Waters v. State ex rel. Maryland Unemployment Insurance Fund

Bruñe, C. J., delivered the opinion of the Court. William Waters, the appellant, was employed by American Radiator and Standard Sanitary Corporation (the Employer or the Radiator Company). He was discharged by the Employer on October 18, 1956, and promptly filed a claim for benefits under the Unemployment Insurance Law (Code (1951), Article 95A, referred to below as the Act). Following proceedings summarized below, on or about May 14, 1957, the Fund paid him benefits aggregating $449.00 for the period from October 18, 1956, to January 24, 1957.

As the result of an arbitration proceeding pursuant to a collective bargaining agreement between his employer and his union, the arbitrator directed that Waters be reinstated as an employee of the Radiator Company with full seniority rights and that he “be made whole for the time lost by reason of his discharge.” The arbitrator’s decision was rendered on May 17, 1957, and Waters was reinstated on May 22nd. The net amount paid him by the Employer was $1,890.91, representing back pay of $2,382.-34, less earnings of Waters during the period in other employment. No deduction was made for unemployment insurance benefits. The Department, on being informed of the award and payment under the labor agreement, and after notice to Waters, ³⁴¹ made a redetermination of his claim and found that the benefits of $449.00 paid him constituted an overpayment which should be recovered under Section 16 (d) of the Act (Section 17 (d) of the Act in the 1957 Code).

This suit was accordingly brought by the State on behalf of the Fund, and resulted in a judgment for the plaintiff in the amount of $449.00, plus interest and costs. Waters appeals therefrom. Waters’ claim was filed on October 21, 1956. The Radiator Company advised the Department of Employment Security (the Department) that Waters had been discharged for gross misconduct in connection with his work.

Such a ground for discharge, if found to exist by the Executive Director of the Department (the Director), would, under Section 5 (b) of the Act (Section 6 (b) in the 1957 Code), disqualify an employee from receiving benefits until he should have become reemployed and his earnings should equal at least ten times his weekly benefits. A Claims Examiner found Waters so disqualified. Waters appealed, and after a hearing a Referee, on December 12, 1956, found that Waters had been discharged but that there had been no misconduct on his part. The Referee accordingly reversed the decision of the Claims Examiner.

The Employer appealed to the Employment Security Board, and that Board, also after a hearing, affirmed the Referee on May 14, 1957. In the arbitration proceeding above mentioned, the arbitrator found that Waters had not been guilty of the misconduct charged against him, thus reaching substantially the same conclusion as the Referee and the Board. Section 16 of the Act deals with offenses under the Act and penalties therefor and the recovery of overpayments. This suit was instituted pursuant to Section 16 (d).

Subsections (a), (b), (c) and (e) all deal with false statements or representations knowingly made and with a knowing failure to disclose a material fact. Section 16 (d) is broader. It reads as follows: “Any person who, by reason of the non-disclosure or misrepresentation by him or by another of a material fact (irrespective of whether such non-disclosure ³⁴² or misrepresentation was known or fraudulent) has received any sum as benefits under this Article while any conditions for the receipt of benefits imposed by this Article were not fulfilled in his case, or while he was disqualified from receiving benefits, shall, in the discretion of the Board, either be liable to have such sum deducted from any future benefits payable to him under this Article or shall be liable to repay to the Board for the unemployment compensation fund, a sum equal to the amount so received by him, and such sum shall be collectible in the manner provided in Section 14 (f) of this Article for the collection of past-due contributions.” As now amended, the Executive Director of the Department is substituted for the Board, and the cross reference as to the manner of collection is to Section 15 (f) of the 1957 Code. Section 16 of Article 95A of the 1951 Code has become Section 17 of the same article in the 1957 edition.

