Makkas v. Unemployment Compensation Board of Review

Per Curiam. The issue before us necessitates an interpretation of R.C. 4141.24(F). For the following reasons we affirm the judgment of the court of appeals. R.C. 4141.24(F) governs the allocation of unemployment compensation liabilities that attach to the purchaser from the sale of part or all of an enterprise. It states: “If an employer transfers his business or otherwise reorganizes such business, the successor in interest shall assume the resources and liabilities of such employer’s account, and continue the payment of all contributions, or payments in lieu of contributions, due under Chapter 4141 of the Revised Code. If an employer acquires substantially all of the assets in a trade or business of another employer, or a clearly segregable and identifiable portion of an employer’s enterprise, and immediately after the acquisition employs in his trade or business substantially the same individuals who immediately prior to the acquisition were employed in the trade or business or in the separate unit of such trade or business of such predecessor employer, then, upon application to the administrator signed by the predecessor employer and the acquiring employer, the employer acquiring such enterprise is the successor in interest. In the case of a transfer of a portion of an employer’s enterprise, only that part of the experience with unemployment compensation and payrolls that is directly attributable to the segregated and identifiable part shall be transferred and used in computing the contribution rate of the successor employer on the next computation date. The administrator by regulation may prescribe procedures for effecting transfers of experience as provided for in this section.” The statute is comprised of two sections. The first is applicable to an enterprise transferred in toto. As a consequence the purchaser assumes the resources and liabilities of the seller’s account and attains the status of “successor in interest.’-’ In the second section the purchaser acquires less than all the assets of an enterprise. In these circumstances the purchaser has the option to elect responsibility for only a portion of the liabilities which are directly attributable to the purchased portion of the enterprise. The basic prerequisite for this pro rata attribution of liability, as a general rule, is an application made to the administrator and signed by the buyer and seller [“predecessor employer and the acquiring employer”]. In re Lord Baltimore Press, Inc. (1965), 4 Ohio St. 2d 68 [33 O.O.2d 436]. It is undisputed that at the time appellee obtained the third business it was the only remaining asset of FCI. Arrearages, however, were owed by FCI for all three businesses. [351] Appellee argues that because he owns a clearly segregable portion of FCI’s original enterprise, yet did not elect to apply to the administrator for successor-in-interest status, no liability should accrue to him. The flaw with this reasoning is that at the time of the sale FCI’s only business was the business acquired by appellee. Under these circumstances, adopting appellee’s rule would encourage expungement of unemployment compensation liabilities, merely by clever intercorporate manipulations. In addition such a rule would also discourage purchasers from properly determining the liabilities of these predecessors. In contrast appellant seeks to hold appellee the successor in interest for the unemployment compensation liabilities of all three businesses previously owned by FCI. While appellant’s approach has the appeal of simplicity in application it would also serve to diminish any incentive for timely enforcement of unemployment compensation obligations. Moreover, not only would a hardship be placed upon appellee but the first two purchasers, who but for the caprices of fortune might now be in appellee’s predicament, and FCI, would be given a windfall. R.C. 1.47 stipulates a statute is presumed to be effective, feasible of execution, and designed to achieve a just and reasonable result. It should be readily apparent that the two positions heretofore offered to analyze application of R.C. 4141.24(F) do not conform with the dictates of R.C. 1.47. Accordingly we are compelled to adopt a third position. We adopt this position because the statute is entirely unclear as to who is responsible for unemployment liabilities if the seller and purchaser do not elect to make application to the administrator pursuant to the second section. It is, however, apparent that “successor in interest” status is ordinarily presumed more desirable to an ongoing purchased business than is the loss of same. As we noted in Lord Baltimore Press, Inc., supra, at 73: “This method of succession [the second portion of the statute] is designed to allow a successor employer to obtain the merit rate of unemployment contribution earned by the predecessor employer if the three elements set forth are rigidly adhered to.” It is also evident, based upon the amendment of the original antecedent to R.C. 4141.24(F) which created the second portion of the statute, that the legislature sought to expand the narrow allowance of successor-in-interest status. See id. at 72. Legislative recognition of situations where only a segregable and identifiable portion of an enterprise is transferred — the substance of the instant transfer — must be reconciled with the form of the instant transaction which concededly amounted to a total transfer of assets remaining to FCI.1 Thus while we are compelled to enforce the express first provision of [352] the statute with respect to total transfers we must temper our decision in view of legislative intention. Under the first section, appellee would normally be compelled to accept all liabilities as successor in interest. Under the second section, FCI, by failing to comply with the procedural dictate of the statute, would be forced to accept the total liability. Accordingly, we recognize both the form and the substance of the facts before us, as did the court of appeals, by holding appellee liable only to the extent of liability attributable to his segregable and identifiable portion of the enterprise.2 The judgment of the court of appeals is affirmed. Judgment affirmed. Locher, Holmes, C. Brown and Wright, JJ., concur. Wright, J., concurs separately. Celebrezze, C.J., Dahling and Douglas, JJ., dissent. Dahling and Douglas, JJ., dissent separately. Dahling, J., 'of the Eleventh Appellate District, sitting for Sweeney, J. Footnotes [1] Time and again in a wide range of contexts, this court has steadfastly refused to exalt form over substance. We specifically noted in State, ex rel. Kitchen, v. Christman (1972), 31 Ohio St. 2d 64 [60 O.O.2d 42]: “At the outset, it should be emphasized that this court examines this transaction, not for [2] Needless to say we would strongly encourage the legislature to clarify the statute to avoid future difficulties of this kind.