MESC v Park Lane Management – 2.22

MESC v Park Lane Management
Digest no. 2.22

Section 22

Cite as: MESC v Park Lane Mgt, unpublished opinion of the Court of Appeals of Michigan, issued September 28, 1999 (Docket No. 210592).

Appeal pending: No
Claimant: N/A
Employer: Park Lane Management
Docket no.: N/A
Date of decision: September 28, 1999

View/download the full decision

COURT OF APPEALS HOLDING: The doctrines of res judicata, and collateral estoppel may preclude relitigation of MESC administrative decisions that are adjudicatory in nature. The defendant’s failure to timely appeal the MESC determination of successorship rendered that determination res judicata, to any subsequent challenges.

FACTS: Defendant provided information to the MESC, from which the MESC was able to determine that defendant acquired 100% of its predecessor’s Michigan assets. The MESC ruled that defendant was subject to the 10% unemployment tax rate. The MESC sent a notice of successorship determination to the defendant, which had 30 days to appeal. The defendant failed to timely appeal. Plaintiff sent revised 10% yearly rate notices to defendant’s correct address. Defendant’s witness denied seeing the notices but admitted that a secretary opened the mail and sent any tax-related documents to a firm that prepared defendant’s taxes.

DECISION: Plaintiff was entitled to collect $23,698.02 in disputed unemployment insurance taxes.

RATIONALE: Plaintiff relied on the “mailbox rule” to prove that defendant received the notice of successorship and yearly tax notices. “[P]roper addressing and mailing of a letter creates a [rebuttable] legal presumption it was received.” Stacey v Sankovich, 19 Mich App 688 (1969) . Plaintiff’s regularly conducted business included the mailing of 200,000 rate determinations and payment notices a year. In this matter, although direct proof that the notices were mailed to defendant was impractical due to the large volume of mailing plaintiff generated, “evidence of the settled custom and usage of the sender in the regular and systematic transaction of its business may be sufficient to give rise to a presumption of receipt by the addressee. ” Insurance Placements v Utica Mutual Ins, 917 SW2d 592, 595 (1996). Plaintiff presented sufficient evidence to give rise to the common-law presumption that defendant received the mailed notices, which defendant failed to rebut.

Digest Author: Board of Review (original digest here)
Digest Updated: 11/04

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

View/download the full decision

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

Bruce & Roberts, Inc v MESC – 2.14

Bruce & Roberts, Inc v MESC
Digest no. 2.14

Section 41

Cite as: Bruce & Roberts, Inc v MESC, unpublished opinion of the Genesee County Circuit Court, issued April 21, 1993 (Docket No. 92-1202-AE).

Appeal pending: No
Claimant: N/A
Employer: Bruce & Roberts, Inc.
Docket no..: L91-15659-2150
Date of decision: April 21, 1993

View/download the full decision

CIRCUIT COURT HOLDING: The Chapter 7 bankruptcy trustee was an employing unit pursuant to Section 40 and, therefore, by definition an “employer subject to this Act” under Section 41(2)(a). Therefore, employer Bruce & Roberts Inc. is a successor, having acquired 75% or more of Balderstone assets by means of bankruptcy.

FACTS: On October 18, 1985, employer sold the business (Sherman’s Lounge) to Balderstone for $160,000. On June 21, 1988, Balderstone filed for Chapter 11 Bankruptcy and for Chapter 7 on March 22, 1989. Employer re-acquired all the equipment and fixtures they sold in 1985 through foreclosure. Also, they purchased the liquor license and inventory from the Chapter 7 bankruptcy trustee. They reopened as Bruce & Robert’s, Inc. on January 2, 1990. They were assigned 10% rate as successor employer, having acquired more than 75% of Balderstone’s assets. Employer asserted it was not a successor and entitled to new employer tax rate of 2.7%.

DECISION: Employer is a successor to Balderstone and the 10% contribution rate was properly assessed.

RATIONALE: Employer acquired through foreclosure everything it had previously conveyed to Balderstone. Repossession after default has been found to be an acquisition even in the absence of a title transfer. The acquisition of assets from a debtor through bankruptcy proceedings also results in an acquisition for purposes of Section 41(2), based on the definitions in the Act of “employer” and “employing unit.”

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

MESC v ASC, Inc – 2.06

MESC v ASC, Inc
Digest no. 2.06

Section 22(d)(3), formerly 22(e)(3)

Cite asMESC v ASC, Inc, unpublished opinion of the Court of Appeals of Michigan, issued August 7, 1991 (Docket No. 119777).

Appeal pending: No
Claimant: N/A
Employer: ASC, Inc.
Docket no.: L82 22133 1825
Date of decision: August 7, 1991

View/download the full decision

COURT OF APPEALS HOLDING: Where a vertical merger takes place involving multiple corporate entities related as parent – subsidiary, the merger transactions occur in sequence, not simultaneously.

