Applicators Of Wisconsin , Inc , Single/Joint Employers And/Or Alter Egos

National Labor Relations Board - Board Decisions

Apr 25, 1989

293 N.L.R.B. 803 (N.L.R.B. 1989)

PERMA COATINGS 803
Perma Coatings , Inc and its Director/Share-
holders-Donald R Peterson , Clifford C Lewis,
Theodore Zander, and Everette C Liddicoat,
and Spartan Group of McFarland, Inc, a/k/a
Applicators of Wisconsin, Inc, Single/Joint
Employers and/or Alter Egos and Central Wis-
consin Carpenters District Council, United
Brotherhood of Carpenters and Joiners of
America, Construction and General Laborers
Union Local No 464, Laborers International
Union of North America, AFL-CIO, and, Oper-
ative Plasterers ' and Cement Masons' Associa-
tion of the United States and Canada, Local
204, AFL-CIO Case 30-CA-9292
April 25, 1989
DECISION AND ORDER
By CHAIRMAN STEPHENS AND MEMBERS
JOHANSEN AND CRACRAFT
On April 27, 1988, Administiative Law Judge
Robert G Romano issued the attached decision
The General Counsel filed exceptions and a sup
porting brief, and Respondent Applicators of Wis
consin, Inc filed an answering brief
The National Labor Relations Board has delegat
ed its authority in this proceeding to a three-
member panel
The Board has considered the decision and the
record in light of the exceptions and briefs and has
decided to affirm the judge's rulings, findings, I and
conclusions and to adopt the recommended Order
The record establishes and the judge found that
Respondent Perma Coatings, Inc was insolvent
and ceased doing business in December 1985, and
that on January 15, 1986,2 it sold its equipment and
certain other assets to Respondent Spartan Group
of Wisconsin, Inc, which in May 1986 became
known as Applicators of Wisconsin, Inc On Octo-
ber 11 the Company was sold to Eugene Kohl and
reorganized under new ownership and officers 3
There is no successorship issue raised by the com-
plaint, and the judge found that the Respondents
are neither a single or joint employer nor alter egos
of each other Accordingly, the judge concluded
that the Respondents did not violate Section 8(a)(5)
and (1) of the Act by Spartan/Applicators and
I The General Counsel has excepted to some of the judge s credibility
findings The Board s established policy is not to overrule an administra
tive law judge s credibility resolutions unless the clear preponderance of
all the relevant evidence convinces us that they are incorrect Standard
Dry Wall Products 91 NLRB 544 (1950) enfd 188 F 2d 362 (3d Cir
1951) We have carefully examined the record and find no basis for re
versing the findings
2 Unless otherwise indicated all dates are 1986
a Following the terms employed by the judge Spartan/Applicators
refers to the corporate entity during the period between January 15 and
October 11 1986 and Applicators/Kohl refers to the corporate entity
following the stock purchase by Kohl on October 11 1986
Applicators/Kohl failing and refusing to bargain
with the Charging Party Unions and adhere to the
terms of the collective-bargaining agreements be
tween the Unions and Perma Coatings, or by deal-
ing directly with employees In so finding, the
judge deemed that the Respondents did not share
substantially common ownership 4 We agree
Perma Coatings was founded and incorporated
by Donald Peterson, its president, who owned a
27-percent share of the Company At all material
times, the other owners and officers of Perma
Coatings were Theodore Zander, vice president, 5
and Clifford Lewis, secretary-treasurer, each of
whom owned 27 percent, and Everett Liddicoat,
who owned a 19-percent share Peterson and Lewis
managed the day-to-day operations of Perma Coat-
ings until 1980, when they became involved in the
daily management of Insul Crete, a corporation the
two formed to market an insulation system that Pe-
terson had developed 6 Thereafter, five different
individuals were hired successively to manage
Perma Coatings and to estimate jobs During peri-
ods that Perma Coatings was without an estimator-
manager, employee James A Miller estimated jobs,
aided occasionally by employee Brian Shields
Following Perma Coatings' cessation of business
in 1985, Peterson formed Spartan/Applicators He
was its president and sole owner At the time of
Spartan/Applicators' formation, Peterson met with
former Perma Coatings employees Brian Shields,
Scott Serstad, and James A Miller and, though the
details of ownership were not worked out com-
pletely, the latter three agreed to run the Company
with the understanding that they would eventually
own it Additionally, at the time of the establish-
ment of Spartan/Applicators, Peterson was advised
by a Dow Chemical representative at Insul-Crete
(see fn 6) that he would not be paid his full Insul-
Crete salary if he managed Spartan/Applicators
By agreement of Miller, Shields, and Serstad, Tim-
othy Parrish, who had no prior association with
the Respondents, was hired as Spartan/Applicators'
estimator-manager in February and the Company
commenced operations Also hired at this time
were James F Miller and James Duesterbeck and
former Perma Coatings employee Zander With the
exception of a brief period in August following
4 The judge did find however that Perma Coatings and
Spartan/Applicators had substantially identical equipment premises and
supervision and some common customers
s Zander was employed as a plasterer at Perma Coatings and later was
one of Spartan/Applicator s initial hires Despite his being an officer of
Perma Coatings there is no evidence that he managed or supervised op
erations there
' In 1984 Dow Chemical Company became the principal owner of
Insul Crete No party contends that Insul Crete and the Respondents
constitute a single employer or alter egos
293 NLRB No 101
804 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
Parrish's discharge, Peterson played no role in the
day-to-day management of Spartan/Applicators
He did, however, have a hand in managing the
Company with respect to certain financial transac-
tions, such as the purchase of Perma Coatings'
equipment
In Superior Export Packing Co, 284 NLRB 1169,
1170 (1987), the Board stated
[W]e find that the lack of substantially identi-
cal common ownership precludes a finding
that Meadowland was an alter ego of Superi-
or Although common ownership is not a pre-
requisite for an alter ego finding, the Board
has found such a relationship absent common
ownership only where both companies were
either wholly owned by members of the same
family or nearly totally owned by the same in-
dividual or where the older company contin-
ued to maintain substantial control over the
business claimed to have been sold to the new
company
It is evident that Peterson's 27-percent owner-
ship of Perma Coatings and his 100-percent owner-
ship of Spartan/Applicators is not subtantially
identical ownership 7 Moreover, Perma Coatings
did not, either itself or through Peterson, control
Spartan/Applicators' operations Perma Coatings
was operationally defunct at the time Spartan/
Applicators was created and commenced oper-
ations Although this Company's purchase of
Perma Coatings' equipment helped alleviate a frac-
tion of Perma Coatings' debt, receipt of the pay
ment by the latter does not establish its control
over the former Further, Peterson credibly testi
fled that he formed Spartan/Applicators so that it
could purchase the defunct Perma Coatings' power
scaffolding at a fair price 8 Peterson's limited in-
volvement in Spartan's financial management is in
sufficient to support a finding that Spartan/
Applicators was controlled by Perma Coatings 9 In
° Compare Campbell Hams Electric 263 NLRB 1143 (1982) enfd 719
F 2d 292 (8th Cir 1983) in which the Board found that an alter ego rela
tionship existed between Campbell Electric Inc and its predecessor
Campbell Hams Electric Inc Tom Campbell owned 49 percent of
Campbell Hams his wife 1 percent and he owned 100 percent of Camp
bell Electric Inc His share of the predecessor was substantially greater
than Peterson s share of Perma Coatings Cf Hawg N Action Inc 281
NLRB 56 (1986)
8It is uncontroverted that Perma Coatings was the only Company of
its type in the State using such scaffolding and that a forced sale would
result in little relief of Perma Coatings overwhelming debt Although the
sale was not effected through a formal sealed bid procedure there is no
suggestion that the equipment was purchased at anything other than a
fair price
8 Additionally the sale of Spartan/Applicators to Kohl in October
1986 resulted in a total divestment of Peterson s ownership interest or re
sidual involvement in the Company
these circumstances, we are persuaded by the ab-
sence of evidence of intervention by Peterson or
any other Perma Coatings officer in the direction
of Spartan/Applicators that the one did not control
the other Compare, Hydro Logistics, 287 NLRB
602 (1987)
Finally, in affirming the judge's decision that no
alter ego relationship exists among the Respond-
ents, we find significant the absence of any antiun
ion motive in the formation and subsequent sale of
Spartan/Applicators The record clearly establishes
that Perma Coatings sustained serious losses from
1980 through 1985 when Peterson and Lewis de-
voted their energies to Insul-Crete Two unsuccess-
ful attempts were made in 1984 and 1985 to trans-
fer Perma Coatings to experienced employees, and
during the summer of 1985, it ceased bidding jobs
in anticipation of closing Among other things,
Perma Coatings was being pressured by McFarland
Bank to develop a repayment scheme (its second,
excluding the original repayment terms) on the
$266,000 balance of a loan insured by the Small
Business Administration, a tax lien was placed
against it in September 1985, and in October 1985,
it was sued by union trust funds for arrearages
Perma Coatings and the Charging Party Unions ul-
timately reached a settlement on the amount to be
paid to the trust funds, premised on Perma Coat-
ings' assertions that it was closing Furthermore,
Peterson's testimony that Perma Coatings and the
Unions enjoyed a good relationship over the years
is not controverted While it is true that a sincere
motivation for the creation or operation of a new
corporation does not preclude finding alter ego
status, the absence of union animus nevertheless
generally militates against finding a "disguised con
tinuance' of the predecessor 10
Accordingly, we agree with Judge Romano that
the Respondent did not violate the Act
ORDER
The National Labor Relations Board adopts the
recommended Order of the administrative law
judge and orders that the complaint is dismissed
10 See Kenmore Contracting Co 289 NLRB 336 339 (1988)
Dennis Selby Esq for the General Counsel
Nicholas J Loniello Esq of Madison Wisconsin for the
Respondent Perma Coatings, Inc, and its named
Directors/Shareholders
Timothy J Casper Esq (Coyne & Niess) of Madison
Wisconsin for Respondent Applicators of Wisconsin,
Inc
Kurt C Kobelt Esq and Marianne Goldstein Robbins
Esq (Previant Goldberg Uelmen Graatz Miller &
Brueggman S C) of Milwaukee Wisconsin, for
PERMA COATINGS 805
Charging Party Central Wisconsin Carpenters District
Council United Brotherhood of Carpenters and Join
ers of America
DECISION
STATEMENT OF THE CASE
ROBERT G ROMANO, Administrative Law Judge I
heard this case at Madison , Wisconsin on 16-17 April
1987 Central Wisconsin Carpenters District Council
United Brotherhood of Carpenters and Joiners of Amer
ica (Carpenters District Council) and Construction and
General Laborers Union Local No 464, Laborers Inter
national Union of North America AFL-CIO (Laborers
Local 464), and Operative Plasterers and Cement
Masons International Association of the United States
and Canada, Local 204 AFL-CIO (Plasterers Local
204), jointly filed an original 8(a)(1) (3), and (5) charge in
Case 30-CA-9292 on 8 August 1986 against Perma Coat
ings, Inc (Coatings) and Applicators of Wisconsin Inc
(Applicators) The original complaint issued on 19 Sep
tember 1986, alleging certain violations of Section 8(a)(1)
and (5) of the Act, including , inter alia , that Respondent
Applicators was a successor employer to Coatings The
complaint also alleged that in violation of Section 8(a)(3)
Respondent Applicators had discriminatorily refused to
employ 10 (named) former employees of Coatings On 3
October 1986, Respondents Coatings and Applicators
(jointly) filed an answer denying the commission of any
of the above alleged unfair labor practices , and, inter
alia, they asserted that on approximately 15 December
1985 Respondent Coatings had ceased its operations, and
that on 8 July 1986 Coatings filed petition for chapter 7
bankruptcy , pursuant to which Coatings assets are being
liquidated Respondents then asserted that each of the 10
persons named and alleged as discriminatorily denied em
ployment by Respondent Applicators (a) were offered
employment with Respondent Applicators and (b) they
may immediately commence employment with Respond
ent Applicators
On 9 April 1987, the General Counsel, on behalf of the
Board by the Regional Director for Region 30 issued an
order essentially approving a request of Charging Party
(Unions) on 7 April 1987 to withdraw their charge alle
gation that ( 1) Respondent Applicators is a successor to
Respondent Coatings , and (2) that Respondent Applica
tors earlier had discriminatorily refused to hire the cer
tam named employees in violation of Section 8(a)(3)
On 10 April 1987 an amended complaint issued in the
above captioned manner alleging certain violations of
Section 8 (a)(1) and (5) of the Act by Respondent Coat
ings and Respondent Spartan Group of McFarland, Inc
(Spartan) a/k/a Applicators
Allegations and Contentions
Essentially it is now alleged that Respondent Spartan
a/k/a Applicators (Spartan/Applicators) has continued
as the employing entity of and for Respondent Coatings
and that Respondent Coatings and Respondent Spar
tan/Applicators are a single and/or joint employer
and/or alter egos It is alleged that Respondents , as such,
have failed and refused to bargain collectively and in
good faith with Charging Party Unions, in violation of
Section 8(a)(5) and (1) that since 7 February 1986 they
have failed to abide by and adhere to certain collective
bargaining agreements existing between Respondent
Coatings and each of the Charging Party Unions respec
tively, and that they have bypassed the Charging Party
Unions as the exclusive bargaining representatives in
their respective appropriate bargaining units by engaging
in certain unilateral acts, and by certain direct dealings
with bargaining unit employees regarding their hire
tenure , and terms and conditions of employment
The complaint explicitly alleges that on or about 15
March 1986, with the authorization and consent of Re
spondent Coatings (named) director/shareholders, and
for their individual benefit, Respondent Spartan pur
chased the assets of Respondent Coatings, that on 2 May
1986, Respondent Spartans corporate name was changed
to Applicators without any accompanying change in
ownership and/or operations and that by virtue of Re
spondent Spartan/Applicators maintenance of the em
ploying entity to and for Respondent Coatings, the
Charging Party Unions have been and continue to be the
exclusive bargaining representatives of the respective ap
propriate bargaining units At outset of hearing , counsel
for the General Counsel further confirmed that in ac
cordance with the amended complaints specific naming
of directors/shareholders of Coatings, the General Coun
sel would seek an imposition of a personal liability on
Respondent Coatings named directors/shareholders for
any violation of the Act found
By answer(s) and affirmative defenses dated 15 April
1987, including as additionally filed at hearing Respond
ents Coatings (and essentially its directors/shareholders)
and Applicators have denied the commission of any of
the unfair labor practices presently alleged in the com
plaint Respondents have additionally raised in their
answer(s) certain affirmative defenses Firstly it is assert
ed that the Unions waived or are estopped to (now)
assert an alter ego claim by reason of contended (prior)
union delay and neglect of work force At hearing
and/or in briefs the Respondents raised related 10(b)
issues for resolution as to all (or certain) of Charging
Party Unions The General Counsel contends however
that the Charging Party Unions were unaware of and
could not have reasonably become aware of Respond
ents failure to abide by and adhere to the collective bar
gaining agreements until on or about 2 July 1986 at
which time the Unions received their first notification
from Respondents regarding the interrelationship result
ing from Respondent Coatings sale of its assets to Re
spondent Spartan/Applicators
Respondents have otherwise denied they are a single
and/or joint employer and/or alter ego, and in support,
they raise varied counterclaims and/or dispute the com
plaint s related base allegations that Respondents have
shared common officers ownership directors, manage
ment supervision, equipment , premises, facilities busi
ness purposes and have formulated a common labor
policy affecting employees of their operations
Regarding ownership and otherwise alleged individual
liability of Coatings shareholders/directors the Respond
806 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
ents in answer(s) have specifically denied the Coatings
asset sale was for the individual benefit of the share
holders of Coatings and, affirmatively (first) allege that
Coatings was insolvent and that the Coatings asset sale
was consummated and structured for the benefit of
Spartan/Applicators, and for certain key employees who
had an expectation to become controlling owners of
Spartan/Applicators under a certain oral stock bonus
plan Respondents next defend that Donald R Peterson
as a minority (27 percent) shareholder of Respondent
Coatings lawfully became the 100 percent owner of
Spartan/Applications which purchased the business and
assets of Coatings incident to a (prospective) Coatings
chapter 7 bankruptcy and after a bona fide business fail
ure of Coatings despite earlier good faith efforts of all
shareholders at rehabilitation of Coatings Respondents
also assert that Peterson has now lawfully divested his
ownership of Spartan/Applicators Respondents contend
the entire transaction was one motivated by compelling
economic consideration, namely to obtain a reasonable
value for an insolvent Coatings assets and to complete a
planned and eventual transfer of ownership and control
to key employees Respondents relatedly contend that
(though) the sale of Coatings assets to Spartan/Appli
cators and Peterson s divestiture of Spartan/Applicators
ownership were separated by 10 months, under the facts
and circumstances shown here they are more properly to
be viewed as but a single transaction
Respondents would have observed that the transaction
was not motivated by any antiunion sentiment, but by
compelling economic necessity With regard to discrimi
natory motive the General Counsel does not now con
tend to the contrary Indeed, the General Counsel con
cedes a severe economic fiscal position of Coatings at the
end of 1985 but counters that in the circumstances of
this case the real economic consideration for information
of Spartan/Applicators is shown to be one of escape
from the union contractors which under applicable
Board precedent is not available to Coatings its share
holders, or to its alter ego Spartan a/k/a Applicators
As stated in brief, it is the General Counsels more spe
cific cross contention that the action of Respondent
Coatings (and/or its director/shareholders) even if as
otherwise claimed economically motivated, was not
available to it (them) under longstanding and existing
Board precedent of Oak Cliff Golam Baking Co 202
NLRB 614, 616 (1973) With contrary reliance on hold
ing of Textile Workers v Darlington Co, 380 US 263
(1965), and on holdings of Board and Court alter ego
precedent Respondents essentially advance public policy
contentions that (1) as a minority stockholder of Coat
ings, Peterson was not precluded by an imposition of
alter ego status, from acting as he did to prevent a
forced sale of Coatings' assets, in order to effect a great
est possible (asset) recovery from a wholly failed bust
ness and (2) Spartan/Applicators as long planned and
eventually constituted has no commonality of ownership
with Coatings, and consequently is should not be found
to be Coatings' alter ego
Effectively Respondents appear four in possible dispar
ate interests Coatings shareholder/directors of Coatings,
irdividually Spartan/Applicators and Applicators as
presently constituted The case presentment for resolu
tion is heavily oriented to financial interest addressments
It is convenient to address all the facts chronologically
However, certain material events appearing in major
conflict are the more conveniently addressed in part II
D, infra
On the entire record, from my observation of the de
meanor of the witnesses and after due consideration of
the briefs of General Counsel and Respondents Coatings
and its named directors and shareholders and Respond
ent Applicators, on or about 5 June 1987, I make the fol
lowing
FINDINGS OF FACT
I JURISDICTION
Jurisdiction is not in issue In material times Perma
Coatings, Inc in a Wisconsin corporation with an office
and place of business in McFarland, Wisconsin, and pn
manly engaged in the installation of exterior insulation,
and related plaster/construction work During the calen
dar year ending 31 December 1985, Coatings purchased
and received at its McFarland, Wisconsin facility, prod
ucts, goods, and materials valued in excess of $50 000 di
rectly from points located outside the State of Wisconsin
Spartan Group of McFarland, Inc (Spartan) later (by
name change) Applicators of Wisconsin, Inc (Applica
tors) is a Wisconsin corporation with an office an place
of business in McFarland, Wisconsin, and is primarily en
gaged in the installation of exterior insulation and related
plaster/construction work During the calendar year
ending 31 December 1986 Spartan/Applicators per
formed services valued in excess of $50 000 for employ
ers located in states other than the State of Wisconsin
Apart from (amended) complaint allegations that the
same is an alter ego and/or single and/or joint employer
with Coatings (each of said allegations being denied by
Respondents) the amended complaint has otherwise al
leged, and Respondents in answer admit and in any
event I presently find that by virtue of its aforesaid busi
ness operations conducted in 1985 Coatings is and by
virtue of the business operations conducted in 1986
Spartan/Applicators is and employer engaged in com
merce within the meaning of Section 2(6) and (7) of the
Act
The amended complaint has also alleged Respondents
answer admitted, and I find that Charging Party Unions,
Carpenters District Council, Laborers Local 464 and
Plasterers Local 204, are each, respectively, a labor orga
nization within the meaning of Section 2(5) of the Act
However, here they constitute but one joint charging
party
II THE UNFAIR LABOR PRACTICE ALLEGATIONS
A Coatings
1 Coatings origin stock ownership, and officers
Donald R. Peterson founded, and incorporated Coat
ings in 1967 The original stockholders were Peterson
Everett Liddicoat and Thomas Meinders Coatings
PERMA COATINGS 807
stockholders in more material times became, and are
now, Peterson, Clifford Lewis and Theodore Zander
(each of whom owns 27 percent of Coatings stock), and
Liddicoat (who owns 19 percent) Peterson is president,
Zander is vice president, and Lewis is secretary treasur
er The latter four shareholders are also directors of
Coatings Until 1980 Peterson and Lewis jointly ran the
day to day business operations of Coatings Coatings has
regularly employed Zander as a plasterer Coatings em
ployed Carolyn Davis as office manager/secretary
through mid 1985 At some point earlier, Davis and
Coatings attorney, Loniello, became additional directors
of Coatings
2 Coatings business operations
Coatings business initially was the spraying of a deco
rative cement coating on the inside of swimming pools,
and the waterproofing of basements Coatings also ap
plied a decorative coating to block buildings At this
time Coatings essentially used an epoxy coating in its
business
In 1971-1972 Peterson developed an exterior insulation
system (Insul/Crete) This system involved placement of
an exterior coating over styrofoam insulation, a trade
product manufactured by the Dow Chemical Company
(DOW) The Insul/Crete system essentially involved a
three phase construction operation Dow brand styro
foam is mechanically fastened to the exterior of a build
ing Fiberglass mesh, and other accessories (expansion
and control points, and stop beads) are installed as neces
sary A basecoat of modified Portland cement is then ap
plied, which is later covered by a finished coat (of sever
al different types) designed to impart an aesthetically
pleasing appearance to the buildings exterior
Coatings had to first develop a market for the new
Insul/Crete exterior insulation system The oil embargo
of the early 1970s helped appreciably By 1973-1974
Coatings' principal business operation related to the
Insul/Crete exterior insulation system in both supplying
the necessary Insul/Crete products and in construction
of the exterior insulation system
3 Coatings business location
Peterson and Liddicoat are equal partners in another
business, Perm Building Company (PBC) PBC owned a
number of properties located (essentially) in one geo
graphical area Thereon PBC owned and operated a
complex of buildings (including certain mini warehouses)
which it rented out to various companies Pertinently,
through the end of 1985 Coatings leased from PBC one
main building located at 4311 Triangle Street McFar
land, Wisconsin (Triangle St Bldg) Coatings rented
certain additional storage room as well, in a coi.ple of
other (PBC) buildings PBC also rented Coatings a
fenced lot located directly across the street from the
main building There Coatings kept its various construc
tion equipment (power scaffolding, trucks, trailers, etc )
when not in use PBC itself maintained an office in the
same Triangle St Building In material times Davis han
dled the payroll for Coatings Davis however was also
responsible for the collection of rents for PBC It ap
pears that Peterson had interests in still other businesses
operating at the same location, and the record reflects
that definitive business lines amongst the businesses were
not always maintained
4 Coatings profit picture, formation of Insul/Crete
Peterson and Lewis ran the day to day operations of
Coatings until 1980 Peterson recalled that in every year
but one, from 1973 until 1980, Coatings had operated at a
profit However, from a graph (of Coatings profit and
losses) compiled by Peterson and Lewis in 1984 (in evi
dence as R Exh 11), it would appear that in addition to
an approximate loss of $20,000 in 1975, Coatings had ex
perienced an approximate $5000 loss in 1977 Generally,
however, Coatings had made a profit, and it did so in
1978 and 1979 Coatings fiscal condition would deterio
rate substantially (after the formation of Insul/Crete) in
1980, and in the years that followed
Peterson testified that he and Lewis (notably them
selves constituting majority stockowners of Coatings) de
cided that the marketing of Insul/Crete products should
be separated, and Coatings thereafter continue in business
as a construction applicator In January 1980 they
formed Insul/Crete Company (Insul/Crete) The record
does not reveal definitively who the original stockhold
ers of Insul/Crete were It was stipulated at hearing that
the former shareholders of Coatings, together, presently
own 16 67 percent interest in Insul/Crete Since 1984,
Dow has owned 50 percent There are now a number of
other stockholders discussed further In 1980, Insul/
Crete commenced its business operations in adjacent
space in the same Triangle St Building
Lewis became the first president of Insul/Crete At
that point Lewis left the employ of Coatings and began
working fulltime for Insul/Crete Peterson is vice presi
dent of Insul/Crete, in charge of technical service and
development Peterson testified that at first he had
worked only part time for Insul/Crete Peterson recalled
it was in the fall of 1980 that he began to work fulltime
for Insul/Crete, and that by October-November 1980
Peterson asserts he had ceased his day to day oversight
of Coatings business operations Essentially that would
have coincided with the date of the end of 1980 con
struction season
In the period 1980-1985, Coatings employed a half
dozen estimator/managers , as to whom Peterson summa
rized none worked out There is a substantial measure of
conflict in the evidence about Peterson s management
participation in Coatings business affairs, particularly in
1985, discussed infra Suffice it to presently observe that
since 1980 and clearly through 1985 Coatings has oper
ated in business essentially as a construction subcontrac
tor (applicator) that bid and installed the exterior insula
tion system known as Insul/Crete Commencing in 1980,
Coatings has purchased its Insul/Crete Styrofoam prod
uct supplies from Insul/Crete
5 Coatings collective bargaining agreements
Coatings has always operated as a union company In
conducting its (Insul/Crete) application business, Coat
ings has regularly employed carpenters, plasterers and la
808 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
borers Coatings has entered into and over the years has
renewed , collective bargaining agreements with each of
the charging party unions
The amended complaint has more definitively alleged
Respondents answer (as amended ) admitted , and/or the
record establishes , and I find (a) Carpenters District
Council has represented Coatings carpenters for ap
