690 A.2d 437 | Conn. Super. Ct. | 1994
This tax appeal presents novel issues concerning the Connecticut law of successor tax liability. A hearing was held at which I heard the testimony of the president of Red, White and Blue Transmission, Inc. ("RWB"), the plaintiff in this case, and two officers of the Department of Revenue Services ("DRS"). A number of documentary exhibits were also received into evidence. The following facts are found.
This case involves the sale of an AAMCO transmission repair business in West Haven. The owner of the business was Salem Enterprise Corp. ("Salem"). On April 29, 1991, Daniel M. Albizu, the president of RWB, and Salem signed a contract in which Albizu agreed to purchase the assets of the business for $50,000. RWB was not mentioned in the contract, but as will be seen it was RWB that ultimately purchased the assets in question. (The franchise itself was purchased from AAMCO in a separate transaction.) The closing was originally scheduled to occur on or before June 1, 1991, but the parties were unable to close at any time during the calendar year 1991. The basic problem was that the existing encumbrances on the business (including substantial DRS liens) greatly exceeded the purchase price.
On December 2, 1991, AAMCO gave RWB an ultimatum. RWB had to close within sixty days or lose its franchise. This ultimatum made RWB anxious to close. Whether for this or some other reason, it cut an important corner. It ignored the procedure set forth in General Statutes §
Rather than conform to the statute, RWB decided to follow the strategy, if it can be called that, of informing the DRS of what it perceived to be its plight — too many encumbrances, not enough assets, and an incipient deadline — and "assuming" that the DRS would act "reasonably." The outcome of this strategy can be readily imagined.
RWB's counsel initially wrote to the DRS on December 18, 1991. That letter suggested that the DRS foreclose on any tax lien and indicated that RWB would purchase the property at auction. On January 3, 1992, RWB's counsel wrote a second letter to the DRS. This letter stated that Salem would sell its assets to RWB in a bulk sale transfer, that the proceeds — after payment of brokerage commissions and attorneys' fees — would be held in escrow, and that the creditors would then divide up the proceeds either by voluntary agreement or court order. On January 21, 1992, RWB's counsel faxed a third letter to the DRS that essentially repeated the second proposal. The DRS did not respond to any of these letters.
The closing occurred on January 22, 1991. RWB purchased the assets and goodwill of the business from Salem for $50,000. Salem and RWB signed an agreement denominating Salem's attorney, Martin J. O'Neill ("O'Neill"), as "trustee for the benefit of creditors."
The evidence concerning the actual payment of the purchase price is somewhat confusing. It appears that RWB made the following payments: $10,000 to Salem in the form of a note. Salem subsequently assigned this note to O'Neill, trustee; $2,500 to Salem's broker; $24,000 to O'Neill, trustee; $11,000 to O'Neill, trustee, as a deposit (previously paid); $2,500 in cash. No witness could recall how or to whom this last amount was paid. *364
The DRS was not a participant in the closing and did not sign any of the closing documents. It subsequently found that, pursuant to §
RWB raises three issues on appeal. It first contends that it has no liability under §
Section
Although there are no Connecticut cases construing this statute, similar statutes have been enacted in many states, and a substantial body of relevant decisional law exists. See annot., 65 A.L.R. 3d 1181 (1975). The case law on the subject has been summarized by the Supreme Court of Missouri as follows: "The courts of sister states consistently emphasize that the purpose of successor liability statutes is to secure collection of taxes by imposing derivative liability on purchasers of a business who are generally in a better financial position to collect or pay the tax from the sale price than the seller quitting the business. E.g., Bank of Commerce v. Woods,
RWB concedes that, for purposes of §
RWB failed to comply with the plain language of the statute. Section
RWB's more general contention that the statute is unfair as applied is an argument that must be directed *367
to the legislature rather than to this court. The requirements of the statute may be onerous in some cases, but they are nonetheless clear. "[T]he fairness of the . . . tax is within the prerogative of the legislature, and not of this court."Yaeger v. Dubno,
RWB's second argument is that, because it purchased Salem's assets in a bulk sale, the DRS is barred from pursuing its assessment by § 42a-6-110 (Rev. to 1993), which provides in relevant part that "[n]o action under this article shall be brought nor levy made more than six months after the date on which the transferee took possession of the goods unless the transfer has been concealed." This contention is defeated by the plain language of the statute relied upon. Section 42a-6-110 (Rev. to 1993) applies only to actions and levies "under this article." The DRS has not brought an action under article six of the Uniform Commercial Code. It has made a tax assessment. "If a claim is asserted based upon rights available irrespective of Article 6, the limitation section will not apply." Carpenter, Bennet Morrisseyv. Jones,
RWB's final argument is that the DRS is estopped from asserting its claim. This argument is unpersuasive. An essential element of estoppel is that "the party against whom estoppel is claimed must do or say something calculated or intended to induce another party to believe that certain facts exist and to act on that belief. . . ." Zoning Commission v. Lescynski,
At argument, RWB attempted to engraft two other arguments into its estoppel argument. It claimed that the DRS had a duty to mitigate its damages and, further, that §
Judgment shall enter for the defendant. The parties shall submit proposed orders within twenty days of the date on which this opinion is filed.