CALIFORNIA EMPLOYMENT STABIIZATION COMMISSION v. PAYNE.
This is an appeal from a judgment rendered in favor of defendant and respondent in an action instituted by appellant commission on January 25, 1944, for the collection of unemployment contributions and interest from the respondent for the period from January 1, 1937, to September 30, 1938, in the sum of $294.58 contributions, plus interest. Defendant's answer set up the defenses of the statute of limitations (Code Civ.Proc. sec. 338, subd. 1) and also the defense of estoppel. The trial court found in favor of defendant and respondent as to both defenses, and appellant upon this appeal contends that the court erred in making said findings.
Before discussing the legal issues involved we shall give a brief summary of the factual situation as shown by the record.
During the years 1936 and 1937 respondent was the proprietor of Waldorf Beauty Shop No. 2, located in San Francisco. It is apparent that, under the terms of the Unemployment Insurance Act, Gen.Laws, Act 8780d, respondent, if an employer of eight or more people, would be obliged to make deductions from the salary of each employee—amounting to 9/10910 of 1%—for contribution to the insurance fund. During the year 1937, respondent had seven admitted employees, and he also retained a janitor, W. B. Markee, under a contract dated in December, 1936, pursuant to the terms of which Markee performed janitorial services in Waldorf Beauty Shop No. 2 during 1937.
It is apparent from the record that respondent filed no contributions returns for the year 1937—such being on the theory that he did not, during that year, have eight employees—but only seven employees and an independent contractor (janitor Markee)—and, for that reason, was not within the ‘contributions' provisions of the statute. It was stipulated that respondent's failure to file returns for 1937 was not due to his bad faith or intent to evade the statute.
‘Sometime around July’ of 1938, respondent was visited by one of appellant's auditors for the purpose of conducting an auddit of respondent's books for the year 1936. At the time of such audit, respondent inquired of the auditor concerning his (respondent's) status as an employer (of eight or more) during 1937. The auditor was shown the contract with Markee—for Markee's 1937 janitorial services—and the auditor informed respondent that he was not liable for unemployment insurance contributions for 1937, ‘on the theory that [he] did not have eight employees.’ During 1937, respondent had made the necessary payroll deductions from his employees, and, after receiving that advice from appellant's auditor, and ‘at his instance,’ respondent refunded to his employees the deductions he had made from their salaries.
On November 17, 1942, an additional assessment was levied upon respondent on the theory that Markee was actually an employee during the period in question (apparently from January 1, 1937, to September 30, 1938), and respondent filed a petition for reassessment. The matter was heard before a commission referee in March, 1943, and the levy was affirmed on the theory that Markee was an employee during 1937. The transcript of that proceeding before the referee was before the court below as plaintiff's Exhibit 2. Respondent appealed directly to the commission, which, on July 1, 1943, affirmed the reassessment. This action (to recover on that reassessment) was filed on January 25, 1944.
We shall first discuss the contention of appellant that the trial court erred in holding that appellant's cause of action was barred by the provisions of subdivision 1 of section 338 of the Code of Civil Procedure, which provides for a three year limitation upon ‘an action upon a liability created by statute, other than a penalty or forfeiture.’
It seems clear that prior to September 19, 1939, the provisions of section 338, subdivision 1, of the Code of Civil Procedure, imposed a three year limitation upon the state's right to sue for delinquent unemployment insurance contributions. California Emp., etc., Comm. v. Smileage Co., 68 Cal.App.2d 249, 156 P.2d 454. Appellant concedes this to be true for the reason that the original act (Stats.1935, Chap. 352) contained no specific limitations period. By a 1939 amendment of the act, section 45.2 was thereto added. That section provided as follows: ‘No statute of this State shall limit the time within which the commission may enforce the payment of contributions by civil action or any other remedy provided by this act if with respect to such contributions no return has been filed.’ Stats.1939, Chap. 630, sec. 6, p. 2053.