Chapter 391 of the Acts of 1957 added subsection (f) to this section. It imposes a limitation of two years from the date of commission of the offense or offenses charged upon prosecutions for violations of subsections (a), (b) and (c). Chapter 392 of the Acts of 1957 amended subsection (e) by providing: first, that any person found by the Board (now the Director) to have made a false statement or representation knowing it to be false, or knowingly to have failed to disclose a material fact, in order to obtain or increase any benefit, shall (instead of may) be required by the Board to repay all benefits for the benefit year with respect to which such false statement or representation or non-disclosure occurs; and second, that such a person shall (not, may) be disqualified from receiving benefits for a specified period of one year from the date on which the determination is made that an improper claim was filed, and thereafter while any sum payable under this subsection is still due and unpaid. The previous law did not relate the then specified period of disqualification to the date of determination that the claim was improper.

Subsection 15 (f) of Article 95A of the 1957 Code, which ³⁴³ was in force when this suit was instituted, is identical in substance with the previous Section 14 (f). It deals with collections of assessments from employers and provides that the amount due may be collected by civil action in the name of the State and imposes costs upon an employer adjudged in default. It further provides that the Director may proceed in the collection of contributions in the manner prescribed by Code (1957), Article 81, Sections 206-211, inclusive. The only one of these sections of Article 81 which has been specifically relied upon by either party to this suit is Section 206, invoked by the appellee, which authorizes a suit to be brought in assumpsit and provides that “such suit may be maintained notwithstanding the existence of other remedies by way of sale of real estate, or otherwise.” The State contends that this action is maintainable as one for money had and received, and urges in substance that this is necessary in order to prevent unjust enrichment.

The appellant-claimant contends that recovery can be had only if the conditions specified in Section 16 (d) of the Act are met. Before turning to the principal issues in the case we must note one matter which was brought to our attention by the appellee’s brief and was discussed at the oral argument. This is the fact that pendente lite the Fund has been made whole through the Department’s applying unemployment insurance benefits accruing to Waters to repayment of the $449.00. These benefits accrued through Waters having become unemployed in 1958.

This suit was instituted by the filing on November 4, 1957, of a declaration clearly based upon Section 16 (d) of the Act. The case was heard on September 17, 1958, the memorandum opinion of the trial court was filed on October 22, 1958, judgment nisi was entered on that date, and judgment absolute in favor of the plaintiff was entered on October 27, 1958. Meanwhile, Waters had filed a new claim for unemployment insurance benefits. Claims were accepted for eleven weeks from September 5 to November 14, 1958; but the amounts allowed were not paid to Waters and were used, instead, to reimburse the Fund.

These facts were learned by counsel at some date subsequent to the entry of judgment. Though both sides wish to have this case determined on the ³⁴⁴ merits, these facts have been brought to our attention as possibly showing that the case is moot. We think that it should not be so regarded. The fact that this situation was unknown to counsel and is not shown by the record, of course, precluded any question of mootness—in whole or in part—being raised in the trial court, although it would appear that most of the applications of benefits had been made before the entry of judgment.

In addition, the right of the Director or of the Department so to apply these benefits depended upon the very questions which were at issue in the trial court and which had been placed before that court by the plaintiff. It may be granted that under the terms of Section 16 (d), the Director might have proceeded to collect either by suit or by application of subsequent benefits, as and if they might accrue. There were no such benefits at the time when this suit was filed, but the suit was pending when such new benefits did accrue and it was actually tried before more than two of such applications had been made. We think that by filing and by proceeding with the suit the State elected to pursue that remedy.

