This case (hereinafter called present case) is a companion case to Crossett Lumber Co. v. McCain, 205 Ark. 631, 170 S.W.2d 64, (hereinafter called former case). The parties have stipulated that the evidence in that case, together with some additional evidence might serve as the bill of exceptions here. Appellants, *Page 53 at times may be designated "Commissioner," and appellee designated "Crossett."
In order to properly define and dispose of the issues in the present case, reference to, and perhaps quotations from, the statement of facts set out in the former case may be necessary, but in an effort to achieve brevity the whole of such statement is incorporated herein by reference, and attention is directed thereto.
The former case was begun on July 9, 1940, when Robert E. Linder, and various other timber cutters, filed their separate claims for unemployment compensation benefits, basing their demands upon allegations that they were employees of Crossett. Linder and the others had been engaged in cutting timber which belonged to, or which was destined for manufacture in the mills of Crossett, but each of them had been hired by and worked under and for men who Crossett contended were independent contractors. Crossett, therefore, contended that these claimants were not its employees, and that such benefits, if allowed, should not be chargeable against it.
Prior to the filing of such claims for benefits Crossett had regularly paid unemployment benefits covering men directly employed and paid by it, but had not reported or paid on compensation paid these independent contractors, or the wages of the men who were hired by and worked under them.
After the claims of Linder and others were filed, Crossett at first took the view that it had no interest in the matter, but upon being advised that the allowance of the claims to these persons as employees of Crossett would establish its liability for the tax, it thereafter assumed the burden of a party to the litigation.
While the former case was still pending, and before there had been a final determination of the question as to what relationship, if any, existed between Crossett and the timber cutters, the office of the Commissioner of Internal Revenue, in Washington, elected to decide that question for itself, and ruled that these timber cutters, and contractors as well, were in fact the servants of Crossett, and that Crossett was liable for unemployment *Page 54 compensation tax based upon payments made to such contractors.
On November 27, 1940, the Unemployment Compensation Division of the State Department of Labor forwarded to all lumber companies in Arkansas a circular letter advising them of the ruling of the Commissioner of Internal Revenue, and in that letter said: "Under the terms of the Second Revenue Act of 1940, 701, which was effective October 8, 1940, employers are allowed sixty (60) days after the date of the enactment of the act in which to pay contributions to State Unemployment Compensation Funds for the years 1936, 1937, 1938 and 1939 and receive credit therefor against the Federal Unemployment Compensation Tax. The sixtieth day is December 6, 1940, and unless such contributions are made not later than that date, then employer will be required to pay the state and will also be required to pay the full tax to the federal government without credit for payments that will eventually have to be made to the state agency anyhow."
Other paragraphs in the letter made demands for the payment of the state tax on or before December 6, 1940, and emphasized the fact that unless it was paid to the state by that date the companies would be required to pay the full amount twice, once to the federal government and once to the state government.
Although no court had declared these timber cutters to be its employees, and, although Crossett was at that time contending they were not, (a contention which was finally sustained by this court), Crossett, nevertheless, found itself in a position where if it refused to pay and it was thereafter determined that such persons were its employees within the meaning of the then existing unemployment compensation law its liability would be doubled. As a result of this gentle persuasion, Crossett elected to pay, but not without an effort to reserve the question and protect its rights.
After some conferences between representatives of Crossett and the Unemployment Compensation Division, Crossett tendered payment by check, which bore the *Page 55 indorsement "Paid Under Written Protest." This check was enclosed in a letter which set out in detail the basis of the protest referred to. We quote from said letter as follows: "This payment is made solely as a matter of precaution, by reason of your aforesaid demand and said credit provision of 701(a) of the Second Revenue Act of 1940.
"Crossett Lumber Company reserves all rights to recover the payment herewith made, or to take credit for it upon any taxes or contributions that may hereafter become legally due, and particularly reserves its rights to such refund or credit in accordance with 14(d) of the Arkansas Unemployment Compensation Law as amended, or any other provisions of law now or hereafter in force, and particularly pursuant to the agreement, rules, regulations and stipulations made by you in connection with or relative to this payment."
At the same time a written agreement was entered into between the Commissioner and Crossett. Such agreement set out the history and nature of the controversy, recognized the good faith of Crossett throughout, acknowledged that the payment so made and accepted was not to be considered a closed transaction, but that such payment was made under protest, and only for the purpose of avoiding the penalties of, and to obtain credit under, 1600 of Internal Revenue Code, and then recited: "It is further agreed that the Commissioner of Labor under the authority vested in him by law does hereby adopt a special rule with respect to said company and with respect to the demand for payment of unemployment contributions upon the remuneration of the individuals herein mentioned to the effect that the due date of said contributions is and shall be the date of this instrument, and the company hereby acknowledges receipt of notice of said special rule for the required ten days.