It is conceded that respondent herein never filed a return upon the contributions concerned in this action. Under the 1939 amendment above noted, then, section 338, subdivision 1 of the Code of Civil Procedure, would not be available to respondent, no return having been filed by him. However, by a 1943 amendment to section 45.2 (Stats.1943, Chap. 1114, sec. 1, p. 3054) that limitations provision was changed to read as follows: ‘No statute of this State shall limit the time within which the commission may enforce the payment of contributions by civil action or any other remedy provided by this act if by reason of any intent to evade the provisions of this act no contribution report or an erroneous return has been filed.’
It should be here noted that it was stipulated that respondent's failure to file returns for the period here involved was not due to bad faith or any intent to evade the statute.
By section 4 of Chapter 1114 (Stats.1943), the Legislature provided further: ‘The amendment made by Section 1 of this act to Section 45.2 of the Unemployment Insurance Act is hereby declared to be merely a clarification of the original intention of the Legislature, rather than a substantive change, and such section shall be construed for all purposes as though it had always read as hereinabove set forth.’
The 1943 amendment to section 45.2 became effective on August 4, 1943. It is admitted by appellant that the commission affirmed the reassessment (on the basis that Markee was an ‘employee’) on July 1, 1943.
Appellant argues that the 1943 amendment to section 45.2 created a new statute of limitation on the state's right to collect delinquent contributions—i. e., where, prior to that amendment, section 338, subdivision 1, of the Code of Civil Procedure would not apply when no return had been filed, it would apply thereafter even where no return had been filed, providing the failure to file was not coupled with an intent to defraud. Appellant contends that the 1943 amendment to section 45.2 cannot constitutionally operate to cut off the right of action afforded under the 1939 addition of 45.2 (no limitation where no return filed) unless appellant be affored the right, within a reasonable time after the effective date of the 1943 amendment, to sue under the limitation as enacted in 1939. Appellant relies upon an unbroken line of authority to the effect that, while the Legislature has the right to lengthen or shorten periods of limitation, it cannot, in doing such, impair vested rights; and, if a cause of action is not barred, limitations thereon may be shortened, provided that a reasonable time for enforcing the right is allowed. Coleman v. Superior Court, 135 Cal.App. 74, 26 P.2d 673; Bank of America Nat. Trust & Sav. Ass'n v. Dennison, 8 Cal.App.2d 173, 47 P.2d 296; In re Estate of Whiting, 110 Cal.App. 399, 294 P. 502; 17 R.C.L. 676; Kozisek v. Brigham, 169 Minn. 57, 270 N.W. 622, 49 A.L.R. 1263; Steele v. Gann, 197 Ark. 480, 123 S.W.2d 520, 120 A.L.R. 758. In Coleman v. Superior Court, supra [135 Cal.App. 74, 26 P.2d 675], it is said: ‘* * * the cases universally support the conclusion that a statute which purports to bar an existing right, without giving reasonable time for its exercise, cannot be upheld, nor can such statutes be applied to existing rights.’ And in Bank of America Nat. Trust & Sav. Ass'n v. Dennison, supra [8 Cal.App.2d 173, 47 P.2d 297], the court said: ‘It is recognized as a fixed rule that no one has a vested right in the statute of limitations until it has run in his favor, and that if a cause of action is not barred the Legislature may shorten or extend the time within which it may be asserted, provided, however, adequate means of enforcing the right still remain. (Citing cases.)’ (Italics added.) See, also, Mercury Herald Co. v. Moore, 22 Cal.2d 269, 138 P.2d 673, 147 A.L.R. 1111; Wells Fargo & Co. v. City and County of San Francisco, 25 Cal.2d 37, 152 P.2d 625.