See City of Baltimore v. Moore, 209 Md. 516, 523-524 , 121 A. 2d 857 ; Petillo v. Stein, 184 Md. 644, 651 , 42 A. 2d 675 ; Beall v. Pearre, 12 Md. 550, 566 , each of which deals with the doctrine of election of remedies, though none of them is directly in point on the facts and the Petillo case recognized the doctrine but held it inapplicable. Here, to hold the case moot, would have a practical effect equivalent to giving the appellee the benefit of an attachment regardless of the validity or invalidity of the claim upon which it is founded; and it would deprive the appellant of an opportunity to have the validity of the appellee’s claim carried through to adjudication in a proceeding instituted by the appellee, which necessarily put the validity of its claim in issue. The State, as we have already noted, does not seek such an advantage. We may add that the situation here is more or less the converse of that which arose in Alleghany Corporation v. Aldebaran Corporation, 173 Md. 472 , 196 A. 418 , where, after the case had been argued and submitted in this court, the appellants took action which had the effect of abandoning the proposed consolidation of the appellant corporations which the appellees had brought ³⁴⁵ suit to enjoin, so that no relief which the court might give could be more adequate than what they had received as a result of the appellants’ action.

On the other hand, no rights of the appellants had been finally adjudicated, since the orders appealed from were only interlocutory. This court, therefore, held the cases to have become moot and dismissed the appeals. In the instant case, the judgment appealed from is final and it is adverse to the appellant’s claimed rights. A dismissal of this appeal as moot might leave the appellant without any remedy.

In Employment Security Board v. Spiker, 194 Md. 351 , 71 A. 2d 299 , a claimant had been paid unemployment insurance benefits. As a result of a subsequent investigation, the Board found that during the period for which said payments were made, the claimant had received some earnings which he failed to disclose to the Board, but that the non-disclosure was not due to any fraudulent intent. The Board then proceeded, under the assumed authority of Section 16 (d) of the Act, to enter an order requiring the claimant to repay the sums which he had received as unemployment compensation. The claimant appealed to a Circuit Court under the supposed authorization of Section 6 (h) of the Act (Section 7 (h) of Article 95A of the 1957 Code), providing for judicial review.

The Circuit Court reversed the order of the Board and the Board appealed. This Court held that the Board had no authority to pass an order requiring the claimant to refund the benefits received, that the “only effect of that order [was] the determination of the Board to bring suit as provided in Article 95A, Section 14 (f)”, and that such an order was not subject to judicial review under Section 6 (h). In the instant case, the order on redetermination was that “the $449.00 unemployment insurance is an overpayment and must be recovered pursuant to Section 16 D [sic] of the Maryland Unemployment Insurance Law.” This order is very similar in terms as well as in effect to what was found to be the “only effect” of the order in the Spiker case, though the order in this case did not purport to limit the projected means of recovery to bringing a suit therefor. It was broad enough, as noted above, to authorize either ³⁴⁶ a suit or a recapture through the application of future unemployment insurance benefits.

As to one aspect of the matter, we are thus brought back to the election of remedies already discussed. As to another aspect, it seems that the present order was no more a final adjudication, whatever method of election might be pursued, than was the order in the Spiker case. That order was held not to be binding except as a determination by the Board to bring suit. Accordingly, the present order does not amount to a bar to the assertion by Waters of a claim for the amount withheld from the unemployment benefits which accrued to him in 1958.

It would seem an unnecessary, technical refinement to hold that the claimant should have appealed from the action of the Director when such an application of funds was made and that he could not continue to litigate his basic right, which was already at issue in this case—especially when this case was either almost or actually on trial, or was awaiting decision throughout most of the period when these applications were being made. We conclude that the case is not moot. On the merits of the case, three principal questions are presented: First, whether the claimant was “unemployed” within the meaning of the Act during the period for which unemployment benefits were paid out of the Fund; second, whether the payment of such benefits was the result of any non-disclosure or misrepresentation of a material fact; and third, whether recovery can be had on behalf of the Fund on a theory of unjust enrichment, even though neither non-disclosure nor misrepresentation of a material fact be shown. The answer to each of these questions depends upon the construction of the Act.

