Honorable Claude A, Williams 

Chairman and Executive Director 

Texas Unemployment Compensation Commission 

Brown Bldg. 

Austin, Texas 

Dear Sir: Opinion No. o-3781 

Re: Application of Article 

5221b, Section 17 (f) (4), 

V.A.C.S., to certain related fact situations. 

Our answer to your questions, subsequently stated 

in this opinion, has been delayed by the appeals In the appellate courts of this State on fact situations involving the 

above enumerated statute, 

You have asked that we assume in the fact situations 

inquired about that there were sufficient persons in emplogment in the required days and weeks to constitute coverage 

under the Unemployment; Compensation ACt provided Section 17 

(f) (4) of the Unemployment Compensation Statute is applicable. 

We are also to assume that, unless specifically 

stated 20 the contrary, in each partnership all partners are 

active in the management and that no control or management 

of the partnership has been delegated to one of the partners. 

You have first inquired if Section 17 (f) (4) of 

Article 5221b, Vernon's Annotated Civil Statutes, renders 

each employing unit liable as an employer under the following 

facts: 

"A owns and operates and individual business. A 

with B operates a partnership. A's investment in the 

partnership amounts to 60% of the assets thereof, 

B's to 40$." 

The Texas Unemplo 

$ 

ent Compensation Act defines 

"employer" in Section 17 (f (4) as follows: 

"(4) Any employing unit which together with 

one or more other employing units, is owned or contro:Lled (by legally enforceable means or otherwise) 
Han, Claude A. Williams, page 2 O-3781 

directly or indirectly by the same interest, or 

which owns or controls one or more other employing 

units (by legally enforceable means or otherwise), 

and which, if treated as a single unit with such 

other employing unit, would be an employer under 

paragraph (1) of this subsection;" 

We are requested to advise you whether under the 

fact situation stated above the individual business of A and 

the partnership business of A and B is owned or controlled 

(by legally enforceable means or otherwise) directly or indirectly by the same interest. 

In our opinion No, O-1724, issued January 4, 1940, 

we held that an individual owning six-sevenths of the assets 

of a partnership and active in the management of the partnership and the same individual operating his own business 

owned and controlled both imploying units within the meaning 

of Section 17 (f) (4) of our Unemployment Act. This opinion 

WEiS released prior to the release of the opinion in the case 

of Texas Unemployment Commission vs. Bass, 151 S. W. (2d) 567. 

In our present situation, it is confessed that A 

owns and controls his individual business. With respect to 

the partnership business of A and B it is generally held that 

each partner, in the absence of an agreement to the contrary, 

has an equal right to control and manage the business. 49 

COP. Jur., Set, 295" It is likewise true that it is generally 

held that partnerships are legally under the control of a 

majo,rit,y of tha partners. Texas Unemployment Compensation 

Commissi:on vs. Bass, 151 S. W0 (2d) 567. There is no majority 

of partners as between two members of a partnership; it, 

therefore, appears to us that the ownership and control of 

the partnership in this fact situation is in both A and B. 

It is true that A may dissolve the partnership by withdrawing 

from it and in that sense he controls the partnership, but 

B, the investor of 40% In the business, may likewise dissolve the partnership business. 

In the case of Texas Unemployment Compensation Commission vs. Bass, supra, the cour,t held that the three common partners in the three partnerships were not owned by the 

same interests because there was an additional partner in two 

of the ,three partnerships. That decision indicates to us 

that the court does not believe that this statute means that 

it is s.lfficient if the same interests own a majority of the 

stock 0.r of the assets of a partnership. Therefore, we do 

not belleve that A, who has his individual business and who 

owns 60$ of the assets of the partnership, owns both of the 

employing units within the provision of the Act under con- 
Hon. Claude A. Williams, page 3 o-3781 

struction. The power of each partner to trade and to incur 

liability on behalf of the partnership is unquestioned; 

aside from this power, A has no more authority In the partnership business than does B. It is a business that may be 

controlled equally by either partner. 

