Gottsch Feeding Corp. v. State

• Decision Date: 12 January 2001
• Docket Number: No. S-99-1156.,S-99-1156.
• Citation: Gottsch Feeding Corp. v. State, 261 Neb. 19, 621 N.W.2d 109 (Neb. 2001)
• Parties: GOTTSCH FEEDING CORP., Appellant, v. STATE of Nebraska et al., Appellees.
• Court: Nebraska Supreme Court

621 N.W.2d 109

261 Neb. 19

GOTTSCH FEEDING CORP., Appellant, v. STATE of Nebraska et al., Appellees.

No. S-99-1156.

Supreme Court of Nebraska.

January 12, 2001.

David A. Domina and James F. Cann, of Domina Law, P.C., Omaha, for appellant.

Don Stenberg, Attorney General, and L. Jay Bartel, for appellees.

HENDRY, C.J., and WRIGHT, GERRARD, STEPHAN, McCORMACK, and MILLER-LERMAN, JJ.

MILLER-LERMAN, J.

NATURE OF CASE

Gottsch Feeding Corp. (GFC) appeals the order of the district court for Lancaster County which affirmed an order of the State Tax Commissioner (Commissioner) sustaining deficiency assessments for Nebraska use and withholding taxes issued by the State of Nebraska, Department of Revenue (Department) against GFC.

The deficiency assessment for unpaid use tax was based on the Department's determination that GFC was liable for such taxes as a "successor" to RFD-TV, Inc. (RFD) pursuant to Neb.Rev.Stat. § 77-2707 (Reissue 1996). The deficiency assessment for unpaid withholding taxes was based on the Department's determination that GFC was liable for such taxes as a "transferee" of RFD, pursuant to Neb. Rev.Stat. § 77-27,110 (Reissue 1996). The Commissioner agreed with the Department's rulings. In affirming the order of the Commissioner on appeal, the district court found that RFD sold its stock of goods to GFC, that GFC acquired the RFD business, and that GFC did not conduct itself merely as a stockholder and concluded that GFC was the "successor" and "transferee" of RFD under §§ 77-2707 and 77-27,110.

GFC argues on appeal that because it purchased stock of RFD, it became a mere shareholder of RFD but did not become either a "successor" or a "transferee" of RFD and was, therefore, not liable for RFD's unpaid use and withholding taxes. Based on the facts of this case, we affirm the order of the district court.

PROCEDURAL HISTORY AND STATEMENT OF FACTS

This case has previously been before us. In our memorandum opinion, Gottsch Feeding Corp. v. Department of Revenue, 254 Neb. xvii (case No. S-97-205, Apr. 29, 1998), we dismissed the appeal for lack of jurisdiction because the summary judgment entered by the Commissioner from which the appeal was taken was entered without authority. Because the Commissioner's order was a nullity, the district court and this court lacked jurisdiction to review the Commissioner's order. Id.

Following our memorandum opinion and order in case No. S-97-205, an administrative hearing was held on September 17, 1998, after which hearing the Commissioner issued an order dated December 15, 1998. The Commissioner determined that GFC was liable for the deficiency assessments as a "successor" and a "transferee" of RFD within the scope of §§ 77-2707 and 77-27,110, respectively. The Commissioner further determined, however, that pursuant to § 77-2702(2), GFC's liability for RFD's unpaid use and withholding tax was limited to the purchase price GFC paid for RFD stock. The Commissioner therefore ordered that the combined tax liability of GFC be reduced to $56,611.96 plus a 10-percent penalty and interest at the statutory rate from December 29, 1989.

GFC appealed the Commissioner's order to the district court for Lancaster County pursuant to Neb.Rev.Stat. § 84-917 (Reissue 1999) of the Administrative Procedure Act. The district court reviewed the case pursuant to its standard of review, which is de novo on the record. See § 84-917(5)(a). The district court determined that the facts were generally not in dispute and adopted the facts as set forth in the Commissioner's December 15, 1998, order as well as determining additional facts. The facts set forth in the Commissioner's order as adopted by the district court were as follows:

[RFD], a Nebraska corporation, with its executive offices located in Omaha, Nebraska, was incorporated on, or about January 13, 1988. RFD's primary business was the operation of a 24-hour, seven-day-a-week television network, which broadcasted to approximately 380,000 homes in the United States and Canada, via satellite. The focus of RFD's programming was information of special interest to rural area [sic], such as commodities, weather, and educational programs directed at the farming and ranching communities. The principal officers of RFD were Patrick G. Gottsch, who served as Chairmen [sic] of the Board and Chief Executive Officer; Edward L. Zachary, who served as President; and Terese Spalding (sister of Patrick Gottsch), who served as Secretary and Treasurer of the corporation.