proximately 7 years and has entered into several collec
tive bargaining agreements , the most recent being effec
tive for the period 28 September 1984 through 31 May
1987, (b) Laborers Local 464 has represented Coatings
tenders and general laborers for approximately 16 years
and has entered into several collective bargaining agree
ments, the most recent effective for the period 1 June
1984 through 31 May 1987 , and (c) Plasterers Local 204
has represented Coatings ' plasterers and cement masons
for many years , with the most recent collective bargain
ing agreement being effective from 1 June 1984 through
31 May 1987
Peterson has testified generally , but without apparent
contradiction , that though from time to time he has had
some disagreements with the unions , he (Coatings) has
enjoyed good relations with the unions , and he has been
welcomed by unions wherever Coatings did business Pe
terson has also testified that he has personally served,
and continues to serve on a joint apprenticeship board,
for which he has received a plaque commemorating 10
years service Though asserting generally that he always
had some flexibility (with the unions) in the conduct of
Coatings ' construction business , Peterson , in the end, has
effectively acknowledged that the successive collective
bargaining agreements that Coatings has had with the
above unions has determined respectively the wages
hours , and working conditions of Coatings above em
ployees I so find presently at least through 1985
6 Coatings developed indebtedness and
deteriorating fiscal condition
a very , very inclusive list' of Coatings assets as securi
ty for the SBA loan
The SBA loan has been also personally guaranteed by
Coatings shareholders , and with still other securities
pledged by them and their spouses In any event Peter
son and Liddicoat further secured the SBA loan with a
mortgage of certain part of PBC owned properties
Lewis mortgaged his own personal homestead, and
Zander pledged two farm properties , one of which was
his homestead
b Other loans
Coatings also has two other loans outstanding with
McFarland The first is a $31 ,000 annually renewable
loan, and the second a $6000 loan The $31 000 loan
itself is secured by further first or second mortgages of
remaining PBC properties owned by Peterson and Liddi
coat Peterson has testified credibly that there is no real
estate presently owned by PBC that is not in some way
encumbered by a mortgage to secure a Coatings debt
The General Counsel has not contended that Coatings
and PBC have been operated as a single integrated em
ployer
c Business losses
Certain uncontested documentary evidence (e g R
Exh 11) and related Peterson testimony, wholly per
suades that Coatings lost money in the conduct of its
business , in 1980 and in each of the following years
through 1985 Peterson , in testifying uncontestedly that
the graph (R Exh 11 ) accurately portrays Coatings net
profit and losses in the years 1973 through 1983, has of
fectively testified that Coatings lost between $50 000-
$60 000 in its fiscal year ending in October 1980 some
$30 000 similarly in 1981 between $130 000-$ 140 000 in
1982 alone and between $ 50 000-$60 000 in the fiscal
year ending in 1983
a The Small Business Administration loan
David Locke is president of McFarland State Bank
(McFarland), and Richard Southerland is McFarland s
vice president and chief loan officer On 2 June 1980,
Coatings obtained a $350 000 loan from McFarland, 90
percent of which loan is guaranteed by the United States
Small Business Administration (SBA) McFarland serv
ices the loan for SBA This loan is hereinafter referred to
simply as the SBA loan
At the time McFarland made the SBA loan to Coat
ings, McFarland obtained a General Business Security
Agreement (GBSA) from Coatings The GBSA is a
standard Wisconsin Bankers Association form In execut
ing it , Coatings effectively secured the SBA loan with a
pledge of all of Coatings ' accounts receivable , general in
tangibles inventory equipment , fixtures , etc This find
ing is based on credited testimony of Respondents wit
ness attorney , James Sweet Sweet s practice is conduct
ed 70 percent in bankruptcy cases (representing both
debtors and creditors) and in related matters I credit At
torney Sweet s testimony in these respects including that
through the GBSA McFarland and SBA had obtained
d Coatings ' interim February 1983 corporate officer
plan for a recovery
In this period Coatings was quite often late in pay
ments on the SBA loan Peterson testified to having nu
merous related meetings with president Locke of McFar
land as to the financial condition of Coatings According
to Peterson , following certain such meetings he and
Lewis prepared a letter dated 4 February 1983, which
Lewis sent to Locke with the purpose to ease Locke s
mind by showing Locke that they had a plan that would
reasonably allow Coatings to proceed in a profitable
manner
Lewis advised Locke specifically that Coatings had
had a severe problem with its general manager at the
time, that the problem did not come to light until year s
end (fiscal 1982), and Lewis outlined the problem to be,
in general , these problems were in the area of correct
bidding and billings and in public relations with old es
tablished customers This coupled with the depressed
market resulted in a lower volume of good projects espe
cially during the last quarter when we generally do the
bulk of our profitable work "
PERMA COATINGS
Lewis then presented Coatings 1983 plan for recov
ery, which described (1) changes already effected that
projected a reduction of $80 000 in Coatings overhead
expenses (2) a viable repay plan for unsecured creditors
one already set in place that would give Coatings time
to rebuild, (3) new income in form of Coatings present
and anticipated construction work for and commissions
prospects in Coatings future business as regional agent
for a new Foam Home building project being offered
by Cubic Structures (another company based in the Tn
angle St Building), (4) Coatings intended increased effort
at bidding for jobs, urged as being effective by a report
ed 2-1/2 present increase in billings accomplished in
recent winter months over compared winter months of
immediate past year, (5) employee renewed commitment
to work effort, inter alia to preserve their jobs, and (6)
Coatings' intention to diversify into related markets in a
new manner, now deemed cost feasible Although ack
nowleged as a matter not within its control, Lewis also
pointed to the current help to a recovery being afforded
Coatings in the form of lowered interest rates Although
Coatings improved substantially on its 1982 net loss posi
tion, Coatings, as noted, still experienced a net loss of be
tween $50000-$60000 in the fiscal year ending (Octo
ber) 1983
7 Insul/Crete ownership developments, asserted as
impacting on Peterson s (and Lewis') intentions
with regard to continuing their ownership interests
in Coatings
As of 5 March 1984 , Insul/Crete and Dow has an
agreement, inter alia, for Dow's optional purchase of
Insul/Crete stock Dow s basic interest was in the mar
keting of its styrofoam trade product in exterior insula
tion systems At that time Insul/Crete had certain indebt
edness with The Northern Trust Company (Northern
Trust) Dow was guarantor of Insul/Crete s revolving
credit agreement with Northern Trust On 5 July 1984
Dow exercised its options to purchase 50 percent of the
outstanding shares of Insul/Crete for a purchase price of
$800000
The salient features of the Dow Insul/Crete 5 July
1984 memorandum of understanding (R Exh 10) are as
follows First Insul/Crete was to repay as much of debt
it owed Northern Trust as was possible, consistent with
prudent cash management and the needs of Insul/Crete
Dow further agreed to certain terms for extending its
guarantee on a revolving credit arrangement between
Insul/Crete and Northern Trust Second, the board of di
rectors of Insul/Crete was to be restructured to nine di
rectors with four directors to be Dow nominees, and re
movable and replaceable only by Dow One of the re
maining five directors was to be a neutral person with
the agreement making provisions for that selection
Third the agreement provided that the president of
Insul/Crete always was to be a Dow nominee, from
Dow director designees , but with certain rights of rejec
tion and/or removal by the board of directors Dow also
agreed to provide certain ongoing accounting assistance
to Insul/Crete, and Insul/Crete agreed to the above
changing terms The General Counsel does not contend,
and from the above recitement other terms of this agree
809
ment, and the record as a whole, it is readily apparent
that Insul/Crete, at least from on and after 5 July 1984
was not a joint single (integrated) employer or alter ego
of Coatings, nor is it alleged to be
In that regard, and perhaps as most materially related
to the issues presented here, the Dow Insul/Crete agree
ment itself contained the following specific restriction
and/or prohibition placed upon Insul/Crete (I/C)
17 I/C will maintain an arm s length relationship
with all other corporations individuals, partner
ships, and businesses and will keep all of its assets
and affairs separate and distinct from those of
others I/C shall avoid paying expenses and making
other expenditures for, and providing facilities or
services to, others except pursuant to written con
tracts Proper charges shall be made by I/C for any
expenditures made or services or facilities provided
for others I/C employees shall not perform services
for others in a manner or at a time or place that is
inconsistent with this provision
Signing the above Dow Insul/Crete agreement, in addi
tion to Lewis Peterson, Zander, and Liddicoat, were 17
other individuals, presumably encompassing all (Insul/
Crete) stockowners and/or other parties with interest in
Insul/Crete
8 Coatings 1984 financial statements
The record reveals that Coatings had financial state
ments prepared on 29 February 1984 (notably prior to
the Dow executed agreement regarding optional pur
chase of Insul/Crete stock) and 31 October 1984 Only
the balance sheet and profit/loss statement, prepared by
Coatings accounting firm Robert Tormey and Associ
ates, as of 31 October 1984 (R Exh 13) has been placed
in evidence It shows Coatings as having a negative
worth then approximating $285,000, and a net loss for
1984 approximating $52 000 Coatings professional ac
countants have made certain disclaimers on the actual fi
nancial position as portrayed by the compilations they
prepared in the 31 October 1984 statement (the basis for
which are not explicated nor appear otherwise adequate
ly identified of record) However it appears of record
that not only, inter aha was the 31 October 1984 Coat
ings financial statement reported in the bankruptcy peti
tion, and it submitted to Attorney Sweet earlier in No
vember 1985, but Peterson has testified the compilations
were accurate and relied upon and that it had served as
basis for tax filing Moreover the General Counsel has
not only not contended accuracy to be the contrary but
seemingly has conceded such
9 Coatings special meeting of stockholders in 1985
and attempted stockholder cash rescue and
authorized stock gift plan and provision for an
alternative chapter 11 reorganization plan
Peterson testified that in 1984, McFarland s Locke was
concerned about Coatings getting a real manager for the
business, and Locke also wanted Coatings to come up
with (another) plan to prove the Company could go for
810 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
ward, or, alternatively, McFarland should not consider
some more serious action (Locke did not testify in this
proceeding)
On 15 January 1985 Coatings' shareholders and direc
tors met and ascribed to action (under Wisconsin law) as
at special meeting of shareholders and directors Minutes
of that meeting (R Exh 14) reflect this meeting was the
culmination of a series of meetings with Coatings pri
mary secured creditor, McFarland The minutes recite
that Coatings was then in substantial financial distress,
suffered from a lack of key management personnel, pres
ently lacked working capital, and anticipated a cash
crunch in its plans for payment of creditors The minutes
explicitly state that McFarland therefore considers its
loan at risk " This time, in addition to the four
shareholder/directors (Peterson, Lewis Zander, and Lid
dicoat) Davis and Attorney Loniello are shown as par
ticipating directors, but not shareholders, of Coatings
On 15 January 1985 Coatings shareholders/directors
and directors authorized Peterson to negotiate for a
transfer of all Coatings common stock to key employees
in return for management and success of Coatings No
consideration was to be paid for the stock at the time,
but the corporation, under the new ownership had to
conversant to pay the debt to McFarland on which the
existing shareholders were personally liable Notably, at
this time, it was resolved that Peterson was to investigate
alternatively a chapter 11 reorganization and a business
plan for Coatings rehabilitation
Coatings was also significantly authorized to enter a
written agreement with all of its shareholders whereby
the shareholders would loan Coatings $45,000 $15,000 to
be received before 30 June 1985 and $30,000 before 31
December 1985 These loan proceeds were to be used
and applied first to obligations on which the (existing)
officers/directors/shareholders had personal liability It
was also resolved that the shareholders/directors would
meet again in January 1986 for the purpose of review
ing the corporations prospects for rehabilitation and
making final decisions regarding bankruptcy rehabilita
tion
As of 15 January 1985, it would thus reasonably
appear the shareholders/directors of Coatings were at
tempting a cash rescue, and they were not then anticipat
ing as an alternative a chapter 7 liquidation but rather a
continuation of Coatings in business either through a ne
gotiation of a stock gift plan to key employees or alter
natively a chapter 11 reorganization In either case Coat
ings would continue in business to pay off of the SBA
loan
Each of the four shareholders/directors concurrently
executed a loan agreement with Coatings That loan
agreement established the proportions to be loaned, with
provision for issuance of 10 year Coatings corporate
promissory note and 8 percent interest, confirming in
tended business continuation, as follows
Liddicoat Peterson Lewis Zander Totals
30 June 1985 $2000 50 $4 050 $4050 $4050 $15 000
(sic but clearly 2850 00)
31 December 1985 570000 8100 8100 8100 30000
There were other provisions acknowledging the above
loan amounts were estimates in being related to
shareholders/directors intention and ability to raise the
money by sale of individually owned unencumbered
Insul/Crete stock However the shareholders each and
all agreed that to the extent they in combination were
unable to raise these sums, they would be jointly and
severally liable to make up the difference
10 The April 1985 stock plan failure
Peterson testified that in 1985 Coatings' stock was
worthless Nonetheless Peterson first developed a plan
for a gift transfer of controlling stock in Coatings to key
employees to motivate the key employees to continue to
work for Coatings, and to induce the key employees to
take on the task of a successful management of Coatings
Peterson defined a key employee as one of who was
able to do takeoffs (viz, accomplish bid estimates
through footage takeoff from blueprints, discussed fur
ther infra), had ability to sell and as an individual who
had a strong desire to own his own business Peterson
has identified certain Coatings employees (Matthew G
Duffy, Brian Shields, James A Miller, Sr and Scott M
Serstad) as being qualified as key employees However
the April 1985 controlling stock gift plan was one nego
hated with Duffy and Shields (Duffy did not testify in
this proceeding, but Shields did )
a Duffy and Shields background
The record is somewhat confusing regarding Duffy s
employment history Peterson recalled that Duffy had
first come to work for Coatings right out of high school
and worked initially as an apprentice plasterer and later
as a journeyman Duffy joined and remained a member
of Plasterers Local 204 In 1983-1984 Duffy had an acci
dent following which, though he attempted to continue
as a plasterer, Duffy was advised (at least at the time)
that he should consider another occupation Peterson re
lated that Duffy attended a computer programmer
school in 1984-1985 While doing so, Duffy continued to
work part time for Coatings but then in sales Respond
ent s Exh 7 reflects that Coatings employed Duffy in
January-February 1985 and in May-September 1985
At this time all of Coatings' records (payroll required
union reports financial statements) were being kept in
the computer of Coatings accounting firm (Tormey)
Duffy had access to a computer and he was able to de
velop a computer estimating program for Coatings Ad
PERMA COATINGS 811
ditionally Peterson knew Duffy to be a very loyal family
man likeable, an excellent employee who was always at
work on time, and with no bad habits
Brian Shields began working for Coatings part time, a
couple of years prior to Shields graduation from high
school in 1977 At first, Shields loaded trucks, picked up
material, and did various shop work After graduation,
Shields began working full time for Coatings as a labor
er At this time Shields mixed portland cement at the
jobsite for the plasterers Shields joined Laborers Union
Local 464, and he remains a member of that union to
date
Shields has testified that in late 1979 and early 1980,
while still working as a general laborer, he also began
running jobs for Coatings Shields kept the records of
the materials used on the job, knew what was needed to
run the job the next day, and kept the job running
smoothly However, in this period, Shields relates he
also regularly reported to Peterson Shields corroborates
Peterson that Peterson was fully involved in both bid
ding and scheduling jobs up to 1979-1980, and he gener
ally corroborates that Peterson had more limited in
volvement thereafter, starting in probably 1980-1981, be
cause Peterson was then becoming busy with
Insul/Crete Shields has recalled and identified several
estimator/managers (Ed O'Dell, Rich Journalan, Jack
Schamalowski, and Charles Crawford) who were hired
by Peterson in the years 1981 through 1985 Shields con
firms they lasted for periods of anywhere from 2 years to
6 months Shields also testified that in 1982-1983, Shields
gradually got more responsibility i e, in deciding what
job to go to next However, Shields also testified that in
periods of manager lapse (in between managers) that it
was usually Miller that had kept operations going and
did the (bid) takeoffs
Shields confirmed that in mid 1985 (with estima
tor/manager Crawford s departure) there was (again) no
one and Miller did some takeoffs However, Shields had
also testified that by Autumn 1985 both Miller and
Shields did it (takeoffs) but that it then got real busy and
neither could adding, there was a fair amount of work
to accomplish before winter This recollection of Shields
would appear in conflict with Peterson's recollection
that Coatings had ceased bidding jobs earlier, in the
summer of 1985 because it was known then that Coat
ings would not be in business after 1985 Peterson who
lived nearby, could observe Coatings employees report
in the morning and he knew Shields was always at work
on time
In summary Duffy and Shields were deemed qualified,
and Peterson sought to have Duffy and Shields agree to
undertake to run Coatings in return for a proffered stock
gift plan It is clear from how far the plan went, before it
failed, that Duffy and Shields were also motivated to
own the business, had it been in their view in the end
deemed fiscally feasible, under the terms of the stock gift
plan then offered to them
b The negotiations
Peterson developed a plan or proposal to transfer con
trolling (but not all) stock in Coatings to the two key
employees, Duffy and Shields Peterson describes three
related meetings as occurring in 1984, other (including
wholly persuasive documentary) evidence convinces me
these events occurred in the first half of 1985 The first
meeting was in nature a general discussion of a stock gift
plan, and it occurred probably in February A draft of
the proposal was next drawn up, which Peterson re
viewed, more probably in mid April A meeting for the
execution of documents was next arranged and held in
the directors and/or conference room of McFarland In
light of documentary evidence of record, there can be no
question but that this meeting was held on 22 April 1985
Nor can there be any question that Peterson fully expect
ed the stock gift plan (which rater alia called for Peter
son s gift of all his stock) to be executed at that time
All the participants and/or representatives of the
major parties in interest were present for the meeting
held on 22 April 1985 Coatings existing four share
holders/directors and its two other directors, prospective
controlling stock donees Duffy and Shields, representa
tives of McFarland (Locke and Southerland), and a rep
resentative of SBA were all present
c The essential terms of the proffered stock gift plan
Duffy (and Shields) eventual rejection
At this time Coatings apparently had issued 1000 of its
total (undisclosed) authorized shares The above four
named shareholders/directors owed 903 of the issued and
outstanding shares Coatings held the remaining 97
shares as treasury shares As reflected in prepared memo
randum of understanding (R Exh 15 ),1 Zander, then
working for Coatings as plasterer , planned to continue to
work for Coatings and he had elected to retain his 251
shares Under the plan, Zander would also remain as
vice president of Coatings Transfer of the remaining 652
shares of Peterson and the others (Lewis and Liddicoat)
was to be made by irrevocable gift to Duffy and Shields,
50-50 Thus concurrent with execution of the agreements
set forth in the memorandum of understanding Coatings
was authorized to issue a certificate of 326 fully paid and
nonassessable shares to each donee , respectively
The agreement explicitly provided that the personal It
ability of Peterson Lewis, Liddicoat, and Zander on the
SBA loan would continue and also, that all the security
they had given to secure the repayment of the SBA loan
would survive the transfer of the controlling shares of
Coatings to Duffy and Shields A provision that Duffy
and Shields would assign all their shares of stock in
Coatings as additional security on the SBA loan was de
leted Although it appears only Duffy and Shields ini
tialled this deletion , they, as well as Peterson and Davis
for Coatings and the four Coatings shareholders (sepa
rately) signed the Memorandum of Understanding
' R Exh 15 is a serves documentary exhibit which encompasses the
various documents that were to be executed by all involved parties in in
terest that would have effectuated Peterson s stock gift plan in April
1985 They are a memorandum of understanding for transfer of a con
trolling interest in the common stock of Perma Coatings Inc with a
(McFarland and SBA) consent to transfer a (related) reaffirmation of
personal guarantees personal liabilities and security agreements a (pre
pared) record of special meeting of shareholders and directors of Permit
Coatings Inc and a separate notice agreement for Duffy and Shields
signature
812 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
with the deletion made Moreover Duffy and Shields
signed the separate notice agreement providing for a 30
day written notice to McFarland and SBA prior to any
future share disposition, encumberance, etc, to be made
by them
The Memorandum of Understanding explicitly pro
vided that Duffy and Shields did not assume any per
sonal liability for any of the corporations debt or other
financial obligations Peterson testified that it was his
understanding that Coatings' unsecured debts, with spe
cific reference to $150,000-$160,000 owed to Insul/
Crete, and probably another $200,000 due to other sup
pliers, would be passed on to the stock donees In light
of the explicit provision that there would be no personal
liability imposed on Duffy or Shields for any of Coat
ings debt, it seems reasonably clear, that Peterson's testi
monial reference here (at best) describes (limitedly) Coat
ings unsecured indebtedness continuing as a Coatings in
debtedness and thus after the gift stock plan execution,
continuing then as a problem, inter alia , for profitable
operation of Coatings under the management of the new
controlling stock owners Duffy and Shields, but not in
the personal liability sense, i e , anymore than for Zander
on Coatings' unsecured debt Moreover it is warranted to
note this does not mean that Coatings overall obligations
on the secured loans to McFarland were to be extin
guished, at least no submitted document appears to me to
have called for that effect
With regard to Coatings' indebtedness to McFarland,
at this time, in addition to the secured SBA loan (then
standing at between $270 000-$280,000), and the secured
loans of $31,000 and $6000, there then existed an addi
tional Coatings $71,000 `Spec Home loan with McFar
land However, from recitements in the Reaffirmation
of Personal Guarantees, Personal Liabilities and Security
Agreements, concurrently to be executed by the four
Coatings shareholders, it is clear that this Spec Home
loan at the time was also secured (see R Exh 15) (The
Spec Home loan does not otherwise appear to be of
material signifiance and is not to be further referred to )
According to Peterson the Reaffirmation document
reaffirming all personal guarantees, personal liabilities
and security agreements on all McFarland loans was to
be executed by Peterson, Lewis Liddicoat and Zander,
to induce McFarland and SBA to themselves execute a
Consent to Transfer (of Coatings controlling stock
ownership) as provided for in the basic Memorandum
of Understanding Agreement Although only Peterson,
Lewis, and Zander appear to have signed the Reaffir
mation" placed in evidence (R Exh 15), and the absence
of Liddicoat signature is not specifically explained of
hearing, it would appear more probably oversight,
and/or omission in the document entered in evidence in
light of all the other circumstances especially the further
developments at this meeting Thus Liddicoat and the
other three shareholders executed the base memorandum
of understanding as did a representative of McFarland
(but not SBA) the Consent to Transfer Peterson testi
fled he did not know why the SBA representative did
not sign, nor does the record otherwise reflect the
reason
Under the April 1985 stock gift plan, Peterson Lewis,
and Liddicoat were to resign as officers and directors
However, Peterson and Lewis agreed to remain reason
ably available to Duffy and Shields for management con
sultations through 31 December 1986 Additionally, Pe
terson and Lewis (apparently) each personally agreed to
forgive $6000 (and interest) promissory notes of Coatings
that they held (Liddicoat and Zander did not agree to
release Coatings from certain promissory notes they
held )
Peterson testified that he had anticipated all the parties
would sign the documents at this meeting, and he asserts
they did sign However, Duffy and Shields signed only
after Duffy said he wanted his attorney (and/or account
ant) to look over the documents At that point there was
a further agreement reached that the documents would
be presently signed, but conditionally, and then held in
escrow to await that review (See R Exh 16) Peterson
acknowleged the above stock gift plan in the end was
never consummated Peterson asserted this was because
Duffy followed the professional advice he received that
the unsecured indebtedness of Coatings was simply too
much for him to reasonably expect to be able to succeed
Shields confirmed, but more generally that Coatings
owed too much to creditors and they did not think that
they could make a go of it with that (debt) hanging over
their heads Peterson learned that Duffy and Shields
would not accept the stock gift plan about 2 weeks after
the meeting at McFarland, thus about the second week
of May 1985
11 Continued buildup of fiscal pressures on
Coatings in 1985, other changes
a The question of Coatings' cessation of fob bidding
There is some conflict whether, as Peterson recalled
Coatings ceased bidding jobs in mid 1985 because they
had already decided that Coatings would not continue in
business after 1985 or as Shields recalled that there was
continued bidding after estimator Crawford left, that
Miller and Shields had continued to do some bidding
through the autumn of 1985 until they got too busy and
in circumstances with enough work to be done for the
rest of the year In contrast Peterson had recalled that
the last person bidding for Coatings was Chuck Craw
ford, who left in the summer of 1985 and after the
summer of 1985, there was no work bid by Coatings (R
Exh 7 confirms that Coatings ceased its employ of
Crawford in June 1985) Peterson otherwise testified that
Coatings continued its operations in 1985 in order to
finish its contracts and to collect as many receivables as
possible Ongoing bidding by Miller and/or Shields
would be compatible to extent of completable jobs In
any event weight of the more credible evidence has con
vinced me that it was in September that Coatings has
ceased bidding on new jobs
PERMA COATINGS 813
b Employment changes
(1) Office
Davis had been employed by Coatings from 1976
through mid 1985, most recently as Coatings office man
ager Peterson recalls that at that point Insul/Crete hired
Davis Pat Hoff, a Kelly Girl , had first occasion to
work for Insul/Crete as temporary secretarial help Pe