Respondent argues that section 45.2 as it read in 1939 is susceptible of the construction which the 1943 Legislature sought to place upon it in section 4 of the 1943 amendment, hereinbefore set forth. This same argument was made in the recent case of California Emp. Stab. Comm. v. Chichester Transp. Co., 75 Cal.App.2d 899, 172 P.2d 100, and in rejecting said argument this court said at page ___ of 75 Cal.App.2d, at page 101 of 172 P.2d:
‘The 1943 amendment further provided that the above italicized portion ‘is hereby declared to be merely a clarification of the original intention of the Legislature, rather than a substantive change, and such section shall be construed for all purposes as though it had always read as hereinabove set forth.’ Stats.1943, ch. 1114, § 4.
‘It is appellant's position that the latter provision is controlling in the present action; that the interpretation of the Legislature in 1943, if not controlling, should be persuasive of the intent of the original enactment. Citations have been submitted but they may be epitomized as follows: ‘Although the legislature cannot authoritatively fix the meaning of the constitution, and its interpretation is not controlling upon the court, yet, where the meaning is doubtful, the contemporaneous and long-continued construction thereof by the legislature is entitled to great deference, and may be supposed to reflect the views of policy and modes of reasoning which prevailed among the framers of the constitution.’ 5 Cal.Jur. sec. 37, p. 604. Section 45.2 as enacted in 1939 is unambiguous and clear. It permitted suits for the collection of unemployment contributions outside the period prescribed in sec. 338, subd. 1 of the Code of Civil Procedure regardless of the intent of the taxpayer where no return had been filed. The right to construe a preexisting statute belongs to the judiciary. Courts may not be forced to construe such a statute in accordance with legislative interpretation though the Legislature has a right to define the terms of a statute for the future. It may not revise the operation of an existing law in the form of an amendatory statute to affect past transactions.'
Appellant contends that it was not allowed a reasonable time to enforce the right of the State to the delinquent contributions after the finality of the assessment was established by the decision of the commission on July 1, 1943, denying respondent's petition for reassessment. The action, as hereinbefore noted, was commenced on January 25, 1944, almost seven months after the final determination of respondent's liability and almost six months after the effective date of the 1943 amendment to section 45.2.
Counsel for appellant concedes that if appellant commission failed to file its action within a reasonable time after August 4, 1943, it was barred by the statute of limitations, and the question which we must here determine is whether or not the trial court's implied finding that appellant did not file its action within a reasonable time is supported by the record. Appellant argues that the great volume of its accounts and pending actions to recover delinquent contributions supports the conclusion that the filing of the action in the instant case was within a reasonable time after the change of statute. There is, however, nothing in the record to show how many of these accounts or actions there were, but even if there were the number claimed by appellant, we do not believe that an appellate tribunal would be justified in holding that the finding of the trial court is without support in the record. While it is true that the statute did not become effective until August 4, 1943, it is also true that the additional assessment here in controversy was levied upon respondent on November 17, 1942, for contributions claimed by appellant for the year 1937, and that the finality of this assessment was determined by appellant commission July 1, 1943. It is also true that the bill (Assembly Bill No. 1518) which became Chapter 1114 of Statutes of 1943 was finally passed by the Legislature on May 5, 1943, and was approved by the Governor on June 8, 1943, so that while the statute did not become effective until 90 days after May 5, 1943, the date of the final adjournment of the Legislature, the trial court could well have assumed that appellant commission was aware of the enactment of said statute on July 1, 1943, the date upon which the finality of the assessment was established. Furthermore, it is evident from an examination of the original pleadings that the complaint is a form already prepared and that with the exception of filling in the name of defendant and the dates and amounts of contributions upon which the action is predicated, the only further typing consists of an allegation of the corporate status of the defendant. Under such circumstances we do not believe that a finding by the trial court that a delay of nearly seven months after the assessment was final, and nearly six months after Chapter 1114 became effective, was an unreasonable delay in filing the action, lacks support in the record. As this court said in California Emp. Stab. Comm. v. Chichester Transp. Co., supra, 75 Cal.App.2d at page ___, 172 P.2d at page 102: ‘Assuming any effect can be given to the legislative intent to affect existing causes of action by its amendment of sec. 45.2 in 1943, it could not affect them until a reasonable time had passed, and the trial court's determination of what constitutes a reasonable time will not be reversed unless it can be said that its conclusion constituted an abuse of discretion.’