"It is further agreed and understood that the said company will within one year file an application for refund of the entire amount paid and that said application will be received by the Commissioner and will be passed *Page 56 upon by the Commissioner upon the merits thereof; and it is further agreed that, if the Commissioner should deny said application for refund and his denial should be contested in the courts, no contention will be made by the Commissioner that the application for refund was not made in due time."
Immediately following such payment under protest, Crossett filed its complaint in the present case seeking a return of the money. The parties were of the opinion that all questions involved in both cases could be and would be determined in the final decision of the former case, and for that reason attorneys on both sides, tacitly at least, consented that the present case should be held in abeyance, and the former case pressed in the belief that both cases would be thereby determined. In the course of his oral argument before this court in the former case, the attorney for Crossett stated without objection by attorneys for the Commissioner that it was the desire of all parties that all questions, including the tax liability, be decided in that case.
In accordance with what appeared to be the desire of the parties, we sought to completely dispose of the controversy and decide all issues in the opinion rendered in the former case, and with respect to the question as to whether or not Crossett was liable for this tax we said, "it necessarily follows that appellant (Crossett) is neither the employer nor the employing unit of claimants and that it cannot be required to pay a social security tax on persons not in its employment." 205 Ark. 631,170 S.W.2d 69.
We thus sought to express the conclusion which we had reached, that under either the existing or the prior statute Crossett in the past had not been, was not then, and in the future would not become, on account of wages earned by timber cutters who were employed and performed services in the manner and under conditions and circumstances disclosed by the record in that case, liable for unemployment benefit assessments.
After the decision in the former case, Crossett requested the Commissioner to refund these taxes, which *Page 57 had been paid under protest, and, although the Commissioner admittedly has authority under 14(d) of act 391 of the Acts of 1941 to make refunds or allow credits in cases where he finds benefit assessments have been erroneously paid or collected, the Commissioner failed to grant Crossett's application, whereupon the present case was revived and heard in the trial court, resulting in a judgment requiring the Commissioner to refund these moneys.
In the opinion rendered in the former case it is said: "The National Social Security Act was enacted by Congress in 1935, 42 USCA, 301, et seq. Arkansas entered the field in 1937 by the enactment of act 155 of 1937 known as Unemployment Compensation Law. This act was amended by act 200 of 1939. In 1941 the Legislature repealed both former acts by Act 391 of that year and enacted what it designated in 1 as the `Arkansas Employment Security Act'."
Then followed a statement of how the claims of the timber cutters arose, a chronological history of the various proceedings taken in connection with the prosecution of such claims, accompanied by references as to which act was in force on the date each step was taken, or proceeding had in the matter. It was then stated: "We are convinced that the correctness of this decision must be determined under the provisions of act 391 of 1941, and that act 155 of 1937 and its amendatory act 200 of 1939 cannot be considered for any purpose."
The court, therefore, proceeded to dispose of the issues, including the question of tax liability, in accordance with the legislative intent as derived from a construction of act 391 of 1941.
The Commissioner now contends that the question whether such tax was erroneously collected was not settled by the former decision. His position is stated in briefs filed on his behalf as follows: "In the case at bar, the question involves the payment of tax which was levied pursuant to the provisions of Act 155, as amended and all of which accrued during the time Act 155, as amended, was in force and effect. No part of this tax involved in *Page 58 this case is for a period of time subsequent to the effective date of Act 391.
"Therefore, it is the position of appellants that this case must, of necessity, be determined under act 155, as amended, and the liability of the Crossett Lumber Company for such tax must be determined pursuant to the provisions of said act 155, as amended."
The statement in the former case to the effect that act 155, as amended, "cannot be considered for any purpose," is, we think, sufficient answer to appellants' contention here. In so far as the question of tax liability is concerned, however, the result is the same whether tested under the provision of act 155 of 1937, as amended, or under act 391 of 1941 — Crossett was at no time liable for this tax under the provisions of either act.
The record in the former case disclosed that one Robert E. Linder, a timber cutter, had worked for Walter Holland, a contractor, from January to April, 1939, and that said Linder had worked for Ben Allen, another contractor, from June 6, 1939, to December 31, 1939, and by consent of the parties in that case the circumstances surrounding the employment of Linder was accepted as representative of the circumstances surrounding the employment of all other timber cutters, and the relationship existing between Crossett and Holland and Allen was accepted as representative of the relationship existing between Crossett and all other contractors.