terson s additional recollection was that Davis hired Hoff
as a Coatings employee (secretary) Peterson relates that
after Davis had left Coatings' employ to go to work for
Insul/Crete, Hoff continued to work as a secretary, but
not as Coatings office manager, though Peterson has
also acknowledged in the end that Hoff performed the
same work for Coatings that Davis previously had, in
cluding handling Coatings' payroll and PBC s rent col
lections Peterson has asserted however, that he did not
know what work Hoff did in 1986
Coatings Statement of Financial Affairs, as filed later
with bankruptcy petition, discussed further infra, reflects
that Coatings in house recordkeeping had been per
formed by Davis from 1976 to 1985, but also by Roxanne
Kohlin, identified in Respondents Exhibit 7 as employed
by Coatings, from July to November 1985, and by Hoff
from September 1985 to the current date, that as of pets
tion filing date of 8 July 1986 While some evidence indi
cates Davis had performed the Coatings recordkeeping
only through June, Respondents Exhibit 7 indicates that
Coatings had employed Davis only through May 1985
and that Coatings first employed Hoff, in September
1985 These entries cause confusion as to when, and
under what circumstances, Davis may have hired Hoff
The more compatible thus credible evidence of record
indicates that Coatings hired Hoff in September, 1985
(2) Asserted work force reductions
Peterson s recollection was that a considerable number
of Coatings employees began leaving its employ in
August-September, 1985 Shields testified only generally
that it was in late 1985 that Coatings was going through
some pretty hard times, that a lot of employees were
leaving us because of a problem with benefits, and that
we were faced with a fair amount of work we had to get
done with diehards There is more support in Coatings'
offered employment complements (R Exh 7) for
Shields' general recollection of late 1985 disaffections,
though not by any means such as is independently con
vincing of a considerable disaffection before October
1985, in light of other circumstances (a) that analysis of
employment histories does not lend support to such a
considerable disaffection, and the construction season
was at that time drawing to its normal close for the year,
(b) given Peterson s testimony that one job (The Con
course Hotel), contrary to its contract provision that it
be completed in 1985, was shut down by the general
contractor/owner in October, because of the weather
and (c) Miller testimony of termination in December
with all the work caught up
In general , Respondent regularly worked a crew of
two to four on a job, and with regard to the Concourse
Hotel job, a full crew is indicated Be that as it may, and
even with an allowance made ( i e, omission) for two in
dividuals listed in Respondents Exhibit 7, as employed
by Coatings in 1985, but without any actual period of
employment appearing of record, there still appear to be
inconsistencies between the total monthly employment
complements as there shown complied, compared with
the totals as are to be generated on analysis of the com
pilation of the individual employees start and ending
months of employment, also there shown The same
(with Respondents monthly totals from R Exh 7 shown
beneath in parenthesis for ready comparison) appears to
reveal
1985 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec
plasterers 7 7 8 9 12 12 9 8 8 8 6 5
carpenters 3 3 5 5 6 6 3 3 3 1 1 0
laborers 2 2 4 4 4 4 4 4 4 4 5 5
not shown 2 2 3 4 6 5 5 4 3 2 2 3
estimator 1 1 1 1 1 1 0 0 0 0 0 0
office 1 1 1 1 1 0 1 1 2 2 2 1
Totals 16 16 22 24 30 28 22 20 20 17 16 14
R Exh 7 (16) (12) (22) (24) (30) (28) (20) (16) (17) (16) (16) (14)
First, the above projects, if anything shows a con
structive seasonal progression Second, the largest drop
in employment occurs in the period June 28 to July 22,
equally split, three carpenters and 3 plasterers Only one
employee (Hewitt) with union membership not shown
appears to have left in August and he was hired in
August Of five employees shown terminating in Septem
ber, two (Bayuk and Neiber) were carpenters two
(Duffy and Krantz) are plasterers, and membership of
the other (Nelson) is not shown However, in October
two plasterers (McCullough and McNally) are newly
fired There is thus at best only limited indication of
Coatings' employ of two fewer carpenters in October
(essentially), coincidental with the Concourse Hotel job
shutdown because of weather There is no indication of
any other employment increase
On this state of the evidence I find Shields recollec
tions of late 1985 disaffections the more reliable with
814 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
earliest disaffections in September, in light of the adds
tional circumstance that it was on 24 October 1985 that
Carpenters and Plasterers filed a lawsuit because of Coat
ings' nonpayment of benefits As we shall see there were
other factors operative in the initiation of a Coatings
September bankruptcy inquiry Before addressing these
factors it is warranted to note Peterson s related recol
lection of a mid 1985 bankruptcy inquiry, also appears
somewhat incongruous as occurring at that time, and far
more probably related to Sweet s September contact, and
discussions infra
c Peterson s asserted recollection of a mid 1985
broach of a McFarland and SBA future release of
Coatings' assets
Peterson has also testified in apparent confluence with
an asserted decision already made that Coatings would
cease business, that he first met with McFarland and
SBA representatives in the summer of 1985 to discuss the
matter of their release of Coatings equipment (in a pro
spective bankruptcy) so that Peterson could obtain the
highest price for it Peterson further testified that McFar
land and SBA agreed, that they liked the idea that they
would not have to become involved, and that Peterson
was trying to cooperate Attorney Sweet apart from
time of occurence, has corroborated Peterson in the
sense that Sweet has testified that in bankruptcy circum
stances, debtor and secured creditors have frequently so
acted, and Sweet credible reasons of record as to the
propriety However, in testifying that his recollection of
a first contact from Lontello was in the fall Sweet s cor
roborative testimony, such as it is, would appear to sup
port Peterson s pursuit of the matter with McFarland
and SBA later Moreover Sweet s recollections on bank
ruptcy inquiry hire and discussion with, inter alia Peter
son indicates contact with McFarland and SBA would
more likely have occurred even later on in the year
There is still other evidence of additional developments
that make the same more probable
d IRS tax lien
Other evidence would support a fall determination to
cease business Bankruptcy petition (R Exh 1) reflects
that on 5 September 1985, IRS had placed a second tax
lien on Coatings for unpaid taxes The first tax lien had
been placed on Coatings on 10 June 1984, more than a
year earlier (A third tax lien would be registered on 9
May 1986)
There is some confusion in the record as to Coatings
delinquent tax status Peterson s recollection was that at
this time (September 1985) taxes were assessed personal
ly against Peterson and Lewis in the amount of $40,000
On other occasion Peterson relates that they (generally)
owed between $40000-$80000, and that the taxes were
paid by the four shareholders bankruptcy petition as
filed on 8 July 1986 reflects under priority claim(s) that
Coatings owed $28,895 45 on an IRS Federal tax lien, as
well as $1,735 54 in delinquent state withholding taxes
and $782 06 in local tax Peterson s testimony on still
other occasion appears to be that all state and Federal
taxes had been paid (as of the hearing date) In any
event, for present purpose, there is no question that in
early September 1985, Coatings four shareholders felt an
immediate financial pressure stemming from the IRS
recent tax lien
e Shareholders agreement for orderly payments
On 15 September 1985, Coatings' four shareholders en
tered a related Agreement Among the Shareholders of
Perma Coatings, Inc For the Orderly Payment of Cer
tam Joint Obligations (R Exh 17) This agreement in
essence, after reciting that Coatings had insufficient
assets to pay the secured indebtedness due McFarland on
which they were personally liable and, insufficient assets
also to pay delinquent state and Federal taxes, on which
they are likely personally liable went on to set forth
the shareholders' agreed individual undertakings (in equi
table proportion to their stock ownership in Coatings) to
raise money to meet these pressing obligations of Coat
ings to IRS and McFarland in that order Their agree
ment provided that they would do so essentially through
a present individual sale and later replenishment of
Insul/Crete stock amongst them, in an equitable manner
The equitable undertakings was occasioned by the cir
cumstance that the Insul/Crete shares then owned by Pe
terson and Lewis were at this time restricted having in
some manner been pledged to Dow, and, thus Peterson s
and Lewis Insul/Crete stock was not available for such
a sale at this time Broadly viewed, this problem was
solved by a mutual agreement that Zander and Liddicoat
(albeit by Peterson as their agent) would presently at
least attempt to sell their unsecured Insul/Crete stock to
raise the money, with Peterson and Lewis committing to
distribute later sufficient Insul/Crete stock that they
owned to Zander and Liddicoat in such equitable
manner as if Peterson and Lewis had participated in the
sale originally Peterson and Lewis undertook to do so as
soon as they had their stock released by Dow
While the terms of this agreement did not explicitly
provide that any shortage would be made up proportion
ately as before the agreement did provide under differ
ent circumstances essentially the equivalent viz for
shareholders respective indemnification along the same
base of percentage of Coatings stock ownership Though
Peterson initially testified that these undertakings were
accomplished, on cross examination Peterson acknow
leged, they have not been met in toto However Peter
son has otherwise confirmed that the money (for tax
payments) was raised in part by the sale of Insul/Crete
stock and in part by Coatings (continuing) receipt of re
ceivables
12 Coatings delinquencies in benefit payments to
various union trust funds
Coatings bankruptcy schedule of priority claims, as
filed on 8 July 1986 records a priority claim of
$57 206 47 due to Wisconsin Carpenters Pension Fund
[sic] c/o attorney Susan Bauman The nature of the
claim is there shown as a Judgement Docketed
5/14/86 It is clear of record however that underlying
issues of delinquent payments to several union trust funds
had arisen in earlier , and more material time
PERMA COATINGS
a The lawsuit jointly brought by certain trustee(s) of
Carpenters District Council funds and Plasterers Local
204 funds against Coatings and Coatings
shareholders/directors
On 24 October 1985, the above (separate) funds them
selves being in number several, and the funds trustee
jointly brought a lawsuit by their attorney Bauman
against Coatings and Coatings shareholder/directors, for
nonpayment of certain delinquent contributions then due
these funds, respectively Attorney Sweet testified relat
edly that he as counsel of record, and Attorney Regina
M Speichinger, an associate of same law firm, represent
ed Coatings (and the shareholders/directors) in defense
of the above lawsuit (They also represented Coatings
(and shareholders/directors) in a Laborers' trust funds
lawsuit subsequently filed in February 1986, as well as in
the matter of Coatings later bankruptcy filing discussed
infra )
As noted, Attorney Sweet had a recollection that he
was initially contacted about a potential bankruptcy
matter by Coatings attorney, Lomello, in the autumn of
1985 Though Sweet recalled he was initially made
aware the bankruptcy inquiry was being made on behalf
of Coatings, Sweet also testified that it was not too much
later that he learned the bankruptcy inquiry had related
to Coatings However, Sweet recalled that quite some
time after that, he actually met with two of Coatings
principals Peterson and another shareholder (probably
Lewis) (Lomello hired Sweet, but the record is mdefi
nite as to time It is likely that it was at time of hire that
Sweet was made aware Loniello s first bankruptcy in
quiry had related to Coatings, thus no earlier than Sep
tember 1985 )
In any event at the later meeting with the two share
holders and Lomello, they discussed generally chapter 7
and chapter 11 bankruptcies various matters related to
timing of the petition filing and the need for planning
Sweet explained that it is generally better for a company
to have the freedom of action of not being in bankrupt
cy if the Company is attempting to get specific bills
paid Sweet broadly explained that conceptually when a
bankruptcy petition is filed, the assets of the bankrupt
whether in the hands of the (bankrupt) corporation or
not flow into the bankrupts estate Claims are then paid
out in accordance with an absolute priority rule of the
bankruptcy code which states which classes of creditors
get paid before others Federal state and local tax
claims have priority, as thereafter do wage claims but
only those that have accrued within certain time limita
tions
A creditors interest may have been secured previous
ly and a creditor with a first lien on an asset gets paid
first out of that asset Questions that apse whether the
creditors interest in one actually so secured by asset (i e ,
properly attached and perfected), are resolved in accord
ance with state law, be it by provisions of the Uniform
Commercial Code (UCC) as may be adotped by the
State, or state mortgage or lien law If in issue the bank
ruptcy court judge makes the determination on the basis
of the aforesaid state law (Sweet confirmed that the
SBA loan had such a first lien on all of Coatings' assets )
b Shareholders' meeting with bankruptcy Attorney
Sweet
815
According to Sweet, at the above meeting with the
two principal shareholders, they determined there were
certain debts the Company and the principals desired to
pay, with decision then made that others were less
urgent Sweet testified they wanted to get the taxes paid,
and they also wanted to pay the union trust funds They
determined seemingly at that same time, that the money
due the union trust funds, except for a small percentage,
would be classified with other unsecured (nonprioritized)
creditors From the recalled discussion covering the
union trust funds delinquencies, and from the fact that a
copy of Coatings last financial statement(s) of 31 Octo
ber 1984 was sent to Sweet on 4 November 1985 it
would appear again as more probable than not that the
above meeting and discussions occurred in November or
at least some time after the Carpenters and Plasterers
union trust funds lawsuit was filed on 24 October 1985
On the other hand, from the fact that the initial contact
with Sweet about a bankruptcy matter had occurred ear
her in September it is reasonably indicated that Coatings
had a bankruptcy proceeding under activated consider
ation at that time Sweet s (apparent) recollection of de
termining in the meeting with Coatings stockholders
that most of the trust funds delinquencies being claimed
in the lawsuit would be unsecured (not occupy priority
status), it is fairly indicated that a significant portion of
those delinquencies extended in time well back before
the end of October lawsuit filing, indeed delinquencies
probably existed prior to September 1986
On inquiry made of Sweet as to timing of a bankrupt
cy petition filing Sweet informed the shareholders that
there was no need to rush to file a bankruptcy, so long
as creditors were not taking any actions to repossess re
ceivables, or to interfere with activities to collect receiv
ables and get bills paid Sweet explained the restrictive
effect of the automatic bankruptcy stay if forced to bank
ruptcy by creditors or by a judgement creditor Accord
ing to Sweet it was decided the filing of a Coatings'
bankruptcy would be delayed for several months because
of the possibility of Coatings collecting some of its ac
counts receivable The hope then was that accounts re
ceivable on Coatings books could be collected to pay
debts in an order that would provide a maximum benefit
to the Company
Sweet initially related that in essence they were trying
to collect Coatings receivables to pay the taxes, and to
pay the union trust funds, but unfortunately the receiv
ables were not much of anything and all came to
naught In contrast as noted, the record indicates that
all of Coatings assets, including accounts receivable
were pledged to the payment of the SBA loan Although
that loan was also personally, and otherwise secured by
Coatings shareholders/directors, and their properties
above noted significantly, on further examination and re
flection, Sweet then recalled that the source of payments
made in settlement of union trust funds claims may have
been from personal contributions of the shareholders as
Peterson has testified was the case The latter appears
the more supported on this record
816 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
c Settlement in principle Coatings bankrupt
Peterson testified that in November-December (I find
December) 1985 a settlement agreement in principle was
reached on the lawsuit filed by the Carpenters and Plas
terers trust funds Peterson also testified without subse
quent contradiction, that during settlement discussions
Peterson had told Carlo Cimino a business agent of Plas
terers Local 204, that Coatings was going to go bank
rupt At that time Peterson assured Cimino that the
agreement reached on the lawsuit would be paid in full
even if they (the named shareholders) had to take it out
of their own pockets Cimino who was present at the
hearing did not testify, nor has there been otherwise a
contention made to the contrary Accordingly I find that
Plasterers Local 204 had been given direct notice in De
cember 1985 that Coatings intended to go bankrupt
Negotiations were conducted in December 1985 How
ever the (partial) settlement and release was actually ex
ecuted in January 1986 The record indicates that Attor
ney Susan Bauman, representing the Carpenters and
Plasterers' trust funds sent a letter dated 2 December
1985 to Attorney Regina Speichinger (of Sweet s law
firm) representing Coatings and Coatings shareholders in
the above trust funds lawsuit apparently setting forth the
moneys deemed due as then known Sweet has testified
relatedly that on some four occasions Attorney Bauman
told Sweet directly that a filing of an involuntary bank
ruptcy would be brought against Coatings unless Coat
rags ceased and desisted from operating or (essentially)
paid up The statements of union trust funds Attorney
Speichinger directly to Attorney Sweet not shown au
thorized otherwise approved or adopted by Charging
Party Unions, would appear not attributable to the
Charging Party Unions because, as the General Counsel
and the Charging Party Unions have correctly argued in
other circumstances that they are separate legal identi
ties and trustees are not agents of the parties designat
ing Neither does it appear that Cimino or others were
trustees Cf NLRB v Amax Coal Co, 453 U S 322 337-
338 (1981) and Food & Commercial Workers Local 1439
(Layman s Market 268 NLRB 780 (1984)) However, the
evidence offered has no less probative value in its bear
mg on the actual circumstances independently facing
Coatings shareholders including Peterson at this time
It thus has probative value in explaining Peterson s and
Coatings subsequent actions In that regard however, I
credit Sweet s testimony over any variant nuance (of
union approval of subsequent Peterson actions) in Peter
son s asserted understanding that there was an agreement
that if Coatings ceased doing business the union funds
would accept the settlement offered
Peterson had a problem with Coatings ceasing to do
business as of 31 December 1985 facing alternative in
voluntary bankruptcy The problem lay in his anticipa
tion that because of circumstances, discussed infra a
forced sale of Coatings assets (particularly certain
unique power scaffolding equipment) would not be likely
to arrive at a reasonable monetary return Peterson testi
feed relatedly and credibly that there is not a big demand
for plastering equipment used plastering equipment did
not have much street value and he was the only plaster
ing firm using power scaffolding in the State of Wiscon
sin Peterson testified he sought to avoid a forced sale, in
order to get as much possible value out of that equip
ment as we could (I thus have no doubt that Peter
son s plan for a sale of the equipment had the approval
of the other Coatings shareholders) Before addressing
Peterson s solution the creation of Spartan applicators
on 15 January 1986 to purchase the equipment, it is ap
propriate to continue with a review of the Carpenters
and Plasterers trust fund settlement later effected
By letter dated 23 January 1986, Attorney Bauman no
tified Attorney Speichinger of additional sums found due
after audit The Bauman letter (R Exh 4) reports in final
account (purportedly) off all moneys dues as of 31 De
cember 1985 to Carpenters trust funds, $5,493 58, to
Plasterers' trust funds, $32, 848 19 and, in toto, the sum
of $38 341 77 (with interest accumulating as stated and
indicated previously reported rate) Notably over 80 per
cent of the total contended indebtedness of Coatings and
its shareholders to these union trust funds, as of 31 De
cember 1985 is thus reflected as due to Plasterers trust
funds
d Trust funds threat of involuntary bankruptcy
Bauman s letter pertinently further stated
Inasmuch as you have advised that the company
has ceased operations, although apparently contin
ues to maintain an office and employ an office
worker, this should be a final accounting of the
monies due As I have indicated earlier, I will force
the company into involuntary bankruptcy should I
become aware it has continued operations In addi
Lion I wish to remind you, again, that the $7,842 39
in vacation fund contributions represent monies
which have been deducted from employee payroll
checks Unless the money is paid to the funds
through this office rather quickly I will have no
choice but to contact the District Attorney regard
ing this
The above letter was received in evidence over the
Charging Party s and the General Counsel s objections
based (initially) on authenticity hearsay and relevance
The letter on its face reflects that a copy was sent to the
Plasterers business agent, Cimino Moreover both coun
sels later conceded Cimino s acknowledgement of receipt
of a copy of this letter as did the General Counsel as
the Charging Party (Laborers Local 464 would shortly
thereafter file its own lawsuit in February 1986 infra)
Although there was initial similar acknowledgement by
the Carpenters an apparent subsequent retraction some
what confuses reliance on that concession
In any event the objection as to authenticity was
withdrawn The objection as to relevancy and hearsay
was pressed with basic reliance on contention that
Charging Party Unions are not the same legal entity as
these trust funds While on the authorities earlier cited
in this regard, I agree with the latter contention in gener
al once again I do not agree that a relationship of inde
pendency of trust funds and Unions is properly disposi
tive of the relevancy of hearsay issue here The extent of
even the claim of the amount due the union trust funds
PERMA COATINGS
has relevancy to Coatings overall claim of a forced dis
continuance of operations, and certainly the stated vaca
tion claim process on moneys deducted from employees
being brought to the attention of the district attorney s
office no less supports Coatings reasonable view of both
making payment thereon, and need to cease doing busi
ness, without regard to the truth of the union trust funds
actual intentions With the acknowledged receipts of the
letter, it seems to me that the Charging Party (through
Plasterers Local 204 and Laborers Local 464, if not Car
penters) is clearly chargeable with awareness of its con
tents, including that the specified union trust funds had
flatly declared to Coatings that should it be later deter
mined that Coatings had not ceased business as of 31 De
cember 1985, the trust funds would visit an involuntary
bankruptcy on Coatings
The General Counsel and the Charging Party (Carpen
ters) argue that the Charging Party Unions awareness of
the bankruptcy of Coatings is not the same thing as the
Charging Party Unions being aware of a future relation
ship between Coatings and Spartan/Applicators What, if
any, probative value the letter and union awareness of its
contents has on that issue of fact is to be addressed, infra,
along with analysis of all related evidence including con
tended reports by Spartan/Applicators employees of
their employment to certain of the unions infra Suffice
it to presently observe, without regard to hearsay decla
ration the letter is deemed relevant on the above basis
and the ruling of receipt of it in evidence is thus reaf
firmed
From the uncontested testimony of Peterson of his ear
her conversation with Cimino during negotiations it is
clear, and it is found that Peterson had openly declared
to the Plasterers that Coatings was going to go bankrupt
From that declaration and thereafter through Cimino s
awareness of the content of the 23 January 1986 letter of
trust funds Attorney Bauman , the Plasterers and the La
borers also knew that Bauman was confirming a purport
ed prior declaration of Coatings to the funds that Coat
ings was ceasing business (except for an office clerical) as
of 31 December 1985 Moreover, Plasterers Local 204
and Laborers Local 464 were also aware that the trust
funds had stated an intention to bung involuntary bank
ruptcy on Coatings should it determine Coatings had not
gone out of business at that time It would appear to me
to be nothing short of naivety not to infer that the
Unions, shown to have had knowledge thereof would be
attentive to the matter of Coatings continuance in busi
ness had Coatings done so openly The question arises
only in combination of the circumstances that Coatings
business cessation occurred at the end of the construction
season and with contention that Coatings did not act
openly but has acted through its alleged alter ego
Spartan/Applicators However, the weight of evidence
convinces me and I find, that Coatings itself ceased all
construction activity, if not on 17 December 1985, then
on or before 31 December 1985
Sweet has testified that subsequently, in January 1986,
through personal payment of certain undisclosed sums
Coatings shareholders obtained a release from the Car
penters and the Plasterers union trust funds, respective
ly Sweet noted that this release did not extend to Re
817
spondent Coatings In that connection the settlement s
relationship, if any to the amount of $57,206 47 shown in
Coatings bankruptcy schedule as due to the Carpenters
on judgment docketed on 14 May 1986 is not definitively
shown of record, nor do I make any finding thereon
B Spartan/Applicators and Related Developments
1 The formation of Spartan, Coatings conditional
sale of assets to Spartan, Spartan's name change to
Applicators
a Spartan s formation subsequent name change
On 15 January 1986, Peterson formed Spartan Group
of McFarland, Inc (Spartan) a Wisconsin corporation
Peterson is president sole director, and sole shareholder
of Spartan, with Peterson to remain so until 11 October
1986 At the outset it is warranted to observe that it is
clear from review of various testimony and documents,
that Peterson had wanted from the start to incorporate
under the name of Applicators (Employees of Spartan
referred to employment by Applicators) Peterson was
prevented from immediately doing so only because that
name was already in some manner in registered use in
the State of Wisconsin, and on that account, Peterson
was prevented from an immediate use of the name by the
State Peterson pursued a use of the name It would not
be until 2 May 1986 that Spartan on receipt of permis
sion from the registered corporate user, would effect its
name change to Applicators of Wisconsin, Inc (Applica
tors) To the extent the General Counsel in brief has
sought to question these facts, or has advanced an argu
ment that there was some intended subterfuge in the
name change the only evidence of record is the above,
and there is thus no evidence to warrant conclusion that
Peterson has not originally sought to incorporate in that
name , or that he, key employees, and others (e g,
Insul/Crete President William Snodgrass, infra) did not
earlier speak in reference to Applicators I conclude and
find there was no separately intended subterfuge in the
May 1986 name change
As used hereinafter, Spartan/Applicators refers to Pe
terson s conduct of corporate business both at first under
the name Spartan and thereafter under the name Appli
cators, until 11 October 1986 Corporate conduct of the
business thereafter is referred to as Applicators/Kohl to
reflect a contended (and found) complete change in own
ership of Spartan/Applicators at that time discussed
infra
b The terms of Spartan/Applicators' purchase of
certain assets of Coatings
On 15 January 1986, Peterson as president of Coatings,
and Lewis as secretary treasurer of Coatings jointly exe
cuted a certain `Agreement For the Purchase and Sale
of All Assets of Coatings (Agreement), and a certain
Bill of Sale , and Peterson, as president of Spartan/
Applicators executed the Agreement (only) On the same
day Peterson, on behalf of Spartan/Applicators also exe
