Landmark Industries of Illinois, Inc. v. Division of Employment Sec., WD
| Decision Date | 08 April 1997 |
| Docket Number | No. WD,WD |
| Citation | 942 S.W.2d 446 |
| Parties | LANDMARK INDUSTRIES OF ILLINOIS, INC., Appellant, v. DIVISION OF EMPLOYMENT SECURITY, Respondent. 52382. |
| Court | Missouri Court of Appeals |
Keith W. Brunstrom, Jefferson City, for appellant.
Ronnae L. Coleman, Mo. Div. of Employment Security, Kansas City, for respondent.
Before SMART, P.J., and SPINDEN and ELLIS, JJ.
Landmark Industries of Illinois, Inc. ("Landmark") appeals a determination of the Labor and Industrial Relations Commission ("Commission") finding Landmark to be a successor company to K-Way Camping Products, Inc. ("K-Way") pursuant to § 288.110, RSMo 1994. 1 Landmark contends that the Commission erred, as a matter of law, in affirming the Division of Employment Security's ("Division") determination that Landmark acquired and immediately continued substantially all of the business of a prior employer, K-Way. Landmark claims that this determination is against the weight of the evidence. The judgment of the Commission is affirmed.
Review is governed by Section 288.210, RSMo Supp.1996, which provides, in pertinent part:
The findings of the commission as to the facts, if supported by competent and substantial evidence and in the absence of fraud, shall be conclusive, and the jurisdiction of the appellate court shall be confined to questions of law. The court, on appeal, may modify, reverse, remand for rehearing, or set aside the decision of the commission on the following grounds and no other:
(1) That the commission acted without or in excess of its powers;
(2) That the decision was procured by fraud;
(3) That the facts found by the commission do not support the award; or
(4) That there was no sufficient competent evidence in the record to warrant the making of the award.
We are not bound by the Commission's conclusions of law or the Commission's application of law to the facts. Where there is no dispute as to the facts and the issue is one of application and construction of a statute to these facts, the issue is one of law. Division of Employment Sec. v. Taney County Dist. R-III, 922 S.W.2d 391, 393 (Mo. banc 1996). We may not, however, substitute our judgment for that of the Commission on factual determinations. Travelers Equities Sales, Inc. v. Division of Employment Sec., 927 S.W.2d 912, 916-17 (Mo.App.1996).
In determining whether the Commission's findings are supported by competent and substantial evidence, we employ a two-step process. This court, in Davis v. Research Medical Ctr., 903 S.W.2d 557, 571 (Mo.App.1995), outlined the process for review of an award made by the Commission in worker's compensation decisions. In Travelers Equities Sales we held that the Davis standard was applicable to employment security decisions as well. Travelers Equities Sales, 927 S.W.2d at 917. Review is a two-step process. First, an appellate court must determine whether the whole record, viewed in the light most favorable to the decision, contains sufficient competent and substantial evidence to support the Commission's decision. Davis, 903 S.W.2d at 571. If it does, the court, in the second step, makes a determination as to whether the decision is against the overwhelming weight of the evidence. Id. In this second step, the reviewing court considers all of the evidence in the record, including that not favorable to the decision. Id.
K-Way operated a manufacturing plant in Lebanon, Missouri. K-Way manufactured boat interiors which K-Way sold to original equipment manufacturers. This was about 75% of K-Way's business. The other 25% was contract production of items such as cushions and vests. K-Way employed 33 people at the time it transferred its assets to Landmark.
Landmark, which operated in Illinois, wanted to expand its capability to manufacture sleeper components for tractors. Landmark also wished to expand its business of manufacturing boat interiors. Landmark and K-Way agreed that, effective October 3, 1994, Landmark would purchase the production assets and real estate of K-Way. Landmark paid approximately $750,000 for K-Way's building, $100,000 for its equipment Immediately after the sale of assets, Landmark continued K-Way's business. In the period of time since October 3, 1994, Landmark has invested approximately $450,000 in new equipment, and converted the manufacturing process from an older sit-down sewing process to a much newer stand-up process. Landmark has also changed the marketing of its production. As of August 31, 1995, Landmark has expanded the boat interior and sleeper component lines to constitute 94.5% of the production from the old K-Way plant. Only about 3.7% of Landmark's sales from the old K-Way plant are made to K-Way's old customers.
and $170,000 for its inventory. Landmark also employed all of K-Way's employees.
