Pioneer Cabinetry, Inc v MESC – 2.17

Pioneer Cabinetry, Inc v MESC
Digest no. 2.17

Section 41(2)

Cite as: Pioneer Cabinetry, Inc v MESC, unpublished per curiam opinion of the Court of Appeals of Michigan, issued September 27, 1994 (Docket No. 145657).

Appeal pending: No
Claimant: N/A
Employer: Pioneer Cabinetry, Inc.
Docket no.: L88-08050-2003
Date of decision: September 27, 1994

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COURT OF APPEALS HOLDING: Although cash should in some instances be treated as an asset, only those assets in a business’ possession at the time of transfer are to be included in computing the total assets of the business.

FACTS: Employer is a manufacturer and wholesaler of kitchen cabinets. In 1986, employer purchased (under a single purchase agreement), assets from Flint Floors, Paradise Industries and Flint Floor Finishers (FFI) for $144,900. As a result, employer’s contribution rate was set at 10%, because it had a acquired more that 75% of FFI’s total assets. Employer contends it did not acquire 75% of FFI’s assets because FFI retained $47,000 in cash after the sale. Another $64,000 in assets were sold to employer which could not be identified as coming from one of the three companies whose assets the employer acquired.

DECISION: Employer is a successor in that it acquired more than 75% of its predecessor’s total assets.

RATIONALE: Employer produced no evidence that FFI had $47,000 in cash at the time of the business transfer. Therefore, such alleged cash assets were properly excluded from the computation of FFI’s total assets. As to the $64,000 in unidentified assets – they were listed as sold to employer. If any were attributed to FFI they would only serve to increase the percentage of assets transferred from FFI to employer.

Digest Author: Board of Review (original digest here)
Digest Updated: 7/99

MESC v Caberfae Associates – 2.03

MESC v Caberfae Associates
Digest no. 2.03

Section 41(2)

Cite as: MESC v Caberfae Assoc, unpublished opinion of the Appeals Court of Michigan, issued May 24, 1990 (Docket No. 115311).

Appeal pending: No
Claimant: N/A
Employer: Caberfae Associates
Docket no.: L83 13583 1846
Date of decision: May 24, 1990

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COURT OF APPEALS HOLDING: The value of pending litigation was too speculative to be considered an asset. As such the employer acquired 75% or more of the predecessor and is a successor employer under Section 41(2).

FACTS: The predecessor corporation operated a ski resort. In 1982 it filed for Chapter 11 bankruptcy. The subsequent purchaser took over operation of the business under the supervision of the bankruptcy court and later purchased all of the assets except ski banks and boot lockers, and a cause of action known as the “Gary Airport Litigation”, for $820,000. It was appellant’s contention the litigation, which had been started ten years earlier seeking $300,000 in damages, was an asset worth that amount and that by not acquiring that asset appellant acquired less than 75% of the predecessor and as such was not a “successor” as defined in Section 41.

DECISION: The subsequent employer was a successor employer under Section 41(2).

RATIONALE: The value of the cause of action was speculative and had not been fixed by competent evidence. As such it is not to be considered an asset. The subsequent employer acquired more than 75% of the assets of the predecessor and is a successor under Section 41.

Digest Author: Board of Review (original digest here)
Digest Updated: 11/90

MESC v Arrow Plating Co – 2.01

MESC v Arrow Plating Co
Digest no. 2.01

Section 22

Cite asMESC v Arrow Plating Co, 10 Mich App 323 (1968).

Appeal pending: No
Claimant: N/A
Employer: Arrow Plating Company, Inc.
Docket no.: L66 176 1277
Date of decision: March 27, 1968

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COURT OF APPEALS HOLDING: “If a vital integral part of the business is not transferred, regardless of how many people make up that integral part, so that the business could not continue, then there has not been a transfer of the `organization’ for the purposes of this Act.”

FACTS: The employer bought much of the assets of Wade Boring Works. The main asset of Wade Boring was the right of possession to a building leased by Wade Boriinng because special zoning allowing the flushing of waste chemicals into the public sewer system. Wade Boring Works retained its phone number, customers, and the right to compete. Arrow’s business was confined to plating operations, while Wade Boring had done both plating and sheet metal fabrication.

DECISION: The employer is not a successor employer under the Act.

RATIONALE: The critical wording of Sec. 41(2) is the phrase defining what must be acquired by a successor employer as “the organization; trade or business, or 75% or more of the assets.” As for “trade or business” it is clear that Arrow did not assume the trade or business, since the clientele were different and the type of work performed by the two companies would appeal to different markets.

In accordance with standard accounting principles, accounts receivable are assets to be considered when computing the percentage of assets transferred.

Arrow Plating’s right to use the building with favorable zoning was the primary concern, but such right was not assigned a value in the transfer. Poor accounting practices made it impossible for the Court to accurately determine the exact value of assets transferred and retained.

“`Organization’ means the vital, integral parts which are necessary for continued operation. In this case, there was not a transfer of the vital, integral parts required for continued operation of the Wade Boring Works. Mr. Frank Beck constituted the entire managerial component of Wade Boring Works, and it could not have continued as a going business without managerial talent.”

Digest Author: Board of Review (original digest here)
Digest Updated: 
11/90