Appeal from Superior Court, Maricopa County; Arthur T. LaPrade, Judge.
Proceeding by the Employment Security Commission of Arizona and the members thereof against the Southwest Lumber Mills, Inc., to recover the amount of unpaid taxes on wages accruing to servants of one performing a contract with defendant to fell trees and cut and transport logs for sawing in defendant's mill. Judgment for plaintiffs, and defendant appeals.
Fennemore, Craig, Allen & Bledsoe, of Phoenix, and McQuatters & Stevenson of Flagstaff, for appellant.
Arthur M. Davis, of Phoenix, for appellees.
Kelly, Superior Judge. Stanford, C. J., and Udall, J., concur. Justice Arthur T. LaPrade having disqualified himself as he was the trial judge, Hon. Henry C. Kelly, Judge, Superior Court, Yuma County, was called to sit in his stead.
Kelly, Superior Judge.
[66 Ariz. 2] In a proceeding originally before the Employment Security Commission, findings were made followed by conclusions and order holding the appellant liable for unpaid tax upon wages accrued, as more fully set forth hereafter, in logging operations in a Government forest for the supply of its lumber mill. Upon appeal to the superior court like findings and conclusions [66 Ariz. 3] were adopted followed by judgment adverse to appellant. The matter is here for review.
The facts set forth in the view most favorable to appellees and as fully as they need be in support of the judgment are as follows.
Appellant is a large manufacturer of lumber, with mill in Flagstaff. Its sawlogs come largely from a federally owned National Forest. Pursuant to an offer of sale of dead timber standing and live timber marked by officers in charge of the forest, appellant became the purchaser of the trees and logs in a large area of forest lands, with license to enter upon them for the removal of their purchase, the ultimate object of which was to transport such logs to its mills for conversion into lumber.
In this purchase and sale contract there were many specifications upon the identification of the logs and trees sold, the method of disposal of the tops and brush, the protection of immature growth, etc., all having for their purpose the prudent and scientific management of the forest and its conservation, none of these conditions having more than an incidental bearing upon the question now to be determined. These specifications were a part of the contract and the observance of them a part of the stipulated performance of it by the purchaser. To carry on its business of sawing and selling lumber it was of course necessary for appellant to fell the trees, to cut the logs into manageable lengths, and to transport them to its millpond for sawing in its mill. In former times appellant itself performed this work, owning and operating the equipment necessary to accomplish it, but many years before had disposed of this equipment and had subsequently relied upon contractors who because of their skills and efficiency, and the high degree of their executive capacities, could manage it more efficiently and economically. It called for bids to do this work. Bruce Gibson was the successful bidder, and the entire job was contracted to him. He entered upon its performance with the unanimous belief of himself, his employers, the appellant, the appellees and all others affected by the operation that he was the entrepreneur to whom this particular item of work was entrusted; that he was performing it upon his own account; and that he was the employer of all service rendered in the conduct of this item of business in which he was engaged. He picked his own crew and determined in agreement with them their rates of pay, their hours of work, and all other terms of their employment, with none of which appellant either concerned itself or under its contract reserved the least power to control. He was an established logging contractor, a specialist in that branch of the lumbering industry; had operated in that line exclusively for many years; owned and used in carrying on his business many items of valuable mechanical equipment, ranging as need arose to a value of more than one hundred thousand dollars; had and took [66 Ariz. 4] contracts of a similar kind with other sawyers; and during a part of the time of the performance of this contract was contemporaneously engaged upon a similar one of like magnitude with another large manufacturer of lumber; and was carried on the books of the appellee Commission as an employer on his own account. He carried on his operation on this basis, paying to the Commission the tax upon his own payroll, and so continued until his bankruptcy, with his contract with appellant not completed. For some time prior to his failure he had defaulted in the payment of the tax upon the wages accruing to his servants, and his estate not being adequate to pay it, these proceedings have resulted upon the claim that as the primary employer the appellant is itself liable for the tax.
The question presented is whether the appellant, for whose ultimate benefit in the conduct of its business of manufacturing lumber all of the services were rendered, was the employer of Bruce Gibson and liable for the payroll tax for all services rendered
by him in the performance of his contract to cut, buck, brush and transport these logs from the Government forest to appellant's millpond. It may be mentioned that under his contract it became a part of his obligation to abide by the specifications and regulations of the Forest Service imposed upon the purchaser by the terms of the timber sale agreement between it and the Government.
The underlying statute levies a tax upon the employer's payroll. Section 56-1002(i) (5), June 1945 ...