The record in the former case is used as the record here, and in addition it is stipulated that "if it should be adjudicated that Holland and Allen were at the time independent contractors, . . . the plaintiff should be entitled to recover in this action. On the contrary, if the court finds that in law or in fact said Holland and Allen were at the time employees of the plaintiff, Crossett Lumber Company, then judgment should be rendered for the defendants."
The words "at that time" found in the language above quoted refer to the time these taxes were paid under protest, to-wit: December, 3, 1940, which was prior to the adoption of act 391 of 1941 and while act 155 of *Page 59 1937, as amended, was still in effect. It is argued, therefore, that unless Allen and Holland were independent contractors under the provisions of act 155, as amended, then the taxes were collected in accordance with the provision of the then existing law, and, therefore, should not be refunded.
In the former case it was expressly held that both under the common law and under the provisions of act 391 of the Acts of 1941 Allen and Holland were independent contractors. Appellants contend that they could not have been so classified under act 155 of 1937, as amended, and in support of this contention cite 2 (5 A, B and C) of said act, which is 8550 (5 A, B and C) of Pope's Digest, which reads in part as follows:
"(5) Services performed by an individual for wages shall be deemed to be employment subject to this act unless and until it is shown to the satisfaction of the Commissioner that. . . .;
"(A) Such individual has "been and will continue to be free from control or direction over the performance of such services, both under his contract of service and in fact, and . . . ;
"(B) Such service is either outside the usual course of business for which such service is performed or that such service is performed outside of all the places of business of the enterprise for which such service is performed; and
"(C) Such individual is customarily engaged in an independently established trade, occupation, profession or business."
Appellants contend that before either Allen or Holland could be held to be independent contractors the record would have to disclose (which it does not) that each and every condition mentioned in paragraphs A, B and C existed.
This argument ignores the first and controlling Paragraph of this sub-section 5 which is "Services performed by an individual for wages shall be . . . subject to the act . . . unless:" Then follows paragraphs *Page 60 A, B and C, which constitute the exceptions. Paragraphs A, B and C can have no application, and, there fore, construction of the provisions thereof are unnecessary, except in cases where the three precedent conditions are first found to exist, to-wit: (1) that services were performed; (2) by an individual; (3) for wages.
The word services is not defined in the act. The Legislature could have used it in the narrow sense of "personal service," or in a more comprehensive sense. We find it unnecessary to decide the question. The fact that the service must be rendered by an individual strongly indicates that personal service was intended. The third condition, however, completely forecloses the question. The service must be performed for "wages." Now the term wages is defined by the act itself in the following language; "`wages' means all remuneration payable for personal service. . . ."
Therefore, since at common law Allen and Holland were independent contractors they would be held to be such under the provisions of act No. 155, as amended, unless the remuneration paid them by Crossett was paid for their personal service. The record wholly fails to disclose any such condition. On the contrary it shows that these men owned trucks, tools and equipment suitable for the cutting and hauling of timber — that they entered into written contracts with Crossett for the cutting and hauling of timber. They hired and fired their own crews, and fixed and paid their wages themselves. Some of these contractors often had two or more crews working at the same time. The contractors were not always present with their crews, and personally did little of the actual physical labor connected with the cutting or hauling of the timber. The remuneration paid them by Crossett were not compensation for their personal services nor in fact reimbursement for moneys paid out for the personal service to their employees. The remuneration paid by Crossett were the agreed contract price, based upon the amount of timber which the contractor actually delivered to the mill site. If, in any week, the contractor had paid out for wages for his men and for replacements, repairs and upkeep of his trucks and other *Page 61 expenses more than he received from Crossett for timber delivered, the loss was his. If he received more from Crossett than he paid out for wages, upkeep, replacements, repairs and expenses, the profit was his. One whose income is determined by the profit or loss which he derives from his individual business cannot be said to be rendering "services for wages," even though he is contributing his personal services to the enterprise.
We conclude, therefore, that at the time these taxes were paid, under protest, and while act No. 155 of 1937, as amended was in effect, Allen and Holland were independent contractors, notwithstanding the provisions of 8550(5) of Pope's Digest.