Further, the court stated in the oplnion 1n the 

Bass case that the control intended by the statute is that 

control which is enforceable. As in the Bass case, the only 

control that i.s enforceable is that which the partners have 

agreed to. In this instance, there is an equal power of 

control in A and B. 

We are of the opinion that Section 17 (f) (4) may 

not be applied to render liable for unemployment taxes the 

employing units owned by A and the partnership of A and B. 

The construction rsf the statute given by the Supreme Court 

of Texas in the Bass case does not permit us to indulge in a 

broad interpretation of this provision of the statute. 

Your question No. 2 asked if there Is liability 

upon both employing units for unemployment taxes if, 

"A and B are equal partners in a grocery businessA 

A and B are lIkewise equal partners in a drug business. 

The statute specifies only ownership and control. 

There are two owners and partners, the same persons, In each 

of the t;wo businesses under consideration. There are only 

the two owners in each busfness; therefore, we believe that 

the two businesses are owned and controlled by the same interest. 

The question has been raised as to the meaning of 

"interest,' whether it is to be construed as singular or 

plural. Our answer to that question is found in Article 10, 

paragraph 4 of Vernon's Annotated Civil Statutes, upon the 

Construction of Laws; it is: 

"The singular and plural numbers shall ea:h include 

the other, unless otherwise expressly provided. 

This forecloses any doubt that the use of the term "interest" 

may also include 'interests." 

The next question arising under this fact situation 

would arise by reason of the difference in the types Of businesses operated, there being a drug business and a grocery 

business. 
. - 

- - 

Hon, Claude A. Williams, page 4 o-3781 

One of the earliest decisions on this question 

was by the Supreme Court of North Carolina in the case of 

Unemployment Compensation Commission vs. City Ice & Coal 

Company, 3 S-E, (2d) 290, in which there were three corporations involved, two of them being in the ice and coal 

business and the third one in the dairy business, The court 

there held that the three businesses should be considered 

as one unit under a statute similar to Article 5221b, Section 17 (f)(4), Vernon's Annotated Civil Statutes. 

More recently, the Court of Civil Appeals at 

Beaumont;, Texas, affirmed the judgment of the trial court 

in the case of Washington Oil Corporation vs. The State of 

Texas, not yet reported, in a fact situation involving 

several corporations engaged in different types of the Oil 

business:. The Supreme Court refused writ of error in this 

case. The Mississippi Supreme Court in Avent et al vs. 

Mississi.ppi Supreme Court,, decided November 24th, not yet 

repor,ted, held that a drug store and a dairy were controlled 

by the same interest and applied a similar statute. The 

courts make no distinction in the application of this provision of the statute because the types of businesses involved are different. 

In our opinion the facts related in your situation 

No. 2 are within the inclusion of Section 17 (f)(4) and the 

two partnerships may be treated as a single unit. 

Your third question recites that: 

"A, B and C are equal partners in a business. 

A, B and D are equal partners in an ano,ther business.' 

You have asked that we assume that control of each 

partnership is in all of ,the partners and that there has been 

no delegation of control to any one of the partners. Under 

the holding of the Supreme Court in the Unemployment Compensation Commission vs. Bass, supra, the two partnerships are 

not owned by the same interests. Further, the fact situation 

present here and that in the Bass case are similar except 

that in the Bass case there were three partnerships. As said 

by Judge Critz in the Bass case: 

"As a general rule partnerships are legally under 

the control of the majority of the partners, but as between themselves, the members of a partnership may vest 

the sole control in one of the partners to the exCbX3iOn 

of all others. Thompson v. Schmitt, 115 Tex, 53; 274 

S. W, 554; Oil Lease & Royalty Syndicate vs. Beeler, 217 

s, w. 1054," 
._ . - 

Hon. Claude A. Williams, page 5 o-3781 

There has been no delegation of partnership 

control, but on the contrary the facts are that A, B and C 

control partnership No. 1 and A, B and D control the other 

partnership. Applying the previously stated rule of law 

that ordinarily control of the partnership is in the majority 

of the partners, A and B are active and equally in control 

and compose the majority in the partnership No. 1 and they 

are siml.larly active and equal in the control and management 

of partnership No. 2. Therefore, we are of the opinion that 

the two partnershi 

that Section 17 (f f 

s are controlled by the same interest and 

(4), supra, is applicable to this fact 

situation rendering both units "employers" under the Act. 

