Summary
finding that word "substantially" in unemployment compensation act "cannot be less than 90% [of the whole] in the ordinary situation"
Summary of this case from IPI, Inc. v. BurtonOpinion
No. 3831.
Decided November 1, 1949.
Although an employer transferred to a successor employing unit one of his businesses which comprised a large part of his total assets his successor is not entitled under the Unemployment Compensation Act (R. L., c. 218, s. 6-F) to the merit rating enjoyed by his predecessor where the evidence warranted the determination that "substantially all of the assets" were not transferred.
PETITION by plaintiff for a declaratory judgment (R. L., c. 370, s. 20) to redetermine the amount of contributions under the Unemployment Compensation Act (R. L., c. 218, as amended) imposed by the defendant as administrator of said act. The statement of facts as stated in the petition and admitted by the answer was reserved and transferred without ruling by Lampron, J. The statement follows:
"1. That Wilfred M. Auclair of Manchester in said County on and prior to January 1, 1936 and thereafter until January 1, 1945 carried on an interstate motor vehicle trucking business, with a principal terminal at said Manchester, doing business as W. M. Auclair Transportation.
"2. That during the year 1944 the said W. M. Auclair had a merit rating of 1.3 per cent for his payroll taxes, and 1.0 per cent for the year 1945, under R. L. Ch. 218 as amended.
"3. That the average number of employees of the said W. M. Auclair in his transportation business for the year 1944 was approximately twenty-five persons, which was somewhat fewer than prior years.
"4. That on January 1, 1945 W. M. Auclair sold all the assets of the trucking business as a going concern to said Auclair Transportation, Inc., a corporation formed to purchase said trucking business, all of the capital stock of which is, and always had been, owned by the said W. M. Auclair. The book value of the transportation business property on said date was $34,095.94; that your petitioner carried on all the trucking business of W. M. Auclair Transportation, and said Auclair did not engage in the trucking business thereafter.
"5. That on and after January 1, 1945 the defendant required the petitioner to pay payroll taxes based upon a rate of 2.7 per cent, though after the passage of Chapter 138, s. 16 of the Laws of 1945, the petitioner duly claimed in writing to the defendant that it was entitled to succeed to the merit rating of said Wilfred M. Auclair in the transportation business.
"6. That subsequent to January 1, 1945 the petitioner has had an employment experience equally as good as the said trucking business enjoyed prior to the formation of the corporation and the purchase by it of said trucking business, so that if the defendant had permitted the said corporation to succeed to the rating of said Auclair it would have paid said payroll taxes for the year 1945 at a rate of 1.0 per cent and thereafter and to date at a rate of 0.5 per cent rather than 2.7 per cent as required by said Commissioner.
"7. That during the year 1945 Auclair Transportation, Inc. had an average of approximately twenty-seven employees, and that thereafter, the average number of employees increased gradually so that for the third quarter of the current year it had approximately fifty employees.
"8. That on October 1, 1940 W. M. Auclair purchased certain real estate which he owned on January 1, 1945 with a book value of about $121,939.66, with a person on the payroll occasionally, and an employee a part of whose salary was charged to the real estate account, and there were no other employees engaged in work connected with said real estate. The said real estate was predominantly rental tenement property.
"9. That prior to and on January 1, 1945 W. M. Auclair owned a gasoline station for the sale of gasoline and allied products, for which he had on that date, and generally, three employees. The book value of the assets of said gasoline station on said date was $4,234.35.
"10. That such real estate and retail gasoline station enterprises were not a part of the assets of the trucking business on January 1, 1945 nor prior thereto.
"11. That prior to January 1, 1945 W. M. Auclair had no employees other than those specified herein.
"12. That the defendant has refused to permit the petitioner to succeed to the merit rating of W. M. Auclair on the ground that he did not transfer `substantially all' of his assets to the petitioner."
McLane, Davis, Carleton Graf and Stanley M. Brown (Mr. Brown orally), for the plaintiff.
F. Maurice LaForce (by brief and orally), for the defendant.
The issue in this case is whether the plaintiff is entitled to the low merit rating of W. M. Auclair upon the transfer described in the agreed facts. The unemployment compensation statute provides that the experience rating of an employer may be transferred to "an employing unit which acquires the organization, trade or business, or substantially all of the assets thereof." R. L., c. 218 s. 6-F as inserted by Laws 1945, c. 138, s. 16.
We are not concerned with the logical and economic considerations for and against experience rating or merit rating as it is usually described in this state (55 Yale L. J. 218, 242) since it is an integral part of the statute. Following the decisions in Lund Company v. Rolfe, 93 N.H. 280 and Sulloway v. Rolfe, 94 N.H. 85, the quoted statute also made the transfer of merit rating for unemployment compensation contributions to successor employing units (Note 60 Harv. L. Rev. 276) an integral part of the law. For the same reasons we do not accept defendant's argument for a strict construction of the statute because of the asserted effect a liberal construction would have on the alleged solvency of the unemployment compensation fund. The statute is to be construed as written having in mind its evident purpose whether the end result is considered by some to be economically good or bad.
Assuming, without deciding, that the rental tenement property valued at approximately $122,000 is an investment and not a business (Cf. Bennett v. Hebbard, 74 N.H. 411, 412), there is the further question of whether the retention of the gasoline station valued approximately $4,200 prevents the transfer from being one of "substantially all the assets thereof" under R. L., c. 218, s. 6-F. The word "substantially" is necessarily an elastic term which does not indicate definite, fixed amount of percentage. At one extreme it may be said that the transfer does not have to be 100%. At the other extreme it may be said that the transfer cannot be less than 90% in the ordinary situation. (See application of Hinzmann Waldmann, 85 N.Y.S.2d, 149; Schuh Trading Co. v. Commissioner, 95 F.2d, 404) although a lesser amount has been considered sufficient under a statute which is broader than ours. Harris v. Egan, 135 Conn. 102; anno. 4 A.L.R. (2d) 721. The relation between the value of the trucking business transferred and the value of the gasoline station retained is not so small from either an accounting or practical viewpoint that we can say as a matter of law that substantially all the assets of the business of W. M. Auclair were acquired by the plaintiff. The determination by the defendant that they were not is one that could be made upon the facts in this case. Unless the defendant deems an adjustment by compromise "to be for the best interests of the state" (R. L., c. 218, s. 11 E) because of facts not in this record, the determination stands affirmed.
Other arguments in behalf of the plaintiff that the statute should be construed to allow the transfer of merit rating are foreclosed by the decision in Seavey Hardware Co. v. Riley, 95 N.H. 502.
Case discharged.
All concurred.