cuted a promissory note, and Coatings executed an abso
lute assignment of the note (See G C Exh 3) The
818 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
Agreement provided for Coatings sale and Spartan/
Applicators purchase of all assets However, the Agree
ment then specifically defined the assets sold (only) to in
clusion of
A All the tangible physical assets of the Corpo
ration which are more particularly described in the
annexed exhibit
B The trade name Perma Coatings and all of
the good will, customers lists customer leads, and
work in progress of Perma Coatings Inc
C The telephone number and all telephone list
rags and trade listings of Perma Coatings Inc
It is thus notable the Agreement did not describe nor
purport to sell Coatings' accounts receivable Neither
was there any provision or a purchase of any Coatings'
stock Nor, most notably, was there any provision for
Spartan/Applicators assuming Coatings rather consider
able outstanding debt
For the described assets, Spartan/Applicators agreed
to pay $80 000, $60,000 of which was for the listed and
indexed tangibles (equipment), and the other $20,000 paid
for the described intangibles in B and C above
Spartan/Applicators agreed to pay the purchase puce
over 7 years, at 10 percent annual interest per terms of a
Spartan/Applicators promissory note to be given to
Coatings The terms of Spartan/Applicators promissory
note provided for periodic payments of $2700 to be
made, on the first day of the months June-November,
being essentially governed by future construction period
considerations
The Agreement specifically relates that the bill of sale
to be provided is with warranty, except that the sold
assets are declared subject to first hen of McFarland on
Coatings SBA loan that Coatings relatedly was to exe
cute an irrevocable assignment of the Spartan/Apple
cators promissory note to McFarland , and, that
Spartan/Applicators was to make its note payments di
rectly to McFarland to be credited to Coatings SBA
loan account Notably there was no provision made for
personal liability on the Spartan/Applicators note given
to Coatings and to be assigned to McFarland There was
then no apparent need Peterson president , sole director,
and sole stockholder of Spartan/Applicators was already
personally liable on the entire SBA indebtedness There
would however be a later McFarland and SBA assump
tion request made on 17 September 1986 under differ
ent circumstances discussed infra Presently I note this
entire transaction was subsequently disclosed in Coatings'
bankruptcy filing on 8 July 1986, to all material parties
On 15 January 1986, Peterson and Lewis on behalf of
Coatings executed the attendant Absolute Assignment
and on the same day Peterson on behalf of Spartan/
Applicators executed the attendant promissory note, by
the terms of which Spartan/Applicators essentially ack
nowleged and agreed to make the above payments di
rectly to McFarland
The basic agreement itself however also contained the
following material terms
The transfer of legal title and the transfer of
physical possession and control of the assets shall be
effective as of the date hereof
This entire Agreeement and the annexed Promis
sory Note and Bill of Sale are void and of no effect
whatsoever unless the U S Small Business Adminis
tration executes and delivers the Consent to Sale in
the form annexed to this Agreement as an exhibit
The consent to sale document is in evidence (R Exh 2)
It reveals that neither McFarland or SBA ever executed
the above referenced consent to sale Peterson relatedly
testified that McFarland and SBA originally said they
would sign the consent , later changed their mind
c Preliminary analysis of the effect on the agreement
of the unmet terms requiring McFarland and SBA
consent to sale and purchase of Coatings assets
The provision of the basic sale and purchase agree
ment did not merely render the agreement voidable by
either Coatings or Spartan/Applicators (or both parties)
Rather , by its explicit terms is declared the entire agree
ment , the bill of sale and the promissory note void,
unless the described consent to sale was executed by
McFarland and SBA , who never signed the consent
form The contract was thereby simply rendered an ex
ecutory , or wholly conditional one, with a stated condi
tion precedent in my view effectively preventing effec
tuation of its other terms for so long as that condition
precedent remained unmet , or, until the unfulfilled condi
tion itself was effectively removed in some manner by
agreement of the contracting parties The latter is in fact
what occurred (I make no finding beyond addressment
of the rights and obligations of the contracting parties
amongst themselves I specifically need not , and do not
reach SBA lien right vis a vis Coatings and/or Spar
tan/Applicators interest in Coatings assets after trans
fer, discussed further infra )
Thus the basic sale and purchase agreement reveals
pen and ink notation of Spartan/Applicators (Peterson s)
subsequent wavier of the condition to wit, Consent
execution by McFarland Bank and SBA waived this 15
da} of March 1986 More definitively the above agree
ment bears notation of Attorney Loniello representing
both Coatings and Spartan in the matter that conditions
[sic] waived and agreement made effective on 3/15/86
Finally bill of sale shown executed by Coatings (Peter
son and Lewis) on 15 January 1986 shows an Accept
ance by Spartan/Applicators (Peterson ) on 15 March
1986
It is clear to me from all the above and I presently
conclude and find that Coatings did not complete a sale
of its assets , and Spartan did not complete purchase and
acceptance of Coatings described assets until 15 March
1986, a date I presently observe that bears significantly,
and adversely on Respondents 10(b) arguments (It will
be recalled initial charge was filed on 6 August 1986 )
d Spartan/Applicators commencement of operations
Coatings has not conducted any construction work
after December 1985 Coatings records of employment
PERMA COATINGS 819
(R Exh 7) confirm that Coatings has itself employed no
bargaining unit employee after ' 12-85' Apart from
Hoff, who appears employed by Spartan/Applicators in
January 1986 , Spartan/Applicators first employees are
shown employed in 2-86 They are (with union mem
bership shown in parenthesis , if known) Theodore
Zander (Plasterers), James F Miller (Plasterers), Timo
thy Parrish (union membership undisclosed, but em
ployed as estimator/manager), and James R Duesterbeck
(undisclosed) Zander and James F Miller had previous
ly worked for Coatings in 1985 , indeed in December
1985 Duesterbeck had not worked for Coatings in 1985,
and Parrish had never worked for Coatings before
It is also material on contended alter ego status and
thus worthy of note even at this juncture that in addition
to Parrish , other contended key management and poten
tial stock owners James A Miller (Plasterers) and Scott
Serstad (Laborers) did not commence their employment
with Spartan/Applicators until 3-86 " Brian Shields (of
asserted similar status) did not commence his employ
ment with Spartan/Applicators until "5-86 "
e Spartan/Applicators ' formation considered in
relationship to Coatings bankruptcy
A copy of the agreement" (sale and purchase of
Coatings assets) was sent to Attorney Speichenger (han
dling Coatings bankruptcy ) on 23 May 1986 Attorney
Sweet has testified relatedly that he was not aware per
sonally of the formation of Spartan/Applicators until the
sale of the property Sweet testified that if a company (as
Coatings) was contemplating bankruptcy , and one of the
principals (as Peterson) intended to set up a similar, if
not identical company within the next several months,
Sweet would want to know that Sweet explained he
would first want to know that to be able to plan, and to
be able to get to the (bankruptcy) trustee first Secondly
he would also want to know because certain debts are
not dischargable , inter alia , failure to pay withholding
taxes , and he would need to know the debt structure of
the person coming out of bankruptcy with regard to its
effect on finance of the new business Third there are re
sidual tax liabilities , and as he now understands , but was
not aware at the time , there is also a consideration to be
made as to any residual union problems In that regard
Sweet acknowledged that Loniello represented Coatings
Spartan/Applicators and Peterson in these matters, while
Sweet represented Coatings only in the bankruptcy (and
union funds lawsuits)
Sweet testified on the related bankruptcy consider
ations at length That testimony covered the nature of
initial trustee assignment , trustee obligations, procedure,
fees, debtor rights and related rights of secured creditors
Insofar as ultimately relevant to the facts of Coatings' in
dividual circumstances , Sweet has essentially testified
that since the secured creditor here (McFarland and
SBA) had first lien security on all of Coatings assets
which were then substantially less than the outstanding in
debtedness owed them and being secured by the assets, a
trustee would on satisfying himself of the facts, recog
nize there was no asset recovery to be made to benefit
any other creditor According to Sweet , the trustee
would have no other interest in the matter beyond effect
ing a rapid closure , unless the creditor had wanted the
trustee to dispose of the assets for the creditor (here un
likely) This is because of the practical reason that there
would be no additional to be earned by the trustee
Sweet thus relates credibly that had this matter of Coat
ings sale of equipment assets been held within a bank
ruptcy proceeding (which was not done as no filing as of
then had occurred), the trustee , on request , would have
acquiesced in a lifting of bankruptcy stay , or to an aban
donment , of the (equipment) assets to the secured credi
tor, who could then dispose of them as state law other
wise provided
Significantly Sweet summarized that insofar as the sale
of the (equipment) assets transaction had impacted on
Coatings financial status , the effect was to trade certain
assets for a reduction of debt Sweet has testified that the
net effect of the transaction was that Coatings was insol
vent , and even more significantly , that there is no ques
tion Coatings was insolvent immediately prior to its sale
of the assets to Spartan/Applicators
2 The interim Laborers trust funds lawsuit, an
(apparently) negotiated full release through 31
December 1985
On 3 February 1986, certain Wisconsin Laborers trust
funds and Trustee Allen Wild filed complaint in the U S
District Court for the Eastern District of Wisconsin,
naming Coatings and Peterson (only) as defendants This
funds ' complaint alleged defendants indebtedness for the
entire period of 1985 was in the amount of $9,563 54
(The complaint alleged nonpayment was with a wilful,
malicious intent , and it accordingly sought punitive
damages in the amount of $100 ,000) More materially,
the Laborers funds complaint related information and
belief that defendant(s) have been disposing of assets to
the benefit of other nonprionty creditors and to the prej
udice of plaintiff Laborers trust funds Finally the relief
sought , inter alia included that defendant(s) be perma
nently restrained from
a Transferring or disposing of assets [sic] accounts
receivable and/or equipment to any party pending
further order of the Court
If granted in form requested the order would have effec
tively precluded the transfer of the (equipment) assets
from Coatings to Spartan/Applicators on 15 March 1986
In the interim on 18 February 1986 in return for a set
tlement (of $6000), the Laborers trust funds executed a
release to Coatings , and to all of its shareholders, officers
and directors (and to the same personally), for all claims
arising `for the tend through December 31, 1985
3 Coatings indebtedness following sale of its assets
to Spartan/Applicators indebtedness as compared
thereto
As of 15 January 1986 Coatings outstanding indebted
ness on the SBA loan was approximately $266,000 With
Spartan/Applicators acceptance (on 15 March 1986)
Spartan/Applicators did not take on any indebtedness
beyond the $80,000 agreed price for Coatings assets
820 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
Following Coatings sale of its assets to Spartan/
Applicators, Coatings still owed McFarland (essentially)
the $266,000 remaining due, but Spartan/Applicators was
obligated to make (only) the periodic payments on the
$80,000 note to McFarland, albeit it would reduce the
$260,000-$270,000 SBA loan According to Peterson s
uncontradicted testimony the payments of Spartan/
Applicators (and Applicators later as shown infra) are
not sufficient to meet the full periodic payments due on
the entire SBA loan The (undisclosed) difference has
been made up by Coatings four shareholders Some of
the money the Coatings' shareholders have produced for
continued payments of Coatings indebtedness on the
SBA loan has come from the sale of their (personally)
owed Insul/Crete stock, or from the sale of other per
sonal properties (In August 1986, PBC sold the building
and premises at 4311 Triangle St to Insul/Crete) In
passing , I credit Peterson s additional testimony that as
to Coatings other McFarland loans (a) the $30,000 loan
is an annually renewable loan, and Peterson (personally)
has been paying the interest on it (only), and (b) princi
pal and interest on the $6000 loan is (at least) supposed
to be paid monthly, by the four Coatings shareholders,
equally Finally, as of hearing, Peterson testified credibly
that the four shareholders of Coatings (on a shared pro
portional basis) are current on their obligations to McFar
land
4 Coatings indebtedness as of bankruptcy filing
Coatings bankruptcy schedule, as filed on 8 July 1986,
reflects a total of unsecured claims in the amount of
$280,292 02, inclusive, inter alia of the following
Insul/Crete (material) $169 597 99
(lease) 393 76 $169 991 75
PBC1 (Service) 6 709 55
(Rents) 19 07900 25 788 55
Shareholder
loans
(apart from
undetermined
officer claim)
Peterson 2 390 90
Lewis 12 390 90
Zander 12 390 90
Liddicoat 8 719 52 45 892 22
The principal areas of factual conflict apse in regard
to Spartan/Applicators 1986 operations They are more
conveniently addressed infra at I D It is deemed helpful
to first address Peterson s divestiture of ownership in
Spartan/Applicators
C Peterson's Divestiture of Spartan/Applicators Stock
1 The reorganization agreement
Peterson interviewed and hired Eugene R Kohl as
Spartan/Applicators estimator in mid September 1986
Prior estimator Timothy Parrish, part of Spartan/
Applicators management since being hired in February
1986, had been fired in August 1986 for certain impropri
eties , not otherwise material to this proceeding Kohl
had obtained his college degree in 1982, with a major in
construction administration and/or management Kohl
relates that within 2 weeks of his hire, Peterson told
Kohl of Peterson s desire to get out of Spartan/
Applicators Kohl felt it was a great opportunity for him,
and pursued it Pursuant to Peterson's direction, Attor
ney Loniello negotiated with Kohl the terms for Kohl s
purchase of a controlling interest in Spartan/Applicators
Kohl had his own accountant review Spartan/Apple
cators financial statement of 30 September 1986 Kohl s
accountant advised Kohl that Kohl was making a very
good decision The General Counsel does not contest Pe
terson's good faith sale of Spartan/Applicators to Kohl
On 11 October 1986, Peterson as outgoing president,
Kohl as newly elected president, and Shields as newly
elected secretary treasurer executed an Agreement for
the Reorganization of Applicators of Wisconsin, Inc
(Reorganization Agreement) In addition to the above,
James A Miller Sr and Scott Serstad signed in accord
The reorganization agreement (R Exh 6) declares its
purpose is intended to satisfy and terminate a prior oral
stock bonus plan and agreement bewteen Spartan/
Applicators and its key employees, and, it recites also an
agreement of Peterson to sell all of his shares in
Spartan/Applicators, one half by a corporate redemption
of stock, and one half by sale to Kohl
The pertinent facts are that Spartan/Applicators then
had 2000 shares authorized The reorganization agree
ment recites 1000 shares as issued to Peterson The book
value of this issued stock is computed to be (essentially)
$50 In that regard Respondents Exhibit 6 includes the
30 September 1986 balance sheet perpared by James L
Nicholson CPA This balance sheet shows Spartan/
Applicators total stockholder equity at that time as
$51,560 28, of which year to date profit is recorded as
$49 560 28
The reorganization agreement declares that Miller
Shields, and Scott have earned and are then due 100
shares each for services they have rendered Spartan/
Applicators under terms of a prior oral stock bonus
agreement (the background of which is in conflict)
Their present share entitlement effects a recalculation of
book value to $40 a share The reorganization agreement
then declares 100 shares at $40 book value are presently
to be issued to Shields and to Serstad It recites that
Miller has elected to receive monetary value in lieu of an
issuance of his 100 earned shares (In this regard, and
contrary to argument advanced by the General Counsel
in brief that Miller never intended to be a stock owner, it
is clear of record that Miller, in January 1986, was agree
able to participation in a new business with Peterson
Shields and Serstad) Thus $4000 is declared payable
(without interest) to Miller in weekly minimum install
ments of $25 Miller has acknowledged that he has not
received any of that money to date Miller however has
also testified that he subsequently sold some scaffolding
to Applicators/Kohl, for which he also has not been paid
to date Miller stands as a creditor of Applicators/Kohl
PERMA COATINGS
Under the reorganization agreement Kohl subscribed
to purchase 100 shares at $40 a share for a total of
$4000, which Kohl has paid to the Corporation in cash
The reorganization agreement then declares Peterson s
desire is to sell and liquidate his entire interest as a share
holder, and to resign as officer and director Under terms
of the agreement, the Corporation redeems 500 shares
from Peterson at $40 book value for a total redemption
cost of $20,000 which is offset by $3,657 47 The offset is
in an accounting for $2000 due the Corporation on Pe
terson s onginal subscription cost, and his return of
$1,657 47 for officer advances received from the corpora
tion The balance of the redemption puce, $16,342 53, is
to be paid by Spartan/Applicators, as follows $1,342 53
at execution of the agreement, and the remainder of
$15,000, per terms of a promissory note of the Corpora
tion Under terms of the Corporations s note, essentially,
a $3000 payment is due Peterson from the Corporation
on 15 January 1988 $6000 on January 15, 1989, and a
final installment of $6000 is due on 15 January 1990 The
note provides for nondefault interest at 7 percent, in liq
uidated sums, and payable on the same above dates, re
spectively In case of default, accrued interest is first
added to principal, and future interest is then set at 12
percent The note is solely that of the Corporation and it
is not personally secured The 500 shares thus redeemed
by the Corporation are returned to unissued status
Under the terms of the reorganization agreement Pe
terson also sells his remaining 500 shares to Kohl at a
price of $45 per share That price reflects a $5 premium
paid Peterson for his sale of a controlling stock interest
to Kohl Total price to Kohl is thus $22 500 Kohl pays
for these shares by a personal promissory note, with
principal to be paid in two installments, viz $10,000 in 3
years, and $12,500 in 5 years There is 7 percent annual
interest, with similar provision for payment of 12 percent
interest on default Peterson transfers the 500 shares to
Kohl at agreement execution Kohl immediately pledges the
500 shares back to Peterson as security on Kohl's promissory
note
Under this agreement Kohl effectively at first holds a
75 percent stock share interest, with Shields and Serstad
each then holding 12 5 percent of issued stock However,
the reorganization agreement also declares a (future) 200
share stock bonus plan for Shields with 50 shares of
stock to be issued to Shields beginning on 31 March
1987, and the same number of shares to be issued in each
successive year through 1990, all in return for similar
services to be performed annually by Shields Essentially
the reorganization agreement, if fully implemented, pro
vides for an eventual stock ownership of 10 percent by
Serstad, 30 percent by Shields and 60 percent by Kohl
who thus at all times retains controlling interest
On execution of the reorganization agreement on 11
October 1986 (I find) Peterson owed no stock in the
Corporation, and Kohl has owned controlling stock in
terest in the Corporation at all times thereafter Hence
operation of the Corporation thereafter is referred to as
Applicators/Kohl herein It is noted that Kohl received
and retains voting and dividend rights of the now
pledged stock, so long as he is not in default on his note,
for payment of which the stock is pledged On such a
821
default both voting and dividend privilege revert to Pe
terson Applicators/Kohl and Kohl are current in their
obligations, although none of the subsequent note pay
ments had, as of hearing, yet become due Kohl testified
that he expects to make all payments timely, and, there is
no evidence submitted to warrant a conclusion to the
contrary
Peterson has testified that he finally has no concern
about the running of this applicator construction busi
ness Insul/Crete s president, William Snodgrass cor
roborates that Peterson s noninvolvement in the applica
tor business is where he has wanted it to be That the
transition was one long intended is central to certain of
Respondents contentions There is conflict in the wit
nesses' accounts
D The Evidence in Conflict and/or Confusion
1 General observations
There is some degree of confusion, if not conflict, in
the evidence in regard to the extent of Peterson's mana
gerial involvement in the conduct of Coatings' business
affairs in 1985 as compared with the conduct of Spartan/
Applicators affairs in 1986, and is to Insul/Crete s posi
tion on both There is appreciable confusion, if not out
right conflict in the evidence as to Peterson s intentions
in his original formation of Spartan/Applicators, and, re
latedly, confusion as to the origin and timing of Peter
son s oral agreement with certain employees on the stock
bonus plan There is confusion as to certain other oper
ational elements bearing on the central alter ego conten
tions Finally, there is some conflict as to Charging Party
Unions first chargeable awareness of Spartan/Appli
cators relationship to Coatings such as it is shown here
to be
2 Background of Peterson's motivations and
intentions
Peterson has testified that his divestiture of Coatings
was an ongoing thing raised from the time Dow bought
into Insul/Crete in July 1984 Peterson has more defini
tively testified that it was brought up at Insul/Crete
Board meetings, by other stockholders and by Insul/
Crete local (sales) representatives who thought the
Company (Coatings) was getting unfair treatment be
cause of Peterson s involvement in it Peterson has also
testified that Insul/Crete s president Snodgrass told Pe
terson to divest his interest in this company, that Peter
son told his attorney, Loniello, that he wanted to get
out, and that the attorney handled the transaction for
him
Some of this testimony is notably imprecise in its rela
tionship to Coatings and/or Spartan/Applicators How
ever I am persuaded by weight of the evidence presented
that Insul/Crete concerns applied to Peterson s involve
ment with both Coatings and Spartan/Applicators con
duct of a local applicator business but in a significantly
varying degree It is clear of record it is not so as to the
business affairs as now conducted by Applicators/Kohl
However as to conduct of business affairs previously by
822 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
Coatings and Spartan/Applicators there are some signifi
cant disparaties in Peterson's and Snodgrass accounts
Since incorporation of Insul/Crete, Peterson and
Lewis have been and are now directors of Insul/Crete
Peterson testified credibly that Dow was fully aware of
Peterson s involvement with Coatings (in 1984) Accord
ing to certain more specific testimony of Peterson at
time of purchase, Dow had said they would like to see
Peterson (and Lewis) divest, and/or consider a divesti
ture of his (their) interest in Coatings, at earliest conven
ience Peterson asserts that his goal in 1985 was to rid
himself of a financial connection to Coatings
Peterson recalls there was not a lot of pressure placed
upon him to do so until about 6 to 8 months later (after
Dow purchase) when they (Insul/Crete) started getting
complaints Peterson would thus place commencement of
the complaints in early 1985, which would roughly cor
respond with Peterson s initially developed plan for a
total divestiture of his stock in Coatings through the in
tended stock gift to Duffy and Shields That plan, as
noted, proved to be too overburdened by the large in
debtedness of Coatings (including the substantial unse
cured indebtedness to Insul/Crete), and the plan ulti
mately failed in May 1985 Peterson asserts that by June-
July 1985, Peterson felt Dow was serious, and at that
time they made a decision that we (whether Coatings, or
Peterson and Lewis, or all four shareholders, is not
clear), would be out of business in December, 1985
Insul/Crete s president Snodgrass has corroborated Pe
terson in some respects, but not wholly and not so on
some rather significant points
Respondent's witness, William Snodgrass, is a Dow
designee director, and he has been the Board approved
president of Insul/Crete since September 1984 Snod
grass has testified significantly that he never made a re
quest to Peterson that he completely terminate all his ac
tivities with Coatings From the outset however Snod
grass wanted all of Insul/Crete s business affairs with
other companies conducted at arm s length Snodgrass
also wanted Peterson to be able to fully perform his as
signed tasks for Insul/Crete, particularly as Insul/Crete
expanded and he wanted Peterson to work towards
being less involved with the affairs of Coatings But he
was also concerned that Coatings pay its large indebted
ness to Insul/Crete
Snodgrass confirmed that Insul/Crete is a marketer of
the exterior insulation system (as developed by Peterson)
and he testified definitively that Insul/Crete is strictly a
supplier of this product to the construction industry It is
not in the applicator business itself Dow s basic interest
in Insul/Crete is in its marketing of Dow's trade product,
styrofoam Insul/Crete (currently) has a network of ap
proved applicators Coatings (and Spartan/Applicators)
was and Applicators/Kohl is an important local applica
tor They, inter alia , have been used to try out a new
product and have served for a job display to visiting
customers Insul/Crete currently does its supply business
with some 275 contractors nationally
In the 2 years (1985-1986) essentially being addressed
here, Insul/Crete effectively has expanded from being a
regional to a national supplier of the Insul/Crete prod
uct As a result of its continued expansion, Insul/Crete
now owns and solely occupies the premises located at
4311 Triangle St, McFarland, Wisconsin, having, as
noted purchased these premises from PBC in August or
September 1986
Snodgrass confirms his own early awareness of Peter
son s involvement with Coatings, but not as uniquely so
Thus, Snodgrass testified that at the time of his arrival in
September 1984, Coatings (and certain other businesses)
had its (their) offices in the same building (located at
4311 Triangle St) as did Insul/Crete Snodgrass relates
that he knew that some of Insul/Crete s employees were
involved in various arrangements with the companies lo
cated there, including Peterson specifically with Coat
ings Snodgrass however explained that Dow s concern
(at the time) was not with Peterson (as such) but with all
the various informal arrangements that existed between
the conglomerate of businesses that were operated there
This extended not only to Coatings, but to all the other
businesses alike, e g, Cubic Structures (foam homes) and
Broken Rocker, another company selling adhesives for
the repair of antiques), and to PBC itself, from whom
Insul/Crete rented certain space adjacent to Coatings
Snodgrass however has candidly testified that Dow
also had a real concern about the large indebtedness that
Coatings had with Insul/Crete at the time, which he re
lates grew to about $150,000 (The difference between
the $170,000 shown as owed by Coatings to Insul/Crete
in Coatings 8 July 1986 bankrutpcy schedule and his
recollection here of about $150,000 owed, is probably in
principal part to be accounted for by consideration of a
Coatings account receivable ($11,867 23) due from
Insul/Crete shown on the schedule as being used as in
terest) In any event, Snodgrass has also candidly testi
feed that Insul/Crete was asked to make purchases for
Coatings because Coatings has a problem with credit
Insul/Crete made the purchases for Coatings, and then
recharged the same to Coatings account with Insul/
Crete
It is readily apparent to me from the above, and I find
that at least to that extent, and in this period
Insul/Crete's own interests then appeared to be best
served by Coatings continuance in the applicator con
struction business in hope that Coatings would remain
both a principal local purchaser of Insul/Crete product,
and (eventually) be able to pay off its large indebtedness