RFD's business did not prove financially viable. On July 25, 1989, Patrick Gottsch and Edward Zachary, directors of RFD, adopted a resolution authorizing the officers of the corporation to file a Petition for Relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Nebraska. Also authorized by the directors was the execution of a "Post Petition Loan and Security Agreement" between RFD and Livestock Marketing Association of Kansas City, Missouri....

On or about July 27, 1989, RFD filed for reorganization under Chapter 11 of the Bankruptcy Code.... Also, on, or about July 27, 1989, RFD filed a motion in the Bankruptcy Court, requesting the incurrence of secured and superpriority indebtedness, pursuant to Section 346(c) of the Bankruptcy Code (11 USCS § 3624(c)) [sic], in order to continue to operate its business.... Included in the motion was the agreement between RFD and Livestock Marketing Association securing post-petition loans, and other financial accommodations....

On August 14, 1989, a special meeting of RFD's shareholders met to, among other things, approve or disapprove an offer by Livestock Marketing Association to acquire, by warrant, an eighty percent (80%) ownership interest in RFD. This offer included [a] financial and capital contribution of $500,000.00. Prior to a vote of the RFD shareholders on the Livestock Marketing Association's proposal, Robert Gottsch, on behalf of [GFC], was allowed to present an alternative offer, whereby GFC would acquire eighty percent (80%) interest in the shares of RFD. GFC's proposal was identical in most respects to the proposal presented by the Livestock Marketing Association, except for the following changes:

1. [GFC] was to be substituted for Livestock Marketing Association;

2. [GFC] would advance $700,000.00 to RFD by November 1, 1989;

3. That in the twelve-month period following November 1, 1989, [GFC] would advance, at its discretion, up to $1,500,000.00 to RFD; and

4. [GFC] would be granted, at $0.01 per share, shares sufficient in number, as of September 8, 1989, to allow [GFC] to acquire an eighty percent (80%) interest in RFD.

It was unanimously adopted by RFD's shareholders to accept GFC's proposal... and an "Agreement of Understanding" was executed between RFD and GFC.... It was on August 14, 1989 that, "Gottsch took over total and daily management and operation of RFD[ .]"...

[GFC] is a South Dakota corporation, domesticated in Nebraska, with business locations in Elkhorn, Nebraska and South Dakota. The corporation's principal business is the feeding of livestock and all activities associated therewith. Robert Gottsch is the President of the corporation; Robert L. Gottsch, Jr., is Vice-President; and Brett A. Gottsch is Secretary/Treasurer....

On August 17, 1989, Livestock Marketing Association unconditionally transferred to GFC, in consideration of $186,673.99, all rights, title, and interest in any, and all agreements executed in favor of RFD.... On August 24, 1989, RFD filed a motion in Bankruptcy Court seeking approval of the assigned and modified agreement in favor of GFC....

On September 6, 1989, the Bankruptcy Court entered an order approving the assigned and modified agreement in favor of GFC, and also approved RFD's incurrence of secured superpriority indebtedness.... Accordingly, a common stock purchase warrant was executed, on September 8, 1989, between Edward Zachary, as President of RFD, and Robert Gottsch, as President of GFC, whereupon exercise of the warrant GFC would acquire 5,661,096 shares of RFD common stock at $0.01 par value per share. This acquisition would represent eighty percent (80%) of RFD's common shares then issued and outstanding....

On September 8, 1989, the RFD Shareholders met and adopted several resolutions ...:

1. The number of shares of the corporation (RFD) to be owned by [GFC] would be in a number equal to four times the number of shares issued and outstanding as of September 8, 1989;

2. The authorized shares of RFD stock authorized to be issued would be increased from 5,00[0],000 to 7,500,000 shares;

3. The resignations of Patrick Gottsch, Edward Zachary, and Sam Curley as Chairmen [sic] of the Board and Chief Executive Officer, and President and Chief Operating Officer, and Vice President, respectively, were accepted;

4. The number of authorized directors of RFD were [sic] reduced from ten to not less than one and no more than three directors;

5. Mr. Robert Gottsch and Mr. Brett Gottsch were unanimously elected new directors of RFD; and

6. The filing of the Voluntary Chapter 11 bankruptcy action was ratified.

Later in the morning of September 8, 1989, the two newly elected directors of RFD, Robert and Brett Gottsch, met in a special meeting of the Board of Directors.... Robert Gottsch was elected Chairman of the board, Chief Executive officer, and President of RFD. Brett Gottsch was elected Vice-President. Terese Spalding was elected Secretary, and David Weiler was elected Treasurer of RFD. David Weiler was also the controller of GFC.... On September 20, 1989, David Weiler was also elected Secretary of RFD, due to the resignation of Terese Spalding....

On or about September 25, 1989, RFD filed a motion in Bankruptcy Court requesting authorization to exercise the common stock purchase warrant.... Included among the attached exhibits to the motion was an exercise of warrant statement prepared for the signature of Robert

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