It is, therefore, appropriate to turn to it for a declaration of the policy which the Act is intended to serve and for the guidance which the Act gives us as to its interpretation. Section 2 sets forth “[a]s a guide to the interpretation and application and interpretation of this Article, the public policy of this State” which the Act is intended to serve. The declaration of policy states in part that “[ijnvoluntary unemployment is * * * a subject of general interest and concern which requires appropriate action by the Legislature ³⁴⁷ to prevent its spread and to lighten its burden which now so often falls with crushing force upon the unemployed worker and his family.” It further states that, in the considered judgment of the Legislature, the public good and the general welfare of the citizens of the State require the enactment of this measure “for the compulsory setting aside of unemployment reserves to be used for the benefit of persons unemployed through no fault of their own.” This policy and the remedial character of the act have been consistently recognized by this Court. Md. Unemployment Compensation Board v. Albrecht, 183 Md. 87, 89 , 36 A. 2d 666 ; Saunders v. Md. Unemployment Compensation Board, 188 Md. 677, 681 , 53 A. 2d 579 ; Robinson v. Md. Unemployment Security Board, 202 Md. 515, 518 , 97 A. 2d 300 .

The definition of “Unemployment” stated in Section 19 (1) of the Act (Section 20 (1) of Article 95A of the 1957 Code), so far as here pertinent, is as follows: “Unemployment. An individual shall be deemed ‘unemployed’ in any week during which he performs no services and with respect to which no wages are payable to him * * “Wages” are defined in Section 19 (n) of the Act, the pertinent provision of which is contained in the first sentence reading as follows: “ ‘Wages’ mean all remuneration for personal services * * The State argues that the amount of the monetary award made by the arbitrator and paid by the Employer to make the claimant whole for the time lost by reason of his discharge constitutes “wages” for the weeks for which unemployment compensation was paid to the claimant, that since his discharge was wrongful, wages were “payable” to him throughout the period and that he was, therefore, not “unemployed” within the definition stated in the Act. The State relies strongly upon Social Security Board v. Nierotko, 327 U. S. 358 , in support of its argument. There the employee was held, notwithstanding his discharge, to be within the definition of an employee under the National Labor Relations Act which included “any individual whose work has ceased * * * because of any unfair labor practice.” There was no question that the individual had been an employee or that his discharge constituted an unfair labor practice under the Act.

It was held that Nierotko also con ³⁴⁸ tinued to be employed within the meaning of the Social Security Act’s definition of employment as “any service of what-every nature, performed * * * by any employee for his employer.” It was further held that the back pay awarded to Nierotko for the period of his actual, though illegal, discharge constituted “wages” within the meaning of the Social Security Act for which he was entitled to credit on his Old Age and Survivors Insurance Account. The appellant contends that Nierotko is not controlling, chiefly for these reasons: the difference in the purpose for which the question of employment or unemployment was being determined; the emphasis allegedly placed upon services in the definition of “wages” in Section 19 (n) of the Maryland Act; and the fact that the wrongfulness of Waters’ discharge flowed from the violation of a contractual, rather than a statutory, right. Here, considering Waters’ position from a practical viewpoint, we find that he was just as badly off insofar as day to day subsistence was concerned as if he had been laid off for lack of work. True, he had a claim against his Employer under the collective bargaining agreement upon which he was ultimately successful.

However, in the meanwhile, the Employer was insisting that Waters’ discharge was for good cause and was contesting both his right to receive unemployment compensation under the Act and his right to reinstatement with back pay under the collective bargaining agreement. From an economic point of view, it would have been an untrue statement (or at the very least a highly misleading one) for one in the position in which Waters was placed immediately after his discharge to have stated flatly that he was then employed. Such a flat statement, if unexplained, would, we think, have been quite clearly fraudulent, if it had been contained, for example, in an application for credit made at that time. With these facts and with the provisions of Section 2 of the Act in mind, we think that it would be an unwarranted construction of the words “wages payable” as used in Section 19 (1) of the Act in defining “unemployed” as meaning not “wages currently payable,” but “wages legally due and payable upon a contingency”—in this event a successful outcome (from ³⁴⁹ Waters’ point of view) of his claim for wrongful discharge.

