Whelco Indus., Ltd. v. United States

Whelco Indus., Ltd. v. United States

Opinion

 [*907] 

ORDER

This is a quiet title action in which the plaintiff, Whelco Industrial, Inc. [Whelco] seeks to remove or invalidate several federal tax liens filed by the Internal Revenue Service in 2004 against assets acquired by Whelco from a company named Whitney Electric Corporation [Whitney] in 2003. At the time of the asset acquisition, Whitney was in receivership; the state court, at the request of the receiver, approved an Asset Purchase Agreement between Whelco and Whitney.

Whelco contends that the government's liens did not, have not, and cannot attach to its assets, and that it otherwise cannot be held accountable for Whitney's tax obligations. In making this argument Whelco relies on Ohio law relating to successor corporations.

The government principally claims that federal  [**2] common law, not state law, controls the determination of whether Whelco is a successor to Whitney, so that Whelco is obligated for Whitney's tax liabilities. The government also claims that the transaction between Whelco and Whitney was fraudulent, and entered into to enable the company's business operations to continue without the encumbrance of the tax obligation. Finally, the government asserts that its notice of lien could not be undone by the state court receivership because it was not a party to that proceeding.

The case was tried without a jury. Following submission of post-trial briefs, the case is decisional.

 [*908]  For the reasons that follow, judgment shall be entered in favor of the government and against Whelco as to the successor corporation issue. ¹ 

Background

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