to Insul/Crete Coatings continued position in the appli
cator construction business locally was also utilitarian to
Insul/Crete s broader interests, viz in Coatings trying
out new products as they were developed by Insul/
Crete, and in serving as job model for viewing by Insul/
Crete s visiting prospective customers As it would turn
out when Coatings eventually went bankrupt Coatings
still owed a very substantial sum ($150 000-$170,000) to
Insul/Crete Insul/Crete has since written that debt off
as a bad debt
The present point however is not one to be lost,
namely that Insul/Crete at this time was motivated, in a
pursuit of its own financial and business growth interests
to allow Peterson some degree of reasonable leeway
when it came to evolving a managerial extrication from
Coatings business affairs in a manner favorable to
PERMA COATINGS
Insul/Crete s own real interests In short, Insul/Crete (I
find) had its own financial and other business interests at
stake in Coatings continuation in business as a local con
struction applicator, not the least of which was Insul/
Crete s base interest in a recovery of Coatings rather
large indebtedness to Insul/Crete
3 Peterson's involvement in the management of
Coatings in 1985 Insul/Crete s approach to i*
Peterson has asserted that in 1985 he had no duties
with Coatings He acknowledges that he knew what was
happening with Coatings, but he asserts he was aware of
it from reports from Coatings secretary, and, he was
also aware of it because it was part of his job with
Insul/Crete to know what was happening with its (ap
proved) applicators This function included visiting Coat
rags jobs locally However, Peterson has asserted the he
was not personally involved with the everyday running
of his Coatings business, that he worked 100 percent of
normal hours for Insul/Crete and that he was on the
road 60 percent to 70 percent of his time Peterson other
wise acknowledged, generally, that when in town, he
might stop by Coatings to talk to the men to keep
abreast Peterson relates that he was not active in manag
ing Coatings jobsites in 1985 Indeed, Peterson has as
serted that the biggest reason for all of the headaches of
Coatings in 1985 was that nobody was managing the
Company
Peterson however has otherwise acknowledged that he
had hired Chuck Crawford, who did the estimating and
bidding for Coatings from January to June 1985, and,
that Jim Miller handled all the jobs did all the hiring,
and as far as he knew Miller did the assigning of men to
all the jobs Miller has essentially confirmed the above,
and he has also testified in detail as to his supervisory job
functions, inter alia of seeing to it that the required men
were hired assigned, and that the jobs were timely sup
plied, and run properly Miller in this regard has de
scribed himself as Coatings job superintendent On the
basis of the above and other supportive and credible evi
dence of record I conclude and find that James A (Jim)
Miller functioned in Coatings management in 1985 as
job superintendent over all of Coatings jobs, whether
titled as such or not However, I also find in light of
credited testimony of Shields earlier noted and other
credited evidence of record including certain essentially
corroborative testimony of Miller, that Shields in 1985
was also part of Coatings management team (apparently
also without job title) performing (at least) as a working
foreman, with various assigned supervisory duties and re
sponsibihties for and exercising independent judgment in
the running and staffing of certain jobsites Thus I also
credit Shields that in 1985, Shields along with Miller de
cided who went to certain jobs In light of all the above,
I do credit Peterson general testimony that in 1985 he
did not participate in Coatings on jobsite management
However I do not fully accept his testimony otherwise,
e g , to the extent it projects disavowal of any significant
participation in the management of Coatings daily busi
ness affairs in 1985 for reasons soon to be made appar
ent
823
Snodgrass testified that as Insul/Crete s vice president
in charge of research and development, Peterson report
ed directly to Snodgrass According to Snodgrass, Peter
son s assigned duties for Insul/Crete were, and are in
product development, in certain manufacturing oper
ations, but with principal responsibility for running
Insul/Crete s technical department which includes selec
tion and training of applicators, and in dealing with any
related job problems Snodgrass confirms that in per
forming these duties for Insul/Crete Peterson spends 60
to 70 percent of his time traveling around the country,
and that as part of his job, Peterson visits jobsites How
ever, Snodgrass also testified that Peterson's first assign
ment was to get Insul/Crete's production plant built, and
his second was to organize Insul/Crete s technical de
partment
Snodgrass explains that since Dow purchased stock in
Insul/Crete, the nature of Insul/Crete has markedly
changed As noted, one immediate goal that Snodgrass
has was to separate all the different businesses being in
formally conducted (at the Triangle Street Building)
from Insul/Crete Insul/Crete wanted to put them all at
arms length to conduct its own business on a more
formal basis e g, to convert to formal contracts and to
ensure that work performed by employees of Insul/Crete
would be charged properly to the other companies
Snodgrass testified that since September 1984 he has
worked towards that goal In that general sense , of want
ing to keep all chargeable Insul/Crete business affairs
separate from the start, Snodgrass supports Peterson s
testimony
Snodgrass also testified that from the time of his arriv
al in September 1984, Insul/Crete s business began to
change profoundly Snodgrass recalls that very quickly
Peterson was spending 80 percent of his time on
Insul/Crete matters However, in describing that other
20 percent, Snodgrass testimony then recounts that most
of that time was spent by Peterson in meeting with Coat
rags' work crews in the morning before 7 a in or 7 30
am after which the crews left for the jobs and also
meeting with them after hours, or on Saturday It is in
that sense that Snodgrass confirmed that Peterson essen
tially put in normal 8 am to 5 p in hours for Insul/
Crete and Snodgrass further testified that at the time he
felt Peterson was making a strong effort to keep his in
volvement with Coatings separate from and on a nonin
terfering basis with Peterson s performance of his as
signed duties for Insul/Crete Again the emphasis was on
keeping Peterson s conduct of Insul/Crete s business of
fairs separate from his involvement with Coatings buss
ness affairs but not to the extent of a prohibition of any
Peterson involvement with the latter, and as we shall
see, not even during the day
Thus Snodgrass has again candidly testified that while
Coatings was located at the same business address as
Insul/Crete (through December 1985 infra), it was easy
for Peterson to move between the operations of Coatings
and Insul/Crete Peterson only had to walk across the
hall Snodgrass also candidly testified that Insul/Crete
did not try to obstruct Peterson nor did they screen the
calls that he received on Coatings business during the
824 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
day I have little doubt that Peterson had continued to
sign some contracts for Coatings in 1985 as he acknow
leges he may have done I also have no doubt it was
viewed in Insul/Crete s best interests that he be able to
do so so, so long as there was progress towards minimi
zation of his involvement and Coatings remained viable
In that regard Snodgrass was aware of the develop
ment of Peterson s proposal in 1985 to turn Coatings
over to a group of employees , and get completely out of
Coatings Indeed , Snodgrass revealingly relates that he
and Peterson had written out a fairly detailed arrange
ment on how Insul/Crete would do business with Coat
ings when Coatings (anticipatedly) would be run by the
(donee) employees Although Snodgrass confirms that
the effort fell through , it is clear that Coatings
Insul/Crete credit arrangements were made by Peterson
and Snodgrass before the stock gift plan to Duffy and
Shields fell through
As noted , Snodgrass has testified that he never made a
request to Peterson that Peterson completely terminate
all his activities with Coatings Snodgrass (I find) credi
bly relates it was more of an agreement that Peterson
would work towards becoming personally less involved
in management An important double distinction appears
thus to be made first between Dow s concern that Peter
son s involvement with Coatings not detract from Peter
son's ability to perform his assigned duties for Insul/
Crete , and a second distinction between Peterson s con
tinued management involvement vis a vis ownership in
terest in Coatings , and their concurrent mutual interests
that Coatings continue as a viable business operation
Nonetheless I credit Snodgrass further testimony
corroborative of certain Peterson assertions , that poten
tial conflicts were recognized , and actual conflicts did
develop in 1985 though according to Snodgrass more
significantly so in 1986 In any event I credit Snodgrass
specific testimony recalling early recognized potential
problems or conflict that would and/or did arise where
Insul/Crete developed a new product and had Coatings
use it Such potential problem or conflict arose if the
new product itself developed an unforeseen problem that
would obligate Insul/Crete to do something about it
After discussion with Peterson it was agreed between
them that Snodgrass would make all those decisions
Snodgrass testified relatedly albeit generally that they
basically agreed to work towards a goal of separating all
potential conflicts of interest out but there was no
formal timetable set to do it Although Snodgrass has
also recalled that a couple of problems did arise for
Insul/Crete with another applicator that sought technical
advice on matters of bidding , but was reluctant to pursue
their resolution with Peterson Snodgrass testified that
those problems had arisen last year (1986) The problems
are discussed infra
4 Coatings move from the Triangle Street Building
to Meinders Road
There is confusion as to precisely when Coatings
moved , indeed confusion as to the extent it had (wholly)
moved out of the Triangle Street Building prior to its
bankruptcy filing in July 1986 Snodgrass testified that
Coatings was located at the same 4311 Triangle Street
Building address as Insul/Crete until Coatings moved
about a half of block away to 4931 Meinders Road At
first Snodgrass recalled the move as taking place I to I-
1/2 years prior (to hearing) which would appear to
place the move (generally) as early as November 1985,
or as late as April 1986 However , Snodgrass also had
other somewhat more illuminating recollections that
Coatings had ceased its operations as of 31 December
1985, and , that Coatings move had occurred while Coat
rags was in existence Snodgrass testimony considered
overall indicates that Coatings had moved some time
prior to 31 December 1985
Thus Snodgrass also has recollections of Coatings
phones being operative in the same building as Insul/
Crete in December 1985 That would indicate Coatings
had continued some presence there in December 1985
Snodgrass could not recall exactly when the Coatings
phones were removed However Snodgrass had no
recollection of Spartan/Applicators ever having phone
lines at the Triangle Street Building Shields also recalled
that Coatings office location was at the Triangle Street
Building and Shields has testified it did not change from
1979 through December 1985 Although on one occasion
Miller appears of record to relate that he and other em
ployees had generally reported at the Meinders Road lo
cation in 1985, other Miller testimony indicates the con
trary E g , Miller otherwise testified as to his (direct)
pickup of material at the Insul/Crete warehouse in 1985,
in comparison with now being at a greater distance (at
Meinders Road), a good block away , and that he now
first phones and picks up the material from Insul/Crete
the next day The latter convinces me, particularly in its
compatibility with other credible evidence of Snodgrass
and Shields that it is the more reliable I conclude and
find that Coatings had continued its construction business
presence at the Triangle Street Building at least into but
not beyond December 1985
There is however an additional question whether
Coatings as a corporation had fully removed its offices
from that location prior to bankruptcy filing Thus, Coat
ings bankruptcy petition filing of 8 July 1986 (to be
noted as pre Insul/Crete purchase of the premises) re
flects Coatings official place of business as (still) at the
Triangle Street Building address Even Hof 's address
also there supplied in regard to location of Coatings
records is shown as being at the Triangle Street Build
ing address, although there appears otherwise to be no
question that Hoff had been employed at Meinders Road
by Spartan/Applicators beginning in January 1986, and
by Applicators/Kohl there through January 1987
What is indicated by the above and the record as a
whole is that Coatings had moved (at least) its equipment
and phone lines to Meinders Road location some time
prior to 31 December 1985 What is clear of record is
that since incorporation Spartan/Applicators has itself
always been located at Meinders Road and that
Spartan/Applicators has used Coatings' same phone
numbers there It is further clear to me that while in
town Peterson had essentially free movement between
Insul/Crete and Coatings operations , effectively through
all of 1985
PERMA COATINGS 825
In that regard , Snodgrass has confirmed his own
awareness of a continuing involvement of Peterson in the
affairs of Coatings in 1985 albeit in a manner such as
had satisfied Snodgrass overall that Peterson was making
an effort to keep his involvement with Coatings separate
and nondisruptive of the accomplishment of his assigned
basic duties for Insul/Crete Although Shields at one
point testified in seeming support of Peterson, that Peter
son was not then real active in the business, and that
Shields felt that that had caused problems for Coatings
because no one was there everyday to report to, on
other occasion , Shields clearly placed Peterson s actual
involvement with Coatings at 60 percent in 1985, as
compared with 5 percent (with Spartan/Applicators) in
1986 The recollections of Snodgrass and Shields are the
more compatible , and I find them the more reliable Cir
cumstances of real conflict also anse as to Peterson s in
tentions in setting up Spartan/Applicators , and in the
timing of his development of a specific stock bonus plan
for key employees
5 The remaining alter ego evidence
a Coatings cessation of operations
Spartan/Applicators commencement of operations
Peterson testified that Coatings had no unit employees
at the end of December 1985 Respondents Exhibit 7, a
compilation of Coatings employee employment records,
supports the same , as does further corroborative testimo
ny of Miller and Shields There is some confusion as to
the commencement of operations by Spartan/Apph
cators Peterson asserted generally that employees were
not doing anything until Spartan/Applicators started
looking for work in February 1986 On other occasion
Peterson related the start of bidding was probably in Jan
uary On still other ocassion, Peterson testified that
Spartan/Applicators had started its bidding with the em
ployment of Timothy Parrish , whom Peterson then re
called had bid work probably from March-Apnl to
July-August 1986 Employment records establish that
Parrish was hired in February 1986, and terminated in
August 1986 Peterson also testified that it was in Febru
ary-March ( 1986) that Spartan/Applicators began paying
monthly rent to PBC for the Meinders Road location in
the amount of $650-$675 (probably $675, as Apphca
tors/Kohl pays $675 and Kohl testified the rent did not
change) In light of findings as to Spartan/Applicators
actual acceptance of the Coatings equipment on 15
March 1986 rental payments beginning in March would
appear fiscally more likely However Spartan/Apple
cators rental payment of $675 itself compares favorably
with $700-$750 monthly rent previously charged to (if
not actually paid by) Coatings The record reveals that
Spartan/Applicators had leased proportionately less
space than had Coatings
b Comparable bidding procedures
Spartan/Applicators completion of Coatings lastjob
Essentially the bidding procedures utilized by Spar
tan/Applicators (and by Applicators/Kohl) were the
same as Coatings had used , though Spartan/Applicators
estimator/bidder Parrish had never previously worked
for Coatings Thus, Spartan/Applicators subscribed to
the Dodge Reports service as had Coatings before it
as does Applicator/Kohl now , and as do any number of
other unrelated construction firms or contractors, gener
ally
The Dodge Reports service , lists, or attempts to list
daily for contractors , all the jobs that are being put out
for bid in a given area The usual procedure is that an
interested applicator estimator calls either the general
contractor or the architect of a newly listed job to deter
mine if there is an exterior insulation system in the job
specifications If there is, and if the estimator desires to
submit a bid on the job, the estimator will take off the
footages from the blueprints made available for that pur
pose , and submit a bid on the job Some general contrac
tors may call the applicator subcontractor , and solicit a
bid Some minor amount of work may involve an estima
tor pricing jobs obtained as a result of customer response
to ads in the yellow pages However , it is clear that the
principal amount of the applicator construction work is
obtained through use of the Dodge Reports service,
and its related procedures
The record reveals that Spartan/Applicators has per
formed applicator ocnstruction work for at least some of
the same general contractors/developers that Coatings
had before it (Until recently , Applicators/Kohl conduct
ed the same operations and used the same service as did
Spartan/Applicators before it , and clearly , in the main,
Applicators/Kohl has continued to do so )
As noted because of bad weather , and owner general
contractor related determinations , Coatings did not finish
one job (the Concourse Hotel) that Coatings had con
tracted to complete in 1985 Spartan/Applicators finished
this job Peterson placed the finish of this job to be ac
comphshed in the spring of 1986 However , Spartan/
Applicators did so under a separate , new contract , signed
in the Spring albeit one seemingly negotiated by Peter
son Be that as it may this is the only Coatings previous
ly contracted job that Spartan/Applicators (or Apph
cators/Kohl) has performed (There was no break in Ap
plicators contracts )
c The conflicting evidence as to Spartan/Applicators
business purposes
When called initially as a witness by the General
Counsel Peterson had testified that he established
Spartan/Applicators and, that the purpose of Spartan/
Applicators was to become a contracting firm, to get
into exterior installation systems, and to bid the work
Peterson acknowledged that to a certain extent it was
the same work as had been done by Coatings However,
Peterson then added that it was obvious that Coatings
was doing something wrong , or Coatings would not
have been in the financial condition it was in Peterson
then testified that the intention of the new corporation
was to do things differently to bid different types of
work , and to act differently The essential thrust of the
above testimony would project Peterson s intention that
Spartan/Applicators would essentially operate as a new
construction applicator subcontractor , but in the same
business as had Coatings performed before it The ques
826 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
tion is whether Peterson (and/or all Coatings sharehold
ers) intended the new company to be set up to operate as
an alter ego of Coatings, or, the new company was
formed for other purpose, and with intention always that
eventual ownership of the new company in the future
would be in others, as is urged to have been the joint
purpose from the start
Peterson has testified that at this time basically he was
trying to avoid a forced sale of Coatings equipment
assets Yet, when subsequently called as Respondent's
witness, on cross examination , Peterson appears to have
specifically denied that his intention at the time was to
try to sell the Coatings equipment through the sale of an
ongoing business (Spartan/Applicators) In passing it is
observed that to the extent Coatings sold its equipment
assets to Spartan/Applicators (I have found) the same
clearly had the approval of Coatings four shareholders,
and, to the extent the new company Spartan/Applicators
agreed to pay the purchase price of $80,000 directly to
McFarland, to be applied to the SBA loan, all four
shareholders of Coatings potentially will benefit by the
reduction (to that extent) of the amount owed on the
SBA loan upon which they remain personally liable
However, it is also observed in passing that benefit is
limited to recovery of fair value of assets and in con
trast, that (at least) in the sense limited to Peterson s pro
spective recovery of essentially 80 percent of the year
to date profit of Spartan/Applicators through 30 Septem
ber 1986 recovery will enure, on this record, to Peterson
(alone), and not to Coatings four shareholders equally
It is Respondent's further contention that Peterson had
at all times intended to divest himself of his ownership of
Spartan/Applicators business In that regard, contention
of simultaneous existence and/or commencement of a
certain stock bonus plan for key employees is principally
relied on by Respondents It urges that that plan s exist
ence taken in conjunction with Peterson s earlier effort
to wholly divest through the (failed) stock gift plan in
April 1985, and viewed in combination with asserted
pressure from Insul/Crete for a divestiture, warrants a
finding that no legitimate inference lies that Peterson s
actual divestiture in October 1986 was occasioned only
because of the unfair labor practice charges filed by the
Unions in the interim on 8 August 1986 In these matters,
there is also confusion
d Stock bonus or benefit plan
Peterson s assertions as to his intent in establishing
Spartan/Applicators and to existence of an oral agree
ment with key employees on a stock bonus plan, are at
best confusing Some aspects are simply left in actual
conflict While asserting there may have been more dis
cussions, Peterson has asserted that there was one meet
mg with Miller Shields and Serstad, which he placed in
November or December 1985 and clearly before Coat
ings had ceased business According to Peterson at this
meeting there was a general discussion about what might
take place after Coatings bankruptcy, and Peterson in
quired if they (Miller, Shields and Serstad) were inter
ested in trying from a company in the plastering busi
ness, but not with reference specifically to Spartan/
Applicators as the company Peterson initially testified
that an agreement was not reached at that time but he
asserts he did determine there was enough interest
shown by the employees in trying to be involved in
some way with a new company
On later occasion, and in marked contrast, Peterson
then asserted that not only did the above three named
key employees know before January 1986 that it (the
new enterprise) was going to be their company, but Pe
terson then also asserted that they had reached a verbal
agreement prior to 1986 some time in November 1985
According to Peterson, the agreement was that these in
dividuals, over a period of 5 to 7 years, would become
100 percent owners of production and work for the com
pany There is thus clear conflict in Peterson s own ac
counts as to origin and key employee agreement on a
stock benefit plan
However, on other occasion Peterson has asserted
(this time, seemingly more compatible with Miller and
Shields accounts) that the decision to set up the new
company was one jointly made in early 1986 by Peterson
and the above three key employees In that respect, Pe
terson asserts that Parrish was later included as part of
his (February) hire arrangement, but with the agreement
of the other key employees On still other occasion Pe
terson has referenced a rough draft of an agreement (on
stock bonuses) in the spring 1986, albeit one admittedly
never signed Peterson however has relatedly testified
that the stock benefit plan was effective in January 1986
(No attempt was made to offer the rough draft of an
agreement in evidence)
Peterson also acknowledged that he did not try to ar
range for an immediate stock distribution to the four key
employees (Parrish, Miller, Shields, and Serstad) when
Spartan/Applicators started up in business Peterson ex
plained this was because, as they knew, they would have
to be there a year before there would be a stock issu
ance Peterson offered further explanation that his attor
ney has advised him that he could not issue shares of
stock in exchange for services performed until the serv
ices were actually performed
However persuasive the consideration of the relation
ship of performance of service to actual stock issuance
may be the same does not serve to adequately explain
the absence of any earlier formalized stock benefit plan
agreement between Peterson and the four key employ
ees The fact is that it more appears of record that Peter
son's recollections of the details of an oral agreement are
not only as above noted, at least confused as to both
timing , and nature of discussion(s), but appear in conflict
as to timing of an actual full and specific agreement
reached with key employees At best what is portrayed
are preliminary explorations with some degree of pre
liminary approvals reached in early 1986 as to which
there is some degree of corroboration, discussed further
infra However, the same appears no less to stand in
stark contrast with the formalized prior (April 1985)
Coatings' stock gift plan that failed and the formalized
(October 1986) Spartan/Applicators reorganization plan
that succeeded On the other hand no requirement that
an agreement on a stock bonus plan be in writing ap
pears of record, and, the reorganization plan itself does
PERMA COATINGS 827
appear to formally implement certain terms of a stock
bonds plan described as previously existing Other evi
dence bearing on the origins of the stock bonus agree
ment must be scrutinized Such review reveals there is
convincing support generally, of a plan for key employee
ownership (with Peterson) in Spartan/Applicators, in
January 1986, but of specifically a stock bonus plan, not
apparently before April 1986
Peterson identifies the key employees as originally
Miller, Shields and Serstad, and later Parrish Only
Miller and Shields have testified The absence of Parrish
as a witness is adequately explained of record, that of
Serstad is not The testimonies of Miller and Shields, al
though not wholly congruous are more consistent
among themselves than with Peterson s account Yet
they are revealing of credible probabilities in certain
import of Peterson s apparent vacillating recollections
It will be recalled that Shields was one of the pnnci
pals in the failed stock gift plan presented in April 1985
(seemingly from Crawford s nonreplacement), Shields
testified (I find) even more convincingly that he knew
Coatings would cease business on 31 December 1985, but
he always knew something could happen Shields credi
bly explains, and (partially) confirms Peterson, that Pe
terson talked to him in December 1985 about it Peterson
asked Shields if Shields would be interested in another
company According to Shields at that time he expressed
both interest and concern Shields recounts that Peterson
then asked who Shields would be interested in working
with, and Shields replied , Miller and Serstad
James A Miller Sr had worked for Coatings off and
on, for 3 years, but in 1985 clearly regularly (R Exh 7)
Miller confirmed that Coatings had terminated him in
December 1985, but only when Coatings work was
caught up Miller testified that he then drew unemploy
ment through February 1986, until hired by Spartan/
Applicators in March 1986 Contrary to Peterson s asser
tions as to the nature of discussions purportedly held
with the three original key employees in 1985, Miller has
testified that when he went on unemployment (in De
cember 1985) he was not really aware that Peterson was
setting up another company Rather Peterson relates that
he learned of it later in January or February 1986
Miller testified that at that time Peterson called a
meeting at Spartan/Applicators office on Meinders
Road Miller confirmed that Miller, Shields, and Serstad
were in attendance along with Peterson Miller corrobo
rates that the purpose of this meeting was to see if they
(the kev employees) wanted toy go into business with Pe
terson It was not to be for Peterson in the business but
the four going into business together They were all
agreeable According to Miller, the only thing that both
ered Miller was the matter of (start up) equipment, and
finances
Miller did not believe that Peterson had mentioned
Coatings bankruptcy at this meeting, but Miller did
recall that Peterson had said the equipment could he ob
tamed from the bank for a certain amount of money
and, Peterson said he would look into it Miller also re
called that Peterson said he was just getting a feeling of
what we could do, if we were interested and how we
would go about it Shields testified that he was involved
in discussions with Peterson Miller and Serstad on
(seemingly) 1 January 1986 Shields otherwise also con
