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Walling v. Plymouth Mfg. Corp.

December 3, 1943


Appeal from the District Court of the United States for the Northern District of Indiana, South Bend Division; Thomas W. Slick, Judge.

Author: Minton

Before KERNER and MINTON, Circuit Judges, and LINDLEY, District Judge.

MINTON, Circuit Judge.

The plaintiff, as Administrator of the Wage and Hour Division of the United States Department of Labor, filed a complaint in the District Court for the Northern District of Indiana alleging that the Plymouth Manufacturing Corporation, an Indiana corporation, and Hubert Tanner, William H. Wolfarth, George E. Warren, and Chester H. Thompson, partners doing business as the Plymouth Manufacturing Company, and Hubert Tanner and Samuel Tomlinson, were engaged at various times after the effective date of the Fair Labor Standards Act of 1938, 29 U.S.C.A. ยง 201 et seq., in the manufacture of goods for interstate commerce, and in the sale, transportation, shipment, and delivery of goods for interstate commerce; and that during said times they paid wages below the standards of the Act, and worked the employees hours in excess of the standards of the Act without paying them for the overtime at time and one-half. The plaintiff prayed for an injunction against the defendants.

After an extensive hearing, the trial court made and filed its findings of fact and stated its conclusions of law thereon, in accordance with the requirements of Rule 52(a) of the Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c. The court found that since October 22, 1938, the Plymouth Manufacturing Corporation had not employed any person or persons except its executive officers, and that it was not engaged in any business except to perform the terms of a certain lease hereinafter mentioned; that at no time since October 22, 1938, was the defendant Samuel Tomlinson an employer, nor did he stand in the relationship of master or entrepreneur to any of the workers; that Hubert Tanner, William H. Wolfarth, George E. Warren, and Chester H. Thompson did not separately constitute a partnership doing business as the Plymouth Manufacturing Company, but they, with all the workers enumerated in the schedule filed, numbering less than one hundred, were engaged as partners in doing business as the Plymouth Manufacturing Company; that the defendants Tanner, Wolfarth, Warren, and Thompson, together with the workers, all of whom had signed a partnership agreement, were pertners; and all of the work the workers performed and the services they rendered were as partners for the partnership, and not as employees of the partnership nor of any of the defendants; and that the operation and conduct of the business and the division of the profits had been carried on in substantial conformity with the partnership agreement.

Upon these findings, the court stated its conclusions that since October 22, 1938, none of the defendants had engaged in interstate commerce, except the co-partnership consisting of all of the members set forth in the findings as doing business under the name of the Plymouth Manufacturing Company; and that no employees of the said Company nor any of the defendants had been employed in vilolation of the Fair Labor Standards Act. Upon these findings and conclusions, the District Court denied the injunction prayed for by the plaintiff. From such judgment, this appeal was taken.

The question presented to us is: Were these workers employees of the defendants or of any of them? Under Rule 52(a), supra, we are not authorized to set aside the findings and conclusions of the trial court unless they are clearly erroneous, and due regard must be given to the opportunity which the trial court had to pass upon the credibility of the witnesses. We do not weigh the evidence here, and unless it clearly appears that the findings and conclusions of the trial court are erroneous, we are bound by them.

First, was the Plymouth Manufacturing Corporation after October 22, 1938, the employer of anybody except its executive officers? The evidence showed that on October 10, 1938, the Corporation was engaged in the manufacture of boxes and baskets in a factory owned and operated by the Corporation in the rural community of Plymouth, Indiana. Its total employees were less than one hundred. The Corporation had not made any profit for the past several years. The president and owner of the great majority of its capital stock was the defendant Samuel Tomlinson. His son-in-law, the defendant Hubert Tanner, an officer of the Company, and the defendants Wolfarth, Warren, and Thompson were on the Corporation's Board of Directors. The Corporation was afraid that it could not operate and meet the standards of the Fair Labor Standards Act, so it decided to lease its plant to Tanner, Wolfarth, Warren, and Thompson, which it accordingly did on October 10, 1938.

The lease covered the plant, equipment, and material on hand; in fact, everything except the cash on hand and the accounts receivable was included. The lease was terminable by either party on thirty days' notice. The lessees were to pay all taxes and insurance and maintain the repairs on the buildings and equipment, and to pay as rent a sum equal to seventy per cent of the net profits of the Company. The Corporation agreed on its part to use reasonable and prudent means to provide funds which the lessees might borrow by paying six per cent interest. The lessees agreed to set up a reserve fund to be expended only as the Corporation and the lessees acting in concert might agree. Upon termination of the lease, all the property was to revert to the Corporation. Subsequently, the lease was modified to provide a rental of five per cent of the gross sales of commodities or merchandise fabricated on the premises. Upon termination of the lease, the property on hand was to be purchased by the lessor at its full appraised value.

The lessees and the sublessee, Plymouth Manufacturing Compnay, went into possession and operated the plant after October 22, 1938. There is no evidence that after it entered into this lease the defendant Corporation had anything to do with the manufacturing business it had formerly conducted. It existed only to perform its part of the lease. Indeed, at the time this suit was filed, the Corporation was in the process of dissolution. There was no evidence of any connection between the Corporation and the business that continued except that of lessor and lessee of the premises upon which the Corporation had theretofore conducted the manufacturing business which was now conducted by the Plymouth Manufacturing Company, and the fact that the Company had become heavily indebted to the Corporation. True, the former officers and directors of the Corporation, except the president, Tomlinson, were engaged in the new enterprise. They were not engaged, however, as officers of the Corporation.

In making its State property tax return throughout the greater portion of the period under consideration, the Corporation returned as its property the raw materials, goods in process, and manufactured articles on hand which were used by the Company. While this is slight evidence that the Corporation was the real operator, we do not think it compelled the court to reach that conclusion in the face of all the other evidence that the Corporation was not engaged in the manufacturing business after October 22, 1938.

In view of these facts, we do not think the District Court's finding that the Corporation was not an employer is clearly erroneous.

Samuel Tomlinson was the president of the Plymouth Manufacturing Corporation. He owned practically all of the stock of that Corporation. After the leasing of the premises, he had nothing to do with the manufacture of the boxes and baskets. He employed no one. As the president of the landlord, he had a vital interest in seeing that the enterprise under the tenant Plymouth Manufacturing Company prospered. He often gave the benefit of his advice and counsel, and he assumed to speak on at least one or two occasions to the workers of the Company in an authoritative way. His conduct and position were that of one with influence and interest but not of one with authority. New Albany Forge & Rolling Mill v. Cooper, 131 Ind. 363, 30 N.E. 294; Petzold v. McCregor, 92 Ind.App. 528, 176 N.E. 640. When the Company got into financial difficulties and was owing the bank $27,000 on its past due notes, which amount was guaranteed by Tomlinson, and the Company was owing the Corporation over $38,000, Tomlinson was hired by the Company at the nominal salary of $25 a week to look after its finances. He was an employee of Company, and not an employer. The court's finding to this effect was not clearly erroneous, but instead was clearly correct. We find nothing in the record to indicate that Tomlinson was an individual employer of anyone.

Although the court made no finding as to Tanner, the failure to make a finding concerning him was equivalent to a finding that he was not an employer. We find no ...

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