MESC v ASC, Inc
Digest no. 2.06
Section 22(d)(3), formerly 22(e)(3)
Cite as: MESC v ASC, Inc, unpublished opinion of the Court of Appeals of Michigan, issued August 7, 1991 (Docket No. 119777).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
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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