Raymond Pearson Motor Co. v. Texas Employment Commission ( 1952 )

ARCHER, Chief Justice.

The above styled causes were heard and decided by the trial court upon the -same testimony. This was by agreement of the parties since the facts and the law applicable to one suit were also applicable, to the other.

Appellant,; ; Raymond , Pearson, Inc.,, brought suit against Texas; Employment Commission and its members, .in their official capacities, seeking ..to recover $23,-016.09. it had paid to. said Commission as unemployment compensation taxes for the calendar years of 1946,. 1947, 1948 and the. first 'six: months 'of 1949. This amount represents the' difference between a rate of 2.7% and .5% on the taxable wages' of Raymond Pearson, Inc.

■ Appellant Raymond Pearson Motor Company filed its suit against Texas Employment Commission and the members thereof, in their official capacities, seeking a refund of $13,429.41 in taxes it had paid to Texas Employment Commission. This amount represented .the difference between a rate of 2.7% and .5% on the taxable wages paid by Raymond Pearson Motor Company during the years 1946, 1947, 1948 • and the first six months of 1949.

It was stipulated that these taxes had been paid by the appellants; that they had timely filed their requests for refunds; that such requests had been refused and that these suits for refunds had been brought within the time provided 'by law.

On July -11, 1951, by agreement of all parties, the two cases were tried at the , same time upon the same evidence, and on July 28, 1951, the court entered a judgment in each case denying each appellant the right to recover the alleged overpayment, of taxes. Each, appellant excepted to 'the ruling of the court and gave notice of appeal.

In 1922. Pearson acquired a Ford Agency, and in connection therewith operated a general garage busine’ss, which he con- ■ tinued to operate as sole owner until he incorporated this division of his business on Jánúary 1, 1946-, during all of which times he had more than' eight employees,. all of whom devoted their time exclusively to this division which was operated as a separate enterprise from any other business owned by Mr. Pearson.

In 1933 Mr; Pearson acquired the Lincoln franchise and the Mercury franchise in 1938. These two franchises were operated as’'one enterprise 'and at a place apart from the Ford Division.' The 'Lin-' coln-Mercüry Division had its - own manager, as did the Ford Division, and the naturd and activities of the two Divisions were separate and distinct. Each of the Divisions' kept its own bank accounts, paid its own social security taxes,- rendered its' own property for tax purposes,- and made contracts for utilities and advertising, and had more than eight employees.

Raymond Pearson, as an ■ individual, became subject to the Act under Section 17 (b) (1),- and executed a form showing such employment.

' On March 30, 1946, the Commission received a notice front Pearson of discontinuation of employment executed on Commission’s form. This form showed that Pearson as an employing unit discontinued his' employment on December 31, 1945, and that' his successors in business were the two corporations. The two corporations together acquired all of the predecessor’s properties and assets on January 1, 1946. Raymond Pearson Motor' Company executed the Employer’s Report of Status which -showed the required employment during twenty weeks in 1946, and an account number was assigned.. Raymond Pearson, Inc. filed a like form and was also assigned an account number.

The question is: Were the two appellant corporations succeeding to all of the properties and assets of the predecessor employer, Raymond Pearson, entitled to succeed to the merit rating of the predecessor?

We do not believe that they were entitled to succeed to the merit rating of Raymond Pearson, predecessor, employer.

The two corporations did not continue Raymond P'earson’s employing enterprise as a single unit, but through two units, and as such, under the statutory succession provision, are not entitled to the tax rate transfer.

In construing Subsection 5(c) (7) of Article 5221b, 'Vernon’s Ann.Civ.St. as it read before its amendment on July 1, 1949, such amendment is not applicable in these cases, the court said in White v. State, Tex.Civ.App.1946, 197 S.W.2d 389, writ ref; n. r. e.: “It is only through this subsection (5(C) (7)) that a changed or reorganized employing unit may succeed to the experience rating of another or predecessor unit.” 197 S.W.2d at page 392.

■ Subsection 5(c) (7), in part, provides: “For -the purposes -of this Section, two or■ more■ employing units which are parties to or the subject of a merger, consolidation, or other form of reorganization effecting a change in legal identity or form, shall be deemed to be a single employing unit if the Commission finds that (i) immediately after such change the employing enterprises of the predecessor employing unit or units are continued solely through a single employing unit as successor thereto; and (ii) immediately after such change such successor is owned or controlled by substantially the same interests as the predecessor employing unit or units; and (iii) the successor has assumed liability for all contributions required of the predecessor employing unit or units; and (iv) the consideration of such two or more employing units as a single employing unit for the purposes of this Section would not be inequitable.” (Emphasis ours.)

Appellants’ contention is that the Ford and Lincoln-Mercury Division, under the facts herein, each constituted a separate employing unit so that when the Ford [Lincoln-Mercury] Division was incorporated it was, under Sec. 5(c) (7), Art. 5221b, a single employing unit through which the predecessor employing unit was continued.

Appellants concede that the Ford and Lincoln-Mercury Divisions would, together, be treated as a single employing unit if necessary to bring their owner within the scope of the Act.

In our opinion appellants’ interpretation of the Act is precluded by Sec. 17(e) thereof which provides: “All individuals performing services within this State for any employing unit which maintains two or more separate establishments within this State shall be deemed to be employed by a single employing unit for all purposes of this Act.”

If we are correct in holding the Ford and Lincoln-Mercury Divisions together constitute but a single employing unit then this case falls squarely within the decisions of the Supreme Court in State v. Dallas Liquor Warehouse No. 4; 147 Tex. 495, 217 S.W.2d 654, and Texas Unemployment Compensation Commission v. General Engineering Corporation, 147 Tex. 503, 217 S.W.2d 659.

■In each of those cases the court held that a single employing unit which was succeeded by two or more corporations was not succeeded by a single employing unit even though ownership and control of the corporations were the same as the ownership and control of the predecessor single employing unit.

The trial court’s judgment is affirmed.