firms the discussions were about potential ownership of
the business what could be done, what they would like
done, how to do it, and that Shields had input on what
they were planning to do
As noted, attached to the Coatings and Spartan/
Applicators sale and purchase agreement (the latter with
an original date of 15 January 1986) there is a listing or
inventory of Coatings equipment with valuations (see
G C Exh 3) Peterson has testified that Miller made the
inventory listing of Coatings equipment, and that Miller
and Shields later put the values on the items of equip
ment According to this Peterson recollection, at the
time Miller and Shields appraised Coatings equipment,
they knew, or had an understanding, or an agreement to
be the eventual potential owners of a new company Pe
terson did not change their evaluation, becuase he
thought it was an honest appraisal
Neither Miller nor Shields appears to have been di
rectly questioned as to their preparation of the inventory
list of Coatings equipment, and/or the related evalua
tion Moreover, Peterson s testimony appears both docu
mentanly supported, and uncontested I credit Peterson s
account as to both preparation, and evaluation of the in
ventory list of Coatings equipment I further find that
both these events occurred on or before 15 January 1986
However, I am not persuaded by the evidence, and I do
not find that the key employees were then aware of Pe
terson s 100 percent ownership of Spartan/Applicators,
or that the terms of the stock benefit plan was then
clearly defined to them
According to Miller there were no other meetings
With regard to definitive terms of stock benefit plan,
Miller has testified that when the business started up,
they were still in the drawing up stage Miller further ac
knowledged that he has never signed anything, nor was
he ever shown any papers (e g , the rough draft of the
stock benefit plan) Indeed Miller has significantly testa
feed he did not know in the spring of 1986 that Peterson
owned 100 percent of Spartan/Applicators There is
some suggestion of record stock was not actually issued
to Peterson until October 1986 Miller testified that his
own understanding was that the owners were Peterson
Miller Shields and Serstad Shields has as much as con
firmed the same in testifying that he felt he was an
owner from 1 January 1986 whether he was, or was not
so legally on paper Otherwise, Miller has testified that it
was eventually worked out that he would get so many
shares over a number of years and he recalled that it
would start at 5 percent
In light of the subsequent declaration of 100 shares
earned it would reasonably appear to the 5 percent
stock benefit, whenever first announced, had application
to Spartan/Applicators total authorized shares Be that
as it may, and in any event it is clear of record that
under any such Spartan/Applicators stock benefit plan
to be on the evidence such as is presented here, that Pe
terson would continue as majority stock owner of
Spartan/Applicators for a significant period e g for at
least 3 years, and more probably longer, particularly in
828 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
light of Peterson s own recollection of the plan operating
over a period of 5-7 years
e The conflict as to key employees ' first employment
by Spartan/Applicators and the related question of the
extent of key employees determination of wages
Peterson has asserted that when Spartan/Applicators
started , only the four key employees (Parrish, Miller
Shields, and Sertad) were employed , and that other em
ployees were hired later , as needed Respondents prof
fered employment records simply do not bear this out,
infra Peterson also testified that the four key employees
determined their own wages , hours and working condi
tions, because they were going to be eventual owners of
Spartan/Applicators and, that the four key employees
determined the wages of the other employees hired later
in the year The evidence offered as to key employees
determination of wages etc again appears confusing
On the matter of key employees initial employment,
apart from Hoff (office) who alone was hired by
Spartan/Applicators in January 1986, Respondents sub
matted a compilation of Spartan/Applicators actual em
ployee complements (R Exh 8) This exhibit reveals
that the key employees (shown below italicized) and
others employed in relevant February-May periods (with
union membership appearing in parenthesis), were as fol
lows
(Union Membership) Feb Mar Apr May
Brown Marvin (Temp ( ) X l day X l day
help)
Duesterbeck James R ( ) X X X X
Hornung Gerald (laborers) X
Miller Francis ( ) X X X
Miller James A (Plasterers) X X X
Miller James F ( ) but (elsewhere X
shown a plasterer)
Parrish Timothy ( ) X X X X
estimator
Ree Dwayne (1) X X
Serstad Scott (laborers) X X X
Shields Brian (laborers) X
Zander Ted (Plasterers) X X X X
Even excluding Brown from consideration, as being
but 1 day temporary help still three of the first four em
ployees hired by Spartan/Applicators were non key em
ployees, and only the described fourth key employee
Parrish was actually first employed at this time At least
two of the initially hired non key employees were regu
larly employed thereafter To be sure, in the following
month of March, Miller and Serstad were employed,
along with Parrish But even then Shields would not be
employed until 2 months later in May 1986 Peterson s
recollection that all four key employees were the first
employed by Spartan/Applicators is simply erroneous at
least in terms of actual payroll record appearance of em
ployment His further assertion that they hired all the
other employees later in the year, and set the employees
wages, fails of full acceptance with that indicated base
error, and because of the contrary effect of other more
credible evidence of record
On other occasion Peterson testified that the (original)
three key employees had set their own salaries (This
recollection, selectively, raises closer issue of whether
the matter of wages of key employees were discussed in
the early January meeting) At the hearing, Peterson tes
tified that he did not know what their salaries were The
General Counsel established in a prior affidavit of 27
June 1986 Peterson has there recorded the weekly sala
nes of Miller, Shields, and Serstad were $688 80 each, re
spectively (Parrish s salary was $475) Peterson then ex
plained that his awareness of the salaries at time of
giving affidavit was because he then had stubs (records)
available to him Peterson denied that he had discussed
Coatings union contracts either with the key employees,
or (later) with Kohl (Kohl testified that union contracts
were not a concern to him at the time Kohl also con
firmed there were no changes in wages when he took
over controlling interest )
Significantly both Miller and Shields have (partially)
corroborated Peterson that Peterson did not mention the
union contracts in their discussions In regard to salary
however, Miller testified that when he began to work (in
March) he was paid a weekly salary of $668 09 Miller
explains that sum represented his regular union scale and
benefits Indeed Miller has testified that he has always
been paid (his) union scale and benefits On this record
it is also clear and I find that Miller was otherwise paid
for his worktime in a given week under terms of
Spartan/Applicators employment in the same manner as
he had been previously while in Coatings employ
Miller however does confirm (generally) that he and
Shields and Serstad talked it (pay) over, and determined
the amounts to be paid other employees But there is
confusion of record as to when this procedure first com
menced Miller testified that in the spring of 1986,
Spartan/Applicators employed carpenters laborers and
PERMA COATINGS
plasterers, and, that as they obtained more work more
were hired With regard to what other employees were
paid Miller has testified (ambiguously) that when
Spartan/Applicators started, that it (pay) depended on
their experience, and/or what they knew or could do,
and not on (what was then) union scale and fnnges Mil
ler s testimony is confusing because he clearly was not
employed until March and a number of regular employ
ees, four, were already employed in February (including
only Parnsh of the purported four key employees), none
of whom have testified Moreover Miller has also testa
feed that there were no other meetings after the first
meeting he had attended with Shields, Serstad, and Pe
terson In that very respect, Miller has additionally testa
feed specifically, and significantly (e g, in comparison
with the content of the discussions in the first meeting),
that he, Shields and Serstad talked it (pay to other em
ployees) over, and set the amounts, not Peterson Miller
has testified explicitly that they did not run it (pay) by
Peterson I am convinced that pay discussions (at least)
for other employees did not come up in the January
meeting that was attended by Peterson
Shields has testified (again generally) that they pretty
much set their own wages, and, that it was a joint agree
ment between the three Shields however then went on
to assert that they each took the highest wages (and
fnnges) that was being paid under the highest union con
tract (seemingly, on this record, the plasterers) (That did
not apply to Parrish ) Shields however then relates being
paid so (thus again ambiguously) from some time in May
The reference in important because Shields was remodel
ing a home since January 1986, and he, personally, did
not start work for Spartan/Applicators until May 1986
Serstad was first employed in March 1986 as was Miller,
but Serstad has not testified, and there is no direct and
credible evidence as to what Serstad was initially paid
With regard to setting wages for new employees,
Shields recollections of Miller Serstad and Shields in
volvement would indicate the same occurred when all
three were employed The first time that would have oc
cured would be May 1986 Shields relates that when the
new employee was hired they asked the employee what
the employee would like to get paid, and what they
knew, and, according to Shields, most of the time they
gave the employee what the employee asked There was
only one employee (Gerald Hornung a laborers union
member) additionally hired in May and (again) only one
additional employee (Henry Reuben) hired in June The
major additional employments (10) commenced in July
1986 Shields other asserted involvements with Spartan/
Applicators, in March and April, offer no definitive help
in this matter The matter of setting wages need not be
belabored by an addressment of further unconvincing
proof
In the end the weight of the above evidence does not
persuade or convince me that from the start Miller,
Shields and Serstad, together set non key employees
wages as they were employed I have no doubt that
Miller drew the equivalent of union wage scale and
fringes from the start, because that is what he was
always paid I also find that Shields was paid higher
wages in May than the Laborers contract called for
829
Indeed, I am persuaded that Shields and Serstad elected,
with Miller agreement, to pay themselves the highest
union wages (and fringes), but mostly likely the discus
sions were in May, and paid from May on I further find
that these three key employees collectively thereafter set
the wages of newly hired employees probably beginning
in May, but in any event surely in July 1986 I further
find they did not always pay wages and benefits consist
ent with existing contracts, and on 8 August the Unions
jointly filed the instant charges (It is clear that they
were involved in the managerial conduct of the financial
interests of Spartan/Applicators in July 1986, discussed
further infra Before proceeding to the consideration of
Spartan/Applicators handling of financial matters, chron
ologically, certain other material events had occurred,
some even prior to May 1986)
f Contended union notice of Spartan/Applicators
operations union investigatory action
(1) Union notice
Peterson and Kohl both acknowledge they did not
provide the Unions notice of their respective business op
erations Miller has testified to an occasion of his going
to the union hall of Plasterers Local 204 to pay his dues
Miller relates that he had a conversation there with
either (past) Plasterers Local 204 Business Agent Jim
O'Connell, or (present) Business Agent Cimino Accord
ing to Miller, Miller was asked (by one or the other)
where he was working Miller replied, Applicators The
General Counsel relatedly established that Miller paid his
dues on 11 February 1986 (for January and February),
and on 1 April 1986 (for March and April) Inasmuch as
Miller has also testified that his conversation with the
business agent occurred after he had started working for
Applicators, it is clear, and it is found that this incident
occurred no earlier than 1 April 1986 (Since such notice
would be well within 10(b) period I need not address
the General Counsels other evidentiary attack on wheth
er Respondent by such evidence offering has actually
proven a Plasterers union notice of Spartan/Applicators
operations in unfair labor practice context )
Shields has testified that Laborers Local 464 also knew
where he was working Thus Shields relates that on an
occasion of his paying dues Local 464 s treasurer
Gordy Kraut, had asked Shields who he was working
for Shields replied that he was working for Applicators
(adding, or it may have been Spartan/Applicators) and
that he was doing stucco work Shields placed the date
as 4 March 1986 Kraut did not testify, and the General
Counsel did not seek to establish an other date of pay
ment of dues (The record does establish that Shields has
continued him membership in Laborers Local 464)
However, the General Counsel correctly would have it
observed that since Shields did not go to work
Spartan/Applicators before May 1986 he would not
have had an occasion on 4 March 1986 (when he paid
dues) to tell Kraut at that time that Shields was working,
and more pointedly, specifically working on a stucco
job, for Spartan/Applicators I am convinced that any
such conversation Shields may have had with Laborers
830 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
Local 464 Treasurer Kraut , would have occurred later,
at time of stucco job assignment , and (at least) after
Shields had actually started his employment in May
1986 Moreover , even clear notice given to Laborers
Local 464 on 4 March 1986 would effect a 10(b) bar
(2) The Carpenters ' questionnaire
The General Counsel has in turn established that in
April 1986 , Carpenters District Council sent a question
naire to Peterson The questionnaire (G C Exh 5)
probes Coatings ' and Spartan/Applicators business rela
tionships , including their places of business , banking,
credit arrangements , tax and unemployment matters,
equipment use, customers , estimators , number and nature
of employees , wages and fringe benefit programs, man
agement , owners officers , directors , shareholders, and
persons involved in labor relations policies
Peterson acknowledged that he received the question
naire on return from a trip made for Insul/Crete Peter
son forwarded it to his attorney (Loniello) Peterson tes
tified that he did not hear back from his attorney, and
Peterson acknowledged that he did not contact the
Union about the questionnaire Indeed , Peterson has ac
knowledged that he has not notified the Union (s) at all
about the circumstances of his startup of Spartan/
Applicators
g Financing Spartan/Applicators
(1) Bank accounts , bank financing
Peterson testified that during the formation of
Spartan/Applicators , he did not immediately secure
loans or credit from an institution From the start Spar
tan/Applicators had a separate bank account albeit in
McFarland , as did Coatings However Spartan/Appli
cators subsequently closed its bank account at McFar
land and opened a new account in Community National
Bank Spartan/Applicators obtained a $10 000 revolving
operating loan from Community National Bank with a
security pledge of Spartan/Applicators accounts receiv
able Spartan/Applicators other (equipment) assets were
clearly subject to the first lien pledge on the SBA loan
Peterson s recollection was that it was in the spring of
1986 that he cosigned a 60-90 day , renewable type
$ 10,000 operating note for Spartan/Applicators, along
with Parrish Miller, Shields , and Serstad, who all signed
personally The executed loan document (Continuing
Guaranty , R Exh 18) confirms a credit loan cosigning
As noted , it provides the first convincing documentary
support for established key employee interests in the
business exiting at that time However , the loan docu
ment is dated 31 July 1986
(2) Extension of Insul/Crete credit to
Spartan/Applicators
Snodgrass relates that he was aware that Peterson had
developed a new company Applicators" as he then
heard it called Snodgrass has testified that Peterson s in
volvement with Spartan/Applicators was limited namely
that Peterson agreed to help with Spartan/Applicators
line of credit with Insul/Crete According to Snodgrass,
Peterson signed a personal guaranty
Thus Snodgrass has confirmed that Insul/Crete has
supplied goods to Spartan/Applicators on Peterson
credit In that regard Snodgrass has testified significant
ly, and wholly credibly , that after the $150 ,000, or more
loss experience that Insul/Crete had with Coatings, they
(Insul/Crete) were cautious , as Snodgrass did not want
to have to report to his shareholders that Insul/Crete
had bad business relations with some of the same compa
ny, or people As Snodgrass initially recalled, it was
probably in the spring of 1986 , when the weather im
proved and sales picked up, that Snodgrass asked Peter
son (only) to sign as guarantor of a line of credit to
Spartan/Applicators , at that time limited to $30,000
Snodgrass otherwise recalled that there were but two
guarantees made to Insul/Crete , one initially by Peterson
alone , and one later executed by Peterson , Kohl and
Shields, but not Serstad
The General Counsel has established that the first
guaranty by Peterson alone was also executed later than
Snodgrass had recalled , viz, on 30 July 1986 (See G C
Exh 1) This first guaranty was executed actually after
Coatings had filed for Chapter 7 bankruptcy Apart from
erroneous recalled time of execution , Snodgrass remain
ing recollection as to this first guaranty appear wholly
congruous with the actual later July date , and its circum
stances Although Snodgrass also confirmed some earlier
awareness of future employee ownership in Spartan/
Applicators , there was no requirement by him at that
time that any future stock benefit owner sign the person
al pledge as there was with extension of (additional)
credit to Applicators/Kohl the following year, when
there was such other ownership , discussed infra
h The SBA assumption agreement request
On 17 September 1986 McFarland s Locke sent Peter
son a letter with an enclosed assumption agreement In
the letter , Locke informed Peterson that SBA attorneys
wanted Peterson (Spartan/Applicators) to execute the
enclosed assumption agreement by 1 October 1986 be
cause of Spartan/Applicators assumption of the (essen
tially equipment) assets of Coatings previously pledged
on the SBA loan The letter also requested financial
statements from Spartan/Applicators at this time Peter
son has testified that he was upset on receipt of this
letter , initially asserting the reason was that he believed
they (McFarland and/or SBA ) were asking for double
collateral because Coatings stockholders were still guar
anteeing payment of the SBA loan, along with their
pledged security Peterson called Attorney Loniello, and
Peterson then notified Locke that he would not sign as
sumption agreement
Peterson later acknowledged that he also felt the
Spartan/Applicators people, then identifying them to be,
in addition to himself Miller, Shields and Serstad, were
all being asked to sign something already covered by
previous collateral The letter itself does not on its face
appear to seek any signature other than Peterson
It is clear that certain pledged assets as primarily here
relevant, Coatings equipment, although assumed by
PERMA COATINGS
Spartan/Applicators subject to Coatings' pledge or SBA
lien, were no less in the possession and use of a company
other than Coatings who had pledged them to McFar
land on the SBA loan To be sure, Peterson had testified
relatedly that McFarland and SBA had originally agreed
to Coatings (insolvency) sale (on their behalf) and
Spartan/Applicators' purchase of the pledged Coatings
equipment was with accepted obligation to pay fair pur
chase price to direct credit on SBA loan It also fairly
appears that if Peterson (and/or others) executed the as
sumption agreement as presented, effectively Spartan/
Applicators thereby would appear to assume an obliga
tion for the entire remaining sum ($261,000) due on the
SBA loan, well beyond, on this record the negotiated
fair purchase puce of the Coatings sale assets transferred
(at best $80,000), and thus well beyond the determined
value of those specific assets pledged in security of the
SBA loan The assumption agreement remains unsigned
All payments due on the SBA loan are current
As it is unnecessary to do so, I consequently make no
finding about whether Coatings formal sale of its re
maiming recoverable assets, in value principally its equip-
ment, as made to Spartan/Applicators without formaliza
tion of SBA execution of a consent to such sale, effec
tively constituted a substantial breach of the basic
McFarland GBSA security agreement, which itself is not
in evidence before me Neither do I make or imply find
ing on Peterson's claim of their (McFarland and SBA)
initial agreement and/or of the effect thereon of any
Coatings' sale payments made by Spartan/Applicators to
McFarland and credited to Coatings' SBA loan account
(See generally on treatment of postpetition effect of a se
cured creditor's arrangements with debtor made prepeti
tion filing in bankruptcy, U S C A Title 11 Bankruptcy
§ 552(b) (1987 CAPP)) I specifically make no finding in
resolution of the effect of either on the substantial earn
ings that Spartan/Applicators achieved by virtue of its
interim operations through 30 September 1986, beyond
observing that, vis a vis Coatings' shareholders, Peterson
(alone) stand to essentially recover the same if
Applicators/Kohl and Kohl meet their respective note
obligations on the redemption and purchase of Peterson s
stock in Spartan/Applicators
What thus appears material and significant in these re
spects in bearing on the issue before me of Spartan/
Applicators being alleged as an alter ego of Coatings, it
seems to me is that Peterson has not only confirmed that
Miller, Shields and Serstad were entitled to prospective
issuance of an earned stock benefit, but he could also
reasonably perceive that his own prospects for divesti
ture were related to his ownership claim on the substan
tial earnings of Spartan/Applicators which were then of
an amount substantially in excess of the monetary value
of the stock bonuses earned Consequently Peterson
could reasonably contend that Coatings other sharehold
ers interests , e g beyond the viability of Spartan/
Applicators to timely make the payments of Coatings'
asset purchase price (at least potentially) did not track
his own interest in Spartan/Applicators' current net
worth In brief, Respondents, but seemingly Peterson in
particular, has urged that Peterson had refused to sign
the assumption agreement as requested by McFarland
831
and SBA, because he wanted the strict independence of
Applicators from the pocketbook interests of Perma
Coatings shareholders " It is there also pertinently
claimed (in regard to divesture) that "Peterson knew he
could not relinquish control to key employees on the
terms demanded by the bank and SBA' Before address
ing Insul/Crete's later (1987) credit arrangements made
with Kohl/Applicators, it is appropriate to preview the
conflicting evidence in regard to the degree of change in
Peterson's managerial involvement in Spartan/Appli
cators in 1986, as compared with his 1985 involvement
with Coatings
i Interim management developments
Peterson testified that the four key employees were
the management committee for Spartan/Applicators,
while Peterson owned that Company More precisely,
Parrish was clearly part of the management team from
February 1986, only until August 1986, at which time he
was fired Kohl became part of Spartan/Applicators
management team on initial hire as its estimator and
office manager in mid September 1986, and served as
such until he purchased controlling stock interest in
Applicators/Kohl on 11 October 1986 Since that time,
Kohl s management responsibilities have increased to
general management
Peterson has testified (generally) that the four key em
ployees ran Spartan/Applicators in 1986 on a day to day
basis, that they made all the key supervisory and business
decisions, and, that Peterson had very little discussion
with the four key employees In the main in 1Q86, and
apart from the special findings on setting wages earlier
made, Peterson is substantially corroborated E g, Miller
confirmed that he, Shields, and Serstad have each run
the separate jobs outside Madison, Wisconsin, for
Spartan/Applicators in this period, and Snodgrass testi
feed to general manager assignment to Parrish, infra
Peterson has also asserted that it (management of
Spartan/Applicators) probably did not differ much from
1985 (Coatings) management In addition to the contrary
findings I have made on the differences in Peterson s
management role in 1985 vis a vis 1986, I also note that
Parrish was never previously employed by, and never
part of Coatings management and that Peterson has
otherwise acknowledged that he did not actually know
what Serstad did in 1985 (Kohl refers to Serstad as
quiet) Otherwise considered, I conclude and find that
the management functions and responsibilities of Miller
and Shields appear of record to be substantially the same
under Spartan/Applicators, as they were under Coatings,
mostly as to jobsite management though with advent of
Kohl in management, particularly after Kohl s taking
over controlling stock interest in Applicators/Kohl,
Miller and Shields' management responsibilities appear to
be even more so confined in nature to jobsite manage
ment, and with clear reversal of prior Miller job superin
tendent prominence over Shields
Snodgrass relatedly testified that (in early 1986) from
general conversations he knew, or had a general aware
ness that Coatings went bankrupt, and that there was an
effort to transfer assets , recalling something was worked
832 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
out favorably under the bankruptcy laws I presently ob
serve that Snodgrass apparent adoption of a more stn
dent approach to Peterson s involvement with Spartan/
Applicators vis a vis Peterson s prior involvements with
Coatings is wholly compatible with Insul/Crete s imme
diate discernment of divergent interests, and with Snod
grass acknowledgement of a substantial debt loss to
Coatings I have no doubt that Snodgrass was fully
aware not only that Coatings was bankrupt but that
Coatings (equipment) assets were not available to extin
guish any of Coatings existing ($150,000, or more) in
debtedness to Insul/Crete As earlier noted Insul/Crete
eventually had to write off the Coatings debt as a loss
However, it in that connection that Snodgrass has oth
erwise given what is very revealing, and convincing tes
timony Thus Snodgrass has related that after Coatings
ceased doing business , Snodgrass specifically told Peter
son in early 1986 that Peterson would have to have a
general manager for the new company (Spartan/Appli
cators), and, that if there was not a general manager for
the new company Insul/Crete would not continue to
pay Peterson a full salary as an Insul/Crete employee
According to Snodgrass Peterson agreed to employ a
general manager for Spartan/Applicators, and Parrish
was it
In that regard Snodgrass has also testified (I find) cre
dibly that any prior confusion over Peterson s presence
on a jobsite i e as representative of Coatings or as rep
resentative of Insul/Crete did not continue (e g, as in
volving Spartan/Applicators) into the spring or summer
of 1986 Rather Snodgrass testified, credibly, that Peter
son put Parrish in as manager and, whether so entitled
or not, as far as Snodgrass knew Parrish basically ran
Spartan/Applicators Shield s testimony that Peterson s
management involvement in 1986 was at best 5 percent
is wholly supportive
Snodgrass does confirm Peterson that when Peterson
had to fire Parrish Peterson came to Snodgrass and
asked for some understanding of Peterson s need to tem
poranly become more involved in the management of
Spartan/Applicators business affairs Snodgrass confirms
that since Peterson was being above board with him,
Snodgrass made such allowance, and it was soon thereaf
ter, that Kohl was hired to replace Parrish
Otherwise Snodgrass has significantly related that he
(also) was not aware that Peterson was the sole share
holder of Spartar/Applicators, and generally, that it was
in early 1986 that he first learned that employees who
had been associated with Coatings, were going to be
owners (naming Miller, Shields, and maybe Serstad)
Snodgrass also testified that he was also not aware of the
stock sale arrangements that Peterson entered (seeming
ly) in the reorganization plan (in regard to Appli
cators/Kohl) but that as a result of that arrangement,
Peterson s management noninvolvement is now where he
has wanted it to be
In regard to the latter consideration, and in contrast
with Peterson s seeming placement of all Insul/Crete
customer complaints as occurring in 1985 Snodgrass has
