 567, 137 Tex. 1 (Tex. 1941)
• Parties: TEXAS UNEMPLOYMENT COMPENSATION COMMISSION et al. v. BASS et al.
• Court: Texas Supreme Court

151 S.W.2d 567

TEXAS UNEMPLOYMENT COMPENSATION COMMISSION et al. v.BASS et al.

No. 7795.

Supreme Court of Texas.

April 9, 1941.

Motion for Rehearing Overruled June 4, 1941.

Writ of error from Court of Civil Appeals for Eleventh Supreme Judicial District of Texas.

Suit by H. J. Bass and others against the Texas Unemployment Compensation Commission and others to enjoin the defendants permanently from collecting, or attempting to collect, from any of the plaintiffs, contributions or taxes claimed by the Texas Unemployment Compensation Commission to be due from the plaintiffs as an employer under the Unemployment Compensation Act, wherein the Texas Unemployment Compensation Commission filed a cross-action to recover contributions or taxes the recovery of which was sought to be enjoined.From a judgment in favor of the plaintiffs, the defendants appealed to the Court of Civil Appeals.To review a judgment of the Court of Civil Appeals, 142 S.W.2d 406, affirming the judgment, the defendants bring error.

Judgments of the Court of Civil Appeals and of the district court affirmed.

Gerald C. Mann, Atty. Gen., and Geo. W. Barcus, Morris Hodges, and Ocie Speer, Asst. Attys.Gen., for plaintiffs in error.

McMahon, Springer & Smart, of Abilene, for defendants in error.

Saner, Saner & Jack, of Dallas, amici curiæ.

CRITZ, Justice.

Three partnerships in Abilene, Taylor County, Texas, filed this suit in the district court of such county against the members of the Texas Unemployment Compensation Commission to permanently enjoin them from collecting, or attempting to collect, from such partnerships, or any of them, or from any of the copartners forming such partnerships, contributions or taxes claimed by the Commission to be due by such partnerships as an "Employer" under the Unemployment Compensation Act of this State.Such Act is now carried in the pocket supplement of Vernon's Annotated Civil Statutes of Texas as Articles 5221b—1 to 5221b—22, both inclusive.The Commission answered to the merits, and also filed cross-action to recover the contributions or taxes sought to be enjoined.Trial in the district court was before the court without the intervention of a jury, and resulted in a judgment enjoining the Commission from collecting, or attempting to collect, the taxes asserted by it.Also the judgment decreed that the Commission take nothing on its cross-action.This judgment was affirmed by the Eastland Court of Civil Appeals.Carpenter v. Bass, 142 S.W.2d 406.This Court granted writ of error on the application of the Commission.

The facts of this case are undisputed— only law questions are involved.

The three partnerships operate three retail drug stores in the City of Abilene in this State.Each of these stores is operated as a separate business and occupies a separate building.These buildings are in different parts of the city.The three partnerships operate respectively under the names of McLemore-Bass Drug CompanyNo. 1, McLemore-Bass Drug CompanyNo. 2, andMcLemore-Bass Drug CompanyNo. 3. H. J. Bass, J. B. Ray, and Mrs. A. P. McLemore, a feme sole, compose the No. 1 partnership.The same three partners who own No. 1 and one additional partner, George D. Graves, own No. 2.The same three partners who own No. 1 and one additional partner, H. K. Bass, own No. 3.As we understand this record, H. J. Bass, J. B. Ray, and Mrs. A. P. McLemore own all of No. 1, one-third each.The three partners who own all of No. 1 also own one-fourth each of No. 2, and George D. Graves owns the other one-fourth.The three partners who own all of No. 1 and three-fourths of No. 2 also own three-fourths of No. 3, and H. K. Bass owns the other one-fourth.It is thus seen that the same three partners together own all of No. 1 and three-fourths of Nos. 2 and 3.

It appears that No. 1 is in the active and exclusive control of J. B. Ray.He is the managing partner, and his rights as such exist by virtue of a contract between all three partners, entered into at the inception of such partnership.No. 2 is in the active and exclusive control of George D. Graves under the same circumstances and conditions that apply to J. B. Ray regarding No. 1. No. 3 is in the active and exclusive control of H. K. Bass under the same circumstances and conditions that apply to J. B. Ray regarding No. 1 and George D. Graves regarding No. 2.The three partnerships are operated independently of each other in every particular, and there is no contention of any fraudulent intent of the parties to evade these taxes in their formation and conduct.

It appears that no one of these partnerships employs as many as eight employees, but the three partnerships together employ more than eight.An employer who does not employ eight or more employees does not come under our Unemployment Compensation Act.It thus appears that whether or not these three partnerships owe the taxes here involved depends on whether or not under our Unemployment Compensation Law the three partnerships comprise one employer.If they do, the taxes are due; if they do not, the taxes are not due.

Article 5221b—17(f)(4) provides:

"`Employer' means

* * * * *

"Any employing unit which together with one or more other employing units, is owned or controlled (by legally enforceable means or otherwise) directly or indirectly 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."

Article 5221b—17(e) defines "Employing unit" as meaning "any * * * type of organization, including any partnership * * * which has * * * in its employ one or more individuals performing services for it within this State."

Article 5221b—17(f)(1) provides that "Employer" means "Any employing unit which * * * has * * * in employment eight (8) or more individuals * * *."

Under the provisions of Article 5221b—17 (f)(4), above quoted, "Employer" means "Any employing unit which together with one or more other employing units, is owned or controlled (by legally enforceable means or otherwise) directly or indirectly by the same interest, * * *."It will be noted that under this statute if more than one employing unit is controlled directly or indirectly by the same interest, the combined units constitute one employer.If such combined units, "controlled" by the "same interest," employ eight or more employees, they come under our Unemployment Compensation Statutes, and therefore come under the taxes thereby imposed.If these three partnerships are under the control of the same interest within the meaning of the above-quoted statute, these taxes are owing.If they are not under such...