02. Employer Liability, Tax Rate, Successorship

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Cite as: Bruce & Roberts, Inc v MESC, unpublished opinion of the Genesee County Circuit Court, issued April 21, 1993 (Docket No. 92-1202-AE).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

02. Employer Liability, Tax Rate, Successorship

MESC v Patt – 2.08

MESC v Patt
Digest no. 2.08

Cite asMESC v Patt, 4 Mich App 225 (1966).

Appeal pending: No
Claimant: N/A
Employer: Fred Patt
Docket no.: N/A
Date of decision: September 13, 1966

View/download the full decision

COURT OF APPEALS HOLDING: The employer’s contributions required under the Michigan Employment Security Act are a tax within the meaning of Section 17 of the Bankruptcy Act and are not discharged in a bankruptcy proceeding. As a result the employer is still liable for them.

FACTS: Employer was a Michigan employer for the years 1955, 1956, and 1957. It was subject to the provisions of the Michigan Employment Security Act. During the period employer paid no contributions as required by the Act.

In 1959 the Commission tried to collect this delinquent contribution in the state circuit court, and got a judgment by default for the delinquent contributions with interest. Employer filed for bankruptcy and obtained a discharge in 1964. In 1965, the MESC garnisheed defendant’s employer to collect on its judgment. Defendant filed a motion to restrain the garnishment on the basis that the judgment had been discharged in bankruptcy.

DECISION: The discharge in bankruptcy did not discharge employer’s obligation to pay the judgment for the delinquent contributions.

RATIONALE: “Regardless of the terminology used, an involuntary exaction, levied for a governmental or public purpose, can be held to be nothing other than a tax within the purview of the Federal bankruptcy act. The right of the State to collect such tax was duly protected by the Congress in the bankruptcy act.”

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