Summary
awarding costs against the Unemployment Compensation Commission was in error because the commission was "merely representing the state" in the case
Summary of this case from State v. CoxOpinion
No. 37803.
January 29, 1943.
1. AGENCY: Real Estate Managing Company Held Independent Contractor And Not Agent of Owner of Apartment. The Byron Company owned an apartment building which was managed by the Hartwig Company, a real estate company. The Byron Company exercised no control over the manner in which the Hartwig Company managed the building, but merely received a check for the net profits. The Hartwig Company took a commission on the gross profits. It acted as an independent contractor and not as the agent of the Byron Company.
2. UNEMPLOYMENT COMPENSATION: Findings of Commission Binding. The finding of facts made by the Commission is supported by substantial competent evidence and is binding upon the Supreme Court.
3. AGENCY: Master and Servant: Undisclosed Agency Not Binding on Employee Hired by Agent: Employee May Treat Either Party as Employer. Even if it were held that the Hartwig Company was an agent of the Byron Company, this fact was not disclosed to the apartment janitor at the time he was hired by Mueller, an employee of the Hartwig Company. The janitor had the right, at his election, to treat either the Hartwig Company or the Byron Company as his employer. This right is unchanged by the fact that when he was employed by Mueller he did not know that Mueller was the agent of the Hartwig Company.
4. UNEMPLOYMENT COMPENSATION: Master and Servant: Agency: Janitor Did Not Elect to Hold Apartment Owner as Employer. The apartment janitor was paid by checks of the Hartwig Company. Subsequently, these checks contained a notation that they were for services rendered the Byron Company. The acceptance of these later checks with such notation did not constitute an election to hold the Byron Company alone as his employer. He was entitled to unemployment compensation as an employee of the Hartwig Company.
5. COSTS: Unemployment Compensation: Costs Should Not be Taxed Against Commission. It was error to tax costs against the Unemployment Compensation Commission or its members.
Appeal from Circuit Court of City of St. Louis. — Hon. David J. Murphy, Judge.
REVERSED.
George A. Rozier, Chief Counsel, and Edward D. Summers, Assistant Counsel, for appellants; Harry G. Waltner, Jr., of counsel.
(1) The Supreme Court has jurisdiction of this cause, because the members of the Unemployment Compensation Commission are parties hereto in their official capacities as state officers. Murphy v. Hurlbut Undertaking Embalming Co., 346 Mo. 405, 142 S.W.2d 449. (2) The findings of fact of the Commission in any contested benefit appeal are conclusive if supported by competent evidence. Sec. 11 (i) U.C. Laws; Sec. 9432 (i), R.S. 1939; A.J. Meyer Co. v. Unemployment Compensation Comm., 152 S.W.2d 184. (3) The respondent is an independent contractor rather than an agent of the Byron Realty and Investment Company. Horn v. Asphalt Products Corp., 131 S.W.2d 871; Maltz v. Jackoway-Katz Cap Co., 336 Mo. 1000, 82 S.W.2d 909; Vaseleou v. St. Louis Realty Securities Co., 344 Mo. 1121, 130 S.W.2d 538; Murphy v. Doniphan Tel. Co., 147 S.W.2d 616, 618; McCrary Engineering Co. v. White Coal Power Co., 35 F.2d 142; Kruse v. Revelson, 115 Ohio St. 594, 155 N.E. 137; Annotation 55 A.L.R. 291; 2 C.J., sec. 10, p. 424; Central Wisconsin Trust Co. v. Industrial Comm., 236 Wis. 496, 295 N.W. 711; In re Gordon, 260 A.D. 973, 23 N.Y.S.2d 261. (4) Assuming, but not conceding, that the respondent was the agent of the Byron Realty and Investment Co., Congo's claim for benefits must be sustained as a result of the failure of the respondent to disclose the agency. Dahl v. Wunderlich, 194 Minn. 35, 259 N.W. 399; Scott v. O.A. Hankinson Co., 205 Mich. 353, 171 N.W. 489; Lee v. Oreon E. R.G. Scott Realty Co., 96 S.W.2d 652; Frandsen v. Industrial Comm. of Utah, 61 Utah, 354, 213 P. 197; Holloway v. Industrial Comm. of Arizona, 34 Ariz. 387, 271 P. 713; Zurich General Acc. L. Ins. Co. v. Division of Accidents Insurance. 99 Cal.App. 767., 279 P. 473; Buckowich v. Ford Motor Co., 99 Colo. 56, 59 P.2d 470; Indiahoma Refining Co. v. Industrial Comm., 311 Ill. 153, 142 N.E. 527; Caliendo v. Catania, 127 Conn. 661, 14 A.2d 752. (5) The circuit court erred in rendering judgment for costs against appellants, because appellants are representatives of the State. Murphy v. Limpp, 147 S.W.2d 420.