It is fundamental that what constitutes a reasonable time depends upon the facts of the particular case and is primarily to be decided by the trial court. Wells Fargo & Co. v. City and County of San Francisco, supra; Miles v. Bank of America, etc., Ass'n, 17 Cal.App.2d 389, 62 P.2d 177; Weaver v. Grunbaum, 31 Cal.App.2d 42, 87 P.2d 406; Smith v. Pelton Water Wheel Co., 151 Cal. 394, 90 P. 934.
It was the function and duty of the trial court to determine whether or not the action was filed within a reasonable time after Chapter 1114, Statutes of 1943, became effective. The trial court has determined that the action was not filed within a reasonable time after the statute became effective and an appellate tribunal should uphold that determination unless it can be said that ‘such conclusion constituted an abuse of discretion.’ As we have already pointed out, the trial court's finding has substantial support in the record and we must, therefore, hold that the trial court did not err in holding that appellant's cause of action was barred by subdivision 1 of section 338 of the Code of Civil Procedure.
Counsel for appellant in its closing brief refers to the recent case of California Emp. Stab. Comm. v. Chichester Transp. Co., supra, in which the trial court upon somewhat similar facts held that an action filed within slightly less than seven months after the statute became effective was filed within a reasonable time, which holding was affirmed by this court. An examination of the record in the Chichester case reveals that that case was tried two days after the instant case but that the judgment therein was entered more than two months prior to the entry of the judgment in the instant case. We do not believe that the affirmance of the judgment in the Chichester case compels us to hold that as a matter of law the complaint in the instant case was filed within a reasonable time. The two cases were tried separately and the appeals in both cases were pending at the same time. If the argument is sound that we must hold as a matter of law that the instant action was filed within a reasonable time because of our decision in the Chichester case, then it would also be a sound argument that, if the appeal in the instant case had been decided first, and we had held that because the question of what was a reasonable time was primarily a question for the trial court, we must affirm the holding of the trial court that the action was not filed within a reasonable time, we would have been compelled to reverse the finding of the trial court in the Chichester case that the action was filed within a reasonable time. The law not only permitted but compelled the two cases to be filed and tried separately. The law likewise made it the duty of the trial judge in each case to weigh the evidence and determine the question of whether or not the action was filed within a reasonable time. For this court to hold that because of the decision in the Chichester case we must now hold that the trial court in the instant case did not have the right to weigh the evidence and determine the question as to whether or not the action was filed within a reasonable time would in our opinion be a clear invasion by an appellate tribunal of the province of the trial court and would in effect amount to judicial legislation.
Our conclusion that the trial court correctly held that appellant's cause of action was barred by the statute of limitations makes it unnecessary to discuss the question of whether the trial court was also correct in sustaining the defense of estoppel.
In view of the foregoing the judgment is affirmed.
