APPEAL from the Circuit Court of Hancock County; the Hon.
WILLIAM M. BARDENS, Judge, presiding.
MR. JUSTICE SCHAEFER DELIVERED THE OPINION OF THE COURT:
The plaintiffs, Ralph D. Todd, Eva D. Todd, and Emma L.B. Todd, brought an action under the Administrative Review Act in the circuit court of Hancock County to review a decision of the Director of Labor affirming assessments against them for contributions to the unemployment compensation fund. From a judgment for the Director, plaintiffs prosecute this appeal.
The facts are undisputed. Ralph Todd, hereafter referred to as Todd, and Eva Todd, his mother, have owned and operated the Amus-U Theatre at LaHarpe as a partnership since 1938. Todd owns seventy-five per cent of the business and his mother twenty-five per cent. In January, 1943, Todd purchased the Diana Theatre in Blandinsville on his own account. This theater was sold in January, 1949. In the meantime, Todd and Emma L.B. Todd, his wife, owned the Dawson Theatre at Stronghurst as equal partners from June, 1945, to December, 1947. Blandinsville and Stronghurst are both fifteen miles from LaHarpe and the same distance from each other.
During the period Todd had a proprietary interest in the theaters in question, each had three employees, a manager, an operator and a ticket seller, and was, to some extent, operated as a separate business. For example, each theater had its own office, maintained a separate bank account in a different bank, purchased supplies and services independently of the others, kept separate books, and filed separate social security and income tax returns. On the other hand, the booking of films for all three theaters was performed by Roy V. Hallowell, manager of the Amus-U Theatre, under the supervision and control of Todd. In addition, although each theater had a separate office and bank account, Hallowell kept the books and records for the three theaters and drew all checks for each of them in his office in LaHarpe. This was the only office having telephone service. Although Todd customarily countersigned all checks, sometimes his mother countersigned checks drawn against the account of the Amus-U Theatre. Todd authorized Hallowell to hire and discharge employees at the three theaters, but invariably performed this duty himself, upon consultation with his mother or his wife. Accompanied by Hallowell, Todd also personally conducted a weekly bank night at each theater. Hallowell's salary was apportioned among the three theaters, the manner of the apportionment being determined by agreement with Todd.
Between December, 1948, and November, 1949, the Director of Labor made a number of assessments against plaintiffs for contributions and interest for appropriate years, commencing in 1943, and aggregating as follows: Amus-U Theatre $940.26, Diana Theatre $661.32, and Dawson Theatre $1053.58. All assessments were made upon the basis that the three employing units constituted a single employer having the statutory minimum of six employees. Upon protests duly filed, a hearing was had before a departmental representative. He found that during the years in question the employing units involved were owned and controlled by the same interests, and recommended that the assessments be affirmed. The Director affirmed the assessments and this action followed.
The principal question presented for determination is whether plaintiffs were covered by the Unemployment Compensation Act. Under the statute, liability for contributions is imposed upon any individual or organization meeting any one of the several definitions of an employer. Section 2(e)(5), (Ill. Rev. Stat. 1949, chap. 48, par. 218(e)(5),) provides, in part: "`Employer' means: * * * (5) 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, * * * 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." The paragraph referred to defines "employer" as any employing unit having six or more employees within twenty or more calendar weeks in a calendar year. (Ill. Rev. Stat. 1949, chap. 48, par. 218(e)(1)(B).) The words "owned or controlled" in section 2(e)(5) have been construed to mean "owned and controlled." (McGrew Paint & Asphalt Co. v. Murphy, 387 Ill. 241; Moriarty, Inc. v. Murphy, 387 Ill. 119.) As thus construed, section 2(e)(5) permits the combination of the employment experience of separate employing units only where they are both owned and controlled by the same interests.
During the years in question, Todd owned seventy-five per cent of the Amus-U Theatre, fifty per cent of the Dawson Theatre, and was the sole proprietor of the Diana Theatre. These holdings constituted ownership of the three businesses, within the contemplation of section 2(e)(5). (McGrew Paint & Asphalt Co. v. Murphy, 387 Ill. 241; Moriarty, Inc. v. Murphy, 387 Ill. 119; Zehender & Factor, Inc. v. Murphy, 386 Ill. 258. See: Lindley v. Murphy, 387 Ill. 506.) As stated in Karlson v. Murphy, 387 Ill. 436: "Sections 2(d), 2(e)(1)(B), 2(e)(2) and 2(e)(5), among others, define `employer,' under certain conditions so as to include several employing `units,' and to include two or more separate corporate entities, if owned and controlled directly or indirectly by the same interests. By these provisions, the General Assembly has made it abundantly clear that enterprises or units which economically and in reality constitute but a single business shall be deemed a single employer, familiar rules of corporation law, partnership law and the law of master and servant to the contrary notwithstanding." In McGrew Paint & Asphalt Co. v. Murphy, 387 Ill. 241, where it was stipulated that O.V. McGrew owned a majority of the shares of each of four corporations and was a minority shareholder in a fifth, Insul-Mastic Laboratories, Inc., this court said: "We hold that the corporations, other than Insul-Mastic Laboratories, Inc., are liable for contributions under section 2(e)(5), * * * for the reason that the agreed facts conclusively demonstrate that McGrew owned and controlled each of these four companies, within the contemplation of section 2(e)(5)."
Plaintiffs contend that the theaters were not owned by the same interests because the word "interests" does not mean an individual. The Unemployment Compensation Act, being remedial, should be liberally construed. (Crouch v. Murphy, 390 Ill. 112; Lindley v. Murphy, 387 Ill. 506.) Moreover, whether liberally or strictly construed, the word "interests," as used in section 2(e)(5), is sufficiently broad to include an individual.
Plaintiffs next contend that the finding of the Director that Todd controlled all three theater businesses is manifestly against the weight of the evidence. From the facts narrated it is clear that neither Eva Todd nor Emma Todd was active in the management or control of the theater businesses in which they owned an interest and that the challenged finding is not contrary to, but rather in accord with, the weight of the evidence. Plaintiffs place reliance upon Moriarty, Inc. v. Murphy, 387 Ill. 119, as requiring a reversal here. While it is true that the factual situations involved are similar, it should be observed that, in the Moriarty case, the Director found that Moriarty owned the several corporations involved but made no finding with respect to the control of the corporations. Upon review, this court, construing section 2(e)(5), held that the words "owned or controlled" properly meant "owned and controlled." In the absence of findings as to control, the judgments of the circuit court confirming the assessments made by the Director were reversed and the causes were remanded to the circuit court, with directions to refer each case to the Director for further proceedings, that is, for a hearing and determination upon the issue of whether the corporations, in addition to being owned by Moriarty, were also controlled by him. Manifestly, the decision in the Moriarty case does not require a reversal in the present case.
Lastly, plaintiffs contend that the Director is estopped from assessing contributions against them by reason of a delay of almost five years in making the assessments and delays up to eighteen months in holding a hearing upon their protests against the assessments, with a consequent accrual of interest at the rate of one per cent per month. The short answer to this is that plaintiffs became liable for contributions commencing in 1943 and could have paid them as they fell due. In any event, the principle of estoppel is inapplicable to the State functioning in a governmental capacity. Clare v. Bell, 378 Ill. 128; People v. Bradford, 372 Ill. 63.
The judgment of the circuit court of Hancock County is affirmed.
Mr. JUSTICE CRAMPTON, dissenting:
I cannot agree with the majority opinion and the importance of the issue to many small business ...