Robert L. Maul for respondent.
(1) The Supreme Court has jurisdiction of this cause, because the members of the Unemployment Compensation Commission are parties hereto in their official capacities as state officers. Murphy v. Hurlbut Undertaking Embalming Co., 346 Mo. 405, 142 S.W.2d 449; A.J. Meyer Co. v. Unemployment Compensation Comm., 152 S.W.2d 184. (2) On a given state of facts, it is a question of law whether the relation of employer and employee exists, and the conclusions of the Commission in that respect are not conclusive and are subject to review by the courts. R.S. 1939, sec. 9432, par. I; Maltz v. Jackoway-Katz Cap Co., 336 Mo. 1000, 82 S.W.2d 909; Vaseleou v. St. Louis Realty Inv. Co., 344 Mo. 1121, 130 S.W.2d 538; Murphy v. Doniphan Tel. Co., 147 S.W.2d 616; Kruse v. Revelson, 115 Ohio St. 594. (3) Respondent is, under the facts in evidence, an agent for the Byron Realty and Investment Company as to the management of the property of said Byron Realty and Investment Co. Maltz v. Jackoway-Katz Cap Co., 336 Mo. 1000, 82 S.W.2d 909; Horn v. Asphalt Products Corp., 131 S.W.2d 871; Dohn v. Wunderlich, 194 Minn. 35, 259 N.W. 399; Smith v. Wenzlich Sales Management Org., Inc., Missouri Unemployment Compensation decision dated July 9, 1941. Commission No. C-485, Appeals Referee A-2536, Hearing No. 524-1131 Ar-1807. Full decision appendix to this brief, p. 2; Prentice-Hall Unemployment Insurance Service, Vol. 2 — California, p. 29547, Sec. 29604; Connecticut, p. 27012, Sec. 27051, Par. 3; Illinois, p. 27012, Sec. 27051, Par. 4; Prentice-Hall Unemployment Insurance Service, Vol. 3 — Iowa, p. 27012, Sec. 27051, Pars. 6 and 7; Michigan, p. 29501, Sec. 29505; Prentice-Hall Unemployment Insurance Service, Vol. 4 — Nebraska, p. 29505, Sec. 29510; New Jersey, p. 29551, Sec. 29629; New York, page 29623, Sec. 29864. Prentice-Hall Unemployment Insurance Service, Vol. 5 — Rhode Island, p. 27012, Sec. 27051, Par. 2, also Sec. 29501 under Current Matter; Tennessee, p. 27012, Sec. 27051, Pars. 4 and 5; Utah, p. 27012, Sec. 27051, Par. 2, also p. 27031, Sec. 27226, Par. 9; Washington, p. 27013, Sec. 27051, Par. 4, also p. 29505, Sec. 29519; Prentice-Hall Unemployment Insurance Service, Vol. 3 — Missouri, p. 29513, Sec. 29539. (4) Under the evidence appellant John Congo had notice of his employment by Byron Realty and Investment Company, through respondent, and acknowledged such employment by acceptance and endorsement of salary checks bearing notations of his relation to Byron Realty and Investment Company. As a result of his acceptance and ratification of such contract of employment his claim for benefits cannot be sustained against respondent. (5) The Unemployment Compensation Law of Missouri is a taxing statute and must be strictly construed against the taxing authority. A.J. Meyer Co. v. Unemployment Comp. Comm., 152 S.W.2d 184; State ex rel. Ford Motor Co. v. Gehner, 325 Mo. 24, 27 S.W.2d 1; State v. Hallenberg-Wagner Motor Co., 341 Mo. 771, 108 S.W.2d 398; State ex rel. Western Union Tel. Co. v. Markway, 341 Mo. 976, 110 S.W.2d 1118; Artophone Corp. v. Coale, 345 Mo. 344, 133 S.W.2d 343; State v. Shell Pipe Line Corp., 345 Mo. 1222, 139 S.W.2d 510; Barnes v. Indian Refining Co., 280 Ky. 811, 134 S.W.2d 620; Texas Co. v. Wheeless, 185 Miss. 799, 187 So. 880.
