Opinion
No. 4792.
Argued November 4, 1959.
Decided December 31, 1959.
1. The unemployment compensation statute (RSA 282:6E) entitling an employing unit acquiring the trade or business of another employer, and intending to continue such business, to the merit rating of its predecessor contemplates a direct succession and transfer of the business and its experience rating from the seller to its purchasing successor.
2. Hence "an employing unit" is not deemed to be a "successor" within the meaning of the statute if there has been an intervening owner between the seller and such employing unit.
PETITION, for a declaratory judgment under RSA 491:22 to the Superior Court by The Pariseau Corporation from an administrative ruling of the New Hampshire Department of Employment Security. The Department on January 25, 1955, ruled that The Pariseau Corporation was not a "successor" within the meaning of R.L., c. 218, s. 6E, now RSA 282:6E, to the "separate account" of Pariseau's, Incorporated, thus causing The Pariseau Corporation to pay unemployment contributions at the maximum rate.
The case was submitted upon an agreed statement of facts as set forth in the stipulations filed by the parties. The Court reserved and transferred to the Supreme Court without ruling the following question of law: "Is the Pariseau Corporation a `successor' within the meaning of R.L. 218, Section 6-E, now R.S.A. 282:6-E to the `separate account' of Pariseau's Inc.?"
The following is the agreed statement of facts:
1. A New Hampshire corporation, Pariseau's Inc., of 1001-1007 Elm Street, Manchester, New Hampshire, became an employer within the meaning of the State Unemployment Compensation Law (RSA 282, as amended) in December 1935 and thereafter continued without interruption to be and remains an employer at the present time, as a matter of law, subject to the final disposition of this case.
2. From 1947 through the close of business on October 2, 1954, the business of Pariseau's Inc. (hereinafter referred to as Pariseau's) was acquiring charge accounts and operating an office at 1001 Elm Street which handled the charge accounts and related work involved in the business of several concerns. Pariseau's leased the space at 1001 Elm Street from 1001 Elm Street, Inc. and then sub-leased the space to these concerns. The store at 1001 Elm Street was identified, for purposes of doing business with the public, as "Pariseau's" (the trade name of Pariseau's Inc.). One employee of Pariseau's received the rents from real estate owned by three (3) corporations, 1001 Elm Street, Inc., The Camann Co. and Manchester Realty Co., and kept the necessary records relating to the receipt of such rent. Said employee was not reimbursed for such services by said three (3) corporations, nor was Pariseau's.
3. The businesses carried on at the store at 1001 Elm Street, Manchester, New Hampshire, by the sub-lessee firms mentioned in #2 above were principally retail specialty businesses in women's and children's clothing and accessories, and there was also a beauty parlor in the store.
4. Pariseau's acquired the charge accounts of customers of the lessees at 1001 Elm Street and these accounts receivable were then owned and handled exclusively by Pariseau's.
5. Pariseau's from 1947 to October 2, 1954 did not engage in the selling of any goods or merchandise at Pariseau's or at any other location in New Hampshire.
6. As a result of an agreement entered into between Pariseau's and Rooks, Inc., a Massachusetts corporation, dated October 4, 1954, Rooks, Inc. purchased the following listed items from Pariseau's:
A. All the rights of Pariseau's Inc. in and to the name "PARISEAU'S," the good will of the business, and the business, formerly conducted by Pariseau's Inc., at 1001 Elm Street, and all the furniture, fixtures and lease-hold improvements owned by Pariseau's Inc., located at 1001 Elm Street, for the sum of $15,000.
B. Accounts receivable of Pariseau's, $122,128.22.
C. All the rights or liabilities of Pariseau's with reference to sub-lessees and concessions or other rights in any person to occupy or use any portion of the premises at 1001 Elm Street, on or after October 4, 1954.
D. Merchandise inventory acquired from DesMonde Shops, Inc. by Pariseau's as of the close of business on October 2, 1954, valued at $44,600.
E. Miscellaneous supplies with a value of $2,000.
Assets belonging to Pariseau's which were not acquired as a result of the agreement of October 4, 1954, were as follows:
I. Stock — Manchester Country Club $ 775.00 II. One (1) Automobile 4,170.59 III. Cash on hand 67,387.25 IV. Life insurance policy on the Treasurer and sole shareholder of Pariseau's Samuel G. Camann, with a cash surrender value on October 4, 1954 of 16,933.43 V. Prepaid insurance premiums 1,965.43 VI. One old desk, adding machine, and a typewriter valued at a total of 250.00 VII. Bad debts in the sum of 1,418.19
7. A new legal person was incorporated under the laws of New Hampshire on October 4, 1954 at 2:10 P.M. which took the name of The Pariseau Corporation. The purchase and sale agreement of October 4, 1954 between Pariseau's and Rooks, Inc. was assigned by Rooks, Inc. to The Pariseau Corporation on October 4, 1954 immediately after incorporation of The Pariseau Corporation. The Pariseau Corporation is, and was on October 4, 1954, wholly owned by Rooks, Inc.
8. The Pariseau Corporation at 1001 Elm Street, on October 4, 1954 engaged in the retail selling of women's clothing which had formerly been conducted by DesMonde Shops, Inc., in the same area, which was approximately thirty per cent of the selling space of said store, and continued the concessionaires in all other departments.