testified that it was not until last year (1986) that Peter
son s involvement became a problem for Insul/Crete At
that time a couple of problems arose with another cus
tomer of Insul/Crete The problem related to the roll to
be played by Insul/Crete s technical department (specifi
cally Peterson) with other customers Essentially one
particular regular customer complained that it was reluc
tant to talk to Insul/Crete s technical department (Peter
son) about how to bid a job or how to treat job details
because the customer felt it was revealing a job lead,
etc to a Peterson associated company Snodgrass asserts
that Insul/Crete than had its own concern that a cus
tomer might not ask a question it should ask I have no
doubt that it was at that time (if ever) Snodgrass mount
ed what Peterson described as real pressure on Peterson
to disentangle himself from management (not ownership)
of the applicator business in 1986, most probably in the
early spring, with the anticipated advent of good weath
er and increased job bidding in general
j Extension of Insul/Crete credit to Applicators/Kohl
The General Counsel has established that a second
guaranty (G C Exh 6) to Insul/Crete was executed by
Kohl on 8 April 1987 and by Peterson on 16 April 1987,
thus well after Peterson s October 1986 sale of all of his
stock interest in Spartan/Applicators Although Snod
grass could not compare (from memory) the volume of
business of Spartan/Applicators in the spring of 1986 to
Coatings 1985 sales (nor Spartan/Applicators' sales to
Applicators/Kohl also thereafter) Snodgrass has ac
knowledged generally that Applicators/Kohl has now
gone beyond the original $30,000 line of credit extension
to Spartan/Applicators and Applicators/Kohl (hereto
fore guaranteed by Peterson only) to an extension of
Insul/Crete credit in the amount of $60,000 presently to
Applicators/Kohl (Kohl testified that he wanted this ad
ditional line of credit to be able to take advantage of
volume discounts) Snodgrass acknowledges that Appli
cators/Kohl is currently one of Insul/Crete s bigger cus
tomers
The extension of such credit to Kohl/Applicators was
passed on by Insul/Crete s credit committee That com
mittee is composed of Insul/Crete President Snodgrass
Security Treasurer Jill Donchek and Credit Manager
Lisa Bedford None have ownership interest in Coatings
Spartan/Applicators or Applicators/Kohl In that regard
Snodgrass testified that Applicators/Kohl is less than
$8000 in account owed past 30 days and that it had been
handling its receivables in a very normal fashion
Snodgrass has also testified that Insul/Crete extends
credit to other applicator contractors through various
forms of security enumerated of record Although Snod
grass (seemingly) did not know of a security arrange
ment that Insul/Crete had involving a nonowner's per
sonal guaranty, Snodgrass was aware that some of
Insul/Crete s extensions of credit were made to com
panies/dealers for whom others (but in some manner
business related) stood as guarantor Be that as it may in
urged similarity, it seems to me that the General Counsel
in any event can garner little further support for his alter
ego contention from the mere circumstances of Peter
son s involvement in the 1987 guaranty on behalf of
Applicators/Kohl
PERMA COATINGS 833
Request for expanded credit was Kohl s Grant of ex
panded credit was a decision for Insul/Crete Willingness
to jointly stand as guarantor of an increased credit was
for Peterson That Insul/Crete wanted Peterson as adds
tional surety before doubling Applicators/Kohl credit
line is one thing Explanation for Peterson s willingness
to continue, indeed increase his guaranty in 1987 is an
other Peterson s willingness to do so is wholly consist
ent with his interest in attaining a full recovery from
Applicators/Kohl and Kohl of their outstanding substan
tial monetary obligations continuing to be due to Peter
son from the corporation and Kohl, for stock redeemed
and purchased respectively In my view, the reorganiza
tion plan is related to, and in the end, is substantially de
pendent on the determination of the more fundamental
issue of the earlier status of Spartan/Applicators as con
tended alter ego of Coatings
Analysis, Conclusions, and Findings
Respondents 10(b) arguments are without ment Pe
terson gave direct notice to Plasterers Local 204, that
Coatings was bankrupt and would cease all construction
operation on 31 December 1985 Both Plasterers Local
204 and Laborers Local 464 were otherwise timely made
well aware of the same I conclude and find that (joint)
Charging Party had effective notice of the above More
over I have found that Coatings had ceased all construc
tion operations by the end of December 1985 However,
Peterson gave no notice to any of the unions that he also
intended to, nor that he thereafter in January 1986 had
actually established another company Spartan/
Applicators, which could subsequently purchase all of
Coatings equipment, and thereafter operate as an appli
cators contractor
Indeed, between Coatings as seller , and Spartan/
Applicators as purchaser of Coatings equipment,
Spartan/Applicators did not even accept the transfer of
Coatings equipment until 15 March 1986, which is well
within the 10(b) period There is no direct evidence that
Spartan/Applicators had placed Coatings' equipment in
use earlier, let alone that Charging Party Unions or any
of them were aware of either a pending sale or interim
use
Some time after Coatings ceased business, Coatings
had blanked out its name on (at least) much of the used
equipment, and it appears a new name (Applicators) was
not put on any of the equipment until Kohl did so, after
his own purchase of controlling stock interest in October
1986 There is no definite evidence that any of the con
struction employees first shown employed by Spartan/
Applicators in February 1986 were definitively em
ployed on 7 February 1986, let alone that any of the
unions were aware of their employment at that time
Section 10(b) of the Act does not begin to run on and
unfair labor practice until the party `adversely affected
is actually or constructively put on notice of the alleged
ly offending act ' Truck & Docks Services, 272 NLRB
592 (1984) Even assuming without so finding that Mil
let's communication of his new employment of Plasterers
Local 204 s hall was made to a currently designated
agent of that Union, and, that both Miller s and Shields
communication were also of nature sufficient to some
how charge Plasterers Local 204 and Laborers Local 464
with actual or constructive notice of (at least ) the possi
bility of an alter ego relationship then existing between
Spartan/Applicators and Coatings , the communications,
and thus any such related notice , are shown to have oc
curred well within the 10(b) period Even more clearly
so is Carpenters District Councils April 1986 question
naire which itself went unanswered Accordingly, it is
concluded and found that all of Respondents advanced
10(b) arguments are without ment , in that there is no
evidence presented sufficient to warrant conclusion joint
Charging Party unions had actual , or constructive notice
of the alleged offending conduct at a point prior to the
commencement of the 10 (b) period
The complaints allegations that Coatings and Spar
tan/Applicators are a single , or joint employer are to be
similarly readily dismissed Coatings ceased all construc
tion business as of 31 December 1985, if not earlier on 17
December 1985 No credible or persuasive evidence is
presented that warrants an inference that Coatings had
continued to conduct any union s unit construction work
after 31 December 1985, either with Spartan/
Applicators , or at all otherwise Coatings mere contra
ued corporate existence did not serve to make it a single
or joint employer with Spartan/Applicators This is
simply not a single employer case , integrated or other
wise , Iowa Express Distribution v NLRB, 739 F 2d 1305
(8th Cir 1984), Glory Sheet Metal, 280 NLRB 1075 fn 1
(1986) Neither is it a joint employer case, NLRB v
Browning Ferris Industries, 691 F 2d 1117 , 1122-1124 (3d
Cir 1982)
The General Counsel has effectively withdrawn all
other prior complaint allegations of successorship and of
discrimination , and, apart from the remaining base alter
ego allegation(s) to be considered infra, there is no other
derivative liability issue that is presently before me for
resolution , cf Williams Motor Transfer, 284 NLRB 1496-
1497 (1987) This is an alter ego case, or it is nothing
The parties have however advanced background re
hances which do occasion some revisit of other funda
mental principles involved to wit as applicable to an
employers contractual obligations to the unions, in face
of economic distress , Oak Cliff Golman Baking Co 202
NLRB 614 (1973) enfd 505 F 2d 302 (5th Cir 1974),
cert denied 423 US 826 ( 1975) and the paramount
nature of entrepreneurial decisions on whether to stay in
business or not , Textile Workers v Darlington Co 380
US 263 (1965)
The General Counsel argues and the Board has previ
ously clearly so held that an employers severe financial
distress , or other economic necessity claims even if
proven do not constitute an adequate defense to an alle
gation that an employer has violated Section 8(a)(5) and
8(d) of the Act as when the employer fails to abide with
applicable provisions of an existing collective bargaining
agreement , Oak Cliff Golman Baking Co, supra at 615-
616 Member Johansen would appear to deem it appro
priate in certain such cases to additionally address a
question of whether an employers particular default
action is such as to have constituted an actual repudi
ation of the collective bargaining contract , or of the col
834 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
lective bargaining obligation itself , or constituted more a
delinquency only in meeting a specific contractual obli
gation , an act more in simple breach of a term of the
contract , cf International Distribution Centers , 281 NLRB
742, 743 and fn 5 (1986) Such a case presentment dis
tinction ^s clearly not involved here
Coatings completely ceased its construction applicator
business on 31 December 1985, and , Coatings is not
charged with acting unilaterally in any manner prior
thereto in violation of Section 8(a)(5) and/or 8(d) Thus,
I observe in passing that this case does not involve an
issue of Spartan/Applicators responsibility for an earlier
unfair labor practice committed by Coatings The es
sence of the multiple issues presented here , in final analy
sis is whether Peterson's thereafter established Spartan/
Applicators is an alter ego of Coatings There is no ques
tion that Spartan/Applicators , since formation and to
date , does not recognize the Unions as the representative
of its employees , nor does it acknowledge that the
Unions contracts , heretofore found binding upon Coat
ings through 1985 , are binding upon Spartan/Applicators
in 1986 , nor upon Applicators/Kohl presently
Respondents essentially advance the position , that con
trary to the General Counsel's urged reliance on Oak
Cliff Golman, supra , in certain circumstances, such as are
urged present here, other important policies have para
mount standing , primarily those effecting free flow of
capital Thus Respondents essentially have asserted a
basic reliance on an employers prerogatives of deter-min
ing when and how long to continue in business Re
spondents urge in that regard that if even when motivat
ed by antiunion considerations , an employer may simply
go out of business , then certainly it may do so when mo
tivated by severe economic circumstances Respondents
further contend that in the process of going out of busi
ness, they may sell their business assets to a new owner,
free of a collective bargaining agreement with stated re
liance on Textile Workers v Darlington Co supra 380
U S at 272 Moreover Respondents would have it ob
served that a new employers continuance in the same
business at the same place, even with the same employ
ees is not indicative , as a matter of law of alter ego
status NLRB v Burns Security Services 406 US 272
(1972)
Apart from the additional single employer and partial
closing considerations in the Darlington case, supra, none
of which are involved here the Darlington case itself ad
dressed an employer intended permanent closing and liq
uidation of the business , with specific circumstances
noted of equipment there necessarily sold piecemeal, but
with a number of other ongoing business circumstances
noted as to be distinguished from the scope of that hold
ing E g see and compare fn 14 with 15 relating to
runaway shop and see notation made of distinction ap
plicable as to sale of an on going business " as to which
other considerations might apply Perhaps even more
pertinently the Supreme Court in Darlington itself had
specifically first observed the Court s own much earlier
holding in Southport Petroleum Co Y NLRB 315 U S
100 (1942) itself more in genre of the case issue present
ment here
The parties appear generally in agreement that the
Board s alter ego doctrine had its genesis in Southport Pe
troleum, supra There, in a reinstatement order case pre
sentment, involving a purported liquidated business and a
newly incorporated company, it was first observed
Whether there was a bona fide discontinuance and
true change of ownership-which would terminate
the duty of reinstatement created by the Board s
order-or merely a disguised continuance of the old
employer, does not clearly appear Id 106
It has long been clear that an employer cannot evade
its bargaining obligations under the Act, or specific obli
gations under a binding contract, by an expedient forma
tion of what appears to be a new company but what in
fact is but a disguised continuance , or alter ego of the
original employer, Howard Johnson Co v Hotel Employ
ees, 417 US 249, 259, fn 5 and see cases cited (1974),
Marino Electric, 285 NLRB 344, 351 (1987)
The Board has generally found such an alter ego stat
ues exists , where two enterprises have substantially
identical management business purpose operation,
equipment, customers, and supervision, as well as owner
ship Nabco Corp, 266 NLRB 687, 693 (1983), Crawford
Door Sales Co, 226 NLRB 1144 (1976) It has been said
that no one factor is determinative, Continental Radiator
Corp, 283 NLRB 234 (1987), Fugazi Continental Corp
265 NLRB 1301 (1982), enfd 725 F 2d 1416 (D C Cir
1984), and that each case must turn on its own set of
facts, Nabco Corp, supra Crawford Door Sales Co supra
Neither animus or discriminatory motive is a prerequi
site but presence, or absence, merely a factor to be con
sidered, Goodman Piping Products v NLRB, 741 F 2d 10
(2d Cir 1984), Oklahoma City Eastern Express 281
NLRB 921 (1986), Gilroy Sheet Metal supra at fn 1
(1986), Apex Decorating Co, 275 NLRB 1459 fn 3
(1985) and Watt Electric Co 273 NLRB 655 658 (1984)
The Board will however address and consider whether
the real purpose behind the creation of a new company
is legitimate or is one accomplished with a prohibited
purpose of evading responsibilites under the Act Mar
Kay Cartage 277 NLRB 1335, 1341 (1985) [T]he focus
of the alter ego doctrine, unlike that of the single em
ployer doctrine is on the existence of a disguised con
tinuance or an attempt to avoid the obligations of a col
lective bargaining agreement through a sham transaction
or technical change in operations (Cases and examples
cited omitted) Carpenters Local Union No 1846 v Pratt
Farnsworth, 690 F 2d 489, 491 (5th Cir 1982), Marino
Electric, supra at 351
The intent to evade may be readily discerned and
appear clear as where an employer readily acknowl
edges the action taken is to escape the economic burden
of the union contract, Watt Electric Co, supra at 658, Ad
vance Electric, 268 NLRB 1001 (1984) However the fac
tual patterns that may arise in contested cases are also
myriad and in some the determinative thrust of the
combination of divergent factors to be considered may
be much less clear in evaluation Thus hard cases par
ticularly arise where the enumerated factors to be con
sidered present an appearance of being closer in balance,
PERMA COATINGS
or, where the advanced business purpose or justification
for the second enterprise itself appears legitimate , albeit
accompanied by some measure of commonality in own
ership, along with some degree of initially secretive non
acquiescence of the second enterprise in the union s con
tractual relationship with the precedent enterprise
There are a number of business factors presented in
this case that would readily support a finding that
Spartan/Applicators is an alter ego of Coatings Some
other factors do less so Some simply strongly indicate
such relationship did not exist
Thus, substantially identical use of equipment, prem
ises, phones, business service provided, mode of oper
ation, and similar use of supplies and customer service,
all would support a finding of alter ego Unquestionably
the equipment that Spartan/Applicators eventually used
in 1986 is the very same equipment that Coatings had
used in 1985 It is also the same equipment that
Applicators/Kohl had used, and presently does use, at
least clearly in the main The related fact that both Kohl
and Shields have each subsequently purchased a vehicle,
which each has placed in the service of Applicators/
Kohl, does not substantially alter the broader underlying
assessment of Applicators/Kohl s continued usage of the
same equipment This is so whether Kohl and Shields
have recently purchased the vehicles in the name of the
corporation or not and irrespective of the consideration
of their personal liability for the purchase price of the
vehicles The fact that they have each placed vehicles in
the service of Applicators/Kohl is of course further cor
roborative support of their having real ownership inter
ests in Applicators/Kohl, at that time
Although it seems that Coatings may not have long
earlier occupied the premises that Spartan/Applicators
has occupied, the fact is also clear that it did for some
period of time, and thus the two companies have occu
pied the same premises at some time (at least successive
ly) They have each rented the premises from PBC
Spartan/Applicators, while paying less rent than that
charged Coatings, in paying rent proportionate to the
space it used as compared with Coatings use, has paid
the same amount as Coatings had (or as Coatings was
charged) and, it paid the same amount as does
Applicators/Kohl now, despite any present intent of
Applicators/Kohl to renegotiate or relocate
All three respectively in their operations as an appli
cators construction subcontractor have used Insul/Crete
as their principal supplier of applicators product They
have (successively) used the same phones, trade names/
listings/directories and advertisements, saving only vehi
cle and equipment name identification All three have
(successively) engaged in basically the same applicators
construction business All three have proved to be will
ing users of Insul/Crete's new products, and to willingly
serve as job models for Insul/Crete s prospective appli
cator contractor affiliates While there are record indica
tions of Applicators/Kohl more recent use of Insul/
Crete competitor product, and of declared intent to
change business location in the future, an alter ego status
is one to be determined at time of formation of the busi
ness, and not at some later date, Rogers Cleaning Contrac
tors, 277 NLRB 482 fn 42 (1985) Even were it to be
835
considered otherwise, Applicators/Kohl even now is still
at the same location and is an even bigger customer of
Insul/Crete, which remains its clear principal supplier
The additional fact that apparently Applicators/Kohl has
not been able to use all of Coatings prior suppliers, be
cause of Coatings poor credit, certainly does not call for
a contrary conclusion
Of discernible lesser import on alter ego status is the
fact that all three business operations have employed es
timators, and all three have basically used the Dodge
Report service rather than prior business customer lists,
as do any number of unrelated construction firms
Spartan/Applicators has also completed the one job left
unfinished by Coating, though it did so much later, and
pursuant to a separate contract, negotiated in the spring
of 1986 in Spartan/Applicators name Spartan/Apple
cators has in general, performed construction applicators
work for a number of customers (owner/developers
and/or general contractors) that Coatings had previously
serviced , though again, essentially through the Dodge
Report service, and not through a Coatings customer
list, and not for all of them (The actual percentages of
continued service to customers previously serviced by
Coatings, or nonservice to same, or different service (to
others) does not definitively appear of record) There is
however no question on this record that Applica
tors/Kohl (following a change of stock ownership) con
tinued to service Spartan/Apphcdtors current and/or
uncompleted contracts On balance, it is concluded and
thus found that the factors of conduct of same business,
mode of operations service to essentially the same cus
tomers and use of essentially the same suppliers all tend
to be additionally supportive of a finding that Spartan/
Applicators is an alter ego of Coatings
Factors of substantially identical management and su
pervision, while in some respects appearing close, are
still deemed overall as supportive of alter ego status Be
cause of retrenchment in Coatings business purposes to
that of a construction applicator only, and due to related
demands placed upon Peterson for increased involve
ment in the management of plant expansion and technical
affairs of Insul/Crete Peterson had reduced involvement
in the actual management of Coatings (at least) from the
fall of 1984 and in 1985 However I have found Peter
son s management involvement with Coatings in 1985
was not insubstantial in manner and for reasons earlier
detailed, that need not be repeated here The record es
tablishes that Peterson, a 27 percent minority stockholder
in Coatings was the driving force in the formation of
Spartan/Applicators, whatever his ultimate intention is
determined to be
The fact is, however, that Peterson s involvement in
managing Spartan/Applicators in 1986 was considerably
different in kind, and much less in degree than it had
been with Coatings in 1985, for different reasons, viz
Snodgrass approach Nonetheless in certain important
business aspects, Peterson discernibly remained in active
overall managerial control, e g by virtue of his 100 per
cent stock ownership in making the initial credit ar
rangements with Insul/Crete as major supplier for
Spartan/Applicators, and with Community National
836 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
Bank for necessary operating funds and also in filling in,
however briefly, as estimator/manager on the occasion
of the required termination of Parnsh
In contrast, with regard to day to day management of
Spartan/Applicators in 1986, and whether functioning as
estimator/manager or more as general manager of the
new company, as pressed for and understood by Snod-
grass, it is in either event clear that Parnsh had never
before worked for Coatings, nor had his eventual replace
ment Kohl, as estimator/office manager On the other
hand, the jobsite managerial responsibilities of Miller and
Shields remained essentially the same for Spartan/
Applicators in 1986 , as they had been for Coatings in
1985 albeit with some degree of appreciable managerial
role reversal more recently for Applicators/Kohl Thus
with Miller declining a stock ownership in October 1986,
and Shields developed stock ownership interests (present
and future) and Shields ascendancy to positions of secre
tary treasurer and director of the Corporation, Kohl now
puts Shields in charge of jobs to be commonly worked
by Shields and Miller On balance, I conclude that con
siderations of substantially identical management and su
pervasion tend to more support a finding that Spartan/
Applicators is an alter ego of Coatings, than not But the
balance would appear to be not so as to Applicators/
Kohl Addressment and evaluation of the dual important
factors of ownership and other lawful business purpose,
in my view, more warrants contrary conclusions, namely
that neither Applicators/Kohl, nor, dispositively, Spar
tan/Applicators is an alter ego of Coatings
Substantially identical ownership, whether based on
ownership of individual(s), or on closed family owner
ship considerations, and considerations of distinct busi
ness purposes served by a new enterprise, are both im
portant factors in the overall assessment of an alter ego
claim There are major changes in both ownership and
general management of Applicators/Kohl as compared
with Spartan/Applicators The substantial changes are
seen in (a) Peterson s sale of his entire stock ownership
half by a corporate redemption, and the other half by
direct sale to Kohl with total Kohl purchases constitut
ing a permanently controlling stock ownership (b) Peter
son s contemporaneous surrender of his prior (sole) offi
cer and director positions (c) Peterson s related general
cessation of all managerial responsibility, and (d) in
Kohl s and Shield s ascendancy to same commencing
with the reorganization plan execution on 11 October
1986
However, with regard to Applicators/Kohl's readily
determined different ownership it is important to note
that while it has been convenient here to present the
facts in terms of operations of Spartan/Applicators and
Applicators/Kohl, a mere name change, as in
Spartan/Applicators is in no sense a determinative con
sideration, Nabco Corp 266 NLRB 687, 694 (1983) and,
there is not a corporation change evidence in Applica
tors/Kohl but merely a change in the ownership of the
corporation, a nondispositive factor where the employ-
ing entity remains the same, as charging party would
have correctly observed, Topinka s Country House 235
NLRB 72, 74-75 (1978), enfd 624 F 2d 770 (6th Cir
1980), Western Boot & Shoe, 205 NLRB 999 1005 (1973)
The holding of Golden State Bottling Co 414 U S 168
176 (1973), applicable to a bona fide successor employ
er's obligation to remedy an unfair labor practice com
matted by a predecessor employer, would appear inappo
site to Applicators/Kohl status which reflects only a
change in stock ownership of the same corporation
Spartan/Applicators, and it would appear to find no ap
placation to Spartan/Applicators where Coatings ceased
operations earlier without commission of earlier unfair
labor practice (There is no question that Shields, the
new secretary treasurer and a director of Applicators/
Kohl had earlier particiapted in the alleged offending
acts of Spartan/Applicators but only as the same is the
contended alter ego of Coatings )
The central issue, in my view evolves to be solely the
questioned relationship of Spartan/Applicators as alter
ego of Coatings Again this is clearly not a closed family
ownership case The very significant element of substan
tially identical ownership of Coatings and Spartan/
Applicators, is a matter most heatedly contested by the
parties, understandably so in the end, with claims of
Board precedent being respectively advanced as support
ive of the contrary positions the parties have taken on
that issue The parties are further much at odds in evalu
ating the presence of claimed different and legitimate
purposes in the formation of Spartan/Applicators
The centrally contested question of substantially identical
ownership existence of legitimate business purpose and
other factors urged as not supportive that Spartan/Apph
cators is alter ego of Coatings With a heavy reliance on
an established background of Coatings unique and dire
financial history, and the four Coatings shareholders ear
her multiple unsuccessful efforts, to preserve Coatings as
a viable business Respondents present in defense four
contentions First Respondents argue that despite over a
significant number of years every possible reasonable
effort being made and undertaken by Coatings and its
four shareholders to remain in business Respondent
Coatings and its four shareholders whom this record es
tablishes harbored no ill will to the unions were in the
end unequivocally and inexhorably driven and forced to
go out of business by fiscal pressures that had mounted
on multiple sides and which in the end included an in
sistence of Union Trust Funds if not the Charging Party
Unions themselves
Secondly Respondents argue that since an issue in alter
ego cases is whether a new enterprise is a disguised
continuance of the old, actual ownership, or substantial
identity of ownership is a very important factor In that
regard, Respondents contend that Peterson was but a 27
percent minority stockholder in Coatings, and that exist
ing Board precedent as is to be found controlling in Clin
ton Foods, 240 NLRB 1246 (1979) end denied 663 F 2d
223 (D C Cir 1980), and in Jersey Juniors Inc 230
NLRB 329 (1979) are determinative on that account of
the issue of an alter ego relationship existing between
Coatings and Spartan/Applicators On the basis of such
precedent Respondents urge the Board to find that Pe
terson s minority (27 percent) stock ownership in Coat
ings and subsequent full (100 percent) ownership in
Spartan/Applicators is not substantial identical owner
PERMA COATINGS 837
ship such as to warrant the finding that Spartan/
Applicators is an alter ego of Coatings
Third , Respondents have argued that the record s
showing of the existence of a key employee stock benefit
plan in 1986 , in the background of a prior unsuccessful
effort by Peterson to give away entirely his own Coat
ings stock in 1985 , and, in light of Peterson 's subsequent
complete divestiture of his sole stock in Spartan/