Emmett Golden and Rene J. Lusser for St. Louis Real Estate Exchange, amicus curiae.
(1) The question as to whether the relationship between the Hartwig Company and the Byron Company was that of independent contractor or the relationship of principal and agent, is a question of law. Therefore the finding by the Unemployment Compensation Commission that the relationship is that of independent contractor is a mere conclusion of law. If, from the facts presented, such conclusion is wrong, then the finding constitutes an error of law, which may be reviewed by the court on appeal. Vaseleou v. St. Louis Realty Securities Co., 130 S.W.2d 538; Murphy v. Doniphan Tel. Co., 147 S.W.2d 616. (2) Under the Unemployment Compensation Act of Missouri, a janitor, under the facts presented in the case at bar, must be deemed to be employed by the owner of the building even though such janitor was hired or paid directly by the agent of the owner, provided the owner had actual or constructive knowledge of the work of such janitor. Section 9423 (g), R.S. 1939. (3) The record in the case at bar definitely establishes the right of the Byron Company, owner of the real estate, to exercise control over the actions of its agent, the Hartwig-Dischinger Company. The fact that the Byron Company did not exercise such right of control does not affect the relationship between the parties. Vaseleou v. St. Louis Realty Securities Co., 130 S.W.2d 538. (4) Under the facts involved in the case at bar, the respondent is a managing agent and as such is not an independent contractor. (a) The management agreement does not contemplate that the respondent shall perform or cause to be performed all of the services required in the owner's building for which the respondent was to receive a flat fee embracing all of such expenditures. (b) The wages of the janitor were paid out of funds belonging to the owner. (c) The managing agent was not required, and did not in fact, furnish any supplies, materials, tools or equipment for the performance of the various tasks in the operation of the building. (d) The building owner did have the right, whether exercised or not, to approve or reject the employment of any of such employees or to discharge or cause to be discharged any of such employees. Skidmore v. Haggard, 110 S.W.2d 726; Maltz v. Jackoway-Katz Cap Co., 82 S.W.2d 909. (5) The Unemployment Compensation Act is an integral part of the federal scheme of social security legislation and as such, the Missouri Act must be in conformity with and must continually be subject to the approval of the Social Security Commission, created by Act of Congress under the Social Security Act, approved August 14, 1935, as amended. Since the Federal Social Security Act is the dominant factor, constructions and interpretations of the Missouri Act should be in harmony and consonance with the Federal Act. Sec. 9426 (k), R.S. 1939. Under the facts as presented in the case at bar, the rulings of the Treasury Department through its Bureau of Internal Revenue construes a janitor to be the employee of the building owner. Regulations 91, Art. 4-S.S.T. 92-Treasury Department Ruling. (6) If in the final analysis should the court uphold the position that the janitor was the employee of the agent under the peculiar facts involved in the case at bar, then in the interest of the twenty-five hundred real estate agents and in the interest of harmony in the scheme of taxation, the court might properly limit its opinion to the particular facts here involved so that the Unemployment Compensation Act will not be so extended as to be made applicable to all managing agents in this State. Sargent v. Clements, 337 Mo. 1127, 88 S.W.2d 174.
