Friedman v. American Surety Co. of New York

Mr. Chief Justice Alexander,

dissenting.

I regret that I am unable to agree with my associates on the constitutionality of the Act in question. Said Act, the Unemployment Compensation Act, compels employers to contribute funds to be used in paying unemployment compensation to their employees during the term of their unemployment. The employees make no contributions whatever to the funds. The employers, make all the contributions, and the funds are payable to the employees upon their becoming unemployed, without the necessity of a showing of indigent circumstances.

That the contributions exacted of the designated employers under the terms of the Act constitute a tax, can hardly be doubted. A tax is sometimes defined as a forced contribution of wealth to meet the public needs of the government (Webster’s New International Dictionary), or as an enforced burden levied by legislative authority for a public purpose. 1 C. J., *16865. The burden imposed by the Act here under consideration meets all of these requirements. In fact, the preamble of the Act itself refers to such contribution as a “tax.” See also Bee-land Wholesale Co. v. Kaufman, 234 Ala. 249, 174 So. 516; Carmichael v. Southern Coal & Coke Co., 301 U. S. 495, 57 S. Ct. 868, 871, 81 L. Ed. 1245, 1255, 109 A. L. R. 1327; Lally v. State, 138 S. W. (2d) 1111, par. 1; Texas Unemployment Compensation Commission et al v. Campbell, Wise & Wright, Inc., et al, 119 S. W. (2d) 388; Independent Gasoline Co. v. Bureau of Unemployment Compensation, 190 Geo. 613, 10 S. E. (2d) 58. Since the majority opinion concedes that the funds so exacted of employers under the Act constitute a tax, I deem further discusison of this phase of the question unnecessary.

The majority'opinion seems to hold that the funds exacted from the employers under the terms of the Act are not public or State funds. In fact, it is said in the opinion: “The money collected for such fund, — though levied and collected in the form of excise taxes,- — is not levied or collected to become a fund of the State as such. The taxes are levied and collected for such fund, and not for the State in its sovereign capacity. * * * To our minds, the fund above described does not come within the terms of this constitutional provision; because, as above stated, the fund is not the property of the State as such, and never goes into the State Treasury. * * * The money here involved is not the property of the State in any capacity, but is a trust fund to be held out of the State Treasury, but in the hands of the State Treasurer as trustee, for the benefit of a class of employees whose employers pay it in by virtue of a tax levied, the tax being in the nature of an excise tax.” If in fact this is not a State fund, collected by the State in its sovereign capacity, then the Act authorizing the collection thereof is void, for our Constitution expressly provides that, “Taxes shall be levied and collected by general laws and for public purposes only.” (Italics mine.) Constitution, Article VIII, Section 3. It also provides: “The Legislature shall not have the right to levy taxes or impose burdens upon the people, except to raise revenue sufficient for the economical administration of the government, * * Constitution, Article III, Section 48. Under these provisions of the Constitution the taxing power of this State cannot be used to raise money for private purposes. It can be used only to raise money for public purposes for the economical administration of the government; and, consequently, any fund so raised must necessarily be *169classed as a State fund or as a public fund. City of Dallas v. Trammell, 129 Texas 150, 101 S. W. (2d) 1009, 112 A. L. R 997; Texas Pharmaceutical Assn. v. Dooley (Tex. Civ. App.), 90 S. W. (2d) 328. Otherwise there would be no constitutional authority for the collection thereof, and this in itself would render the Act void. As said by Chief Justice Phillips in Waples et al v. Marrast, 108 Texas. 5, 184 S. W. 180, par. 4, L. R A. 1917a, 253; • “Taxes are burdens imposed for the support of the government. They are laid as a means of providing public revenues for public purposes. The sovereign power of the State may be exercised in their levy and collection only upon the condition that they shall be devoted to such purposes; and no lawful tax can be laid for a different purpose. Whenever they are imposed for private purposes, as was said in Broadhead v. Milwaukee, 19 Wis. 624, 670, 88 Am. Dec. 711, it ceases to be taxation and becomes plunder.” See also Goodnight v. City of Wellington, 118 Texas 207, 13 S. W. (2d) 353; 40 Tex. Jur., 14.