9. Immediately prior to the purchase and sale, Pariseau's employed ten persons.
10. Immediately subsequent to the purchase and sale, Pariseau's employed two persons, one on a part-time basis, through January 1, 1955 after which date it furnished no further employment.
11. The Pariseau Corporation hired nine of the former employees of Pariseau's on October 4, 1954, one of whom continued to be employed on a part-time basis by Pariseau's, as stated above.
12. Subsequent to the purchase and sale, Pariseau's has continued in existence without a change of name; its business since the sale has been and continues to be the real estate business.
13. No corporate stock of Pariseau's was sold to either Rooks, Inc. or The Pariseau Corporation.
14. At the time of the purchase and sale (October 4, 1954) the "separate account" (maintained by the State, of New Hampshire, Department of Employment Security, by reason of R.L., c. 218, s. 6C, now RSA 282:6C) of Pariseau's was such that said corporation was entitled to a merit rate (R. L., c. 218, s. 6D, now RSA 282:6D) of .06 per cent.
15. The State of New Hampshire, Department of Employment Security, on January 25, 1955 ruled that The Pariseau Corporation was not a "successor" within the meaning of R.L. c. 218, s. 6E, now RSA 282:6E, to the separate account of Pariseau's and refused to assign or transfer the "separate account" of Pariseau's to The Pariseau Corporation.
The total assets of Pariseau's including cash, on October 2, 1954, immediately preceding the sale to The Pariseau Corporation, were $270,339.79. Liabilities, including accounts payable, were $115,106.76, capital stock amounted to $82,100 and the surplus to $73,133.03, or a total of $270,339.79. On October 4, two days after the sale to the plaintiff, the assets of Pariseau's, including cash and $122,128.22 due from the plaintiff corporation, totaled $229,467.70. and the liabilities, including accounts payable, amounted to $70,506.76. The capital stock was $82,100 and the surplus $76,860.94, totaling the above $229,476.70.
Further facts appear in the opinion.
Reserved and transferred by Morris, J.
Devine, Millimet McDonough and Bartram C. Branch (Mr. Branch orally), for the plaintiff.
James M. Riley, Jr. and Edward F. Smith (Mr. Riley orally), for the defendant.
The parties agree that the question to be determined by the court is "whether or not under the facts stated in this Agreed Statement of Facts, the provisions of the purchase and sale agreement between Pariseau's Inc. and Rooks, Inc. the two (2) balance sheets attached hereto, the Pariseau Corporation is a `successor' under . . . RSA 282:6E to the `separate account' of Pariseau's Inc." The issue involves the interpretation of RSA 282:6E, the material portions of which read as follows:
"6E SUCCESSORSHIP.
"(1) . . . an employing unit which acquires the organization, trade, or business, or substantially all of the assets thereof, of any employer, excepting . . . any assets retained by such employer incident to the liquidation of his obligations . . . and who intends to continue such organization, trade or business . . ." shall have a right to the unemployment compensation merit rating of its predecessor.
At the outset, the plaintiff is faced with the proposition that it did not acquire anything from Pariseau's, but from Rooks, Inc., which in turn had purchased a portion of the business and assets of Pariseau's before the plaintiff corporation came into existence. While no jurisdiction has been more inclined to look at the substance rather than the form of legal transactions than has ours, yet the fact remains that Rooks, Inc. became an "employing unit" separate and distinct from either the plaintiff or Pariseau's. Lund Company v. Rolfe, 93 N.H. 280, 282; Seavey Company v. Riley, 95 N.H. 502, 505. For a short period Rooks alone operated the business.
If, as the plaintiff argues, Rooks, Inc. did not intend to carry on the business of Pariseau's, it did not satisfy the requirements of section 6E, which stipulates that a "successor" must "intend to continue such organization, trade or business." If, on the other hand, it may be said that Rooks did intend and did carry on the business from the opening of the store on the morning of October 4, 1954 until 2:10 P.M. on that same day, when the plaintiff corporation came into existence, then the plaintiff did not succeed to Pariseau's, but to Rooks, Inc.
The plaintiff says that direct succession is not essential and that the dealings between Pariseau's and Rooks were a mere "procedural step" which should not be considered in determining whether the plaintiff succeeded to the business of Pariseau's. A short answer to this is that the statute (RSA ch. 282) nowhere makes provision for such a procedure, but contemplates a direct succession and transfer of a business and its experience rating from the seller to its purchasing successor. While it is considered advisable to reward an employer with good employment records by giving him a favorable rating and thereby reducing his payments (anno. 22 A.L.R. (2d) 673, 676; 60 Harv. L. Rev. 276-279; 55 Yale L.J. 218, 242), the connection between him and his successor must be so close and direct as to reasonably insure a continuance of similar good conduct on the latter's part if he is to have his predecessor's rating. A basic purpose of the legislation would be defeated by adoption of the interpretation of s. 6E urged by the plaintiff, which would do away with the necessity for direct successorship.
Decisions of administrative boards and lower court holdings from other jurisdictions, cited by the plaintiff in support of its argument that we should ignore the sale to Rooks as a "mere procedural step," are not persuasive. In general, they are clearly distinguishable from the case before us on their facts, the statutes involved and the policies adopted by the tribunals concerned. We decline to follow them.
It is unnecessary to decide whether the plaintiff acquired "substantially all of the assets" of Pariseau's, Inc. within the meaning of section 6E because whatever acquired was not acquired directly from Pariseau's. It follows the order is
Petition dismissed.
All concurred.