California Employment Stabilization Commission v. Walters

KNIGHT, J. Plaintiff brought this action to recover certain sums of money alleged to be due as contributions, interest and penalties under the provisions of the California Unemployment Insurance Act (Stats. 1935, p. 1226, as amended; Deering’s Gen. Laws 1937, Act 8780d). The sole issue the trial court was called upon to decide was whether during the year 1937 the Big Basin Inn, in California Redwood Park, and the concessions connected therewith, were operated under an arrangement constituting a partnership. If it was, then admittedly defendant was not subject to payment of the contributions provided for in the act.

The cause was tried twice. The judge before whom it was tried first, after hearing the evidence, held that a partnership existed; but subsequently he was stricken with fatal illness and his death prevented the signing of the findings. The judge before whom the case was tried the second time reached the same conclusion and made findings to that effect. From the judgment entered thereon plaintiff appeals.

The material facts are these: For more than ten years preceding January 1, 1937, the defendant, Mrs. Walters, oper[556]ated the Inn and the concessions connected therewith, under a lease from the state which hy its terms expired on December 31, 1937; and at the end of 1936 she concluded she would not ask for a renewal of the lease. The open season began May first of each year and ran on into the fall. Prior to 1937 most of the twenty-five or more persons Mrs. Walters had employed to assist in carrying on the business had been with her each year for several years, some of them being students and teachers on vacation. Mrs. Walters owned the equipment in the Inn, and each year the resort and the concession had been operated at a substantial profit. At the beginning of the year 1937 Mrs. Walters decided to show her appreciation for the faithful and efficient services of those who had theretofore assisted in the successful operation of the business by inviting them to join with her in an agreement to operate the business for the remaining year of the lease and to divide the profits in proportion to the salaries theretofore received by them. An agreement was prepared and signed to that effect. It bore the title “Co-operative Agreement.” Mrs. Walters was referred to therein as the proprietor, and the other parties as “persons heretofore designated as ‘Employees’;” and the agreement provided as follows: that “the net earnings realized from the operation of the hotel, store, lunchroom and other concessions . . . shall be divided between the persons whose names appear on sheet attached hereto marked Page 2, in the proportion representing a percentage based on the total salary or earnings of each employee for the year 1937. Net earnings shall be construed as meaning the gross earnings or income from all operating sources less cost of merchandise sold and less operating expenses including supplies, salaries, wages, insurance, taxes, interest, depreciation and all other charges or unusual expenses incident to the operation of all the various units or concessions.” The substance of the third and final paragraph of the agreement was that the parties thereto were given the privilege of requesting and receiving monthly or semi-monthly the amounts accruing to them to that date on the basis of the minimum salaries shown on page two of the agreement. The agreement was drawn prior to April 15, 1937, and signed at that time by Mrs. Walters and about twelve of the other parties thereto who began work at that time in preparing the Inn and the concessions for the opening of the season; and it was signed