We therefore approach the question as to whether the Legislature had the right to authorize the use of such public funds in the manner provided for in the Act. Our Constitution, Article III, Section 51, provides as follows: “The Legislature shall have no power to make any grant of any public moneys to any individual, association of individuals, municipal or other corporations whatsoever”; except (a) to provide compensations for indigent and disabled Confrederate veterans and sailors; (b) the issuance of bonds in the year 1933 in the sum of $20,000,000, to be used to relieve the hardships of needy and distressed people resulting , from unemployment; (c) old age assistance; (d) compensation for the needy blind; and (e) assistance to destitute children under the age of fourteen. The grant that is prohibited by this section of the Constitution contemplates and includes any gratuity or payment of public funds directly to any individual, for any purpose other than in return for services rendered or other property rights. Byrd v. City of Dallas, 118 Texas 28, 6 S. W. (2d) 738; Rhoads Drilling Co. v. Allred, 123 Texas 229, 70 S. W. (2d) 576; Dallas County v. Lively, 106 Texas 364, 167 S. W. 219; Jones v. Williams, 121 Texas 94, 45 S. W. (2d) 130, 79 A. L. R. 983; City of Aransas Pass v. Keeling, 112 Texas 339, 247 S. W. 818; Bexar County v. Linden, 110 Texas 339, 220 S. W. 761; State v. Bradford, 121 Texas 515, 50 S. W. (2d) 1065; Henson v. Commissioners’ Court of Henderson County (Tex. Civ. App.), 56 S. W. (2d) 240. In Byrd v. City of Dallas, *170supra, a pension authorized by the voters of the City of Dallas in favor of city firemen was upheld, on the ground that the pension was a part of the compensation contemplated by the contract of hire to be paid for services rendered by such employees. In discussing this question, however, the court said: “That portion of title 109 of the Revised Statutes referred to in the certificate is not in anywise obnoxious to the provisions of the Constitution cited. Without discussing in detail these' provisions of the Constitution, it is sufficient to say each of them is intended to prevent the application of public funds to private purposes; in other words, to prevent the gratuitous grant of such funds to any individual, corporation, or purpose whatsoever. This limitation upon the power of the Legislature is a wholesome one and is plainly stated in unequivocal terms. It is academic to say the Legislature has power to pass any law which its wisdom suggests that is not forbidden by some provisions of the Constitution (federal or state). If the pension provided for in this Act is a gratuity of donation to the beneficiary, it is clearly forbidden by the fundamental law.” It was held in the case just quoted from that the pension therein provided for was not a gratuity, but was a part of the compensation agreed to be paid by the City to its employees. That holding can be fully justified, because there the City voluntarily agreed in advance that, if its firemen would work for the City a definite time, the City would pay them, in addition to their monthly salary, a pension under certain stipulated conditions.. That a contract was entered into voluntarily by the parties, and the pension was rightly classified as a part of the compensation agreed to' be paid to such employees for their services. In the case at bar the contract is not a voluntary one on the part of the employers. They are compelled to make the so-called “contributions” by the strong arm of the law in the exercise of its taxing power. The relation, therefore, is not a contractual one, and the funds so exacted of the employers cannot be classified as a part of the compensation agreed to be paid by the employers.

Our Workmen’s Compensation Law was sustained only on the theory that the relation created thereby was a voluntary one. There the employer could refuse to become a subscriber to the Act, and the employee could refuse to work for an employer who was a subscriber. The employer by taking out compensation insurance, and the employee by accepting employment with such a subscriber, thereby consented to abide by the ' provisions of the Act. It is interesting to note, however, what *171Chief Justice Phillips said would be the effect but for such consent. In this connection it was said: “There is no such thing in this country as taking one man’s property without his consent and giving it to” another by legislative edict. That is nothing less than confiscation by legislative decree. If this Act, therefore, had declared an employer not consenting to its provisions absolutely liable in damages at the suit of an employee for any injuries sustained by the latter in the employment, without reference to any wrong or breach of duty committed by the employer, it would have been void. Such a law would have amounted to a legislative forfeiture of property rights, regardless of the holding of any court upon the question.” Middleton v. Texas Power & Light Co., 108 Texas 96, 178 S. W. 556. The Act here under consideration has no element of consent on the part of the employers. This is a plain case, in the language of Chief Justice Phillips, of “taking one man’s property without his consent and giving it to another by legislative edict.”

It is not contended that the laborers coming within the meaning of the Act here under consideration are employees of the State, or of any municipal branch thereof, or that they have ever delivered any property to or rendered any service for the State, in return for the benefits to be paid to them under the Act. So far as they are concerned, it is a pure gratuity.. It is not required that such employees, who are to receive the benefits be in necessitous circumstances. They may be as wealthy as the employers, and yet they are to receive the funds so exacted from the employers through the taxing power of the State. The Act contemplates a direct grant to the individuals, and not merely the maintenance of an institution, such as a school, asylum, or bureau for their assistance. Very clearly, therefore, the Act provides for a direct grant of public moneys to individuals, and is necessarily in conflict with the express provisions of Article III Section 51 of our Constitution as above set out.

In this respect it should be noted that our State Legislature is not invested with that broad and unrestricted authority in the use of public funds as is the Congress of the United States. It has been held in numerous cases that Congress may make grants or gratuitous payments of public funds to individuals without the necessity of pre-existing .legal liability therefor. United States v. Realty Co., 163 U. S. 427, 440, 16 Sup. Ca. 1120, 41 L. Ed. 215; Work v. Rives, 267 U. S. 175, *172182, 45 Sup. -Ct. 252, 69 L. Ed. 561. No such right exists in the Legislature of the State of Texas. The people of Texas, for reasons satisfactory to themselves, have seen fit to prohibit, by express constitutional provision, the making of such grants; and any such gratuitous payments contrary to the Constitution are void.