The Division determined that Landmark was a successor corporation to K-Way as defined in § 288.110, RSMo Supp.1996. As a successor corporation, Landmark was responsible for its predecessor's account, actual contribution and benefit experience, annual payrolls, and liable for current or delinquent contributions. Because of K-Way's unfavorable experience rating, the ruling that Landmark is a successor means that Landmark will be required to pay higher taxes to the Division than it would as an entirely new enterprise. Landmark sought review of this decision. A hearing was held on November 1, 1995. The appeals referee affirmed the decision of the Division and found that Landmark was a successor corporation. As a result of the referee's decision, Landmark filed an application for review with the Commission. The Commission affirmed the referee's decision and adopted its findings and conclusions. It also filed a supplemental opinion. In its supplemental opinion, the Commission acknowledged that the case was a close one. It ruled, however, that the fact that Landmark chose to modernize the manufacturing process and eliminate some of the business established by K-Way did not alter the fact that on the date of the sale, Landmark received tangible and intangible assets from K-Way which amounted to substantially all of the K-Way business. Landmark appeals.
The issue in this case is whether, pursuant to § 288.110, Landmark is a successor corporation to K-Way. The relevant portion of § 288.110 provides:
Any individual, type of organization or employing unit which has acquired substantially all of the business of an employer, excepting in such case any assets retained by such employer incident to the liquidation of his obligations, and in respect to which the division finds that immediately after such change such business of the predecessor employer is continued without interruption solely by the successor, shall stand in the position of such predecessor employer in all respects, including the predecessor's separate account, actual contribution and benefit experience, annual payrolls, and liability for current or delinquent contributions, interest and penalties.
We must, therefore, examine (1) whether Landmark acquired substantially all of K-Way's business and (2) whether that business was continued without interruption. Landmark argues that the Commission's interpretation of the statute defeats the purpose of the statute. It also argues that it did not acquire substantially all of K-Way's business nor did it immediately continue the business of K-Way.
The public policy of Missouri, as stated in § 288.020.1, is that "[e]conomic insecurity due to unemployment is a serious menace to health, morals, and welfare of the people...." The law dealing with employment security is, therefore, to be liberally construed in order to accomplish its stated purpose of promoting employment security "by increasing opportunities for jobs" and "by providing for the payment of compensation to individuals in respect to their unemployment." § 288.020.2, RSMo 1994. Landmark claims that application of § 288.110 to designate it as a successor company would defeat the purpose of promoting employment in Missouri because it penalizes Landmark, which has increased employment opportunities in Missouri, by charging it with a higher employment contribution rate. Landmark asserts that the law as applied to the facts of this case constitute a taxing statute. Landmark reminds us that tax laws are to be strictly construed against the taxing authority. While it is true that tax laws are generally strictly construed against a taxing authority, the tax provisions of the employment security law, are "incidental to its paramount and remedial purpose of relief...." Sample & Sell, Inc. v. Labor & Indus. Relations Comm'n, 764 S.W.2d 109, 111 (Mo.App.1988).
We are not unsympathetic to the argument that a business such as Landmark should not be penalized for taking a struggling business and making it more productive, as opposed to starting up a wholly separate business from scratch. However, we also recognize that Landmark's argument, if adopted, would substantially undermine the whole concept of a successor employer. The concept of successor liability is based upon the notion that a company which takes over a going business receives certain benefits which would not have accrued to that business if there had not been a company previously existing. Because of the close connection between the new and the old, it is not unjust to treat the new ownership according to the experience rating of the old. Also, the likelihood of being assigned an adverse experience rating can be factored into the negotiations over the purchase price of the business so that some of the cost of the adverse rating may be shifted back to the former owner.
Landmark argues that it did not acquire substantially all of the...
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...bound by the Commissions' conclusions of law or its application of law to the facts. Landmark Industries of Illinois, Inc. v. Division of Employment Security, 942 S.W.2d 446, 447 (Mo. App. W.D. 1997). Where the facts are undisputed and the issue involves the application and construction of ......
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