Summary
finding no successor-in-interest but noting that, if all the assets of a business were transferred to the new business, there would have been a transfer of the business and the new business would be a successor-in-interest
Summary of this case from KATE CORP. v. OHIO STATE UNEMPLOY.Opinion
No. 34443
Decided December 21, 1955.
Unemployment compensation — Contributions by employer — Merit rating — Transfer of part of business — Rating acquired by employer's successor — "Successor in interest" construed — Section 1345-4, General Code.
APPEAL from the Court of Appeals for Franklin County.
Prior to 1945, National Smelting Company, herein referred to as National, owned and operated a plant on Grant Avenue in Cleveland for the smelting and production of aluminum alloys; and it also used a plant on Diese Avenue in Cleveland for the smelting and production of magnesium alloys. The Diese Avenue plant and most of the equipment therein were owned by the United States government and rented to National.
When World War II ended in 1945, the government's demand for magnesium stopped and the Diese Avenue plant was virtually shut down. Although there had been as many as 300 employees at this Diese Avenue magnesium plant, all were discharged except seven or eight retained for cleaning up the plant and a dismantling crew which was engaged in liquidating the remaining scrap and radial engines at this plant.
On the other hand, National continued to operate the Grant Avenue aluminum plant after the war and at the beginning of 1948 was employing over 570 at that plant.
After the war, National desired to sell its business and it entered into negotiations for such a sale with Apex Smelting Company, herein referred to as Apex, which had been engaged for years in the smelting of aluminum and production of aluminum alloys.
As a result of these negotiations, Apex, in January, 1948, purchased all the Grant Avenue plant assets, National's trademarks, name and existing orders; and National agreed that it would not engage in the business of smelting aluminum or producing aluminum alloys within the territory previously served by National. The cash, accounts receivable and investments of National and its inventory at the Diese Avenue plant were not purchased by Apex. Thereafter, Apex continued the smelting of aluminum and production of aluminum alloys at the Grant Avenue plant, with most of the same personnel which had theretofore been employed therein by National; and the activities of National were confined to the liquidation of those assets which had not been sold to Apex.
Under the statutes of Ohio with respect to unemployment compensation, after three years during which an employer pays a maximum rate of 2.7 per cent, his rate may be reduced if the amount standing to his credit on account of contributions exceeds the total benefits chargeable to his account. The new reduced rate depends upon what percentage of his average annual payroll such excess represents, and it may be as low as 0.3 per cent. See Section 1345-4, General Code (Section 4141.25, Revised Code).
The rate established for Apex prior to 1948 had been 2.7 per cent and it was continued at that percentage after the Apex acquisition of the Grant Avenue plant from National. In 1950, Apex applied to the Administrator of the Bureau of Unemployment Compensation for a reduction of its 1950 rate, claiming that it was entitled under the applicable Ohio statutes to the benefit of National's reserve account balance in the computation of its rate. The administrator, relying upon Eiber Realty Co. v. Dunifon, Admr., 84 Ohio App. 532, 82 N.E.2d 565, rendered a decision determining that Apex was not entitled to the benefit of that account balance in the computation of its rate. On appeal to the Common Pleas Court, that court rendered a judgment affirming that decision of the administrator. On appeal to the Court of Appeals, that judgment of the Common Pleas Court was affirmed.
The cause is now before this court on appeal as of right from the judgment of the Court of Appeals and pursuant to allowance of a motion to certify the record.
Mr. Walter J. Mackey, Messrs. Alexander, Ebinger Wenger and Mr. John D. Holschuh, for appellant.
Mr. C. William O'Neill, attorney general, Mr. John W. Hardwick, Mr. William M. Gemmill and Mr. Leon L. Wolf, for appellee.
Admittedly, the contentions of Apex depend upon an interpretation of subdivision (c) (1) of Section 1345-4, General Code (122 Ohio Laws, 695, 705, 706), as in force on January 1, 1948, which read (this statute, now Section 4141.24, Revised Code, was substantially amended in 1951. See 124 Ohio Laws, 488, 498):
" If an employer shall transfer his business or shall otherwise reorganize such business, the successor in interest is hereby required to assume the resources and liabilities of such employer's account, and to continue the payment of all contributions due under the Unemployment Compensation Act." (Emphasis added.)
Admittedly, National continued to employ more than three employees after the sale of its Grant Avenue plant to Apex. Admittedly, it was an employer required to contribute under the Ohio unemployment compensation statutes. See Section 1345-1, General Code (Section 4141.01, Revised Code). There is no definition of the word "business" as used in those statutes. However, it is apparent that, if, after the sale of its Grant Avenue plant to Apex and before the completion of its liquidation, National had transferred all its remaining assets and all its activities to a newly organized corporation, there would have been a "transfer" of its "business" by National as an "employer," and the transferee corporation would be "the successor in interest" of National within the meaning of those words as used in the foregoing-quoted statute.
It is apparent therefore that, if the 1948 sale by National to Apex represented any transfer of National's "business," it did not represent a transfer of the "whole" but only a transfer of a "part" of that business.
Prior to 1941, the words of the foregoing-quoted statute, which read, "transfer his business," were followed by the words "in whole or in part" (117 Ohio Laws, 289, 294). By amendment of that statute in 1941 (119 Ohio Laws, 821, 831), the latter words were eliminated from the statute, and they were not replaced by the subsequent 1947 amendment of the statute. It appears that, by the elimination of the foregoing words "in whole or in part," the General Assembly quite clearly expressed the intention that there should be no "successor in interest" within the meaning of the foregoing-quoted statute unless the whole of an employer's business was transferred. Apex's arguments to the contrary would be persuasive only in the absence of this expression of intention by the General Assembly.
It is further contended that, in making his decision, the administrator relied upon evidence which was not in the record, and that both the Common Pleas Court and the Court of Appeals likewise relied upon such evidence in support of their judgments. However, in view of our interpretation of the above-quoted statute and of the facts which are conceded by appellant and do appear in the record, we do not believe that such reliance could possibly have prejudiced Apex. Apex concedes that, after the sale of the Grant Avenue plant, National retained certain assets, was engaged in activities relative to their liquidation and employed more than three employees in those activities. As hereinbefore pointed out, it necessarily follows that the "whole" of National's "business" had not been transferred to Apex and that Apex was not "the successor in interest" of National within the meaning of the foregoing-quoted statute.
Judgment affirmed.
WEYGANDT, C.J., MATTHIAS, HART, ZIMMERMAN, STEWART, BELL and TAFT, JJ., concur.