While we entertain no serious doubt as to the correctness of the conclusion announced in the preceding paragraph, it might be well to observe in passing that in construing an act imposing a special tax, such as we have here, we must construe the same strictly against the state and favorably to the taxpayer, and all ambiguities or doubts therein respecting liability for such tax must be resolved in favor of the taxpayer. Wiseman v. Ark. Utilities Co.,191 Ark. 854, 88 S.W.2d 81; Hardin v. Ft. Smith C. B. Co., 202 Ark. 814, 152 S.W.2d 1015.
The views herein expressed are in no way in conflict with the decision in the case of McKinley v. R. L. Payne Son Lbr. Co., 200 Ark. 1114, 143 S.W.2d 38.
The effect of that decision is that regardless of the artful devices which were employed to create the illusion that he was an independent contractor, Bailey, the person whose status was there in question, was, both at common law and under this statute, nothing more nor less than a mere foreman. Under those circumstances he and those working under him were individuals rendering a personal service for wages and, therefore, the true employer was properly chargeable with the tax.
Counsel raise no question relative to whether this is such a suit as is prohibited by art. V, 20 of the Constitution, which provides that the State "shall never be made a defendant in any of her courts."
Neither the trial court nor this court acquires jurisdiction in a case where the pleadings show that the *Page 62 suit is in effect one against the State Pitcock v. State,91 Ark. 527, 121 S.W. 742, 134 Am. St. Rep. 88. Since jurisdiction of the subject-matter cannot be conferred by consent of the parties, the question, even though not raised by the parties, is always open. It presents itself, and must be determined by the court. Price v. Madison County Bank, 90 Ark. 195, 118 S.W. 706. The court has, therefore, considered the question as to whether it lacks jurisdiction in this case on account of the constitutional prohibition above mentioned.
The fact that a state officer instead of the State itself is designated as the party defendant does not foreclose the question, for if the State is in fact the real party in interest, then the suit falls within the constitutional prohibition. Jobe v. Urquhart, 102 Ark. 470,143 S.W. 121, Ann. Cas. 1914A, 351; McConnell v. Ark. Brick Mfg. Co., 70 Ark. 568, 69 S.W. 559; Pitcock v. State,91 Ark. 527, 121 S.W. 742, 134 Am. St. Rep. 88; Allen Engineering Co. v. Kays, 106 Ark. 174, 152 S.W. 992; Ark. State Highway Commission v. Partain, 193 Ark. 803,103 S.W.2d 53; Page v. McKinley, 196 Ark. 331,118 S.W.2d 235.
Section 14(d) of Act 391 of 1941 (a similar section having been included in Act 155 of 1937) authorizes the Commissioner, after he "shall determine that payment of . . . contributions . . . were erroneous" to allow the employer "to make an adjustment thereof . . . in connection with subsequent payments . . . (and) if such adjustment cannot be made the Commissioner may refund . . . the amount erroneously paid."
The act does not authorize judicial review of the actions taken by the Commissioner under this section.
Section 9 of Act 391 of 1941 defines and prescribes the method of administering the "Unemployment Compensation Fund," which is derived largely from the payment of contributions by the employers. An almost identical provision was included in Act 155 of 1937. Paragraph (b) of said 9 requires the Commissioner to designate a treasurer and custodian of the fund, and *Page 63 requires such person to "maintain within the fund three separate accounts; (1) a clearing account, (2) an unemployment trust fund account, and (3) a benefit account." Collections are first deposited in the clearing account and refunds allowed by the Commissioner under 14(d) of the act are payable from the clearing account. At the times and in the manner as in that section provided funds are transferred to the other two accounts which are deposited with the Secretary of the Treasury of the United States.
The majority of the court have reached the conclusion (in which Mr. Justice Robins, Mr. Justice McFaddin and the writer do not concur) that in view of the facts reflected by this record, and particularly the facts that (a) the payments were made under protest, and (b) that both the Commissioner and Crossett understood that it was not a closed transaction, but that the validity of the assessment would be contested, and (c) that a written agreement was entered into at the time, which recognized that this suit would be brought, and (d) that the Commissioner has in this case specifically stipulated that "if it should be adjudicated that Holland and Allen were . . . independent contractors the . . . plaintiff should . . . recover . . .," all taken together is sufficient to justify the inference that the moneys so paid to the Commissioner by Crossett under protest, at no time were mingled with or became a part of the funds of the State, but that the Commissioner accepted, and has since held the same, in the capacity of a trustee or escrow agent for the parties, subject to the adjudication of Crossett's liability for such taxes. The majority holds that under such circumstances the suit is not against the State.
Affirmed.