Court Opinion

ID: 3987632
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:43:46.248663+00
Date Added: 2024-06-11T13:52:25.232739
License: Public Domain

I dissent. I agree that the relationship between the Hotel Company on the one hand, and the "name bands" and "special attractions" on the other hand, were service relationships and constitute "employment" within the meaning of the Unemployment Compensation Act, and tax liability exists. This was settled by the Singer Case cited in the main opinion. I agree therefore that the Commission was correct in holding the Hotel Company liable for employment taxes thereon from the date the Commission advised the Hotel Company of the change in its ruling or policy in regard to such matters. I think that part of the order of the Commission taxing unemployment contributions against the Hotel Company on amounts paid by it to "name bands" prior to notice of the Commission's change of policy and new ruling, is in its nature retroactive taxing, beyond the power of the Commission and void.
I can see no reason why the State, and any and all of its agencies should not be held to the same standards of morality, equity, and fair dealing that it exacts from the people. I think any effort by the state or any of its agencies to set *Page 37 
itself beyond, or exempt itself or its acts and conduct from, such standards is beyond its constitutional power and void. The state is a political entity set up by the people for the purposes of united action to insure that all its population, personal or corporate, receive the same privileges and submit to the same obligations in their conduct and relationships with one another. Beyond this there is no reason for the existence of the state. The preamble to the Utah Constitution declares: "We, the people of Utah, in order to secure and perpetuate the principles of free government." Art. 1, Sec. 1 grants all men the same inherent and inalienable rights; and Sec. 2 declares that all free governments are founded on the authority of the people "for their equal protection and benefit." Section 27, declares that "Frequent recurrences to fundamental principles is essential to the security of individual rights and the perpetuity of free government." The state has only those powers given it by the Constitution, Duchesne Co. v. State Tax Comm., 104 Utah 365,140 P.2d 335; and we search in vain for any power given to the state to exempt itself, or its agencies from the standards of fair dealing imposed by the people upon themselves. It may be taken for granted that neither the members of the Industrial Commission nor of this court would put its approval upon action such as here involved by one individual in his dealings with another. But let us go directly to the law point discussed in the prevailing opinion.
The following questions are presented: (1) Was the agreement above referred to, made by the parties in settlement of similar disputes in 1939, and forming the basis of action from that time until these cases arose in 1942, a determination of the legal relationship between the company and the "bands" so as to fix the relationship of the company and the bands for the purpose of tax liability, and bind the commission? (2) If question (1) be answered in the negative, was the agreement and the action thereon such as to bar or estop the commission from collecting taxes on such activities engaged in prior to the time of a change in policy or ruling had been given by the commission? *Page 38 
The hotel company contends that the agreement was a legal determination of the meaning and application of the act, and when the company settled with the commission on that basis and dismissed its suit, that agreement became the law of the case, and the commission cannot now change its ruling to the detriment of the company. The commission on the other hand argues that the agreement was merely a compromise of then pending cases, and had no future application. No case in point is cited in the briefs and I have found none, so I am left to a determination from the agreement itself and what was done by the parties under it. That the agreement was an administrative interpretation of the act and a determination of its meaning as applied to the facts as they then existed, and as they exist in this case is clear. Under the agreement the company was not required to pay the tax on the amount paid the "name bands" in the suits then pending, and upon that settlement they were dismissed by the hotel company. A stipulation filed in this case with respect to the nature, substance and meaning of that agreement reads in part as follows:
"* * * that the further agreement was that the Company would continue to pay contributions on all members of the local Orchestras which it employed, which payment it has made; but that the Company would not be required to pay on Unit or `Name Bands' otherwise known as `Traveling Orchestras,' made up out of the state and brought into the state as a unit and maintained as a unit during the time they were playing for the Company in the State * * *"
In view of this agreement, the commission's contention that it was intended thereby to compromise only the pending cases, must fail — the agreement does not permit of such interpretation. That the commission may make an interpretation or determination of the meaning of the act is clear, as "it shall be the duty of the industrial commission to administer" the unemployment compensation act. Sec. 42-2a-11 (a)(1), U.C.A. 1943. Interpretation of the act is incident to its administration, since the administrator must first determine the meaning of an enactment before he can administer it, and enforce its provisions. Of course, this *Page 39 
interpretation is not final since it is reviewable by the courts. Sec. 42-2a-11, U.C.A. 1943. But the question here is whether, once having announced an interpretation, or a statement of policy under the act, the commission is bound by such determination until changed, either by its own action, or by pronouncement of the courts. An enactment of the legislature, or a judgment of the court, is the law until repealed, amended, reversed, or vacated. When such is done, ordinarily the change is effective as of the time it is made. It has been held that the courts will not permit a change of administrative interpretation to operate retroactively to the detriment of those relying thereon in good faith.