Applicators in October 1986 and as then coupled with
Spartan/Applicators concurrent stock issuances in im
plementation of a prior stock benefit plan for key em
ployees, further warrants a finding that ownership of
Spartan/Applicators was never intended to be the same
as Coatings To the contrary , it is urged that Peterson
had formed Spartan/Applicators for a joint purpose,
namely , to dispose of the assets (equipment) of the failed
Coatings business at a fair or full value , and to eventual
ly transfer ownership and control of Spartan /Applicators
from himself to key employees
Fourth and finally , Respondents centrally argue that
under the unique circumstances that are presented here,
Spartan/Applicators should not be found to be but a
merely disguised continuance " of Coatings In that
regard , Respondents have argued that the General Coun
sel s position to the contrary ,is fatally flawed , in that the
General Counsel has focused only on the sale of certain
of Coatings ' assets to Peterson s new enterprise , but the
urged position fails to take into sufficient account the
massive debt of Coatings that did not transfer , and which
remains that of Coatings In that regard , I observe (as
the parties stipulated ) chapter 7 proceedings do not dis
charge a corporation from its debts , nor do they dissolve
the corporation , NLRB v Better Bldg Supply Corp 837
F 2d 377 (9th Cir 1988)
Respondents summary argument here essentially is
that Coatings was indisputably in a state of complete in
solvency , and it was forced to go out of business In
those circumstances , Respondents argue that Peterson,
specifically as but a 27 percent minority shareholder of
Coatings, and the other shareholders of Coatings , should
not be precluded by an alter ego imposition from an of
fectuation of the salutory action that Peterson took for
the lawful business purpose of accomplishing Coatings
recovery of at least fair value through a sale of those
assets to a new enterprise , for the benefit of third party
creditors
Respondents would have it relatedly found that the
very structure of the Coatings assets sale to Spar
tan/Applicators is itself inconsistent with the pocketbook
interests of Coatings four shareholders , in that it did not
provide for payment to be made to McFarland in
amounts that would fully meet Coatings ' required pen
odic payments on the SBA loan, and , as a consequence,
the shareholders have had to make up the periodic pay
ment difference It is relatedly argued that the terms of
the sale and purchase agreement were set up to primarily
benefit the new company , Spartan/Applicators Finally
Respondents have essentially argued that had not Peter
son acted as he did , when he did , a forced sale of Coat
ings ' assets at that time would have benefited no one,
certainly not the failed Coatings enterprise , and also not
the third party creditors and the real party in interest
with respect to those assets
The short answer to all of these contentions based on
argument that the Coatings sale did not benefit the share
holder as much as it did third party creditors of course
must be , and is, that the sale did benefit the four share
holders , including Peterson , and it did so substantially It
benefits them directly to the extent Spartan /Applicators
has paid , and Applicators/Kohl now has paid , and will
continue to periodically pay the previously agreed Coat
ings assets purchase price , a substantial sum ($80 ,000), to
the McFarland bank to credit on the SBA loan To that
extent the SBA loan has been and is being steadily re
duced , thus benefiting the four Coatings shareholders
who would remain otherwise personally liable on the full
SBA loan amount still due However , they do not benefit
exclusively The third party creditor clearly receives the
same benefit , on this record a fair value benefit
In passing I observe that to the extent the General
Counsel has additionally mounted an attack on the actual
fair value of the purchase price that was arrived at, I
find that the arguments advanced are simply without
persuasion Here the argument made appears to centrally
rest on observations that the asset evaluation and the sale
were not accomplished by independent parties and/or by
a sealed bid , as in bankruptcy In my view the issue of a
valid sale procedure as thus presented is not a question
of law , as to which there can be only one answer , and, in
terms of resting on factual base the deficiency conten
tion is simply one not adequately supported of record
Thus the General Counsels stated reliance is on lack
of use of sealed bids absence of an appraisal by a disin
terested third party , and/or a vague claims the Respond
ent could have waited to sell the assets in season That
position fails to take into account that the uncontradicted
testimony of Peterson is that there was no market for
Coatings ' used equipment , which in general had no street
value , and not just that there was no market for it in De
cember 1985 Neither does it take into account Peterson s
testimony of a concern that Coatings obtain a fair value
return on the substantial ($45,000) power scaffolding
equipment in circumstances where , on this record Coat
ings had been heretofore the only plasterer using such
equipment in Wisconsin Essentially the General Counsel
does no more than argue for a preference for a sealed
bid in a bankruptcy proceeding and a sale in season
More is required to support the contention that a sale in
other manner is inappropriate and/or improper E g
some showing must be made that the assets were in fact
not fairly evaluated , or the sale procedure is irregular in
some other fatal respect Here the equipment assets were
formally listed They were evaluated by two individuals
who knew they were to have opportunities for future
ownership interests in the new enterprise They were
aware that the new enterprise in which they were to be
part owners , would likely purchase the assets at the eval
uated fair price, and become obligated in that amount
There is no record showing of deficiency in the evalua
tion I remain unpersuaded of the General Counsels late
questioning thereof Indeed , on the state of the evidence
as presented on this record , I find the asset evaluations
838 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
were both fair, and orderly under the circumstances
Contrary to the General Counsel's assertion that Miller
never intended to be a stock owner, I have found that he
was agreeable at the outset to be a participant in a new
business venture with Peterson, as well as with Shields
and Serstad
Respondents' central contentions remain otherwise
that Peterson, as a 27 percent minority stockholder,
should not be effectively precluded from taking the en
trepreneunal action of forming a new enterprise to pur
chase the assets of the failed Coatings at a fair price, by
Board imposition of an alter ego status because Peterson
at first owned 100 percent of the stock of the new enter
prise that he always intended to eventually turn over to
others, nor should the Coatings' shareholders be visited
with directed personal liability for their part in (i e, be
cause they approved of) a sale of Coatings' assets that
obtained a fair recoupment on the assets of the failed
corporation to the benefit of third party creditors, and
more then they would likely have recouped otherwise
Before making a final evaluation of the parties above
central positions, certain other related positions and/or
contentions advanced by the parties are more readily dis
posed of, and/or serve to improve focus on the remain
ing central issues First, in advancing certain contentions
in brief, Respondents appear to have urged for an exten
sion of the holdings of NLRB v Bildisco & Bildisco, 465
U S 513 (1984), and In re Continental Airlines, 115
LRRM 2364 (1984), for contract relief in Board unfair
labor practice proceedings
In general, it is well established that Board proceed
ings fall within exceptions to automatic stay bankruptcy
provisions Cf Custom Restaurant Corp, 283 NLRB No
14 slip op at 5 (Feb 23, 1987), not reported in Board
volumes To the extent the Respondents would appear to
have urged for a Board stay on judgment of unfair labor
practice committed in period prepetition filing in bank
ruptcy or here essentially urge a Board release of an
employer from burdensome contractual terms on eco
nomic survival principles, similar to that enumerated in
In re Continental Airlines, supra, it appears the same is to
be rejected Cf General Split Corp 284 NLRB 418 fn 2
(1987) When, and under what circumstances an employ
ee may be released from burdensome terms of collective
bargaining agreement during term of bankruptcy in
order to remian viable, or because balance of the equi
ties clearly favors it, is a matter of orderly procedure
for the bankruptcy court Image Systems 285 NLRB 370,
371-372 (1987), cf Edward Cooper Painting 273 NLRB
1870, 1871 (1985), enfd 804 F 2d 934 (6th Cir 1986), and
see also Pub L 98-353, § 541, 98 Stat 333 390-391
(1984)
Thus, here it is important to distinguish that the dire
economic straits of Coatings are not being addressed on
any such urged claim of economically excused perform
ance of an otherwise binding contract, but rather they
are addressed solely as determined economic facts and
relevant history of Coatings' business operation that have
bearing on the real issue presented the Board, namely,
the contested alter ego status that is whether Coatings
actually went out of business, or whether Coatings has
really continued in business, under the operational guise
of Spartan/Applicators In regard to the propriety of
alter ego issue addressment of a bankrupt corporation,
but as to one not shown subject to the supervision of the
bankruptcy court, any indicated contention of Respond
ent for preclusion on that basis cannot prevail, as the
Board appears to have already addressed that very issue,
and held to the contrary, Otten Truck Line, 282 NLRB
494 (1986), see Allis Chalmers Corp, 286 NLRB 219 fn 1
(1987)
Respondents have relatedly urged that there is a lack
of substantial identity, or continuity in the persons who
had worked for Coatings, later working for
Spartan/Applicators and or Applicators/Kohl I do not
agree that it was so at first, though it appears clearly so
later However the fact is that Spartan/Applicators' em
ployment started limitedly in February 1986, and re
mained limited until July 1986 I have earlier found, with
certain exclusions (viz Office Hoff, 1 day help Brown,
and estimator/manager Parrish), that two of the three in
dividuals initially hired by Spartan/Applicators in Febru
ary 1986, had previously worked for Coatings, and at
least two were members of union The character of the
majority of the employees employed in ensuing months
through June, then a total of eight (with/exclusions) re
mained in character as having been both principally pre
viously employed by Coatings, and members of the
Unions (plasterers and laborers )
It was only in July that the character of the majority
of those employed changed in being then both not previ
ously employed by Coatings, and not shown to be mem
bers of the Unions Overall, of the individuals employed
in 1986 two thirds had not previously been employed by
Coatings in 1985, and approximately three fourths do not
appear as members of the Unions As noted, allegations
of discrimination and successorship have been with
drawn I do not find this July employment factor very
helpful in determining alter ego status in February par
ticularly as I am in the end convinced that it was in July
that Miller, Shields, and Serstad were actively establish
ing wages for the new employees and at a time they had
prospective ownership interests declared Moreover, I
reject Respondents related assertions that the Unions for
a significant period had failed to be attentive to the em
ployees and, that the evidence presented as a whole has
established that Charging Party Unions have taken posi
tions in this matter that reveal an intent to misuse Board
alter ego processes and to simply put Spartan/Appli
cators and/or Applicators/Kohl out of business Unions
may act on a timely discovery of a reasonably perceived
alter ego noncompliance with their existing contracts,
and they may timely pursue lawful contractual claims
and/or unfair labor practice charge determination
indeed they may well have obligation to do so
In turn however I reject Charging Party Unions
contention that Kohl is shown by the evidence to be but
a nominal owner As clearly evidenced of record, Kohl
has not only committed to a cash (capital) risk by his
$4000 stock subscription, Kohl has also committed to a
personal obligation on a $22,500 promissory note to Pe
terson on Kohl's concurrent purchase of the controlling
stock from Peterson Moreover Kohl stands at risk over
PERMA COATINGS 839
all in his endeavor in that he has purchased a majority
stock interest in an enterprise which itself has substantial
remaining debt obligation to Peterson ($ 16,342 53, plus
interest) for corporate redeemed stock , as well as cur
rently some $65,000 remaining due on the Corporation's
prior purchase of Coatings ' equipment , to be paid to
McFarland , for credit on Coatings ' SBA loan Some
$38,000 in accounts receivable at time of purchase does
not minimize Kohl's risk Kohl owes nothing on the re
maining debt due on the SBA I thus conclude and find
that Kohl is not but a nominal player in his entrepreneur
ial endeavor , and I further conclude and find that Kohl's
ownership interest is not in any sense substantially identi
cal with that of Peterson before him in the Spartan/
Applicators enterprise , but separate , and distinct In the
end I have thus found myself persuaded to Respondents
Spartan/Applicators further contention in brief that one
issue and one issue only ultimately controls the outcome
of the case, namely is their such continuity of ownership
between the old enterprise Coatings , and the new enter
prise Spartan/Applicators that Spartan/Applicators is to
be held bound by the old enterprise s collective bargain
ing agreement
As to Respondents first and basic argument , the Gen
eral Counsel at hearing and in brief had conceded that
Coatings was undergoing severe financial distress at the
time , but argues that this is simply not a sufficient show
ing to justify an avoidance of contractual obligations,
with a central reliance on Oak Cliff Golman Baking Co,
supra The General Counsel further argues that is the re
quired result even where the individual does the only
thing the individual knows to do to support himself, with
stated reliance on Rogers Cleaning Contractors, 277
NLRB 482 (1985) I note in passing that the Rogers
Cleaning case involved a family owned business that
never lost its basic character as such , and, that the new
company had apparently purchased the assets of the old
company , at very favorable terms , id at 488-489
The General Counsel has secondly argued that the
cases relied on by Respondents in support of contended
nonsubstantial identity of ownership do not do so, and,
that they are distinguishable on the basis of the nature of
the ownerships involved in the old and new companies
Thus the General Counsel argument is that in Clinton
Foods, supra there was only one individual who was a
common owner , and he an 18 percent minority stock
holder in the old enterprise , and but a 30 percent minori
ty stockholder in the new enterprise Similarly , the Gen
eral Counsel would distinguish the ownership in the
Jersey Juniors case supra in that in Jersey Juniors there
was but a 9 percent minority stockholder (albeit also
with a $50 ,000 secured loan to the old company), who
subsequently became a 70 percent stockholder in a new
company , which eventually purchased the assets of the
old company , but unlike here, did so as a result of an
award made by a disinterested party , upon a sealed bid
submitted in bankruptcy
It is the General Counsel's contention that the instant
matter is more controlled by Board finding of substantial
identical ownership as made in Hawg N Action, 281
NLRB 56 fn 2 ( 1986), where a 50 percent owner in the
old enterprise became a 100 percent owner in the new
enterprise , and there , an alter ego relationship was found
by the Board I have earlier observed that the formalized
evaluations of Coatings ' assets appear fair , and properly
arrived at in this case presentment While otherwise ac
knowledging that Peterson s 27 percent stock ownership
in Coatings is not a ma jority (nor is it in amount the 50
percent ownership found in Hawg-N Action , supra), the
General Counsel basically argues it is a significant stock
holding in the old company , which, in combination with
Peterson s 100 percent ownership in the new company
and the other substantially identical business factors of
record is sufficient to warrant finding that Spartan/
Applicators is an alter ego of Coatings The fact is that
Peterson s 27 percent ownership in the old enterprise
rests essentially between the case authorities advanced by
the parties
The General Counsel alternatively attacks the validity
of Peterson 's 100 percent ownership in the new enter
prise Thus, the General Counsel first argues that Coat
rags' sale and Spartan/Applicators purchase of Coatings'
(equipment) assets was actually a mere paper transac
tion with stated reliance on Royal T Meat, 238 NLRB
245, 249 (1978), enfd 614 F 2d 777 (9th Cir 1980) In
passing I observe however, that in Royal T Meat, id , the
evidence was determined not sufficient to conclude that
the old company had been forced or compelled to terms
nate the business by external or internal fiscal force,
there was no ownership transfer of premises and equip
ment from the old to the new enterprise, and, while a
sole owner of the old employer had appearance of no
ownership in the new , the arrangement disclosed was
that the old owner was to receive 60 percent of the prof
its of the new enterprise
The General Counsels position here rests on an obser
vation (seemingly correct , insofar as it goes) that at the
time of purchase Peterson had paid nothing for his sub
scribed Spartan/Applicators stock However to the
extent that the General Counsel appears to have alluded
in brief that Spartan/Applicators itself paid nothing for
Coatings equipment , that assertion can be viewed as ac
curate only in sense of immediate cash outlay Clearly
Spartan/Applicators had formally purchased Coatings'
assets for a substantial amount ($80,000) and it did so in
elusive of the substantial amount ($60,000) attributable
specifically to equipment purchase Spartan/Applicators
also formally executed a corporate promissory note in the
full purchase amount, with provision for interest and it
accepted Coatings equally formalized equitable assign
ment of the note s proceeds to McFarland, for credit on
the SBA loan in acknowledgment of its purchase of
assets subject to first lien of SBA loan Moreover, sub
stantial (apparently $ 15,000) payments have been made
to date (at least) most pursuant to the terms of the note
The General Counsel has secondly argued that Peter
son was an agent for the three (other) Coatings share
holders in the transaction , which was clearly accom
plished for their benefit, and that in reality Peterson was
only a straw man," or front for all Coatings' share
holders The General Counsel on that account would
discount Peterson s surface 100 percent ownership of
Spartan/Applicators , and essentially argues there is con
840 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
tinuity of identical ownership, or, at least a continuity of
beneficial ownership A problem with this assertion is
however, that I have earlier found that Coatings other
shareholders have not been shown to share in
Spartan/Applicators profits from the conduct of its busi
ness affairs, beyond Spartan/Applicators payments made
to McFarland solely related to purchase price of Coat
ings assets They are not shown to share in Spartan/
Applicators' earnings for its operations through 30 Sep
tember 1986 , substantial amount (e g, approximately
$40,000, with allowance for earned stock issuance) In
the absence of even a claim raised by the other Coatings'
shareholders thereto, the same, it seems to me, projects
persuasive probative support that Spartan/Applicators,
vis a vis other Coatings shareholders interests, was truly
Peterson's sole endeavor, irrespective of whether under
taken initially with promise of key employee prospective
ownership interest, and with approval of shareholders
for sale of Coatings assets at an established fair value
Accordingly, I conclude and find that Peterson in this
endeavor was not just a front or straw man for all
the shareholders of Coatings Rather, I find that as a mi
nonty shareholder of Coatings he acted on his own in
setting up Spartan/Applicators though with purpose, at
least inter alia, of purchasing Coatings assets for a fair
value, which had the approval of the other shareholders,
and worked to their benefit, as well as his own
In passing however, I am not persuaded that the ulti
mate conclusion on ownership interest should rest on Re
spondents claim that Spartan/Applicators was set up in
part to benefit key employees, or to impart ownership to
them Rather I am persuaded that key employees were
involved to make operation of a new enterprise the more
feasible Primarily I have reluctance to conclude there
was such significant key employee divergent stock bonus
ownership interests at play This is not because the of
fered evidence has failed to convince me that a promise
of some common venture ownership was not offered to
key employees at the outset, e g in January 1986 but
because I am convinced it was then but in a drawing up
stage was not then sufficiently defined and remained
probably not so until April, and because, even then the
proposed plan when announced in any event clearly en
visioned a very substantial period of new enterprise oper
ation before Peterson's initial 100 percent ownership
would be less than a majority and he potentially lose
control of the enterprise The weight of evidence has
convinced me that the key employees set wages for new
employees at the earliest in May but far more likely and
principally in July But even if it were to be considered
otherwise the ownership observations above would still
exist For all of these reasons I now am of the view that
the ultimate and diapositive issue is whether under all of
the circumstances Peterson s 27 percent minority owner
ship interest in Coatings and 100 percent ownership of
Spartan/Applicators constitutes the substantial identical
ownership required of an alter ego I think not
First, the General Counsels concession that Coatings
was undergoing severe financial stress at the end of 1985,
it seems to me misses the mark in the degree of its under
statement It is difficult to imagine a stronger factual
background to support Respondents basic contentions
that Coatings in 1985 was a business going out of buss
ness and an enterprise which actually went out of busi
ness on 31 December 1985 For 6 straight years (1980-
1985) Coatings had suffered substantial net losses There
is no evidence that Coatings, as part of a single employer
or other conglomerate, was being intentionally operated
at a loss, for some perceived and/or directed good of the
whole To the contrary an early February 1983 corpo
rate officer plan then called for a severe expense re
trenchment, for a program of renewal of employee moti
vation to preserve their jobs and for vigorous pursuit of
old and new business That effort simply failed Coatings
operational failure continued as a substantial one in 1984,
and, by the end of 1984, McFarland Bank (and presum
ably the SBA) viewed their still very substantial SBA
loan at risk
In the ensuing period stretching from January 1985
through the end of December 1985, additional plans for a
Coatings stockholder cash rescue failed to fully material
ize, and in any event, failed to effect a rescue of the en
terpnse Authorization for a plan initially for an entire
stock gift, and then implementation of an actual (April)
formalized plan calling for gift of controlling (and all of
Peterson s) stock, failed at the last moment for fiscal rea
sons Clearly the failure was because of the even then
overburdening debt load of Coatings, and not only from
the SBA loan, but from other loans to McFarland and
even more so to other major creditors By September,
Coatings external fiscal pressures were still mounting
They culminated at that time with an IRS tax lien filing,
and with an acknowledged present inability on the part
of Coatings to pay the taxes, or to meet its SBA loan
payments At least by this time (I have found) Coatings
was forced to cease bidding new jobs An internal stock
holder cash plan for an orderly payment of taxes and
SBA loan could not in the end be fully implemented and
it also proved unavailing External union trust funds law
suits ensued in October 1985 and the union trust funds
themselves subsequently unequivocally threatened Coat
ings with an involuntary bankruptcy even at the moment
they were settling claims only through 31 December
1985 Such settlements as were accomplished were ac
complished (at best) in the main by but additional cash
outlays of the four Coatings shareholders, and ironically
at a time when the General Counsel would call into
question Peterson s failure to immediately pay stock sub
scription in the new enterprise
What Coatings shareholders/directors perceived at
the start of the last year of operation might call for an
alternative plan of chapter 11 reorganization, by the end
of the year had become a situation deemed to warrant a
chapter 7 liquidation with such filing held off until July
1986 only in final hope of collecting some additional ac
counts receivable an action that only continued in a lack
of success
The foregoing in the end has wholly persuaded me,
and I resultingly find, Coatings was a business irretneva
bly going out of business and it went out of business on
31 December 1985 as a grossly insolvent company It is
thus only properly in that established context of a wholly
failed business that Peterson s actions may properly be
PERMA COATINGS
evaluated in regard to sale of certain assets of Coatings,
and in regard to his establishment of Spartan/Applicators
to purchase them, and engage in business with them Re
spondents have stated the same basic ownership issue as
follows Can a 27 percent minority owner of a bankrupt
enterprise become a 100 percent owner in a new enter
prase, purchase the old company s remaining assets, in
good faith, at fair value, and thereafter start a similar (or
same) enterprise, free of the collective bargaining agree
ments of the old? In the circumstances presented here, I
think it may
Thus I am of the view that a real minority stock
owner, such as shown here (27 percent), may engage in
the same business in a new enterprise that is wholly
owned (100 percent), where, as here there is both a lack
of substantial identical ownership between the old and
new enterprises, and it is clear that the old enterprise
does not control the new enterprise Given the central
established facts here that the old enterprise Coatings,
because of external and internal forces actually went out
of business in a state of insolvency, that Peterson owned
a clearly separate and minority (27 percent) interest in
Coatings, that Peterson established a separate enterprise
with 100 percent ownership initially in himself, that the
new enterprise purchased the assets of the old enterprise
for lawful purpose, did so formally, at fair value, and in
good faith, and finally given that the new enterprise has
engaged in the same business, but has done so without
any evidenced actual control by the old enterprise, I
conclude and find that Spartan/Applicators was not an
alter ego of Coatings, Superior Export Packing, 284
NLRB 1169, 1170 (1987) Marino Electric, 285 NLRB
344 (1987)
Accordingly, I shall dismiss the allegations that by Pe
terson's setting up and operating Spartan/Applicators
Respondents Coatings, Peterson and Coatings other
named shareholders Spartan/Applicators, or any of
them, have violated Section 8(a)(5) and (1) of the Act by
841
any direct dealing with key employees and/or by an un
lawful refusal to apply Coatings existing contracts with
the Unions It follows only the more readily that
Applicators/Kohl has not violated the Act in any of the
above respects
CONCLUSIONS OF LAW
1 Perma Coatings, Inc, and Spartan Group of McFar
land, Inc now by name change Applicators of Wiscon
sin, Inc, is each an employer within the meaning of Sec
tion 2(2), (6), and (7) of the Act, and not an alter ego of
each other
2 Central Wisconsin Carpenters District Council,
United Brotherhood of Carpenters and Joiners of Amer
ica and Construction and General Laborers Union Local
No 464, Laborers International Union of North Amer
ica, AFL-CIO, and Operative Plasterers and Cement
Masons International Association of the United States
and Canada Local 204 AFL-CIO are all a joint Charg
ing Party herein and each, respectively, is a labor orga
nization within the meaning of Section 2(5) of the Act
3 Neither Perma Coatings, Inc or its four named
shareholders or any of them, nor Spartan Group of
McFarland, Inc, by name change Applicators of Wis
consin Inc, or the latter as now under different owner
ship, has in any manner violated Section 8(a)(5) and (1)
of the Act
On the basis of these findings of fact and conclusions
of law, I issue the following recommended2
ORDER
The complaint is dismissed in its entirety
2 If no exceptions are filed as provided by Sec 102 46 of the Board s
Rules and Regulations the findings conclusions and recommended
Order shall as provided in Sec 102 48 of the Rules be adopted by the
Board and all objections to them shall be deemed waived for all pur
poses