Your fourth fact situation is: 

"H and W are husband and wife. g manages a 

business which is community property. W manages 

a business which is her separate property. The 

receipts of W's business go into a bank account 

maintained in the business name, separate and apart from H's bank account, into which the receipts 

of the community business go. H does not in any 

manner interfere with or attempt to manage W's 

business, although he has made no gift of the 

profits of W's business to her as they accrue." 

H, the husband, manages the business which is the 

community property of H and W and under Article 4619, Vernon's 

Annotated Civil Statutes, the control of this communItg property is in the husband. We must now determine whether H 

owns or controls the business operated by W. 

You have recited that the receipts from W’s business 

go into a bank account maintained in the business name separate and apart from H's bank account. Article 4622, Vernon's 

Annotated Civil Statutes, provides that the funds on deposit 

in a bank whether in the name of the husband or wife shall be 

presumed to be the separate property of the party in whose 

name thiey stand, regardless of who made the deposit. 23 Tax. 

JUr., Section 72, page 96, states that the enactment of this 

statute is not for the purpose of controlling the status Of 

the property, but is merely a rule of evidence designed 

primari~ly for the protection of the bank in paying out such 

monies. The presumption that property is that of the spouse 

in whose name the deposit is carried may be rebutted. 'Technically, a married woman may be a merchant or trader at will,,, 

so far ias the immediate transaction of business is concerned. 

23 Tex. Jur. p* 304. However, the profits of the business 

engaged in by W, in our opinion, are community profits and 

property. See Speer's Law of Marital Rights in Texas,"p. 367. 
Won. Claude A. Williams, page 6 Q-3781 

Article 4714 of Vernon's Civil Statutes gives the 

wife the authority to control her separate property, and in 

this instance the business that she is operating. In general, profits, whether by way of interest, dividends or revenues do not belong to the separate estate of the husband 

or wife. 23 Tex. JuP., Section 60, page 85= The earnings 

of the business operated by W being community property, it 

will be necessary for you to determine whether these profits 

go back into the business operated by W. If the profits go 

back into the business and are commingled, the separate 

estate loses its identity and assumes the character of community property. W must be able to identify the separate 

estate in order to sustain a claim of the property being her 

separate estate. We do not have all of these facts, but if 

the profits, representing community funds, have gone back 

into the business, the business changes its character and becomes community business, and under the statute is legally 

under the control of H, the husband, even though it is 

operated by the wife. 

The decisions of our a pellate courts reflect that 

the application of Section 17 (f P (4) depends upon the facts. 

If, in fact, the business is run solely and exclusively by 

W, without consultation or advice from H, there is no actual 

control of that business by H. 

There is, however, the legal conception that husband and wife are one person and the husband is in control 

of the community property. 

In our opinion, you will have to obtain all the available facts before determining if this is a situation 

covered by Section 17 (f) (4). You must bear in mind the 

requirement of actual control; if there are any facts reflecting such control by H, we believe that the two units 

may be considered as one employing unit. 

If you should decide that H is controlling the business of W, we believe that you would also have the burden 

of proving the community profits were commingled with the 

separate estate. 
Han, Claude A, Williams, page 7 o-3781 

Yours very truly 

ATTORNEY GENERAL OF TEXAS 

By s/Morris Hodges 

Morris Hodges 

Assistant 

MH:N:wc 

APPROVED FEB 27, 1942 

s/Grover Sellers 

FIRST ASSISTANT 

ATTORNE'Y GENERAL 

Approved Opinion Committee By s/BWJ3 Chairman