The doctrine of relation-back simply does not fill the need which the Act was designed to meet. A disputed claim, even though it may later be established as perfectly valid, is not the equivalent of cash when it comes to paying for food at the grocery store. That the General Assembly intended that persons discharged without fault on their part should be entitled to receive benefits under the Act seems apparent from the general words of the Act and from the disqualification raised by Section 5 (b) against those who voluntarily quit and those guilty of actual or threatened deliberate and wilful misconduct connected with their work and the lesser disqualifications provided for by Section 5 (c) against those discharged or suspended for less serious misconduct connected with their work. The parenthetical clause in Section 16 (d) of the Act under which recovery may be had where there has been a nondisclosure or misrepresentation of a material fact resulting in the receipt of benefits under the Act, which reads “(irrespective of whether such non-disclosure or misrepresentation was known or fraudulent)”, is intended to make an innocent nondisclosure or misrepresentation of a material fact as effective as a basis for recovery as a non-disclosure or misrepresentation knowingly or fraudulently made.

See Tube Reducing Corp. v. Unemployment Compensation Comm., 62 A. 2d 473 (N. J.). However, even under this broad scope which we think this clause is intended to have, there must still be a non-disclosure or misrepresentation of a material fact. We think that this contemplates an existing fact, not something which may or may not occur in the future. As a basis for relief against fraud, a misrepresentation must be a misrepresentation of an existing fact, and not merely of some future or contingent event or an expression of opinion, as was said in Schnader v. Brooks, 150 Md. 52, 57 , 132 A. 381 , and in Boulden v. Stilwell, 100 Md. 543, 552 , 60 A. 609 .

See also Glendale Corporation v. Crawford, 207 Md. 148, 157 , 114 A. 2d 33 . We think that the same rule is applicable to an innocent misrepresentation or non-disclosure of a material fact. We do not think that there was any misrepresentation (or, ³⁵⁰ as developed below, any concealment) of an existing fact at the time when the Board made its finding in favor of Waters and affirmed the allowance of his claims or when payment was made to him. Our view on this point is, we think, supported by Hill v. Review Board of Indiana, 112 N. E. 2d 218 (Ind.

App.). In that case the Board sought to recoup unemployment benefits paid for a period for which the claimant was entitled to, and subsequently did receive, holiday pay. Recoupment was denied for either non-disclosure or misrepresentation under a statute similar to ours. The court held that there was no misrepresentation or non-disclosure at the time when the claim was made.

A somewhat different approach reaching the same result was taken in Claim of Sapp, 266 P. 2d 1027 (Ida.). There, a statement that the claimant was available for work was held not to be a misrepresentation, even though it was also held that the claimant was not so available, on the ground that the claimant was asserting a conclusion and hence was not failing to disclose or misrepresenting a material fact. A somewhat similar view was expressed in Wagner v. Unemployment Compensation Comm., 198 S. W. 2d 342 (Mo.), in which the basis for payment of the claim was said to have been the finding by an administrative official rather than the claimant’s statement of his claim. For the reasons above set forth, we hold that the possibility of the claimant’s reinstatement and of his receiving compensation for time lost did not prevent his being “unemployed” during the time when he was actually not working for the Employer and when the Employer was paying him no wages and was denying and contesting his right to compensation under the collective bargaining agreement.

Consequently there was no misstatement. This conclusion renders any extended discussion of the second question unnecessary, insofar as misrepresentation is concerned. Since, as we hold, the claimant was unemployed at the time when he represented himself as being unemployed, his statement to that effect cannot be considered a misrepresentation. As to the matter of concealment of a material fact, which is the other ground for restitution under Section 16 (d) ³⁵¹ of the Act, we think there was none.

One fact, not already mentioned, which is stipulated in this case is that before the Board made its decision affirming the Referee’s decision in favor of Waters, Waters informed the Board that the differences between him and the Employer were then pending in proceedings