In fields outside of the treasury department the Federal cases hold that administrative rulings and practices cannot be retroactive, and as to past transactions, they are binding. InUnited States v. MacDaniel, 7 Pet. 1, 14, 8 L. Ed. 587, it was said:
"* * * of necessity, usages have been established in every department of the government, which have become a kind of common law, and regulate the right and duties of those who act within their respective limits. And no change in such usages can have a retrospective effect, but must be limited to the future.
"Usages cannot alter the law, but it is evidence of the construction given to it; and must be considered binding on past transactions."
This language referred to the practice of paying additional money to a clerk in the Navy department for the performance of duties in addition to those for which he was regularly employed. There was no statutory authority either for the appointment for the additional work, or for the additional payment. The individual involved had been working for a long period of time, and received compensation. Suit was brought by the government to recover compensation paid. In United States v. Alabama G.S.R.Co., 142 U.S. 615, 12 S. Ct. 306, 308, 35 L. Ed. 1134, the court dealt with a regulation or practice of the post office department, as follows:
"It is a settled doctrine of this court that in case of ambiguity the *Page 40 
judicial department will lean in favor of a construction given to a statute by the department charged with the execution of such statute, and, if such construction be acted upon for a number of years, will look with disfavor upon any sudden change, whereby parties who have contracted with the government upon the faith of such construction may be prejudiced. It is especially objectionable that a construction of a statute favorable to the individual citizen should be changed in such a manner as to become retroactive, and to require from him the repayment of moneys to which he had supposed himself entitled, and upon the expectation of which he had made his contracts with the government."
Citing Edwards' Lesse v. Darby, 25 U.S. 206, 12 Wheat. 206, 6 L. Ed. 603; United States v. State Bank of NorthCarolina, 31 U.S. 29, 6 Pet. 29, 8 L. Ed. 308; and other cases.
In the case last cited the court dealt with a situation similar to the one here presented. The hotel company during the three years the commission's ruling was in effect, contracted in reliance thereon. The prices to be paid to "name bands" were or may have been determined in view of the fact that their services were tax free. It is now "especially objectionable" that we permit a changed construction of the statute to be retroactive and force the hotel company to pay more for those services than was contemplated by their contracts. To the same effect on the question of retroactiveness, see Kansas City, M.  O.R.R. Co.
v. United States, 53 Ct. Cl. 258, affirmed in Northern Pac.Ry. Co. v. United States, 251 U.S. 326, 40 S. Ct. 162,64 L. Ed. 290; United States v. Freeman, 3 How. 556, 11 L. Ed. 724; 42 Am. Jur. 410.
There are some federal cases contra on the above proposition, but they all involve Treasury Department rulings and orders. InManhattan G.E. Co. v. Com'r of Int. Rev., 297 U.S. 129,56 S. Ct. 397, 400, 80 L. Ed. 528, where the regulation in force at the time of the transaction in question was invalid, and the government was trying to collect taxes under a subsequent regulation, it was held that tax liability was governed by the later rule. The court however, declared that this was not giving retroactive effect to the *Page 41 
treasury department rule, but rather that this later rule was the first proper application of the statute. It was said:
"The statute defines the rights of the taxpayer and fixes a standard by which such rights are to be measured. The regulation constitutes only a step in the administrative process. It does not, and could not, alter the statute. It is no more retroactive in its operation than is a judicial determination construing and applying a statute to a case at hand."
This decision gives a retroactive effect to the regulation in that it allows the regulation to affect transactions completed before it came into existence. To the same effect is Titsworth
v. Com'r. of Int. Rev., 3 Cir., 73 F.2d 385, 387, where it was said that it is the statute and not the regulation that imposes the tax liability, and so:
"Whether Regulation 74 was defective in not providing a proper method of spreading the basis of cost or not clear in defining the scope of its application, we see no sound reason why the error should not be corrected."
Helvering v. R.J. Reynolds Tobacco Co., 306 U.S. 110,59 S. Ct. 423, 83 L. Ed. 536, recognized the power of the Treasury Department to make its rules and regulations retroactive in effect. However, these cases are of little weight in this case, since there is a very material difference in the statutory authority given to the treasury department, and that given to the Industrial Commission. Tit. 26, U.S.C.A. Int. Rev. Code, § 3791 (b) 53 Stat. 467 reads:
"Retroactivity of regulations or rulings. The Secretary, or the Commissioner with the approval of the Secretary, may prescribe the extent, if any, to which any ruling, regulation, or Treasury Decision, relating to the internal revenue laws, shall be applied without retroactive effect." (Italics added.)
As the federal cases hold, this can mean only that if nothing is said about the question, the regulation or ruling is retroactive. Even under this statutory provision, the Supreme Court has held some regulations to have prospective effect only, illustrating the extreme reluctance of *Page 42 
courts to give retroactive effect to such administrative acts. As in Rasquin v. Humphreys, 308 U.S. 54, 56, 60 S. Ct. 60, 62,84 L. Ed. 77, where it was said:
"Whatever validity the amended regulation of 1936 may have in its prospective operation, we think it is so plainly in conflict with the statute as to preclude its application retroactively so as to subject to tax such transfer as was made by the creation of the trust in 1934."