I dissent. The majority opinion is unsound on principle, and fails to follow controlling authorities. It creates a most confusing and anomalous situation. In the case of California Emp. Stab. Comm. v. Chichester, etc., Co., 75 Cal.App.2d 899, 172 P.2d 100, cited in the majority opinion, the tax proceeding, identical with the one here involved, was filed on February 28, 1944. The Superior Court of San Francisco found that the proceeding was filed within a reasonable time after August 4, 1943, the effective date of the statute imposing the statute of limitations on the State. This court affirmed that holding. Thus, in that case, it was determined that a little less than seven months was a reasonable time for the State to file its action. In the instant case the State filed its action January 25, 1944, substantially less than six months after the effective date of the limitation statute. In this case the Superior Court of San Francisco, a different judge presiding, has held that the State's claim was barred by the statute of limitations, thus impliedly holding that the action was not filed within a reasonable time. Two of the three judges that signed the Chichester opinion now affirm this latest holding. It cannot be contended that the facts relating to the reasonable time issue were any different in the two cases. The same taxing agency is involved. The same tax is involved. The very same period of time following August 4, 1943, is involved. Both cases arose in the San Francisco district. The facts as to the number of cases pending in the state agency during this period are obviously identical. Yet in the Chichester case we find this appellate court affirming a holding that seven months is a reasonable time, while in the instant case we find a majority of the same court affirming a holding that less than six months is an unreasonable time. While the law may not be an exact science, certainly it is not so unscientific, so uncertain and so illogical that an appellate court must affirm diametrically opposed conclusions based on identical and uncontradicted facts. The appellate courts are not so impotent. To so hold is to make the appellate courts a mere rubber stamp for the trial courts. It is no answer to say, as do the majority, that what is a reasonable time is a question of fact. The mere statement of that legal proposition does not make the finding of fact of a trial court inviolate. To so hold would be to apply a sound and fundamental legal proposition to a factual and legal situation to which it was never intended to apply. It would require appellate judges to close their eyes to the realities of the situation. The interpretation of uncontradicted evidence quite frequently becomes a question of law.
There is no legal distinction between interpreting a written document susceptible of two reasonable constructions, and in interpreting uncontradicted evidence. The law is now well settled that the construction of a written document, where there is no conflicting parol evidence, is for the appellate courts, and that the appellate courts are not bound by even a reasonable construction of the trial court. In re Estate of Platt, 21 Cal.2d 343, 131 P.2d 825; Moore v. Wood, 26 Cal.2d 621, 160 P.2d 772; Moffatt v. Tight, 44 Cal.App.2d 643, 112 P.2d 910; Mitchel v. Brown, 43 Cal.App.2d 217, 110 P.2d 456; Texas Company v. Todd, 19 Cal.App.2d 174, 64 P.2d 1180. The same rule should here apply.
It is not necessary, however, to rely on analogies. There is ample Supreme Court authority, binding on this court, holding that appellate courts will not countenance diametrically opposed conclusions from the same facts. The leading case is Southern Pacific Co. v. City of Los Angeles, 5 Cal.2d 545, 55 P.2d 847. The problem there presented was this: An aqueduct operated by the city of Los Angeles broke. The Inyo Chemical Company and the Southern Pacific Company suffered severe damage to their properties. Each brought an action against the city. In both cases the major issue was whether the aqueduct broke as a result of the negligence of the city, or whether the break was caused by an act of God. The cases were tried before separate courts. The evidence, although somewhat conflicting, was substantially the same in the two cases. One trial court found the accident occurred as the result of the negligence of the city. The other trial court found that the accident was caused by an act of God, and that the city was not negligent. The two cases were separately appealed. The appellate court affirmed both determinations of the trial court, using much the same argument as is advanced by the majority in the instant case, namely, that the determinations involved were questions of fact. The Supreme Court granted hearings in both cases. In the first case—Inyo Chemical Co. v. City of Los Angeles, 5 Cal.2d 525, 55 P.2d 850—the Supreme Court affirmed the finding that the city was negligent. The Supreme Court then considered the Southern Pacific case, supra, in which the trial court had held that the aqueduct failed because of an act of God and that the city was not negligent. This determination was reversed, not because it was not supported, but because it was opposed to the finding in the Inyo Chemical Co. case. At page 548 of 5 Cal.2d, at page 849 of 55 P.2d, appears this most significant language which is clearly applicable here: ‘It would be most anomalous for such decisions to stand, reaching diametrically opposite conclusions as to the legal effect of the same occurrence, where the essential facts are similarly presented, and are in most particulars undisputed. The rule that a reviewing court is bound by the findings of the trial court on conflicting evidence cannot apply to a situation such as this, where two lower courts, dealing with substantially the same evidence, have reached different conclusions of law, on the legal issue of whether from this evidence legal responsibility is imposed by the law upon the defendant. It is within the proper function of this court, upon petition for hearing, to eliminate this confusion, and to determine the legal effect of the evidence in both cases.’
