Zehender & Factor, Inc. v. Murphy

• Decision Date: 21 March 1944
• Docket Number: No. 27618.,27618.
• Citation: 53 N.E.2d 944,386 Ill. 258
• Court: Illinois Supreme Court
• Parties: ZEHENDER & FACTOR, Inc., et al., v. MURPHY, Director of Labor.

386 Ill. 258

53 N.E.2d 944

ZEHENDER & FACTOR, Inc., et al.,

v.MURPHY, Director of Labor.

No. 27618.

Supreme Court of Illinois.

March 21, 1944.

Certiorari by Zehender & Factor, Inc., and others, petitioners, against Francis B. Murphy, Director of Labor, to review record of Department of Labor which found contributions due under Unemployment Compensation Act. From adverse judgments, petitioners appeal.

Affirmed.Appeal from Circuit Court, Cook County; Michael Feinberg, judge.

Walter F. Cunningham, of Chicago (G. A. Buresh, of Chicago, of counsel), for appellants.

George F. Barrett, Atty. Gen. (William C. Wines and Mary V. Neff, both of Chicago, of counsel), for appellee.

STONE, Justice.

This cause is here on appeal from the judgment of the circuit court of Cook county quashing a writ of certiorari sued out by appellants to review the record of the Department of Labor which found contributions due from appellants under the Unemployment Compensation Act, as follows: Zehender & Factor, Inc., $1,352.57; W. Zehender and F. G. Factor doing business as Zehender & Factor, $54; Zehender Pharmacy, Inc., $128.77.

The cause comes on through usual notice by the Department of Labor followed by protests of appellants that they were not employers or employing units within the purview of the Unemployment Compensation Act. Ill.Rev.Stat.1943, chap. 48, par. 218. After hearing appellants filed further objection that no showing was made that appellants employed the requisite number of employees; that no employee or former employee had ever applied for benefits, and that time for making such application had long since expired. It is also urged that the assessment was taking private property without due process of law, in violation of the Constitution of the United States and that paragraph (5) of subsection (e) of section 2 of the act is unconstitutional and void. The court held valid the provision of the act questioned, quashed the writ of certiorari and entered the judgments against appellants in the sums indicated.

It appears from the record that Zehender Pharmacy, Inc., was incorporated in 1932 and operated a drugstore until 1937, when the business was sold to one W. Stengle. The corporation was dissolved in 1938 and distribution was made to stockholders, as follows: W. Zehender 219 shares, Fred Factor 219 shares, Gilbert Keebler 300 shares, a Mr. Kozak 10 shares, and the wives of Zehender and Factor each one share. In 1937 the corporation had two employees. Zehender & Factor, Inc., was incorporated in December, 1928, as Thesen & Zehender, Inc., and its name was changed to Zehender & Factor, Inc., in July, 1937. This corporation operated a drugstore until 1939 when W. Zehender and F. G. Factor took over the business and operated it as a copartnership. The corporation was dissolved December 30, 1939. In 1937 the corporation had an authorized capital stock of 200 shares, of which Zehender owned 100 shares, Factor 99 shares and Factor's brother one share.

It is argued here (1) that the Unemployment Compensation Act levies taxes and must be strictly construed as other tax statutes and (2) that the act is unconstitutional in its entirety as being in violation of various sections enumerated; that subsection 2(e)(5) is void in that it violates section 2 of article II and sections 1 and 2 of article IX of the Illinois Constitution, Smith-Hurd Stats., and the Fifth and Fourteenth Amendments to the Constitution of the United States. Appellants' counsel seek to argue in their briefs the invalidity of various sections of the statute. It appears from the record, however, that the only section as to which a constitutional question was raised in the trial court, and passed upon by it, was subsection 2(e)(5). It has been many times held by this court that the question of the constitutionality of a statute cannot be properly raised for the first time in this court, but must have been called to the attention of the trial court and ruled upon by it, and the person challenging its validity must have preserved proper exceptions to such rulings. McNeil & Higgins Co. v. Neenah Cheese & Cold Storage Co., 290 Ill. 449, 125 N.E. 251;Moses v. Royal Indemnity Co., 276 Ill. 177, 114 N.E. 554;Cummings v. People, 211 Ill. 392, 71 N.E. 1031. Assignments of error must be based upon the record itself and not merely upon arguments of counsel or upon the fact that the question might have been raised in the pleadings or during the trial. City of Sullivan v. Central Illinois Public Service Co., 287 Ill. 19, 122 N.E. 58;People v. Cannon, 236 Ill. 179, 86 N.E. 215.

