Unemployment Comp. Comm'n Of North Carolina v. Jefferson Standard Life Ins. Co, 449.

• Citation: 2 S.E.2d. 584,215 N.C. 479
• Decision Date: 03 May 1939
• Docket Number: No. 449.,449.
• Court: United States State Supreme Court of North Carolina
• Parties: UNEMPLOYMENT COMPENSATION COMMISSION OF NORTH CAROLINA. v. JEFFERSON STANDARD LIFE INS. CO.

2 S.E.2d. 584
215 N.C. 479

UNEMPLOYMENT COMPENSATION COMMISSION OF NORTH CAROLINA.
v.
JEFFERSON STANDARD LIFE INS. CO.

No. 449.

Supreme Court of North Carolina.

May 3, 1939.

[2 S.E.2d. 585]

BARNHILL and SCHENCK, JJ., dissenting.

Appeal from Superior Court, Wake County; Hubert E. Olive, Special Judge.

Action by the Unemployment Compensation Commission of North Carolina against the Jefferson Standard Life Insurance Company to recover contributions due the unemployment compensation fund on commissions paid by defendant to its soliciting agents. Judgment for plaintiff, and defendant appeals.

Affirmed.

This is a civil action to recover alleged contributions due the unemployment compensation fund upon the commissions paid by defendant to its soliciting agents and its managers in their capacity as soliciting agents. Upon specific waiver of a jury, the judge found the facts.

To the following findings of fact there were no objections or exceptions: That defendant is a member of the Federal Home Loan Bank of Winston-Salem but has never availed itself of this source of

[2 S.E.2d. 586]

credit, nor has it ever discharged any functions or duties of the Bank or of the Government by reason of its membership in said Bank; that the typical agent and the typical manager (in his capacity as soliciting agent) of defendant are under written contracts to defendant, are required to give bonds satisfactory to defendant, are subject to direction as to territory and as to duties, are required to perform such further duties as may be assigned by the defendant, are required to devote their full time, talents and energies to defendant's business, and are prohibited from soliciting insurance for any other company without defendant's written permission. From ample evidence, but over defendant's objection, the judge found: That the soliciting agents and managers (in their capacities as soliciting agents) are required to deliver policies in accordance with defendant's instructions in its manuals furnished to them by defendant; that defendant furnishes such agents and managers account books, vouchers, and other books and papers necessary for their work and all such books, papers, etc, remain the property of defendant, subject to its inspection at any time and subject to be returned upon termination of the contract; that the soliciting agents and managers (in their capacities as agents) are governed strictly by instructions given them by defendant at the time of the making of the contract and thereafter, and are at all times held to strict compliance with the conditions of the contracts, which may be terminated by either party on ten days written notice; that defendant's agents are under the supervision and control of defendant's managers; that defendant furnishes desk space to its soliciting agents in all its offices and the agents and managers (as agents) use this space in performing part of their duties for defendant; that defendant advances money to its agents and district managers to aid them in conducting their business of soliciting for defendant; that education and recreational meetings for the agents are held by defendant and their expenses, generally, at such meetings are paid by defendant; "that the services performed by the soliciting agents and managers in their capacity as soliciting agents is a necessary and integral part of the business in which the defendant is engaged and for which it was originally chartered; and further that said agents are not customarily engaged in an independently established trade, occupation, profession or business."

Based upon the above, and other, findings of fact, the trial judge concluded, as a matter of law that the defendant was not, by reason of its membership in the Federal Loan Bank of Winston-Salem, an instrumentality of the United States such as is exempt from the provisions of the Unemployment Compensation Law, Pub.Laws 1936, Ex.Sess, c. 1, as amended; and, further, that the employment of the soliciting agents and the district managers (as soliciting agents), and the remuneration paid them, is such as to bring them under the provisions of the Unemployment Compensation Law and thus require defendant to make proper contribution for such purpose. From a judgment to this effect, defendant appealed, assigning as its principal errors the two conclusions of law indicated above.

Smith, Wharton & Hudgins, of Greensboro, for appellant.

Adrian J. Newton, Ralph Moody, and J. C. B. Ehringhaus, Jr., all of Raleigh, for appellee.

CLARKSON, Justice.

Two questions are decisive of this appeal: (1) Is the membership of a North Carolina insurance corporation in the Federal Home Loan Bank of Winston-Salem sufficient to constitute the corporation such an instrumentality of the United States as to exempt it from the provisions of the N. C. Unemployment Compensation Law, Pub.Laws 1936, Ex.Sess. c. 1? We think not. (2) Does the relationship between defendant and its soliciting agents and managers (in their capacity as soliciting agents) constitute "employment", and the compensation paid them constitute "wages" and "remuneration", as those terms are defined and used in the N.C. Compensation Law? We think so.

(1) Home Loan Bank Member as Federal Instrumentality. In Capitol Building & Loan Ass'n et al. v. Kansas Commission of Labor and Industry, 148 Kan. 446, 83 P.2d 106, 112, 118 A.L.R. 1212, recently decided, a building and loan association sought exemption from a state unemployment compensation act by reason of its membership in a Federal Home Loan Bank. In a clear and logical opinion speaking to the subject, it is stated: "Tested by all the light the diligence of counsel for the litigants has supplied us, as well as by our own researches, we do not regard the plaintiffs' mere stockholder membership in the

[2 S.E.2d. 587]

Federal Home Loan Bank of Topeka, with the privileges and duties attendant on that relationship, as sufficient to constitute them federal instrumentalities, nor to relieve them from making contributions to the unemployment compensation fund created by the statute of 1937."

Although we recognize that, as stated in Metcalf & Eddy v. Mitchell, 269 U.S. 514, 522, 46 S.Ct. 172, 174, 70 L.Ed. 384, "Just what instrumentalities of either a state or the federal government are exempt from taxation by the other cannot be stated in terms of universal application, " we think that the conclusion in the Capitol Building &. Loan Ass'n case, supra, indicates the sound view in the instant case. We agree with the view indicated in Clallam County v. United States, 263 U.S. 341, 44 S.Ct. 121, 68 L.Ed. 328, that there is a very real distinction between the creation of an agency primarily and fundamentally to discharge a function of the Federal government and the grant of incidental powers, functions or duties of the Federal government to, a private enterprise existing primarily for profit. See the opinion by Justice Holmes, Clallam County v. United States, 263 U.S. 341, 344, 44 S.Ct. 121, 68 L.Ed. 328. A similar distinction was recognized in Federal Land Bank v. Priddy, 295 U.S. 229, 233, 234, 55 S.Ct. 705, 706, 707, 79 L.Ed. 1408, where it was pointed out that, although Federal Land Banks are "instrumentalities of the federal government", "joint-stock land banks are privately owned corporations, organized for profit to their stockholders through the business of making loans on farm mortgages" and "there is nothing in their organization and powers to suggest that they are government instrumentalities". Again, in Federal Compress & Warehouse Co. v. McLean, 291 U.S. 17, 54 S.Ct. 267, 269, 78 L.Ed. 622, a private warehouse business sought to escape state taxation on the ground that it had been licensed, for the storage of agricultural products by the Federal government; in answer to this the Court said: "It can no longer be thought that the enjoyment of a privilege conferred by either the national or a state government upon the individual, even though to promote some governmental policy, relieves him from the taxation by the other of his property or business used or carried on in...