This is not an isolated ruling. In Colburn Biological Institute v. Shaffer, 12 Cal.2d 168, 169, 82 P.2d 938, the Supreme Court stated: ‘Moreover, a granting of the requested relief will be another step toward the termination of this litigation and will do much to obviate a contrary adjudication as to the personnel of the institute's trustees. Diametrically opposed judgments upon this legal issue would present an anomalous and wholly unsatisfactory situation.’ The same rule was announced, and the rule of the Southern Pacific Company case unequivocally reaffirmed, in Ferroni v. Pacific Finance Corp., 21 Cal.2d 773, at page 780, 135 P.2d 569, at page 573. These cases are binding on an intermediate appellate court. They are not mentioned in the majority opinion.
Of course, the fact that the finding in the Chichester case that seven months was a reasonable time was affirmed, is now not binding in this case. It is not a matter of which court decided the problem first. The true rule is this: We must now determine from the facts presented in the instant case and in the Chichester case, as a matter of law, what constitutes a reasonable time. We must exercise an independent judgment on this issue. Otherwise we would not be performing our proper appellate functions. Certainly the finding of the first trial court deciding this issue is not binding in this second appeal. After reading all the evidence in both cases relating to this issue, as an appellate justice, I now determine, as a matter of law, in interpreting the identical evidence introduced in both cases on this issue, that seven months is a reasonable time. A fortiori six months is necessarily a reasonable time, and the implied finding of the trail court to the contrary in the instant case should not stand.
The judgment here involved cannot be sustained in toto on any theory of estoppel. In the instant case the estoppel is predicated upon the alleged representations of an unidentified tax auditor of the taxing agency who, it has been found, made certain representations to the taxpayer upon which he relied. So far as tax cases are concerned, it has been heretofore held that official rulings of a tax agency may, under some circumstances, create an estoppel against the tax agency. Garrison v. State of California, 64 Cal.App.2d ,20, 149 P.2d 711; La Societe Francaise, etc., v. California Emp. Comm., 56 Cal.App.2d 534, 133 P.2d 47. There is, of course, a great difference between formal rulings by the tax agency, and informal opinions given by, or conversation had with, a mere employee of the agency. There is nothing in the record of the present case to show the actual or ostensible authority of the employee to make the representations. However, even if it be conceded that the representations of a mere employee are sufficient to create the estoppel, certainly, on reason and authority, the estoppel should not apply to the total tax, but only to that portion which could have been passed on, which right has been lost in reliance on the representation. This problem was discussed by this court at length in the La Societe Francaise case, supra. It was there held that while the estoppel would apply against the portion of the tax which could be passed on to the employees, and to interest and penalties, the estoppel could not apply to the portion of the tax due from the taxpayer which he had to pay himself. A moment's reflection will demonstrate the necessity for such limitation. If it once be held that a representation by a mere employee will create an estoppel against the State in tax cases even as to that portion of the tax due from the taxpayer, the collection of taxes admittedly due would be seriously hampered by one incompetent or careless or dishonest employee. Normally, an estoppel does not apply against the State. In recent years certain exceptions to that rule have been created. See Farrell v. County of Placer, 23 Cal.2d 624, 145 P.2d 570, 153 A.L.R. 323, and cases there cited. The La Societe Francaise case created another exception and a proper one. But the rule of that case should not be extended so as to apply against a tax admittedly due where the tax could not have been passed on had the representation not been made. Any intimation in the case of Garrison v. State of California, 64 Cal.App.2d 820, 149 P.2d 711, that the estoppel can or does apply to the total tax is unsound and should not be followed.
For these reasons I believe that the judgment should be reversed.
SCHOTTKY, Justice pro tem.
WARD, J., concurs.