And in Shearer v. Anderson, 2 Cir., 16 F.2d 995, 996, 51 A.L.R. 534:
"Whatever the effect of the departmental interpretation of the later act of 1918 may be on the construction of the same clause reenacted by still later legislation, it cannot operate retroactively; we are here concerned with rights under the act of 1916. The later views of the department as to the meaning of this act can be at the best but persuasive."
The only way in which these conflicting opinions can be reconciled is that in instances where it appears that to give a retroactive effect will impose undue hardship on the taxpayer, the court will refuse to do so, even though the department said nothing in its order to the effect that it should have prospective effect only.
Let us contrast the provisions of our statute with those governing the treasury department. Sec. 42-2a-11 provides:
"(a)(1) It shall be the duty of the industrial commission to administer this act; and it shall have power and authority to adopt, amend, or rescind such general rules, regulations, and special orders * * * and take such other action as it deems necessary or suitable to that end. * * *
"(b) General rules and special orders may be adopted, amended, or rescinded by the commission only after public hearing or opportunity to be heard thereon, of which appropriate notice has been given. Regulations of the commission may be adopted, amended, or rescinded and shall become effective in such manner as the commission shall prescribe. General rules shall become effective ten days after filing with the secretary of state and such publication in one or more newspapers of general circulation in this state as the commission shall prescribe. Special orders shall become effective ten *Page 43 
days after notification to or mailing to the last-known address of the individuals or concerns affected thereby."
Not only do the above statutory provisions not specifically authorize the commission to make its orders retroactive, but I believe that the implications are that orders should not be retroactive. It is well recognized that unless the mandate of the statute is plain and compels that construction, it will not be construed to be retroactive. United States v. Moore,95 U.S. 760, 24 L. Ed. 588; Brewster v. Gage, 280 U.S. 327,50 S. Ct. 115, 74 L. Ed. 457; Miller v. United States, 294 U.S. 435,55 S. Ct. 440, 79 L. Ed. 977; United States v. Magnolia PetroleumCo., 276 U.S. 160, 48 S. Ct. 236, 72 L. Ed. 509. From this rule it follows that unless the statute plainly and clearly gives power to an administrative body to make retroactive orders and rules, it will not be so construed. Our statute does not compel such an interpretation, and I should not so interpret it.
There is yet another reason why the order of the Commission should not be retroactive. The original interpretation or ruling was made in 1939, interpreting Sec. 42-2a-19 (j)(5) to exclude "name bands" from the operation of the act. In 1941, Laws 1941, c. 40, the legislature reenacted the entire Unemployment Compensation Act as it now appears in U.C.A. 1943, and made no change in the provisions of the section interpreted by the commission's order. It is well recognized that re-enactment without change, when there is an administrative interpretation of the statute is a legislative approval of that interpretation or ruling. Johnson v. Manhattan R. Co., 289 U.S. 479,53 S. Ct. 721, 77 L. Ed. 1331; United States v. Dakota-Montana Oil Co.,288 U.S. 459, 53 S. Ct. 435, 77 L. Ed. 893; Massachusetts Mut.Life Ins. Co. v. United States, 288 U.S. 269, 53 S. Ct. 337,77 L. Ed. 739. In Helvering v. R.J. Reynolds Tobacco Co., supra [306 U.S. 110, 59 S. Ct. 427, 83 L. Ed. 536], the court dealt with such a situation, saying:
"* * * we are of opinion that the re-enactment of the section, *Page 44 
without more, does not amount to sanction of retroactive enforcement of the amendment, in the teeth of the former regulation which received Congressional approval, by the passage of successive Revenue Acts including that of 1928 [26 U.S.C.A. Int. Rev. Acts, page 351 et seq.]"
In that case, there was an interpretation of the act, then re-enactment of the legislation, subsequently a different interpretation, and then another re-enactment. The court held that merely because of the last re-enactment, Congress did not intend that the later interpretation should be retroactive, in view of the former interpretation which had also been approved by re-enactment. By re-enactment without change, the Utah legislature approved the Commission's interpretation of Sec. 42-2a-19 (j)(5). However, by also re-enacting Sec. 42-2a-11 (a) (1) the legislature sanctioned a future change in this construction. Since the Commission is subject to the legislative authority, and has only the power given by the legislature, its future change may not be retroactive in the teeth of a construction which has received a legislative sanction and approval. The Commission was in error in making its order retroactive to 1940. Under the facts here presented the Commission should be bound by its interpretation of the act until such time as that ruling, practice, or interpretation was modified, and such modification was effective as of the time it was published and/or communicated to plaintiff.
MOFFAT, Justice, deceased. *Page 45