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MESC v Patt 2.08

Section NA

LIABILITY, Bankruptcy, Definition of tax

CITE AS: MESC v Patt, 4 Mich App 225 (1966).

Appeal pending: No

Claimant: NA

Employer: Fred Patt

Docket No: NA

COURT OF APPEALS HOLDING: The employer's contributions required under the Michigan Employment Security Act are a tax within the meaning of Section 17 of the Bankruptcy Act and are not discharged in a bankruptcy proceeding. As a result the employer is still liable for them.

FACTS: Employer was a Michigan employer for the years 1955, 1956, and 1957. It was subject to the provisions of the Michigan Employment Security Act. During the period employer paid no contributions as required by the Act.

In 1959 the Commission tried to collect this delinquent contribution in the state circuit court, and got a judgment by default for the delinquent contributions with interest. Employer filed for bankruptcy and obtained a discharge in 1964. In 1965, the MESC garnisheed defendant's employer to collect on its judgment. Defendant filed a motion to restrain the garnishment on the basis that the judgment had been discharged in bankruptcy.

DECISION: The discharge in bankruptcy did not discharge employer's obligation to pay the judgment for the delinquent contributions.

RATIONALE: "Regardless of the terminology used, an involuntary exaction, levied for a governmental or public purpose, can be held to be nothing other than a tax within the purview of the Federal bankruptcy act. The right of the State to collect such tax was duly protected by the Congress in the bankruptcy act."



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