The record in this case shows that subsection 2(e)(5) was the only section of the statute attacked on constitutional grounds in the trial court or passed upon by that court. Appellants argue that they are endeavoring to demonstrate the invalidity of the entire act in order to show that subsection 2(e)(5) is invalid. We are not impressed with that type of argument. If they had desired to challenge the validity of other sections of the act, they could very readily have done so, but can scarcely hope at this time to bring before the court their objections to sections of the act which were not objected to and passed upon in the court below.

Subsection 2(e)(5) declares an employer to be: ‘Any employing unit which together with one or more other employing units, is owned or controlled, directly or indirectly, by legally enforceable means or otherwise, by the same interests, or which owns or controls one or more other employing units directly or indirectly, by legally enforceable means or otherwise, and which if treated as a single unit with such other employing units or interests or both would be an employer under paragraph (1) of this subsection.’ Appellants contend that the act is a taxing statute and therefore all parts are to be strictly construed in favor of the taxpayer. If the act is taxing statute, authorities cited by appellants, holding that such acts are to be construed strictly, are in point. Cooley in his work on Taxation, volume 1-2, defines taxes as ‘the enforced personal contributions of persons and property, levied by the authority of the state, for the support of the government and for all public needs. They are the property of the citizen, demanded and received by the government, to be disposed of to enable it to carry into effect its mandates and discharge its manifold functions.’ The Unemployment Compensation Act declares its policy and moving purpose to be to alleviate the evils flowing from wide-spread unemployment and to provide benefits to those workers coming within the act as at least a partial reimbursement for loss of income during periods of unemployment. Section 23(a) of the act, Ill.Rev.Stat.1943, chap. 48, par. 240(a), provides that the money collected under the act shall be kept separate and apart from all public monies of the State by the State Treasurer, who is made the custodian thereof, and that the act shall be administered by the Director of Labor exclusively for the purpose of the act. In Oak Woods Cemetery Ass'n v. Murphy, 383 Ill. 301, 50 N.E.2d 582, this court declared this statute to be an exertion of the police power of the State, holding that relief of unemployment is a public purpose and that the act is remedial. On this same principle it has been held that acts which may be regarded as enacted in the interest of public welfare and providing for assistance of the unemployed, are entitled to receive liberal interpretation. Maine Unemployment Comp. Comm. v. Androscoggin Junior, Inc., 137 Me. 154, 16 A.2d 252;New Haven Metal & Heating Co. v. Danaher, 128 Conn. 213, 21 A.2d 383;Young v. Bureau of Unemp. Comp., 10 S.E.2d 412;Singer Sewing Machine Co. v. State U. C. Comm., 167 Or. 142, 103 P.2d 708,116 P.2d 744, 138 A.L.R. 1398. Illinois remedial legislation has heretofore been regarded as entitled to liberal construction even though it requires involuntary contributions to maintain it. Grand Trunk Western R. Co. v. Industrial Comm., 291 Ill. 167, 125 N.E. 748;Chicago, W. & V. Coal Co. v. People, 181 Ill. 270, 54 N.E. 961,48 L.R.A. 554;Consolidated Coal Co. v. Illinois, 185 U.S. 203, 22 S.Ct. 616, 46 L.Ed. 872.

While we are not inclined to quibble over the distinction between contributions and the assessment of payments, we are of the opinion that the amounts required to be paid do not come within the classification of general taxation, and that the statute is not a taxing statute and is entitled to liberal construction to the end that its purposes may be met.

It is next contended that subsection 2(e)(5) is indefinite in that it does not refer to any generally accepted body of precedents, standards of conduct or grounds of common knowledge or understanding upon which it may be based, and specifically that the act does not define the meaning of the terms ‘controlled, directly or indirectly,’ or ‘legally enforceable means or otherwise,’ or ‘by the same interests.’ It is also argued that contributions assessed by the Director, which have developed into judgments entered by the court against appellants are not based on the amount of property which each corporation owns, nor the number of shares of stock, nor on the nature of business conducted, nor on the number of employees of each separate corporation, but that each corporation is assessed because the combined employees of two independent corporations are equal to the number of employees required to bring an employer under the statute, and this because each corporation is owned by certain individuals, while other corporations employing an equal total number of persons are not taxed because their stock is owned by different individuals. Appellants' counsel argue that each corporation is an entity and, under the Constitution, is each a person and entitled to equal protection of the laws with other corporations of like...