The present proceeding was commenced by the filing with the Unemployment Compensation Commission of a claim by one John Congo. In said claim Congo alleged that he had last worked for the present respondent, the Hartwig-Dischinger Realty Company (hereinafter called the Hartwig Company). Claimant was employed as a janitor of an apartment building which was owned by the Byron Realty and Investment Company (hereinafter called the Byron Company). The Hartwig Company, as an employer, is admittedly subject to the provisions of the Missouri Unemployment Compensation Act [Art. 2, Ch. 52, R.S. Mo. 1939.] It is conceded that the Byron Company is not subject to said act. Therefore if the claimant were employed by the Hartwig Company he would be entitled to compensation, but if he were employed by the Byron Company his claim must necessarily be denied. The claim was allowed by the full commission and proceedings were instituted in the circuit court to set aside such allowance. From a judgment of the court, setting aside the order of the commission, an appeal has been taken.
The facts with reference to Congo's employment are as follows: The apartment house where he worked was encumbered by a mortgage securing bonds held by a number of individuals. This mortgage became in default and a foreclosure thereof was sought. In order to protect the interest of the bondholders by buying in the property at foreclosure the Byron Company was incorporated. The stock of such company was held by the former bondholders in proportion to the number of bonds they had owned. Some of these incorporators were interested also in the Hartwig Company which was engaged in the real estate business and which had existed for sometime prior to the incorporation of the Byron Company. After the purchase of the apartment building at the foreclosure sale the Byron Company made an arrangement with the Hartwig Company for the management of the apartments. The Hartwig Company rented the various apartments to individuals, looked after repairs, deposited the rent money in a special rental account from which it paid taxes, water rates and other expenses and periodically accounted to the Byron Company for the gross profits, deducting therefrom a fixed proportion as a commission for its managerial services. The actual management of the apartment was done by one Mueller who was admittedly at all times a regular employee of the Hartwig Company and was placed in charge of said work by the Hartwig Company. Congo was unemployed. He advertised in a newspaper for a job. He was then called on by Mueller who made an arrangement to hire him. The name of the Byron Company was not mentioned in the transaction. It is also shown that Mueller hired certain other persons for work in connection with the apartment. One was a resident manager who was given her rent as part of her compensation. Another was a man who did cleaning and repairing occasionally. The checks by which Congo was paid were all drawn by the Hartwig Company. Toward the end of his employment the company inserted on each check a notation: "For services rendered to Byron Realty and Investment Company." Congo denied that such notation was on the checks when he got them and it seems plain that the notation was not used on the earlier checks. Congo was discharged at the end of his employment by Mueller.
As stated above the first question to be decided is: Was Congo an employee of the Hartwig Company or of the Byron Company? It is, of course, possible for a principal to appoint an agent and authorize such agent specifically to employ a subagent or servant who then becomes an employee of the principal. Was this situation present in the instant case? Or was the Hartwig Company an independent contractor which had agreed to perform all of the managerial functions in connection with the apartment building through its own employees? This court has recently had occasion to consider again the distinction between agents and independent contractors. [Bass v. Kansas City Journal Post Co., 347 Mo. 681, 148 S.W.2d 548.] We there cited with approval a statement [81] contained in the American Law Institute, Restatement of the Law of Agencies, sec. 2: "A servant is a person employed by a master to perform service in his affairs whose physical conduct in the performance of the service is controlled or is subject to the right to control by the master. An independent contractor is a person who contracts with another to do something for him, but who is not controlled by the other nor subject to the other's right to control with respect to his physical conduct in the performance of the undertaking." A more detailed analysis of the relationship of independent contractors is found in the case of Skidmore v. Haggard, 341 Mo. 837, 110 S.W.2d 726, l.c. 729, and many of the cases are collected in the following annotations: 19 A.L.R. 1168, 20 A.L.R. 684, 61 A.L.R. 223, 75 A.L.R. 725, Ann. Cases 1918-C 672. See also Maltz v. Jackoway-Katz Cap Co., 336 Mo. 1000, 82 S.W.2d 909, l.c. 916.
