P J Hospitality, Inc. v. Dep't of Treasury

306 Mich.App. 479

857 N.W.2d 285

P J HOSPITALITY, INC.

v.DEPARTMENT OF TREASURY.

Docket No. 314302.

Court of Appeals of Michigan.

Submitted June 11, 2014, at Detroit.

Decided June 26, 2014.

Approved for publication Aug. 21, 2014, at 9:00 a.m.

Abraham & Rose, PLC, Farmington Hills (by Jerry R. Abraham ), for P.J. Hospitality, Inc.

Bill Schuette, Attorney General, Aaron D. Lindstrom, Solicitor General, Richard A. Bandstra, Chief Legal Counsel, and Matthew B. Hodges, Assistant Attorney General, for the Department of Treasury.

Before: DONOFRIO, P.J., and GLEICHER and M.J. KELLY, JJ.

Opinion

PER CURIAM.

Petitioner appeals as of right the Tax Tribunal's opinion and judgment, which adopted the findings of fact and conclusions of law of a hearing referee, who had upheld respondent's assessment of successor liability to petitioner. Because the tribunal did not commit an error of law or adopt a wrong legal principle and its factual findings were supported by competent, material, and substantial evidence, we affirm.

I. BASIC FACTS

Before 2007, the entity Soulful Concepts, Inc., owned the restaurant in Southfield, Michigan, called Beans & Cornbread. Patrick Coleman, in turn owned Soulful Concepts. In 2007, petitioner, also owned by Coleman, purchased all of Soulful Concepts' business, including all of its assets, for $50,000¹ and continued to operate the Beans & Cornbread restaurant. Coleman testified that he thought the value of all the assets was between $30,000 and $40,000. Coleman stated that this transaction was done because Soulful Concepts had “some debt issues” and “needed to get a fresh start.” Part of those debt issues involved large tax liabilities owed to both the federal government and the state of Michigan.

Specifically, at the time of the referee's hearing, the amount owed to the federal government was approximately $150,000, and the amount owed to the state of Michigan, not including some interest, was approximately $57,000.

Respondent assessed petitioner with Soulful Concepts' Michigan tax liability on the basis that it was a successor entity under MCL 205.27a(1). Petitioner objected to the assessment and filed a petition for a hearing. Petitioner argued at the hearing that under the statute, its liability was limited by the fair market value of the assets acquired minus any senior, outstanding liabilities, such as the amount owed to the federal government. As a result, petitioner claimed that, with the value of the assets not exceeding $40,000, the outstanding $150,000 owed to the federal government “eviscerate[d] any sort of liability” to respondent.

After holding a hearing, the referee disagreed and concluded that respondent's assessment was proper. First, the referee did not accept Coleman's lay opinion on the evaluation of the assets, stating that it “cannot be accepted as credible or accurate.” The referee explained:

[Coleman] did not make any effort to describe the property with the specificity that would be needed to determine its fair market value. There is no evidence regarding the value of the liquor license or goodwill. [Coleman] executed the documents of sale on behalf of both the seller and the purchaser, which indicates that this was not an arm's-length transaction and the stated purchase price cannot be accepted as fair market value. There is no market evidence whatsoever to support an appraisal of the value of the assets or the business.

The referee also concluded that if any federal tax liens existed, there was no evidence that they were ever perfected by being recorded in the Oakland County Register of Deeds. Furthermore, the referee concluded that the statute only allows for liability to be limited by the fair market value of the business acquired minus any proceeds of the sale that were used to satisfy a senior, secured interest. But the referee also found that none of the proceeds were used for such a purpose; thus, petitioner was not entitled to any reduction in liability.

The Tax Tribunal affirmed the referee's decision and adopted his proposed opinion, including the findings of fact and conclusions of law.

II. ANALYSIS

Review of decisions by the Tax Tribunal is limited. “Unless fraud is alleged, an appellate court reviews the decision for a misapplication of the law or adoption of a wrong principle.” Podmajersky v. Dep't of Treasury, 302 Mich.App. 153, 162, 838 N.W.2d 195 (2013), quoting Liberty Hill Housing Corp. v. Livonia, 480 Mich. 44, 49, 746 N.W.2d 282 (2008) (quotation marks omitted). “The tribunal's factual findings are deemed conclusive provided they are supported by competent, material, and substantial evidence on the whole record.” Podmajersky, 302 Mich.App. at 162, 838 N.W.2d 195.

But to the extent that our review involves issues of statutory interpretation, that aspect of our review is de novo. Id. The primary goal of statutory interpretation is to give effect to the intent of the Legislature. Ford Motor Co. v. Woodhaven, 475 Mich. 425, 438, 716 N.W.2d 247 (2006). To ascertain the Legislature's intent, we look to the language in the statute and give the words their plain and ordinary meanings. Lafarge Midwest, Inc. v. Detroit, 290 Mich.App. 240, 246, 801 N.W.2d 629 (2010). If the statute's language is not ambiguous, this Court will enforce the statute as written. Ford Motor, 475 Mich. at 438–439, 716 N.W.2d 247.

MCL 205.27a(1), which governs successor liability, provided the following at all relevant times:²

If a person liable for a tax administered under this act sells out his or her business or its stock of goods or quits the business, the person shall make a final return within 15 days after the date of selling or quitting the business. The purchaser or succeeding purchasers, if any, who purchase a going or closed business or its stock of goods shall escrow sufficient money to cover the amount of taxes, interest, and penalties as may be due and unpaid until the former owner produces a receipt from the state treasurer or the state treasurer's designated representative showing that the taxes due are paid, or a certificate stating that taxes are not due. Upon the owner's written waiver of confidentiality, the department may release to a purchaser a business's known tax liability for the purposes of establishing an escrow account for the payment of taxes. If the purchaser or succeeding purchasers of a business or its stock of goods fail to comply with the escrow requirements of this subsection, the purchaser is personally liable for the payment of the taxes, interest, and penalties accrued and unpaid by the business of the former owner. The purchaser's or succeeding purchaser's personal liability is limited to the fair market value of the business less the amount of any proceeds that are applied to balances due on secured interests that are superior to the lien provided for in [MCL 205.29(1) ].

Petitioner first argues that the tribunal erred by relying on the fact that there was no evidence that any of the federal tax liens were ever recorded. However, this issue is not relevant because, as will be discussed later, the existence of any senior security interests only comes into play when proceeds from the sale of the business are used to satisfy part of that debt,

and there was no evidence that any proceeds were applied in this manner....