FACTS: Prior to June 1982, Wisco Corporation was a wholly owned subsidiary of Ultra International, Inc. In turn, Ultra was a wholly owned subsidiary of American Sunroof Corp. Heinz Prechter was the sole stockholder of Sunroof, and he was the sole director of all 3 corporations. At the time Wisco’s contribution rate was 7.8% and Sunroof’s rate was 5.5%. Without applying statutory limit provisions, both corporations would have had a rate of 9%. For economic reasons Sunroof dissolved both Wisco and Ultra into their parent corporations. The business name of Sunroof was changed to ASC, Inc. On June 23, 1981, Prechter signed 3 separate resolutions dissolving the 3 corporations into their parent business effective June 30, 1982. MESC notified ASC, Inc. that it was a successor of the other businesses and assigned a 9% contribution rate for 1982 pursuant to Section 22(e)(3) because it treated the transfer as “simultaneous”.

DECISION: The mergers in this case were not “simultaneous”, and Section 22(e)(3) is not applicable. The rate assigned to ASC is the same as Sunroof’s – 5.5%.

RATIONALE: “We agree with the Board of Review and the circuit court that it was legally impossible for the transfer in this case to have occurred concurrently. If the assets of a subsidiary corporation are to be transferred to the parent corporation the subsidiary and parent may not both dissolve at the same time. The parent must remain in existence in order to accept the subsidiary’s assets. Only after a subsidiary has dissolved and the parent has accepted its assets may that parent dissolve and transfer both its assets and its former subsidiary’s assets to another corporation.”

Digest Author: Board of Review (original digest here)
Digest Updated: 12/91

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

View/download the full decision 

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

Midway Stop-n-Shop, Inc v MESC – 2.19

Midway Stop-n-Shop, Inc v MESC
Digest no. 2.19

Sections 22, 41

Cite as: Midway Stop-n-Shop, Inc, v MESC, unpublished opinion of the Cass County Circuit Court, issued March 29, 1990 (Docket No. 86-12638AA).

Appeal pending: No
Claimant: N/A
Employer: Midway Stop-N-Shop, Inc.
Docket no.: L86-08390-RM1 (Bypassed Board of Review)
Date of decision: March 29, 1990

View/download the full decision

CIRCUIT COURT HOLDING: Where successor took over an ongoing business, including the real estate via lease, and continued in business with essentially all the assets except for a large amount of cash, the cash was properly disregarded in determining the percentage of assets transferred.

FACTS: In June 1985, employer acquired an ongoing business (convenience store). Acquisition of $47,000 in inventory, equipment and goodwill was not in dispute. Issue was whether or not $59,000 in leasehold improvements on the realty and $80,000 in cash assets not transferred by the predecessor should be considered in determining whether or not more than 75 percent of assets were transferred. The referee found that out of a total of $126,000 in assets available for transfer, $106,000 was transferred, or 84 percent. He included the leasehold improvements in the transfer. He found that $20,000 of the $80,000 was available for transfer but should not be considered as a transferable asset.

DECISION: Employer is a successor under Sections 22 and 41, having acquired more than 75 percent of the predecessor’s assets.

RATIONALE: Transfer of a leasehold is the transfer of an asset for purposes of successorship because the transferee acquires an ownership interest in the property. With regard to cash assets, considering cash reserves (as opposed to receivables) as a transferable asset can lead to an absurd result of paying cash for cash. It could also lead to manipulation of the transaction for the purpose of, for example, reducing the amount of assets transferred as compared with the total assets.

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

Ha-Marque Fabricators, Inc v MESC – 2.04

Ha-Marque Fabricators, Inc v MESC
Digest no. 2.04

Section 19, Section 22(d)(3), formerly 22(e)(3)

Cite asHa-Marque Fabricators, Inc v MESC, 178 Mich App 470 (1989); lv den 435 Mich 877 (1990).

Appeal pending: No
Claimant: N/A
Employer: Ha-Marque Fabricators, Inc.
Docket no.: L82 18210 1893
Date of decision: July 17, 1989

View/download the full decision here

COURT OF APPEALS HOLDING: A weighted average of the tax rate of the employer’s two predecessors which were merged into it must be used to determine the employer’s tax rate under Section 19 and 22(e)(3).

FACTS: The employer, based in Illinois, acquired two Michigan subsidiaries and merged them into its operation during a corporate reorganization and then filed a registration report to determine liability with the MESC. MESC assigned a 9% tax rate for 1982. The MESC based its calculations on legislative amendments to the rate calculation provision. The legislature failed to amend Section 22(e)(3) to conform to the other amendments. MESC interpreted the law to require that in mergers the employer should be assigned a total of the former employer’s rates.

DECISION: Employer’s tax rate must be determined by a weighted average of the merged former employer’s rates pursuant to Section 22(e)(3) and 19(a)(6) of the Act.

RATIONALE: “Although in this appeal, the MESC interprets Section 22(e)(3) to mandate a calculation of the employer’s contribution rate based on the balances in the employer’s experience account, we do not believe that the legislature intended such a construction. While we give respectful consideration to the MESC’s interpretation of the statute, we are not bound by it and we decline to follow it here.”

“We believe that the circuit court judge correctly interpreted Section 22(e)(3) as requiring that a weighted average approach be applied to determine Ha-Marque’s contribution rate … .”

Digest Author: Board of Review (original digest here)
Digest Updated: 6/91

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

View/download the full decision 

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