That my interpretation of the Constitution in this respect is correct is not only sustained by a logical interpretation of the language used in the Constitution itself, and by the authorities above cited, but by the unbroken line of conduct on the part of the Legislature and the people themselves in the past. At six different times since the adoption of the Constitution in 1876, occasions, have arisen in which it was deemed necessary to make direct grants to citizens of the State. In 1895 it was thought proper to make grants in favor of indigent Confederate veterans and sailors, and their dependents; in 1933 it was thought that grants should be made in favor of needy people who were in distress because of unemployment; in 1935 it was deemed necessary to make grants for old age assistance to citizens over 65 years of age; in 1936 it was deemed necessary to make grants in favor of retired school employees (see Article III, Section 48a, of the Constitution) ; in 1937 it was deemed necessary to make grants in favor of the needy blind; and in the same year it was, deemed necessary to make grants in favor of destitute children under the age of 14 years. See amendments to Article III, Section 51, of the Constitution. It is significant that in each of these instances it was deemed necessary, both by the Legislature and by the people, that an amendment to the Constitution should first be submitted to and adopted by the people before the grant could be made. It is a- well-established rule that the construction which the parties have put on a written instrument, as evidenced by their conduct thereunder, — that is, what they have done in compliance with its provisions, — has great weight in determining the true meaning of the instrument. That rule applies with equal force here. The fact that all down through the years, for a period of more than 60 years, the people and the Legislature have deemed an amendment to the Constitution necessary, in order to authorize such a grant, argues mightily in favor of the view that such special constitutional authority was necessary before such a grant could be made by the Legislature. Certainly the public purpose was as apparent and the demand was as pressing for the Government to grant direct aid to the indigent Confederate veterans who had fought in behalf *173of the State, or to the needy blind, or to destitute children of tender years, as it was to grant such aid to laborers merely because they were temporarily unemployed, and regardless of whether they were in indigent circumstances. Yet in each instance it was deemed necessary to secure the approval of the people by a direct vote on the subject before the aid could be granted.

Since the Act here under consideration provides for direct grant of public funds to individuals who do not come within any of the exceptions provided for in the Constitution, it is in . conflict with the provisions of Article- III, Section 51, of our Constitution, and is therefore, in my opinion, unconstitutional and void.

I am also of the opinion that the Act in question conflicts with the Constitution in another respect. Article VIII, Section 6, of our Constitution provides as follows:

“Sec. 6. No money shall be drawn from the Treasury but in pursuance of specific appropriations made by law; nor shall any appropriation of money be made for a longer term than two years, except by the first Legislature to assemble under this Constitution, which may make the necessary appropriations to carry on the government until the assemblage of the sixteenth Legislature.”

Section 5221b-7 (c) of the Act here under consideration directs that when the funds therein provided for are collected, they shall be deposited with the State Treasurer. He in turn is directed to deposit them in the Unemployment Trust Fund of the Federal Government; and such funds are to be withdrawn only for the payment of the benefits provided for under the Act. The Commission may requisition such funds, and pay them out from time to time, as is necessary for the payments provided for in the Act. The Act itself expressly provides: “Expenditures of such moneys in the benefit account and refunds from the clearing account shall not be subject to any provisions of law requiring specific appropriations or other formal release by State officers of money in their custody.” It takes no argument to demonstrate that there is an irreconcilable conflict between these provisions of the Act and the above-quoted provisions of the Constitution. The Act provides that the funds may be paid out without specific appropriations; whereas the Constitution, in language that cannot be mis*174understood, provides that no money shall be drawn from the treasury except in pursuance of specific appropriations made by law. The conflict between the terms of the two provisions cannot be made clearer than is made by the provisions themselves. The Treasurer cannot pay out the funds on the requisition of the Commission without a specific appropriation and at the same time obey the provisions of the Constitution, which forbid the paying out of public funds without a specific appropriation. If the provisions of the Constitution requiring specific appropriations by the Legislature before public funds are to be paid out of the treasury, are to stand, then the provisions of the Act authorizing the expenditure of these funds without an appropriation by the Legislature must fall, because the two provisions cannot be observed at the same time. The Constitution of the State of California provides: “No money shall be drawn from the treasury but in consequence of appropriation made by law, and upon warrants duly drawn thereon by the Controller.” The Supreme Court of that State, in Gillum v. Johnson, 7 Calif. (2d) 744, 62 Pac. (2d) 1037, secs. 4 and 5, held that funds collected under a companion act could be paid out without any other appropriation other than that given in the Act itself, because the appropriation thereby made was a continuing one. It should be noted, however, that the Constitution there under consideration did not provide, as ours does, that no appropriation shall ever be made for a longer-term than two years. Under our Constitution there can be no such thing as a continuing appropriation for an indefinite period of more than two years. See National Biscuit Co. v. State, 134 Texas 293, 135 S. W. (2d) 687, sec. 8; Pickle v. Finley, 91 Texas 484, 44 S. W. 480; 38 Tex. Jur., 844. There is, therefore, a direct conflict between the provisions of this Act and the foregoing constitutional provision.

I think that this last defect could be corrected by an appropriation each two years, but the defect first referred to appears to be incurable. In my opinion, the Act ought to be held unconstitutional.

Opinion delivered April 9, 1941.