The exact terms of the agreement between the Hartwig and the Byron Companies are not shown by the record. The proceeding before the Commission was informal. Much legally incompetent evidence was received and it is difficult to determine on the basis of legally competent evidence all of the facts of the case. For example, no weight can be given to the assertion of the President of the Byron Company that the Hartwig Company was its agent or that the Byron Company had a right to put a man out there as a janitor. Such statements are mere legal conclusions of the witness. In view of this absence as to the express terms of the oral contract we are forced to draw such inferences as possible concerning the contract from what was actually done by the parties. Actually no control whatever was exercised by the Byron Company over the manner in which the Hartwig Company managed the apartment. All that the Byron Company did was to receive a check for the net profits of the venture. As stated, the renting of apartments and the collection of rent, the payment of all expenses including the wages of Congo, the payment of taxes and the overseeing of repairs to the building were conducted by the Hartwig Company. The Hartwig Company was engaged in performing similar services for many other real estate owners. It did not receive a fixed compensation from the Byron Company but took a commission which was a proportion of the gross profits of the enterprise. Under these facts, and applying to them the rule laid down in the cases of Bass v. Kansas City Journal Post Co., 347 Mo. 681, 148 S.W.2d 548, supra, and Skidmore v. Haggard, 341 Mo. 837, 110 S.W.2d 726, supra, it is apparent that the Hartwig Company acted as an independent contractor and not as the agent of the Byron Company.
This was the finding of facts made by the Unemployment Compensation Commission and such finding is supported by substantial competent evidence. As such it is binding upon this court, [A.J. Meyer Co. v. Unemployment Compensation Commission, 348 Mo. 147, 152 S.W.2d 184.]
However, even if it were held that the Hartwig Company was an agent of the Byron Company, it did not disclose this fact of agency to Congo at the time he was employed. It is a general rule that where one who is in fact the agent for another makes a contract with the third person without disclosing the fact of agency, or if he discloses such fact without disclosing the identity of his principal, he will be individually bound by the contract and the third party may hold the agent or the undisclosed principal at his election. [Am. Law Inst., Restatement of Law of Agency, sec. 322; 2 Am. Jur., Agency, sec. 404.] This rule applies to the agent of an undisclosed principal who employs the services of another. [Curtis v. Miller (Va.), 80 S.E. 774, 50 L.R.A. (N.S.) 601.] Respondent says, however, that the undisclosed principal rule cannot apply to this case because Congo was actually employed by Mueller and did not know that Mueller was acting as the agent of the Hartwig Company. This fact is immaterial. Mueller was actually acting as the agent of the Hartwig Company. The case, then, stands exactly as it would had the Hartwig Company directly, through its directors and officers, hired Congo. If that had been true and the Hartwig Company had not disclosed the fact of its agency — if it were an agent — to Congo, he might have held either corporation at his election.
But it is said that Congo made such an election to hold the Byron Company when he accepted pay checks with the notation above set out on them. It is to be remarked that at the time the contract of employment was made and for a long time thereafter no such notation was placed on the checks. The mere fact that [82] during the latter months of Congo's employment he accepted and cashed these checks certainly does not constitute an election to hold the Byron Company alone as his employer for the checks were drawn by the Hartwig Company. It seems clear, therefore, that Congo was actually an employee of the Hartwig Company and, as such, is entitled to the compensation awarded him by the commission.
Another question is raised in the case which is not directly necessary for its decision but in view of the action of the trial court should be mentioned in this opinion, namely: The parties defendant in the review proceeding in the circuit court, in addition to the claimant, were the Unemployment Compensation Commission and its respective members. In holding against the latter the trial court awarded costs and taxed the same against these defendants. These costs should not have been taxed against the Unemployment Compensation Commission and its members since they were merely representing the State of Missouri in the case. [Murphy et al. v. Limpp, 347 Mo. 249, 147 S.W.2d 420.]
The judgment of the circuit court was for the wrong party. The decision of the Commission must be sustained and the judgment below reversed. It is so ordered.
The foregoing opinion by HAYS, J., in Division One is adopted as the opinion of the Court en Banc. All concur except Gantt, J., absent.